BALKRISHAN GUPTA AND ORS. versus SWADESHI POLYTEX LTD. AND ANR

Citation: [1985] 2 S.C.R. 854 · Decided: 12-02-1985 · Supreme Court of India · Bench: E.S. VENKATARAMIAH · Disposal: Dismissed

Cited by 3 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

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BALKRISHAN GUPTA AND ORS .. 
v •. 
SWADESHI POLYTEX LTD. AND ANR. 
February 12, 1985 
[E.S. VENKATARAMiAll AND SABYASACIU MUKHARn, JI.] 
.. Companies Act, l9S6-Sectlons 41, 87, 137, ISO and· 169-Member/ 
sl:are-holder of a· cOmpany-Meaning of-When does a person cease to be a 
member/shareholder-Rights and Privileges of a shareholder when a Receiver 
i.r appointed in respect of the shares-Scope of-Sections 182A~ 149 of the 
U.P. Land R~rtnue Act 1901and1. SI and Order XL o/C.P.C. 
. · U.P. Land Rerenue Act 1901, ss. IB2A, 149 ands. SI and order XL of 
C.P.C.-Appofntment of Receiver In respect of shares-Attachmeni' and Pledge 
of sharer-Whether it deprlve1 the' shareholder of irs title or right to vote and 
other privllege~Whether ownership of shares vests in the Recei11er-A charg-
ing order and order of attachment-Distinction between. 
Industrial (DeP<lopment and Regulation) Act 1951, s. I BAA(]) (a)-
Order of Central Go1ernment taking m~r management of shareholder-company-
Whether deprive1 the share·holder company of its right to vote in respect of 
shares. 
· 
Indian Contract Act 1972-SectlonJ 112 and 178A-P1edge and 
mortgage-Distinctl~n between. 
Section 169 (1) of'the Companies Act provides that the Board of . 
directors t..f a CC'rnpany shatJ., on the requisition pf such number of members 
of the compaOy as is specified in sub-section (4). forthwith proceed duly to 
call an extraordinary general meeting of the company, Sub-section 4(a) says 
, that the number of members entitled to requisition a·-meeting in regard to 
any matter shall be1 in the case of a company having a share capita], such" 
number of them as held at the date of the deposit of the requisition, not 
Jess than one-tenth of suCh of the paid up capital of the compJny as at that 
. date carries the right of voting in regard to that matter. 
The Swadeshi Cotton Mills Company Ltd. (for short, the Cotton Mill"' 
Company!, bad 10 lakb• share• out or 39,00,000 shares or R,s. 10/ • each in 
the respondent Swadesbi Polyte• Ltd. (for short, tho Polyte• Company). On 
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BALKRISHNA v. SWADESHI POLYTEX 
8S5 
27th October, 1977, the Collector of Kanpur passed an order under s. 182A 
of the U.P. Land Revenue Act 1901 (for short, the Land Revenue Act, 
read with s. 5 of the U.P. Government Eleclrical Undertakings (Dues 
Recovery) Act 1958 appointing a Receiver in respect of the Cotton Mi1Is 
Company, since it could oat meet the wage bill, the dues of the U.P. 
Electricity Board and several other monetary claims against it from about 
1975~76 on account of a serious set back in its financial position. By tho 
said order, he empowered the Receiver to seize 1 lak:h of shares of the 
Polytex Company and to pledge them in favour of the State Governu1ent of 
Uctar Pradesh against a Joan for !he purpose of meeting the dues payable 
to the employees of the Cotton Mills Company. He made a further order 
under s. I 49 of the Land Revenue Act re~d with s. S of the U.P. Govern· 
meat Electrical Undertakings (Dues Recovery) Act 1958 attaching the 
remaining 9 lakhs shares of the Polytex Company held by Cotton Mills 
Company and empowering the Receiver to seize them. Pursuant to the 
orders of the Collector, the Receiver seized 10 lakhs shares held by the 
Cotton Mills Comp<Jny ond pledged 3.5 lakhs shares in favour of the 
Governmeo of U.P. and kept the remaining 6.S Jakbs share~ with him. 
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The Cotton Mills Company and four others 
share-holders who 
D 
together held 10,01,950 share of Rs. 
JO each in the Polytex Company 
sent a n~tice to the Polytex Company under s. 169 of the Act requiring the 
Board of Directors of PolyteJt Company to consider and pass c'ertain resolu-
tions regarding removal of its Managing Director and three directors and 
appointment of some other persons in their place. Pursuant to such requisi· 
tions, the directors of the Polytex Company resolved to hold the extraordi· 
nary meeting on March 28, 1984. However, the meeting CC'Uld not be held, 
since some of the share holders had obtained temporary injunctions restrain-
ing the holding of the meeting. The matter ultimately came up before the 
Supreme Court in Special Leave Petitions when it clirected the High Court 
to !Dake an order for holding the meeting notwithstanding any order of 
injunction etc, issued by any other court or authority in India. Accordingly, 
the meeting was fixed for 14th August 1984. But, in the meanwhile, 
appeltant No. 1 moved an application b

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