1997 (6) TMI 362 - Board - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Company Law Board (CLB) to entertain applications under Section 111 of the Companies Act, 1956, for rectification of the register of members of public limited companies.
2. Jurisdiction of the CLB to entertain appeals under Section 111(2) in respect of public limited companies.
3. Implications of the new Sub-section (14) to Section 111 and new Section 111A.
4. Alternate remedies available to investors if the CLB lacks jurisdiction.

Detailed Analysis:

1. Jurisdiction of the CLB to entertain applications under Section 111 for rectification of the register of members of public limited companies:

The Depositories Ordinance, promulgated on September 20, 1995, and subsequently becoming the Depositories Act on August 10, 1996, amended certain provisions of the Companies Act, including Section 111. The newly inserted Sub-section (14) in Section 111 specifies that "company" means a private company. This implies that the provisions of Section 111, including rectification of the register of members, apply only to private companies. The respondents argued that the CLB's jurisdiction to deal with public limited companies in matters specified in Section 111 has been removed, and any rectification for public companies must be sought under Section 111A. The petitioners, however, contended that their vested right to seek rectification through the CLB, which accrued before the amendment, should not be taken away by the new enactment.

The judgment concluded that the term "company" in Section 111(4) now refers only to private companies, and thus, the provision for rectification of the register of members of public companies under this section does not arise. The legislative intent was to exclude public companies from the purview of Section 111, and the CLB cannot assume jurisdiction for rectification matters concerning public companies under this section.

2. Jurisdiction of the CLB to entertain appeals under Section 111(2) in respect of public limited companies:

Section 111(2) provides for an appeal to the CLB in case a company refuses or delays the registration of transfer of shares. The same reasoning applied to Section 111(4) holds for Section 111(2). The Depositories Act, through its amendments, intended to exclude public companies from the jurisdiction of the CLB under Section 111. However, an amendment effective from January 15, 1997, added a proviso to Section 111A(2), allowing the CLB to entertain appeals in cases of refusal to register transfers for public companies. Thus, while the CLB had no jurisdiction under Section 111(2) for public companies, the new proviso to Section 111A(2) now provides a remedy.

3. Implications of the new Sub-section (14) to Section 111 and new Section 111A:

Given the negative findings on the first two issues, the need to address this issue did not arise in the judgment. However, the new Sub-section (14) to Section 111 clearly limits the application of Section 111 to private companies. Section 111A, which applies to public companies, provides specific grounds for rectification and appeals, particularly concerning the transfer of shares.

4. Alternate remedies available to investors if the CLB lacks jurisdiction:

For public companies, the right to move the CLB for rectification or appeal under Section 111 no longer exists. The only remedy available under the current legal framework is to move the civil court. The judgment referenced the Full Bench decision of the Delhi High Court in Ammonia Supplies Corporation Pvt Ltd. v. Modern Plastic Containers Pvt. Ltd., which held that matters contained in Section 111 could be agitated in a civil court.

Maintainability of the Petitions:

- First Petition (C. P. No. 1 of 1996): The petition was dismissed as the CLB lacked jurisdiction to entertain the matter, even though the cause of action arose before the Ordinance. The right to move the CLB does not survive the jurisdictional change brought by the new enactment.

- Second Petition (C. P. No. 16 of 1996): This petition for rectification under Section 111(4) was dismissed as not maintainable since the CLB has no jurisdiction over public companies under this section. However, the respondent bank accepted the CLB's suggestion to provide some relief to the petitioners.

- Third Petition (C. P. No. 18 of 1996): This petition, relating to the refusal to register the transfer of shares, was dismissed as not maintainable under Section 111. The petitioners were granted liberty to file a fresh petition under Section 111A, which now provides a remedy for such cases.

In conclusion, the judgment clarified that the CLB's jurisdiction under Section 111 is limited to private companies, and any rectification or appeal concerning public companies must be sought under the provisions of Section 111A or through civil courts.