Holding

Consent given by a General Power of Attorney holder on behalf of a member is a valid consent under section 399(3) of the Companies Act, 1956.

Summary

Three shareholders of Jeypore Sugar Co. Ltd., including a daughter residing in the USA, filed a petition under sections 397/398 of the Companies Act, 1956. The daughter had executed a General Power of Attorney (GPA) in favour of her father, who gave written consent on her behalf as required by section 399(3). The respondents objected, arguing that consent must be given personally by the member and not through an agent. The High Court upheld the objection and dismissed the petition. On appeal, the Supreme Court held that section 399(3) does not require personal consent and that, under the general rule of agency, a GPA holder can validly give consent. Rule 88 of the Companies (Court) Rules 1959 was also interpreted as not mandating personal consent. Consequently, the Supreme Court allowed the appeal, set aside the lower courts' orders, and permitted the petition to proceed.

Issues considered

Whether consent required under section 399(3) of the Companies Act, 1956 must be given personally by the member or can be given by an agent under a General Power of Attorney.
Whether Rule 88 of the Companies (Court) Rules, 1959 imposes a requirement of personal consent.
Whether section 399(3) constitutes an exception to the general rule of agency.

Legislation cited

Companies Act, 1956s. 397, s. 398, s. 399(1), s. 399(3)
Companies (Court) Rules, 1959s. Rule 88

Subjects

Companies Act 1956Section 399General Power of AttorneyAgency lawShareholder consentPetition under sections 397/398Corporate governance

Judgment

"' P. PUNNIAH A
v.
JEYPORE SUGAR CO. LTD. AND ORS.

APRIL 6, 1994

[B.P. JEEVAN REDDY AND B.L. HANSARIA JJ.J B

Companies Act, 1956-Ss.397, 398, 399(1) (a) a11d (3}-Conse11t by
General Power of Attomey GPA holder 011 behalf of member to file applica-
tion--Held, constitutes valid conse11t-S.399(3)-Whether an exceptio11 to the
normal rule of agency-Affidavit filed by member i11 High Court that she had c
authorised the GPA holder--Wliether to be take11 as consent-Con1pany
(Court) Rules 195')--R.88

In October 1978, three shareholders of the respondent'.company
including the first appellant filed an application under Ss.397/398 in the
High Court. The first appellant, P was General Power of Attorney holder D
for his daughter, R who was resident in the USA. The statutory require-
-'
ment of l/lOth share-holding needed to file the said application was
admittedly satisfied if this consent was valid.
~ A preliminary objection, that the consent had to be by the member
personally and not by the GPA holder, was raised. In proceedings before E
the High Court, R filed an affidavit, int~r alia, clarifying that she had
authorised her father to act on her bahalf in the matter. The Company
Judge and the Division Judge, however, sustained the objection. Hence this
appeal.
F
'l Allowing the appeal,

HELD (By the Court) : l. The consent given by the GPA holder on
behalf of the member constitutes a valid consent, in view of the ."'~cts and
circumstances of the present case. [394-F]
G
Per Jeevan Reddy, J.

2. Section 399 of the Companies Act, 1956 or sub-section (3) thereof
• does not either expressly or by necessary implication indicate that the
consent to be accorded thereunder should be given by the member per·
sonally. [390-G] H
385
386 SUPREME COURT REPORTS [1994] 3 S.C.R.

A 3. Section 399(3) is no exception to the normal rule or agency. The
normal rule is that whatever a person can do himself, he can do it through
his agent, except certain functions which may he personal in nature or
otherwise do not admit or such delegation. The consent contemplated by
Section 399(3) falls under the general rule and not under the exception.
[391-C]
B
4. Rule 88 or the Companies (Court) Rules 1959 does not in any
manner indicate that the consent should be given by the member personal·
ly. It only requires that the letters of consent signed by the consenting
members shall be annexed to the petition alongwith their names and
addresses and other prescribed particulars. [392·B]
c
Killick Nixon Ltd.v. Bank of India, (1985) 57 Com Cas 831, approved.

Makhan Lal Jain v. Amrit Banaspati Co. Ltd., AIR (1953) All 326,
Charanjit Lal Chowdhury v. Union of India, AIR (1951) SC 41 and R. Subba
Rao v. CIT, Madras, AIR ((1956) SC 604, distinguished.
D 5. The preliminary objection to the maintainability of the application
filed under Section 397/398 is unsustainable in law. [394-F]
!
'
Per Hansaria, J. (concurring) :

E 6. The respondent may be correct on the legal question under con·
sideration. But, in view of the affidavit filed by the member clarifying that
she had authorised her father to act on her behalf in the matter at hand,
the application under Section 397/398 or the Companies Act 1956, as filed
in the court, ought to be taken as one to which she had consented.
[pp. 394-H; 395·A]
.,
F CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1899 of ·'
1981.

From the Judgment and Order dated 27.2.81 of the Orissa High
Court in A.H.0. No. 14 of 1980.

G Vinod Bhagat for the Appellant.

G.S. Srinvivasa Rao for the Respondent.

The Judgment of the Court were delivered by

H B.P. JEEVAN REDDY, J. An application under sections 397/398 of
PUNN!Afl v. JEYPORE SUGAR CO. (JEEVAN REDDY, J.] 387

the Companies Act, 1956 can be filed inter alia by "any member of members A
holding not less than one-tenth of the issued share capital of the Company"
- vide clause (a) of sub-section (1) of section 399. Sub-section (3) of section
399 says that among the members of the Company entitled to make an
application by virtue of sub-section (1) "any one or more of them having
obtained the consent in writing of the rest may make the application on
behalf and for the benefit of all of them".
B

The three appellants in this appeal are the share-holders of the first
,,
)
respondent-company, Jeypore Sugar Company Limited. The Respondents
are its Directors. The first appellant's daughter Smt. V. Rajeshwari also
holds certain shares in the first respondent-company. She is married and C
has been residing in U.S.A. since 1973. Before leaving for the U.S.A., she
executed a General Power of Attorney (G.P.A.) in favour of her father, the
first appellant herein, on 29th November, 1973.

On October 25,.1978, the three appellants herein filed an application D
under sections 397/398 in the High Court of Orissa. To comply with the
req1iirement of one-tenth share-holding, the first appellant gave consent in
writing for and on behalf of Smt. Rajeshwari as her G.P.A. holder. If the
share-holding of Rajeshwari is taken into account and she is deemed to
have consented to the filing of the said application, the requirements of
section 399 are admittedly satisfied. The precise question in this appeal is E
whether the consent given by her G.P.A. holder for and on her behalf -
and not by her personally - is a valid consent within the meaning of
sub-section (3) of section 399

As soon as the application under sections 397/398 was filed by the F
appellants, some of the respondents raised a preliminary objection to the
maintainability of the application on the ground that it does not comply
with the requirement of section 399 inasmuch as the consent given by the
first appellant on behalf of and as the attorney of Smt. Rajeshwari, and not
by herself personally, cannot be treated as 'consent' within the meaning of
section 399 (3). Both the Company Judge, and on appeal the Division G
Bench of the Orissa High Court, upheld the said objection and dismissed
the application on the said preliminary ground alone.

For a proper appreciation of the question arising herein, it would be
appropriate to read section 399 of the Companies Act here : H
388 SUPREME COURT REPORTS (1994] 3 S.C.R.

A "Section 399. Right to apply under sections 397 and 398. - (1)
The following members of a company shall have the right to apply
under section 397 or 398 :

(a) in the case of a company having a share capital, not less
than one hundred members of the company or not less than
B one-tenth of the total number of its members, whichever is less or
any member or members hokjing not less than one-tenth of the
issued share capital of the company, provided that the applicant
or applicants have paid all calls and other sums due on their shares;

(b) in the case of a company not having a share capital, not
c less than one-fifth of the total nnmber of its members.

(2) For the purposes of sub-section (1), where any share or
shares are held by two or more persons jointly, they shall be
counted only as one member.
D
(3) Where any members of a company are entitled to make an
application in virtue of sub-section (1), any one or more of them
having obtained the consent in writing of the rest, may make the
applications on behalf and for the benefit of all of them."

E (Sub-sections (4) and (5) are omitted as unnecessary.)

The relevant clauses of the General Power of Attorney executed by
Smt. Rajeshwari in favour of the first appellant may also be noted:
11
4. To sell, convert, collect, get in, or manage or collect or
F otherwise administer any property movable or immovable which
may be vested in me alone or join with others.

10. To take, prosecute, or defend, all legal proceedings touch-
ing any of my matters in which I am or may here-after interested
or concerned and also if thought fit to compromise, refer to
G
arbitration withdraw or confess judgment or in any such proceed-
ings.

12. To vote at the Meetings of the Company or Companies and
otherwise to act as my proxy or representative in respect of any
H shares or stock or debentures which may hereafter, be acquired
PUNNIAH v. JEYPORE SUGAR CO. (JEEVAN REDDY, J.) 389

by me and for that purpose to sign and execute and proxies or A
other instruments in my name and on my behalf.

13. To appear and act in all the Courts, in the Registration
office and in any Offices ·of the Government, District, Board,
Municipality or any local authority, on my behalf.
B
14. To sign, all the papers to be filed into, Courts or offices on
my behalf and to receive the moneys or other properties from
. , Courts or other offices on my behalf.
'
15. Generally to act my attorney or Agent in relation to the
matters aforesaid and all other matters in which I may be interested
c
or concerned and on my behalf to execute or do all deeds, acts or
things as fully and effectively in all respects as I myself do it if I
personally present. 11

A reading of the several clause of the G.P.A. discloses ex-facie that D
the powers given thereunder are wide enough to take in the power to grant
the consent under section 399 (3). Under the said deed, Smt. Rajeshwari

. empowered her father to manage and otherwise administer her movable
and immovable properties including shares and stock as may be held by
her and to take all proceedings before all the authorities and Courts
E
concerning the said properties and shares. The deed also empowered him
to sign all necessary papers relevant in that behalf and to file them in
courts and generally to do all things as may be necessary to safeguard her
interest. It is obvious that in pursuance of the said deed, it would have been
perfectly legitimate for the first appellant to institute suits, petitions and
other proceedings with respect to the shares or other movable and immov- F
able properties held by Sml. Rajcshwari. Indeed it would well have been
within the power of the G.P.A. holder to have himself figured as an
applicant, acting in the name of Smt. Rajeshwari, in the said application
filed under sections 397/398. If so. there appears no reason why the consent
could not have been given by the Power of Attorney holder which is only G
a step towards protecting the interest of Rajeshwari. It in effect means
joining the filing of the application under section 397/398. May be that
there are some functions/duties which carmot be performed through a
Power of Attorney Agent (e.g., quasi-judicial/judicial functions) but there
appears to be no good reason why the consent contemplated by section H
390 SUPREME COURT REPORTS [1994) 3 S.C.R.

A 399 (3) cannot be given by such Power of Attorney-holder, when indeed
he could himself have filed such an application in the name of and on -.c.
behalf of Smt. Rajeshwari. In this connection we may notice yet another
fact. With a view to counter-act the objection taken by the respondents,
the appellants filed an affidavit of Smt. Rajeshwari wherein she affirmed
B that on her recent visit to India she was apprised by her father of the affairs
of the first respondent-company and of the proposal to file an application
against the first respondent-company and its management alleging oppres-
sion and mismanagement. She affirmed that she had authorised her father
to act on her behalf as her G.P.A. in that behalf and to take all such steps ·;
C as he deemed proper to protect her interest.

The Company Judge and the Division Bench have, however, taken
the view that the consent to be granted by a member of the Company under
section 399 (3) must be a conscious decision of the member himself/herself.
They opined that the member must personally apply his mind to the
D advisability of granting consent and then grant it. In this view of the matter,
they held, the G.P.A.-holder is not competent to grant the consent. Mr.
Sibal, the learned counsel appearing for the respondents, supported the
said reasoning. He submitted that the right or power to grant consent
under section 399 (3) is a personal right which cannot be delegated to or
E exercised by an agent. They very filing of an application under sections
397/398 has serious repercussions on the reputation and credit-worthiness
of the company. It must therefore be insisted that the decision to grant
consent must be a personal decision of the member and not a decision of
his agent. Mr. Sibal further submitted that this is not even a case where
the Power of Attorney expressly authorised the agent to grant consent
F under section 399 (3). The deed in question is merely a General Power of
Attorney and that is not enough.

We are unable to agree with the said reasoning. Section 399 or
sub-section (3) thereof does not either expressly or by necessary implica-
G tion indicate that the consent to be accorded thereunder should be given
by the member personally. As we have emphasised hereinabove, the first
appellant could have filed, or joined as an applicant in an application under
sections 397/398 in the name of and for and on behalf of Smt. Rajeshwari
as her G.P.A. holder. No question of 'consent' would have and could have
H arisen in such a case. If so, it is un-understandable as to why and how he
PUNNIAH v. JEYPORE SUGAR CO. [JEEVAN REDDY, J.] 391

could not have given consent on behalf of Smt. Rajeshwari, the member, A
under section 399 (3). No rule or decision could be brought to our notice
saying that the consent under section 399 (3) cannot be given by a G.P.A.-
holder (who is empowered by the principal to manage and administer the
shares and stocks held by the principal and to take all necessary steps and
proceedings in all Courts, Offices and Tribunals in that behalf). In this B
connection, it is relevant to notice that shares may also be held by a
company or other corporate body. Question may arise what does one mean
by a personal decision by a company or other juristic person. Be that as it
may, we see no warrant for holding that section 399 (3) is an exception to
the normal rule of agency. The normal rule is that whatever a person can C
do himself, he can do it through his agent, except certain functions which
may be personal in nature or otherwise do not admit of such delegation.
The consent contemplated by section 399 (3)falls under the general rule
and not under the exception.

Mr. Sibal brought to our notice Rule 88 of the Companies (Court) D
Rules, 1959 which reads:

"88. Petition under section 397 or 398. - (1) Where a petition
\ is presented under section 397 or 398 on behalf of any members
' of a company entitled to apply under section 399 (1), by any one E
or more of them, the letters of consent signed by the rest of the
members so entitled authorising the petitioner or petitioners to
present the petition on their behalf, shall be annexed to the
petition, and the names and addresses of all the members on whose
behalf the petition is presented shall be set out in a schedule to
the petition and where the company has a share capital, the F
petition shall state whether the petitioners have paid all calls ·and
• other sums due on their respective shares. Where the petition is
I
presented by any member or members authorised by the Central
Government under section 399 ( 4) the order pf the Central
Government authorising such member or members to present the G
petition shall be similarly annexed to the petition. A petition under
section 397 shall be in Form No. 43, and a petition under section
398 shall be in Form No. 44.

(2) A petition under section 397 or 398 shall not be withdrawn "
without leave of the Court, and where the petition has been H
..l_,

392 SUPREME COURT REPORTS [1994] 3 S.C.R.

A presented by a member or members authorised by the Central
Government under sub-section (4) of section 399, notice of the
application for leave to withdraw shall be given to the Central
11
Government.

What the Rule says is that the letters of consent signed by the
B consenting members shall be annexed to the petition alongwith their names
and addresses and other prescribed particulars. The Rule does not in any
manner indicate that the consent should be given by the member personal-
ly.

C Mr. Vinoo Bhagat, learned counsel for the appellant invited our
attention to a decision of the Division Bench of the Bombay High Court
in Killick Nixon Limited and Others v. Bank of India and Others, (1985) 57
Company Cases 831. In this case it is held that the General Power of
Attorney-holder empowered to grant consent under section 399 (3). The
D General Power of Attorney concerned therein is substantially in the same
terms as the one concerned herein. We agree with the said decision.

Mr. Sibal brought to our n<Jtice a few decisions to which we may
advert now. A learned single Judge of Allahabad High Court held in
E Makhan Lal Jain and another v. The Amrit Banaspati Co. Ltd. and others,
A.I.R. (1953) Allahabad 326 that the consent in writing contemplated by
section 153 (C) (3) of Companies Act, 1913 requires that the writing itself
should indicate that the members have affJXed their signatures, having
applied their mind to the question before them and have consented for the
action being taken. (Section 153 (c) (3) of the Companies Act, 1913,
F considered in the said decision broadly corresponds to section 399 (3).
Looking at the sheets of papers allegedly constituting the consent of the
consenting members, the learned Judge held that having regard to their
contents, they cannot be treated as consent letters. Learned Judge held
that the writing itself should indicate that the person has applied his mind
G to the question before him and has given his consent and that where a
petitioner obtained another shareholder's signature on a blank piece of
paper and sought to supplement it by an affidavit or an oral sworn
statement of the member himself or his agent cannot be said to have
complied with the requirements of the section. Nowhere does the decision
H say that such consent must be given by the member personally and that it
PUNNIAH v. JEYPORESUGARCO. [JEEVAN REDDYJ.] 393

cannot be given through his agent. A

Mr. Sibal relied upon the decision of this Court in Charanjit Lal
Chowdhwy v. The Union of India and othm, A.LR. (1951) SC 41 and in
particular the statement in para 78 at page 62. In the said paragraph, this
Court considered the question whether the shares held by a person can be
B
said to be 'property' within the meaning of Articles 31 (2) and 19 (1) (f)
and whether acquisition of the company by the Government amounts to
acquisition of the shares of the shareholders. The petitioner contended that
it does. Repelling the said contention, S.R. Das, J. observed:

11
Thesc rights, as already stated, are, no doubt, privileges in- c
cidental to the ownership of the share which itself is property, but
it cannot, in my opinion, be said that these rights, by themselves,
and apart from the share are, 11 property11 within the meaning of
those articles, for those articles only regard that as "property" which
can by itself be acquired, disposed of or taken possession of. The D
right to vote for the election of directors, the right to pass resolu-
tions and the right to present a petition for winding up are personal
rights flowing from the ownership · of the share and cannot by
themselves and apart from the share be acquired or disposed of
or taken possession of as contemplated by those articles. The
second question is assuming that these rights are by themselves E
"property", what is the effect of the Ordinance and the Act on such
"property". It is nobody's case that the Ordinance or the Act has
authorised any acquisition by the State of this "property" of the
shareholder or that there has in fact been any such acquisition.
The only question then is whether this "property" of the F
shareholder meaning thereby only the rights mentioned above, has
been taken possession of by the State. It will be noticed that by
the Ordinance ~r the Act these particular rights of the shareholder
have not been entirely taken away, for he can still exercise these
rights subject, of course, to the sanction of the Government.
Assuming however, that the letters placed on these rights are G
tantamount to the taking away of the rights altogether, there is
nothing to indicate that the Ordinance or the Act has, after taking
away the rights from the shareholder, vested them in the State or
in any other person named by it so as to enable the State or any
other person to exercise those rights of the shareholder". H
394 SUPREME COURT REPORTS [1994) 3 S.C.R.

A The observations to the effect that the 1ight to present an application
of winding up and the right to vote for the election of Directors are the
personal rights of shareholders must be understood in the context of the
question considered therein. The observations cannot be torn from their
context to hold that the said right cannot be exercised through an agent.
B That was not the issue before the Court. Mr. Sibal also brought to our
notice the decision of this Court in R. Subba Rao v. Commissioner of
income-tax, Madras, A.LR. (1956) S.C. 604. The matter arose under section
26 (A) of the Indian Income Tax Act, 1922 read with Rules 2 and 6 of the
Rule framed in·that behalf. The Rules provided that an application for 1
C renewal of registration of the firm " shall be signed personally by all the
partners". It is because of the said requirement that it was held that
partners must sign such an application personally. In the absence of any
such expression in Section 399 (3), the said decision is of no help to the
respondents herein.

D Mr. Sibal lastly contended that the petition was filed as far back as
m 1978 and that over the years, certain Directors have ceased to be
directors by death or otherwise and that some new directors have come
into Office. An affidavit was handed over across the bar stating that some
of the directors have expired. The affidavit, however, does not say that any
E new directors have come into office or that in their absence the present
appeal is not maintainable. We need not, therefore, express any opinion on
this contention.

For the above reasons, the appeal is allowed and the orders of the
learned Company Judge and the Division Bench impugned herein are set
F
aside. The consent given by the first appellant for and on behalf of Smt.
V. Rajeshwari, as her G.P.A. holder, is a valid consent within the meaning
·~
of sections 399 (3) and, therefore, the preliminary objection to the main- 1
tainability of the application filed under section 397/398 is unsustainable in
law. The application may be proceeded with in accordance with law
G expeditiously, in view of the fact that about fifteen years have been spent
on a preliminary objection alone. No orders as to costs.

HANSARIA, J. I am in respectful agreement with my learned brother
in the conclusion arrived at by him. Though it may be that on the legal
H question under consideration the contention of Shri Sibal is correct for ~he
PUNNIAH v. JEYPORE SUGAR CO. [HANSARIA, J.] 395

reasons advanced by him, as Smt. Rajeshwari made her position clear in A
the affidavit filed in the High Court, to which brother J eevan Reddy has
adverted to, I do think she had authorised her father to act on her behalf
in the matter at hand, and the· application under section 397/398 of the
Companies Act, 1956, as filed in the Court, ought to be taken as one to
which she had consented.
r U.R. Appeal Allowed.