2011 (10) TMI 515 - HC - Companies Law

Writ petition - Territorial jurisdiction - cancellation of shares - prayer of the respondent-company made before the Company Law Board Delhi for cancellation of those shares respondent have registered office at Shillong Held that - mere fact that the respondent No. 2 has its registered office at Shillong or carries on its business at Shillong has absolutely no bearing on whether the shares allotted by it in the year 2001-02 is legal or not. No part of the cause of action of the company petition pending before the Company Law Board at Delhi lies within the territorial jurisdiction of this Court. As this writ petition is being dismissed on the ground of its non-maintainability. Writ petition dismissed.

Issues Involved:
1. Legality of the proceedings arising out of Company Petition No. 45/2003.
2. Jurisdiction of the Company Law Board, Principal Bench, Delhi.
3. Maintainability of the writ petition under Article 226 of the Constitution.
4. Alternative remedies available to the petitioner.

Detailed Analysis:

1. Legality of the Proceedings:
The petitioner, a shareholder of a private limited company registered in Shillong, questioned the legality of proceedings under sections 397/398 read with section 402 of the Companies Act, 1956, pending before the Company Law Board (CLB), Principal Bench, Delhi. The petitioner was informed by the respondent-company that his shares were being canceled as part of a settlement in the ongoing case. He argued that he was not made a party to the case, which had been pending since 2003, and was unaware of it until he received the letter on 17-6-2011. The petitioner contended that no meeting or resolution for the cancellation of shares had been held, nor was his consent obtained, suggesting collusion among the respondents to extinguish his legal rights without his knowledge.

2. Jurisdiction of the Company Law Board, Principal Bench, Delhi:
The petitioner argued that the CLB, Principal Bench, Delhi, lacked territorial jurisdiction as the respondent-company's registered office was in Shillong. The respondents countered that the writ petition was not maintainable under Article 226 of the Constitution, as the CLB was located in Delhi, outside the territorial jurisdiction of the Gauhati High Court. They maintained that the petitioner had alternative remedies under sections 10-F and 405 of the Companies Act.

3. Maintainability of the Writ Petition under Article 226:
The court examined Article 226(1) and (2) of the Constitution, which allows High Courts to issue writs within their territorial jurisdiction. The petitioner contended that since the company was registered in Shillong, the Gauhati High Court had jurisdiction. However, the court noted that the petitioner was challenging the legality of proceedings before the CLB in Delhi, which was outside its jurisdiction. The court referred to the Supreme Court's decision in Alchemist Ltd. v. State Bank of Sikkim, emphasizing that the cause of action must be material, integral, or essential to the dispute. The mere fact that the company was registered in Shillong did not constitute a cause of action within the meaning of Article 226(2).

4. Alternative Remedies Available to the Petitioner:
The respondents argued that the petitioner had alternative statutory remedies under sections 10-F and 405 of the Companies Act, which he had not exhausted. The court agreed, noting that the petitioner could approach the competent and jurisdictional court to address his grievances.

Conclusion:
The court concluded that the writ petition was not maintainable due to lack of territorial jurisdiction. The fact that the respondent-company was registered in Shillong did not confer jurisdiction upon the Gauhati High Court for a dispute pending before the CLB in Delhi. The court dismissed the writ petition, allowing the petitioner to seek redress in the appropriate forum. The interim order was vacated, and no costs were awarded.

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