1998 (5) TMI 344 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the appeal under section 10F of the Companies Act, 1956.
2. Jurisdiction of the Company Law Board (CLB) to pass interim orders under section 408 of the Companies Act, 1956.
3. Validity of the CLB's direction to financial institutions to nominate a Director to the Board of the appellant company.

Detailed Analysis:

1. Maintainability of the Appeal:

The appeal was filed by the appellant company against the order of the CLB under section 10F of the Companies Act, 1956. The Central Government raised a preliminary objection regarding the maintainability of the appeal, arguing that the question of jurisdiction of the CLB to pass interim orders was not raised before the CLB and, therefore, could not be raised in the appeal.

The court referred to the decision of the Supreme Court in CIT v. Scindia Steam Navigation Co. Ltd. and the Division Bench decision of the Calcutta High Court in Metal Press Works Ltd. v. Ram Pratap Kayan. The court concluded that the appeal was maintainable, as it involved a question of law arising out of the order of the CLB. The court distinguished the advisory jurisdiction under section 66(1) of the Indian Income-tax Act from the appellate jurisdiction under section 10F of the Companies Act.

2. Jurisdiction of the CLB to Pass Interim Orders:

The appellant company argued that section 408 of the Companies Act does not empower the CLB to pass interim orders and that the CLB exceeded its jurisdiction by passing such an order. The court examined the provisions of section 408, which allows the Central Government to appoint Additional Directors to the Board of a company on the order of the CLB. The court noted that section 408 does not provide for the making of interim orders.

The court referred to the decision of the Supreme Court in Morgan Stanley Mutual Fund v. Kartick Das, which held that a statutory tribunal has no jurisdiction to grant interim relief unless expressly provided by the statute. The court also considered the inherent powers of the CLB under rule 44 of the Company Law Board Regulations, 1991, and concluded that such powers cannot be exercised in excess of the statutory provisions.

3. Validity of the CLB's Direction to Financial Institutions:

The CLB directed the financial institutions to nominate a Director to the Board of the appellant company, which the appellant company challenged as being beyond the scope of section 408. The court observed that the CLB's order was not in conformity with the reliefs sought by the Central Government in its application. The court held that the CLB acted outside the provisions of section 408 and that the impugned order was beyond the scope of the final order contemplated under section 408.

The court concluded that the CLB had no jurisdiction to pass the impugned order and that the order was liable to be set aside. The court allowed the appeal and set aside the order passed by the CLB on 21-1-1998.

Conclusion:

The court held that the appeal was maintainable under section 10F of the Companies Act, 1956. It concluded that the CLB exceeded its jurisdiction by passing an interim order under section 408, which does not provide for such orders. The court set aside the CLB's order directing the financial institutions to nominate a Director to the Board of the appellant company. The parties were directed to bear their own costs.