030-SLLR-SLLR-1993-1-DAMAYANTHI-ABEYWARDENE-AND-ANOTHER-v.-HEMALATHA-ABEYWARDENE-AND-OTHERS.pdf
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DAMAYANTHI ABEYWARDENE AND ANOTHER
v.
HEMALATHA ABEYWARDENE AND OTHERS
COURT OF APPEAL.
S. N. SILVA, J. ANDP. EDUSSURIYA, J.
A.L.A. APPLICATION NO. 119/88.
C. GALLE NO. 2567/SPL.
30 OCTOBER, 17 NOVEMBER, 1992,
12 AND 25 FEBRUARY 1993.
Company Law – Companies Act No. 17 of 1982, sections 210, 211, 212, 214and 216 – Summary procedure – Affidavits – Hearsay evidence – Interlocutoryapplication – Recognized agent – Civil Procedure Code sections 181, 373, 376,437 and 25 (b) – Section 183 (a) of the Civil Procedure Code as amendedby Act No. 79 of 1988 – Evidence Ordinance, section 60.
The petitioner – respondent (Hemalatha Abeywardena) a long time resident inEngland filed this application in terms of sections 210 and 211 of the CompaniesAct No. 17 of 1982 in respect of the company Mussendapotta Estates Ltd., inwhich she held 32% of the shares. The Company in question is a private Companyestablished by one Abraham Abeywardena with the objective of managing a 200acre estate owned by him in Galle. The Articles of Association of the Companyare intended to retain the ownership of the estate within the family of the saidAbraham Abeywardena. The petitioner-respondent is the widow of one of thesons of Abraham Abeywardena. She has been issued letters of administrationof the estate of that son. It appears that she becomes entitled to 32% of theshares of the Company in that capacity. She filed application in the District Courtcomplaining of oppression (section 210 (1) and mismanagement (section 211(1)against the two respondent-petitioners, being the children of the other son ofAbraham Abeywardena. It appears that their father managed the estate after thedeath of Abraham Abeywardena and that the petitioner-respondent's husband wasin England at the relevant time. The complaint is that after the death of their
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father, the respondent-petitioners have unlawfully got themselves appointed asdirectors and are carrying on the affairs of the Company in a manner oppressiveto the other members and prejudicial to the interests of the Company. Therespondent-petitioners are entitled to 52% of the shares of the Company.
Upon the application being filed by way of summary procedure as required bysection 212 of the Companies Act, the District Court issued an Order Nisideclaring that the two respondent-petitioners are not Directors of the Companyand that a new Board be constituted.
The application was supported with the affidavit of one T. Nadeson who heldthe power of Attorney of the petitioner-respondent. The affidavit contained matternot within the knowledge and observation of Nadeson and the documents annexedwere not originals except for the power of Attorney. The District Judge actedon the affidavit as if in an interlocutory application and entered order nisi.
Held :
Section 210 and 211 of the Companies Act No. 17 of 1982 provide astatutory scheme for the intervention by court in the management of acompany. Section 214 of the Companies Act restricts the classes ofpersons who may file an application for intervention by Court. Section 212prescribes the applicable procedure. In terms of that section every applicationhas to be made by way of summary procedure and every person soughtto be affected by the order shall be named as a respondent in the petition.Section 376 of the Civil Procedure Code provides that a petition filed byway of summary procedure should be supported by affidavits and otherdocumentary evidence necessary to furnish prima facie proof of the materialfacts set out or alleged in the petition. In regard to a person who may deposeto an affidavit and its contents, reference should be made to sections 437and 181 of the Civil Procedure Code. Section 437 provides that wheneverevidence on affidavit is required for production in any application or actionof summary procedure, whether already instituted or about to be instituted,affidavits or written statements of facts conforming to the provisions of section181 may be sworn or affirmed to by the person professing to make thestatement embodied in the affidavit, before any court of Justice of the Peaceor Commissioner of Oaths within the local limits of whose jurisdiction heis at the time residing. The rule in section 181 confines an affidavit to astatement of such facts as the declarant is able of his own knowledge andobservation to testify to and is intended to restrict the contents of affidavitsto direct evidence as is prescribed in section 60 of the Evidence Ordinance.
By necessary implication it excludes hearsay from such affidavits. The onlyexception is that in interlocutory applications a statement of what is believed,as to the relevant facts, may be included. This exception is subject to aproviso that reasonable grounds for such belief should also be set forth inthe affidavit.
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The interlocutory applications referred to in section 181 of the Civil ProcedureCode are those in which relief is sought in the course of a proceeding andincidental to the final relief sought in the case. They are distinct from caseswhere the final relief is sought either by way of plaint or petition. Wherethe application is for final relief it cannot be characterized an interlocutoryapplication merely because it is made by way of petition, in terms of section373 read with section 376 of the Civil Procedure Code an application byway of summary procedure is instituted by petition supported by affidavitsand documentary evidence required to furnish prima fade proof of thematerial facts set out or alleged in the petition. Therefore an affidavit filedwith a petition under section 212 of the Companies Act is not one filedin an interlocutory application. It would not be open to include in such anaffidavit matters which the declarant believes to exist as provided in theexception to section 181. It should contain only direct evidence and nothearsay or other evidence or matters not admissible as direct evidence.
The fact that T. Nadeson holds a power of attorney and is a recognizedagent pertains to his capacity to file an affidavit on behalf of the petitioner-respondent. It does not lend any extra credence to the affidavit. His affidavitmust comply with the requirements of the Civil Procedure Code. Even ifthe provisions of section 183 (a) of the Civil Procedure Code brought bythe Civil Procedure Code (Amendment) Act No. 79 of 1988 (not yet inoperation at the time of this case) are applied, the relevant amendmentpermits an attorney to file an affidavit instead of the party to the action wheresuch party is absent from Sri Lanka. The proviso to this section states thatin such situation the person making the affidavit must be one having personalknowledge of the facts of the cause of action and must in his affidavit swearor affirm that he deposes from his own personal knowledge.
Nadeson was not a member of the company and had no personalknowledge of the affairs of the company or the management of the estate.He was neither present nor entitled to be present at the meetings of thecompany. His affidavit contains several matters resting entirely on his belief.
It cannot be said to contain direct evidence merely because it is said tobe based on letters which have not been properly admitted.
The petition filed in D.C. Galle is not supported by affidavits or documentaryevidence as may furnish prima fade proof of the material facts set out andalleged in the petition.
Cases referred to :
Samarakoon v. Ponniah 32 NLR 257.
Simon Fernando v. Goonesekera 47 NLR 512.
Kanagasabai v. Kirupamoorthy 62 NLR 54.
In re Clive Mills Co., Ltd., (1964) 34 Company Cases 731, 749.
fn re Bengal Luxmi Cotton Mills Ltd., (1965) 35 Company Cases 187.
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Damayanthi Abeywardene and Another v. Hemalatha Abeywardene
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APPLICATION for Leave to Appeal and Appeal from the Order of the DistrictJudge of Galle.
K. Kanag-lswaran, P.C. with A. Tittawella and H. Cabraal for petitioner.
H. L. de Silva, P.C. with S. Mahenthiran for respondents.
Cur. adv. vult.
March 19, 1993.
S. N. SILVA, J.
The respondent-petitioners filed an application for leave to appealand for revision in respect of the order dated 13.9.1989 of learnedDistrict Judge. It was agreed by counsel that this matter could beargued on the basis that leave has been granted. Accordingly,written submissions were tendered and learned President's Counseladdressed court to clarify matters that arose from the writtensubmissions.
The petitioner-respondent (a long time resident in England) filedapplication in terms of sections 210 and 211 of the Companies ActNo. 17 of 1982 in respect of the company ' Mussendapotta EstatesLtd '. This is a private company established by one AbrahamAbeywardena with the objective- of managing a 200 acre estate ownedby him in Galle. The Articles of Association of the company areintended to retain the ownership of the estate within the family ofthe said Abraham Abeywardena. The petitioner-respondent is thewidow of one of the sons of Abraham Abeywardena. She has beenissued letters of administration of the estate of that son. It appearsthat she becomes entitled to 32% of the shares of the company inthat capacity. She filed the application in the District Court complainingof oppression {section 210 (1)} and mismanagement {211 (1)} againstthe two respondent-petitioners being the children of the other sonof Abraham Abeywardena. It appears that their father managed theestate after the death of Abraham Abeywardena and that thepetitioner-respondent's husband was in England at the relevant time.The complaint is that after the death of their father, the respondent-petitioners have unlawfully got themselves appointed as directors andare carrying on the affairs of the company in a manner oppressiveto the other members and prejudicial to the interests of the company.The respondent-petitioners are entitled to 52% of the shares of thecompany.
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Upon the application being filed by way of summary procedure,as required by section 212 of the Companies Act No. 17 of 1982,the District Court issued an Order Nisi in respect of the reliefs soughtin paragraph (c) (1) and (ii) of the prayer to the petition. That is,
a declaration that the 1st & 2nd respondents (the tworespondent-petitioners) are not Directors of the company, and
a direction that a new Board of Directors be constitutedas prayed for.
The two respondent-petitioners and the 2nd respondent-respondent (being a daughter of the said Abraham Abeywardena)filed objections to the Order Nisi. Learned President's Counselappearing for the two respondent-petitioners raised a preliminaryobjection that the application is bad since it is not supported byaffidavits and other documentary evidence as required by law. It wassubmitted that the affidavit which was not of the petitioner-respondentbut her attorney, one T. Nadeson, contains matters not within theknowledge and observation of that person and that the documentsfiled with the affidavit (other than the Power of Attorney) are notoriginals and are not admissible as evidence. Learned District Judgerejected this objection by the order appealed from on the basis thatthe affidavit has been filed in an interlocutory application and thatthe deponent being the attorney of the petitioner-respondent has dulyaffirmed to its contents. He has also observed that the affidavitconfirms the averments of the petition and that the contents aresupported by documents some of which are originals.
At the hearing of this appeal the argument related mainly to thevalidity of the affidavit of Mr. Nadeson. Learned President's Counselfor the respondent-petitioners submitted that learned District Judgewas in error when he held that the affidavit was filed in an interlocutoryapplication. It was submitted that the affidavit was filed with the petitionbeing the application for relief in the case. It was also submitted thatthe affidavit does not conform to the requirements of sections 181and 376 of the Civil Procedure Code. In relation to the provisionsof sections 210 and 211 of the Companies Act, it was submitted thatin considering the nature of the application and the relief sought, thereshould be strict compliance with the requirements of the Civil Pro-cedure Code as to the contents of the affidavit. Learned President's
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Counsel appearing for the petitioner-respondent conceded that theaffidavit is not one filed in an interlocutory application. However, itwas suhmitted that the affidavit is valid since it has been filed bya recoonized agent of the petitioner-respondent in terms of section25(b) of the Civil Procedure Code and its contents are supportedby the documentary evidence annexed to the petition.
Sections 210 and 211 of the Companies Act provide a statutoryscheme for the intervention by court in the management of aCompany. The corresponding provisions in the earlier law weresections 153(A) and 153(B) of the Companies Ordinance introducedby the Amending Act No. 15 of 1964. Similar provisions are foundin sections 397 and 398 of the Indian Companies Act 1956. Section214 of the Companies Act No. 17 of 1982 restricts the classes ofpersons who may file an application for intervention by court.Section 212 prescribes the applicable procedure. In terms of thatsection every application has to be made by way of summaryprocedure and every person sought to be affected by the order shallbe named as a respondent in the petition. This leads us to aconsideration of the provisions of the Civil Procedure Code relatingto summary procedure. Section 376 states as follows :
” With the petition, and so far as conveniently canbe attached thereto, . shall be exhibited such affidavits,authenticated copy records, processes, or other documentaryevidence as may be requisite to furnish prima facie proof ofthe material facts set out or alleged in the petition, or the courtmay in its discretion permit or direct the petitioner to adduceoral evidence before the court for this purpose, which shall betaken down by the court in writing
It is to be seen from this section that a petition filed by way ofsummary procedure should be supported by affidavits and otherdocumentary evidence necessary “ to furnish prima facie proof of thematerial facts set out or alleged in the petition In regard to theperson who may depose to an affidavit and its contents, referenceshould be made to sections 437 and 181 of the Code. Section 437provides that " that whenever evidence on affidavit is required forproduction in any application or action of summary procedure, whetheralready instituted or about to be instituted, affidavits or writtenstatements of facts conforming to the provisions of section 181 may
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be sworn or affirmed to by the person professing to make thestatement embodied in the affidavit before any court or Justice ofthe Peace or Commissioner of Oaths within the local limits of whose
jurisdiction he is at the time residingSection 181 is as
follows :
" Affidavits shall be confined to the statement of suchfacts as the declarant is able of his own knowledge andobservation to testify to, except on interlocutory applications,in which statement of his belief may be admitted, provided thatreasonable grounds for such belief be set forth in the affidavit."
The rule in section 181 which confines an affidavit to “ a statementof such facts as the declarant is able of his own knowledge andobservation to testify to “ is intended to restrict the contents ofaffidavits to direct evidence as prescribed in section 60 of theEvidence Ordinance. By necessary implication it excludes hearsayfrom such affidavits. The only exception is that in interlocutoryapplications a statement of what is believed, as to the relevant facts,may be included. This exception is subject to a proviso that rea-sonable grounds for such belief should also be set forth in theaffidavit. The significance of the constituent elements of section 181,the rule, the exception and the proviso to the exception, are madeclear in the judgments of the Supreme Court in the cases ofSamarakoon v Ponniah Simeon Fernando v Goonesekera (2) andKanagasabai v Kirupamoorihy (3).
Learned District Judge considered the objection on an incorrectpremise when he observed that the affidavit has been filed inan interlocutory application. Learned President's Counsel for thepetitioner-respondent, as noted above, rightly conceded this matter.The interlocutory applications referred to in section 181 are thosein which relief is sought in the course of a proceeding andincidental to the final relief sought in the case. They are distinctfrom cases where the final relief is sought either by way of plaintor petition. Where the application is for final relief it cannot becharacterised an interlocutory application merely because it is madeby way of petition. Section 212 of the Companies Act provides thatevery application under the provisions of sections 210 and 211 shallbe made by way,, of summary procedure. In terms of section 373read with sectiora 376 of the Civil Procedure Code an applicationby way of summajy procedure is instituted by petition supported by
CADamayanlhi Abeywardene and Another v. Hemalatha Abeywardene
. and Others (S. N. Silva, j.)279
affidavits and documentary evidence required to furnish prima facieproof of the material facts set out or alleged in the petition. Thereforean affidavit filed with a petition under section 212 of the CompaniesAct is not one filed in an interlocutory application. Such an affidavitwill be governed by the rule in section 181 of the Civil ProcedureCode referred above and should contain only direct evidence. Thatis, a statement of such facts as the declarant is able of his ownknowledge and observation to testify to, in relation to the mattersset out or alleged in the petition. It would not be open to includein such affidavit, matters which the declarant believes to existas provided in the exception .to section 181. It certainly cannotinclude hearsay or other evidence or matters not admissibleas direct evidence.
The next aspect to be considered is the significance of therequirements of section 181 of the Civil Procedure Code, referredabove, in relation to a proceeding instituted under section 212 of theCompanies Act. Sections 210 and 211 vests an extensive jurisdictionin the court to intervene in regard to alleged oppression andmismanagement in a company. The court is empowered generallyto make orders as it thinks fit for remedying or preventing the matterscomplained of or apprehended. Without prejudice to the generalityof these powers, the court is empowered to make specific ordersin terms of section 216. Such orders are made on the basis of theproof adduced with the petition including the affidavits subjecthowever to any objection the respondents may take upon an ordernisi or an interlocutory order being made. Hence the requirementsof section 181 of the Civil Procedure Code are significant in relationto such proceedings,,Learned President's Counsel for the respondent-petitioners relied on two judgments of the High Court of Calcutta inrelation to the corresponding provisions of sections 397 and 398 ofthe Indian Companies Act 1956 and Order 19, rule 3 sub-rule (1)of the Indian Civil Procedure Code. In re Clive Mills Co. Ltd. (4)Mitra, J observed as follows :
"An application under sections 397 and 398 of the Act isnot an interlocutory application. The matter is finally disposedof by the order made on the application itself. Nothing remainsoutstanding, unless orders are made keeping certain mattersoutstanding. The application is disposed of on the basis of the
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averments in the pleadings, unless the matter is directed tobe tried on evidence. The pleadings in the matter, includingthe petition and the affidavits are to be treated as evidence,and that being so, the rules of evidence must be strictlyadhered to. The averments in the petition and in the affidavitswhich are verified as based on information, are by their verynature, hearsay evidence. And if such averments are thefoundation of the case made out by the petitioner, or thefoundation of the defence made out by the respondents, thecourt should not rely or act upon the same. To do otherwise,would be to ignore the fundamental principles of the rules ofevidence. If the averments in the pleadings are such that, butfor them, an order cannot be made, persons who have personalknowledge of the facts stated must come forward and put whatthey^h^ye to say on affidavits. If other persons, having nopeosohdl khowledge of the facts, are set up to verify factsstated in petitions or affidavits, as being based on informationsupplied and believed to be true, the averments so verifiedcannot be relied on by the court. I must make it clear, however,that my views in this matter are confined to proceedings undersections 397 and 398 of the Companies Act, 1956, in whichorders are asked for on the basis of charges laid in the petitionand affidavits. These views should not be taken to apply toother proceedings under the Companies Act, 1956, or tointerlocutory matters in other proceedings. "
In a later case In re Bengal Luxmi Cotton Mills Ltd(5) the sameJudge repeated the foregoing observations and held that rulesof evidence must be strictly adhered td in relation to theapplications that are made for intervention by court under thecorresponding sections. We are of the view that these observationsare useful in relation to the application of the correspondingprovisions of our law, referred to above. Hence we hold that theaffidavits filed in an application to court in terms of section 212 ofthe Companies Act for intervention by court in respect of allegedoppression or mismanagement as stated in sections 210 and 212have to strictly comply with the provisions of sections 376, 437 and181 of the Civil Procedure Code. They have to furnish prima facieproof of the material facts set out or alleged in the petition and assuch should contain only direct evidence, that is, statements of suchfacts as the declarant is able of his own knowledge and observation
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to testify to. They cannot contain matters resting in the belief of thedeclarant or hearsay or other matters that may be inadmissible asevidence.
Learned District Judge has observed that the affidavit confirmsthe averments in the petition. Indeed, on a comparison it is revealedthat 1he affidavit is a verbatim repetition of the averments of thepetition. However, the correct test is not to consider whether oneconfirms the other upon a comparison of this nature. Repetition ofthe averments of a petition in the affidavit is an evil that we oftennote in affidavits that are filed. Learned Judge has regrettably seena virtue in this evil. The correct test is to ascertain whether the affidavitcontains direct evidence, that is, statements of such facts as thedeclarant is able of his own knowledge and observation to testify toand whether this evidence together with the documentary evidencefurnisftes prima facie proof of the matters of fact set out or allegedin thei petition.
Learned President's Counsel for the petitioner-respondentsubmited that the said T. Nadeson holds a power of attorney of thepetitioner-respondent and he is a recognized agent of the petitioner-respordent in terms of section 25 (b) of the Civil Procedure Code.This submission in our view, pertains to the capacity of T. Nadesonto file 4n affidavit in these proceedings on behalf of the petitioner-responjent. However, the fact that he is a recognized agent ofthe peiioner-respondent does not lend any extra credence to theaffidavit The affidavit, whether it be of the recognized agent or ofany otter person should satisfy the requirements of the CivilProcedue Code referred above. Learned President's Counsel alsosubmittei that the grounds urged on behalf of the respondent-petitionee in effect seek to apply the provisions of section 183(a)of the Cvil Procedure Code introduced by Civil Procedure Code(Amend rent) Act No. 79 of 1988, which was not in operation, tothis case The relevant amendment permits an attorney to file anaffidavit ietead of the party to the action where such party is absentfrom Sri Ltnka. The proviso to this section states that in such situationthe persoi making the affidavit must be one “ having personalknowledgtof the facts of the cause of action and must in his affidavitswear or ffirm that he deposes from his own personal knowledge".In fact theb is no such statement in the affidavit of T. Nadeson andif this amfidment was in operation the matter would have been
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beyond argument. However, section 181 of the Civil Procedure Codehas always been in operation and as found above this section requiresonly direct evidence to be contained in an affidavit filed in proceedingsof this nature.
T. Nadeson being the holder of the power of attorney is not amember of the company and has no personal knowledge cf theaffairs of the company or the management of the estate. His affidavitcontains several matters resting entirely on his belief; They ire:
. that the company has remained as a de facto partnershipof the children of the late Abraham Abeywardena (paragraph 7);
that the meeting of the Directors held on 12.9.1985 wasnot a duly convened meeting and that neither the 1st nor th* 2ndrespondent (fespondent-petitioners) were Directors at that time andthat there was no quorum for the meeting (paragraph 13 ;
that the 32nd Annual General Meeting held on 21.121985was not validly convened (paragraph 16).
Suffice it to say that this person was neither present nor eititledto be present at any of these meetings. Learned President's Cfunselfor the petitioner-respondent submitted that these avermenfe aresupported by letters 'X5' and 'X6' of the 3rd respondent-respondent(Mrs. Jayasinghe, a daughter of Abraham Abeywarden^. Thecontents of these letters are in themselves inadmissible anf couldproperly be produced only by the 3rd respondent-responder* If thepetitioner-respondent intended to rely on the contents of thesf lettersshe should have filed an affidavit of the 3rd respondent-respndent.However, the affidavit of T. Nadeson cannot be said to contai directevidence merely because they are said to be based on leprs, thecontents of which have not been properly admitted. Therefore we seeno merit in the submissions of learned President’s Couns^ for thepetitioner-respondent.j
The resulting position is that the petition of the ptitioner-respondent filed in the District Court of Galle is not sup Drted byaffidavits or documentary evidence as may furnish prima 1 lie proofof the material facts set out and alleged in the petitia. In thecircumstances learned District Judge was in error when he purported
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De Silva, v. Atukorale, Minister of Lands, Irrigation and
Mahaweli Development and Another
283
to make an Order Nisi on the basis of that petition. We accordinglyallow this appeal and set aside the Order Nisi that has been issuedin the case and the order dated 13.09.1988. It is to be noted thatthis decision is not based on the merits of the allegations containedin the petition. Considering all the facts and circumstances we wouldrefrain from making an order for costs either in this Court or in theDistrict Court. Accordingly the parties will bear their respective costs.
P. EDUSSURIYA, J. – I agree.
Appeal allowed.
Order nisi set aside.