Company Law Board
Canara Bank vs Nuclear Power Corporation Of India Ltd. ... on 29 July, 1994
Equivalent citations: [1995]84COMPCAS62(CLB)
ORDER
1. M/s. Canara Bank, a body corporate, constituted by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, as principal trustee of Can Bank Mutual Fund, has filed a petition under Section 111(2) and Section 111(4) of the Companies Act, 1956, on November 27, 1992. The petition relates to non-registration by Nuclear Power Corporation of India Ltd., of 9% NPC Bonds of the face value of Rs. 50 crores, purchased by the fund on February 27, 1992. The respondents in this petition, besides Nuclear Power Corporation of India Ltd., include Shri Hiten P. Dalai, a notified person under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, Andhra Bank Financial Services Ltd. and Standard Chartered Bank. Shri Hiten P. Dalai has acted as broker in the transaction stated above. M/s. Andhra Bank Financial Services Ltd., the transferor of these bonds and the Standard Chartered Bank is another claimant of title to these bonds, besides the Can Bank Mutual Fund.
2. The above case was heard by us on different dates and certain interim orders were also passed including for the deposit of half-yearly interest in fixed deposit accounts. While the proceedings were continuing, it was brought to our notice that an Ordinance has been promulgated on January 25, 1994, namely, the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Ordinance, 1994, which subsequently has become an Act on receipt of the assent of the President on March 28, 1994. It was argued before us in yet another similar case relating to securities that by virtue of this Ordinance, the jurisdiction of the Company Law Board, in relation to any matter arising out of the transactions in securities entered into after April 1, 1991, and on or before June 6, 1992, in which a notified person is involved has been withdrawn. In the present case, the transaction was entered into on February 27, 1992, and there is also the involvement of a notified person. Hence, we decided to afford an opportunity to the parties concerned to argue on the applicability of the Ordinance to the present case. Accordingly, a hearing was held on May 2, 1994, along with the other case in which also the same issue was involved.
3. At this hearing the petitioner and all the respondents excepting Shri Hiten P. Dalai, were represented. It was strongly contended on behalf of Nuclear Power Corporation of India Ltd. that the Ordinance is applicable to the Company Law Board and hence the proceedings stand transferred to the Special Court. This, however, was strongly refuted by counsel representing Standard Chartered Bank. Shri J.C. Seth, advocate, who appeared on behalf of Nuclear Power Corporation of India Ltd., took a stand that the Ordinance applies to proceedings before the Company Law Board. He proceeded with the definition of a "court" as contained in Section 2(11) of the Companies Act, which states that "court" means the court having jurisdiction under this Act with respect to that matter relating to that company as provided in Section 10. Section 10 relates to the jurisdiction of the High Court and the District Courts. The argument of Shri Seth was that Section 10E which deals with the Company Law Board should be considered as part of Section 10 and since the definition of a court as contained in Section 2(11) is linked with Section 10, the Company Law Board is also a court as contemplated in the Companies Act itself. Shri Seth also referred to Dr. Baliram Woman Hiray v. Justice B. Lentin [1989] 176 ITR 1 ; AIR 1988 SC 2267, to state that the apex court has laid down certain tests regarding what a court is. He further submitted that in Chandrapal Singh v. Maharaj Singh, AIR 1982 SC 1238 even the Rent Control Officer has been deemed to be a court. He also referred to Noreen R. Srikantaiah v. Dasarath Ramaiah [1987] 61 Comp Cas 435 ; AIR 1985 Kar 208, to state that a court can be constituted with a limited jurisdiction. He also stated that even the exception with regard to appeals as provided in the Ordinance is applicable to appeals under Section 111(2) of the Companies Act because such petitions are in the nature of appeals and hence exempted. He also drew our attention to letter 335/CUS/ANZ/CLB/ Pt 3126, dated January 20, 1994, of the custodian appointed under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. In his letter addressed to the Company Law Board, in reply to a reference made to him in another case, he has expressed a view that since a notified person is involved, the matter falls within the jurisdiction of the Special Court. He further added that the Company Law Board has already taken a decision to transfer its proceedings in that case, viz., in ANZ Grindlays Bank v. National Hydro Electric Power Corporation Ltd. [1995] 82 Comp Gas 747 (CLB), to the Special Court after considering the provisions of the Ordinance. Accordingly, the same ratio should be applied in this case as well, he stressed.
4. Arguments were submitted by Shri K. S. Cooper, senior advocate, on behalf of the Standard Chartered Bank to the effect that the Ordinance has no applicability to the Company Law Board. He pointedly drew our attention to Section 9A(1) of the Ordinance *See [1994] 79 Comp Cas (St.) 105, 106. which reads as follows :
"9A. (1) On and from the commencement of the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Ordinance, 1994, the Special Court shall exercise all such jurisdiction, powers and authority as were exercisable, immediately before such commencement, by any civil court in relation to any matter or claim :--
(a) relating to any property standing attached under Sub-section (3) of Section 3 ;
(b) arising out of transactions in securities entered into after the 1st day of April, 1991, and on or before the 6th day of June, 1992, in which a person notified under Sub-section (2) of Section 3 is involved as a party, broker, intermediary or in any other manner."
5. According to him, the specific reference is to a civil court. According to Shri Cooper, the Company Law Board is not a court and even if it be considered as a court, it is not a civil court either. On a plain reading of Section 9A(1), the jurisdiction of a civil court in relation to matters or claims which immediately before the commencement of the Ordinance were in seisin of the civil court shall be exercisable by the Special Court. Section 9A(3) denies any civil court the authority, power or the jurisdiction to deal with or be entitled to deal with such suits, matters or claims, as mentioned in Section 9A(1).
6. The matters pending before all courts are not transferable. There are several types of courts, namely, civil courts, criminal courts, revenue courts, family courts or special courts and the Ordinance contemplates only those areas which are pending in the civil courts to be transferred. The Company Law Board is exercising both judicial and non-judicial functions whereas a court in the strict sense exercises only judicial functions. For example, granting approvals under Sections 17, 113(1), 141 are some non-judicial functions, where there is no lis or dispute between two or more parties. He also cited the decision of the Company Law Board, Western Region Bench in Carbon Corporation of India Ltd. v. Abhudaya Properties P. Ltd. [1992] 73 Comp Cas 572 which has recorded the reasons as to why the Company Law Board is not a court. The Company Law Board is even now entitled to exercise and discharge such functions and powers as are entrusted by the Central Government under the Companies Act. Section 10E(4)(c) recognises the Company Law Board as a civil court for certain limited purposes only. He explained the purpose of the Ordinance in the background of the Special Court Act, 1992, and stated that the Special Court is already vested with the powers of a criminal court. However, in order to expedite the disposal of cases relating to notified persons, it was considered necessary to clothe the Special Court with the powers of a civil court also and as such the Ordinance took away the jurisdiction of civil courts in respect of those transactions which are spelt out in Section 9A(1). The purpose of this Ordinance is only to transfer cases pending before civil courts relating to security transactions by notified persons, but other matters pending before any other court will not be transferred to the Special Court. Sub-section (4)(d) of Section 10E of the Companies Act further makes the position very conclusive by the use of the words with regard to the Company Law Board "every Bench shall be deemed to be a civil court". Sub-section (5) further makes it clear that "natural justice shall prevail". This need not be stated specifically in the case of a court. Moreover, in the case of a civil court, the Civil Procedure Code will apply whereas in the case of the Company Law Board as per Sub-section (6) it has got to follow its own procedures and as such the Civil Procedure Code is not applicable.
7. We have carefully considered the contentions of Shri J. C. Seth, advocate on behalf of the respondent-company, with regard to our order in ANZ Grindlays Bank v. National Hydro Electric Power Corporation Ltd. [1995] 82 Comp Cas 747 (CLB). In that case, both the petitioners and the respondents did not have any conflict of views on the transferability of cases pending before the Company Law Board as per the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Ordinance, 1994. We have specifically recorded in our order that the same counsel who is appearing for the petitioners in the other case being heard along with the present case had stated that "as per the new Section 9A(2), introduced by Clause 3 of the Ordinance, all suits, claims and other legal proceedings pending before any court before the commencement of the Ordinance relating to the securities arising out of the transactions entered into between April 1, 1991, and June 6, 1992, in which a notified person is involved as a party/broker/intermediary or in any other manner stand transferred to the Special Court on coming into force of the Ordinance. According to him, the jurisdiction of the Company Law Board has been completely withdrawn with regard to matters relating to these transactions as respondent No. 4, Fair Growth Financial Services Ltd., is a notified person. Hence, the present proceedings before the Company Law Board including the main petition has to be transferred to the Special Court". Counsel, on the other side in that case, Shri L.R. Gupta, submitted only with regard to an exception for the transfer as provided in Section 9A(2) in respect of appeals. He did not challenge the basic applicability of the Amendment Ordinance to the Company Law Board. In the above circumstances, there was no opportunity available to us to get the point relating to whether the Company Law Board was a civil court or not, argued as there was unanimity of views on both the sides. The letter of the custodian was also in the nature of an opinion and is not conclusive.
8. We have now gone into the question of applicability of the relevant provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Act, 1994 (Act 24 of 1994), as assented to on March 28, 1994. The words "court" or "civil court" have not been generally defined in the judicial dictionary or in any enactment. The characteristic features of a court are also not clearly spelt out specifically anywhere. However, the pronouncement of a distinctive judgment is considered an essential sine qua non for a court and unless and until a binding and authoritative judgment can be pronounced by a person or body of persons it cannot be pronounced that he or they constitute a court. Justice Venkatarama Iyer in Virindar Kumar Satyawadi v. State of Punjab, AIR 1956 SC 153, 157, after setting out a catena of judgments by the Privy Council, etc., has pronounced "it may be stated broadly that what distinguishes a court from a quasi-judicial tribunal is that it is charged with a duty to decide disputes in a judicial manner and declare the rights of parties in a definitive judgment". The Supreme Court again in Dr. Bali Ram Woman Hiray v. Justice B. Lentin, AIR 1988 SC 2267 ; [1989] 176 ITR 1, has cited the same court's judgment in Jagannath Prasad v. State of U.P., AIR 1963 SC 416 ; [1963] 14 STC 536, which merely enumerates some negative propositions such as that a tribunal is not necessarily a court in the strict sense because it gives a final decision, etc. The Supreme Court has examined the question of whether a particular tribunal is a court or not with reference to a particular Act and not as a general proposition. Shri K. S. Cooper has submitted that the decision of the Company Law Board (Western Region Bench) in Carbon Corporation of India's case [1992] 73 Comp Cas 572 which again has been decided in the context of applicability of the Limitation Act. Similarly, the question whether a tribunal is a court or not has been decided by the Supreme Court with reference to the Commission of Inquiry Act, the Evidence Act, the Contempt of Court Act, the Income-tax Act, etc., but there is no general proposition in this regard. To the question whether the Company Law Board is a court or not under the Companies Act, the reply has to be only in the negative because "court" has been defined under Section 2(11) to mean the courts which have jurisdiction under Section 10, viz., the court of a Magistrate of First Class or, as the case may be, a Presidency Magistrate having jurisdiction to try offences apart from the High Court and the District Court. Section 10E is not a part of Section 10, but it constitutes a separate Section in itself. As such, in our view under the Companies Act, the Company Law Board is not recognised as a court. Since the context in the present case is with reference to a civil court it is also necessary for us to examine whether we constitute a court under the Civil Procedure Code rather than under the Companies Act. A civil court is to be distinguished basically from a criminal court. However, all civil courts are bound by the provisions of the Civil Procedure Code. In the case of the Company Law Board, however, Section 10E(6) makes it abundantly clear that it shall have power to regulate its own procedure which in other words means the Company Law Board is not required to adhere to the provisions of the Civil Procedure Code. Moreover, Section 10E(4)(c) clothes every Bench of the Company Law Board with the powers of a court under the Civil Procedure Code in respect of certain limited matters which, in other words, means that otherwise the Company Law Board does not have the powers of a civil court in all matters excepting those spelt out under that section. In view of these, we are unable to agree to the proposition that the Company Law Board is a civil court.
9. We also observe that the objective of the Amendment Ordinance appears to be in consonance with the objective of the Special Court Act of 1992, namely, expeditious disposal in respect of civil matters wherever notified persons were involved. We also find that as at present the Company Law Board has parallel jurisdiction with the civil courts in respect of matters relating to companies by which the option is available to litigants either to go to the civil court in a suit or to come to the Company Law Board, under the specific provisions of the Companies Act. It appears that due to the unavoidable pendency of cases in civil courts involving a long waiting period the Legislature has considered it appropriate to amend the Special Courts Act to clothe the Special Court with the powers of a civil court with the objective of expeditious disposal especially in matters where notified persons were involved. The Amendment Act, however, does not intend to disturb the proceedings before the Company Law Board as it will not in any way in conflict with the objective of amendment. We, therefore, hold that the Special Court Amendment Act, 1994, does not apply to the proceedings before us and that our jurisdiction and powers to deal with matters relating to securities as provided in the Companies Act, 1956, continue to remain with us. Accordingly, the main petition will be further heard on October 3, 1994.
10. Ordered accordingly.