2013 (3) TMI 90 - HC - Companies Law

Cancellation of shares - Petitioner was a registered shareholder of respondent-company having its registered office at Shillong - respondent-company has not held any meeting nor has it taken any resolution for cancellation of the shares allotted in the year 2001-2002 which would include petitioner s shares - neither has the respondent-company taken his consent in writing or otherwise for cancellation of his shares - writ filled by the petitioner desiring to question the tenability of the prayer of the respondent-company made before the Company Law Board, Delhi for cancellation of those shares - Whether the facts projected by the respondent-company in their petition can constitute a material, essential or integral part of the cause of action? Held that - Mere fact that the respondent-company was registered, or has its registered office, at Shillong, is not decisive, and has absolutely no bearing with the lis or the dispute involved in the case so as to confer territorial jurisdiction upon Gauhati High Court. Thus having a registered office of the respondent-company at Shillong has not, even remotely, touched upon the controversy involved in the company petition pending before the Principal Bench of Company Law Board at Delhi, the bundle of facts to be proved by the respondent-company before the Company Law Board at Delhi for the right to judgment is not about the situs of their registered office. On the contrary, this writ petition is squarely covered by the decision of the Apex Court in Adani Exports Ltd. case (2001 (10) TMI 321 - SUPREME COURT OF INDIA). Therefore, the 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 is rather the cause of action for the company petition such an issue cannot, by any stretch of imagination, be held to constitute a material, essential or integral part of the cause of action, they are as different as chalk and cheese. Thus 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. Writ petition dismissed on the ground of its non- maintainability for want of territorial jurisdiction.

Issues Involved:
1. Legality of the proceedings under Company Petition No. 45/2003.
2. Territorial jurisdiction of the Gauhati High Court.
3. Maintainability of the writ petition under Article 226 of the Constitution of India.

Detailed Analysis:

1. Legality of the Proceedings under Company Petition No. 45/2003:
The petitioner, a shareholder of a private limited company registered in Shillong, challenged the legality of proceedings under Company Petition No. 45/2003 pending before the Company Law Board, Principal Bench, Delhi. The petitioner claimed that his shares were canceled without his consent and without following due legal procedures. He argued that he was not made a party to the proceedings, despite being a necessary party, and was unaware of the case until he received a letter from the respondent-company.

2. Territorial Jurisdiction of the Gauhati High Court:
The core issue revolved around the interpretation of Article 226(1) and (2) of the Constitution of India. The petitioner contended that since the company is registered in Shillong, the Gauhati High Court has jurisdiction. However, the respondents argued that the writ petition is not maintainable as the Company Law Board is located in Delhi, outside the territorial jurisdiction of the Gauhati High Court.

Article 226(1) limits the High Court's jurisdiction to the territories it exercises jurisdiction over, and the authority or person must be within those territories. Article 226(2) allows the High Court to issue directions if the cause of action arises within its jurisdiction. The court cited the Supreme Court's decision in Alchemist Ltd. v. State Bank of Sikkim, which held that the cause of action must be material, integral, or essential to the dispute.

The petitioner argued that the registered office of the company being in Shillong should confer jurisdiction. However, the court found that the location of the registered office is not a material or integral part of the cause of action. The subject matter of the company petition was the legality of share allotments, not the location of the company's registered office.

3. Maintainability of the Writ Petition under Article 226:
The respondents argued that the petitioner had an alternative remedy under sections 10-F and 405 of the Companies Act, 1956, and had not exhausted these remedies. They relied on several Supreme Court decisions to support their claim that the writ petition should be dismissed for lack of maintainability.

The court concluded that the petitioner failed to establish that any part of the cause of action arose within the territorial jurisdiction of the Gauhati High Court. The mere fact that the company is registered in Shillong does not constitute a cause of action. The court held that the writ petition is not maintainable due to lack of territorial jurisdiction.

Conclusion:
The Gauhati High Court dismissed the writ petition on the grounds of non-maintainability due to lack of territorial jurisdiction. The petitioner was advised to approach the competent and jurisdictional court to address his grievances. The interim order passed earlier was vacated, and no order as to costs was made.

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