2009 (7) TMI 756 - HC - Companies Law

Whether the Company Law Board is not vested with the power to entertain preliminary objections? Held that - Learned counsel for the respondents have not placed before this court any provision of Companies Act or Regulations (except regulation 44) which confers the power on the Company Law Board to decide the preliminary issues as per Order XIV, rule 2 of the CPC. It must, therefore, be held that the Company Law Board has no power to decide preliminary issues nor can exercise powers under CPC other than those conferred under section 10E(4C) of the Companies Act. Appeal allowed.

Summary

Issues:
1. Jurisdiction of the Company Law Board to entertain applications to decide preliminary issues.
2. Whether the Company Law Board has the power to decide preliminary issues under the Companies Act and its regulations.

Analysis:
Issue 1:
The judgment involves two appeals against an interlocutory order passed by the Company Law Board. The petitioner challenged the allotment of shares as oppressive, while the respondents questioned the jurisdiction of the Company Law Board to entertain the petition. The Company Law Board disposed of the matter by distinguishing the scope and jurisdiction of the Board for Industrial and Financial Reconstruction (BIFR) and the Company Law Board. It was held that the acts of mismanagement and statutory violations could be bifurcated and dealt with separately. The petitioner contended that the Company Law Board cannot entertain preliminary objections, while the respondents argued that the petition should be rejected due to pending proceedings before the BIFR.

Issue 2:
The contentious issue in the appeals was whether the Company Law Board has the power to entertain applications to decide preliminary issues. The judgment highlighted that the Company Law Board is a statutory body under the Companies Act and its proceedings are governed by regulations. It was noted that the regulations do not specifically confer power on the Company Law Board to decide preliminary issues. The court referred to section 10E(4C) of the Companies Act, which outlines the powers of the Company Law Board similar to those of a court under the Code of Civil Procedure, but limited to specific matters. The judgment cited a Supreme Court decision emphasizing that procedural powers of a civil court given to a commission are for specific purposes only. Ultimately, it was held that the Company Law Board does not have the power to decide preliminary issues beyond what is conferred under the Companies Act.

In conclusion, Company Appeal No. 19 of 2005 was allowed, while Company Appeal No. 20 of 2005 was dismissed. The judgment clarified that if the Company Petition is still pending before the Company Law Board, the parties are free to raise all grounds previously raised. No costs were awarded in this matter.