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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 ..... nreasonable or perverse or by committing ex facie error on the face of the record, no useful purpose would be served in entertaining the complaint for breach of principles of natural justice though otherwise such a complaint is not genuine and not supported by any statement of fact in the memorandum of appeal nor any ground raised for such purpose save and except the oral submissions made by the learned counsel for the appellant during the course of hearing. Hence, we find that contention raised by the learned counsel for the appellant cannot be accepted. There is considerable force in the contention raised by the learned counsel for the appellant that respondent no. 2 by virtue of Section 15(2) of the University Act, is entitled to the office as Chancellor for his lifetime but, even by interim order dated 26.4.2016, this Court has not prohibited him from functioning as the Chancellor but what has been directed was that, any hindrance or interference in the administration of the University should not be created. Therefore, lawful exercise of the power as per the University Act by the Chancellor was not prohibited but, any hindrance or interference in the administration of the Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... papers to the forensic expert and other relief are not 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 ₹ 67,50,000/-, out of which ₹ 47,50,000/- was paid by cash and the balance of ₹ 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant to approach before the Civil Court for establishing the genuineness 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 Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lowest employee, they are employees of the University. It has been stated that the functioning of the University 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings in O.S. No. 2911/2016 or any other civil suits. 11. It is made clear that in all aforesaid civil suit/s between respondent Nos. 2 and 3 or the 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 ₹ 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e University as per the Alliance University Act, 2010 (hereinafter referred to as the 'University Act') and further he is a lifetime Chancellor of the University. He 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 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for which the Civil Court was appropriate remedy, and if the application for directing the production of documents and directing the reference to the forensic expert, if disposed 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 al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the latter case, direct the company to pay damages, if any, sustained by the party aggrieved. (3) The provisions of this section shall not restrict the right of a holder of securities, to transfer such securities and any person 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... REFUSAL (1) If a company refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in, or debentures of, 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be punishable with fine which may extend to [ten thousand rupees], and with a further fine which may extend to [one thousand rupees] for every day after the first day after which the default continues. (10) Every appeal or application to the [Tribunal] under sub-section (2) or sub-section (4) shall be made by a petition in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal may decide any question relating to the title of any person who is a party to the application made by him for his name entered or omitted from the register and it further provides that the Tribunal may decide any questions, which it is necessary or expedient to decide in connection with the application for rectification. Sub-section (8) to sub-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curity is transferred. Further, sub-section (2) of Section 58 shows additional intention on the part of the Parliament though is relatable to a public Company. The proviso to Section 58(2) puts the condition that the securities are freely transferable but on the condition that the contract for transfer of the security is enforceable as the contract. To put in other 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of A.V. D'Costa, Divisional Engineer G I P Railway v. B.C. Patel and another reported at AIR 1955 SC 412, the Apex Court found that even if the authority under the Payment of Wages Act has power to determine actual wages as per the contract, it has no jurisdiction to determine the question of potential wages for which separate remedy is to be resorted to. 30. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the CLB was confronted with the situation that as per the appellant, the documents for transfer of the shares were genuine and therefore the company ought to have transferred the shares of respondent nos. 2 and 3 in favour of the appellant. Whereas, as per the respondent nos. 2 and 3, documents were not genuine but, the forged. Had it been a case of mere averment and denial of fact 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation, it is found that the documents are forged and not genuine, it would be more appropriate to relegate the party to the Civil Court for proving the genuineness of the document including by proving the signature because the Civil Court will have the competence to make appropriate declaration in this regard irrespective of the investigation made by the Police or the Criminal case. 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 appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order dated 09.03.2016 in CA 1/15 in CP 10/2015 passed by Company Law Board, Chennai as found at Annexure-A. 42. Further, no ground is brought to our notice on the basis of which it can be said that any complaint is made for non-observance of Principles of Natural Justice. On the contrary, the tenor of the appeal and the questions raised go to show that the appellant, after accepting the finding 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 circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Civil Court. We would have addressed such question but it appears to us that since no motion was made in the proceedings in the Company Petition before the CLB, we need not express any view. In any case, proceedings of main Company Petition are still pending before CLB, if any contingency arises in law, CLB is not precluded from passing the interim order save and except on the point for which it has 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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