1977 (9) TMI 97 - HC - Companies Law

Shares Power, to issue of at discount, Winding up Suits stayed on winding-up order, Application of act to banking companies

Summary

Issues Involved:
1. Jurisdiction of the civil court to entertain the suit.
2. Validity of the amalgamation of the transferor-bank with the plaintiff-bank.
3. Legality of the forfeiture of the defendant's shares.
4. Bar of limitation on the suit.

Detailed Analysis:

1. Jurisdiction of the Civil Court:
The primary contention was whether the civil court had jurisdiction to entertain the suit, given the provisions of the Companies Act, 1956, and the Banking Regulation Act, 1949. The court scrutinized sections 10, 2, and 36-B of the Banking Regulation Act and sections 10(2)(b) and 616(b) of the Companies Act. It was clarified that section 45B of the Banking Regulation Act confers exclusive jurisdiction on the High Court only in matters relating to the winding up of banking companies. Therefore, the jurisdiction of civil courts in other matters remains unaffected. The court concluded that the civil court had jurisdiction to entertain the suit as it did not arise out of winding-up proceedings.

2. Validity of the Amalgamation:
The court examined the validity of the amalgamation of the transferor-bank with the plaintiff-bank. It was noted that the scheme of amalgamation was sanctioned by the Government of India under section 45(7A) of the Banking Regulation Act, and a true copy of the notification (Ex. A-9) was provided. The court upheld the presumption of regularity of acts done by public servants under section 114(e) of the Evidence Act, concluding that the scheme of amalgamation was valid and unassailable.

3. Legality of the Forfeiture:
The plaintiff-bank claimed that the defendant's shares were forfeited due to non-payment of call money. However, the court found that there was no proof of service of the forfeiture notice on the defendant. The court emphasized that proper service of notice is a condition precedent for valid forfeiture. Citing the Supreme Court's decision in Public Passenger Service Ltd. v. M. A. Khadar, the court held that a defective notice renders the forfeiture invalid. Consequently, the court concluded that the forfeiture of the defendant's shares was invalid.

4. Bar of Limitation:
The court addressed the issue of whether the suit was barred by limitation. It was noted that the suit was filed on September 12, 1966, and the alleged cause of action arose on September 10, 1963, when the shares were purportedly forfeited. Since the forfeiture was found to be invalid, the court held that the suit was time-barred under article 55 of the Limitation Act, 1963.

Conclusion:
The judgment and decree of the appellate court were set aside, and the suit was dismissed with costs throughout. The civil revision petition was allowed, concluding that the civil court had jurisdiction, the amalgamation was valid, the forfeiture was invalid, and the suit was barred by limitation.