2010 (12) TMI 1069 - HC - Companies Law

Whether the courts below adopted the right perspective while deciding that the civil court has no jurisdiction to entertain the suit? Held that - The correspondence addressed to defendant No. 1 had made a prayer seeking issuance of duplicate share certificates. Section 113 laid down the period of limitation for issuance of such certificates. The company also sought for certain other details from the plaintiff which as per the plaintiff included the registered folio numbers as also affidavit and the indemnity bond which have been furnished by the plaintiff to the defendant company. It was thus now in the domain of the Company Law Board to make the necessary rectification in the register of members. As is evident from the averments made in the plaint and the prayer clause of the plaint, these prayers of the plaintiff could have been answered only by the Company Law Board. There is no perversity in the findings in the impugned judgment. No interference is called for. Substantial question of law is answered accordingly. Appeal dismissed.

Summary

Issues:
1. Suit for declaration and mandatory injunction against the defendant company for non-transfer of shares.
2. Preliminary objection of jurisdiction under sections 10 and 113 of the Companies Act, 1956.
3. Interpretation of the distinction between rectification and title to shares.
4. Jurisdiction of civil court in cases of share transfers and rectification.

Analysis:
1. The plaintiff filed a suit against the defendant company for the non-transfer of shares purchased, which were subsequently stolen. Despite repeated requests for duplicate share certificates, the defendant did not transfer the shares. The trial judge dismissed the suit citing sections 10 and 113 of the Companies Act, 1956, which reserve jurisdiction for the Company Law Board. The appeal upheld this decision based on relevant case law.

2. The plaintiff argued that the case involved a declaration of ownership rather than rectification, as the shares were not yet transferred in his name. Citing legal precedents, the plaintiff contended that the civil court's jurisdiction was not barred in such cases. However, the court examined the correspondence and found that the requests made by the plaintiff could only be addressed by the Company Law Board for rectification, as per the provisions of the Companies Act, 1956.

3. The judgment referred to Section 155 of the Companies Act, which outlines the power of the court to rectify the register of members in cases of errors or omissions. The court emphasized the importance of complying with the Act's procedures before seeking rectification and highlighted the exclusive jurisdiction of the company court in such matters. The court clarified that rectification involves failures on the part of the company to adhere to statutory requirements for share transfers.

4. Ultimately, the court concluded that the plaintiff's prayers for issuance of duplicate share certificates and other related requests fell within the purview of the Company Law Board for rectification. As the plaintiff's claims could only be addressed by the Board, the civil court lacked jurisdiction in this matter. The appeal was dismissed, affirming the decision that the Company Law Board was the appropriate forum to handle the issues raised in the suit.