The document is a case brief for Bennett Coleman v. Union of India. It summarizes that the respondents challenged a judgment reconstituting the board of directors of Bennett Coleman company. The court had to determine if the appeal was maintainable. It analyzed sections 408 and 402 of the Companies Act of 1956 to distinguish the powers of the government and courts. The court ultimately pronounced that when acting under sections 398 and 402, the court has wide powers to pass orders and give directions without violating section 255.

1. BENNETT COLEMAN V. UNION OF INDIA
Case Brief
Prepared By:
Akshay Anurag
4th Year student of National University of Study and Research
in Law, Ranchi.

2. CHAPTERISATION:
 Facts
 Issues
 Explanation And Analysis
 Provisions Discussed
 Cases For Reference
 Pronouncement

3. BRIEF FACTS
 The appeals have been proffered by respondent 1 (i.e the
company, represented by its shareholders) and respondent no. 8
and 10 in their capacity as the directors of the company.
 The respondents have challenged the judgment as well as the
order dated 28th August, 1969 wherein the judge directed
reconstitution of the board of directors for the said company in the
manner done for the past 7 years.

4. ISSUES
Whether the appeal can be held
to be maintainable?

5. EXPLANATION AND ANALYSIS
 It is contended on the part of appellants that they has lost right to appeal
on the ground that it has submitted to orders of court.
 The order of the court specifically meant that they would make such
orders fit as it thought based on the circumstances of the case and that
no party would have any right of appeal against such order.
 Thus, the court dwelled into determining whether the right to appeal is
lost to the party b y laying down a test for the same which stated that
the correct test for judging whether the right to appeal be lost is to
ascertain what procedure the original court has followed.
 Should because of the argument the procedure for reaching the
decision be fundamentally different to that usually followed by courts,
the right of appeal would be lost ?

6.  The appellants challenged the reconstitution of the board of directors
contending that it contravened provisions of Section 255 (Appointment of
directors and proportion of those who are to retire by rotation) of the
Companies Act of 1956.
 The order of the judge had immune 2/3rd of directors from retiring by
rotation and further the board had fixed a period of seven years thus
depriving the shareholders of the company a right in the management of
the affairs of the company.
 The appellants contended that by appointing three directors by the
Government was in violation of Section 408 of the Companies Act of 1956.
 The court was not entitled to act in contravention of section 255.

7.  To answer the above contentions, the court distinguished between the powers of the
Government and the powers of the court by looking at Sections 408 and 402 of the
Companies Act of 1956.
 while dealing with the prevention of oppression and mismanagement; some limitations
or restrictions have been set on the Government’s powers.
 Under section 397 read with section 402 of the Companies Act of 1956, power has
been conferred on the court to make such orders as it thinks for.
 The court would judicially exercise with the objective of preventing the affairs of the
company from being conducted in a way that may be prejudicial to public interest.
 Sections 397 and 398 of the Companies Act of 1956 are intended to avoid the winding
up of the company and to keep it going while at the same time providing relief to the
minority shareholders of the company from acts of oppression and mismanagement
and this the court can only do so by interfering with the normal corporate management
of the company.

8. PROVISIONS DISCUSSED
 408.PowersofGovernmenttopreventoppressionormismanagement.
(1)Notwithstanding anything contained in this Act, the Central Government, mayappoint suchnumberofpersons
as the Company Law Board may, by order in writing, specify as being necessary to effectively safeguard the
interests of the company, or its shareholders or the public interests to hold office as directors thereof for such
period, not exceeding three years on any one occasion, as it may think fit, if the Company Law Board, on a
referencemadetoitbytheCentralGovernmentoronanapplicationofnotlessthanonehundredmembersof
the company or of the members of the company holding not less than one- tenth of the total voting power
therein, is satisfied, after such inquiry as it deems fit to make, that it is necessary to make the appointment or
appointments in order to prevent the affairs of the company being conducted either in a manner which is
oppressivetoanymembersofthecompanyorinamannerwhichisprejudicialtotheinterestsofthecompany
ortopublicinterest:Providedthatinlieuofpassinganorderasaforesaid,theCompanyLawBoardmay,ifthe
company has not availed itself of the option given to it under section 265, direct the company to amend its
articles in the manner provided in that section and make fresh appointments of directors in pursuance of the
articlesassoamended,withinsuchtimeasmaybespecifiedinthatbehalfbytheCompanyLawBoard.
(

9. 2) In case the Company Law Board passes an order under the proviso to sub- section (1), it
may, if it thinks fit, direct that until new directors are appointed in pursuance of the order
aforesaid, such number of persons as the Company Law Board may, by order, specify as
being necessary to effectively safeguard the interests of the company, or its shareholders or
the public interest, shall hold office as additional directors of the company and on such
directions, the Central Government shall appoint such additional directors.]1. Subs. by Act 65
of1960,s.154,for"theorderterminatingtheagreement".
(3) For the purpose of reckoning two- thirds or any other proportion of the total number of
directors of the company, any director or directors appointed by the Central Government
undersub-section(1)or(2)shallnotbetakenintoaccount.
(4)A person appointed under sub- section (1) to hold office as a director or a person directed
under sub- section (2)to hold office as an additional director, shall not be required to hold any
qualification shares nor his period of office shall be liable to determination by retirement of
directors by rotation; but any such director or additional director may be removed by the
CentralGovernmentfromhisofficeatanytimeandanotherpersonmaybeappointedbythat
Government in his place to hold office as a director or, as the case may be, an additional
director.1.Ins.byAct65of1960,s.155.

10.  (5)NochangeintheBoardofdirectorsmadeafterapersonisappointedordirectedtoholdofficeasa
director or additional director under this section shall, so long as such director or additional director
holdsoffice,haveeffectunlessconfirmedbytheCompanyLawBoard.]
 (6)NotwithstandinganythingcontainedinthisActorinanyotherlawforthetimebeinginforce,where
anypersonisappointedbytheCentralGovernmenttoholdofficeasdirectororadditionaldirectorofa
company in pursuance of sub- section (1) or sub- section (2), the Central Government may issue
such directions to the company as it may consider necessary or appropriate in regard to its
affairs3 and such directions may include directions to remove an auditor already appointed and to
appoint another auditor in his place or to alter the articles of the company, and upon such directions
being given, the appointment, removal or alteration, as the case may be, shall be deemed to have
comeintoeffectasiftheprovisionsofthisActinthisbehalf havebeencomplied withwithoutrequiring
anyfurtheractorthingtobedone.]
 (7)The CentralGovernmentmayrequirethe persons appointedasdirectors or additionaldirectorsin
pursuanceofsub-section(1)orsub-section(2)toreporttotheCentralGovernmentfromtimetotime
withregardtotheaffairsofthecompany.]

11.  397. Application to Company Law Board for relief in cases of
oppression.
(1) Any members of a company who complain that the affairs of the company2 are being
conducted in a manner prejudicial to public interest or] in a manner oppressive to any
member or members (including any one or more of themselves) may apply to
the1 Company Law board] for an order under this section, provided such members have a
rightsotoapplyinvirtueofsection399.
(2) If, on any application under sub- section (1), the Company Law Board] is of opinion-(a) that
the company' s affairs are being conducted in a manner prejudicial to public interest or] in a
manneroppressivetoanymemberormembers;and
(b) that to wind up the company would unfairly prejudice such member or members, but that
otherwise the facts would justify the making of a winding- up order on the ground that it was
just and equitable that the company should be wound up; theCompany Law Board] may
withaviewtobringingtoanendthematterscomplainedof,makesuchorderasitthinksfit.

12.  398. Application to Company Law Board for relief in cases of mismanagement.
(1) Any members of a company who complain-(a) that the affairs of the company 3 are
being conducted in a manner prejudicial to public interest or] in a manner prejudicial to
the interests of the company; or
(b) that a material change (not being a change brought about by, or in the interests of, any
creditors including debenture holders, or any class of shareholders, of the company) has
taken place in the management or control of the company, whether by an alteration in its
Board of directors, or of its managing agent or secretaries and treasurers 1 or manager],
or in the constitution or control of the firm or body corporate acting as its managing
agent or secretaries and treasurers, or in the ownership of the company' s shares, or if it
has no share capital, in its membership, or in any other manner whatsoever, and that by
reason of such change, it is likely that the affairs of the company 2 will be conducted in a
manner prejudicial to public interest or] in a manner prejudicial to the interests of the
company; may apply to the 3 Company Law Board] for an order under this section,
provided such members have a right so to apply in virtue of section 399.

13. (2) If, on any application under sub- section (1), the 3 Company Law Board] is
of opinion that the affairs of the company are being conducted as aforesaid
or that by reason of any material change as aforesaid in the management
or control of the company, it is likely that the affairs of the company will be
conducted as aforesaid, the 3 Company Law Board] may, with view to
bringing to an end or preventing the matters complained or apprehended,
make such order as it thinks fit.

14.  402. Powers of Company Law Board on application under
section 397 or 398.
Without prejudice to the generality of the powers of the Company
Law Board] under section 397 or 398, any order under either
section may provide for-
(a) the regulation of the conduct of the company' s affairs in future;
(b) the purchase of the shares or interests of any members of the
company by other members thereof or by the company;
(c) in the case of a purchase of its shares by the company as
aforesaid, the consequent reduction of its share capital;
(d) the termination, setting aside or modification of any
agreement, howsoever arrived at, between the company on

15. (e) the termination, setting aside or modification of any
agreement between the company and any person not referred
to in clause (d), provided that no such agreement shall be
terminated, set aside or modified except after due notice to
the party concerned and provided further that no such
agreement shall be modified except after obtaining the
consent of the party concerned;
(f) the setting aside of any transfer, delivery of goods, payment,
execution or other act relating to property made or done by or
against the company within three months before the date of
the application under section 397 or 398, which would, if
made or done by or against an individual, be deemed in his
insolvency to be a fraudulent preference;
(g) any other matter for which in the opinion of the 1 Company
Law Board] it is just and equitable that provision should be
made.

16. CASES FOR REFERENCE
 Mohinidevi Choraria & another v. Apsara Cinema Pvt. Ltd &
others, (1988 (4) BCR 597)
In this case court opined that:
“The future conduct of Company’s affairs can be regulated by the order
made under Section 397 or 398 of the Act and not by an independent
proceeding. This does not, however, mean that such an order under
section 402 cannot be made subsequent to the termination of the petition
under Section 397 or 398 of the Act. An order regulating the conduct of the
Company’s affairs in future may be made under section 402 after the
disposal of the petition under Section 397 or 398 of the Act, provided, the
circumstances of the case show that by its order under sections 397 or
398, the Court had retained seisin over the matter. Whether the Court has
retained seisin depends upon the facts and circumstances of each case.”

17.  The cases of :
1) Life Insurance Corporation of India v. Haridas Mundhra and others, A.I.R.
1959 Cal. 695.
2) Lord Krishna Sugar Mills Ltd., v. Smt. Abnash Kaur, (1974)44 Company
Cases 210.
3) Bhagwati Prasad Bajoria and others v. British India Corporation Ltd.,
Kanpur and others, A.I.R. 1964 All. 75,
illustrate that the order under Section 397 and or 398 by its very
nature must leave the doors open for future application under
section 402 of the Act.

18. PRONOUNCEMENT
 While acting under section 398 and section 402 of the
companies act of 1956, the court has ample jurisdiction and
very wide powers to pass such orders and give directions as
to thinks fit to achieve that object and the same will not be
violative of section 255.

19. REFERENCES
 www.scconline.com
 https://indiankanoon.org/
 http://www.mondaq.com
 https://www.manupatrafast.com