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Jayesh Ramniklal Doshi vs Carbon Corporation Ltd. And ...

on 6 February, 1992

Bombay High Court Jayesh Ramniklal Doshi vs Carbon Corporation Ltd. And ... on 6 February, 1992 Equivalent citations: 1992 (2) BomCR 588, (1992) 94 BOMLR 706 Author: D Dhanuka Bench: D Dhanuka JUDGMENT D.R. Dhanuka, J. 1. The plaintiff is a shareholder of Carbon Corporation Limited, the first defendant-company. Defendant No. 2, Shri Mukul Harkisandass Dalal, has been functioning as a managing director and as a director of the first defendant-company for the past several years. Defendants Nos. 3 to 10 are other directors of the first defendant-company. Defendant No. 11 is the secretary of the first defendant-company. 2. The plaintiff contends that defendant No. 2 is not entitled to function as a managing director of the first defendant-company by reason of the statutory prohibition contained in section 267(a) of the Companies Act, 1956 (1 of 1956). The plaintiff contends that defendant No. 2 ceased to be a director of the first defendant-company by reason of the provisions contained in section 283(1)(d) of the said Act. The plaintiff contends that defendant No. 2 was adjudged as an insolvent by this court in insolvency proceedings adopted by creditors of defendant No. 2 (i.e., Insolvency Petition No. 60 of 1988 and Insolvency Petition No. 46 of 1985) and defendant No. 2 has incurred the statutory disqualification from functioning as a director as well as a managing director of the company by reason of the order of adjudication dated April 20, 1989, passed in Insolvency Petition No. 60 of 1988 and the order of adjudication dated October 21, 1991, passed in Insolvency Petition No. 46 of 1985. Defendant No. 2 contends that the orders of adjudication passed by this court adjudging defendant No. 2 as an insolvent have been set aside by the Hon'ble Supreme Court and the appellate orders relied on by defendant No. 2 have the effect of wiping out the orders of adjudication with retrospective effect as if the orders of adjudication were never passed. Thus, the decision of this notice of motion will depend upon the interpretation and effect of orders of the Hon'ble Supreme Court on the orders of adjudication already passed and the applicability or non-applicability of section 267 and section 283 of the Companies Act I of 1956. 3. The plaintiff has filed this suit for a declaration and an injunction so as to prevent defendant No. 2 from functioning as a managing director of defendant No. 1 company as well as to prevent defendant No. 2 from functioning as a director of defendant No. 1 company and for various consequential and connected reliefs. The plaintiff has taken out the present notice of motion for interim reliefs almost in the same terms, There is no dispute between the parties in respect of relevant facts. 4. Before I refer to the relevant facts having a bearing on this notice of motion, it is necessary to refer to the relevant provisions of the Companies Act I of 1956. Section 267 of the said Act reads as under: 267. Certain persons not to be appointed managing directors. - No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its managing or wholetime director who (a) is an undischarged insolvent, or has at any time been adjudged an insolvent; (b) suspends, or has at any time suspended, payment to his creditors, or makes, or has at any time made, composition with them; or (c) is, or has at any time been, convicted by a court of an offence involving moral turpitude. Section 385 of Companies Act 1 of 1956 reads as under:
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Jayesh Ramniklal Doshi vs Carbon Corporation Ltd. And ... on 6 February, 1992

"385. Certain persons not to be appointed managers. - (1) No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its manager who (a) is an undischarged insolvent, or has at any time within the preceding five years been adjudged an insolvent; or (b) suspends, or has at any time within the preceding five years suspended, payment to his creditors; or makes, or has at any time with the preceding five years made, a composition with them; or (c) is, or has at any time within the preceding five years been, convicted by a court in India of an offence involving moral turpitude. (2) The Central Government may, by notification in the Official Gazette, remove the disqualification incurred by any person in virtue of clause (a), (b), or (c) of sub-section (1), either generally or in relation to any company or companies specified in the notification. Section 385(2) of the Act empowers the Central Government to remove the disqualification incurred by a manager by virtue of the provisions contained in section 385(1) of the Act. In the case of a managing director, the provisions of the Act are more stringent as no power is conferred on the Central Government or any other authority to remove the disqualification similar to the power conferred under section 385(2) of the Act in the case of managers incurring similar disqualification. In the case of managing directors, a person who has at any time been adjudged as an insolvent is disqualified from being appointed or continued as managing director of a company for his lifetime whereas in the case of a manager such disqualification operates only if the person concerned was adjudged as an insolvent within the preceding five years. Section 267 of the Act was enacted on the recommendation of the joint Committee on the Companies Bill, 1953. The Joint Committee explained the difference between section 267 and section 385 of the Act in the following words : "The Committee feel that the provision should be stiffer in the case of the managing director than in the case of a manager and have, therefore, omitted the provision found in original clause 285(2) (section 385) for the removal of the disqualification imposed by the clause. The limitation of the disqualification to a period of five years has also been removed. The legislative history of this provision is, therefore, of considerable significance and points out the legislative object in enacting section 267 of the Act. The provisions of section 267 of the Act are mandatory. I shall refer to section 283 of the Act a little later. 5. This notice of motion, inter alia, involves consideration of the following questions : (a) Whether defendant No. 2 was at any time adjudged as an insolvent and is, therefore, not entitled to be appointed or continued as a managing director of the company by reason of the prohibition contained in section 267 of the companies Act I of 1956 ? (b) Whether by reason of the appellate order dated February 5, 1990, passed by the Hon'ble Supreme Court in Civil Appeal No. 106B of 1990, the order of adjudication dated April 20, 1989, passed by this court in Insolvency Petition No. 60 of 1988 was wiped out with retrospective effect so as to make the said original order of adjudication non-existent from inception ? (c) Whether the above-referred appellate order has the effect of terminating or discharging the insolvency of defendant No. 2 from a future date subject to defendant No. 2 making payments of the stipulated amounts to the petitioning creditor within the stipulated time as set out in the order of the Hon'ble Supreme Court ?

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Jayesh Ramniklal Doshi vs Carbon Corporation Ltd. And ... on 6 February, 1992

(d) Whether by reason of the appellate order dated November 20, 1991, passed in Special Leave Petition No. 17818 of 1991, the order of adjudication of defendant No. 2 as an insolvent passed on October 21, 1991, in Insolvency Petition No. 46 of 1985, was wiped out with retrospective effect so as to make the said order of adjudication non-existent from inception or whether the said order sets aside the insolvency of defendant No. 2 merely from a future date, i.e., prospectively ? At this stage, I do not propose to refer to section 283 of the Companies Act 1 of 1956, as the plaintiff's case based on the said section is proposed to be dealt with separately. 6. It is now necessary to refer to the material facts having a bearing on the subject-matter of this notice of motion. The relevant facts are not disputed and are not disputable in view of both parties having relied on admitted documents, the dispute being only in respect of interpretation of the order of the Hon'ble Supreme Court and the applicability of the relevant provisions of the Companies Act I of 1956. The contest is between the plaintiff and defendant No. 2. The rest of the defendants have sub-mitted to the orders of the court. The material facts are as under : (a) On May 12, 1988, this court passed a decree on admission in Summary Suit No. 2409 of 1985 in favour of one Advance Paints Pvt. Ltd. and against defendant No. 2. By the said decree, defendant No. 2 was ordered and decreed to pay to the said decree-holder a sum of Rs. 12,32,397.60 together with interest as set out therein. Defendant No. 2 did not pay the decretal amount for a very long time. Defendant No. 2 defaulted. (b) Section 9(1) of the Presidency Towns Insolvency Act provides that the debtor shall be deemed to have committed an act of insolvency, if the debtor fails to comply with the insolvency notice within the prescribed period, i.e., 35 days, from the service of the insolvency notice unless the debtor satisfies the court that he has a counter-claim or set off against the creditor which equals or exceeds the decretal amount. Section 9(1) was inserted in the said Act by the Boinbay Act XV of 1939. (c) On July 5, 1988, this court, as an Insolvency Court, issued Insolvency Notice No. N/118 of 1988 passed on the abovereferred decree dated May 12, 1988, whereby defendant No. 2 was called upon to pay the amount specified in the insolvency notice within a period of 35 days from the service thereof. The said insolvency notice was served on defendant No. 2 on July 13, 1988. On August 18, 1988, the period of 35 days expired. Defendant No. 2 did not pay the amount specified in the said insolvency notice. According to the petitioning creditor in the said insolvency proceeding, i.e., Insolvency Petition No. 60 of 1988, defendant No. 2 committed an act of insolvency by reason of not satisfying the decretal debt and by reason of not complying with the insolvency notice based tliereon within the period of 35 days from the service of notice as aforesaid. On September 28, 1988, Messrs. Advance Paints Pvt. Ltd. filed the said Insolvency Petition No. 60 of 1988 in this court seeking adjudication of defendant No. 2 as an insolvent. (d) By an order dated April 20, 1989, M. P. Kenia J. adjudged defendant No. 2 as an insolvent and directed that all the estate and effects of the said insolvent shall vest in the Official Assignee of Bombay. It was, however, directed that the said order of adjudication shall not become operative until May 3, 1989. The question which arises for consideration of this court in this notice of motion is whether this order of adjudication dated April 20, 1989, was wiped away with retrospective effect and became non-existent on the appellate order being passed by the Hon'ble Supreme Court on February 5, 1990, to which reference would be soon made. (e) Being aggrieved by the said order, defendant No. 2 preferred an appeal before the Division Bench of this court, being Appeal No. 526 of 1989. Pending admission of the said appeal, operation of the order of adjudication dated April 20, 1989, was stayed by Lentin and Mehta JJ. on April 27, 1989, subject to defendant No. 2 complying with certain conditions. By an order dated June 7, 1989, the said Appeal No. 526 of 1989 was dismissed. However by the very same order, the Hon'ble Division Bench stayed the operation of order of adjudication dated April 20, 1989, for a period of four weeks on the terms and conditions set out in the said
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Jayesh Ramniklal Doshi vs Carbon Corporation Ltd. And ... on 6 February, 1992

order. (f) On June 28, 1989, defendant No. 2 preferred a petition for special leave to appeal before the apex court, being petition for Special Leave to Appeal (Civil) No. 7938 of 1989. By an order dated July 5, 1989, the Division Bench of this court stayed the publication of advertisements till July 11, 1989. By an order dated July 10, 1989, the Hon'ble Supreme Court extended the stay of publication of advertisement up to July 28, 1989. The stay of operation of the order of adjudication was not granted or extended by the apex court. The order of adjudication became "operative" on the expiry of four weeks from June 7, 1989. (g) On July 21, 1989, the Hon'ble Supreme Court passed the following order : "There will be stay of insolvency proceedings up to October 23, 1989. Upon the petitioner depositing a sum of Rs. 50,000 (rupees fifty thousand) with the Prothonotary and Senior Master of the Bombay High Court by September 11, 1989, and another sum of Rs. 50,000 (rupees fifty thousand) by October 23, 1989, the stay will continue until the disposal of the appeal by the Division Bench in the High Court of Bombay. . . ." By the abovereferred order, further proceedings in insolvency were stayed. However, the order of adjudication had already become operative and the assets and effects of defendant No. 2 had already vested in the official assignee as a consequence thereof. It is not necessary to reproduce the other portions of the said order, a copy whereof is annexed as exhibit 'C', to the plaint. It is, however, necessary to state in passing that defendant No. 2 had taken out Notice of Motion No. 345 of 1989 in Summary Suit No. 2409 of 1985 for stay of execution of decree dated May 12, 1988, passed in the said suitx By an order dated March, 14, 1989, Pendse J. had dismissed the said notice of motion. Against the dismissal of this notice of motion concernin g stay of execution of the decree, defendant No. 2 had filed an appeal, being Appeal No. 1270 of 1989 and the said appeal was pending on the day when the abovereferred order dated July 21, 1989, was passed by the Hon'ble Supreme Court. (h) On September 5, 1989, a further order was passed by the Hon'ble Supreme Court for a direction to the effect that certain amounts receivable by defendant No. 2 in the Bombay City Civil Court Suit No. 3006 of 1985 would be collected by the official assignee representing the estate of defendant No. 2 and out of that amount, the official assignee shall deposit a sum of Rs. 50,000 in the insolvency proceedings forthwith. This order clearly indicates that the official assignee was in charge of the estate of defendant No. 2 at the material time. 7. The interpretation of order dated February 5, 1990, passed by the Hon'ble Supreme Court disposing of Civil Appeal No. 1068 of 1990, arising out of Special Leave Petition No. 7938 of 1989, is directly relevant for purpose of disposal of this notice of motion. The said order reads as under "Special leave granted. We direct that the amount of rupees one lakh deposited with the Prothonotary and Senior Master of the Bombay High Court. in Insolvency Suit No. 60 of 1988 be handed over to respondent No. 1, Messrs. Advance Paints Pvt. Ltd., or to their duly authorised attorney. The balance amount of rupees one lakh and fifty thousand would be paid to respondent No. 1 by September 30, 1990. On this balance amount of Rs. 1,50,000 interest at the rate of 12 per cent per annum shall be paid from February 1, 1988, to September 30, 1990, or earlier date if the amount is paid. In case of default of payment of the sum of rupees one lakh and fifty thousand and the interest due thereon as aforesaid, respondent No. 1 will be at liberty to initiate and revive the insolvency proceedings against the appellant. In the meantime, the insolvency proceedings shall remain stayed. On payment of the aforesaid money the insolvency proceedings will stand discharged.
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Jayesh Ramniklal Doshi vs Carbon Corporation Ltd. And ... on 6 February, 1992

With these observations, the civil appeal is disposed of. No order as to costs." 8. I have given my anxious consideration to the rival submissions made at the Bar in respect of interpretation and effect of the said order dated February 5, 1990. Shri Makhija, learned counsel for defendant No. 2, has submitted that by virtue of the said order dated February 5, 1990, the order of adjudication dated April 20, 1989, passed in Insolvency Petition No. 60 of 1988 became non-existent With retrospective effect, i.e., from inception. Shri Makhija, learned counsel for defendant No. 2, has submitted that the original order of adjudication has merged with the appellate order and the effect of the appellate order was that the original order of adjudication was set aside retrospectively and from inception. Shri S. D. Parekh, learned counsel for the petitioner, has submitted that the appellate order dated February 5, 1990, merely terminates or discharges the order of adjudication and insolvency proceedings from a future date subject to defendant No. 2 complying with the condition of payment to the creditor concerned as specified in the said order. To my mind, the question of interpretation of this order is plain and simple. The appellate order does not state that order of adjudication ought not to have been passed by M. P. Kenia J. The appellate order does not state that defendant No. 2 did not commit an act of insolvency, or that the petition for adjudication of defendant No. 2 as an insolvent was liable to fail. It is within the power of the appellate court to grant indulgence or permit the debtor to make payment of the admitted debts by instalments and pass an order terminating or discharging the order of adjudication with effect from the date of the debtor making payments. The most relevant portion of order dated February 5, 1990, passed by the apex court reads as under : "On payment of she aforesaid money the insolvency proceedings will stand discharged." 9. The question to be asked is as to whether the order of adjudication is wiped away with retrospective effect or whether the order of adjudication stands terminated on payment of stipulated amounts. The question to be asked is - Can it be said that the order of adjudication was erroneously passed or erroneously implemented or acted upon until February 5, 1990 ? To my mind, the appellate order does not state that the order of adjudication was erroneously passed or erroneously acted upon. The appellate order merely grants an indulgence to the debtor to pay the decretal amount by instalments fixed. The question to be asked is - Can it be said that defendant No. 2 was at no time adjudged an insolvent within the meaning of the latter part of section 261(a) of the Act ? The answer to these questions is obvious. 1 hold that defendant No. 2 was adjudged an insolvent by the order of adjudication dated April 20, 1989, passed in Insolvency Petition No. 60 of 1988 and the order of adjudication became operative on the expiry of the period of four weeks from June 7, 1988. During the pendency of the appeal before the Supreme Court, stay of publication of advertisement was extended by order dated July 10, 1989. The said order dated July 10, 1989, cannot be construed to mean stay of operation of the order of adjudication. By subsequent orders dated July 21, 1989, September 5, 1989, and February 5, 1990, further proceedings in insolvency were stayed subject to the official assignee being authorised to collect certain amounts from a creditor of defendant No. 2 as more particularly set out in the order of the Supreme Court dated September 5, 1989. On disposal of the appeal by order dated February 5, 1990, further proceedings in pursuance of the order of adjudication remained stayed with a provision for ultimate discharge of such proceedings, provided the amounts specified in the said order were paid by defendant No. 2 to the creditor concerned within the stipulated time. It is not possible to construe the said order dated February 5, 1990, to mean that the order of adjudication passed by this court stood set aside from inception. It is not possible to accept the submission of defendant No. 2 that the court must proceed on the footing as if defendant No. 2 was never adjudged as an insolvent and the said order of adjudication was never passed. That is not the intent, purport or content of the order dated February 5, 1990. 10. In a given situation, the appellate court may be satisfied that the debtor has committed an act of insolvency as alleged by the petitioning creditor and the order of adjudication passed by the trial court is justified on facts and in law. Even in such a situation, the appellate court may grant an indulgence or chance to the debtor to pay the debt by instalments and provide for "discharge" of the order of adjudication and insolvency proceedings on the payment being completed. In such a case, it cannot be said that the order of discharge of insolvency operates with retrospective effect as if the debtor was never adjudged insolvent and the order of
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Jayesh Ramniklal Doshi vs Carbon Corporation Ltd. And ... on 6 February, 1992

adjudication is to be treated as non-existent from inception. An order of discharge of insolvency does not mean setting aside of the insolvency from inception. In this setting, the appellate order would merely mean that the order of adjudication is terminated from the date of completion of payments specified in the appellate order. In other words, discharge of insolvency does not mean nullification of insolvency from inception. It cannot be forgotten that law makes a marked distinction between discharge of insolvency and nullification thereof from inception. In my judgment, the effect of the appellate order would have to be determined in the light of a true interpretation thereof. I, therefore, hold that in this case the appellate order of the Supreme Court does not have the effect of wiping out the order of adjudication as if it never existed at any point of time. 11. In passing, I must refer to an interesting and instructive judgment of the Supreme Court in the case of Vidya Charan Shukla v. Purshottam Lal Kaushik, , which appears to have no direct relevance to the problem for consideration of the court in this case. The ratio of the said judgment is not applicable to this case and it cannot be extended by analogy. In Vidya Charan Shukla's case, , Sarkaria J., speaking for the Bench, held that acquittal of the returned candidate before the decision of the election petition pending in the High Court had with retrospective effect made his disqualification nonexistent, even at the date of the scrutiny of nominations. When an appellate court sets aside an order of conviction and passes an order of acquittal in substitution thereof, the order of acquittal has the effect of retrospectively wiping out the disqualification as completely and as effectively as if it never had existed. The statement of law to the above effect can be deduced also from Manni Lal's case, . In the present case, the ratio of these cases can have no application particularly when the appellate court has "discharged" the insolvency from a future date on the condition of the debtor paying the balance of the debt by instalments. In a criminal case, it is not permissible to the court to acquit an accused from a future date. When an appellate court passes an order of acquittal, it follows that the accused was never guilty of the offence with which he was charged and the order of conviction passed by the trial court was always erroneous. In insolvency jurisdiction, in a given situation, the appellate court can discharge the insolvency or the order of adjudication from a future date provided the insolvent complies with the conditions prescribed at a future date. Such an order of appellate court cannot be construed to mean that the order adjudicating the debtor as an insolvent was never passed or that it was erroneous when passed or that it is wiped out with retrospective effect. The two situations are thus not comparable and the appellate order in,the instant case must be construed on its terms in the context of the facts of the case having regard to the terminology used in the order. 12. In the light of the above discussion, I hold that the statutory prohibition contained in section 267 of the Act operates and no company can appoint or continue the appointment of defendant No. 2 as managing director. I hold that the order of adjudication stood discharged or terminated from a future date as set out in order dated February 5, 1990, and not retrospectively from inception. 13. The plaintiff has contended in paragraph 10A of the plaint that defendant No. 2 was once again adjudged as an insolvent on April 20, 1989, by an order passed by I. G. Shah J. in Insolvency Petition No. 46 of 1985 filed by Messrs. Ramniklal Mohanlal, another decree-holder in a sum of Rs. 20,27,176.99. An appeal filed by defendant No. 2 against the said order was dismissed by a Division Bench of this court. By an order dated November 20, 1991, the Hon'ble Supreme Court set aside the order passed by the High Court with a provision for revival thereof if the amount of instalments fixed under the said order remained unpaid. It is not necessary to express any opinion on the interpretation of order dated November 20, 1991, passed by the Honourable Supreme Court in Special Leave Petition No. 17818 of 1991 arising from the order passed by the Division Bench of this court in Appeal No. 1055 of 1991 concerning the order of adjudication passed by I. G. Shah J. on October 21, 1991, in view of my findings on the interpretation and effect of the order of adjudication dated April 20, 1989, passed in Insolvency Petition No. 60 of 1988.
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Jayesh Ramniklal Doshi vs Carbon Corporation Ltd. And ... on 6 February, 1992

14. I shall now refer to another ground of disqualification urged by the plaintiff in the plaint based on section 283 of the Act. Section 283(1) of the Act provides that the office of a director shall become vacant if the director is adjudged an insolvent. Sub-section (2) of section 283 provides that such disqualification shall not take effect for a period of thirty days from the date of the adjudication.' Sub-section (2)(b) of section 283 further provides that such disqualification shall not take effect where any appeal or petition is preferred within thirty days against the order of adjudication or until the expiry of seven days from the date on which such appeal or petition is disposed of. Sub-section (2)(c) of section 283 of the Act provides that such disqualification shall not take effect where further appeal is filed by the director concerned within a period of seven days against the appellate order. The provisions of section 283 of the Act are somewhat different from the provisions contained in section 267 of the Act. Section 267 of the Act does not contain any provision analogous to section 283(2) of the Act. The relevant portion of section 283 of the Act is extracted hereafter for ready reference : "283. Vacation of office by directors. - (1) The office of a director shall become vacant if. . . (d) he is adjudged an insolvent...." "283(2). Notwithstanding anything in clauses (d), (e) and @) of sub-section (1), the disqualification referred to in those clauses shall not take effect (a) for thirty days from the date of the adjudication, sentence or order; (b) where any appeal or petition is preferred within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date on which such appeal or petition is disposed of; or (c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction, or order, and the appeal or petition, if allowed, would result in the removal of the disqualification, until such further appeal or petition is disposed of." 15. Shri S. D. Parekh, learned counsel for the plaintiff, has contended that the vacancy in the office of a director as contemplated under section 283(1) arose as defendant No. 2 did not file special leave petition before the Hon'ble Supreme Court within seven days of the dismissal of Appeal No. 526 of 1989 by Lentin and Chaudhari JJ. on June 7, 1989. To my mind, Shri Makhija is right when he contends that defendant No. 2 filed a Special Leave Petition against order dated June 7, 1989, in time, i.e., on June 28, 1989, though not within seven days from June 7, 1989, inasmuch as operation of the order of adjudication was stayed for four weeks under the abovereferred order. dated June 7, 1989. In view of my finding on the interpretation of the final and ultimate order dated February 5, 1990, passed by the Hon'ble Supreme Court while disposing of Civil Appeal No. 1068 of 1990, it shall have to be held that vacancy in the office of director held by defendant No. 2 did arise on February 5, 1990. By virtue of the said order dated February 5, 1990, insolvency proceedings remained stayed during the interregnum, i.e., till the same were "discharged on payment" of the stipulated amount by defendant. No. 2 to the petitioning creditor. In this view of the matter, for the purpose of considering applicability of section 293 of the Companies Act 1 of 1956, it shall have to be held that defendant No. 2 ceased to be a director of defendant No. 1-company on February 5, 1990. Defendant No. 2 ceased to be managing director of the company on expiry of four weeks from the order dated June 7, 1989, when the order of adjudication became operative. Section 267 of the Act is absolute and not subject to any provision analogous to section 283(2) of the Act. It is, however, obvious on a reading of section 283 of the Act that defendant No. 2 can be appointed or elected as a director afresh in accordance with law and the articles of association of the company. In other words, the disqualification incurred by defendant No. 2 prevents defendant No. 1-coinpany from continuing the appointment of defendant No. 2 "as managing director" of the company for all time to come, but does not prevent defendant No. 1 from appointing or electing defendant No. 2 as a director of the company in future in accordance with the provisions of the Act
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Jayesh Ramniklal Doshi vs Carbon Corporation Ltd. And ... on 6 February, 1992

and in accordance with the provisions of the articles of association of the company. 16. In the result, I pass the following order : (1) Pending hearing and final disposal of the suit, defendant No. 2 is restrained by an order and injunction of this court from holding himself out to be the managing director or director of defendant No. 1-company and from functioning as managing director or director of defendant No. 1. (2) Pending hearing and final disposal of the suit, defendants Nos. 1 and 3 to 11 are also restrained from permitting defendant No. 2 to act as managing director or director of defendant No. 1. (3) Pending hearing and final disposal of the suit, defendant No. 2 is restrained from receiving any salary, perquisites, benefits or privileges from defendant No. 1 as managing director or director of defendant No. 1. 17. It is hereby clarified that the order of injunction restraining defendant No. 2 from functioning as a director of defendant No. 1 shall not operate if defendant No. 2 is hereafter appointed or elected as a director of defendant No. 1 in accordance with the provisions of the Companies Act I of 1956 and the provisions contained in the articles of association of defendant No. 1-company, as section 283 of the said Act merely provides for occurring of a vacancy in the office of a director on the specified event taking place and does not prescribe any bar in respect of fresh appointment. 18. The plaintiff has made out a strong prima facie case in support of the injunction sought. The question of lax argued before this court turns on a construction of the orders of the Supreme Court dated February 5, 1990, and November 19, 1991. 19. Having regard to the facts and circumstances of the case, there shall be no order as to costs of the notice of motion. 20. Learned counsel for defendant No. 2 applies for stay of operation of this order for a period of four weeks. Having regard to the strong prinia facie findings recorded by the court and the statutory prohibition, contained in section 267 of the Act, it is not possible to accept this request and grant blanket stay. I would have considered the request of defendant No. 2 for partial stay in respect of surrender of amenities, if any, enjoyed by defendant No. 2 in his capacity as managing director, subject to defendant No. 2 not functioning as a director or managing director of defendant No. 1-company during the interregnum, but no such course is acceptable to defendant No. 2. Having held that defendant No. 2 is prohibited by law from functioning as a managing director or director of the company and having relied on the order of adjudication passed by this court, I am not able to persuade myself to grant the request made by learned counsel for defendant No. 2. Accordingly the application for stay is rejected. 21. Issue of certified copy is expedited.

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