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TMI Blog2009 (12) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... justice if they act in a manner in which Vasudevan J. acted in these proceedings. The consequence of the order passed by the Member of the Company Law Board would be to obstruct the effective exercise of rights by a shareholder of the company from seeking recourse to his remedy of convening an extraordinary general meeting and for seeking enforcement of the resolutions that may be passed at such a meeting. In Life Insurance Corporation of India v. Escorts Ltd. [1985 (12) TMI 289 - SUPREME COURT OF INDIA] , the Supreme Court affirmed the right of every shareholder to convene a meeting including a meeting for the removal of a director. The right of a shareholder to convene and hold such a meeting cannot be questioned. Judicial intervention in such matters particularly by a Bench which had no jurisdiction to entertain the proceedings justifiably gives rise to a feeling of grave disquiet. This court must with a measure of restraint observe that the provisions of the regulations ought to have been observed by the Member of the Company Law Board. Unfortunately they were not. Appeal allowed. - CO. APPEAL NO. 46 OF 2009 CO. APPLICATION NO. 389 OF 2009 CO. PETITION NO. 112 OF 2005 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajinder Singh during his lifetime. Upon the death of Rajinder Singh on May 11, 2005, the shares were transmitted to the name of the first respondent. 3. On December 13, 2005, the first respondent filed a company petition under section 397 before the Principal Bench of the Company Law Board at New Delhi. The appellant and the third respondent filed an application under section 111A challenging the transmission of shares to the name of the first respondent. Both the petitions were disposed of by a judgment dated February 14, 2007 ( Smt. Sandeep Kaur Ahluwalia v. Mukat Pipes Ltd. [2007] 138 Comp Cas 33 ) of the Company Law Board. By its judgment the Company Law Board held that the resolution of the board of directors dated December 5, 2005, for the retransmission of shares to the individual partners of the partnership firm, viz. , the appellant and the first and the third respondents would have to be set aside. The order of the Company Law Board holds that the first respondent validly held shares representing 43.38 per cent, of the capital and consequently, the first respondent would be entitled to at least two directors out of a total of five directors on the board of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors at a meeting held on March 8, 2007. 6. The third respondent instituted a suit before this court on the original side in terms of the directions issued by the Company Law Board on February 14, 2007 ( Smt. Sandeep Kaur Ahluwalia v. Mukat Pipes Ltd. [2007] 138 Comp Cas 33 ), in which a motion for interlocutory relief was taken out. By the ad interim orders of this court dated June 7, 2007, July 3, 2007 and July 24, 2007, an annual general meeting of the company which was scheduled to be held on August 10, 2007, came to be deferred. Consequently, the exercise of rights under the said shares by the first respondent came to be restrained. On December 16, 2008, a learned single judge of this court dismissed the suit at the hearing of the notice of motion. The order of the learned single judge was challenged in appeal by the third respondent. During the pendency of the appeal, the interim orders were continued and the appeal was to be heard at the stage of admission. 7. The first respondent called for the convening of an annual general meeting on April 27, 2009. In the meantime, on April 16, 2009, the appellant issued a notice for the dissolution of the partnership, Muktanan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this court allowed the appeal and set aside the order of the learned single judge dated December 16, 2008, dismissing the suit. 9. An appeal was filed by the first respondent challenging the judgment of the learned single judge dated May 7, 2009, on the petition under section 9 of the Arbitration and Conciliation Act, 1996. The judgment was reserved in the appeal on August 3, 2009. Once again, an oral application was made before the Division Bench for postponing the extraordinary general meeting of the second respondent which was scheduled to take place on August 8, 2009, by the advocate for the first respondent. The prayer for the grant of a postponement of the extraordinary general meeting was not acceded to by the Division Bench. 10. On August 3, 2009, the appellant was served with an application 1 , purportedly filed by the first respondent under section 634A of the Companies Act, 1956, before the New Delhi Bench of the Company Law Board. The notice mentioned that the first respondent would be moving an application before the New Delhi Bench of the Company Law Board on August 4, 2009, at 2.30 p.m. for the grant of relief. The relief that was sought in the application w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... older-Surindra Engineering Ltd., which was not a party to the proceedings before the Company Law Board. The Company Law Board was directed by this court :o pass orders after considering all issues arising under the application including the issue pertaining to maintainability and jurisdiction and to issue at least a reasoned prima facie finding by 5.00 p.m., on August 7, 2009, as regards the holding of the extraordinary general meeting which was scheduled to take place at. 4.00 p.m. on August 8, 2009. 11. The Member of the Company Law Board, Mrs. Vimla Yadav, J. who had heard the proceedings on August 4, 2009, was not available on August 7, 2009. Accordingly, the application was heard on August 7, 2009, by another Member (Vasudevan J.). By his order dated August 7, 2009, the Member of the Company Law Board, while declining to grant an absolute stay on the holding of the extraordinary general meeting directed that the resolutions that may be passed at the meeting shall not be implemented until the proceedings in the suit before this court and the arbitral proceedings were concluded. According to the appellant a copy of the order was made available at 7.40 p.m. on August 7, 2009, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssuming that it was an application for execution of the order dated February 14, 2007. In any event, Vasudevan J. was not a Member of the Principal Bench at the material point of time and was therefore not entitled to adjudicate upon the matter. 13. On behalf of the first respondent it has been submitted that ( i ) The order of the Company Law Board dated February 14, 2007, did not as a matter of fact merge with the order of this court dated May 4, 2007, since the order of the Company Law Board was neither set aside, modified or confirmed by this court; ( ii ) Even assuming that there was a merger of the order of the Company Law Board with the order passed by this court on May 4, 2007, even then an application for execution of the order dated February 14, 2007, could only lie before the Company Law Board in view of the provisions of sections 37 and 38 of the Code of Civil Procedure, 1908 ; ( iii ) Upon the transfer of jurisdiction of the High Court under sections 397 and 398 to the Company Law Board, rule 6 of the Companies (Court) Rules, 1959, will continue to apply and hence all applications for execution of the orders passed by the Company Law Board must be governed by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouster of the first respondent as a director of the company. This, it was submitted, should not be allowed. 14. In dealing with the rival submissions it would at the outset be necessary for the court to elucidate the statutory basis for the exercise of jurisdiction by the Company Law Board and by its Benches. Section 10E of the Companies Act, 1956, provides for the constitution of the Company Law Board. Sub-section (4B) of section 10E provides that the Board may by an order in writing form one or more Benches from among its members and authorise each such Bench to exercise and discharge such of the powers and functions of the Board as may be specified in the order. Every order or act done by a Bench in the exercise of such powers or the discharge of such functions shall be deemed to be the order or act, as the case may be, of the Board. Every Bench as referred to in sub-section (4B) is conferred with certain specified powers which are vested in a civil court while trying a suit, under the Code of Civil Procedure, 1908, in respect of certain matters. In other words, what sub-section (4B) of section 10E emphasises is that the Board is empowered to constitute Benches from amongst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power to transfer any matter pending before the Regional Benches to the Principal Bench either upon the request of all the parties or for other reasons which have to be recorded in writing. Regulation 7 provides that all proceedings other than proceedings before the Principal Bench under regulation 4 shall be instituted before the Bench within whose jurisdiction the registered office of the company is situated. 17. Under the provisions of the regulations, the Company Law Board discharges its judicial functions through Benches. The Principal Bench at New Delhi is now a Bench with a stipulated jurisdiction covering certain specific provisions of the Companies Act, 1956 and of the Monopolies and Restrictive Trade Practices Act, 1969. The Regional Benches are vested with the residuary jurisdiction to adjudicate upon matters falling under all other sections of the Act, save and except for those upon which the jurisdiction has been conferred upon the Principal Bench. Consequently, it is evident that proceedings under sections 397 and 398 of the Companies Act, 1956, not being specifically assigned to the Principal Bench of the Company Law Board, fall squarely within the jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88B of the Act and under section 2A of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) shall be dealt with by the Principal Bench at New Delhi consisting of any one of the following : 1.Shri S. Balasubramanian, Chairman 2.Shri K. K. Balu, Vice-Chairman (2)Matters relating to all sections except 247, 250, 269 and 388B of the Act and under section 2A of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) shall be dealt with by the New Delhi Bench consisting of any one of the following : 1.Smt. Vimla Yadav, Member 2.Shri S. Balasubramanian, Chairman (3)Matters relating to all sections except 247, 250, 269 and 388B of the Act and under section 2A of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) shall be dealt with by the Kolkata Bench consisting of any one of the following : 1.Shri S. Balasubramanian, Chairman 2.Shri K. K. Balu, Vice-Chairman (4)Matters relating to all sections except 247, 250, 269 and 388B of the Act and under section 2A of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) shall be dealt with by the Mumbai Bench consisting of any one of the following : 1.Shri V. S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata, Mumbai and Chennai. Consequently, on and from April 1, 2008, the Principal Bench at New Delhi ceased to have any jurisdiction whatsoever to adjudicate upon matters arising under sections 397 and 398 of the Companies Act, 1956. 20. The facts as they have emerged from the record of these proceedings clearly establish the following : (1)The company application that was filed by the first respondent was instituted before the New Delhi Bench of the Company Law Board ; (2)The company application was initially heard by Mrs. Vimla Yadav J. who was a Member only of the New Delhi Bench with effect from April 1, 2008 ; (3)Affidavits were filed by the appellant as well as by the first respondent before the New Delhi Bench of the Company Law Board ; (4)The impugned order that was passed by Vasudevan J. clearly spells out in paragraph 18 that the application had been made before the New Delhi Bench. The order erroneously states that the case was originally heard by the Chairman, but goes on to state that it was later taken on by a Member of the New Delhi Bench. Vasudevan J. was on August 7, 2009, not a Member of the Principal Bench. The company application was filed for executio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all proceedings under the Act and the Rules. In other words, rule 6 of the Companies (Court) Rules, 1959, is subject to an express provision that is made by the Act and is subject to those provisions. Sections 634 and 634A of the Companies Act, 1956, make a specific provision for the execution of orders. Section 634 provides that any order made by a court under the Act may be enforced in the same manner as a decree made by the court in a suit pending therein. Section 634A deals with enforcement of orders of the Company Law Board and provides that any order made by the Board may be enforced by that Board in the same manner as if it were a decree made by a court in a suit pending therein. It is lawful for the Board to send, in the case of its inability to execute the order to the court within the local limits of whose jurisdiction, in case of an order against a company, the registered office of the company is situated. Reference may be made in this connection to the judgment of the Supreme Court in Stridewell Leathers P. Ltd. v. Bhankerpur Simbhaoli Beverages P. Ltd. [1994] 79 Comp Cas 139 ; [1994] 1 SCC 34. The Supreme Court held that appeals against orders passed even by the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds on a different footing and where a court has no jurisdiction over a subject-matter of a suit by reason of a limitation imposed by a statute, charter or commission it cannot take up the cause or matter. An order passed by a court having no jurisdiction would be a nullity and neither consent nor waiver or acquiescence can confer jurisdiction upon a court. 25. That leads the court to the question as to whether it was at all open to the first respondent to file an application before the Company Law Board for enforcement of the order dated February 14, 2007. The submission of the first respondent is that there was no merger of the order dated February 14, 2007, in the subsequent order of this court dated May 4, 2007. Consequently it has been urged before the court that the application for execution of the order dated February 14, 2007, was competent and was correctly made to the Company Law Board at New Delhi. Now as already noted earlier, by its order dated February 14, 2007, the Company Law Board held that the first respondent was on the basis of a valid holding of 43.38 per cent, of share capital entitled to at least two directors out of a total of five on the board and who ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 26. The Supreme Court held in Gojer Bros. P. Ltd. v. Ratan Lal Singh [1974] 2 SCC 453, that (page 458) : "The juristic justification of the doctrine of merger may be sought in the principle that there cannot be, at one and the same time, more than one operative order governing the same subject-matter". The Supreme Court held that the judgment of an inferior court, if it is subject to an examination by a superior court, ceases to have existence in the eye of law and is treated to have been superseded by the judgment of the superior court. In paragraphs 17 and 19 of the judgment, the Supreme Court laid down the principle in the following terms (page 460) : "An application of this very principle yields the result that if the court of appeal confirms, varies or reverses the decree of the lower court, the decree of the appellate court is the only decree that can be amended ( Brij Narain v. Tejbal Bikram [1910] 37 IA 70 ; ILR 32 All 295) ; or that the limitation for executing a decree runs from the date of the decree capable of execution and that is the decree of the appellate court which supersedes that of the court of first instance ( Saiyid Jowad Hussain v. Gendan Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firming the order put in issue before it. Clearly under section 10F the High Court in an appeal is vested statutorily with the jurisdiction to affirm, modify, vary or reverse a judgment of the Company Law Board. The doctrine of merger applies as a consequence. Upon the order of this court dated May 4, 2007, the order of the Company Law Board merged with the final direction that was issued by this court. There was in that situation no basis whatsoever for the first respondent to file an application for the enforcement ostensibly of the directions contained in the order of the Company Law Board dated February 14, 2007. 29. The Company Law Board by its order impugned in these proceedings has declined to injunct the holding of the extraordinary general meeting but has nonetheless proceeded to issue a direction that the resolutions that may be passed at the meeting shall not be enforced pending the disposal of the suit and the arbitral proceedings. In the view which has already been taken by this court, the order passed by the Company Law Board was wholly without jurisdiction and would have to be quashed and set aside on that ground alone. But, in order to render a complete determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be to obstruct the effective exercise of rights by a shareholder of the company from seeking recourse to his remedy of convening an extraordinary general meeting and for seeking enforcement of the resolutions that may be passed at such a meeting. In Life Insurance Corporation of India v. Escorts Ltd. [1986] 59 Comp Cas 548; [1986] 1 SCC 264, the Supreme Court affirmed the right of every shareholder to convene a meeting including a meeting for the removal of a director. The right of a shareholder to convene and hold such a meeting cannot be questioned. Judicial intervention in such matters particularly by a Bench which had no jurisdiction to entertain the proceedings justifiably gives rise to a feeling of grave disquiet. This court must with a measure of restraint observe that the provisions of the regulations ought to have been observed by the Member of the Company Law Board. Unfortunately they were not. 31. In the circumstances, the appeal would have to be allowed and is accordingly allowed. The order passed by the Company Law Board on August 7, 2009, is set aside. In the circumstances, Application No. 389 of 2009 shall stand dismissed. 32. The application for stay i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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