Calcutta High Court
Assam Brooke Ltd. vs Shasan Projects India Ltd. And Ors. on 29 November, 1995
Equivalent citations: [1996]85COMPCAS665(CAL)
Author: U.C. Banerjee
Bench: U.C. Banerjee
JUDGMENT U.C. Banerjee, J.
1. This application for stay is directed against the order of the Company Law Board dated October 27, 1995, wherein the Company Law Board directed the applicant before the Company Law Board to lodge the share certificates being the subject-matter of the proceedings along with the transfer instruments by November 20, 1995, and also directed the company to register the shares by November 30, 1995. The Company Law Board went on to direct that in the event of failure on the part of the company to effect registration in terms of the order, the Bench Officer, Eastern Region, Calcutta, is directed to visit the registered office of the company and to carry out suitable rectification in the register of members in that regard.
2. It is this order which is said to be not in accordance with law and the intervention of the High Court has been sought for under Section 10F of the Companies Act, 1956. Two principal issues have been raised before this court: the first being whether the Company Law Board has jurisdiction to direct the Bench Officer, Eastern Region, Calcutta, to visit the registered office of the applicant and to carry out suitable rectification in the register of members of the appellant-company. On the second count it has been contended that the Regional Bench of the Company Law Board cannot vary, alter or modify an earlier order of the Principal Bench of the Board and thereby sit in appeal over the order of the Principal Bench.
3. Turning attention on to the first count, viz., the jurisdiction under Section 10E of the Act of 1956 in regard to the direction to the Bench Officer, Eastern Region, to carry out suitable rectification of the register of members of the appellant-company, Mr. Chowdhury submitted that the Company Law Board cannot possibly direct its officer to execute an order in the manner as it had done. There is ex facie an error and mistake which is liable to be corrected by the High Court under Section 10F of the Act.
4. While the issue at first blush seems to be rather attractive but on a close scrutiny of Section 634A of the Companies Act, 1956, the situation seems to be otherwise. Section 634A expressly provides that any order of the Company Law Board may be enforced by that court in the same manner as if it were a decree made by a court in a suit pending therein. Therefore, the powers as prescribed are of the widest possible amplitude and as such the direction to an officer of the Board to rectify the register of members cannot be said to be an abuse of such a power. Mr. Chowdhury drew the attention of the court to the Companies (Court) Rules as also the Regulations framed under the Act so far as the Company Law Board is concerned. The Regulations unfortunately, however, are silent on this score and the Rules also do not speak anything contrary to the provisions of the statute. The powers have been conferred on the Company Law Board under Section 634A and in discharge of that power, the Board has directed one of its officers to visit the registered office and to rectify the shareholders' register. It might be a novel one as ascribed by Mr. Chowdhury but there is no inherent lack of jurisdiction as such. In that view of the matter the question of there being a substantial question of law involved for determination by this court under Section 10F of the Act does not and cannot arise. In the premises, the submissions of Mr. Chowdhury on the first count fails.
5. Turning attention on to the second count, viz., modification of the earlier order of the Principal Bench by a later order of Regional Bench, it is to be noted that the Principal Bench on January 27, 1995, recorded :
"Having considered the prayer carefully, we are inclined to grant this prayer of the petitioner and accordingly we hereby order that respondents Nos. 1 to 17 shall not transfer" any of the shares covered in the petition nor the company would register any transfers, if lodged."
6. It is on this observation of the Principal Bench of the company that Mr. Chowdhury placed reliance and contended that as a matter of fact there is existing an order of injunction in regard to the transfer by the respondents herein together with an order of injunction operating against the company from effecting registration of any transfer, even if lodged in regard to the subject proceeding and it is on this score that Mr. Chowdhury raised the plea of there being involved a substantial question of law to be decided by this court under Section 10F of the Act of 1956. For convenience' sake, the observations of the Regional Bench ought to be noted at this point. The Regional Bench observed (at page 664 supra) :
" It is clear from the order passed by us in the Eastern Bench that we were conscious of the restraint order passed by the Principal Bench. In fact we ourselves constituted the Principal Bench which passed the interim order, and our intentions were very clear, viz., that the injunction order will cover these 1,00,000 (one lakh) shares as well. We also made a specific mention of the Principal Bench's order in our order under Section 111 in order to ensure that our order should not be otherwise misconstrued as contradictory. In fact the petition before the Principal Bench was under Section 250 of the Act and the restraint order issued by the Principal Bench was so intended that if later, the Company Law Board was to order investigation into the shares, such investigation should not be hampered. By our order dated May 12, 1995, under Section 111 we have merely preserved this position as intended by the Principal Bench, hence . . . categorically stated that the registration of the transfer of the impugned shares would be subject to the order of the Principal Bench in the petition under Section 247/250. Therefore, according to us, there is no contradiction between the order of the Principal Bench and the Eastern Bench."
7. Mr. Chowdhury relying upon the observations as above submitted that this contradiction has in fact been recognised by the Regional Bench and merely by ascribing an order that the same shall abide by the result of the Principal Bench, that by itself would not cure the defect of sitting as an appellate authority over the order passed by the Principal Bench.
We, however, do not consider this submission of Mr. Chowdhury to be of any substance. The order of the Principal Bench is clear and categorical and there exists no inconsistency whatsoever. In this context, the observation of the Company Law Board (Principal Bench) ought to be noticed.
The Board observed :
"Heard Shri Harish Salve on his interim prayer at page 32 of the petition, especially relating to restraining respondents Nos. 1 to 17 from transferring their shares till the disposal of the petition. Dr. Singhvi also supported this prayer pointing out that certain shares held by these respondents have been lodged for transfer and unless otherwise these transfers are restrained, then if the Company Law Board were to order investigation into these shares such investigation would be hampered."
8. Be it noted that it is on the basis of this submission that the Company taw Board passed the order of injunction restraining respondents Nos. 1 to 17 from transferring any of the shares, being the subject-matter of the proceeding before the Board, neither the company would be authorised to register any transfer, if lodged, as noted more fully hereinabove.
9. It is on this count that Mr. Sarkar, appearing for the respondents in the matter, contended that the order of the Principal Bench does not provide any restraint so far as this particular rectification is concerned in regard to the names of respondents Nos. 1 to 17. The prohibitory order, if any, is restrictive in nature and provides only for further registration. Mr. Sarkar contended that the language is very specific and to the effect that respondents Nos. 1 to 17 shall not transfer any of the shares and it is on this count that the Company Law Board passed an order on to the company in regard to registration of any transfers. The word "nor" is very significant and obviously refers to the subsequent transfer and not the rectification in regard to respondents Nos. 1 to 17. The status of the shares ought to be maintained so as to avoid any inconvenience in the matter of investigation. We record our concurrence with the submissions of Mr. Sarkar. There is no incongruity neither any inconsistency between the two orders. In any event, the Regional Bench of the Company Law Board has specifically recorded that the order shall be subject to the orders of the Principal Bench. The order of restraint in so far as transfer of these shares from respondents Nos. 1 to 17 to a third party, still remains and as such there is no possibility of there being any transfer of shares from respondents Nos. 1 to 17 to any third party but rectification of the register as directed by the Regional Bench cannot, in our view, be said to be bad nor be termed to be sitting in judgment over an order of the Principal Bench.
10. In that view of the matter the contention of Mr. Chowdhury on the second count also fails. The application for stay, therefore, fails. In view of the order as above, the question of entertaining the appeal does not arise. The company is directed to effect the transfer in accordance with law as directed by the Board.
11. At this stage, however, Mr. Chowdhury submitted that the name of transferee in relation to the instrument of transfer stands in the name of Sonawala Exports Ltd. but respondents Nos. 1 to 17 are desirous of having the said transfer affected in favour of Shasan Projects India Ltd. We are not, however, at this stage going into the issue excepting, however, directing the company to act strictly in accordance with law and the order as passed by the Company Law Board.
12. Mr. Chowdhury, appearing for the company; prays for stay of operation of this order. Considering the submissions made on behalf of the parties as noted above we are not inclined to grant an order of stay excepting recording, however, that the time to carry out the order of the Company Law Board be extended till December 10, 1995.
13. Both Mr. Sarkar and Mr. Gupta, appearing for the respondents, have not used any affidavit in opposition to this stay application and as such the allegations in the petition are not admitted by Mr. Sarkar's client.
14. The matter is treated as on the day's list as adjourned motion and is disposed of accordingly.
15. Let a xeroxed certified copy of this order be made available to the parties with utmost expedition.
Ronojit Kumar Mitra, J.
16. I agree.