Delhi High Court
Harnam Singh And Ors. vs Bhagwan Singh And Ors. on 6 February, 1991
Equivalent citations: ILR1991DELHI625, 1991RLR420
JUDGMENT Mahinder Narain, J.
(1) This is a suit filed by the plaintiffs for declaration and injunction with respect to shares of respondent No. 20, M/s. J.B.S. Builders & Traders Pvt. .Ltd. One of the reliefs which they seek, is a direction to issue to defendants No. 1, 2 and 3 to deliver duly registered share certificates mentioned in the plaint, to plaintiffs No. 1, 2, 3 and 4. Also prayed for, is a decree for cancelling transfer deeds with respect to the said shares, 2200 in number, in favor of any other person.
(2) In effect, what the plaintiffs seek is the remedy which is postulated by section 155 of the Companies Act for rectification of shares.
(3) The Companies Act, 1956 provides in its section 155 as under:- 155.(1) If- (a) the name of any person- (i) is without sufficient cause, entered in the register of members of a company; or (iiJ after having been entered in the register, is, without sufficient cause, omitted there from; or (b) default is made, or unnecessary delay takes place, in entering on the register the fact of any person having become, or ceased to be, a member; the person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the register. (2) The Court may either reject the application or other rectification of the register; and in the latter case, may direct the company to pay the damages, if any, sustained by any party aggrieved. In either case, the Court in its discretion may make such order as to costs as it thinks fit. (3) On an application under this section, the Court- (a) may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between member's or alleged member, or between members or alleged in embers on the ode hand and the company on the other hand; and (b) generally, may decide .any question which it is necessary or expedient to decide in connection with the application turn rectitication. (4) From any order passed by the Court on the application, or on any issue raised therein and tried separately, an appeal shall lie on the grounds mentioned in section 100 of the Code of' Civil Procedure, 1908- (a) if the order be passed by a District Court, to the High Court; (b) if the order be passed by a single Judge of a High Court consisting of three or more Judges, to a Bench of that High Court (5) The provisions of sub-section (1) to (4) shall apply in relation to the rectification of the register of debenture holder's as they apply in relation to the rectification of the register of members.
(4) By virtue of the provisions of section 155(3)(a) of the Companies Act, the Court, meaning the Company Judge dealing with a section 155 petition, is enabled to determine any question relating to title of any person who is a. party to the application, to have his name entered in or omitted from register of members.
(5) By virtue of the provisions of Rule 6 of the Companies (Court) Rules'. 1959. framed by the Supreme Court, the practice and procedure of the Court, and the provisions of the Code of Civil Procedure apply to proceedings taken under the Companies Act Rule 6 of the Companies (Court) Rules reads as under:- 6.Practice and Procedure of the Court and provisions of the Code to apply.--Save as provided by the Act or by these rules the practice and procedure of the court and the provision of the Code so far as applicable, shall apply to all proceedings under the Act and these rules. "The Registrar may decline to accept any document which is presented otherwise than in accordance with these rules or the practice and procedure of the Court, (6) By virtue of the aforesaid rule. 6. all provisions, of the Code of Civil Procedure which could apply to matters befor. the Company Court, and the powers given by the Code and its provisions could be exercised by the Company Judge. Provisions of section 9 of' the Code of Civil Procedure, also need to be referred to. Section 9 reads as under:- 9.The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits; of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred. [Explanation 1]- -A suit in which the right to property or to an office is congested is a suit of a civil nature, notwithstanding that such right may depend entirely on the decision of questions as to religious rites or ceremonies. [Explanation 2].-For the purposes of this section, it is immaterial whether or. not any fees are attached to the office referred to in Explanation I or whether or not such office is attached to a particular placet.
(7) The words in section 9 of the Code of Civil Procedure are very clear. All suits which are of civil nature excepting suits, cognizance of which is expressly or impliedly barred, are maintainable under section 9. To my mind, the cognizance of a suit of the kind which has been filed by the planitiffs, is barred m view of the principle enunciated in Nazir Ahmad's case, and reiterated by the Supreme Court-
(8) It K contended by Mr. P. C. Khanr.a tha the instant suit is maintainable, as it raises some complicated questions of title to the said shares, and according to him, inasmuch as the suit raises complicated questions of title the same could not be dealt with under section 155 of the Companies Act. Mr. Khanna refers to a judgment of Division Bench of this Court in 2nd (1972) I Delhi 431 (The Punjab Distilling Industries Ltd. v. Biermans Paper Coating Mills Ltd. & another) to support his contention. In my view, however, that judgment does not help the contention of Mr. Khanna for the reason that the same related to proceedings under section 155 of the Companies Act itself. That judgment' was not delivered in a suit.
(9) Mr. Khanna also refers to a judgment of single Judge of the Bombay High Court in (Rao Saheb Manilal Gangaram Sindore and another' v. Messrs. Western India Theatres Ltd. and others), wherein Justice S. M. Shah held that an ordinary civil suit is maintainable with respect to disputes relating to shares. He also expressed the view that the proceedings under section 155 of the Companies Act are of a summary nature.
(10) Before Justice Shah, it was not contended that the provisions of section 155 are part of the Companies Act, which is a special statute. It was also not contended before Justice Shah in that suit that it is a well established principle of law that when statute requires a particular thing to be done in a particular manner, it can be done in that manner, or not at all; that all other methods are forbidden. This was so stated by the Privy Council in Air 1936 Privy Council 253 (Nazir Ahmad v. King Emperor). This principle was reiterated by me in the case Sulochna Uppal v. Surinder Sheel Bhakri, 1990(3) Delhi Lawyer 325. in which I referred to a number of Supreme Court judgments also. I had said as follows :- I had put to Mr. R. K. Maknija that m view of the judgment of the Privy Counsel in Nazir Ahmad v. King Emperor , the suit was not maintainable, as the Privy Council had stated that "when a statute requires a thing -to be done in a particular way, if must be done in that manner, or not at all. Every other method is forbidden. This proposition laid down by the Privy Council in a criminal case; has not been held to be confined to only criminal matters by the Supreme Court, which has followed this proposition in a large number of cases, both criminal and noncriminal". (See Rao Shiv Bahadur Singh and another v. State of Vindh-P. ; Ballabhdas Agarwala v. J. C. Chakravarty ; State of Uttar Pradesh v Singhara Singh & others. : Gujarat Electricity Board v. Girdharlal Motilal and others ; and Ramchandra Keshav Adike [dead] by L. Rs. v. Govind Joti Chavare & others). In fact in 1975 Supreme Court 915. the Supreme Court stayed that the aforesaid principle had been slated much earlier than., in Taylor v. Taylor reported as (1875) 1 Ch.426.
(11) From what is stated above, it is apparent that' the principle which was enunciated by the Privy Council in Nazir Ahmad's case, had been around since much earlier, as was noted by the Supreme Court in 1975 Supreme Court 915. It is also clear that the principle enunciated oy the Privy Council which has been approved by the Supreme Court in all the aforesaid judgments, is applicable to both criminal and non-criminal matters.
(12) Mr. Khanna also refers to 1973 Company Cases 371 (Public Trustee v. Rajeshwar Tyagi and others), a judgment of Division Bench of this Court. In that case, the Division Bench relied upon the judgment and order of a Full Bench of this Court 'in University of Delhi v. Hafiz Mohd. Said, as to what the meaning of the word ."judgment" was. The views expressed in the Tyagi's case are primarily based upon the view of the Full Bench of this Court' in Hafiz Mohd. Said's case. The judgment of the Full Bench of this Court in Hafiz Mohd. Said's case was over-ruled by the Supreme Court. In any event it is not good law in view of (Shah Babulal Khimji v. Jayaben D. Kania and another).
(13) In any event, in my view, the Companies Act is a special statute, which provides for special and specific remedies, and in view of the principle enunciated in Kazir Ahmad's case, and reiterated by the Supreme Court in the cases referred to above, keeping in view the fact that the powers of the Company Judge to try and dispose of the matters, are co-extensive with that of the civil court in view of Rule 6 of the Companies (Court) Rules, it would not be right for the civil court to entertain matters which relate to rectification of register of members, or which involve determination of title to shares- in companies., when specifically under the provisions of section 155(3)(a), questions (if title can be determined by Company Court.
(14) Mr. Khanna also refers and relies upon judgment of single Judges of this Court, reported as 1983 Company Cases 301 (Anil Gupta v. Delhi Cloth and General Mills Co. Ltd.). In that case. the court was dealing with a question which arose under section 155 of the Companies Act. Here the position is otherwise. Mr. Khanna wishes to file a suit, and wishes to rely upon the observations to the effect that in case complicated questions of law and tact arises in a case., the matter should not be decided under section 155 of the Companies Act, the Hon'ble Judge (B. N. Kupal, J.) did not refer to any case which held that despite section 155 of the companies Act, 1956, despite Rule 6 of the Companies (Court) Rules 1959, questions of title in shares have to be tried by a civil suit alone.
(15) The learned Singh Judge noted the judgment of the Gujarat High Court reported as (1978) 48 Company Cases 438 (Shri Gulabrai Kalidas Naik v. Shri Luxmidas Laliubhai Patel), wherein it was observed as under :- A bare perusal of section 155 on its own language does not indicate that She jurisdiction conferred by the section is one hedged in with a condition that it can only be exercised when relief can be granted in a summary manner. There is nothing in the language of section 155 which excludes decision .of questions of title to shares that may arise in an application for rectification of register. On the contrary, the language of sub-section (3) makes it abundantly clear that in such application, court has power to decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register and the court would have further jurisdiction to decide the question of title even when it arises between. members or alleged members, or between members or alleged members on the one hand and the company on the other. Sub-clause (b) of sub-section (3) further widens the jurisdiction of the court under section 155 when it permits or enables the court generally to decide any question which it is necessary or expedient to decide in connection with the application for rectification.
(16) The Hon'ble Single Judge noted the conflict between the Gujarat. High Court and a Division Bench of this Court in Punjab Distilling Industries's case (supra).
(17) As I have noted above, that case was- a proceeding under section 155, and in that case, the Division Bench did not consider the observations of Nazir Ahmad's case, or the judgments of the Supreme Court referred by me above, (18) Inasmuch as there is no distinction between the power of a Judge of the High Court on the original side to try the matter as civil suit, and as a Judge of the High Court of Delhi, sitting as a Company Judge to investigate questions of. tide, it. would be appropriate that the proceedings relating to questions of title are also determined by the Company Judge.
(19) Learned counsel for the plaintiffs has not cited any single case which was filed as an original civil suit which relate to declaration of title to shares, and which was held to be maintainable.
(20) In this view of the matter, in my view, the cognizance of suit relating to title to shares, is impliedly barred by section 9 of the Code of Civil Procedure.
(21) In view of Order Vii Rule ll(d) of the Code of Civil Procedure, on reading of the plaint, since same relates to determination of right of title to shares in a limited company, the plaint is liable to be rejected, and the same is hereby rejected.