1991 (1) TMI 378 - HC - Companies Law

Summary

Issues Involved:
1. Transfer of interest under Section 26(4) of the Foreign Exchange Regulation Act, 1973.
2. Validity of the transfer of shares and interest without Reserve Bank of India's approval.
3. Availability of alternative remedies under the Companies Act, 1956.
4. Constructive res judicata.

Issue-wise Detailed Analysis:

1. Transfer of interest under Section 26(4) of the Foreign Exchange Regulation Act, 1973:
The petitioner sought a writ of declaration to declare the transfer of interest held by the holding company, Snia Viscose, in its subsidiary company, Sapina, to another foreign company, Lock Heath Properties Thirty Ltd., as violative of Section 26(4) of the Foreign Exchange Regulation Act, 1973. The petitioner argued that this transfer was void in the absence of prior approval from the Reserve Bank of India. Section 26(4) of the Act states, "No transfer of any interest in any business in India made by a person resident outside India to any person also resident outside India shall be valid unless such transfer is confirmed by the Reserve Bank on an application made to it in this behalf by the transferor or the transferee."

2. Validity of the transfer of shares and interest without Reserve Bank of India's approval:
The petitioner contended that the transfer of shares by Snia Viscose to Sapina and subsequently to Lock Heath Properties Thirty Ltd. was done without the approval of the Reserve Bank of India, thereby violating Section 26(4) of the Foreign Exchange Regulation Act. The Division Bench of the High Court had earlier dismissed the appeal on the grounds that there was no sufficient evidence to prove the transfer of interest and that no application had been made by the transferor or transferee to the Reserve Bank of India. The counter-affidavit by the Director, Enforcement Directorate, stated that the company asserted no transfer of shares according to their books.

3. Availability of alternative remedies under the Companies Act, 1956:
The court emphasized that the petitioner had ample remedies under the Companies Act, 1956. Sections 234, 237, and 247 of the Companies Act provide mechanisms for investigation and redressal of grievances regarding company affairs. The court noted that the petitioner could approach the Company Law Board under Section 247 of the Companies Act to seek redressal. The Company Law Board had already investigated the matter and found no justification to initiate any investigations under Section 247 or 250 of the Companies Act.

4. Constructive res judicata:
The court held that the issue raised in the present writ petition had already been decided by the Division Bench of the High Court and the Supreme Court. The Division Bench had dismissed the appeal on the grounds of lack of evidence and availability of alternative remedies. The court applied the principle of constructive res judicata, stating that the petitioner could not raise the same issue again by impleading new parties. The court concluded that the petitioner had already exhausted the available remedies and could not seek a declaration under Article 226 of the Constitution of India.

Conclusion:
The court dismissed the writ petition on multiple grounds, including the availability of alternative remedies under the Companies Act, lack of evidence to prove the transfer of interest, and the principle of constructive res judicata. The court held that the petitioner could not seek a declaration under Article 226 of the Constitution of India, as the issue had already been decided by the Division Bench and the Supreme Court.