2001 (11) TMI 959 - HC - Companies Law

Issues Involved:
1. Jurisdiction of the Company Court vs. Civil Court to entertain an application by a director challenging a notice for forfeiture of shares and vacating office.
2. Interpretation of statutory provisions under the Companies Act, 1956, particularly sections 283(1)(f) and 10.
3. The applicability and extent of inherent powers of the Court under Rule 9 of the Companies (Court) Rules.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Company Court vs. Civil Court:
The primary issue was whether the Company Court has jurisdiction to entertain an application filed by a director challenging a notice for forfeiture of shares and a directive to vacate office. The petitioner argued that the Company Court is competent to adjudicate such matters, citing sections 2(11) and 10 of the Companies Act, 1956. The respondent contended that the Civil Court has exclusive jurisdiction under section 9 of the Code of Civil Procedure, 1908. The Court held that the High Court has wide jurisdiction under section 10, except where jurisdiction is expressly conferred on the District Court. The Court emphasized that the phrase "relating to" in section 10 has a broad scope, allowing the High Court to adjudicate matters concerning the company.

2. Interpretation of Statutory Provisions:
Section 283(1)(f) of the Companies Act, 1956, which deals with the automatic cessation of a director's office upon failure to pay call money, was scrutinized. The Court noted that while the disqualification is automatic, it is subject to the fulfillment of specific conditions. The director can challenge the occurrence of the jurisdictional fact leading to disqualification. The Court underscored that statutory rights and obligations created under the Companies Act should be adjudicated in a forum established under the same statute. The Court rejected the view that no application could be entertained by the Company Court, emphasizing the need for a remedy if a person is wrongly disqualified.

3. Inherent Powers of the Court:
Rule 9 of the Companies (Court) Rules, which provides for the inherent powers of the Court, was also considered. The Court asserted that these inherent powers enable the Court to pass necessary orders for the ends of justice or to prevent abuse of the Court's process. The Court reiterated that where the law creates a right, there must be a remedy available through a competent Court. The doctrine of "Ubi Jus Ibi Remedium" (where there is a right, there is a remedy) was invoked to support the maintainability of the application before the Company Court.

Findings and Conclusion:
The Court concluded that the Company Court has the jurisdiction to entertain the application challenging the notice for forfeiture of shares and vacating office. It emphasized that statutory disqualification under section 283(1)(f) creates a liability that should be adjudicated by the Company Court. The Court did not delve into whether the Civil Court's jurisdiction is ousted but affirmed the Company Court's competence to address the issue. The matter was remitted to the appropriate Bench for consideration of the merits and the application under the Arbitration and Conciliation Act, 1996. The costs of the reference were to be determined in the main application.

Significant Phrases:
- "The phrase 'relating to' is of wide amplitude."
- "Rights and obligations created under a statute for the first time should ordinarily be adjudicated in a forum which has been created under the same statute."
- "The doctrine of Ubi Jus Ibi Remedium would fill up the gap."
- "Automatic cessation of Office of director of a company has a direct nexus with the function of the company itself."

This comprehensive analysis ensures that the legal terminology and significant phrases from the original text are preserved while providing a detailed understanding of the judgment.

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