9911796707
TMI Blog1995 (3) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... se in these circumstances. The Canara Bank (the appellant) had made an application before the CLB under section 111 of the Companies Act seeking relief against the Nuclear Power Corporation of India Ltd. (the first respondent), which had refused to register in its books in the name of the Canara Bank bonds of the Nuclear Power Corporation purchased by the Canara Bank. The Standard Chartered Bank (the fourth respondent) had also claimed ownership of the said bonds. The Canara Bank alleged that it had acquired the said bonds from the Andhra Bank Financial Services Ltd. (the third respondent) through one Hiten P. Dalai, (the second respondent) who had acted as a broker. Hiten P. Dalai is a person notified under the provisions of section 3(2) of the Special Court Act and was, as the application of the Canara Bank before the CLB showed, involved as a broker in the transaction relating to the said bonds. The application of the Canara Bank was pending disposal before the CLB when, on 25-1-1994, the Special Court Act was amended by the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Ordinance, 1994, and section 9A was intro-duced. The Canara Bank and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the High Court within the local limits of whose jurisdiction the Special Court was situated, with the concurrence of the Chief Justice of India. Section 6 empowered the Special Court to take cognizance of and try such cases as were instituted before it or transferred to it. Section 7 dealt with the jurisdiction of the Special Court and it reads thus : "7. Jurisdiction of Special Court. - Notwithstanding anything contained in any other law, any prosecution in respect of any offence referred to in sub-section (2) of section 3 shall be instituted only in the Special Court and any prosecution in respect of such offence pending in any court shall stand transferred to the Special Court." Section 9 made provision for the procedures and powers of the Special Court. It stated that the Special Court should in the trial of cases before it follow the procedure prescribed by the Code of Criminal Procedure, 1908, for the trial of warrant cases before a Magistrate. It was also provided that the Special Court would be deemed to be a Court of Session, having all the powers of such a Court. Section 10 provided that an appeal would lie from any judgment, decree, sentence or order, not being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the records of such suit, claim or other legal proceeding, proceed to deal with it, so far as may be, in the same manner as a suit, claim or legal proceeding from the stage which was reached before such transfer or from any earlier stage of de novo as the Special Court may deem fit. (3) On and from the commencement of the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Ordinance, 1994, no court other than the Special Court shall have or be entitled to exercise, any jurisdiction, power or authority in relation to any matter or claim referred to in sub-section (1). (4) While dealing with cases relating to any matter or claim under this section, the Special Court shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice, and subject to the other provisions of this Act and of any rules, the Special Court shall have the power to regulate its own procedure. (5) Without prejudice to the other powers conferred under this Act, the Special Court shall have, for the purposes of discharging its functions under this section, the same powers as are vested in a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt (Trial of Offences Relating to Transactions in Securities) Amendment Ordinance, 1994, was promulgated by the President on the 25th January, 1994...." Analysis of section 9A. 5. By reason of sub-section (1) of section 9A, on and from the date of commencement of the Amendment Ordinance the Special Court exer- cises all such jurisdiction, powers and authority as were exercisable by any civil court in relation to any matter or claim (a) relating to any property standing attached and (b) arising out of transactions in securi- ties entered into between the stated dates in which a notified person was in any manner involved. By reason of sub-section (2) any suit, claim or other legal proceeding (other than an appeal) pending before any Court immediately before the commencement of the Amendment Ordinance, being a suit or proceeding the cause of action whereof was such that it would have, if it had arisen after the commencement of the Amendment Ordinance, been within the jurisdiction of the Special Court, stands transferred to the Special Court. By reason of sub-section (3), on and from the commencement of the Amendment Ordinance no Court other than the Special Court may exercise any ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing out of transactions in securities entered into between the stated dates in which a notified person is involved. Sub-section (2) of section 9A also speaks of a 'Court'; a proceed-ing before a Court, the cause of action of which arises out of a transaction in securities entered into between the stated dates in which a notified person is involved, stands transferred to the Special Court. The question, in these circumstances, is whether the use of the words 'civil court' in sub-section (1) excludes the application of section 9A to the CLB? Sub-section (1) of section 9A is divisible into two parts. By the first part, the Special Court is empowered to exercise, on and from the commence- ment of the Amendment Ordinance, all such jurisdiction, powers and authority as were exercisable before such commencement by any civil court. By the second part, the Special Court is empowered to exercise such jurisdiction, powers or authority in regard to the matters or claims therein specified, which include matters or claims arising out of transac-tions in securities entered into between the stated dates in which a notified person is involved. So read, the Special Court has the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. (2) The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may appeal to the Company Law Board against any refusal of the company to register the transfer or transmission, or against any failure on its part within the period referred to in sub-section (1), either to register the transfer or transmission or to send notice of its refusal to register the same. (3) An appeal under sub-section (2) shall be made within two months of the receipt of the notice of such refusal or, where no notice has been sent by the company, within four months from the date on which the instrument of transfer, or the intimation of transmission, as the case may be, was delivered to the company. (4) If- (a) the name of any person- (i)is, without sufficient cause, entered in the register of members of a company, or (ii) after having been entered in the register, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed. (11) In the case of a private company which is not a subsidiary of a public company, where the right to any shares or interest of a member in, or debentures of, the company is transmitted by a sale thereof held by a Court or other public authority, the provisions of sub-sections (4) to (7) shall apply as if the company were a public company : Provided that the Company Law Board may, in lieu of an order under sub-section (5), pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid, within such time as may be allowed for the purpose by the order, on payment to the purchaser of the price paid by him therefor or such other sum as the Company Law Board may determine to be a reasonable compensation for the right in all the circumstances of the case. (12) If default is made in complying with any of the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. (13) Nothing in this section and section 108, 109 or 110 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r omitted from the register and to decide any question which it is necessary or expedient to decide in this connection. An appeal to the High Court against any decision or order of the CLB on a question of law is available to any person aggrieved, thereby under the provisions of section 10F. Whereas sub-sections (2) and (3) of section 111 term the pleading that the person aggrieved has to file before the CLB an 'appeal', sub-section (4) requires the person aggrieved to apply, sub-section (5) speaks of it as an 'appeal' or an 'application', sub-section (7) as an 'application' and sub-section (10) as an 'appeal or application', which shall be made 'by a petition in writing'. The words 'appeal' and 'application' in the context of the provisions of section 111 have the same meaning. Plainly, it is an application that has to be made. 11. The powers under section 155 were exercised by a civil court. Reference may be made to the definition of 'Court' in the Companies Act. Section 2(11) defines 'Court' to mean, with respect to any matter relating to a company, other than any offence against the Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns as may be conferred on it, by or under this Act or any other law, and shall also exercise and discharge such other powers and functions of the Central Government under this Act or any other law as may be conferred on it by the Central Government, by notification in the Official Gazette under the provisions of this Act or that other law." Reference to the provisions of section 10F has already been made. 13. 1t is to be noted that the CLB performs functions which are admin-istrative, as under sections 224 and 269, and curial, as under section 111. Contentions 14. Mr. Salve, the learned counsel for the Canara Bank, who was supported by Mr. J.C. Seth, the learned counsel for the Nuclear Power Corporation, submitted that section 9A(1) conferred upon the Special Court the jurisdiction of a civil court 'in the wider sense', as including Courts exercising powers conferred upon civil courts. The word 'civil' was used in section 9A(1) to contrast the provisions thereof with those of section 9(2), whereunder the Special Court was given all the powers of a Court of Session. The jurisdiction of the Special Court, until the coming into force of the Amendment Ordinance, und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son notified had been involved in a transaction relating to securities which he had purchased and which were not being registered in his name, as a broker or intermediary or in any other manner at any time between the stated dates. It was, therefore, inappro-priate to hold that such a litigant was bound to take recourse to the law before the Special Court and not before the CLB under section 111, particularly when, by reason of the provisions of the latter provision, he had to move within a specified time limit. The interpretation suggested on behalf of the Canara Bank was not really a purposive interpretation. Attention was drawn to the provisions of section 4 whereunder the Custodian was entitled, if satisfied after such inquiry as he thought fit that any contract or agreement entered into between the stated dates in relation to any property of a person notified under section 3(2) had been entered into fraudulently or to defeat the provisions of the Special Court Act, to cancel such contract or agreement whereupon such property stood attached. Even if the CLB under the provisions of section 111 of the Companies Act made any order with regard to any securities, that order would st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Union of India, that the authority of the Central Government under section 111 was, nevertheless, purely administrative. In an appeal under section 111 there was a lis or dispute between the contesting parties relating to their civil rights, and the Central Government was invested with the power to determine that dispute according to law; it had to consider and decide the proposal and the objections in the light of the evidence and not on grounds of policy or expediency. The power to order registration of transfers had to be exercised subject to limitations similar to those imposed upon the exercise of the power of the Court in a petition under section 155. Those restrictions also applied to the exercise of the power by the Central Government. The Central Government had to decide whether, in exercising their power, the directors were not acting oppres-sively, capriciously or corruptly or in some way mala fide. The decision had manifestly to stand those objective tests. The exercise of such authority of rendering a decision upon the respective contentions by reason of which the rights of the contesting parties were directly affected was judicial. It was immaterial that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of administrative Tribunals had come into existence. These Tribunals had the authority of law to pronounce upon valuable rights. They acted in a judicial manner and even on evidence on oath, but they were not part of the ordinary courts of civil judicature. They shared the exercise of the judicial power of the State but were brought into existence to implement some administrative policy or to determine controversies arising out of some administrative law. They were very similar to Courts but were not courts. When the Constitution spoke of 'Courts' in articles 136, 227 and 228 and in articles 233 to 237 and the Lists of the Constitution, it contemplated courts of civil judicature but not Tribunals other than such courts. This was the reason for using both the expressions in articles 136 and 227. By 'Courts' was meant courts of civil judicature and by 'Tribunals' those bodies of men who were appointed to decide controversies arising under certain special laws. Among the powers of the State was included the power to decide such controversies. This was undoubtedly one of the attributes of the State and was aptly called the judicial power of the State. In the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed that the shares be registered or need not be registered. The Central Government was also empowered to include in its orders directions as to payment of costs or otherwise. The function of the Central Government was curial and not executive. There was provision for a hearing and a decision on evidence, and that was indubitably a curial function. In its functions the Central Government often reached decisions but all its decisions could not be regarded as those of a Tribunal. Resolutions of Government might affect rights of parties and yet they might not be in the exercise of judicial power. Resolutions of Government might be amenable to writs under articles 32 and 226 in appropriate cases but might not be subject to a direct appeal under article 136 as the decisions of a Tribunal. The position, however, changed when Government embarked upon curial functions and proceeded to exercise judicial power and decide disputes. In these circumstances, it was legitimate to regard the officer who dealt with the matter and even Government itself as a Tribunal. The word ' Tribunal' was a word of wide import and the words 'Court' and 'Tribunal' embraced within them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the reason both expressions were used in articles 136 and 226. The judgment is, therefore, determinative in deciding whether a Tribunal is subject to the jurisdiction of this Court under article 136 or of the High Court under article 227, but it does not hold that a 'Court' is only a court of civil judicature in the ordinary hierarchy of courts. 19. In our view, the word 'Court' must be read in the context in which it is used in a statute. It is permissible, given the context, to read it as comprehending the courts of civil judicature and Courts or some Tribunal exercising curial, or judicial, powers. In the context in which the word 'Court' is used in section 9A of the Special Court Act, it is intended to encompass all curial or judicial bodies which have the jurisdiction to decide matters or claims, Inter alia, arising out of transactions in securi- ties entered into between the stated dates in which a person notified is involved. 20. The occasion for enacting the Special Court Act must not be lost sight of. The Statement of Objects and Reasons of the Bill to replace the Amendment Ordinance has already been quoted. A Joint Parliamentary Committee was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng an important role. It is because of these elements that the economy of the country had to suffer and while some gained thousands of crores, millions of investors lost their savings. The criminality of the perpetrators of the scam becomes all the more depictable as it was during this period that the country was passing through most trying times, economically and financially. An observation that the Committee has been constrained to make at a number of places in the succeeding chapters is that for all these not many have yet been identified and effectively punished." 21. Having regard to the enormity of the 'scam' and its vast ramifications, Parliament thought it was necessary that all the matters of claims arising out of transactions in securities entered into between the stated dates in which a person notified was involved should be brought before and tried by the same forum. That forum had been invested with the jurisdiction to try persons accused of offences relating to transactions in securities entered into between the stated dates. It was also required to give directions to the Custodian in regard to property belonging to persons notified which stood attached under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th, that the chairman has a casting vote and that third parties have power to intervene are immaterial, especially if the statute setting it up prescribes a penalty for making false statements; elements to be considered are (1) the requirement for a public hearing, subject to a power to exclude the public in a proper case, and (2) a provision that a member of the Tribunal shall not take part in any decision in which he is personally interested, or unless he has been present throughout the proceedings. A Tribunal is not necessarily a court in the strict sense of exercising judicial power merely because (1) it gives a final decision; (2) it hears witnesses on oath; (3) two or more contending parties appear before it between whom it has to decide; (4) it gives decisions which affect the rights of subjects; (5) there is an appeal to a court; and (6) it is a body to which a matter is referred by another body. Many bodies are not courts even though they have to decide questions, and in so doing have to act judicially, in the sense that the proceedings must be conducted with fairness and impartiality. Examples are the benchers of the Inns of Court when considering the conduct of one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and does, act judicially. Its orders are appealable. The CLB, further, is a permanent body constituted under a statute. It is difficult to see how it can be said to be anything other than a Court, particularly for the purposes of section 9A of the Special Court Act. 24. We shall assume that a shareholder whose name the company has refused to enter in its register would be put to some difficulty in deciding whether he should approach the Special Court or the CLB, but that is no reason to interpret the provisions of section 9A in a manner that would defeat its intendment and adversely affect the public interest. In any event, the time taken in approaching the CLB in a matter that should have been filed before the Special Court would not be of any consequence for there is no time limit within which the Special Court has to be approached; and it is most unlikely that the Special Court would be approached unless the shareholders were sure that his claim fell within section 9A(1). 25. It will be remembered that Mr. Nariman had drawn attention to provisions of section 4 of the Special Court Act and argued that even if the CLB, under the provisions of section 111 of the Companies Act, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
