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1. This application under Sections 111(4) and 111(7) of the Companies Act, 1956 (hereinafter referred to as "the Act"), has been filed by Dr. Jitendra Nath Saha and Smt. Bithika Sana (hereinafter referred to as "the petitioners") for rectification of the register of members of respondent No. 3 (hereinafter referred to as "the company") by declaration of certain allotment of shares as invalid and direction to distribute the resultant shares in accordance with law. This application was heard on July 27, 28, 1992, by a Bench constituted by Order No. 11/2/92-CLB(PB), dated June 5, 9, 1992, read with corrigendum dated July 15, 1992, of the Company Law Board (hereinafter referred to as "CLB").

(iii) Whether in a proceeding under Sections 111(4) and 111(7) of the Act, it is possible to decide the bona fides of the allotments made by the board of directors and declare such allotment invalid and consequently order rectification of the register of members.

8. We shall first deal with the first issue because if our views in that respect are in the negative, then it may not be necessary for us to examine the remaining issues. Before amendment of the Companies Act, 1956, by the Companies (Amendment) Act, 1988, Section 111 covered cases of trans fers or transmissions and power under that section was given to the Central Government and Section 155 relating to rectification of the register of members was dealt with by the courts. By the Companies (Amendment) Act, 1988, Section 155 was omitted and the said section was incorporated in Section 111. Clause 16 of the Companies (Amendment) Bill, 1987, inter alia, reads as under (see [1987] 62 Comp Cas (St.) 81, 117) :

10. This is so far as the applicability of the provisions relating to transfer or transmission is concerned. These provisions now form part of Section 111 as Sub-sections (1), (2) and (3). Sub-sections (4), (7) and (8) primarily incorporate the provisions of Section 155 of the Act as it existed before the amendment. There was nothing in Section 155 to indicate that it was not applicable to private limited companies and litigation had been resorted to under that section with regard to rectification of register before the High Courts. In Clause 16 of the Amendment Bill it is mentioned that the provisions of Section 155 are being incorporated in Section 111. Thus, if Section 155 was applicable to a private limited company, there is no reason why the present lection 111 in particular, Sub-sections (4) and (7) should not be applicable to a private limited company. The existing provisions of Sub-section (11) are in substance similar to the provisions of Sub-section (8) which deals with transmission which has no relevance in the present case. There is no provision in the new Section 111 declaring its inapplicability to private limited companies. There is of course a significant addition by way of Sub-section (13) in the new section which is as under :

"... it is made crystal clear that not only the court can examine the question of title that may arise in an application under Section 155, but it would also have the jurisdiction to decide other questions which may arise as ancillary or incidental to the main controversy and the court cannot be asked not to decide them on the ground of lack or want of jurisdiction because the statute specifically confers such wide jurisdiction. There was definite purpose behind enacting Sub-clause (b) to Sub-section (3), namely, to thwart any suggestion that the court cannot clutch at jurisdiction and decide the questions which do not directly fall under Section 155, or, for that matter, under any other provisions of the Companies Act. In order to make Section 155 an effective remedy for the relief for placing one's name on the register of members or for compelling the company to omit some name, which name has been wrongly placed, not only the Companies Act has conferred the right on an aggrieved person to move the court under Section 155, but created a forum, namely, the court hearing matters under the Companies Act, and widened the jurisdiction by conferring power on the court not only to decide the question of title, but also to decide all questions which are ancillary and incidental to the main questions . . . jurisdiction conferred by Section 155(3) is comprehensive jurisdiction which enables the court in an application under Section 155 to examine all questions, complex, intricate or otherwise, relating to the title to the shares, and further enlarges the jurisdiction of the court set up under the Companies Act to decide all those questions, which the court considers necessary or expedient to decide in connection with the application for rectification. In other words, when an application for rectification of the register is made, it would be open to the court while considering the main relief to decide all questions that may arise in such an application on rival contentions."