1. By this chamber summons, defendants Nos. 1 and 2 who are directors of Britannia Industries Ltd., the seventh defendant, in the suit seek that :
(i) the names of plaintiffs Nos. 1 and 2 be struck out and/or deleted from the cause title of the plaint filed in the suit;
(ii) the portions of the pleadings put forth in the plaint as more particularly mentioned in the schedule to the chamber summons be struck out and/or deleted; and
(iii) the verification clause of the plaint filed be struck out and plaint be returned as defective.
2. The first plaintiff is a company, incorporated under the laws of the United Kingdom. The first plaintiff holds 50% of the share capital of a company called "Associated Biscuits International Holdings Ltd." (for short, "ABIH") which is also incorporated under the laws of the United Kingdom. ABIH holds 100% of the share capital of a company called "Associated Business International Ltd." (for short, "ABIL") a company also incorporated under the laws of the United Kingdom. ABIL in turn holds directly or indirectly through Nat West Nominees Ltd. (for short, "Nat West") 38.15% of the issued capital of the seventh defendant-company. The second plaintiff though not a shareholder is a director of the seventh defendant-company having been nominated on the board of directors of the seventh defendant by the first plaintiff. The third plaintiff holds 294 shares in the seventh defendant-company. Defendants Nos. 1 to 6 are directors of the seventh defendant-company. The first defendant is the chairman of the board of directors of the seventh defendant-company. The second defendant is the wife of the first defendant. Apart from defendants Nos. 1 to 6, the board of directors of the seventh defendant-company comprises Mr. J. Gagrat, Mr. Sawai Bhavani Singh of Jaipur, Mr. Pierre Bonnet, Mr. Claude Le Gouis, who are not parties to the suit, and the second plaintiff. The seventh defendant-company is a public limited company duly incorporated under the provisions of the Indian Companies Act, 1913, and is an existing company under the provisions of the Companies Act, 1956. The eighth defendant is a partnership firm. The ninth defendant is a company incorporated in Singapore. The tenth defendant is also a company incorporated in the British Virgin Islands. The eleventh defendant is also a company incorporated in Liberia. The twelfth defendant is brother-in-law of the first defendant and was appointed as general manager, exports of the seventh defendant in the year 1991.
3. According to the plaintiffs, as averred in the plaint filed, defendants Nos. 1 to 6 who were at all material times directors of the seventh defendant company are interested and/or concerned in or with defendants Nos. 9, 10 and 11. Defendants Nos. 1 to 6 are directors of the seventh defendant company arranged for :
(i) all transactions of export of cashew and soya meal by the seventh defendant to be routed only through defendants Nos. 9, 10 and 11 :
(ii) a sum of as much as approximately Rs. 25 crores to be advanced and made available to themselves by the seventh defendant in the guise of providing six months unsecured interest free/concessional rate credit only to defendants Nos. 9, 10 and 11;
(iii) the profit that would have normally been earned by the seventh defendant on all such transactions to be diverted to themselves through defendants Nos. 9, 10 and 11.
4. It is further averred that defendants Nos. 1 to 6 have illegally, wilfully and fraudulently suppressed and failed to disclose their interest and concern in or with defendants Nos. 9, 10 and 11 and the transactions undertaken by the seventh defendant with defendants Nos. 9, 10 and 11 and as a consequence of non-disclosure of interest, defendants Nos. 1 to 6 have vacated their office as directors of the seventh defendant-company under the provisions of the Companies Act, 1956. It is also averred that since defendants Nos. 1 to 6 and 12 have caused wrongful loss to the seventh defendant and have caused wrongful gains for themselves by or under the contracts and/or arrangements between the seventh defendant on the one hand and defendants Nos. 9, 10 and 11 on the other hand, defendants Nos. 1 to 6 and 12 be ordered and decreed to pay the sum of US dollar 8 million equivalent to Rs. 25 crores to the seventh defendant.
5. The plaintiffs have filed the suit, inter alia, praying for a declaration that defendants Nos. 1 to 6 have vacated their office as directors of the seventh defendant-company; for an order restraining defendants Nos. 1 to 6 from acting as directors of the seventh defendant-company; for an order directing defendants Nos. 1 to 6 and 12 to furnish particulars and accounts of the transactions undertaken by the seventh defendant with defendants Nos. 9, 10 and 11; for accounts of the loss caused by defendants Nos. 1 to 6 and 12 to the seventh defendant and the wrongful gains that they have allegedly secured for themselves; for an order and decree against defendants Nos. 1 to 6 and 12 for payment of such amounts as compensation and damages as may be ascertained; for an order and decree against defendants Nos. 1 to 6 and 12 for payment of the sum of US dollar 8 million equivalent to Rs. 25 crores to the seventh defendant; for interim and ad interim reliefs specified in the plaint filed.
6. It may be mentioned here that on behalf of plaintiffs Nos. 1 and 2, the plaint filed has been signed by one R. A. Shah who is a practising solicitor of this court and a partner in the firm of Crawford Bayley and Co., solicitors and advocates for the plaintiffs in the suit. The plaint filed has been verified by the said R. A. Shah in his capacity as constituted attorney of plaintiffs Nos. 1 and 2. Even the vakalatnama filed in the suit has been signed by the said R. A. Shah on behalf of plaintiffs Nos. 1 and 2 and accepted by him as partner in the said firm of Crawford Bayley and Co. The plaint filed has been countersigned by the said firm of Crawford Bayley and Co., as advocates for the plaintiffs through the said R. A. Shah as partner therein. It may also be stated that though according to the plaintiffs, the first plaintiff controls 50% interest in 38.15% of the issued capital of the seventh defendant company through ABIL and ABIH, neither the first plaintiff nor the second plaintiff is a shareholder/member of the seventh defendant company and the second plaintiff, without being a shareholder, is a nominee of the first plaintiff on the board of directors of the seventh defendant company.
7. In the facts of the case the following points arise for consideration :
(i) Whether the names of plaintiffs Nos. 1 and 2 are liable to be struck out and/or deleted from the cause title of the plaint under the provisions of Order 1, rule 10 of the Code of Civil Procedure, 1908;
(ii) Whether the portions of the pleadings in the plaint as more particularly set out in the schedule to the chamber summons are liable to be struck out under the provisions of Order 6, rule 16 of the Code of Civil Procedure, 1908;
(iii) Whether the plaint filed has been properly and validly signed on behalf of plaintiffs Nos. 1 and 2. If not, the effect thereof;
(iv) Whether the plaint filed has been properly and validly verified. If not, the effect thereof.
8. Before proceeding to consider the abovementioned points, it may be mentioned here that initially the first plaintiff on the one hand and plaintiffs Nos. 2 and 3 on the other hand, intended to appear in the proceedings of this chamber summons through separate set of learned counsel. Mr. Ram Jethmalani, learned counsel, has mentioned his appearance for and on behalf of the first plaintiff whereas Mr. Nariman, learned counsel, has mentioned his appearance for and on behalf of plaintiffs Nos. 2 and 3. However, in view of the objection taken on behalf of defendants Nos. 1 to 7 and 12 to the effect that where more persons than one joined as co-plaintiff in a suit, each of the plaintiffs has not got an individual right of engaging his own advocate or counsel and conducting the case independently of the other plaintiffs, Mr. Ram Jethmalani, while conceding the said proposition, made a statement to the effect that his appearance along with Mr. Nariman, Mr. Chinoy, Mr. Seervai and Mr. Diwan be recorded to show cause for and on behalf of all the plaintiffs.
9. Mr. Mehta on behalf of defendants Nos. 1 and 2, Mr. Vahanvati on behalf of defendants Nos. 3, 4, 5, 6 and 12 and Mr. Chagla on behalf of the seventh defendant have submitted that plaintiffs Nos. 1 and 2 not being shareholders of the seventh defendant company and their names admittedly not being entered on the register of members of the seventh defendant company as holders of shares, have no locus standi to file and/or maintain the suit and as such, their names are liable to be struck out and/or deleted from the cause title of the plaint filed in the suit under the provisions of Order 1, rule 10(2) of the Code of Civil Procedure, 1908. It is further submitted that the second plaintiff in his capacity merely as director of the seventh defendant company is not entitled to institute and/or maintain the suit, he, in that capacity having no locus standi to do so. Initially, Mr. Ram Jethmalani and later on Mr. Chinoy on behalf of the plaintiffs have submitted that the joinder of the present three plaintiffs is perfectly in accord with Order 1, rule 1 of the Code of Civil Procedure, 1908. On behalf of the plaintiffs, it is further submitted that it is not denied by either of the defendants that the third plaintiff has a cause of action. It is not denied that the plaint does disclose a cause of action and the defendants have not sought any relief under Order VII, rule 11 of the Civil Procedure Code. It is further submitted on behalf of the plaintiffs that once the cause of action is admitted, it may inhere in the first plaintiff as in their submissions, the first plaintiff is a substantial shareholder by reason of having 50% interest in 38.15% of the issued capital of the seventh defendant company, the remaining half being vested in the first defendant and his nominees. It is further submitted that a derivatives action has been held to lie at the instance of the beneficial owner of shares. In the submission of Mr. Chinoy, it is a corollary of the principle that when the wrong is done to the company and its assets are in jeopardy and the company is or is likely to be damnified, somebody else can project the company's interest, if the company is in the control of the wrongdoers. That somebody should not be a busybody or a mere interloper. He may be a formal shareholder, he may be a real owner of shares, though technically not on the register of shareholders, or he may be a director, who is not a party to the wrongdoing. Mr. Chinoy has further submitted that the cause of action in the suit substantially rests on the breach of the statutory provisions of sections 299 and 295 of the Companies Act, 1956, by defendants Nos. 1 to 6 and so long as the person suing has some interest, the civil remedy is available to him. It is further submitted that section 153 of the Companies Act, 1956, does not prevent a company from choosing to recognise equitable interest. It certainly does not constitute a bar on the court's power to recognise equitable interest in shares. Mr. Chinoy further submitted that a director is bound to protect the interest of the company. His acquiescence is wrong doing lands him in personal liability. A director, to save himself from personal liability, must take all steps including taking legal action. When a company director files a suit, he is not enforcing a right, he is performing a duty. It is also submitted that Order 1, rule 10 of the Civil Procedure Code has nothing to do with cause of action or want of it. The rule is a part of Order 1, the heading of which is "parties to suit". This expression is not synonymous with a plaintiff who has no cause of action or a plaintiff wrongly suing. The expression "improperly joined" in Order 1, rule 10(2) refers to the joinder of a plaintiff in breach of Order 1, rule 1. Hence, in the submission of Mr. Chinoy, Order 1, rule 10(2) applies not where a plaintiff's suit is to be dismissed but where a plaintiff has to be dismissed from the suit. It is further submitted that on any view being taken both plaintiffs Nos. 1 and 2 are necessary and proper parties, and they have been properly joined in the suit as the plaintiffs.
10. Order 1, rule 1 and Order 1, rule 10(2) of the Civil Procedure Code, read as under :
Order 1, rule 1 :
"All persons may be joined in one suit as the plaintiffs where -
(a) any right to relief in respect of, or arising out of, the same act or transaction or series of acts or transactions is alleged to exist in such persons, whether jointly, severally or in the alternative; and
(b) if such persons brought separate suits, any common question of law or fact would arise."
Order 1, rule 10(2) :
"The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and complete to adjudicate upon and settle all the questions involved in the suit, be added."
11. Under Order 1, rule 1, two or more persons may be joined as the plaintiffs in a suit if the right to relief alleged to exist in each plaintiff arises from the same act or transaction and there is a common question of law or of fact. Therefore, before a person can be joined as a plaintiff in a suit, it is necessary that a right to relief claimed therein must exist in favour of such person. Under Order 1, rule 10(2) of the Civil Procedure Code, the court can at any stage of the proceedings order that the name of any party improperly joined, whether as the plaintiff or the defendant, be struck out. The impropriety referred to in this rule is in introducing a party who has no right to relief claimed in the suit. The court, under this rule, has jurisdiction to strike out the names of any person whose presence in the suit is likely to cause embarrassment. Defendants Nos. 1 and 2 are not seeking dismissal of the suit in the chamber summons. They are only seeking that the names of plaintiffs Nos. 1 and 2 who are improperly joined, having no right to the reliefs claimed in the suit, be struck out. As held by the Madras High Court in the case of Jujishti Panda v. Lakshmana Dola Behara , under Order 1, rule 10(2), it is the plaintiffs who are dismissed from the suit and not that the suit is dismissed against them. If plaintiffs Nos. 1 and 2 have a right to the reliefs claimed in the suit, their names from the cause title cannot be struck out. However, if plaintiffs Nos. 1 and 2 have no right to the reliefs claimed in the suit, their names have got to be struck out from the cause title at this stage since it can be done at any stage of the proceedings. Order XIV, rules 1 and 2 of the Civil Procedure Code do not and cannot render statutory provisions and wordings contained in Order 1, rule 10 and Order VI, rule 16 of the Civil Procedure Code nugatory. In the case of Dhartipakar Madan Lal Agarwal v. Shri Rajiv Gandhi, , it has been held by the Supreme Court that pleadings can be struck out at any time under Order VI, rule 16 of the Civil Procedure Code.
12. This leads us to consider as to whether the first plaintiff and/or the second plaintiff are the shareholders and/or members of the seventh defendant company having right to the reliefs claimed in the suit.
13. Under section 2(27) and section 41 of the Companies Act, 1956 (for short, "the said Act"), a member is defined. Section 2(27) provides as follows :
"'member', in relation to a company, does not include a bearer of a share-warrant of the company issued in pursuance of section 114."
Section 41 provides as follows :
"(1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members.
(2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members, shall be a member of the company."
14. Under Indian company law, the word "member" is synonymously used with the word "shareholder". Therefore, it is only a person who is on the register of members of the company who is a member/shareholder of the company. Neither the first plaintiff nor the second plaintiff is a person who is on the register of members of the seventh defendant company. Hence, plaintiffs Nos. 1 and 2 are not shareholders/members of the seventh defendant company. Further, under the said Act, certain rights are given only to members, e.g., the right to vote, apply for winding up, get notice of annual general meetings, to remain present at the annual general meeting, to receive dividend, to apply for investigation of company affairs, to inspection and to form part of quorum. Plaintiffs Nos. 1 and 2 not being members cannot exercise any of the aforesaid rights nor any other rights conferred only on members by the said Act. It is now well settled law that no claims by one whose name is not on the register of members of a company be made against the company. In the case of Howrah Trading Co. Ltd. v. CIT , it has been held by the apex court that the words "member", "shareholder" and "holder" of a share have been used interchangeably under the provisions of the Indian Companies Act, 1913. It is further held that the words "holder of a share" are really equal to the word "shareholder" and the expression "holder of a share" denotes, in so far as the company is concerned, only a person who, as a shareholder, has his name entered on the register of members. The Supreme Court in the case of Balkrishan Gupta v. Swadeshi Polytex Ltd., has further held that even if a receiver is appointed of shares he has no right to vote and only the member on the register has the right to vote. It has also been held that ownership of a share denotes the relation between a person and any right that is vested in him. As held by the Supreme Court in the case of Narandas Karsondas v. S. A. Kamtam, , in India, there is no distinction between legal and equitable estates. The law of India knows nothing of that distinction between legal and equitable property in the sense in which it was understood when equity was administered by the Court of Chancery in England. Relying upon Rani Chhatra Kumari v. Mohan Bikram Shah , it has been held that under the Indian laws, there can be but one owner that is, legal owner. In Killick Nixon Ltd. v. Bank of India  57 Comp Cas 831, a Division Bench of this court has held that under section 41(2) of the said Act, a person whose name is entered in the register of members shall be a member of the company. The contentions of the plaintiff's that the court can take cognisance of a trust as per Dharwar Bank v. Mahomed Hayat  1 Comp Cas 199 (Bom); 33 BLR 250 is contrary to section 153 of the said Act which has an overriding effect because of section 9 of the said Act. In any event, there is no trust qua plaintiffs Nos. 1 and 2. No such trust can be said to have arisen or exist under the Indian law in favour of plaintiffs Nos. 1 and 2. The only exception was given by the Supreme Court in the case of World Wide-Agencies Pvt. Ltd. v. Margaret T. Desor where under section 397 a legal representative whose name was not on the register of members but whose name ought to have been brought was considered to be a person who could apply under section 397 of the said Act. In that case letters of administration were obtained, the company's articles recognised interest and title of legal representatives and the court held that a right has devolved on legal representatives. In the instant case, plaintiffs Nos. 1 and 2 have no such right in law either to be on the register of members or to be brought on the register of members of the seventh defendant company. Neither the courts in India nor in UK have allowed a non-member to maintain a derivative action. Plaintiffs Nos. 1 and 2 also do not fit into the exceptions laid down in Bhajekar v. Shinkar, AIR 1934 Bom 243; 36 BLR 483 and Satyavart Sidhantalankar v. Arya Samaj, Bombay  17 Comp Cas 21 (Bom); 48 BLR 341.
15. A member as defined under section 41 of the said Act can maintain an action against the company, -
(i) to enforce a personal right, e.g., the right to vote at or to attend a meeting;
(ii) a representative action under Order 1, rule 8 of the Civil Procedure Code, on behalf of himself and other shareholders. Such action can be maintained if the same is a derivative action. In such a derivative action a shareholder can seek reliefs in favour of the company. Such action, therefore, is not to enforce a personal right of the shareholder.
16. The question then is, what is a derivative action and who can maintain it. In Foss v. Harbottle  2 Hare 461, it has been held that it is the company which has a right to maintain an action in its corporate name. It has further been held that the court will not interfere in the internal management of the company. This principal rule is subject only to limited exceptions as laid down therein. None of the exceptions apply to the facts of the instant case. In Mozley v. Alston  1 Ph 790, it was shown that a suit in which injury was alleged to be suffered by a corporation could not be sustained by individual members unless at least it was shown that the company could not or would not institute proceedings in their corporate character. Further held that a shareholder could not ask the court to injunct directors from acting as such. In Pender v. Lushington  6 Ch 70, it was held that "members" means "member for the time being of the company... and it means prima facie a registered shareholder or stock holder... so that a member is a man who is on the register... The result appears to me to be manifest, that the company has no right whatever to enter into the question of the beneficial ownership of shares". In the said case, it was held that a meeting of the company should be called to decide whether or not the company's name should be used as the plaintiffs. In MacDougall v. Gardiner  1 Ch 13, it was held that "if the thing complained of is a thing which in substance the majority of the company are entitled to do or if something has been done irregularly which the majority of the company are entitled to do legally... there can be no use in having a litigation about it, the ultimate end of which is only that a meeting has to be called and then ultimately the majority gets its wishes". It was further held that "nothing connected with internal disputes between the shareholders is to be made the subject of a bill by some one shareholder on behalf of himself and others unless there be something illegal, oppressive, or fraudulent - unless there is something ultra vires on the part of the company qua the company or on the part of the majority of the company so that they are not fit persons to determine; but that every litigation must be in the name of the company, if the company really desire it... and it is the company, as a company, which has to determine whether it will make anything that is wrong to the company a subject-matter of litigation, or whether it will take steps to prevent the wrong from being done". Further held that "there may be a great many wrongs committed in a company - there may be claims against directors... there may be a variety of things which a company may well be entitled to complain of but which as a matter of good sense they do not think it right to make the subject of litigation; and it is the company as a company which has to determine whether it will make anything that is wrong to the company a subject-matter of litigation, or whether it will take steps itself to prevent the wrong from being done." In Prudential Assurance Co. Ltd. v. Newman Industries Ltd.  Ch 204, it was held that the trial judge "ought to have determined as a preliminary issue whether the plaintiffs were entitled to sue on behalf of Newman by bringing a derivative action. It cannot have been right to have subjected the company to a 30-day action... in order to enable him to decide whether the plaintiffs were entitled in law to subject the company to a 30-day action. Such an approach defeats the whole purpose of the rule in Foss v. Harbottle  2 Hare 461;  67 ER 189 and sanctions the very mischief that the rule is designed to prevent. By the time a derivative action is concluded, the rule in Foss v. Harbottle  2 Hare 461;  67 ER 189 can have little, if any, role to play".
17. In view of the well-settled position in law, it is only the seventh defendant company which is entitled to maintain an action for the wrong allegedly done to it and plaintiffs Nos. 1 and 2 have no locus standi to maintain the above suit. The only exception to the aforesaid rule which permits a shareholder to maintain an action for the wrong alleged to have been done to the seventh defendant company is if the shareholder can show that wrongdoers are in control of the seventh defendant company and the seventh defendant company would hence be unable to maintain any action. In the facts of the present case, the seventh defendant had at the board of directors' meeting held on 30th November, 1992, decided to take all necessary steps required to ascertain any alleged loss caused to the seventh defendant and furthermore to recover such loss. Neither in the plaint nor in the affidavit-in-reply to the chamber summons filed by the plaintiff, it is contended that wrongdoers are in control of the seventh defendant company. Since plaintiffs Nos. 1 and 2 are not shareholders of the seventh defendant, they are not entitled to maintain the suit which can at the highest be maintained only by a shareholder if the same falls within the exceptions to the rule in Foss v. Harbottle  2 Hare 461;  67 ER 189.
18. On behalf of the plaintiffs, Mr. Chinoy has fairly contended that there is no Indian or English authority which allows a non-shareholder/member to maintain a derivative action. However, efforts were made to justify the action of plaintiffs Nos. 1 and 2 by relying on the judgments of American courts where in some American States "double" or "triple" derivative actions have been permitted. Reliance has been placed on HFG Company v. Pioneer Pub. Co. 162 F2d 536 (State of Illinois); Goldstein v. Groesbreck 142 F2d 422 (State of New York); U. S. Lines Inc. 96 F2d 148 (State of New York) and Kaufman v. Wolfson 151 NYS 2d 530 (State of New York) which are all State decisions where State substantive law does not prohibit a non-member from maintaining such an action. Under Indian Law, it is settled that only a member on the register of members can sue and, therefore, the American cases relied upon by the plaintiffs can have no application. In the case of Joseph Kuruvilla Vellukunnel v. Reserve Bank of India, , the apex court of our country has held as under (at page 1397) :
"The aid of American concepts, laws and precedents in the interpretation of our laws is not always without its dangers and they have therefore to be relied upon with some caution if not with hesitation because of the difference in the nature of those laws and of the institutions to which they apply."
19. Under section 153 of the said Act, "no notice of any trust, express, implied or constructive, shall be entered on the register of members..." Under section 153B of the said Act, it is provided that where shares are held in trust by any person, a declaration shall be made in the manner prescribed and a copy thereof sent by the trustee to the company concerned. Under section 187C(1) of the said Act, a person whose name is entered on the register of members but who does not hold the beneficial interest in those shares shall make a declaration to the company specifying the name and particulars of the person who holds the beneficial interest in such shares. Also a person holding a beneficial interest in the shares of a company shall make a declaration to the company under sub-section 187C(2) of the said Act within 30 days after becoming such beneficial owner. In the instant case, the first plaintiff which claims to be the beneficial owner of the shares in the seventh defendant company, has not made any declaration either under section 153B or under section 187C(2) of the said Act nor has ABIL which is registered as the holder of 38.15% shares of the seventh defendant company, made any declaration as required by section 187C(1) of the said Act. It may also be stated that the claim of the plaintiffs that the first plaintiff is the real owner of the shares standing in the name of ABIL is directly counter to section 4(1) of the Benami Transactions (Prohibition) Act, 1988, which reads as under :
"4. Prohibition of the right to recover property held benami. - (1) No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property."
20. Mr. Chinoy, learned counsel for the plaintiffs, submitted that in the facts of the case, all that was required was to lift the corporate veil of the seventh defendant company to find out who the real or de facto shareholders of the seventh defendant company were. However, in view of the fact that neither the first plaintiff nor the second plaintiff are shareholders of the seventh defendant company, reliance placed by Mr. Chinoy on the averments made particularly in paragraphs 2, 4, 9 and 12(a) of the affidavit of Nicolas Moulin filed in reply to the chamber summons cannot give locus standi to plaintiffs Nos. 1 and 2 to maintain the present suit inasmuch as a suit similar in nature to the present one can only be maintained by a shareholder of the seventh defendant company. As per the pattern of shareholding of the seventh defendant company given by the plaintiffs in the plaint filed as well as in the affidavit of the said Nicolas Moulin, ABIL holds directly or indirectly through Nat West 38.15% of the issue capital of the seventh defendant company which is a distinct company with a separate corporate identity. In the case of Saloman v. Solaman and Co.  AC 22, it is settled that a company is a distinct and separate entity and courts would lift the corporate veil only in exceptional circumstances. The judgment in Saloman v. Salomon and Co.  AC 22 still holds the field and has been followed by the Supreme Court in Tata Engineering and Locomotive Co. Ltd. v. State of Bihar . In para 24 thereof, the Supreme Court has stated as under (at page 468 of 34 Comp Cas) :
"The true legal position in regard to the character of a Corporation or a company which owes its incorporation to a statutory authority, is not in doubt or dispute. The Corporation in law is equal to a natural person and has a legal entity of its own. The entity of the Corporation is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purpose; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them, similarly the creditors of the members have no right to the assets of the Corporation. This position has been well-established ever since the decision in the case of Salomon v. Salomon and Co.  AC 22 was pronounced in 1897; and indeed, it has always been the well recognised principle of common law. However, in the course of time, the doctrine that the Corporation or a company has a legal and separate entity of its own has been subjected to certain exceptions by the application of the fiction that the veil of the Corporation can be lifted and its face examined in substance. The doctrine of the lifting of the veil thus marks a change in the attitude that law had originally adopted towards the concept of the separate entity or personality of the Corporation. As a result of the impact of the complexity of economic factors, judicial decisions have sometimes recognised exceptions to the rule about the juristic personality of the Corporation. It may be that in course of time these exceptions may grow in number and to meet the requirements of different economic problems, the theory about the personality of the Corporation may be confined more and more."
21. In support of his submission that this court should "remove the corporate veil", Mr. Chinoy has put reliance on the case of State of U. P. v. Renusagar Power Co., wherein the Supreme Court observed that the doctrine of lifting the corporate veil is expanding in the context of modern jurisprudence. In para 63 thereof, it has been observed as under (at page 159 of 70 Comp Cas) :
"It is high time to reiterate that, in the expanding horizon of modern jurisprudence, the lifting of the corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. The aim of the legislation is to do justice to all the parties. The horizon of the doctrine of lifting of the corporate veil is expanding. Here, indubitably, we are of the option that it is correct that Renusagar was brought into existence by Hindalco in order to fulfil the condition of industrial licence of Hindalco through production of aluminium. It is also manifest from the facts that the model of the setting up of power station through the agency of Renusagar was adopted by Hindalco to avoid complications in case of take over of the power station by the State or the Electricity Board. As the facts make it abundantly clear that all the steps for establishing and expanding the power station were taken by Hindalco, Renusagar is a wholly owned subsidiary of Hindalco and is completely controlled by Hindalco. Even the day-to-day affairs of Renusagar are controlled by Hindalco. Renusagar has, at no point of time, indicated any independent volition. Whenever felt necessary, the State or the Board have themselves lifted the corporate veil and have treated Renusagar and Hindalco as one concern and the generation in Renusagar as the own source of generation of Hindalco. In the impugned order the profits of Renusagar have been treated as the profits of Hindalco."
22. In that case, the court held on the facts that the holding company and the subsidiary were to be treated as one and the same because the subsidiary was created to generate and supply energy and power to the holding company in order to enable it to maintain its production commitment to the State and, therefore, generation of power was considered for the purpose of excise to be the holding company's own source of supply and not supply from a separate entity. It was there held that there was no separate or independent existence and all day-to-day affairs were controlled. The same is not the situation as regards ABIH, ABIL/Nat West and the first plaintiff in the instant case. Mr. Mehta, learned counsel appearing for defendants Nos. 1 and 2, has justifiably put reliance on the case of LIC of India v. Escorts Ltd. , wherein tests are laid down as to when a court will pierce the corporate veil, i.e., where the defendant has to be further probed into. The corporate veil is lifted against an entity if the entity is hiding behind the veil so as to escape liability or penalty. None of the tests laid down in Escorts Ltd.'s case, apply to the instant case wherein the first plaintiff is seeking to get locus standi to maintain the present suit by asking this court to lift not only its own corporate veil but also the corporate veil of ABH, ABIL, Nat West. The Supreme Court in Escorts Ltd.'s case, has cited with approved Pennington on Company Law wherein he has stated (at page 1417) :
"Four inroads have been made by the law on the principle of the separate legal personality of companies. By far the most extensive of these has been made by legislation imposing taxation. The Government, naturally enough, dose not willingly suffer schemes for the avoidance of taxation which depend for their success on the employment of the principle of separate legal personality, and in fact legislation has gone so far that in certain circumstances taxation can be heavier if companies are employed by the taxpayer in an attempt to minimise his tax liability than if he uses other means to give effect to his wishes. Taxation of companies is a complex subject, and is outside the scope of this book. The reader who wishes to pursue the subject is referred to the many standard text books on corporation tax, income-tax, capital gains tax and capital transfer tax.
The other inroads on the principle of separate corporate personality have been made by two sections of the Companies Act, 1948, by judicial disregard of the principle where the protection of public interests is of paramount importance, or where the company has been formed to evade obligations imposed by the law, and by the courts implying in certain cases that a company is an agent or trustee for its members."
23. The Delhi High Court in the case of Carrasco Investments Ltd. v. Special Director, Enforcement Directorate  79 Comp Cas 631;  2 Comp LJ 339, on which reliance has been placed by Mr. Vahanvati, learned counsel appearing for defendants Nos. 3 to 6 and 12, considered a case wherein there was an agreement for purchase by one foreign company of the shares of another foreign company to indirectly acquire control of 38.7% of the share capital of an Indian company. It was contended that this arrangement actually amounted to indirectly purchasing the shares of the Indian company. It was held (at page 653 of Comp Cas) :
"We do not find it permissible or even necessary to tear the corporate veil of the R. G. Shaw companies to hold that in acquiring the shares of the R. G. Shaw companies, Carrasco in fact acquired the shares of Shaw Wallace. We are supported in this view by a decision of the Supreme Court in LIC v. Escorts Ltd. ."
24. The doctrine of the lifting of a corporate veil cannot be applied to a plaintiff who is not a shareholder of a company but claims that if the veil of the corporate personality of the plaintiff is lifted, the real holder will emerge. The corporate veil is lifted when in defence proceedings, such as for the evasion of tax, an entity relies on its corporate personality as a shield to cover its wrong doings. The submission made on behalf of the plaintiffs that the corporate veil of the first plaintiff be lifted has no legal foundation and cannot be accepted.
25. The second plaintiff is a non-proprietary director of the seventh defendant and can have no right beyond those conferred on him by statute, viz., the said Act. A non-proprietary director cannot : -
(a) apply for the winding up of the company under section 439 of the said Act;
(b) sue for oppression, mismanagement under sections 397 and 398 of the said Act.
26. He has no right to receive notice of annual general meetings unless he is a member. He cannot form part of a quorum and he has no right to vote. He has no right to apply to the Central Government for investigation of the affairs of the company. He has no right to dividends declared. He acts as a delegate of the board and not in his own rights. He is not entitled to inspection of minutes book of a general meeting of the company. He is not an agent or a trustee of the shareholders. A non-proprietary director has the following rights under the said Act :
(a) to be heard prior to his removal;
(b) to receive notice of board meetings;
(c) to be given notice of the resolution proposed to be passed by circulation; and
(d) to inspect books of account.
27. A non-proprietary director is entitled to sue the company only in certain cases. In Pulbrook v. Richmond Consolidated Mining Co.  9 Ch 610, it was held that where a director who is improperly and without cause excluded by his brother directors from the board, he is entitled to an order restraining such directors from so excluding him. The second plaintiff is not attempting to enforce any of his individual statutory rights. Like any other employee of a company a non-shareholder director owes duties to the company but has no right to exercise any of the powers which a shareholder who is a proprietor of the company can exercise. The case of Jackson v. Minister Bank Ltd.  15 LR Ir 356 relied upon by Mr. Chinoy is an Irish case. The case of Jackson (supra) and also the case of Joint Stock Discount Co. v. Brown  LR Eq. Cases 381 also relied upon by Mr. Chinoy are contrary to settled Indian law and as such, have neither persuasive nor binding effect. These case even do not hold that a non-shareholder director can maintain a derivative action on behalf of the company. Even the articles of association of a company constitute contract between the company and its members but do not confer any rights on a person other than a member. The articles of association do not confer any rights on a non-proprietary director of the company.
28. Mr. Chinoy submitted that a declaratory decree in the suit can be passed with the plaintiffs establishing a cause of action in the strict sense of the term. In support of his submission, Mr. Chinoy has relied upon the case of Guaranty Trust Company of New York v. Hannay and Co.  2 KB 536 as also on the case of Vemareddi Ramaraghava Reddy v. Konduru Seshu Reddy, and on the case of Supreme General Films Exchange Ltd. v. His Highness Maharaja Sir Brijnath Singhji Deo of Maihar, . These cases do lay down that the declarations can be granted even though no consequential relief is capable of being granted to the plaintiff. That does not mean that without any cause of action, a plaintiff can file a suit to get a declaratory decree therein. In the case of Guaranty Trust Co. of New York  2 KB 536, a declaration that a particular tax was not leviable or illegal was held capable of being granted although the plaintiff did not seek consequential reliefs therein. In the case of Vemareddi Ramaraghava Reddy, , a worshipper was allowed to sue for a declaration that a compromise decree entered into on behalf of a deity was void as not binding though he did not ask for the property transferred thereunder to the transferred back to him as that right would only be with the deity. In the case of Supreme General Films Exchange Ltd., , the plaintiff had filed a suit claiming a declaration that a lease executed in favour of the defendant therein in respect of a theatre by its former owners was void and ineffective against the plaintiff's rights under decrees obtained in other suits in execution whereof the said theatre was attached. The Supreme Court on the facts held that the plaintiff possessed sufficient legal interest in the theatre as a mortgagee as well as an assignee of a decree holder who had got the property attached before he filed his suit, so as to enable him to sue for the declarations he sought.
29. In the facts, I hold that plaintiffs Nos. 1 and 2 have no right to the reliefs claimed in the suit and their names are liable to be struck out from the cause title even at this stage.
Order VI, rule 16 of the Civil Procedure Code reads as under :
"Striking out pleadings :
The court may at any stage of the proceedings order to be struck out or amended any matter in any pleadings -
(a) which may be unnecessary, scandalous, frivolous of vexatious, or
(b) which may tend to prejudice, embarrass or delay the fair trial of the suit, or
(c) which is otherwise an abuse of the process of the court."
30. Thus, at any stage of the proceedings, the court has power to strike out any matter in any pleading which in the opinion of the court is unnecessary, scandalous, frivolous or vexatious or which tends to prejudice, embarrass or delay the fair trial of the suit or which is otherwise an abuse of the process of the court.
31. A suit is always based on a cause of action."A cause of action" means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is a bundle of facts which the law applicable to them gives the plaintiff a right to relief against the defendant. In the plaint, the plaintiffs were required to state only such facts which constitute the "cause of action" for the reliefs claimed therein. The plaintiffs have claimed the relief of declaration that defendants Nos. 1 to 6 have vacated their office as directors of the seventh defendant company since, according to the plaintiffs, defendants Nos. 1 and 2 in violation of section 299 of the said Act have not disclosed their interest or concern in the contracts or arrangements between the seventh defendant company on the one hand and defendants Nos. 9, 10 and 11 on the other hand and have also prayed for order and injunction against defendants Nos. 1 to 6 to restrain them from acting as directors of the seventh defendant company. Since, according to the plaintiffs, defendants Nos. 1 to 6 and 12 have caused wrongful loss to the seventh defendant and wrongful gains to themselves through the instrumentality of defendants Nos. 9, 10 and 11, the plaintiffs have also sought the reliefs of accounts and ascertainment of loss and/or damages caused and decree against defendants Nos. 1 to 6 and 12 for payment thereof to the seventh defendant. The plaintiffs have, however, made several statements in the plaint relating and/or anywise pertaining to "shareholders agreement relating to ABI Holdings Ltd., dated December 21, 1989" (for short, 'the shareholders agreement'), and otherwise which do not anywise constitute cause of action in respect of the reliefs claimed in the suit. As a matter of fact, a separate suit in respect thereof has already been instituted abroad in a court of law which is pending. The statements and averments made by the plaintiff as more particularly mentioned in the schedule annexed to the chamber summons do not constitute cause of action formulated in the plaint nor do the same support the cause of action set out in the plaint filed nor would the same form part of evidence in chief which the plaintiffs would be bound to lead for the purpose of obtaining the reliefs asked for nor are the same necessary or relevant or germane to the reliefs sought in the suit. Such statements and averments are irrelevant, unnecessary, scandalous, frivolous and tend to prejudice or embarrass the contesting defendants and as such are liable to be struck out from the plaint at this stage under the provisions of Order VI, rule 16 of the Civil Procedure Code.
32. In the case of P. D. Shamdasani v. Central Bank of India Ltd. (No. 2), AIR 1944 Bom 197, Coyajee J. of our court formulated the following test for considering an application of this kind, -
"(a) Whether the allegations made constitute the cause of action formulated in the plaint ?
(b) Whether the allegations made support the cause of action in the pleading ?
(c) Whether the allegation or the statement could form part of the evidence-in-chief which the plaintiff would be bound to lead for the purpose of obtaining the relief asked for ?"
33. In the said case, it was held that the words complained of being both scandalous and irrelevant the only order that could be passed would be of expunging such pleadings. The said judgment has in terms been followed by Dhanuka J. in his judgment delivered on 20th and 23rd April, 1992, in Arbitration Petition No. 210 of 1989 in Award No. 160 of 1989 in the matter of Oil and Natural v. Offshore Enterprises Inc. In R. R. Tewari v. Vijaiyalaxmi, , it is held that Order VI, rule 16(b) of the Civil Procedure Code permits striking out of pleadings which may, inter alia, embarrass the fair trial of the suit. The said position is reiterated in the case of Dhartipakar Madan Lal Agarwal v. Shri Rajiv Gandhi, . It is held that those paras in the petition which do not disclose any cause of action, are liable to be struck off under Order VI, rule 16 as the court is empowered at any stage of the proceedings to strike out or delete a pleading which is unnecessary, scandalous, frivolous or vexatious or which may tend to prejudice, embarrass or delay the fair trial of the petition or suit. In Knowles v. Roberts  38 Ch 263, it was held that (at page 270) :
"It seems to me that the rule that the court is not to dictate to parties how they should frame their case, is one that ought always to be preserved sacred but that rule is, of course, subject to this modification and limitation, that the parties must not offend against the rules of pleading which have been laid down by the law; and if a party introduces a pleading which is unnecessary and it tends to prejudice, embarrass and delay the trial of the action, it then becomes a pleading which is beyond his right... It becomes, therefore, the duty of the judge who has apply the rule (Order XIX, rule 27 - Rules of Supreme Court, 1883), to apply his power in a fit case; and a fit case will be that which fulfils the definition of the rule and in which there are no other circumstances which make it inappropriate and inconvenient or unjust to apply the power."
34. The cases cited by the plaintiffs relate to Order VII, rule 11 of the Civil Procedure Code where the entire plaint (and not part) is required to be rejected as disclosing no cause of action. Order VII, rule 11 cannot, therefore, be extrapolated to apply to Order I, rule 10 or Order VI, rule 16. In the case of Millington v. Loring  6 QB 190, on the facts, it has been held that the facts alleged in the plaint were "material facts" and as such were properly pleadable. It has been further held that the statements neither being scandalous nor tending to prejudice or embarrass the fair trial of the action could not be struck out. The case of Dyson v. Attorney General  1 KB 410 also relied upon by Mr. Chinoy deals with striking out pleadings as disclosing no cause of action. The provisions of the Rules of Supreme Court, 1883, mentioned in Dyson's case are equivalent to Order VII, rule 11 of the Civil Procedure Code. It was in this context that the court had taken the view that it could not dismiss an action because it thinks that the plaintiff would not succeed and cannot be driven from the judgment seat in this manner. In the instant case, no relief under Order VII, rule 11 of the Civil Procedure Code has been claimed in the chamber summons and as such, the ratio laid down in Dyson's case has no applicability. Reliance has also been placed by Mr. Chinoy on the Division Bench judgment of this court in the case of Bomi Munchershaw Mistri v. Kesharwani Co-operative Housing Society Ltd.  3 Bom CR 238 which also deals with a case where the entire plant was sought to be struck off. Although this prayer was brought under Order VI, rule 16 (because earlier an identical application was brought under Order VII, rule 11 - which was dismissed), the court said that it would not take the plaint off the record unless the cause of action was incontestably bad. In this context Dyson's case was cited. In the same context, Bomi Mistri's case followed Williams and Humbert Ltd. v. W. & H. Trade Marks (Jersey) Ltd.  1 All ER 129 (HL), which squarely deals with RSC Ord. 18, r. 19 (English equivalent of Order VII, rule 1 of the Civil Procedure Code) and, therefore, has no application. In the case of Purshottam Vishindas Raheja v. Life Insurance Corporation of India, , on which reliance has also been placed by Mr. Chinoy, it has been held that under Order VII, rule 11 of the Civil Procedure Code the entire plaint has to be dismissed. It is not applicable to the facts of the instant case. In Varajlal Bhaishanker v. Ramdat Harikrishna  ILR 26 Bom 259, relied upon by Mr. Chinoy, it was held that misjoinder of two different plaintiffs to sue two different defendants for two different assaults was not permissible since they had not the same cause of action. This also has no application to the facts of the instant case. On behalf of the plaintiffs, reliance has also been placed on the case of Manohar Lal v. Roshan Lal, AIR 1938 Lah 799, where the court held that after the trial a necessary party cannot be dismissed as a plaintiff under Order I, rule 10 of the Civil Procedure Code but that his claim should be dismissed. This case, on the contrary, supports defendants Nos. 1 and 2 as it shows that different considerations arise prior to the suit being heard as against after the trial begins.
35. As mentioned hereinabove, the plaint has been signed by the said Mr. R. A. Shah for and on behalf of plaintiffs Nos. 1 and 2. The said Mr. R. A. Shah is a practising solicitor of this court and is a partner in the firm of Crawford Bayley and Co., solicitors and advocates for the plaintiffs. The plaint is verified also by the said Mr. R. A. Shah in his capacity as constituted attorney of plaintiffs Nos. 1 and 2. It may also be mentioned here that the vakalatnama filed in the suit has been signed by the said R. A. Shah for and on behalf of plaintiffs Nos. 1 and 2 and as aforesaid, the said vakalatnama has also been accepted by the said Mr. R. A. Shah in his capacity as the partner in the said firm of Crawford Bayley and Co. Although under the provisions of the Code of Civil Procedure an applicable to this court, the solicitors and/or advocates practising in this court can be appointed as power of attorney holders, yet the question which arises for consideration is should an advocate or solicitor sign the vakalatnama, plaint and verify the plaint for and on behalf of the same plaintiffs for whom he also appears in the suit in which the plaint and the vakalatnama are filed. Recently, this question has been extensively considered by Dhanuka J. in his well considered judgment in the case of Oil and Natural Gas Commission v. Offshore Enterprises Inc. delivered on 18th December, 1992 (Arbitration Petition No. 210 of 1989 in Award No. 66 of 1989). As held by Dhanuka J., advocates in their personal capacity are enjoined to act with complete impartiality and detachment and not entitled to identify themselves with their clients or cause personally. The paramount duty of an advocate is to assist the court in its task of administering justice. It is further held that in the event of there being any conflict between the interest and duty, the advocate must yield in favour of his duty to assist the cause of fair and impartial justice. On the other hand, a constituted attorney is entitled to identify himself with the donor of the power of attorney and act in the same manner as the suitor-litigant is entitled to act. Construing the provisions of the Civil Procedure Code harmoniously and in a manner so as to prevent confusion, anomaly and misunderstanding, Dhanuka J. has held that the law does not permit the combination of the two capacities in the same cause. On the contrary, the law prohibits such combination and rightly so. In may view, an advocate cannot act in a dual capacity and cannot be a mixture of two characters. Since the vakalatnama as also the plaint have been signed by the said Mr. R. A. Shah for and on behalf of plaintiffs Nos. 1 and 2, in the facts stated hereinabove, in my view, neither the vakalatnama nor the plaint filed in the suit have been properly signed by plaintiffs Nos. 1 and 2.
36. In the case of Raj Kumar Dhar v. Colonel A. Stuart Lewis, , it has been held that verifications of pleadings is an important matter which may have serious consequences. The object of verification is to fix responsibility of the party verifying and to prevent false pleadings being recklessly filed or false allegations being recklessly made. It must have some sanctity and for that purpose the rule makes provisions by insisting upon the competency of the person verifying where he is somebody other than the actual party concerned by requiring him to prove to the satisfaction of the court his acquaintance with the facts of the case. This is all the more imperative where the competency of the person verifying is challenged by the other side. It has further been held that where the plaint contains serious allegations of fraud against the defendants and the verification is sought to be made by an agent under a power of attorney by merely putting on record the power of attorney, it is wholly insufficient for the purpose, as the plaintiff's agent simpliciter holding an authority to sign the verification under the power of attorney would be incompetent to verify the plaint. It has further been held that in the circumstances the plaintiff should be required to verify the plaint himself so that he may accept full responsibility for it under the law. In the case of Consolidated Foods Corporation v. Brandon and Co. Pvt. Ltd.  62 BLR 799, the aforesaid position has been reiterated. In may view, the present verification of the plaint is contrary to the provisions of Order 6, rule 15 of the Code of Civil Procedure. However, it would be proper in the facts of the case to give an opportunity to the plaintiffs to have the plaint verified in accordance with law and in confirmity with the provisions of Order 6, rule 15 of the Code of Civil Procedure in the plaintiffs so desire.
37. On behalf of the plaintiffs, it was submitted that there has been delay on the part of defendants Nos. 1 and 2 in taking out the present chamber summons, which delay has been deliberately caused to avoid the hearing of the notice of motion which the plaintiffs had taken out in the suit. It is also submitted that the chamber summons is not maintainable and is liable to be dismissed. I find no substance in either of the submissions made on behalf of the plaintiffs. As aforesaid, the chamber summons of the nature taken out on behalf of defendants Nos. 1 and 2 can in law be taken out at any stage of proceedings of the suit. Order 1, rule 10(2) and Order 6, rule 16 of the Code of Civil Procedure, 1908, enable defendants Nos. 1 and 2 to maintain the present chamber summons if on the merits the case for the reliefs claimed therein is made out be defendants Nos. 1 and 2. In the facts stated hereinabove there is no doubt that defendants Nos. 1 and 2 have made out a case for maintaining the present chamber summons.
38. Besides the authorities referred to hereinabove, other authorities have also been cited at the Bar by learned counsel appearing in the proceedings of this chamber summons. Since the other authorities cited by learned counsel are not found to be relevant for the proceedings of the present chamber summons, the same have not been referred to by me in this order.
39. It is not possible to part with this order without appreciating the efforts made by all learned counsel appearing in placing in meticulous and forthright manner relevant facts and law before the court for its consideration. The written submissions have also been of great assistance to the court.
40. In the result, the chamber summons is made absolute in terms of prayers (a) and (c). So far as prayer (b) is concerned, liberty is granted to the plaintiffs to cure the defects by reverifying the plaint in accordance with the law and provisions of Order 6, rule 15 of the Code of Civil Procedure, 1908, within a period of two weeks failing with the prothonotary and senior master of this court is directed to return the plaint to the learned advocates for the plaintiffs as defective.
41. In the circumstances of the case, there shall be no order as to costs of the chamber summons.
42. Mr. Diwan, learned counsel also appearing for the plaintiffs, applies for stay of operation of this order for a period of two weeks. Since there is no merit in the application, the same is rejected.