2016 (3) TMI 60 - HC - Companies Law

Single Judge Jurisdiction under Section 392 of the Companies Act, 1956 - Held that - Except Section 446 (and dependent on the conditions which are to be fulfilled as spelt out by it) there is no other power under the Companies Act, authorizing the Company Court to exercise universal jurisdiction, as it were, and adjudicate disputes concerning third parties transactions with the company. Therefore, the power is, in a sense, sui generis and applicable only in the event of a winding up order being made. As correctly held by the impugned judgment, Section 446 and the phraseology it adopts precludes the exercise of a wide, unenumerated jurisdiction of the kind invoked by the appellants. Thus, Section 446 and the exclusive jurisdiction provided by it, subject to express preconditions, which regulate its exercise, rule out the existence of a wide, un-spelt residual jurisdiction under Section 392 which is both ubiquitous and unregulated. In other words, the maxim exclusio unis est exclusio alterius (which means mention of one thing implies the exclusion of another ) squarely applies to this case. The other feature peculiar to this case is that the power of the Company Court to decide upon matters and disputes which do not directly relate to its jurisdiction, apart from being limited in its operation to what is expressly stated in Section 446, is also excluded in relation to matters and causes which are to be tried by Tribunals and Courts of exclusive jurisdiction. Thus, it was ruled in Indian Bank v Official Liquidator 1998 (5) TMI 342 - SUPREME COURT OF INDIA that even under Section 446, the Court does not possess the power to set aside the order of a tribunal constituted under a rent control legislation. Thus the Company Court acted correctly in refusing to exercise jurisdiction under Section 392 having regard to the nature of reliefs claimed by the appellants

Issues Involved:
1. Jurisdiction under Section 392 of the Companies Act, 1956.
2. Implementation and supervision of the Scheme of Arrangement.
3. The role and powers of the Company Court.
4. Claims against third parties not involved in the original Scheme.
5. Applicability of Section 446 of the Companies Act, 1956.

Issue-Wise Detailed Analysis:

1. Jurisdiction under Section 392 of the Companies Act, 1956:
The appeals challenged the jurisdiction of the Company Court under Section 392 of the Companies Act, 1956, to adjudicate disputes involving third parties who were not part of the original Scheme of Arrangement. The appellants argued that Section 392 conferred broad powers on the Company Court to supervise and implement the Scheme, including resolving disputes with third parties. The respondents contended that the Company Court's jurisdiction was limited to parties involved in the Scheme and did not extend to third-party disputes.

2. Implementation and Supervision of the Scheme of Arrangement:
The Scheme of Arrangement was sanctioned on 26.05.1978, with modifications, to address the financial difficulties faced by the company. The Scheme included provisions for the recovery of properties and the settlement of creditors' dues. The appellants sought directions under Section 392 to retrieve possession of properties previously occupied by the company. The respondents argued that they were lawful tenants and that their possession was protected by rent legislation.

3. The Role and Powers of the Company Court:
The appellants relied on Clause 8 of the sanctioned Scheme, which granted the Company Court jurisdiction over disputes related to the Scheme's implementation. They argued that the Scheme had statutory effect and modified existing contracts, thus overriding the jurisdiction of civil courts. The respondents countered that the Company Court's jurisdiction was limited and that disputes involving third parties should be resolved in ordinary civil courts.

4. Claims Against Third Parties Not Involved in the Original Scheme:
The learned Single Judge held that Section 392 did not empower the Company Court to adjudicate claims against third parties who were not part of the original Scheme. The Judge emphasized that the Scheme was binding only on the company, its creditors, and contributories, and not on third parties. The Judge concluded that disputes involving third parties should be resolved through appropriate civil proceedings.

5. Applicability of Section 446 of the Companies Act, 1956:
The learned Single Judge also addressed the applicability of Section 446, which confers jurisdiction on the Company Court to adjudicate claims involving the company after a winding-up order is made. The Judge noted that no winding-up order had been made in this case, and thus, Section 446 did not apply. The Judge concluded that the Company Court's jurisdiction under Section 392 was not as extensive as that under Section 446.

Analysis and Conclusions:
The Court analyzed the provisions of Sections 392 and 446 of the Companies Act, 1956, and relevant case law, including S.K. Gupta v. K.P. Jain, Sudershan Chit (India) Limited v. O. Sukumaran Pillai, and others. The Court noted that Section 392 conferred broad powers on the Company Court to supervise and implement the Scheme but did not extend to adjudicating disputes involving third parties not part of the Scheme. The Court emphasized that Section 446 applied only when a winding-up order was made, which was not the case here.

The Court concluded that the Company Court correctly refused to exercise jurisdiction under Section 392 for claims against third parties. The Court upheld the learned Single Judge's decision, stating that disputes involving third parties should be resolved in ordinary civil courts. The appeals were dismissed without costs.

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