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TMI Blog2016 (8) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... t granted. 2. In order to appreciate the controversy, we may refer to the facts in a nutshell. 3. As per the appellant, on 29-01-2015, share purchase agreement under the Memorandum of Understanding was entered into between the appellant and the respondents No. 2 and 3 for purchase of 2,25,000 shares, on 29-01-2015. As per the appellant, total consideration was Rs. 67,50,000/-, out of which Rs. 47,50,000/- was paid by cash and the balance of Rs. 20,00,000/- was to be paid through post dated cheques dated 25-03-2015, for which receipts are issued by respondents No. 2 and 3. As per the appellant, the application was made to the respondent No. 1 - Company for transfer of the aforesaid shares in favour of the appellant. 4. The Respondent-Company called for additional details. In the meantime, the appellant came to know that a suit has been filed on 17.04.2015 before the City Civil Court, Bengaluru in O.S. No. 25382/2015 by one Mr. Abhay Govind Chebbi, claiming himself to be a Director of the first Respondent/Company with certain other persons claiming rights over the first Respondent/Company. The appellant also came to know that there was interim injunction granted in the above filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the said documents and after the genuineness of such document is determined, the appellant may further approach this Court for pursuing the matter for transfer of the shares purchased by the appellant and C.A. No. 1/2015 was disposed of but the main Company Petition was kept pending for enabling the appellant to approach before the Board. It is under these circumstances, the present appeal before this Court. 7. It appears that pending the present Company Appeal, two IAs, I.A. No. 2/2016 has been preferred by Smt. Shaila Chebbi, Smt. Mala Madikeri, Sri. Abhay Govind Chebbi, Sri. Prakash Siddappa and Sri. Sudhir Angur for being impleaded as party-respondents by contending that they are the persons in whose favour, prior to the subject transfer, the shares were already transferred in their favour and they would be effected by any order passed, which may be passed in the present proceedings and it is contended that in any case they would be effected if any order is passed for transferring of shares or otherwise in favour of the appellant. 8. I.A. No. 3/2016 has also been filed by M/s. Alliance University for being impleaded as party-respondent contending inter alia that though p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iversity from the level of Vice Chancellor till the lowest level would not in any manner be adversely affected by the inter se dispute either between the appellant and respondent Nos. 2 and 3, and even if the dispute exists between respondent Nos. 2 and 3 and the applicant of I.A. No. 2/2016. It has been further stated that the inter se dispute between respondent Nos. 2 and 3 and applicant of I.A. No. 2/2016, civil suit being O.S. No. 2911/2016 has been filed in the Court of City Civil and Sessions Judge, Bengaluru, and the ad-interim injunction has been granted which is yet to be finalized by the civil Court. It has been further stated that there are also other civil suits filed and pending in the City Civil Court, Bengaluru. 5. Taking into consideration the aforesaid aspects, in order the ensure that the functioning of the University and more particularly, the education of the students and the staff may not suffer, appropriate care needs to be taken even while considering the matter for interim order. At the same time, liberty should also be reserved to the parties in the civil suits in O.S. No. 2911/2016 and others to pursue their rights if any, in the said proceedings, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants of I.A. No. 2/2016, the rights and contentions of the parties shall remain open in those respective proceedings. Let the matter be listed for final disposal at the admission stage on 22.06.2016. 10. It has been reported that thereafter the amount of Rs. 47,50,000/- has been deposited with this Court and the condition has been complied with. 11. The learned counsel for the appellant contended that the CLB by passing the impugned order has abdicated from its duty in two fold manner; one is that when the petition was made before CLB under Section 58 read with Section 59 of the Companies Act, 2013 (hereinafter referred to as the Act of 2013), it has power to decide the principal question of transfer of the shares in their favour and while deciding the said question, all incidental aspects including as to whether the signatures are genuine or not or whether there was any valid transfer in favour of the appellant or not, etc., were required to be examined. But in the impugned order, after the finding is recorded by the CLB that the petition is maintainable, it has relegated the appellant to the Civil Court that too by giving directions to the Civil Court as if the Board is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that taking into consideration the aforesaid statutory provision, giving express power as per Section 50(2) of the University Act to continue as Chairperson of the sponsoring body as the first Chancellor and further entitled to hold the office for life, no prohibitory order may be passed even if this Court is inclined to intervene in the dispute inter se in capacity as the shareholder and transfer of such shares between the appellant and Respondent Nos. 2 and 3. 13. Whereas, Mr. K.G. Raghavan, learned Senior Counsel appearing for Respondent No. 3 while supporting the order passed by CLB contended that when this Court has to exercise the appellate power against the order passed by CLB under Section 10F of the Act of 1956, the judicial scrutiny could be limited to the extent that whether the discretion has been perversely exercised by CLB or not. In his submission, taking into consideration that a police complaint was filed and the investigation is made by the police and the charge-sheet is filed wherein it has come on record through the opinion of handwriting expert that the signatures were forged and the documents were fabricated, and under these circumstances, the CLB h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed of, such an approach on the part of the CLB cannot be said to be unreasonable or perverse exercise of the discretion, which may call for interference by this Court. He also submitted that the scope and ambit of power of this Court under Section 10F of the Act of 1956 is limited to substantial questions of law. After considering the facts and circumstances, the discretion has been exercised by the CLB, hence it cannot be said that any substantial question of law would arise for consideration, as be canvassed on behalf of the appellants. He therefore prayed that this Court may dismiss the appeal. 14. Learned counsel appearing for the applicants who are desirous to be impleaded as parties in the present appeal made two fold submissions; one is that they have preferred application before CLB to be impleaded as parties so far as the applicants in I.A. No. 2/2016 are concerned but up-till now, CLB has not passed any order permitting them to be impleaded as parties. In his submission, up-till now, CLB has also not passed any order, which can be said to be adverse to them. But since the appeal was preferred against the order of CLB and this Court in exercise of the appellate power ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the company, it shall within a period of thirty days from the date on which the instrument 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 transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. (2) Without prejudice to sub-section (1), the securities or other interest of any member in a public company shall be freely transferable: Provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract. (3) The transferee may appeal to the Tribunal against the refusal within a period of thirty days from the date of receipt of the notice or in case no notice has been sent by the company, within a period of sixty days 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 public company without sufficient cause refuses to register the transfer of securities within a period of thirty days from the date on which the instrument of transfer or the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson acquiring such securities shall be entitled to voting rights unless the voting rights have been suspended by an order of the Tribunal. (4) Where the transfer of securities is in contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992(15 of 1992) or this Act or any other law for the time being in force, the Tribunal may, on an application made by the depository, company, depository participant, the holder of the securities or the Securities and Exchange Board, direct any company or a depository to set right the contravention and rectify its register or records concerned. (5) If any default is made in complying with the order of the Tribunal under this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees, or with both." 17. The aforesaid provisions of Section 58 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, the company, it shall, within two months from the date on which the instrument 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 2[Tribunal] 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 regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writing and shall be accompanied by such fee as may be prescribed. (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 [Tribunal] 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 [Tribunal] 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 [five hundred rupees] for every day during which the default continues. (13) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (14) are not required to be considered in the present proceedings and hence, we find that the discussion in this regard may not be required in the present order. 20. On conjoint reading of Section 58 of 2013 Act with Section 111 of the Act of 1956, it appears that sub-section (7) of Section 111, which was earlier in the statute book by express provision for deciding the question relating to any person for title is not found on the statute book in Section 58 of the Act of 2013. Two views are possible, one, if considered on the basis of applying the principle of conscious omission on the part of the Parliament, one may say that the power to decide the question relating to the title is not provided or rather expressly omitted as were available to the Tribunal/CLB under the Act of 1956 by virtue of Section 111(7). The another view is that in the interpretary process, Court may read such power with the Tribunal/CLB under Section 58. It is by now well settled as to the principles of interpretation of statute that the Court may read any incidental power in aid of the main power. But such aid of incidental power should not fall in the arena of substantive power of any Forum and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her words, such contract of security should be enforceable in law, then only, such securities are to be treated as freely transferable. Had the Parliament intended to leave the power upon the Tribunal/CLB to examine the contracts in law, the proviso ought not to have inserted. The mechanism for transfer of the shares for securities as provided under Section 58 is principally the same, may be the private company or the public limited company but the important aspect is that power as were available to the Tribunal under sub-section (7) of Section 111 as per 1956 Act are not available to the Tribunal/CLB under Section 58 of the Act of 2013. Hence, it is not possible for us to accept the contention of the learned counsel for the appellant that sub-section (7) of Section 111 in the interpretative process should not be given any meaning or should not be given any weightage while addressing the jurisdiction or the scope of jurisdiction of the Tribunal/CLB. 25. In the decision of the Apex Court in the case of Tirupathi Balaji Developers (P.) Ltd. and others, v. State of Bihar and others reported at 2004 (5) SCC 1, the matter was pertaining to the appellate and ancillary power of the Const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the decision of Apex Court in case of Union of India and another v. Paras Laminates (P.) Ltd., reported at 1990 (4) SCC 453, the Apex Court held that the implied ground of impugned incidental and ancillary powers are very much by express grant and therefore, it can be said that such powers are incidental and ancillary to make the ground effective but as observed by us hereinabove, such incidental and ancillary powers cannot be stretched to confer the jurisdiction for examination of title it can be said as a substantive power required to be conferred by the express provision of the statute. 31. Under these circumstances, we find that as per Section 58 of the Act 2013, if the question arises for the title of the person in whose favour the shares are to be transferred, adjudication power may not be available to the Tribunal/CLB to exercise power under Section 58 of the Act, 2013. 32. We may now further examine as to whether the discretion has been perversely exercised by the CLB in the impugned order for relegating the appellant to the competent Civil Court or not. Before we address ourselves on the said aspects, we may add that the principal power under Section 58 with the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t between the parties namely, the transferor and the transferee possibly it might stand on different footing and different consideration. But in a case where apart from the denial by contending that the documents were forged, the additional situation that a criminal complaint is filed which has been investigated by the Police and the during the course of the investigation as per the handwriting expert's opinion, the signatures are not found to be genuine and consequently the documents are found as forged and charge sheet is filed, would stand on the peculiar facts and circumstances leading the CLB not to order directly transfer of the shares in favour of the appellant. 36. In our considered view, if in a criminal proceedings, the Police has investigated and charge sheet is filed on the premise that the documents were forged, then, the exercise of the discretion by the CLB for relegating the appellant to approach before the Civil Court for proving genuineness of the documents could not be said as perverse or erroneous on the face of it or which shocks the conscious of the Court. It is hardly required to be stated that if there are two possible views, it cannot be said to be a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After the genuineness of the document is so proved and the appropriate declaration is made by the Civil Court, unless otherwise prohibited by any competent forum known to law, CLB will have power to direct the Company to transfer the share in favour of the appellant but until such declaration is granted by the Civil Court, CLB may not be in a position to issue direction to the Company to transfer the share for the simple reason that unless the documents are found to be genuine including the signature thereof, the question of effecting transfer of shares or issuance of directions for transfer of shares may not arise. Under these circumstances, we do not find that CLB has committed any error in exercise of discretion in relegating the appellant to approach before the Civil Court for getting appropriate declaration about the genuineness of the documents for transfer of the shares in their favour. 39. In the decision of the Apex Court in case of CCI Chambers Cooperative House Society Ltd. v. Develpoment Credit Bank Ltd., reported at 2003 (7) SCC 233, it was observed that if the Consumer Commission after considering the pleadings of both the sides forms an opinion as to the nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding of CLB in the main company petition No. 10/15 that the petition is maintainable, has made a limited challenge to the discretion exercised by the CLB to relegate the appellant to approach before the Civil Court. 43. In the decision of the Apex Court in case of Y. Sleebachen and others v. State of Tamil Nadu through superintending engineering water resources organization/public works department and another reported in 2015 (5) SCC 747, it was found that the recital in the Judgment cannot be a ground to challenge but as observed by us hereinabove, when not a single statement is made for deprivation of the opportunity to the appellant for hearing of main Company Petition by CLB, we do not find that the said decision would be of any help to the appellant. 44. Under these circumstances, we find that not only the contention raised by the learned counsel for the appellant is without there being any factual foundation but the same is not genuine because if the appellant consciously did not make any submission in the main company petition when main company petition as well as company application were heard simultaneously, no complaint can be made at the later stage that there is bre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the appropriate adjudication should be made before Civil Court. As such, until the party approaches before the Civil Court, appropriate interim order could have been considered by CLB but, in our view, when no motion was made before CLB, all such aspects shall be a mere academic exercise but, suffice it to observe that as and when such contingency arises in law, the parties may move before CLB or may be before Civil Court as the case may be and at that stage, rights and contentions of both the sides would remain open. 48. In the decision of the Apex Court in case of V.S. Krishnan and others v. Westfort Hi-tech Hospital Ltd. and others reported at 2008 (3) SCC 363, the Apex Court expressed for the scope and ambit of the appellate power of this Court under Section 10F of the Act but in our view, even if it is considered for the sake of examination that, the appeal is maintainable then also, even on merits, we do not find that the decision of CLB is against any law or is based on any irrelevant material or omission to consider the relevant material. The said decision would be of no help to the learned counsel for the appellant. In view of the aforesaid observation and dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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