Andhra HC (Pre-Telangana)
Tej Prakash S. Dangi And Ors. vs Coramandal Pharmaceuticals Ltd. And ... on 10 October, 1996
Equivalent citations: [2002]108COMPCAS516(AP)
JUDGMENT Lingaraja Rath, J.
1. The appellants, having failed to persuade the learned Company Judge to hold the application filed by them to obtain a declaration that forfeiture of their shares in respondent No. 1 company is illegal, as maintainable, have preferred this appeal. The appellants had obtained shares in respondent No. 1 company, but since they failed to pay the call money in respect of the balance due on the shares, the shares were forfeited. The appellants filed the company petition before the learned Company Judge seeking redressal raising the question that since they had been allotted the shares which were endorsed as 'fully paid-up', these could not be forfeited even though money was due to be paid to the company in respect of the shares. The learned Judge held that the application was not maintainable since there was no statutory provision under which an action in respect of forfeiture of shares lay before the court. Admittedly, the provision regarding forfeiture of shares is provided only in the articles of association of the company. Article 29 of the articles provides that when a member fails to pay any call money on the appointed day, the Board may serve a notice requiring the payment and if the notice is not complied with, a resolution may be passed by the Board to forfeit the shares. The Board has also the authority to cancel the forfeiture of shares on such terms as it thinks fit. Admittedly, there is no provision of in the Companies Act for a court to entertain a petition regarding forfeiture of shares made under the articles of association.
2. Mr. M.S.K. Sastry, learned counsel for the appellants, has raised the same submissions which were urged before the learned Company Judge and were negatived. Placing reliance on the definition of 'court' in Section 2(11) and Section 10 which deals with the jurisdiction of court it is the argument that in all matters relating to companies, the High Court has the general jurisdiction unless such jurisdiction is specifically conferred on the District Courts. The learned Company Judge took the view that Section 10(1) does not say anything more than only specifying that in such of the matters where the court has been conferred the jurisdiction under the Companies Act, 'court' would mean the High Court, unless the matter has been notified to be within the cognizance of the District Court. There is no provision in the Companies Act vesting general authority in the High Court to deal with all matters relating to a company. Section 2(11)(a) defines 'the Court', with respect to any matter relating to a company (other than any offence against the Act), as the court having jurisdiction under the Act with respect to that matter relating to the company, as provided in Section 10. Section 10 so far as relevant is as follows:
"10. Jurisdiction of Courts. -- (1) The court having jurisdiction under this act shall be-
(a) the High Court having jurisdiction in relating to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of Sub-section (2); and
(b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered officers in the district.
(2) The Central Government may, by notification in the official gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the court, not being the jurisdiction conferred-
(a) in respect of companies generally, by Sections 237, 391, 394, 395 and 397 to 407, both inclusive ;
(b) in respect of companies with a paid up share capital of not less than one lakh of rupees, by Part VII (Sections 425 to 560) and the other provisions of this Act relating to the winding up of companies. ..."
3. Both the provisions of Section 10 read with Section 2(11) show that where in respect of a matter relating to a company, the court has jurisdiction, the court having that jurisdiction would be the High Court unless the District Court has been notified as the court to deal with that matter. Section 10 is not designed to be a sweeping provision, blanket in nature, to assume suzerainty over all questions that may arise in connection with a company. The courts are not the only functionaries under the Companies Act to decide matters. Power has been vested within the scheme of the Act also with the other authorities like the Company Law Board or the Central Government.
4. There are provisions in the Act conferring, specifically, powers on the court in relation to matters provided therein. Some such sections are Sections 101, 102 391 to 394, 433, etc. Similarly, powers have been conferred on the Company Law Board under Section 17, 79 and other provisions. Powers have also been conferred on the Central Government like those in Section 235. There is no provision in the Act to enable the High Court to entertain an application relating to forfeiture of shares. It has rightly been pointed out by the learned Company Judge that Section 155 which vested power in the court to rectify the register of members if the name of any person had been omitted without sufficient cause from the register of members of the company, has since been deleted from 31 May, 1991, by the Amendment Act of 1988 and that besides, by the Depositories Ordinance, 1996, Section 111 of the Act has been confined to private companies, and a new Section 111A has been added which empowers the Company Law Board to direct any company to rectify the register or the records where a transfer if shares has been made in contravention of the provisions of the Securities and Exchange Board of India Act or regulations made thereunder or in violation of the Sick Industrial Companies (Special Provisions) Act, 1985. Evidently, the law has not made a provision, like those noticed earlier, vesting jurisdiction in the court to deal with a matter of forfeiture of shares made under the articles of association. The powers vested in the High Court or the District Court, as the case may be, under the Companies Act are in respect of only rights and obligations arising under the Act. The High Court or the District Court is not designed to function as common law courts in respect of every grievance arising in relation to a company. Except in matters where specific right is conferred on the High Court or the District Court under the Act, the jurisdiction of the common law court is not ousted in respect of causes of action which may arise besides those contemplated under the Act. The learned Company Judge rightly referredc to the observations of Justice Willies in a decision in Wolverhampton Newwater Works Co. v. Hawkesford (1884) 7 WR 464 which read as under :
"There are three classes of cases in which a liability may be established founded upon a 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 case 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 and it is not competent to the party to puruse the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to."
5. The grievance of the appellants does not come under the first or the third category of cases. If the appellants have any rights to sue in the matter complained of by them, that can only be by an action under the common law.
6. The law relating to the subject has also been exposed in the similar manner by earlier decisions of this court as also by other High Courts. In Mylavarapu Ramakrishna Rao v. Mothey Krishna Rao (1947) 17 Comp Cas 63 (Mad), a learned Single Judge of the Madras High Court held, negativing an application by the newly elected secretary and treasurer of the company for direction to his predecessor to hand over the records and accounts of the company and for an injunction restraining him from proceeding with his suit challenging the validity of the election, that the application was not maintainable as there is no provision in the Indian Companies Act which gives the Company Court exclusive jurisdiction in all company matters. In deciding the case, the learned Judge differed from the decision in British Indian Corporation Ltd. v. Robert Menzies (1936) 6 Comp Cas 250 (All) and held that there is no provision in the Indian Companies Act which gives the Company Court (i.e., the court having jurisdiction under the Act) exclusive jurisdiction in all company matters. The question was examined at length by a Single Judge of this court in Avanthi Explosives (P) Ltd. v. Principal Subordinate Judge (1997) 5 Comp LJ 345 (AP) : (1987) 62 Comp Cas 301 (AP), where the learned Judge took the view as under (paras 14 and 15 at page 350 of Comp LJ):
"It may be seen that there are various provisions in the Act which refer to 'the court', such as Sections 107, 155, 163(6), 237, 391, 394, 395, and 397 to 407, 425, etc. The Central Government is empowered, however, to confer jurisdiction on the District Court powers only in respect of some of these sections, but not all. In my view, Section 10 of the Act only proceeds to enumerate or specify 'the court having jurisdiction under this Act', wherever such jurisdiction is conferred on 'the court' by the other provisions of the Act. Powers are conferred by the Act not only on courts, but also on other authorities like the Central Government, the Company Law Board and the Registrar ; and where a power is vested in a court, that court has to be specified. Beyond so specifying the court competent to deal with a matter arising under the Act, Section 10 does not purport to invest the company court with jurisdiction over every matter arising under the Act. It may be that, in view of the elaborate provisions contained in the 1956 Act in regard to the management and the conduct of a company's affairs including important internal matters of administration, the court's interference by civil court has become more limited, but the power has not at all been taken away. Every suit for redress of individual wrongs cannot be considered as merely concerned with matter of internal management. (M.P. Menon J. in R. Prakasam v. Sree Narayana Dharma Paripalana Yogam (1980) 50 Comp 611 (Ker)."
6.1 In deciding the case, learned Judge also referred to a decision in Bhagawan Das Garg v. Canara Bank Ltd. (1978) 51 Comp Cas 31 (AP) : (1978) 1 An WR 504 which held that Section 10 confers jurisdiction on High Court only in respect of certain matters.
7. More recently, Justice Sivaraman Nair reiterated the same view in K.K. Maheshwari v. Rockhard Building Materials Ltd. , in a matter relating to removal of directors contrary to the provisions of Section 284 of the Companies Act, and held that where there is no exclusion of jurisdiction of the civil court either by express provision or by necessary implication, the civil court shall have jurisdiction under Section 9 of the Code of Civil Procedure and that Section 2(11) or Section 10(1) cannot be understood to exclude the jurisdiction of the civil court in any manner. The learned Judge held the petition as liable for dismissal for the only reason that the petitioners were not able to point out any provision of law conferring exclusive power to decide the disputes relating to the removal of directors.
8. Pressing for the opposite view, Mr. Sastry has placed reliance on a decision of a Single Judge of this court in Nizamabad Corn Products (P) Ltd. v. Vasudev Walia . The court in that case was considering the maintainability of a suit in the civil court to declare a resolution passed in the annual general meeting and the meeting of the Board of directors removing a director of a company as illegal and void and for permanent injunction. The learned Judge held that the view that the civil court's jurisdiction has not been taken away merely because Section 10 confers jurisdiction on the High Court, cannot be correct in view of the specific direction contained in Section 10(1)(a), viz., 'except to the extent to which jurisdiction has been conferred on any District Court, in pursuance of Sub-section (3)'. The learned Judge proceeded on the footing that he civil court has jurisdiction only in matters in respect of which specific jurisdiction has been conferred upon it and that otherwise, the High Court has the exclusive jurisdiction in all matters. Since the learned Judge was deciding contrary to the view taken in the earlier decision of the court in Avanthi Explosives P. Ltd. v. Principal Subordinate Judge (1997) 5 Comp LJ 345 (AP) -- it was necessary to have referred the case to a larger Bench. A judgment of a co-ordinate Bench is binding unless it is overruled by a larger Bench. Besides, the view was also not legally correct. The civil court would have jurisdiction in all matters unless its jurisdiction is either expressly or by implication ousted. We hence overrule the decision.
9. Mr. Sastry has also sought to place reliance on the decision in Public Passenger Service Ltd. V. M.A. Khadar (, where applications under Section 155 were maintained in the High Court in the matter of forfeiture of shares. The application had been filed seeking setting aside of the forfeiture of the shares and for necessary rectification in the register of the company. The decision in no way runs counter to the view taken by us as the application was made under Section 155 of the Companies Act, which no longer exists in the Act. The case has no application to the case on hand.
10. Another decision in Maharaj Kumar Mahendra Singh v. Lake Palace Hotels and Motels (P) Ltd. (1985) 58 Comp Cas 805 (Raj), a decision of the Rajasthan High Court no doubt has taken the view that since power is conferred under Section 209(4) of the Act on a director a statutory right of inspection of the books of account, other books and papers of a company, the right is enforceable by way of an application in the High Court as the court having jurisdiction. The learned Judge observed as under:
"The general maxim is ubi jus ibi remedium (Where there is a right, there is a remedy). Here Sub-section (4) of Section 209 of the Act confers a statutory right of inspection, and the court which has jurisdiction under the Act, in my opinion, possesses powers to enforce that statutory right. It has been urged that the Companies (Court) Rules, 1959, do not envisage any such petition and what petitions lie are specified. Petitions provided under the rules are exhaustive. I am unable to agree with this submission as well. As already stated, when Sub-section (4) of Section 209 of the Act envisages conferment of right of inspection on the director, then the director can seek a remedy by moving a petition to this court. Thus, I hold that the petition is maintainable under Section 209(4) of the Act and the company is under an obligation to allow inspection to the petitioner of all the books of account and other books and papers."
11. We are unable to concur with the view taken as a whole. There may be other remedies available to enforce the right, but the remedy is not available in the High Court, since the Companies Act does not stipulate as such.
12. In the result, the appeal has no merit and is dismissed with costs. The order of stay granted in this appeal on 9 September, 1996, is vacated.