Company Law Board
A.V. Sampat, Official Liquidator vs Dunlop India Ltd. And Anr. on 22 May, 1995
Equivalent citations: [1996]87COMPCAS398(CLB)
ORDER
1. This is a petition filed on October 28, 1992, by the liquidator of BoB Fiscal Services Ltd. (hereinafter called "BoB Fiscal") under Section 111 of the Companies Act, 1956, praying for an order directing the respondent-company to register the transfer of 7,42,400 equity shares in the name of the petitioner and for other consequential reliefs. The respondents in this case are :
(1) Dunlop India Ltd. (hereinafter called "Dunlop") having its registered office at Calcutta and (2) Bank of Baroda, a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, having its head office at Baroda.
2. The main facts of this case are : BoB Fiscal (a wholly owned subsidiary company of Bank of Baroda) was incorporated in 1988. In the same year BoB Fiscal purchased from all-India financial institutions 7,42,400 equity shares of Dunlop. Immediately thereafter during September 22, 1988, to October 4, 1988, all the scrips in respect of these shares were lodged with Dunlop along with duly stamped transfer deeds. According to the petitioner, BoB Fiscal is an investment company within the meaning of Section 372 of the Companies Act, 1956. Pending the transfer of the impugned shares BoB Fiscal entered into contracts for sale of these shares with two brokers at Bombay. After the lodgment, BoB Fiscal enquired from Dunlop about the date by which the transfer deed will be registered. In reply, Dunlop called for a board resolution of the transferors, confirming as to whether the purchase was on its own behalf or on behalf of its clients and, if so, the necessary declaration and permission of the Reserve Bank of India in case the purchase was for any non-residents. These queries were answered by BoB Fiscal. Thereafter Dunlop called for a copy of the board resolution of BoB Fiscal under Section 292 of the Companies Act. On this BoB Fiscal protested and drew the attention of Dunlop to the relevant clauses in the memorandum and articles to the effect that BoB Fiscal was an investment company, Still the required board resolution was also sent. Dunlop thereafter raised the question of a board resolution under Section 372(5) of the Companies Act and also called for a copy of the approval of the Central Government. This is despite Dunlop having been told about the relevant clauses in the memorandum of association that the petitioner was an investment-company. According to the petitioner the acquisition was also within the limits laid down under Section 372 of the Companies Act, 1956. Still BoB Fiscal replied to this query and even thereafter further information regarding different activities of the petitioner-company were sought which BoB Fiscal refused to furnish being confidential information. According to BoB Fiscal the piecemeal correspondence on the part of Dunlop was to intentionally delay registration. By the entire process time was lost up to July, 1989.
3. It is further stated that the shares purchased constituted even less than 5 per cent. of the subscribed capital of Dunlop and as such Section 372 was not applicable. Dunlop, it is further alleged wrongfully raised the ruse of Section 372 knowing fully well that it was not applicable. Though the respondent-company intimated its intention to approach the Department of Company Affairs for a clarification with regard to applicability of Section 372 it actually did not do so which shows its bad intention.
4. While the above process was on, in September 1990, BoB Fiscal resolved to voluntarily wind itself up under Section 484(1)(b) of the Companies Act and the petitioner was appointed as the liquidator. In November, 1990, this fact was intimated to the respondent-company. The petitioner vide his letter dated November 15, 1990, called back the transfer documents in view of the resolution for voluntary winding up. On receipt of this letter the respondent-company questioned the authority of the petitioner to withdraw the applications for transfer, It continued to refuse the return of the documents and also did not supply a draft indemnity for return of the documents for which it was originally agreeable. According to the petitioner, by an arrangement with Bank of Baroda, all the assets, title and interest of the company were vested in the said bank. The bank also applied to the Reserve Bank of India for permission for take over of the assets and liabilities of BoB Fiscal and the same was granted in February 1991. The Reserve Bank of India also stipulated that the said bank may arrange to unload the shares and debentures taken over at a suitable time. The respondent-company was duly informed about the arrangement as well as the Reserve Bank of India approval referred to above, Despite this the respondent-company did not return the shares but called for confirmation from Bank of Baroda that BoB Fiscal is a 100 per cent. subsidiary and also for an indemnity. An offer without prejudice was made by Bank of Baroda through its solicitors for sale of the shares to the respondent-company. Despite giving all clarifications, the respondent-company delayed registration but was agreeable to consider returning the impugned shares together with the relevant transfer deed upon compliance with certain requirements. At no stage did the respondent-company refuse to register the shares but it continued to default in registration. As a consequence Bank of Baroda had to incur huge losses to the extent of refunding the purchase price to the brokers and also paying a sum of Rs. 2.45 crores on account of interest as the contract was rescinded. The respondent-company has also not paid the dividend for the years 1988-89 onwards. The loss of interest on account of non-payment of dividend has been assessed at Rs. 75 lakhs. The petitioner has prayed for an order directing Dunlop to register the transfer of the impugned shares as well as for payment of the arrears of dividend since 1989. The petitioner has also prayed for directions for an enquiry to be instituted as well as for costs.
5. In its reply, Dunlop has raised the preliminary objections that the petition suffers from delay, acquiescence, waiver and limitations. According to Dunlop, the right to apply under Section 111 had expired by December, 1988, and otherwise also a period of more than 3 years has expired resulting in the petition being barred by limitation. The company has disputed that BoB Fiscal is an investment company within the meaning of Section 372 of the Companies Act, 1956. The board of BoB Fiscal, at its meetings held on May 17, 1988, has accepted the ceiling prescribed under Section 372 and now it cannot contend that it is an investment company. This is the reason why Dunlop called for information to determine whether BoB Fiscal is an investment company or not. Despite the offer of Dunlop to make a reference to the Department of Company Affairs BoB Fiscal did not provide all relevant information. Neither the petitioner nor BoB Fiscal ever intimated about any contract for sale of the impugned shares to the two brokers. The allegation that Dunlop was intentionally delaying registration was denied. Information was called for from BoB Fiscal only to ensure proper compliance with the provisions of law. There was no intention to delay but the query was necessary as the ceiling limit was shown to be applicable to BoB Fiscal as per its own resolution. For the purpose of determining whether a company is an investment company, it has to be ascertained as to whether the principal business is acquisition of shares and other securities which is a question of fact. Mere mention in the main objects clause of the memorandum of association cannot make it the principal business of the company. In fact the investments made by BoB Fiscal were far in excess of the limits prescribed under Section 372 of the Companies Act and as such was required to be sanctioned by a general body resolution and also required to be approved by the Central Government. It was also required to be sanctioned unanimously by the board of directors. Since all these approvals had not been obtained. Dunlop concluded that the provisions of Section 372 of the Companies Act have not been complied with, The Department of Company Affairs could not be approached by Dunlop due to refusal by BoB Fiscal to supply relevant information. Dunlop further states that there cannot be any arrangement or agreement between Bank of Baroda and BoB Fiscal after the voluntary liquidation nor was Dunlop aware of it. There is also nothing to indicate that even if such arrangement exists it is binding on Dunlop. Dunlop was also not aware of any approval granted by the Reserve Bank of India. It was also pointed out by Dunlop through its solicitors that the petitioner had not complied with the requirement and it was further stated that the draft of the release deed and the discharge deed were forwarded to BoB Fiscal but the petitioner has not complied with the requirements. The reply also stated that from the letter dated April 16, 1992, of the solicitors of the petitioner it is clear that property had already vested in Bank of Baroda and the said bank had taken charge of all the properties. The sale transaction of impugned shares with the brokers had already been cancelled and the shares were required to be registered in the name of Bank of Baroda and there was no need to execute the indemnity by the petitioner and as such the solicitors had asked whether Dunlop was agreeable to register the shares in the name of Bank of Baroda. These contrary stands were pointed out to the solicitors of the petitioner. The petitioner has suppressed all the above correspondence which itself is a ground for dismissing the petition. According to the reply, the petitioner has adopted different stands with regard to the contract of sale with the brokers ; once stating that the sale had actually taken place and later to state that there was only a contract to sell. The allegation of the petitioner that Dunlop did not comply with the request for buying the shares back is incorrect as legally a company cannot buy its own shares. The reply has also denied and disputed that Bank of Baroda had suffered any loss as alleged at all. Dunlop had acted bona fide and in the best interest of all but it is only the petitioner and BoB Fiscal's non-compliance with the queries which has resulted in the situation complained of by the petitioner, The respondent-company has stated that the reliefs cannot be granted due to the fact that the petitioner himself is not seeking registration but has only asked for return of the shares, and also that the shares were sold further and that Bank of Baroda is seeking registration in its name.
6. Before the hearing of the main petition two applications Nos. 36 and 37 of 1994 were filed on behalf of Dunlop ; one raising a preliminary objection with regard to the maintainability of the petition and the other for summoning witnesses to be examined as well as for inspection of documents. Both the parties agreed before us for mutual inspection of documents relating to the averments in their affidavits. As regards the preliminary objection and the prayer for examination of witnesses, with the consent of parties these were to be considered at the time of hearing of the main petition.
7. At the hearing held on November 16, 1994, Shri S. B. Mookherjee, senior advocate for the respondent-company, argued on the preliminary objection. He stated that admittedly BoB Fiscal is not the petitioner. The petitioner is one A. V. Sampat who describes himself as the liquidator of BoB Fiscal. A voluntary liquidator cannot be an applicant unless a resolution under Section 512 read with Section 457 of the Companies Act is passed authorising him to institute any proceedings. The copy of the resolution at page 114 of the petition does not confer any authority to initiate legal proceeding in respect of the shares. He further stated that if it is contended that all the rights and obligations in respect of the shares in question are vested in the Bank of Baroda, then BoB Fiscal or the petitioner has no right or interest in the shares nor title to apply for rectification. He, therefore, submitted that due to conflicting claims and assertions as to title this is required to be determined before any order is made for rectification. Shri Mookherjee further stated that Shri A. V. Sampat has sought registration in his name, when the assets have been taken over by the Bank of Baroda. He submitted that on this ground alone the petition is liable to be rejected. In this connection, he cited Indian Chemical Products Ltd. v. State of Orissa [1966] 36 Comp Cas 592 ; AIR 1967 SC 253 and Luxmi Chand v. Bengal Coal Co. [1882] ILR 8 Cal 317 to establish that when a vesting takes place registration can be done only in the name of such party.
8. Shri Mookherjee further contended that the present petition is barred by limitation. This contention is based on the fact that the cause of action arose in 1988 when the jurisdiction was with the High Court. As such the present petition would not have been entertained by the High Court if the jurisdiction had continued in view of the provisions of the Limitation Act and the Civil Procedure Code, Order 7, Rule 11 and Order 14, Rule 2. He also referred to the Company Law Board Regulations, 1991, which deals with limitation. Section 111(4) was not in the statute book when the shares were lodged and the right to apply under Section 155 had been already lost. He further stated that even if the argument of limitation is not applicable, the petitioner should have instituted proceeding within a reasonable time. He also contended that there is no subsisting right which can be enforced and if a right no longer survives it cannot be enforced.
In this connection, he cited Tilokchand Motichand v. H.B. Munshi, CST, AIR 1970 SC 898 ; 25 STC 289 (SC) and Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh, AIR 1953 SC 221 ; [1953] 4 STC 114.
9. Shri Mookherjee also stated that it is not clear whether the present application is under Section 111(2) or 111(4). In any case in both the subsections the period prescribed therein had expired inasmuch as when the present petition was filed there was no subsisting right to be enforced by the petitioner. He also relied on the observation of the Supreme Court in Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala [1961] 31 Comp Cas 387 ; AIR 1961 SC 1669, wherein while comparing the provisions of the erstwhile sections 111 and 155, the Supreme Court held that the restrictions which are applicable in the exercise of the powers of the court also apply to the exercise of the appellate power by the Central Government (now the Company Law Board). Therefore, he stated that if an application for rectification should be barred after three years the appeal before the Company Law Board would also be barred if the applications are made after expiry of the said period. In the above context he also cited (i) Jawahar Mills Ltd. v. Sha Mulchand and Co. Ltd. [1949] 19 Comp Cas 138 ; AIR 1959 Mad 572 ; (ii) Mahadeolal Agarwala v. New Darjeeling Union Tea Co. Ltd., AIR 1952 Cal 58 ; (iii) Kerala State Electricity Board v. T.P. Kunhaliumma, AIR 1977 SC 282 ; (iv) Raja Bahadur Kamahhya Narayan Singh v. State of Bihar [1962] 46 ITR 516 (Patna) ; (v) CIT v. Bengal Card Board Industries and Printers P. Ltd. [1989] 176 ITR 193 (Cal).
10. Regarding the facts of the case and the other legal issues there is not much of difference in the versions. It is an admitted fact that though the impugned shares were lodged during September 22, 1988, and October 4, 1988, the registration was neither done nor rejected. According to learned counsel for Dunlop, Dunlop insisted on certain information to be provided to satisfy itself that ;
(a) BoB Fiscal is an investment company and, therefore, is exempted from Section 372 of the Companies Act.
(b) The acquisition by BoB Fiscal is not benami and that BoB Fiscal is not being used as a conduit for funnelling funds from public financial institutions to the Ambani group of companies.
11. Shri Mookherjee also submitted that in view of the facts in the case before the Supreme Court in N. Parthasarathy v. Controller of Capital Issues [1991] 72 Comp Cas 651 ; AIR 1991 SC 1420, the genuineness of the acquisition of the impugned shares is in doubt. Further, it was also to be established that the principal business of BoB Fiscal is the acquisition of shares and securities which could be determined only from the balance-sheet of the company which was not available. He cited the decision of the Gujarat High Court in Distributors (Baroda) Pvt. Ltd v. CIT [1968] 69 ITR 614 in this connection. He also submitted that BoB Fiscal has gone into voluntary liquidation but there was no declaration of solvency and if the solvency is not there the voluntary liquidation itself will be questionable and if the shares go into the hands of the financiers it will be against public policy as decided by the Supreme Court. The respondent-company required all the above information to take a definite stand in the matter after getting the information.
12. Shri Mookherjee called for a copy of the vesting agreement and declaration- of solvency. Shri Mukherjee also submitted that there are complicated questions of law and facts which cannot be decided in a summary proceeding and hence the petition deserved to be dismissed.
13. Shri A.K. Mitra, senior advocate, appearing on behalf of the petitioner, refuted the arguments regarding the Limitation Act, as well as other preliminary objections. With regard to limitation, Shri Mitra stated that the Limitation Act applies only to courts and it does not apply to proceedings before the Company Law Board, it being not a court, Carbon Corporation Lid. v. Ablntdaya Properties Pvt. Ltd. [1992] 73 Comp Cas 572. In this connection, he also cited the Company Law Board decision in Simret Kalyal v. Bhagwnndas and Co. P. Ltd. [1994] 1 Comp LJ 442 (CLB). He also cited the decision of the Company Law Board in Canara Bank v. Nuclear Power Corporation of India Ltd. [1995] 84 Comp Cas 62 to show that the Company Law Board is not a court. He also referred to the Bombay High Court decision in Shailesh Prabudas Mehta v. Calico Dyeing and Printing Mills Ltd. [1990] 67 Comp Cas 533 to state that the delay does not involve abandonment of rights which applies to both the parties. He further stated that if at all there is any delay it is due to the company marking time by raising one frivolous issue or the other. Having done that now the company cannot take advantage of its own default. He further stated that when there is a continuing wrong there is no question of limitation. In this connection, he cited the Supreme Court decision in Bhagirath Kanoria v. State of M. P., AIR 1984 SC 1688 ; [1986] 68 FJR 98 and Bharathamata Desiya Sangam v. Roja Sundaram, AIR 1987 Mad 183. According to him even if limitation under the Limitation Act is taken into account, it goes up to November, 1991, by which time the amendment has come into force and the jurisdiction has undergone a change. He also confirmed that the petition is made under Section 111(4) of the Companies Act, 1956.
14. With regard to the contention of the respondent-company that there are complicated questions and hence the Company Law Board cannot decide the same, counsel was of the view that there is no such complicated question involved in this case which cannot be decided by the Company Law Board. Still, this is a discretion which is entirely left to the Company Law Board to decide.
15. As regards the authority of the petitioner, Shri Mitra stated that the voluntary liquidator has filed this petition only in his representative capacity. The plea that there should be prior authority has been squarely answered by the Madras High Court in J. Loomchand Sait v. Official Liquidators, Peerdhan Jaharmall Bank Ltd. [1953] 23 Comp Cas 142 ; AIR 1953 Mad 595, where it has been concluded that if at all, it is only an irregularity and does not vitiate the proceedings. As regards the existence of the authority, the resolution at page 114 of the petition authorises in terms the liquidator to do all acts as may be required for the beneficial winding up. Getting the shares registered in the name of the company is an essential step for beneficial winding up. As regards the vesting of the rights and obligations in Bank of Baroda it is not open to Dunlop to raise this issue as they have denied the vesting. The averments regarding vesting of the shares in Bank of Baroda is merely by way of narration of facts. Shri Mitra, therefore, submitted that Dunlop should be directed to register the shares in the name of BoB Fiscal. In fact, according to him, there is no difference of opinion on this issue that the shares can be registered only in the name of the transferee mentioned in transfer deed.
16. Shri Mitra finally stated that copies of the vesting agreement and declaration of solvency are irrelevant for deciding the transfer but presented the balance-sheet of BoB Fiscal as demanded by Dunlop.
17. We have carefully considered the pleadings, oral arguments and written submissions of the parties. The main issues which arise in this case are :
(a) whether the petition is maintainable ;
(b) if maintainable, is there any unnecessary delay on the part of Dunlop as contemplated in Section 111(4) of the Act.
18. As regards maintainability, the respondent-company's challenge is based on the following :
(i) that BoB Fiscal is not the petitioner ;
(ii) that the liquidator has no authority to institute these proceedings ;
(iii) that the rights and obligations in respect of the shares are already vested in Bank of Baroda ;
(iv) that the petition is barred by limitation.
19. The first and second points are inter-related. The petitioner in this case is one A.V. Sampat, who has filed the petition as the voluntary liquidator of BoB Fiscal. The prayer of course in the petition is for registering the shares in the name of the petitioner, namely A.V. Sampat. The transfer deeds, however, indicate that the transferee is BoB Fiscal. In these circumstances the point raised by the respondent-company is very relevant. However, during the hearing both the parties fairly conceded that Dunlop cannot register the shares in the name of any one else other than in the name of the transferee as stated in the transfer deed. As such there is no conflict on this score. However, the petition filed by the liquidator of the company needs to be examined. It has been substantiated by the petitioner through a resolution under Section 490(1) passed at the extraordinary general meeting of BoB Fiscal. This resolution not only evidences the appointment of Shri A.V. Sampat as the voluntary liquidator but also indicates his powers. These powers include taking necessary steps/action for outstanding matters and to do all acts, deeds and things as may be deemed necessary for the beneficial winding up of the company. The registration of impugned shares was an outstanding matter. As such in our opinion the liquidator is duly empowered to initiate this action. As regards the objection that there is no resolution under Section 512 empowering the liquidator to initiate proceedings, the petitioner's counsel has aptly drawn our attention to the decision of the Madras High Court in J. Loomchand Sait v. Official Liquidators, Peerdhan Johawnall Bank Ltd. [1953] 23 Comp Cas 142 ; AIR 1953 Mad 595. In this case, the official liquidator of the company initiated proceedings without indicating that he is doing so in his representative capacity. Further the official liquidator was charged for violation of Section 179 of the Indian Companies Act, 1913 in as much as no prior sanction of the court was obtained for instituting any proceedings. The court observed in this case that "in the absence of specific terms in the law that sanction should be previously obtained, it follows as a necessary corollary that sanction required by the official liquidator could be given by the concerned authority at any time even after proceedings have actually been instituted or even in the course of the proceedings". As such this objection relates to an irregularity rather than an illegality. Further, we find from the resolution under Section 490(1) of the Companies Act that the powers of the liquidator have been spelt out which are adequate to take care of the present proceedings. As regards vesting in Bank of Baroda, the respondents themselves do not want to take cognisance of this. Moreover, since BoB Fiscal is still not dissolved, the vesting is not very relevant. Still this is considered in greater detail later.
20. A valid question has been raised on behalf of Dunlop regarding the nature of the petition i.e., whether it is an appeal under Section 111(2) or an application under Section 111(4) as it is not clearly spelt out. This question is relevant for testing the maintainability on limitation. However, the respondent-company has made it clear in the argument as well as in the written submissions that it is an application under Section 111(4) and may be dealt with accordingly.
21. Shri Mookerjee argued at length on the maintainability due to limitation even under Section 111(4). One limb of his argument is that the cause of action arose in 1988, when the jurisdiction was with the High Court. His point was that since the High Court could not have entertained the petition if the jurisdiction had continued there, the same limitation should apply to the proceedings before the Company Law Board as well. The facts in this case show that the limitation extends up to October, 1991, reckoned on the basis of the cause of action arising in October, 1988. However, in May, 1991, the jurisdiction was shifted to the Company Law Board from the High Court, and as such the limitation had not expired in May, 1991. The petitioner cannot be held back by limitation restrictions when there is a statutory amendment which frees them from the limitation provisions. Of course this is on the assumption that Limitation Act does not apply to the Company Law Board which is examined at length. As such this argument of Shri Mookherjee cannot be accepted.
22. Now coming to the applicability of the Limitation Act to the Company Law Board, Shri Mookherjee submitted that in line with the decision of the Supreme Court in Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhun-jhunwala [1961] 31 Comp Cas 387, the Company Law Board has to adjudicate on the same lines as a court and whatever limitation is applicable to the court will apply to the Company Law Board as well. In our view, the decision of the Supreme Court in this case is not relevant to the present context. In that case, the Supreme Court was concerned with the maintainability of an appeal under Article 136 of the Constitution. In that context, the Supreme Court has observed that the proceedings started under Section 111 by way of an appeal before the Central Government have all the trappings of proceedings before a judicial tribunal and as the Central Government exercises judicial powers of the State to adjudicate upon rights of the parties in civil matters when there is a lis between the contesting parties, the conclusion was that it acts as a tribunal and not as an executive body. Hence, the Central Government in exercising appellate powers under Section 111 of the Companies Act, 1956, is a tribunal exercising judicial functions and is, therefore, subject to the appellate jurisdiction of the Supreme Court under Article 136 of the Constitution. In the present case, however, there is no doubt that the Company Law Board is a tribunal exercising judicial functions. Further, there is no specific observation in the case referred to with regard to limitation.
23. As regards the applicability of limitation we have to go by the provisions of the Limitation Act, 1963. With the coming into force of the 1963 Act and the repeal of the 1908 Act, Article 137 which provides an omnibus limitation of three years becomes applicable to all applications for which no period of limitation is provided elsewhere in that Act. Consequently though by the earlier provision of the 1908 Act this omnibus limitation was applicable only to proceedings governed by the Civil Procedure Code, the new provision applies to all applications before a court irrespective of whether it is under the Civil Procedure Code or not. The only question to be examined by us is whether this omnibus clause is applicable to an application before any tribunal other than a court. This question has been already examined by the Supreme Court in Nitymmitd M. Joshi v. LIC, AIR 1970 SC 209. The observation of the apex court in this regard is set out below (page 210) :
"In our view, Article 137 only contemplates applications to courts, In the Third Division of the Schedule to the Limitation Act, 1963, all the other applications mentioned in the various articles are applications filed in a court. Further, Section 4 of the Limitation Act, 1963, provides for the contingency when the prescribed period for any application expires on a holiday and the only contingency contemplated is 'when the court is closed'. Again under Section 5 it is only a court which is enabled to admit an application after the prescribed period has expired if the court is satisfied that the applicant had sufficient cause for not preferring the application. It seems to us that the scheme of the Indian Limitation Act is that it only deals with applications to courts, and that the Labour Court is not a court within the Indian Limitation Act, 1963."
24. The Supreme Court in the above case reconsidered its own judgment in Town Municipal Council, Athani v. Presiding Officer, Labour Court, Hubtt, AIR 1969 SC 1335, wherein though the apex court revised one of the two findings under Article 137, it confirmed the other finding, viz., that the limitation under Article 137 applied only to courts. In view of this settled position, we have now only to consider whether the Company Law Board is a court for all intents and purposes or not. In this connection, we have to keep in view a recent judgment of the Supreme Court in Canara Bank v. Nuclear Power Corporation of India Ltd. (Civil Appeal No. 13206 of 1995) since reported in [1995] 84 Comp Cas 70 (SC).
25. Considering the issue whether the term "civil court" used in the Special Court Act would include the Company Law Board, the Supreme Court in this case specifically observed that (at page 95) : "It is difficult to see how it can be said to be anything other than a court particularly for the purpose of Section 9A of the Special Court Act". This observation, in our opinion, has to be understood in the context in which the court has made the observation. The apex court in the same judgment has emphasised that the word has to be read with reference to the context. It states (at page 91) :
"In our view, . . . the word 'court' used in Section 9A of the Special Court Act, is intended to encompass all curial or judicial bodies which have the jurisdiction to decide matters or claims, inter alia, arising out of transactions in securities entered into between the stated dates in which a person notified is involved." This observation cannot be torn out of context, on the question of citing the Supreme Court out of context. It is appropriate to refer to the decision of the Supreme Court itself in CFT v. Sun Engineering. Works (P.) Ltd. [1992] 198 ITR 297 ; AIR 1993 SC 44, wherein it is observed that (page 320 of 198 ITR) 'it is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court, divorced from the contest of the question under consideration and treat it to be the complete "law" declared by the Supreme Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court. A decision of this court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of the Supreme Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this court to support their reasoning' (para 39)."
26. The various other decisions of the Supreme Court as in Dr. Baliram Waman Hiray v. Justice B. Lentin, AIR 1988 SC 2267 ; [1989] 176 ITR 1 and Jagannath Prasad v. State of U. P., AIR 1963 SC 416, all go to show that the apex court has examined whether a tribunal is a court or not with reference to the context in which the word court is used, This being so in the present case, we have to consider whether the Company Law Board is a court or not in the context of the Limitation Act, 1963. Since the pronouncement of the Supreme Court on this issue is amply clear as reflected in the two judgments cited above specifically on the applicability of Article 137 to tribunals other than courts we are of the view that the omnibus clause under Article 137 of the Limitation Act does not apply to the Company Law Board. Consequently, the petition is maintainable and does not suffer from any infirmity on account of limitation.
27. Having held that the petition is maintainable the next relevant issue is whether there is any unnecessary delay on the part of Dunlop. The fact of BoB Fiscal having become entitled to the shares is undisputed but the contention is that there has been unnecessary delay on the part of Dunlop since the shares were lodged from September 23, 1988, to October 4, 1988, whereas Dunlop was marking time seeking some clarification or the other till September, 1990, i.e., nearly for-two years when the special resolution for voluntary winding up was passed. Since Dunlop is a listed company, under Section 22A of the Securities Contracts (Regulation) Act (SCRA), the company should have decided either to register or refuse registration within two months of lodgment. Thus, viewed in the light of Section 22A of the SCRA there is certainly a delay. As regards the question whether this delay is unnecessary, we have to look at the facts, viz., the list of dates which reveals the factual position. Dunlop wrote four letters on different dates namely October 31, 1988, November 28, 1988, January 2, 1989, and February 13, 1989, seeking different information each time. When Dunlop took nearly one month to scrutinise the documents it could have called for all the information at one stroke instead of spreading the queries by correspondence over a period of four months. Though all the queries seemed to have been satisfactorily explained, the only query which remained not conclusively answered related to whether BoB Fiscal was an investment company as defined under Section 372(10) of the Companies Act, 1956. For this purpose, the memorandum of association was made available and attention was drawn to the objects clause. Still Dunlop wanted to satisfy itself with reference to the main business of the company from the balance-sheet which, however, was not made available. It is now argued by Dunlop that having regard to the decision of the Division Bench of the Gujarat High Court in Distributors (Baroda) Pvt. Ltd. v. C/T[1968] 69 ITR 614, the principal business could be determined only from the balance-sheet. It is now evident from the balance-sheet of BoB Fiscal submitted at the time of hearing for the period ended March 31, 1989, that the company had an investment income of Rs. 11.56 crores out of a total income of Rs. 15.99 crores. Such income from investment goes to establish that the company was basically an investment company and not merely a company holding investments without trading. With this the only outstanding query of Dunlop also stands settled. However, having regard to the piecemeal manner in which the queries were raised and also the nature of queries, we are of the view that there has been unnecessary delay in taking a decision by Dunlop.
28. The law on this subject of delay in transfer of securities has become crystal clear at least as regards listed companies after the decision of the Division Bench of the Madras High Court in Kothari Industrial Corporation Ltd. v. Lazor Detergents Ltd. [1994] 81 Comp Cas 699 (Mad). The Division Bench of the Madras High Court has held categorically that (at page 729 Comp Cas) "having regard to the purpose and object sought to be achieved by the introduction of Section 22A of the SCRA and the mischief sought to be remedied as well as deliberate change in the language adopted in the new section we hold that the doctrine of implied repeal will come into play and the provisions in Section 22A will prevail over the provisions of Section 108 of the Act in relation to listed securities to the extent to which they are inconsistent". The High Court has also emphasised on the non obstante clause under Section 22A of the SCRA over the provision of Section 111. It has also emphasised that Sub-section (4) of Section 22A of the SCRA prescribed the time-limit within which a company shall form in good faith its opinion as to whether registration of transfer as applied for ought or ought not to be refused. Thus Section 22A provides a time frame, limited options and rigid grounds for refusal. In view of this, listed companies have now only two options, viz :
1. To register the security, or
2. To refuse registration on the permissible grounds.
29. These options are also to be exercised within the prescribed time-limits. In view of the strict regulation under Section 22A of the SCRA in case no decision could be taken due to lack of information from the transferees, the only course open is to return the documents back to the person who has lodged the same. Any other course will lead to violation of the law. There is no scope under Section 22A of the SCRA now for a third option, viz., to retain the securities beyond the time-limits prescribed though such a scope can be read into the provisions of Section 111,
29. This is the inevitable conclusion keeping in view the object of Section 22A which has also been emphasised by the Madras High Court as contained in Section 22A(2), namely, that securities of companies shall be freely transferable. To hold otherwise would mean allowing companies to use their discretion to hold on to the lodged securities for an indefinite period of time. This will defeat the objective of Section 22A(2). In view of the above, we have no doubt in holding that there has been an unnecessary delay on the part of Dunlop.
30. As regards the point that complicated questions of law and facts being involved, there is need for examination of witnesses and that the Company Law Board should use its discretion to dismiss the petition, we consider that there are no such complicated questions involved and there is no need for recording witnesses. We, therefore, hold accordingly.
31. As regards the other issues raised by Dunlop, these are later developments after two years whereas unnecessary delay has already taken place. In fairness to Dunlop we have to examine these issues to satisfy ourselves whether the rectification will be impossible or illegal. The issues relate to vesting of shares in Bank of Baroda and apprehension that the transaction is illegal.
32. As regards vesting, even though Bank of Baroda might have got the ownership by way of vesting, the petitioners are not seeking registration in the name of Bank of Baroda. The facts of the case in Indian Chc.micnl Products Ltd. v. State of Orissa [1966] 36 Comp Gas 592 ; AIR 1967 SC 253 are different in as much as transfer was sought on the basis of vesting but registration was sought in some other name. Here the transfer is not sought on the basis of vesting. In fact BoB Fiscal has also made it clear that subsequent to the registration in its name it will arrange to transfer the shares in the name of Bank of Baroda. Moreover, Bank of Baroda is the 100 per cent. holding company. There is no doubt in this case about the bona fides of BoB Fiscal with regard to the transactions entered into by them. Since the transferors are all financial institutions, there is no possibility of a doubt as to the validity or bona fides of the transactions. Consequently the application of the decision of the Calcutta High Court in Luxmi Cluind v. Bengal Coal Co. [1882] ILR 8 Cal 317, is also ruled out. The question perhaps may be relevant in case BoB Fiscal is already dissolved or there is a subsequent development which renders the rectification illegal or impossible which is not the case here.
33. Dunlop also raised a doubt regarding the legality of the transaction due to a subsequent litigation in which the Supreme Court has held certain transactions entered into by BoB Fiscal as illegal. It is the case of Dunlop that the Supreme Court has observed in that case that "though any person or company is lawfully entitled to purchase shares of another company in the open market, if the transaction is done surreptitiously with a mala fide intention by making use of some public financial institution as a conduit in a clandestine manner such deal or transaction would be contrary to public policy and illegal". It is the apprehension of Dunlop that the impugned shares are also in the nature of such transactions and as the Supreme Court has held that such transactions are against public policy and illegal the register of members should not be rectified. This argument in our opinion is totally untenable. The burden of proof lies on the party alleging that the transaction is surreptitious and there is mala fide intention and that the financial institutions have been used as a conduit in a clandestine manner. In the absence of any proof in this regard it would be improper on our part to brand the transaction as contrary to public policy.
34. Dunlop also raised the question of solvency of BoB Fiscal which question was not raised in its reply. It is also contended by the petitioner that Dunlop never challenged the voluntary winding up. In the circumstances, it cannot call for a copy of the declaration of solvency. The argument of Dunlop is that in case BoB Fiscal is insolvent the shares may get into the hands of the creditors of BoB Fiscal who may include certain persons who were identified in the Supreme Court decision in N. Partha-sarathy v. Controller of Capital Issues [1991] 72 Comp Cas 651 ; AIR 1991 SC 1420, and may amount to illegal transactions. Though this argument is beyond the pleadings all the same we are not convinced of this argument because it is a fact that BoB Fiscal is a 100 per cent. subsidiary of the Bank of Baroda and the shares would be ultimately in the hands of the Bank of Baroda. Further, according to the approval granted by the Reserve Bank of India to the Bank of Baroda, these shares have to be unloaded in the market. We, therefore, conclude that the rectification will not be rendered impossible or illegal.
35. Having concluded that the rectification is warranted the next issue to be decided is whether the petitioner is entitled to the relief claimed. In the petition, the petitioner has sought registration in his name. The petitioner himself has conceded during the arguments, that the registration could be made only in the name of the person who has submitted the transfer deed in his favour along with the share certificates. In view of this, the company cannot be directed to register the shares in the name of the petitioner. Moreover, since the petitioner has filed the petition in his representative capacity the shares ought to be registered in the name of BoB Fiscal. Accordingly, we direct the company to register the transfer of 7,42,400 equity shares in the name of BoB Fiscal within 30 days from the receipt of a copy of this order. Dunlop shall also pay to BoB Fiscal all the dividends on the above shares for the years 1988-89 and thereafter any dividend which is transferred to the credit of the Government can be claimed by BoB Fiscal from the concerned authorities. BoB Fiscal shall also be entitled to any bonus and rights shares issued in the interregnum. The rights shares/debentures if any shall be offered to BoB Fiscal within 30 days of receipt of a copy of this order and a period of one month shall be allowed for making remittance against these shares. The prayer regarding a direction for enquiry by the Department of Company Affairs is in our opinion unnecessary keeping in view the facts presented in this petition. No order as to costs.