1980 (3) TMI 207 - HC - Companies Law

Powers of Court to rectify register of members, Powers of Central Government to authorise with permission of High Court to takeover management or control of industrial undertaking

Issues Involved:
1. Rectification of the share register under Section 155 of the Companies Act, 1956.
2. Impact of winding-up proceedings and Central Government takeover under the Industries (Development & Regulation) Act, 1951.
3. Jurisdiction of the court to grant relief during the period of Central Government management.

Issue-wise Detailed Analysis:

1. Rectification of the Share Register:
The petitioner sought rectification of the share register of Bengal Potteries Ltd. for 38,000 equity shares under Section 155 of the Companies Act, 1956. The court noted that the winding-up order for Bengal Potteries Ltd. was issued on February 9, 1976, and the Central Government took over the management of the company on September 15, 1976, under Section 18FA of the Industries (Development & Regulation) Act, 1951. The court emphasized that the management and control of the company were transferred to the Industrial Reconstruction Corporation of India Ltd., which was appointed as the authorized person.

2. Impact of Winding-up Proceedings and Central Government Takeover:
The court examined the provisions of Section 18FA, sub-sections (3), (4), (5), and (10) of the Industries (Development & Regulation) Act, 1951. These provisions mandate that the authorized person takes over the management from the Official Liquidator and that all proceedings related to the winding-up of the company remain stayed during the period of Central Government control. Additionally, Section 18FB(1)(b) suspends the operation of all contracts, agreements, and rights related to the industrial undertaking during this period. The court highlighted that the list of members prepared by the authorized person cannot be rectified by the court while the company is under Central Government management.

3. Jurisdiction of the Court to Grant Relief:
The petitioner argued that the provisions of the Companies Act, 1956, were not suspended, citing various sections of the Industries (Development & Regulation) Act, 1951. However, the court disagreed, stating that Chapter III-AA of the Act, introduced by the 1971 amendment, specifically deals with the management of companies in liquidation taken over by the Central Government. The court held that Section 18FA forms a complete code for such situations, and the winding-up proceedings, including the rectification of the share register, remain stayed during the Central Government's management period. The court further noted that any right to transfer shares or rectify the share register remains suspended under Section 18FB(1)(b) and (4) of the Act.

The court also referenced Section 536(2) of the Companies Act, 1956, which prohibits changes in shareholding after liquidation without court approval. Given the stay on all winding-up proceedings under the Industries (Development & Regulation) Act, 1951, the court concluded that it lacks jurisdiction to rectify the share register as requested by the petitioner.

Conclusion:
The court held that the application for rectification of the share register is not maintainable at this stage due to the stay on winding-up proceedings and the suspension of the petitioner's rights under the Industries (Development & Regulation) Act, 1951. Consequently, the court made no order on the application and ruled that there would be no order as to costs, considering the peculiar circumstances of the case.

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