Delhi High Court
Vijay M. Shah vs Flex Industries Ltd. on 1 December, 1995
Equivalent citations: 1996IAD(DELHI)260, [2001]103COMPCAS1063(DELHI), 61(1996)DLT378, 1996(36)DRJ283
Author: Dalveer Bhandari
Bench: Dalveer Bhandari
JUDGMENT Dalveer Bhandari, J.
(1) The petitioners have Filed this Company Petition under Section 81 and Section 10 and Rule 11 (b) and 17 of the Companies Act, 1959. The petitioners are shareholders of respondent Flex Industries Limited. They hold 1,37,500 shares among themselves.
(2) The respondent-company issued 'Right Issue' on 16th September, 1995 and the Right Issue was closed on 15th October, 1995. According to the scheme of the issue, the petitioners were entitled to two right shares and one warrant, for every Five shares held as on the said date. According to the petitioners, they were entitled to 54960 right shares and warrants attached thereto and 27480 Rights debentures and warrants attached thereto as mentioned in the letter of offer. It is submitted by the petitioners that the Securities and Exchange Board of India (SEBI) have issued instructions to all the companies that with a view to protect the interest of investors , the letter of offer for 'Right Issue' be sent to the shareholders by registered post.
(3) The petitioners submitted that they did not get a notice of 15 clear days as contemplated under Section 81, and consequently the petitioners have been deprived of their valuable rights in respect of Right Issue as well as warrants and debentures. The petitioners submit that at no time the said company as well as Registrar of Issue sent the letter of offer relating to the Right Issue cither at the foreign addresses or at the Bombay address.
(4) It is further submitted that petitioner no.1 had telephoned Shri Ashok Chaturvedi. Chairman and Managing Director on 14.10.92 from London that the petitioners had not received the original offer forms from the Company. The Company sent duplicate forms at the Bombay address, i.e. Manish C/o 609, Jagannath Shanker Shot Road, Singapuri Building, 2nd Floor, Bombay-400002. The envelope containing the duplicate forms was delivered to Manish Mehta c/o Sanjay Scientific Corporation, Ground Floor, Singapuri Building, Bombay. Manish Mehta in turn gave the said envelope to Manish Shah on 14.10.94. Local trains at Bombay were not operating on 14.10.94 and, therefore, the offices were not functioning. 15,10.94 was Saturday. The banks were half day open. It was impossible to send the documents to New Delhi and therefore, the Bank of India, M.G. Road, Bombay was approached to accept 13 applications. The said bank refused and declined to accept the same. 16.10.94 was Sunday. On 17.10.94, the banker to the Issue Credit Lyonnais at Bombay was approached and requested to accept the applications. He took the applications but after sometime he returned the same as the closing date 15.10.94 had expired and applications were to be submitted at New Delhi.
(5) Petitioner no.1 sent a letter by Fax on 17.10.94 to the company requesting for the issue of the rights share as well as warrants. The petitioners have not received any reply from the company.
(6) In these circumstances, the petitioners had no other alternative but to approach this court and consequently, they Filed this petition. It is submitted by the learned counsel for the petitioners that under section 81, the lime of 15 days means that there should be an interval of 15 days from the date of receipt and date of closing. In the instant case, the respondent-company had never sent original offer under Section 81 (1)(b) to the petitioners. It is submitted by the petitioners that provisions of section 81 are mandatory. The Company cannot allot 54960 rights shares with warrants as well as 27480 rights debentures with warrants of the petitioners to any one else including the promotors. The petitioners further mentioned that the petitioners have no option but to approach this Court because the jurisdiction of the Company Law Board is Confined to Sections 397 to 407 of the Act. The petitioners have pointed out that the letters of offer had to be sent by the respondents by registered post and in support of their submission, the learned counsel for the petitioners has relied on a circular letter dated 3.6.1986 addressed to all Stock Exchanges informing that the Government had decided that henceforth, all companies listed or seeking enlistment on Stock Exchanges shall issue refund orders, allotment letters, certificates, only by registered posts. It has now been considered necessary that with a view to protect the interest of investors, letters of offer for rights issue be also issued to shareholders by registered post in future.
(7) Mr. Ram Panjwani, learned counsel for the petitioners has placed reliance on Smt. Arati Dutta vs. M/s Eastern Tea Estate (P) Ltd, . In this case, the Supreme Court has held that in respect of the orders passed by the Single Judge of the High Court under Sections 397, 398 of the Act, the provisions of Section 483 would be attracted and an appeal Would lie to the Division Bench.. The appeal lies to the same High Court irrespective of the powers under the Letters Patent, meaning thereby that the jurisdiction which the court exercises on the. Company Side is "akin to the jurisdiction exercised by the Court on the Original Civil Side. The orders passed on the Original Civil Side are appealable. Similarly, orders passed by the Company Judge in exercise of his jurisdiction are also appealable to the Division Bench of the same High Court.
(8) The learned counsel for the petitioners has submitted that this Court under Rule 9 of the Companies (Court) Rules has inherent powers. Rule 9 is reproduced as under:-
(9) Inherent powers of Court Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court."
(9) It is also submitted that these inherent powers are in addition to the powers, which this Court enjoys, under Section 151 of the Code of Civil Procedure.
(10) Under the inherent powers, the Court for accomplishing the ends of justice or to prevent the abuse of the process of the court can certainly give necessary directions. The learned counsel has also placed reliance on Bansi Dhar and Sons vs. The Commissioner of Income-tax, I.L.R. (Delhi) 1977 (2), page 393. In this case the Division Bench of this Court has held and relevant observation are set out as under:-
"IT is well settled that the High Court, as a "Court", has inherent jurisdiction to act "ex debito institiae", if the circumstances of a case so demand. The inherent jurisdiction or power is inherent in the High Court, because it is a 'Court', and is unrelated to, and independent of, the nature of its jurisdiction-advisory, consultative, original, appellate or revisional in the case before it...... In a Reference under the Income tax Act, the High Court or the Supreme Court, as the case may be, gives a definite judgment on the questions referred..... The High Court or the Supreme Court is thus a 'Court' even [in a Reference].... (Hence) it has inherent jurisdiction. It can, therefore, act in exercise of the inherent jurisdiction for granting slay of recovery of the tax pending disposal of the Reference. Held further:
IT is well settled that inherent jurisdiction or power is inherent in a Court, and S.151 Civil Procedure Code does not confer such .jurisdiction or power......but merely saves it.........Therefore, the fact, that there is no provision in the Income tax Act making the provisions of the Code of Civil Procedure applicable to a reference proceedings before the High Court or the Supreme Court, does not mean that the High Court or the Supreme Court cannot exercise its inherent jurisdiction or power in a proper case."
(11) The learned counsel for the petitioners has also placed reliance on H.H. Maharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur and others vs. Union of India, . The court observed that "THEright, liability or obligation in dispute must arise out of the provisions of the Constitution which has any bearing on any treaty, agreement, covenant, engagement, etc. The expression "relating to" means inter alia "stand in some relation, to have bearing or concern, to pertain, to refer to bring into association with or connection with."
(12) It is submitted that if the matter relates to a company, then, the jurisdiction has to be conferred to the High Court and under Section 10 of the Companies Act, it has to be the High Court where the registered office of the Company is situated.
(13) The learned counsel for the petitioners has relied on a Division Bench judgment of the Madhya Pradesh High Court, reported as Nava Samaj Ltd., Nagpur and others vs. Civil Judge, Class I, Rajnandgaon and others., , and has drawn attention of this Court, particularly on the following passage of para 8 of the judgment, the relevant part of that para reads as under: "THE necessary implication of Section 3 of the Act of 1913, as also of Section 10 of the Act of 1956, is to exclude jurisdiction of other Courts in regard to matters covered by the Companies Act. In connection with the exclusion of jurisdiction of other Courts, the line of inquiry is not whether there is any provision besides S.10 in the Companies Act giving the Company Court exclusive jurisdiction in company matters. But it is whether after having specified the Courts having jurisdiction under the Companies Act, the said Act contains an "otherwise" provision excluding the jurisdiction of the Company Court in matters falling under the Companies Act."
(14) Mr. Panjawani, learned counsel for the petitioner has placed reliance on Manjasri Raha & Ors etc. Vs B.L. Gupta & Ors. Etc. . In this case the Supreme Court had dealt with and interpreted Section 95(2)(b) of Motor Vehicles Act. This section restricts the liability of the Insurance Company to Rs 2,000.00 only in case of a third party. The Court suggested to the Legislature to increase the liability of the insurance company. The Court observed that it was anamolous that if a passenger dies in a plane accident, his family gets the compensation of Rs.1,00,000.00 and other person who dies in a road accident his family gets Rs.2,000.00 only. In the said case the objection was taken by the respondent that the plaint filed by the relation of the deceased was loosely drafted, in that context the Court observed that though the plaint is loosely drafted but clearly contains the relief of compensation against Gupta and Ramswaroop, the driver, in this back ground, the Court observed: "PLEADING Shave to be interpreted not with formalistic rigour but with latitude or awareness of low legal literacy of poor people."
(15) This case certainly has no relevance as far as facts of the present case are concerned. in the instant case the petitioners are shareholders of the respondent company - Flex Industries Limited and they hold 1,37,500 shares among themselves. The value of those shares admittedly run into crores of rupees. The petitioners in the instant case are all affluent non-resident Indians staying abroad. These petitioners cannot be equated with the relations of that illiterate unfortunate poor man who had been killed in road accident and his family had received only Rs.2,000.00 as compensation under Section 95(2)(b) of the Motor Vehicle Act. Apart from that even in the resent case the Court is really not determining the controversy involved in the case strictly on the basis of pleadings in a formalistic manner as argued, On the contrary Court's endeavor in this case has been to find out the real grievance of the petitioners after comprehensively construing the averments and allegations of the petition. Therefore the above mentioned case has no relevance in the facts and circumstances of this case.
(16) Mr. Panjawani has also cited the case of Maharaja Exports and Another Vs Apparels Exports Promotion Council 60 Company Cases page 353. In this case Chawla J. of Delhi High Court has held that the High Court has jurisdiction unless it expresses that the High Court has no jurisdiction.
(17) In R. Prakasam V. Sree Narayana Dharma Paripalana Yogam [1980] 50 Company Cases 611 (Ker.) Kerala High Court had held that except in cases where the Companies Act, 1956, confers jurisdiction on the company court or some other authority like the Central Government or the Company Law Board, either expressly or by implication, all other disputes pertaining to a company are to be resolved through the forum of civil court when the disputes are kept on being resolved by them. Where wrong is done to an individual member, he can insist, by recourse to a civil suit, on "strict observance of the legal rules, statutory provisions and provisions in the memorandum and articles of association which cannot be waived by a bare majority of shareholders". Similar view was taken in a judgment reported as Panipat Woollen and General Mills Company Ltd. Vs P.L. Kaushik 39 Company Cases 249(Punj.). While interpreting the provisions of section 9 of the Code of Civil Procedure vis-a-vis the Companies Act, during the course of the judgment, it was observed as under: "UNDER section 9 of the Code of Civil Procedure, 1908, civil courts have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is expressly or impliedly barred. Unlike some statutes, the Companies Act does not contain any express provision barring the jurisdiction of the ordinary civil courts in matters covered by the provisions of the Act. In certain cases like winding up of companies, the jurisdiction of civil courts is impliedly barred."
THE law declared in this case is based on well settled principle of law. This case also docs not help the petitioners in any manner.
(18) He submitted that even after amendment in the Act section 81 has not been touched, meaning thereby that section 81 has not been included in the list of the sections in respect of which the jurisdiction has been transferred to the Company Law Board. The Legislature in its wisdom Jias not incorporated and included section 81 in the list of those sections in respect of which the jurisdiction has been transferred to the Company Law Board, therefore, the petition filed under Section 81 of the Companies Act has to be dealt by the High Court and learned counsel for the respondent is not correct in his submission that this Court has no jurisdiction to deal with this petition.
(19) Mr. Panjawani has also placed reliance on N.I.I. Ltd. Vs N.I.N.I.H. Ltd. Air 1981 Supreme Court page 1298 in which the Court had observed that technicalities cannot be permitted to defeat the excess to jurisdiction conferred by Section 397. He also invited the Court's attention to the observation that the Court is not powerless to do substantial justice. These are well settled principles of law and jurisprudence but arc of no avail to the petitioners in the facts and circumstances of the instant ease.
(20) The learned counsel for the petitioners has also relied upon Supreme Court judgment reported as Premier Automobiles Ltd. vs. Kamlekar Shanturam Wadke of Bombay and Others, . The Supreme Court while summing up this judgment has stated as under:-
"TO sum up, the principles applicable to the jurisdiction of the Civil Court in relation to an industrial dispute may be stated thus:
(1)If the dispute is not an industrial dispute, nor docs it relate to enforcement of any other right under the Act the remedy lies only in the civil court.
(2)If the dispute is an industrial dispute arising out of a right or liability under the general or common law and not under the Act, the jurisdiction of the Civil Court is alternative, leaving it to the election of the suitor concerned to choose his remedy for the relief which is competent to be granted in particular remedy.
(3)If the industrial dispute relates to the enforcement of a right or an obligation created under the Act, then the only remedy available to the suitor is to gel an adjudication under the Act.
(4)If the right which is sought to be enforced is a right created under the Act such as Chapter Va then the remedy for its enforcement is either section 33C or the raising of an industrial dispute, as the case may be."
(21) The learned counsel has also placed reliance on another celebrated judgment of the Supreme Court reported as N.P. Ponnuswami vs. Returning Officer, Namakkal Constituency and others, 1952 S.C.R.218, Mr. Panjwani submitted that every right must have a corresponding remedy to enforce it. he has particularly drawn the attention of the Court to that portion of the judgment where the Court has laid down as under:-
"IT is- now well-recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes in Wolverhampton New Water Works Co. v. Hawkesford(1) in the following passage:-
THERE are three classes of cases in which a liability may be established founded upon statute. One is, where there was a liability existing at common law, and that liability is affirmed by a statute which gives a special and peculiar form of remedy different from the remedy which existed at common law; there, unless the statute contains words which expressly or by necessary implication exclude the common law remedy, the party suing has his election to pursue either that or the statutory remedy. The second class of cases is, where the statute gives the right to sue merely, but provides no particular form of remedy; there, the party can only proceed by action at common law. But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it........... The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to."
(22) The learned counsel for the petitioners has also drawn the attention of this Court to the judgment of the Chief Justice Falshaw, of the Punjab High Court, reported as Muni Lal Peshawaria, and others vs. Bulwant Rai Kumar and others, Air 1965 Punjab 24. In this case also, the Court has arrived at the conclusion that where a liability not existing in general law and is created by a statute, which at the same time gives a special and particular remedy for enforcing it, the remedy provided by the Statute must be followed and it is not competent to the party to proceed by action at general law. In this case also, Flashaw C.J. relied on the principles laid down in well known dictum of Willes J. in Wolverhampton New Waterworks Co. v. Hawkesford (1859) 6 Cbns 336 at p. 358.
(23) The learned counsel for the petitioner has also relied on British India Corporation Ltd. and others vs. Robert Menzies Air 1936, Allahabad, 568. In this case, the Court had observed that it is well understood in all systems of civilised jurisprudence that where there is a right, there is a remedy.
(24) Mr. Panjwani submitted that under Section 81 of the Company Act, time of 15 days mean that there should be interval of 15 days from the date of receipt and date of closing. In the present case, the company had never sent original offer under Section 81(1)(b) to the petitioner. The fraud has been alleged against the company. It has also been alleged that the company has acted malafide and illegally. It is also alleged that action of the company is oppressive.
(25) Mr. Haksar, learned counsel for the respondent-company in reply had taken a threshold objection that this petition before this Court is not maintainable. He submitted that though this petition has been filed under Section 81(1)(b)(10) of the Companies Act, 1956, whereas allegations and averments when properly comprehended clearly make out a case .under Section 397 and 398 of the Companies Act. Mr. Haksar had also drawn attention of the Court to the averments of the petition where fraud has been alleged against the company. It has also been alleged that the company has acted mala tide and illegally. He also pointed out from the averments of the petition where it is alleged that action of the company is oppressive. Learned counsel for the respondent submitted that after amendment in the Companies Act, the jurisdiction of deciding the disputes of 397 and 398 of the Companies Act has been transferred to the Company Law Board. After the amendment, any petition with such allegations can only be filed and entertained by the Company Law Board.
(26) Mr. Haksar also submitted that this petition under Section 81(1)(b)(10) of the Companies Act, 1956 is not maintainable because Section 81 of the Companies Act merely provides the procedure to be adopted by the Company in case of issuance of Right Shares and it does not provide any remedy or legal right by way of Companies Act in the event of any alleged breach of the said Section. Section 81 of the Companies Act, 1956 reads asunder:
"81.(1) Where at any time after the expiry of two years from the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares,then,-
(A)such further shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid-up on those shares at that time;
(B)the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not acceptable, will be deemed have been declined;
(C) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favor of any other person; and the notice referred to in clause (b) shall contain a statement of this right;
(D)after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the 'Board of directors may dispose of them in such manner as they think most beneficial to the company.
' EXPLANATION:In this sub-section, "equity share capital" and "equity shares" have the same meaning as in section 85.
(1A) Notwithstanding anything contained in sub-section (1); the further shares aforesaid may be offered to any person whether or not those persons include the persons referred to in clause (a) of sub-section (1) in any manner whatsoever-
(A)if a special resolution to that effect is passed by the company in general meeting, or (B)where no such special resolution is passed, if the votes cast (whether on a show of hands, or an a poll, as the case may be) in favor of the proposal contained in the resolution moved in that general meeting (including the casting vote, if any, of the chairman) by members who, being entitled so to do, vote in person or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting and the Central Government is satisfied, on an application made by the Board of directors in this behalf, that the proposal is most beneficial to the company.
(2)Nothing in clause (c) of sub-section (1) shall be deemed (a) to extend the time within which the offer should be accepted, or (B)to authorise any person to exercise the right of renunciation for a second time, on the ground that the person in whose favor the renunciation was first made has declined to take the shares Comprised in the renunciation.
(27) It is also mentioned in the reply that the petitioner No. 1 alone has filed the petition and verified the affidavit. In any event it is submitted that the present petition is not a representative action as such the petitioners have suffered from mis-rejoinder and costs of parties.
(28) It is also mentioned that this petition is not Filed in good faith and suffers from gross delay. èIt is submitted that the respondent company advertised in number of newspapers including t 'Economic Times', Bombay Edition on 12.9.1994 concerning the right offer, in the said advertisement it is clearly stipulated that in the event any member does not receive the right offer letter, the application could be sent on a plain paper. It is submitted that the petitioner never did so, they could have applied even on a plain paper before the closure of the issue. It is submitted that since the petitioners did not have necessary funds in time they did riot intentionally apply for the right offers and have taken the mala fide stand that they did not receive the right offer.
(29) In reply it has also mentioned that the petitioners were required to submit the application to Credit Lyonnais, K.G. Marg, New Delhi and not in Bombay. It is, therefore, submitted that due to the failure of the company they alone had to suffer and not the company or the other shareholders.
(30) Mr. Haksar submitted that eyen on merit, the petitioners have no case. The company has acted with utmost fairness and allegations made against the company are utterly baseless and without any foundation.
(31) In reply it is also incorporated that the respondent company has properly addressed, prepared and posted by Regd. post all applications to the petitioners from Delhi on 8th September, 1994 as is also evident from the Register of Registered posts issued by post office Okhia Industrial Area, New Delhi, this Register shows that letters were sent by registered posts, it is also mentioned that by virtue of Section 53 of the Company, the Regd. letters are presumed to have been delivered at the address in the ordinary course of law. It is denied that the petitioners have not received Regd. letters. The respondent company submitted that in any event, the respondent company is not liable in any manner.
(32) In reply it was mentioned that the respondent was in no way liable or responsible if the courier delivered the duplicate form to Manish Mehta in place of Manish Shah. There is nothing remains of the said delivery of the duplicate form and as such respondent's liability was to properly address and pro page the envelope to the company in the application form in compliance and it was done with full and meticulous compliance of the law and accordingly the respondent is not liable or answerable for the non receipt of the registered letter or for the alleged delay in delivery of the duplicate. It would have been received by Credit Lyonnais in Delhi on Monday, the 17th October, 1994 which could have been accepted.
(33) It is also mentioned in the reply that the Credit Lyonnais, Bombay was right in refusing to accept the application in as much as only the New Delhi Branch of Credit Lyonnais was only entitled to receive the above application. The petitioners had to work according to instructions which were contained in the application form. It is submitted that request made by the petitioners is not bonafide in as much as they did not tender the application at Bombay only. It is also submitted that the respondent ought to have accepted the same at Bombay.
(34) Learned counsel for the respondent submitted that allotment of right shares and right debentures have been made in consultation with the Delhi Stock Exchange Association. In the end it is denied that the petitioners arc entitled to any relief and according to the respondent, the petition is liable to be dismissed with exemplary costs.
(35) Mr. Haksar, learned counsel for the respondent placed reliance on Shanti Prasad Jain Vs Kalinga Tubes ltd. and others Air 1962 Orissa 202. In this case the Single Judge of the Orissa High Court while dealing with Section 397 and 407 of the Company Act before amendment has held that having regard to exclusive jurisdiction of the high Court under Section 397 to 407 both inclusive read with Section 10 of the Companies Act, 1956, -the decision in the said Misc. Appeal cannot operate as res judicata, indeed the question of granting reliefs against oppression to the minority shareholders and mismanagement of the Company's affairs under Sections 397, 398, 402 and 403 is the exclusive jurisdiction of the High Court alone, and no such relief, as prayed for herein, can be given in the said title suit, therefore, no order made in the said title suit can operate as res judicata, nor there can arise any question of alleged estoppel either in law or in facts of this case.
(36) Learned counsel submitted that now with the amendment in the Company Act this jurisdiction vests in the Company Law Board. Therefore, if the petitioners allege mismanagement or oppression the proper remedy for the petitioners is to File a petition before the Company Law Board and not before this Court.
(37) Mr. Haksar also placed reliance on M, Doshit Vs Reliance PetroChemicals Ltd. VoL 79, Company Cases, 830. The relevant portion in this case is set out as under
"THE High Court is a special court or a company court with special company jurisdiction and that jurisdiction has to be found from specific provisions of the Act. The High Court does not have any general plenary or residuary jurisdiction to deal with all matters and all questions arising under the Companies Act."
"RULE11 illustrates the matters with respect to which the High Court has jurisdiction. All the twenty-three items illustrate the jurisdiction of the High Court conferred by the various provisions of the Companies Act in respect of specific matters relating to the companies situated within its jurisdiction. The High Court is a special court with special company jurisdiction and that jurisdiction has to be found from specific provisions of the Act and the High Court does not have any general plenary or residuary jurisdiction to deal with all matters and all questions arising under the Companies Act."
(38) Mr. Haksar has also placed reliance on Satish Chandra Vs Union of India . In this case the amendment Act 31 of 1988 by which the jurisdiction to Company Law Board had been challenged. The court observed :
"THE winding up power has more serious consequences the same has been retained with the High Court while clothing the Board with a less drastic power visualised by Section 397. The difference does provide a good ground of distinction. The argument of lack of intelligible and acceptable differentia in having two for the aforesaid two purposes is therefore not tenable.
THE provision cannot also be assailed on ground that the minority shareholders who would normally like to invoke power of Section 397 would be required to approach Benches of the Board which do not function in all the States as do the High Courts and therefore minority shareholders would not be able to obtain relief against the oppression by the majority. Regulation 7 of the Company Law Board Regulations, 1991which provides for place of.sitting of Benches of the Board complete answer to such an argument."
(39) The Court also observed that the Administrative Tribunals which had been set up by the Act were taken as a substitutes of the High Court, whereas Company Law Board is not so, which would be apparent from the fact that an appeal from the orders of Board has been provided to the High Court by Section 10F inserted in the principal Act by Section 5 of the Act, whereas from the judgment and order of the Administrative Tribunal as set up by the aforesaid Act no appeal lies to the High Court.
(40) Mr. Haksar also placed reliance on N.I.I.Ltd. Vs N.I.N.H. Ltd. and submitted that this case though cited by the counsel for the petitioner, in fact supports the respondant. He particularly placed reliance on para 2 of the judgment. The relevant portion is set out as under: "IT is clear from these various decisions that on a true construction of Section 397, an unwise, inefficient or careless conduct of a Director in the performance of his duties cannot give rise to a claim for relief under that section. The person complaining of oppression must show that he has been constrained to submit to a conduct which lacks in probity, conduct which is unfair to him and which causes prejudice to him in the exercise of his legal and proprietary rights as shareholder. It may be mentioned that the Jenkins Committee on Company Law Reform had suggested the substitution of the word 'Oppression' in Section 210 of the English Act by the words 'unfairly prejudicial' in order to make it clear that it is not necessary to show that the act complained of is illegal or that it constitutes an invasion of legal rights."
(41) He has also placed reliance on R. Prakasam Vs Sree Narayana Dharma Paripalana Yogam 50 Company Cases, page 611. The course of case' law seems to be that except in cases where the Companies Act confers jurisdiction on the company court or some other authority, either expressly or by necessary implication, all forum of the civil courts, when such disputes are capable of being resolved by them.
(42) The Court has held that grievance of the petitioners pertain to the realm of individual right of alleged wrong done to individual members and not to the realm of corporate rights, the petitioners should possibly insist on strict observance of relevant provisions in a civil suit. In any event the Company Court has no jurisdiction to grant relief in a matter like this.
(43) Mr. Haksar also cited R.R. Rajendra Menon Vs Cochin Stock Exchange Lid. and Another reported in 69 Co. Cases 256. In this case the relevant portion is set out as under: "NO provision in the Act has been brought to our notice as specifying expressly or impliedly that an application to compel a company to comply with the requirements in section 257 will lie in the company court. The Act specifics certain questions or disputes to be resolved by the Central Government, certain others by the Company Law Board and certain matters to be dealt with by the company court. Only such matters as area specified in the Act or in the rules to be dealt with by the court could the company court deal with. The jurisdiction of the ordinary civil court can be regarded as impliedly barred in respect of those matters specified in the Act to be dealt with by the Court. It cannot be held that the jurisdiction of the civil court in respect of all other matters relating to a company is barred. The corollary is that, unless a particular matter is specified in the Act to be dealt with by the company court, it cannot exercise jurisdiction merely because it is also a matter which relates to a company."
(44) In the said case the Division Bench of Kerla High Court examined a large number of judgments and while affirming the judgment of the single Judge observed : "IT is difficult to construe the definition clause under section 2(11) or even section 10 as one conferring jurisdiction exclusively or otherwise. Section 10 of the Act does not purport to invest the company court with jurisdiction over every matter arising under the Act. Where's wrong is done by an individual member, he could insist by recourse to a civil suit. In the said case, an application was filed before the court for compelling the company to hold the annual general meeting, since section 166 of the Act imposes such a duty on the company. It was held that such-an application is not maintainable in the company court as the Act does-not specify a matter of that nature to be dealt with by the company court." "
(45) Mr. Haksar also submitted that this petition under Section 81 is not maintainable. Section 81 is only a procedural Section. The petitioners for their grievances of oppression cannot invoke section 81 of the Companies Act. According to him under the cover of section 81 the petitioners are in fact invoking section 397 and 398 of the CompaniesAct.
(46) I have car6fulfy perused the pleadings and considered rival contentions of the learned counsel for the petitioner and the respondent. I have also analysed the judgments cited by the learned counsel.
(47) Though the instant petition has been filed under Section 81 and Section 10 and Rule 11(b) and 17 of the Companies Act, 1959 but when averments and allegations incorporated in the petition are properly comprehended and analysed, it becomes abundantly clear that this petition is in fact a petition under Section 397 and 398 of the Companies Act. The petitioners have alleged fraud in the petition. The petitioners have also alleged that the company has acted mala fide and illegally. The petitioners have alleged that action of the company is oppressive. Such allegations and averments can only be incorporated and gone into in a petition preferred under Section 397 and 398 of the Companies Act.
(48) Merely filing a petition or mentioning Section 81 and Section 10 and 'Rule 11(b) and 17 of the companies Act, 1959 cannot change or alter the real nature and character of dispute or controversy involved between ' the petitioners and the respondent. It is the bound and duty and function of the Court to properly comprehend the substance of the allegations and averments incorporated in the petition.
(49) The Courts ought not to be governed merely by the outer forms of the petition. The Courts should be guided and governed primarily by the inherent substance of the averments and allegations incorporated in the petition.
(50) When this well established yardstick is made applicable to the instant case, the conclusion becomes irresistible that this petition is in fact a petition under Section 397 and 398 of the Companies Act, 1959. After the amendment in the Companies Act, 1959, the jurisdiction to decide and determine matters pertaining to sections 397 and 398 has been transferred to the Company Law Board. .
(51) In this view of the matter, the present petition is not maintainable before this Court and is accordingly dismissed. In the peculiar facts and circumstances of this case parties are directed to bear their own costs.