Bombay High Court
National Insurance Company Ltd. vs Glaxo India Ltd. on 16 February, 1999
Equivalent citations: AIR1999BOM240, 1999(2)BOMCR741, (1999)2BOMLR331, [1999]98COMPCAS378(BOM), 1999(2)MHLJ883, AIR 1999 BOMBAY 240, (1999) 2 ALLMR 491 (BOM), (1999) 2 MAH LJ 883, (1999) 2 MAHLR 730, (1999) 34 CORLA 30, (1999) 98 COMCAS 378, (1999) 2 COMLJ 205, (1999) 2 BOM CR 741, 1999 (2) BOM LR 331, 1999 BOM LR 2 331
Author: F.I. Rebello
Bench: F.I. Rebello
ORDER F.I. Rebello, J.
1. The appellants aggrieved by the order dated 24th July, 1988 passed by the Company Law Board, Western Region Bench, Mumbai, have preferred the present appeal. The main contention urged on behalf of the appellants is that the Company Law Board erred in holding that the disputes raised in the petition raise complicated questions which could not be decided by the Company Law Board in exercise of its jurisdiction under section 111 of the Companies Act. In addition, it is also submitted that no reasons have been given by the Board for the order passed and consequently the matter must be remanded to the Board for dispossing of the matter by giving reasons for its order.
2. The short facts which are necessary for disposal of the appeal may now be stated.
It is the case of the appellants that the Stock Holding Corporation of India Limited (SHCIL.) had sent 10,750 equity shares of the respondent company for transfer in the name of the appellants on 15th March, 1991. The respondent company transferred only 4700 shares. The respondent company also had issued rights issue in the ratio of 1: 5 in the years 1993 and had also issued Bonus shares in the ratio of 1:1. The appellants felt that the shares issued as rights shares and bonus shares would not be allotted to the appellants and consequently the name of the appellants will not be entered in the Register of Members of respondent company in respect of 14,520 shares. It is their case that the Register should be rectified in respect of 14,520 shares by entering the name of the appellants.
The respondent company filed their reply dated 6th July, 1995. The respondent company stated that they received a letter dated 15th March, 1991 from SHCIL giving the details of 10,750 shares. The respondent company, however, received only 4,700 shares. A letter dated 13th May, 1991 was addressed to SHCIL The repsondent company also sent an acknowledgment dated 16th May, 1991 for the receipt of 4,700 shares. SHCIL made enquiries as late as in December, 1993 after the rights issue. The respondent company did not admit that the petitioner is a lawful owner of the said 6050 shares. It is thereafter set out that as the respondent company did not receive the missing shares it cannot under any circumstances be made responsible for the same. The 6050 missing shares were not lodged with the company for transfer and this was intimated to the appellants time and again. It is also pointed out that the appellants had filed a civil suit and in view of that the petition ought not to be entertained.
At this stage it may be pointed out that the appellants have averred that though they had filed a suit on account of some observation made by the Company Law Board the suit was withdrawn. It may further to be noted that in respect of these very 6050 shares there are subsequent transfers effected by the repsondent company.
3. The Company Law Board after considering the matter arrived at a conclusion that the matter involve complicated questions of fact which could not be decided in a petition under section 111 of the Companies Act, 1956 and the controversy could be decided only by a Civil Court. With the above background the points urged cannot be decided. It may be relevant to mention at this stage that section 111 was substituted by the Companies (Amendment) Act, 1988 with effect from 31st May, 1991. Pursuant to this section 155 was omitted from the Companies Act. Section 111 thereafter was again amended by introduction of sub-section (4) which came into effect from 20th September, 1995. By virtue of the said amendment section 111 applies only to a private company which includes a private company which had become a public company by virtue of section 43-A of this Act. The appellants are a Public Limited Company. However, the petition was filed before the said amendment. There is no dispute at the Bar that the provisions of section 111 would be applicable in so far as the petition filed before the Company Law Board is concerned. Against an order passed under section 111 an Appeal lies under section 10-F. By virtue of the said section from an order of the Company Law Board an Appeal lies to the High Court within the time as set out.
4. The question which arises is whether by virtue of sub-section (4)(c) of section 10-F the Company Law Board can exercise all the powers of the Court and as such the jurisdiction of the Civil Court will be ousted. In other words the question that arises is whether in the cases covered by section 111 the jurisdiction of the Civil Court is ousted. The matter need not detain me for long. Sub-section(4) of section 111 before its substitution in section 111 was section 155 of the Companies Act. Section 155 and sub-section(4) of section 111 is in para materia. Various High Court including this Court had considered section 155. Some High Courts had taken one view as to the scope of the power under section 155 of the Companies Act. Two Division Benches of the Delhi High Court had taken different views of the matter and as such the matter was referred to the Full Bench of the Delhi High Court in the case of Ammonia Supplies Corporation Private Ltd. v. Modem Plastic Containers Pvt. Ltd. and others, 1994(79) Com.Cas. 163. After considering the various views of the other High Courts as also its earlier judgment in the case of Harnam Singh v. Bhagwan Singh, 1992(74) Com.Cas. 726 on account of which the reference was made as also the observation of the Apex Court in the case of Public Passenger Service Ltd. v. M.A. Khadar, , the Full Bench of the Delhi High Court answered the reference as under :-
1. The jurisdiction exercised by the Company Court under section 155 of the Act is discretionary and summary in nature.
2. In exercise of discretionary and summary jurisdiction, the Court can decline to entertain petitions involving disputed and complicated questions requiring examination of extensive oral and documentary evidence.
3. The remedy of suit for adjudication of dispute relating to title to share is not barred.
5. The scope of section 155 of Civil Procedure Code came up for consideration before the Apex Court in the case of Ammonia Supplies Corporation Private Ltd. v. Modern Plastic Containers Pvt. Ltd. and others, which matter arose from a judgment of the Delhi High Court, which relied on the Full Bench Judgment in the case of Ammonia Supplies Corporation v Put. Ltd. (supra). The Apex Court was answering the following question:-
"Whether in the proceedings under section 155 of the Companies Act the Court has exclusive jurisdiction in respect of the matters raised therein or have only summary jurisdiction?"
It may be noted that in so far as the facts of that case were concerned, the appellant company before the Apex Court had made investment in shares of M/s. Modern Plastic Containers Pvt. Ltd. to the extent of 50% shares. Shri D.P. Bharagava, son of M.L. Bhargava married the sister-in-law of one V.K. Bhargava, one of the Managing Directors of the respondent company. On account of this relationship the appellant company invested in the aforesaid shares of the respondent company. The dispute pertains to this investment. According to the respondent company there was no such investment made by the appellant company nor any share was transferred by the repsondent company in favour of the appellant company. On the other hand the bone of contention of the appellant company was that in spite of the payment of the aforesaid amount of the shares it was not invested in such shares. The appellant company had become 50% share holder of the respondent company about which there was an acknowledgment of the respondent company. Reliance was placed on the balance sheet of the appellant company, as also the audited statement of accounts and the Income -tax assessment orders. On 18th January, 1983 Shri V.K. Bhargava died in a car accident and according to the appellant is the reason for the dispute between the appellant company and the respondent company being raised by the brothers of deceased Shri V.K. Bhargava. A petition came to be filed amongst others under section 155 of the Companies Act. The petition was, however, confined to relief under section 155 of the Companies Act. The only issue before the Apex Court was the jurisdiction of the Court under section 155 while dealing with the application. It was contended that the sole beneficiary was Shri M.L. Bhargava. There are certain other facts which need not be stated. The Apex Court, thereafter referred to para 7 of its earlier judgment in the case of Public Passenger Service Ltd. (supra). It was sought to be contended before the Apex Court that the said judgment was per incuriam. In the alternative it was contended that the attention of both the Full Bench of the Delhi High Court and of the Apex Court in Public Passenger Private Limited was not drawn to the definition of 'Court' as defined under section 2(11) and section 10 of the Companies Act. It was argued that if that had been considered a different interpretation would have followed. If that definition is read into section 155 of the Court would only be a Company Judge and not Civil Judge. In para 14 in so far as its own judgment in Public Passenger Service Limited (supra) the Apex Court observed that the argument that the judgment was per incuriam had to be rejected as the issue was directly in issue and was considered with respect to the interpretation of section 155 and hence it could not be said by any stretch of imagination that the decision was per incuriam. In para 13 the Apex Court culled the ratio in Public Passenger Service Ltd. and held that by reasons of its complexity or otherwise if the matter can more conveniently be decided in a suit, the Court may refuse relief under section 155 and relegate the parties to a suit. Thereafter considering the various provisions and case law cited, the Apex Court in para 26 observed as follows:--
"There could be no doubt any question raised within the peripheral field of rectification, it is the Court under section 155 alone which would have exclusive jurisdiction. However, the question raised does not rest here in case any claim is based on some seriously disputed civil rights or title, denial of any transaction or any other basic facts which may be the foundation to claim a right to be a member and if the Court feels such claim does not constitute to be a rectification its discretion to send a party to seek his relief before Civil Court first, for the adjudication of such facts, it cannot be said that such right of the Court to have been taken away merely on account of the deletion of the aforesaid proviso. Otherwise under the garb of rectification one may lay claim of many such contentious issues for adjudication not falling under it. Thus in other words the Court under it has discretion to find whether the dispute raised are really for rectification, or is of such a nature, unless decided first it would not come within the purview of rectification."
Thereafter in para 27 the Apex Court observed as under :--
"The Court has to examine on the facts of each case, whether an application is for rectification, or something else."
Thereafter it proceeded to observe as under :--
"So far exercising of power for rectification within its field there could be no doubt the Court as referred under section 155 read with section 2(11) and section 10, it is the Company Court alone which has exclusive jurisdiction."
The following observations are also material from para 31 :--
"So whenever a question is raised Court has to adjudicate on the facts and circumstances of each case. If it truly is rectification all matter raised in that connection should be decided by the Court under section 155 and if it finds adjudication of any matter not falling under it, it may direct a party to get his right adjudicated by Civil Court."
Thereafter the Apex Court observed as under :--
"We have already held above the jurisdiction of the 'Court' under section 155, to the extent it has exclusive the jurisdiction of Civil Court is impliedly barred. For what is not covered as aforesaid the Civil Court would have jurisdiction."
It is, therefore now clear from the judgment of the Apex Court in M/s. A.S. Corporation (P) Ltd. (supra), the Apex Court has held that in so far as the matters of rectification are concerned, it is the Company Court alone which would have jurisdiction. If issues which have to be answered are not peripheral to rectification but issues regarding title, etc. then such other issues will have to be decided by the Civil Court. The Apex Court has now recognised that it is the Company Court which would be the Court of exclusive jurisdiction in so far as rectification is concerned. However, if issues arise, whether the applicant is the owner of the shares; whether there is fraud or forgery in holding the shares or the very title to the shares, then such issues will be beyond the jurisdiction of the Company Court and will have to be decided by the Civil Court. To that extent, the judgment of the Full Bench of the Delhi High Court where it held that there is a jurisdiction in the Company Court to relegate the parties to a suit has been departed from. The earlier judgment of the Apex Court in the case of Public Passenger Service Ltd. will have to be read in the context of the observations of the Apex Court in the case of M/s. A.S. Corporation (P) Ltd. (supra).
6. Applying that ratio can it be said that the order of the Company Law Board is liable to be set aside on the ground that there are complicated questions of fact which the Company Law Board cannot go into. The learned Counsel for the appellant would be right that the order of the Company Law Board would be contrary to the ratio of the Apex Court in M/s. A.S. Corporation (P) Ltd. However, in so far as the final order is concerned I find it will be difficult for this Court to interfere with the said order for the following reasons.
The respondent company at the threshold had informed the appellants that they had not received 6050 shares. In other words there is a dispute as to the very transaction itself which is not merely a matter for rectification. Secondly, there are disputes whether the persons who are holding the shares are holding the shares on account of forged documents. In other words it is not merely the case of the appellant being the owner of the shares and the company for wrong reasons refusing to rectify the register without cause. When there are disputes as to whether the appellants are the owners of the shares not be a case exclusively pertaining to rectification which could be decided by the Company Law Board. In that light of the matter though the reasons given by the Company Law Board cannot be sustained, its ultimate conclusion cannot be set aside.
7. That leaves us with the other point as raised, that the Company Law Board has not given the reasons and for that purpose the order has to be set aside for giving fresh decision. The matter is in appeal. It is now well settled that the Appellate Court can exercise the same powers as the trial Court. After the Court has come to the conclusion that the issues raised cannot be decided by the Company Law Board it will be futile to send the matter back to the Company Law Board to merely undergo the same exercise in a different manner and reject the company petition. The appellants have pointed out in the appeal memo that the suit was withdrawn based on certain observations made by the Company Law Board. That cannot be an answer for the Company Law Board to assume jurisdiction.
At this stage I may point out that some other judgments had been cited at the bar. I have not referred to them as in my view the matter could be answered on the touchstone of the judgment of the Apex Court in the case of M/s. A.S. Corporation (P) Ltd. (supra).
With the above observations, the appeal stands dismissed. In the circumstances of the case there shall be no order as to costs.
8. Appeal dismissed.