Holding

The Division Bench was not bound to reconsider prior orders and correctly dismissed the review petition as the appellant had no valid ground and was indulging in dilatory tactics.

Summary

The appellant, a legal representative of an ex‑director of a company that had been liquidated, challenged a Company Judge's order that held all former directors jointly and severally liable for a sum with interest in a misfeasance proceeding. The Company Judge dismissed the appellant's application for review of that order, and the Division Bench of the Bombay High Court also dismissed the appeal and later a petition for review of its own judgment. The appellant sought a review of the Division Bench's order, alleging new material and that he had not been given a chance to be heard. The Supreme Court held that the Division Bench, while exercising its review jurisdiction, was not bound to reconsider the correctness of earlier orders and found that the appellant had engaged in dilatory tactics, with no valid ground for review. Consequently, the Court confirmed the High Court's order and dismissed the appeal.

Issues considered

What is the scope of a High Court's review jurisdiction when a review petition challenges an earlier order of a Company Judge?
Whether the appellant's claim of new material and lack of notice justifies a review of the Division Bench's order.
Whether the appellant's conduct amounts to dilatory tactics warranting dismissal of the review petition.

Legislation cited

Code of Civil Procedures. Order XLII Rule 1, s. Order XLVII Rule 7
Companies Act, 1956s. 483, s. 543(l)(a)

Subjects

Companies Actmisfeasanceliquidationreview jurisdictiondirector liabilitydilatory tacticsappellate review

Judgment

t

A AVINASH HANSRAJ GAJBHIYE
v.
OFFICIAL LIQUIDATOR, M/S. V. PHARMA. P. LTD.

FEBRUARY 17, 2006

B [S.B. SINHA AND P.K. BALASUBRAMANYAN, JJ.]

Companies Act, 1956-Section 483:

Company-Liquidation-Misfeasance proceedings-Company Judge
C holding Directors liable to pay certain amount with interest thereon-Review
petitions against-Dismissed by tlie company judge as also by the Division
-
Bench of High Court-On appeal, Held: High Court, in exercise of its review
jurisdiction, not bound to consider the correctness of prior orders-Basis of
review was certain additional material which after due diligence was not
D within the knowledge of 1he applicant/not produced by him when the order
was passed-Division Bel'lch of the High Court noticed the conduct of the
applicant and found him indulging in dilatory tactics to thwart the order
passed by the Company Judge-Hence, both the Division Bench and the Single
Judge ofthe High Court justified in dismissing the Review Petitions as initiation
of proceedings by the applicants found to be untenable and without merit.
E The respondent-firm went into liquidation, and was ordered to be
would up. In a misfeasance proceedings, the Company Judge held all the
ex-Directors of the Company jointly and severally liable to pay certain
amount with interest thereon. Appellant, legal representatives of the
Directors, filed review pdition, which was dismissed by the Company
F Judge. Appeals against the order was dismissed by the Division Bench of
the High Court. Hence the present appeal.

Dismissing the appE~al, the Court
HELD:l.1. The Division Bench of the High Court while exercising
G its review jurisdiction or when called upon to exe.rcise its review
jurisdiction was not bound to consider the reviewability or correctness of
all the prior orders including the order on the review petition. (361-E)
1.2. The review was sought by the appellant on the basis of certa'in I
f
additional material which according to him had relevance and the

H 358
AVINASH HANSRAJ GAJBHIYE "·OFF!. LIQUI. V. PHARMA. P. LTO [PK BALASUBRAMANYl\N, J.] J 59
Company Judge had found no ground for review based on discovery of A
~~~ new and important matter which after the exercise of due diligence was
not within the knowledge of the appellant or could not be produced by
him at the time when the original order was passed. This finding by the
Company Judge was affirmed by the Division Bench in its order dated
19.9.2002. When the appellant sought a review of that order, the Division
Bench found that the appellant was indulging in dilatory tactics just to
B
thwart the order passed by the Company Judge on the misfeasance
application. The Court also found that there was no ground made out for
1
---#
reviewing its order dated 19.9.2002. The Division Bench and the Single
Judge both were justified in not acceding to the prayer for review made
by the appellant. (361-G-H; 362-A-B) c
1.3. The appellant had an opportunity to put forward his contentions
as a notice in that behalf was taken out to him and served on him. Besides,
instead of taking appropriate steps at appropriate times, the appellant had
indulged in initiating proceedings one after another which were all found
to be untenable and without merit. (362-C-D) D
1.4. The High Court cannot be faulted for refusing to review its order
__,, dismissing the Company Appeal, or in dismissing the Company Appeal
~ itself. (362-DI

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1156 of2006.
E
From the Judgment and Order dated 18.7.2003 of Bombay High Court
in Company Application No. 7612002 in Company Appeal No. 312002.

Gagan Sanghi, Rameshwar Prasad Goyal for the Appellant.

T. Raja and S.C. Sharma for the Respondents. F
The Judgment of the Court was delivered by

P.K. BALASUBRAMANYAN, J. I. Leave granted.

2. This appeal, as can be seen from paragraph I of the Petition for
Special Leave to Appeal, challenges the order of the High Court of Bombay, G
Nagpur Bench dated 18.7.2003 whereby the Division Bench of the High
Court refused to review its judgment in Company Appeal No. 3 of 2002
J ~-
dated 19.9.2002 dismissing the appeal. Company Appeal No. 3 of 2002 was
I filed by the appellant, the legal representative of an ex-Director of Mis
Vidarbha Pharmaceuticals Private Limited, a company that went into H
t
360 SUPREME COt:RT REPORTS [20061 2 S.C.R.

A liquidation and which was ordered to be wound up in Company Petition No.
7 of 1985 by order dated 9.11.1998. Though that appeal was against the
order dated 16.8.2002 in Company Application No. 56 of 200 I, the appellant
attempted to challenge the earlier orders dated 7.9.200 I and 22.7.1999, passed
during the winding up proceedings. By the order dated 7.9.200 I, the Company
B Judge had dismissed the application No. 40 of 1999 filed by the appellant for
setting aside the order dated 22.7.1999 passed by him in a misfeasance
application, holding that all the ex-Directors of the Company were jointly
and severally liable under Section 543 (l)(a) of the Companies Act to pay to
the Company an amount of Rs.6,29,220/- with interest thereon at the rate of
18% per annum with effect from 6.10.1996 along with the costs of the
C proceedings. The order dated 22.7 .1999 that was sought to be challenged was
the order on the misfeasance application. The order dated 16.8.2002 was one
by which the Company Judge rejected an application for review filed by the
petitioner seeking a review of the order passed on 7.9.2001. The appeal was
in time only as regards the order dated 16.8.2002 refusing to review the
earlier orders in misfeasance proceedings passed by the Company Judge. The
D appeal was not accompanied by ev~n an application for condoning the delay
in filing the appeal as against the orders dated 7.9.2001 and 22.7.1999even
though the challenges to them were clearly barred by limitation. The Division
Bench of the High Court, therefore, ordered on 19.9.2002 that the orders
passed by the Company Judge on 7 9.200 I and 22. 7.1999 were not amenable
E to scrutiny for their sustainability in the appeal filed and the appeal had to
be confined to one from the order dated 16.8.2002. Thereafter, the appeal
was dismissed holding that the Company Judge was justified in refusing to
review the orders passed in the Misfeasance Application. The appellant then
filed a petition to review the judgment in Company Appeal No. 3 of 2002.
By order dated 18. 7.2003, the application for review was dismissed. It is that
F orcier that is challenged in this appeal.
3. For the purpose of this case, we do not think it necessary to consider
the question whether the appeal filed before the Division Bench under Section
483 of the Companies Act against an order refusing to review the orders on
G the Misfeasance Application was maintainable, the wide words of Section
483 notwithstanding (an order rejecting an application for review is not
appealable even under the Code of Civil Procedure either under Order XLIIJ
Rule l(w) or Order XL VII Rule 7). We proceed on the assumption that the
appeal was maintainable. ..
I

H 4. Learned counsel for the appellant submitted that the order of the
/
~
I AVINASH HANSRAJ GAJBHIYE "· OFFI. LIQUI. V. PHARMA. P LTD. (PK. BALASUBRAMANYAN. J] J 61

Division Bench sought to be reviewed, proceeded on the basis that it was an A
appeal challenging the order dated 16.8.2002 passed by the Company Judge
dismissing an application for review preferred by the appellant and the order
dated 16.8.2002 passed by the Company Judge and the challenge thereto,
included a challenge to the prior orders dated 7.9.200 I and 22.7.1999. This
argument cannot be accepted. The order dated 16.8.2002 was that the Petition
for review filed by the appellant seeking a review of the order dated 7.9.2001 B
passed in Company Application No. 40 of 1999, which was one for recalling
the order dated 22. 7.1999 was liable to be dismissed. The Company Judge
after referring to the facts leading to that application and considering the
merits of that application held that there was no error apparent on the face
of the record which justified a review of the order dated 7.9.2001. The C
application for review was thus dismissed on 16.8.2002. It was this order that
was dealt with in Company Appeal No. 3 of 2002 by the Division Bench in
its order which was sought to be reviewed. The order specified that the
appeal was against the order dated 16.8.2002. Therefore, the application for
review filed by the appellant before the Division Bench could be treated only
as an application for review of the order dated 19.9.2002 refusing to interfere D
with the order dated 16.8.2002. It is not possible to accept the argument of
learned counsel for the appellant that the Division Bench while exercising its
review jurisdiction or wnen called upon to exercise its review jurisdiction
was bound to consider the reviewability or correctness of all the prior orders
including the order on the review petition. E
5. While dismissing the Petition for review of the order dated 7.9.2001,
on 16.8.2002, the Company Judge found on the basis of the material on
record of Company Application No. 40 of 1999 and the contentions sought
to be raised by the appellant that there was no error apparent on the face of
the record in the order dated 7.9.200 I. Therefore, what was involved in F
Company Appeal No. 3 of2002 was only the correctness of that order of the
Company Judge and the Division Bench by its judgment dated 19.9.2002,
found no reason to interfere. The review was sought by the appellant on the
basis of certain additional material which according to him had relevance and
the Company Judge had found that no ground based on discovery of new and G
important matter which after the exercise of due diligence was not within the
. knowledge of the appellant or could not be produced by him at the time when
' the original order was passed, was made out. This finding by the Company
\
. J
Judge was affirmed by the Division Bench in its order dated 19.9.2002 .
r When the appellant sought a review of that order, as indicated earlier, the
.. Division Bench considered the conduct of the appellant right through the H
t
362 SUPREME COURT REPORTS j2006j 2 S.C.R.

A proceedings and found that the appellant was indulging in dilatory tactics just
to thwart the order passed by the Company Judge on the misfeasance
application. The court also fo~nd that there was no ground made out for
reviewing its order dated 19.9.2002. On a consideration of the relevant aspects,
we find that the Division Bench and the learned single Judge were both
B justified in not acceding to th<: prayer for review made by the appellant.

6. Learned counsel for the appellant submitted that the order on the
misfeasance application was made without the appellant, who was only a
legal representative of one of the Directors, really getting an opportunity to
put forward his contentions. But on the materials, it was found that he had
C such an opportunity, a notice in that behalf having been taken out to him and
served on him. His plea that he had no notice was found to be unacceptable.
It is also seen that instead of taking appropriate steps at appropriate times, the
appellant had indulged in initia1:ing proceedings one after another which were
all found to be untenable and without merit. In the circumstances, one can
only say that the appellant has to thank himself for the situation he finds
D himself in, even if there is any merit in his claims. The High Court cannot
be faulted for refusing to review its order dismissing the Company Appeal,
or in dismissing the Company Appeal itself.

7. Thus, we are satisfied that no ground is made out for interference 1
with the order of the High Court challenged in this appeal. The order of the
E High Court is confirmed and this appeal is dismissed.

S.K.S. Appeal dismissed.

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