ORDER
1. This review petition is against the order dated April 2, 1991, passed by this Bench in Appeals Nos. 2 to 5/111/SRB of 1990, under Section 111 of the Companies Act, 1956, and References Nos. 2 to 5/22A/SCRA/SRB of 1990 under Section 22A(4)(c) of the Securities Contracts (Regulation) Act, 1956. The petitioners herein were not parties to the said proceedings, but the order-dated April 2, 1991, passed in the said proceedings has placed restrictions on the petitioners regarding the disposal of their equity shareholdings in Vikrant Tyres Limited (hereinafter referred to as “the company”). Being aggrieved by the said order, the petitioners have filed this review petition. The order dated April 2, 1991, of this Bench, inter alia, provides that none of the review petitioners holding shares in the company shall dispose of their shares without making a reference to the Company Law Board. The relief sought for in this review petition is to modify the order dated April 2, 1991, in so far as the order requires the petitioners not to dispose of their shares in the company without making a reference to the Company Law Board. This review petition has been filed under Regulation 27 of the Company Law Board Regulations, 1991, along with an application under regulations 43 and 44 of the said Regulations for enlargement of time to file the review petition. It is mentioned in the petition and the application for enlargement of time that the order dated April 2, 1991, was received by one of the petitioners on April 19, 1991, and as the order has placed a restriction on the petitioners regarding the disposal of shares of the company, the petitioners wanted to have a joint discussion among themselves in order to decide the course of action to be taken by them. It is also stated that the petitioners had organised joint meetings among themselves and had also taken legal advice from their counsel and this had taken time for the applicants to prepare and file the review petition. It is further stated that the delay in filing the said review petition beyond the period of 60 days prescribed under Regulation 27 is neither wanton nor wilful. Copies of the review petition along with an application for enlargement of time have been served on the respondents and respondents Nos. 1, 2 and 4 have filed their replies opposing the review petition.
2. The matter came up for hearing first on September 16, 1991, when, after hearing counsel/advocates appearing for the respective parties, an interim order was passed by this Bench whereby the petitioners were allowed to file a single review petition and directions were also issued for filing of affidavits in opposition by the respondents and the matter was filed for further hearing on September 20, 1991.
3. When the matter came up for hearing on September 20, 1991, a memo was filed on behalf of the petitioners. It is mentioned in the said memo that, if this Bench decides that the Company Law Board Regulations, 1991 (hereinafter referred to as “the Regulations”), are not applicable to the review petition filed by the petitioners, the same may be treated as having been filed under Rule 45 of the Company Law Board (Bench) Rules, 1975 (hereinafter referred to as “the Rules”). Shri S.G. Prabhakharan, advocate, appearing for the review petitioners contended that although the order of this Bench was passed under the rules on April 2, 1991, the review petition could only be made under the Regulations as the review petition has been filed after the said Regulations came into force from May 31, 1991. He urged that the law of limitation is a procedural law and the provisions existing on the date of the review petition shall apply. He relied on the following decisions of the courts to support his’ contentions ;
4. C. Beepathuma v. Shankaranarayana, AIR 1965 SC 241, Mani Devi v. Ram Prasad, AIR 1968 Pat 70 and Shankarappa v. Union of India, AIR 1957Hyd 21.
5. Shri S.B. Mukherjee, senior counsel appearing for respondents Nos. 1 and 2 opposed the contentions made by Shri Prabhakharan. In this case, the order dated April 2, 1991, of this Bench was received by one of the petitioners on April 19, 1991, and as per the Rules in force on that date, a review petition could be filed within 90 days from the date of the order. However, before the period of 90 days expired, the Regulations came into force from May 31, 1991, and, under the Regulations, a review petition could be made within 60 days from the date of the order. In this case, the order was passed on April 2, 1991, and 90 days expired on July 1, 19,91, and, under the Rules, the petitioners could file the review petition within that date. In the Regulations which came into force from May 31, 1991, the time for filing of review petition was reduced to 60 days and, under the said Regulations, the petitioners could have filed the review petition by June 1, 1991. The review petitioners filed this petition on July 24, 1991, and, therefore, the same has been filed beyond the time prescribed under the Rules as also the Regulations.
6. Opposing the application for enlargement of time, Shri Mukherjee brought to the notice of this Bench the provisions of regulations 27(2) and 43 and pointed out that the time fixed for filing of review petition cannot be enlarged by this Bench by invoking its powers under Regulation 43. On the other hand, Shri Prabhakharan, relying on the provisions of regulations 43, 44 and 48, contended that this Bench has power to enlarge the time on merit. Under Regulation 27(2), no application for review shall be made after the expiry of a period of 60 days from the date of the order. Regulation 43, inter alia, provides that, where any period is fixed by or under the Regulations for doing any act or filing of any documents or representations, the Bench may, in its discretion, enlarge such period, even though the period fixed by or under the Regulations may have expired. The review petition is no doubt a representation by an aggrieved party against an order made by the Bench and filing of such review petition is also the doing of any act and,- therefore, the enlargement of time under Regulation 43 shall also include a review petition under Regulation 27. The review petitioners are public financial institutions within the meaning of Section 4A of the Companies Act, 1956, and since the order dated April 2, 1991, has affected their future dealings for disposal of shares of the company, it is but natural that they wanted to consult among themselves to decide the course of action to be taken in the matter. It is in that context that they had organised joint meetings among themselves and also taken legal advice from their counsel and this has resulted in delay in filing the review petition. The order of this Bench dated April 2, 1991, was received by one of the review petitioners on April 19, 1991, and, in all fairness, the time of 60 days or 90 days has to be counted from that date. Under the Rules, the review petitioners had time till July 18, 1991, for filing the review petition and in fact they have filed the review petition on July 24, 1991. However, under the Regulations, the time for filing of the review petition expired on June 18, 1991. After taking into consideration the facts and circumstances of the case, we are of the view that the delay in filing the review petition is bona fide and, accordingly, we find that there is sufficient cause justifying the exercise of discretionary power of the Bench for enlargement of time under Regulation 43 and we hereby extend the time for the filing of the review petition.
7. On the main review petition, Shri Mukherjee urged that the review petitioners herein cannot be considered to be a party under Clause (b) of Regulation 2(1) and, accordingly, they have no right to make this review petition under Regulation 27. He contended that, under Regulation 27, any party considering itself aggrieved by an order made by the Bench may apply for a review of the said order and the word “party”, as defined in the regulations, means a person who files an application or petition before a Bench, the respondent, Registrar of Companies or the regional director and includes any person who has a right under the Companies Act, 1956, to make suggestions or objections. Shri Mukherjee pointed out that since the petitioners were not parties before this Bench in the proceedings under Section 111 of the Companies Act, 1956, and Section 22A of the Securities Contracts (Regulation) Act, 1956, they have no right to make a review petition. Shri Prabhakharan, on the other hand, contended that, as shareholders of the company, his clients have an unfettered right to deal with the shares of the company held by them and the order passed by this Bench has affected the rights of his clients in disposing the shares of the company and, as shareholders, his clients are entitled to make suggestions or objections and, accordingly, his clients are definitely “party” within the meaning of Regulation 2(1)(p). Shri Prabhakharan also pointed out that as per the decisions of the Supreme Court in L/C of India v. Escorts Ltd. [1986] 59 Comp Cas 548, statutory bodies like the Life Insurance Corporation, etc., as shareholders of a company can exercise the same rights as are available to other shareholders. It is a well-settled principle of rule of law that, if a person is adversely affected by any order of the court or tribunal, he is certainly an aggrieved party and the principles of natural justice demand that such a person cannot be left without a remedy. No order of a court or Tribunal should be allowed to adversely affect the rights of persons who are not parties before it and if they do, such persons should not be left without a remedy and the court or tribunal cannot be left powerless to undo the wrong done to him. Such an aggrieved person may move the court or tribunal on the footing that he is bound by the judgment or order and, being aggrieved, may seek review of that judgment or order, as the case may be. The review petition may be entertained and heard after notice to all the parties concerned. In that event, he cannot have a grievance that he was not heard. It is mentioned in the petition that the petitioners, in their market operations, sell and buy shares of many companies including those of the fourth respondent company in their daily operation and the restrictions put by the order of this Bench would create practical difficulties in their day-to-day operations if the petitioners have to approach this Bench every time they sell shares of the fourth respondent company. Although the review petitioners were not parties to the proceedings in which the Bench passed its order on April 2, 1991, the said order has affected their business dealings to some extent and, therefore, they should be considered to be an aggrieved party entitled to make a review petition under Regulation 27 and, accordingly, we are of the view that this review petition is maintainable.
8. The brief facts of the case in Appeals Nos. 2 to 5/111/SRB/90 and References Nos. 2 to 5/22A/CSRA/SRB/90 arc as under :
Three private limited companies of the Chhabria group being respondents Nos. 1 to 3 in this review petition, acquired 5,55,200 shares of the company which account for 5.34% equity shares of the company and the registration of these shares was refused by the board of directors of the company on the ground that this is likely to bring about a change in the composition of the board of directors which would be prejudicial to the interest of the company and also to public interest. The board of directors of the company consisted of the nominees of the Karnataka State Industrial Investment and Development Corporation Limited (KSIIDC) holding 43.92% shares of the company and of other financial institutions and nationalised banks whose holdings are about 30% shares of the company. As the total shareholdings of the State Financial Corporation and other financial institutions and nationalised banks are a little over, 73% it has been observed in the order of this Bench that, unless any of these bodies try to join hands with the Chhabria group, there is no apprehension that the acquisition of a little over 5% of the shares of the company would destabilise the management. It is also observed that, as long as these major bodies do not part with their holdings in the company to anyone else, there is no basis for any apprehension of take-over of the company. Since the board of the company consisted of the nominee-directors of the State Financial Corporation and public financial institutions who took the decision to refuse registration of transfer of the impugned shares, it was observed in the said order that these financial institutions are taking an active interest in managing the affairs of the company. It was further observed in the order that the financial institutions are themselves apprehensive of take-over and, in that context, this Bench ordered that none of these financial institutions holding shares in the company shall dispose of their shares without making a reference to the Company Law Board. The controlling block of shares in the company is held by the State Financial Corporation and public financial institutions and nationalised banks and their total holdings are a little over 73%. The directors of the company are nominees of these Government bodies corporate. Being major shareholders only these bodies corporate can decide the management pattern of the company. The Chhabria group of companies which have acquired a little over 5% shares of the company cannot bring about any change in the management of the company as long as the Government bodies corporate do take an active interest in the affairs of the company.
9. In the review petition, it is submitted that the observations about the financial institutions taking an active interest in the management of the company and the restriction on the disposal of their holdings in the company have been made without taking into account the facts that the petitioners were not parties to the proceedings before this Bench and no notice was given nor any opportunity was afforded to them to explain that such an order should not be passed against them. It is further submitted that rules of natural justice demand that before an order is passed against any person by any judicial or quasi-judicial authority, an opportunity should be granted to such person to represent his case. It is also mentioned that the observations made in the order of this Bench to the effect that the financial institutions are taking an active interest in managing the affairs of the company is likely to give an impression that they are taking an active part in the day-to day management of the company which is not correct. It is also submitted that the review petitioners have no active role in the day to day management of the company. It is further mentioned that the review petitioners, in their market operations, sell and buy shares of many companies and, accordingly, the order passed by this Bench would create practical difficulties in their day-to day operation if they have to approach the Bench everytime they sell shares of the company. Shri Prabhakaran reiterated the submissions made in the petition. He further submitted that the sale of shares by his clients is done as part of their regular day-to-day business activities on commercial considerations and the restriction imposed by the order of this Bench has caused real and practical difficulties in their business dealings. At the hearing, Shri Prabhakharan read out the policy notes received from his clients governing sale of shares. He, subsequently, submitted a verified petition containing the policy notes of all the petitioners governing sale of shares. “It is mentioned in the said policy notes that the financial institutions like the Industrial Development Bank of India Ltd., the Industrial Finance Corporation of India and the Industrial Credit and Investment Corporation of India sell shares of the companies acquired in the course of their project financing operation mainly with the object of recycling of funds. The sales are generally effected in the market in small lots through approved brokers at different centres. Sales in bigger lots are made to investment institutions, mostly to the Unit Trust of India, Life Insurance Corporation and the General Insurance Corporation through direct negotiation at their request. It is also mentioned that while dis investing shares in the market, care is taken that such shares do not disturb management control or affect market sentiments unduly. The policy notes of the Life Insurance Corporation of India, the Unit Trust of India and the United India Insurance Company Limited indicate that they normally sell shares on commercial considerations with a view to making profit. The sale transaction normally takes place in small lots through recognised brokers and, whenever there is definite information with regard to any attempt at take-over of a company, sale of shares of such a company is avoided. All the review petitioners in their policy notes have referred to the recent Government guidelines on institutional transactions in shares. It is mentioned that, in terms of the said guidelines, whenever such a sale exceeds one per cent. of the paid-up capital of the company, the information regarding the transaction and the price shall be disclosed to the general public by the institution concerned through a press release within a day of the transaction and information is also to be sent to the Securities Exchange Board of India and the concerned stock exchange. Shri Prabhakharan urged that, since buying and selling of shares of listed companies through recognised brokers is the normal business transactions of the petitioners and in selling shares, they take care that such sale does not disturb the management control of the company and, also in view of the recent guidelines of the Government of India for disclosure of information regarding any sale of over one per cent. of the paid-up capital of the company, this Bench may be pleased to modify the order dated April 2, 1991, in so far as the order requires the petitioners not to dispose of their shares in the company without making a reference to the Company Law Board.
10. In the statement of objections filed by respondents Nos. 1, 2 and 4, it is mentioned that the petitioners have not given sufficient grounds which will justify this Bench to review its order. Respondents Nos. 1 and 2, in their objection, have denied that the petitioners do not take active interest in the management and affairs of the company and also denied that, by virtue of the order passed by this Bench, practical difficulties would be created in the day-to-day operations by the petitioners or in sale of shares of the company. Shri Mukherjee, appearing for respondents Nos. 1 to 3, reiterated the submissions made in the statement of objections filed by his clients.
11. Respondent No. 4, i.e., the company, in its statement of objections, has also stated that it has preferred a writ petition before the Hon’ble High Court of Karnataka challenging the constitutional validity of Section 22A of the Securities Contracts (Regulation) Act, 1956, and the order dated April 2, 1991, passed^by this Bench and the said writ petition has been admitted by issue of rule nisi on April 18, 1991, and is pending adjudication. It is further submitted that, as the matter is seized by a higher judicial body, it would be inappropriate for this Bench to consider and grant the application for review. In reply to a query from this Bench, Shri Naganand, appearing for the company, submitted that no ad interim order of injunction has been granted by the Hon’ble High Court of Karnataka while issuing rule nisi. In view of this position, we are of the view that the said writ petition will not stand in the way of our disposing of this review petition. The company has also opposed the review petition on the grounds that the review petitioners have not made out any case for grant of relief in the review petition apart from pleading practical difficulties and the so-called violation of the rules of natural justice and the petitioners have not placed any material to show whether and if so how, they are affected by the directions given by this Bench. Shri Naganand read out some passages from the books entitled Natural Justice by Paul Jackson and Wade Administrative Law, 6th edition, regarding the principles of natural justice and contended that rules of natural justice have not been violated in this case simply because the petitioners have not been given a hearing before the passing of the order by this Bench. Shri Naganand produced copies of relevant pages from both the books. It is seen that both the authors have quoted the following observations made by Tucker L.J. in Russel v. Duke of Norfolk [1949] 1 All ER 109, 118 (CA) :
“The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject-matter that is being dealt with and so forth.”
12. Shri Prabhakaran, on the other hand, appearing for the petitioners, relying on the following decisions of the court, contended that since the order of this Bench has affected the rights of his clients to dispose of the shares of the company, they should have been given an opportunity to represent their case in writing or otherwise and thereby the principles of natural juslice have not been complied with :
Shri Bhagwan v. Ram Chand, AIR 19G5 SC 1767 and Amritsar Sugar Mills Co. Ltd, v. Union of India, AIR 1983 Delhi 337.
13. In the matter of Amritsar Sugar Mills Co. Ltd., AIR 1983 Delhi 337, the Division Bench of the Delhi High Court, inter alia, observed that it is now well settled that the principles of natural justice have to be complied with if the action taken results in adversely affecting a civil right and this rule requires that a person who may be adversely affected by a decision should be given a reasonable opportunity of being heard. It is further observed that it is not necessary that, in every case, a personal hearing has to be afforded but the least which has to be done is to give an opportunity to the person to represent his case in writing or otherwise.
14. We have carefully considered the submissions made in the petition and in the statements of objection and also the arguments adduced by counsel/advocates appearing for the respective parties. The review petition has been filed under Regulation 27. Sub-regulation (1) of the said regulation reads as under :
“Any party considering itself aggrieved by an order made by the Bench on account of some mistake or error apparent on the face of the record desires to obtain a review of the order made against him, may apply for a review of the order to the Bench which had made the order.”
15. Under the above sub-regulation, a review petition shall lie against an order made by the Bench on account of some mistakes or errors apparent on the face of the record. The review petitioners have mentioned that the observations made by this Bench that the financial institutions are taking an active interest in managing the affairs of the company is likely to give an impression that they are taking an active part in the day-to-day management of the company which is not correct as they have no active role in the day-to-day management of the company. We do not consider that the observations made in the order will give an impression that the financial institutions are taking an active part in the day-to-day management of the company. In corporate management, the affairs of a company are managed by a board of directors and the managing director of the company also functions under the superintendence, control and direction of the board of directors. There is no denial of the fact that the majority of the directors of the company are the nominees of the public financial institutions and the State Financial Corporation and, in that sense, it is correct to say that the financial institutions are taking an active interest in managing the affairs of the company. The fourth respondent, i.e., the company, in its statement of objections, has stated that the averments of the petitioners that they are not taking any active part in the day-to-day management of the company is not entirely correct. It is further stated that some of the petitioners and other financial institutions are represented on the board of directors of the company by their nominee directors and are also represented on the audit sub committee and the management committee of the board of directors. Another ground taken by the review petitioners is that the rules of natural’ justice were not followed by this Bench while passing the order as they were not given any opportunity to represent their case. As some of the petitioners and other financial institutions were represented on the board of directors of the company through their nominee-directors which took the decision to refuse registration of transfer of the impugned shares, this Bench in its order, observed that the financial institutions are themselves apprehensive of takeover. The reference under Section 22A(4)(c) of the Securities Contracts (Regulation) Act, 1956, was made to this Bench by the company with the approval of its board of directors which consisted of the nominees of the petitioners and through the company they got an opportunity to represent their case and, therefore, it cannot be said that the rules of natural justice were not followed. It is true that individual notice was not given to all the financial institutions but they got an opportunity to make their representation through the company. In any case, we have entertained the review petition and heard all the parties concerned and it cannot be said now that the rules of natural justice have not been complied with.
16. The reasons for which the petitioners seek this Bench to review the order is that the order passed by this Bench would create practical difficulties in their day-to-day operation if the petitioners have to approach this Bench every time they sell shares of the company. The restriction was imposed in view of the apprehension of a take-over bid expressed by the company. The shareholding pattern of the company shows that financial institutions and Government companies hold about 75 per cent. shares of the company and of the remaining 25 per cent. shares, companies of the Chhabria group hold five per cent. Even if the Chhabria group of companies acquire the remaining 20 per cent. of the public shareholdings, their holdings will be only one-fourth of the total shareholdings as the remaining three-fourth shares are held by financial institutions and with 25 per cent. holdings, it will not be possible for the Chhabria group of companies to bring about a change in the management of the company as long as the financial institutions holding the major block of shares keep the Chhabria group of companies out of the management. The order passed by this Bench on April 2, 1991, has not put any restriction regarding acquisition of 20 per cent. of the public shareholdings in the company. The financial institutions in this review petition now want us to delete the directions requiring them not to dispose of their shares in the company without making a reference to the Company Law Board. If this restriction is removed, there will be no control over the disposal of shares held by the financial institutions including the petitioners herein and this may bring about a change in the management of the company. The main grievance of the petitioners is that the sale of shares in small lots is their normal day-to-day business transaction and there will be multiplicity of proceedings before this Bench if they have to come every now and then and obtain permission for such day-to-day transaction. In the policy notes of the Industrial Development Bank of India and Industrial Credit and Investment Corporation of India, it is mentioned that they do not sell shares in bigger lots other than to the investment institutions like the Unit Trust of India, Life Insurance Corporation and General Insurance Corporation and such sale does not disturb the management control. It is mentioned in the policy notes of the Unit Trust of India that, in case the company apprehends any possibility of cornering the management/ takeover bid by any group, it may inform the same in advance to the institutions and, in that case, the respective institution would consider if any change in the policy is called for. All the petitioners in their policy notes have stated that whenever there is definite information with regard to any attempt for take-over of a company, the sale of shares of such company is avoided. The order passed by this Bench does not affect the rights of the petitioners to sell” their holdings in the company, but a reference is required to be made to the Company Law Board so that it can examine whether, by such disposal, there is any possibility of a substantial change in the controlling interest of the company and thereby effecting a change in its management. It appears that the petitioners are also very much conscious of their responsibilities in the matter of any change in the management of a company while disinvesting shares and care is taken to ensure that such disinvestment does not disturb management control of the company. The recent guidelines issued by the Government of India regarding disclosure of sale in excess of one per cent. of the paid-up capital of a company are applicable to the petitioners. The petitioners in their normal day-to day transactions sell shares in small lots and they are facing practical difficulties in such dealings as they have to get the permission of this Bench every now and then. Among the petitioners, the present holding of United India Insurance Company Limited is less than one per cent. the holding of the Industrial Credit and Investment Corporation of India and nationalised banks who are not petitioners herein is also less than one per cent. Among the remaining four petitioners, the holding of the Unit Trust of India is a little over 18 per cent. and the holding of others is between 2 and 4 per cent. In the course of hearing, this Bench asked Shri Prabhakaran to sound the financial institutions about the feasibility of joint discussion to dispose of one per cent. of shares of the company. From the policy notes of the respective petitioners, it appears that each is guided by its own policy regarding purchase and sale of shares and it will not be feasible to have joint discussion among themselves to dispose of one per cent. shares of the company. In view of the practical difficulties expressed by the financial institutions, we are of the view that it is necessary to modify our order so that their day-to day transactions relating to sale of shares in small lots is not affected. Accordingly, we modify our order dated April 2, 1991, to the following extent :
“The Unit Trust of India and the Karriataka State Industrial Investment and Development Corporation who hold 18.48 and 43.92 per cent. of shares of the company respectively, shall be able to sell shares of the company in small lots through approved brokers up to one per cent. of the paid-up capital of the company each without making a reference to the Company Law Board.
The Life Insurance Corporation, the Industrial Finance Corporation of India and Industrial Development Corporation of India, United India Insurance Company Limited and nationalised banks, shall be able to sell shares of the company up to ten per cent. of their present holdings, in each case in small lots, through approved brokers without making a reference to the Company Law Board,
The Industrial Development Bank of India, the Industrial Finance Corporation of India and the Industrial Finance and Investment Corporation of India can sell shares of the company in bigger lots to investment institutions, viz., the Unit Trust of India, the Life Insurance Corporation and the General Insurance Corporation through direct negotiation without making a reference to the Company Law Board.”
17. The Karnataka State Industrial Investment and Development Corporation, by a letter, sought permission of this Bench to pledge shares of the company held by it with the Unit Trust of India for borrowing the special deposit assistance. The said permission is granted subject to the condition that the Unit Trust of India shall not dispose of the said shares except in accordance with the terms of this order.