9911796707
TMI Blog2022 (12) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a nominee Director on the Board of said company. TCL was declared as a sick company and consequently, proceedings were pending before the Board for Industrial and Financial Reconstruction (hereinafter referred to as 'BIFR'). The plaintiff companies applied for impleadment as a party to such proceedings to which the Respondent No.1 and 2 through TCL opposed but the BIFR allowed the impleadment application. This order allowing impleadment was challenged by TCL before the Appellate Authority for Industrial and Financial Reconstruction, Delhi (hereinafter referred to as 'AAIFR') which was dismissed and a further appeal to the Delhi High Court in W.P. (C) No. 11327/2015 was also dismissed by the Division Bench of this Court. 3. During the pendency of the proceedings before BIFR, the plaintiff companies entered into a Memorandum of Understanding (hereinafter referred to as 'MoU') dated 25th January 2011 with Respondent No.3 to transfer the said 50.21% of the issued share capital of TCL to the Respondent No.3, and the Respondent No.3 in return agreed to deposit Rs. 60 lakhs with the plaintiff companies as security for the performance of the said MoU. In furtherance of the MoU, the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as entered into a transaction with them as the plaintiff companies had already entered into a MoU with the Respondent No.3 in respect of the 50.21% shareholding in TCL and that, the plaintiff companies are ready to refund the entire sum of Rs.90.00.000/- (ninety lakhs rupees) to the Respondent No.2 along with interest. In response to this email, the Respondent No.2 addressed an email to Mr. Dhoot that the transaction between the plaintiff companies and Respondent No.2 hold good and the referred transaction between the plaintiff companies and Respondent No.3 is void. 7. Subsequent to this correspondence, the Respondent No.1 called for a meeting of the Board of Directors of TCL on 27th August 2013, at which meeting resolutions were passed to the effect that the duplicate share certificates be issued in respect of shareholding of the plaintiff companies and the said shares be transferred in favour of the Respondent No.1 and 2 jointly. 8. On 3rd September 2013, TCL wrote another email to the plaintiff companies thereby, demanding the original share certificates of the said 30 lakhs shares with a condition that, in case the original share certificates were not handed over or if the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ISSIONS On behalf of the Appellants: 12. Mr. Jayant Mehta, learned senior counsel in support of the averments made in the instant appeal has submitted that in the peculiar facts and circumstances of the instant case, the bar under Section 430 of the Act, 2013 is not attracted. He has submitted that Section 430 is pregnant with the phrase 'in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine' and in the present case, the NCLT is not empowered to adjudicate upon the issue of disputed title of share in addition to the relief of permanent mandatory injunction and prohibitory injunction, so by no stretch interpretation such powers can be read into the powers and functions of the NCLT to attract the bar envisaged under Section 430 of the Act, 2013. 13. Mr. Mehta has also submitted that the proceedings before the NCLT are only summary in nature and hence, the NCLT is not empowered to adjudicate upon the prayers sought in the instant case as it requires leading of evidence at length. It is submitted that on a bare perusal of Section 58 of the Act, 2013 it can be deciphered that NCLT has no power to decide the issues of title and it can only dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no bar to adjudication for purposes of transfer of shares unless the court finds otherwise. The stay order obtained by GD herself could not debar her from making a statement to settle the matter. The judgments relied upon by the appellants have no application to such a fact situation. 16. In Ammonia [(1998) 7 SCC 105], the scope of jurisdiction of the Company Court to deal with an issue of rectification in the Register of Members maintained by the Company was considered. Following Public Passenger Service Ltd. v. M.A. Khadar [AIR 1966 SC 489], it was held that jurisdiction under Section 155 was summary in nature. If for reasons of complexity or otherwise, the matter could be more conveniently decided in a suit, the Court may relegate the parties to such remedy. Subject to the said limitation, jurisdiction to deal with such matter is exclusively with the Company Court. It was observed: (Ammonia case [(1998) 7 SCC 105] , SCC p. 122, para 31) "31. ... It cannot be doubted that in spite of exclusiveness to decide all matters pertaining to the rectification it has to act within the said four corners and adjudication of such matters cannot be doubted to be summary in nature. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such seriously disputed question of title." (iii) N. Ramaji Vs. Ashwath Narayan Ramji & Anr. (2017) SCC Online Mad 37591; "30. The learned Senior Counsel for the petitioner contended that the judgment rendered by the Division Bench of Karnataka High Court in (2016) 198 CompCas 481 (Kar) in (K. Ravinder Reddy v. Alliance Business School), was challenged in the Apex Court and by order dated 10.03.2017, it was held that the question of law with regard to Section 58 of the Companies Act is kept open. The learned Senior Counsel for the first respondent in reply submitted that the Hon'ble Apex Court has held in the said judgment that there is no reason to interfere with the impugned order passed by the High Court of Karnataka and further submitted that the said judgment of Hon'ble Apex Court support the case of the first respondent as the judgment of the Karnataka High Court has been confirmed by the Hon'ble Apex Court. 31. The contention of the learned counsel for the petitioner is that as per Section 10GB of the Companies Act, 1956, which was inserted by the Companies (Second Amendment) Act, 2002, the suit is barred by the provisions of the Companies Act, is devoid of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil,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." (v) Jai Kumar Arya vs Chhaya Devi, (2017) SCC Online Del 11436. "118. We are constrained, therefore, to observe that it is not possible to accept Mr. Chandhiok's submission that the reliefs claimed by the plaintiffs in CS (OS) 285/2017 fall, statutorily, within the purview of jurisdiction of the NCLT. 119. There is, in fact, no provision, in the Act, whereunder the claim contained in CS (OS) 285/2017, as made by the plaintiffs - irrespective of the merit or demerit thereof - could have been preferred before the NCLT. No case of exclusion of the jurisdiction of the Civil Court, under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We are conscious of the fact that in the present case, the cause of action has arisen at a stage prior to this enactment. However, we are of the view that 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. (ii) SAS Hospital Pvt. Ltd. & Anr. vs Surya Construction Pvt. Ltd. & Ors., CS (Comm) No. 1496/2016 decided on 6th October 2018 (Del HC). "28. If these two tests are applied i.e., as to whether the Tribunal's order is attributed finality and as to whether the Tribunal would be able to do what a Civil Court could do, it is clear that an order under Section 59 of the 2013 Act has specific consequences for non-compliance. The order is appealable to the appellate tribunal. The Tribunal has to apply the principles of natural justice. Under Section 242(2)(d) of the 2013 Act, the Tribunal can impose restrictions on the transfer or allotment of the shares of the company. It can also pass an interim order under Section 242(4) of the 2013 Act. Consequences for non-compliance have also been provided under Section 242(4) of the 2013 Act. The Plaintiffs have a right to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts grievance is regarding making entry in the Register of Members showing another 906599 equity shares treating the same as having been converted from CCDs. As per Section 59, the only question relevant is whether the name of Appellant has been entered regarding shares said to have been issued against CCDs to be "without sufficient cause". In this matter although there is Investment Agreement, we will not dwell much on the Agreement as admittedly, the protection sought by the Appellant and Respondent No.13 while entering into the Investment Agreement was translated into amendment of the Articles of Association which clearly has a higher binding nature and protection as the Company as well as all the shareholders including Directors become bound by the same. 31. The contesting Respondents have relied on Judgement in the matter of "Ammonia Supplies Corporation (P) Ltd. Versus Modern Plastic Containers Pvt. Ltd. and others" reported in 1998 7 SCC 105 and the learned NCLT has also referred to this Judgement of the Hon'ble Supreme Court so as to state that there are contentious issues and they cannot be looked into under Section 59 Petition of the Act. This Tribunal had the occasion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act, 2013 has been amended which provides for the power of rectification of the Register under Section 59 of the said Act. Learned counsel has also drawn our attention to Section 430 of the Act, which reads as under:- "430. Civil court not to have jurisdiction.- No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate." The effect of the aforesaid provision 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have purposely used the word "prima facie" in the above paragraph analysing the mattar on tlie basis of law as it stood before coming into force of New Act. 21. In para - 31 of the Judgement in the matter of "Ammonia Supplies" portions of which we have reproduced above, the Hon'ble Supreme Court had observed that there was nothing under the Companies Act expressly barring the jurisdiction of the Civil Court and thus mandated that the "Court" should examine whether prima facie what is said is a complicated question or not. The earlier Section 10 GB of the companies Act, 1956 relating to Civil Court not to have jurisdiction, does not appear to have been enforced but the position has now changed with coming into force of Company Appeal (AT) N0.222 of 2018 Companies Act, 2013 and Section 430 of the Act providing that Civil Court would not have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act. Under the new Companies Act - Section 59, it is for the NCLT to consider if the name of any person is "without sufficient cause" entered or omitted from the register of member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate that the provisions of the Companies Act, 2013 are not applicable in the facts and circumstances of the case. It is submitted that the facts of the suit CS No. 5700/2016 relate to the period when even the Companies Act, 2013 was not notified. It is submitted that the relevant provisions of Companies Act, 2013 pertaining to issue of duplicate share certificate were not even notified at the time of date of filing of suit CS No. 5700/2016. 25. The learned trial Court while adjudicating the instant plea of the plaintiff companies, held as follows: "Insofar as the third objection qua non applicability of provisions of the Companies Act, 2013 is concerned, same is meritless because the said Act came into force in the August, 2013 and present suit had been filed in the year 2015. Further, the nominee director Yatinder Vir Singh wrote to defendant No. 1 and informed to Y. N. Dhoot on 05.09.2013. The alleged meeting of Board of Directors of the defendant No. 1 was purportedly held on 27.08.2013. The previous Act (The Companies Act, 1956) was repealed by Section 465 of the Companies Act, 2013. The Company Law Board constituted under the Companies Act, 1956 was to be dissolved on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Courts as it envisages not only the inherent powers of the Civil Courts to entertain any suit of a civil nature, but also the inherent rights of the disgruntled yet hopeful litigants to approach the civil Courts with a huge expectation that they will get justice from this forum, which would adjudicate upon their infracted legal rights and will invoke the legal machinery to protect and vindicate such rights. It is a settled proposition of law that the exclusion of the jurisdiction of a civil Court is not to be readily inferred. But law cannot be unreasonable, as the law prevailing in a region cannot divorce from the societal requirements. In other words, law and societal advancements go hand in hand and the law has to be modified/adjusted in a way so as to always cater to the ever dynamic needs of the society. In this background, though in a different context, it is apposite to refer to the following lines written by Joseph P. Bradley, former Associate Justice of the Supreme Court of United States of America. "Society cannot exist without law. Law is the bond of society: that which makes it, that which preserves it and keeps it together. It is, in fact, the essence of civil societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: (i) whether the legislative intent to exclude arises explicitly or by necessary implication, and; (ii) whether the statute in question provides for adequate and satisfactory alternative remedy to a party aggrieved by an order made under it." 33. The Hon'ble Supreme Court in a classic decision in the case of Ganga Bai vs. Vijay Kumar, AIR 1974 SC 1126, held that: "15. There is an inherent right in every person to bring suit of a civil nature and unless the suit is barred by statute one may, at one's peril, bring a suit of one's choice. It is no answer to a suit howsoever frivolous the claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit. But the position in regard to appeals is quite the opposite." 34. It is apposite to refer to the milestone decision of a Constitution Bench of the Hon'ble Supreme Court in Dhulabhai vs. State of Madhya Pradesh, AIR 1969 SC 78, wherein the apex court laid down the following principles relating to the exclusion of jurisdiction of civil courts: "(1) Where the statute gives a finality to the orders of the special tribunals the Civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not readily to be inferred unless the conditions above set down apply." 35. A suit is said to be expressly barred when it is barred by any enactment for the time being in force. Indisputably, it is open for a competent legislature to bar the jurisdiction of civil Courts in respect of a particular class of suits of a civil nature, provided that in doing so it acts within the four corners of the legislative powers conferred upon it and does not violate the letter and spirit of the Constitutional provisions. It is a settled proposition that every presumption should be made in favour of the jurisdiction of a civil Court and the provisions of exclusion of jurisdiction of a Court must be strictly construed. If there ever arises any suspicion about the ousting of the jurisdiction of a civil Court, then the Courts are duty bound to lean towards an interpretation which would uphold the jurisdiction of a civil Court. And, if the remedy provided by a statute is not adequate and all questions cannot be decided by a special tribunal, the jurisdiction of a civil court is not barred. 36. At this stage, before deciding as to whether the civil court's jurisdiction is barred or not, it is pertine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board by making regulations in this behalf. (3) If the stated minimum amount has not been subscribed and the sum payable on application is not received within a period of thirty days from the date of issue of the prospectus, or such other period as may be specified by the Securities and Exchange Board, the amount received under sub-section (1) shall be returned within such time and manner as may be prescribed. (4) Whenever a company having a share capital makes any allotment of securities, it shall file with the Registrar a return of allotment in such manner as may be prescribed. (5) In case of any default under sub-section (3) or sub-section (4), the company and its officer who is in default shall be liable to a penalty, for each default, of one thousand rupees for each day during which such default continues or one lakh rupees, whichever is less." "46. Certificate of shares.-(1) A certificate, 79[issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary], specifying the shares held by any person, shall be prima facie evidence of the title of the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." "179. Powers of Board.-(1) The Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do: Provided that in exercising such power or doing such act or thing, the Board shall be subject to the provisions contained in that behalf in this Act, or in the memorandum or articles, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of dealings between a company and its bankers, the exercise by the company of the power specified in clause (d) shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day-to-day operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of. (4) Nothing in this section shall be deemed to affect the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified in this section." "241. Application to Tribunal for relief in cases of oppression, etc.- (1) Any member of a company who complains that- (a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or (b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture-holders or any class of shareholders of the company, has taken place in the management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; (f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e): Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned; (g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (h) removal of the managing director, manager or any of the directors of the company; (i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims; (j) the manner in which the managing director or manager of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable 345[* * *] with fine which shall not be less than twenty-five thousand rupees but which may extend to 346[one lakh rupees]." "243. Consequence of termination or modification of certain agreements.-(1) Where an order made under Section 242 terminates, sets aside or modifies an agreement such as is referred to in sub-section (2) of that section,- (a) such order shall not give rise to any claims whatever against the company by any person for damages or for compensation for loss of office or in any other respect either in pursuance of the agreement or otherwise; (b) no managing director or other director or manager whose agreement is so terminated or set aside shall, for a period of five years from the date of the order terminating or setting aside the agreement, without the leave of the Tribunal, be appointed, or act, as the managing director or other director or manager of the company: Provided that the Tribunal shall not grant leave under this clause unless notice of the intention to apply for leave has been served on the Central Government and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company are entitled to make an application under sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them." 37. In Shashi Prakash Khemkha (D) Through LRs vs. NEPC Micon (supra), the Hon'ble Supreme Court while interpreting Section 430 of the Act, 2013, made the following pertinent observations: "Learned counsel for the appellants says that the issue raised by the appellants qua the transfer of shares, whether done 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. Learned counsel for the appellants has drawn our attention to the view expressed in Ammonia Supplies Corporation (P) Ltd. vs. Modern Plastic Containers Pvt. Ltd. and Others (1998) 7 SCC 105, to canvass the proposition that while examining the scope of Section 155 (the predecessor to Section 111), a view was taken that the power was fairly wide, but in case of a serious dispute as to title, the matter could be relegated to a civil suit. The submission of the learned counsel is that the subsequent legal developments t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d will no way affect the validity of the law creating the Tribunal." 40. In Madras Bar Association vs. Union of India, (2015) 8 SCC 583, the Hon'ble Supreme Court is held as under: "11. First of all, the creation of Constitution of NCLAT has been specifically upheld in 2010 judgment. It cannot be denied that this very Petitioner had specifically questioned the Constitutional validity of NCLAT in the earlier writ petition and even advanced the arguments on this very issue. This fact is specifically noted in the said judgment. The provision pertaining to the constitution of the Appellate Tribunal i.e., Section 10FR of the Companies Act, 1956 was duly taken note of. Challenge was laid to the establishments of NCLT as well as NCLAT on the ground that the Parliament had resorted to tribunalisation by taking away the powers from the normal courts which was essentially a judicial function and this move of the Legislature impinged upon the impartiality, fairness and reasonableness of the decision making which was the hallmark of judiciary and essentially a judicial function. Argument went to the extent that it amounted to negating the Rule of Law and trampling of the Doctrine of Separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als, the Legislature can prescribe the qualifications/eligibility criteria. The same is however subject to Judicial Review. If the court in exercise of judicial review is of the view that such tribunalisation would adversely affect the independence of judiciary or the standards of judiciary, the court may interfere to preserve the independence and standards of judiciary. Such an exercise will be part of the checks and balances measures to maintain the separation of powers and to prevent any encroachment, intentional or unintentional, by either the legislature or by the executive." 41. By way of Section 430 of the Act, 2013, a company has an existing remedy to approach the NCLT in terms of Section 241 read with Section 244 of the Act, 2013 and consequently, the Tribunal has been given wide powers to pass such orders as it may think fit in terms of Section 242 of the Act, 2013. Chapter XXVII deals with the constitution of the Tribunals. Powers have been given to the Tribunal to 'pass such orders thereon as it thinks fit' in terms of Section 420 of the Act, 2013. Moreover, under Section 424 of the Act, 2013 the Tribunal also has the same powers and functions as are vested wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members of such a company. Therefore, such provisions cannot be said to be applicable to the disputed governing TCL. It is pertinent to refer to Section 250 of the Act, 2013 which deals with the effect of company being notified as dissolved. "250. Effect of company notified as dissolved.- Where a company stands dissolved under section 248, it shall on and from the date mentioned in the notice under sub-section (5) of that section cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company." 44. It is also important to refer to the relevant portion of the order dated 24th November 2020 passed by the NCLT, Chandigarh bench by way of which TCL was dissolved: "23. In the result, by exercising powers conferred on the Adjudicating Authority, under Section 54 of the Code, the Interim Application bearing CA No.584/2019 in CP (18) No.SO/Chd/Hry/2017 is disposed of with the following directions: (i) M/s. Tirupati Ceramics Limited, the Corporate Debtor, is hereby d ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
