2019 (2) TMI 971 - SC - Companies Law

Transfer of shares - Exercise of power under Section 111-A of the Companies Act, 1956 (as amended in 1988) and the Depositories Related Laws (Amendment) Act, 1997 - whether issued raised rightly or wrongly, has to be adjudicated by some forum whether it be a civil suit or the exercise of jurisdiction by the then Company Law Board? Held that - The effect of section 430 of Companies Act is that in matters in respect of which power has been conferred on the NCLT, the jurisdiction of the civil court is completely barred - It is not in dispute that were a dispute to arise today, the civil suit remedy would be completely barred and the power would be vested with the National Company Law Tribunal (NCLT) under Section 59 of the said Act. We are conscious of the fact that in the present case, the cause of action has arisen at a stage prior to this enactment. Thus, Relegating the parties to civil suit now would not be the appropriate remedy, especially considering the manner in which Section 430 of the Act is widely worded - in view of the subsequent developments, the appropriate course of action would be to relegate the appellants to remedy before the NCLT under the Companies Act, 2013 - appeal allowed.

Summary

Issues:
1. Interpretation of Section 111-A of the Companies Act, 1956 and the Depositories Related Laws (Amendment) Act, 1997.
2. Jurisdiction of civil court in matters empowered to be determined by the National Company Law Tribunal (NCLT).
3. Relegation of parties to the appropriate forum for adjudication of disputes regarding share transfers.

Analysis:
1. The judgment concerns the exercise of power under Section 111-A of the Companies Act, 1956 and the Depositories Related Laws (Amendment) Act, 1997. The Madras High Court reversed the Company Law Board's decision, leaving the appellants with the option of a civil suit. The counsel argued that the issue of share transfer should be adjudicated by a forum, citing legal precedents. The court noted the amendment in the Companies Act, 2013, which vests the power of rectification with the NCLT under Section 59, thus affecting the present case.

2. Section 430 of the Companies Act, 2013 bars civil courts from entertaining suits or proceedings within the NCLT's jurisdiction. The court acknowledged that the dispute in this case arose before the enactment but emphasized that the civil suit remedy would now be barred, and the power would lie with the NCLT. Despite the historical context, the court deemed it inappropriate to relegate the parties to a civil suit, given the broad wording of Section 430.

3. Consequently, the court decided to direct the appellants to seek remedy before the NCLT under the Companies Act, 2013. The appellants were granted a two-month window to file a fresh petition due to the lapse of time. The appeals were allowed to this extent, with no order as to costs. The judgment highlights the importance of adapting to legal developments and ensuring the appropriate forum for dispute resolution, even when the cause of action predates the relevant legislative changes.