TMI Blog1977 (5) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners in this petition also seek a relief by way of rectification of register, their membership being in dispute, such a composite petition cannot be entertained by the court. The contention was overruled as per decision dated 26th June, 1975 [vide Gulabrai Kali das Naik v. Laxmidas Lallubhai Patel [1977] 47 Comp. Cas. 151 (Guj.)] admitting the petition for relief under section 155 and keeping the prayer for relief under sections 397 and 398 in abeyance till relief under section 155 is determined. Directions were given for filing affidavit-in-reply and date was fixed for admission of documents. Thereafter, the court, after taking into consideration rival contentions, framed the issues that arise for determination in the present petition in the presence of the parties. Issues Nos. II and III are as under : "II. Whether a petition is maintainable against the persons who are neither directors nor shareholders, having regard to the provisions of section 155 of the Companies Act ? III. Would the court entertain a petition for relief under section 155 of the Companies Act, if it involves disputed questions of fact ?" These two issues cover the preliminary objection r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ud, undue influence and even conspiracy, fabrication of documents, such as minutes of the meeting of the board of directors, and that investigation would be necessary by way of oral evidence tested by cross-examination. Let there be no doubt in the mind of anyone that after this petition is set down for hearing, whatever Mr. B.R. Shah has stated, presumably in the heat of arguments, that he is willing to proceed on affidavits, it would hardly be satisfactory. In order to reach a just decision, court must permit oral evidence to be led and in that behalf also direction was given that a list of witnesses should be filed. I am told that they have already been filed. Therefore, the question which I must pose to myself is where the arena of dispute involves such disputed questions of fact, which involve allegations and counter-allegations and which requires to be determined so as to find out the title to shares in the presence of persons other than the members of the company, would preclude me from proceeding with the petition within the four corners of section 155 of the Companies Act. That simultaneously raises the more important and incidental question whether the court should forb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses between members or alleged members, or between members or alleged members on the one hand and the company on the other hand; and ( b )generally, may decide any question which it is necessary or expedient to decide in connection with the application for rectification". Sub-section (4) provides for an appeal against any order made by a court on application or on any issue raised therein and tried separately and it also provides a forum for it. A bare persual of section 155 on its own language does not indicate that jurisdiction conferred by the section is one hedged in with a condition that it can only be exercised when relief can be granted in a summary manner. There is nothing in the language of section 155 which excludes decision of questions of title to shares that may arise in an application for rectification of register. On the contrary, the language of sub-section (3) makes it abundantly clear that in such application, court has power to decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register and the court would have further jurisdiction to decide the question of title even whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omit some name, which name has been wrongly placed, not only the Companies Act has conferred right on aggrieved person, to move the court under section 155, but created a forum, namely, the court hearing matters under the Companies Act, and widened the jurisdiction by conferring power on the court not only to decide the question of title, but also to decide all questions which are ancillary and incidental to the main question. Even there, Parliament did not use the well-known expression "questions which are ancillary or incidental to the main question", but used the expression of wider amplitude when it leaves to the court "to decide all and every questions that may arise in such a petition and which the court considers necessary or expedient to decide in connection with application for rectification". When it is said that the court may decide the question ancillary or incidental to the main dispute, while exercising jurisdiction conferred by a special statute, it would always be necessary to decide whether other questions are ancillary or incidental to the main question. You cannot exercise collateral jurisdiction for collateral purpose. But sub-clause ( b ) of sub-section (3) co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducing sub-section (3) in which it is made abundantly clear that a question relating to the title of person claiming share being put in issue can be examined by court and Parliament did not stop at that, but went further and said that not only examine the question of title which the court would have jurisdiction to examine, but the court may also examine all those questions which the court considers necessary and expedient to decide in order to grant or refuse the main relief. If any given respondent were to come and say that the transfer form lodged by the petitioner who claims to be a member is a forged one, such mere assertion itself would be sufficient to throw out the petitioner, because an issue as to forgery would raise intricate or complex questions of civil law and cannot be examined in a petition under section 155. I am afraid, such a jurisdiction of wide amplitude would be rendered fruitless and nugatory, and the purpose behind introducing a section like 155 would stand defeated. It would be a teasing illusion of doubtful legal utility. This becomes crystal clear for it can be said that if the company admits the dispute, why force the petitioner to come to the court. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is a long line of decisions that jurisdiction conferred by section 116 of the U.K. Act is of a summary nature and complicated and complex questions, if they arise in a petition for rectification are not determined in exercise of the summary jurisdiction and parties are relegated to a suit. Undoubtedly, sub-section (3) of section 116 of the U.K. Act is in pari materia with sub-section (3) of section 155 of our Act. It was, therefore, said that the interpretation put on subsection (3) of section 116 of the U.K. Act should more or less guide our approach in the matter. I would bear that in my mind with this reservation that there is material difference in the procedural part ordained by the U.K. law and our law with regard to approaching the court for rectification of register. Let me at the outset notice relevant rules of the Supreme Court (1965 revision) framed under the Companies Act, 1948, and styled as Court Procedure (England). Rule 3 provides that an application under section 116 of the Act for rectification of the register of members of a company may be made by originating summons or originating motion. Rule 4 provides for those applications which ought to be made by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars to identify the cause or causes of action in respect of which the plaintiff claims that relief or remedy. Order XXI, rule 1 of U.K. 1959 Annual Practice, page 681, says that a petition is a cause or matter and, therefore, inspection may be had under rules 15 to 18 of Order XXXI. It further reads to the effect that the petitioner as plaintiff may interrogate. Rule 1 also provides for inspection of documents referred to in the pleadings or affidavits. Rule 19-A provides for supplying of verified copies instead of inspection of original documents. On an application of a party, the court or a judge has power to order discovery of particular document or class of documents. Order IX (U.K.) (1965) sets out general provisions with respect to petitions. Rule 5 may be taken into consideration with advantage because it clearly makes out a distinction between an application and a petition when it provides that no application in any cause or matter may be made by petition. Petition, therefore, stands by itself as special kind of pleading in respect of certain specified matters. Now, below rule 5, there is a note that even in a petition evidence can be given by affidavit. That aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... storical and long connection with Anglo-Saxon jurisprudence by which we are governed for nearly two centuries we also sometimes pay undue and undeserved respect to the form rather than the substance. Consequently, we have, in our Companies (Court) Rules, provision for applications that can be made by petition and those which can be made by judge's summons returnable to the judge in court or in the chambers. In any event, as we have borrowed this distinction, we must stand by. The Supreme Court must not have made any exercise in futility when it said that certain applications enumerated in rule 11 must be made by petition. If the body of our Companies Act provide a mirror reflection of English law and also follow to some extent its pattern and yet the Supreme Court has made a notable departure, such noticeable difference, the court must bear in mind. While in England under the rules herein-above quoted it is made distinctly clear that an application for rectification under section 116 of the U.K. Act can be made by originating summons or originating motion, in India it has to be made by petition. Why did the Supreme Court make this departure ? It must be with some purpose. The Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise provided in the Act itself or by the rules thereunder or by these rules, may be disposed of by a judge in chambers. Rule 729 in Chapter XXXV provides that all petitions shall be presented under the direction of the judge who may be sitting in Chambers for the time being, except in company winding-up business as provided in rule 60. There is a proviso which is not very material. Rule 733 provides for presentation of a petition praying for reduction of capital. There was no specific rule that an application for rectification of register that can be made under section 38 of the Indian Companies Act, 1913, was required to be made by a petition. It can, therefore, be made by way of an application to the judge in chambers. That was the position under the Original Side Rules of the Bombay High Court and that position prevailed till 1st October, 1959. This aspect has to be borne in mind while appreciating the ratio of some of the decisions of the Bombay High Court on which reliance was placed to canvass a proposition that jurisdiction under section 155 is of a summary nature. With this statutory position being kept in the background let me turn to some of the decisions to which my ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t I will refer to one decision of the Supreme Court against the judgment of this High Court wherein the Division Bench of this High Court had heard parole evidence for a good number of days and that aspect was sought to be commented upon in the Supreme Court and the decision of this High Court was affirmed. Therefore, merely because parole evidence may become necessary that itself would not deprive jurisdiction if the court otherwise possess it. But in England where the prescribed procedure required that an application for rectification must be made by an originating summons or motion or by an action commenced by writ, it brought within its wake the limitations imposed upon courts that in such proceedings disputed questions of facts are not investigated and the party is relegated to a suit and the court may decline to make an order on motion. The court would thus decline jurisdiction as the matter was commenced by originating motion. It is not said that such would be the approach of the court in the matter brought before it by way of petition. Therefore, the proposition here-in above quoted cannot be construed to mean that as soon as some complex questions arise even when action is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Steam Tramway Co. v. B.N. Lang [1931] 1 Comp. Cas. 206 (Bom.), the learned judge came to the conclusion that the matter is entirely in the discretion of the court to examine the contention or to direct a party to regular suit. This decision is not an authority for the proposition that the court has no jurisdiction to entertain a petition when complex and intricate questions of title are raised. Mr. Mehta fairly conceded that it is not his submission that the court has no jurisdiction, but the court in its discretion and wisdom should decline to exercise the jurisdiction. That is entirely a different thing from saying that the court in such a situation has no jurisdiction under section 155 of the Act. If may also be borne in mind that while declining to entertain the petition, it was observed in that case that in all matters arising under the Companies Act the rules provide that the application must be by a petition and, therefore, it is not envisaged that complicated questions of facts must be tried on a petition where remedy for action is available to a party. Now, with great respect, it is difficult to understand how it could have been said at the relevant time that an appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (Bom.), it was observed that the provision made in section 155 for a procedure by way of an application is only a provision for a summary procedure. But it does not whittle down or abrogate the provision by way of a suit forgetting the relief contemplated by that section. In that case, the matter was brought before the court for rectification of register of the members maintained by the defendant-company, alleging that the latter had wrongfully refused to register in their name certain shares in respect of which they had submitted to the company duly completed transfer form. A preliminary objection was raised that the subject-matter of the suit has been valued by the plaintiff at Rs. 1,300, and the High Court on its original side will have no jurisdiction to entertain the suit. While examining this contention, it was said that civil court had jurisdiction to decide all questions of title to property and that the shares being one such property civil court can entertain the suit where title to property is disputed and that remedy under section 155 is a summary remedy. In fact that question hardly fell for consideration and it appears to have been decided or the concession. This bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition observing that the matter was comparatively a simple one. Mr. Mehta emphasised the fact that the court re-stated the position of law that when complicated and/or complex questions arise the proper forum would be the civil court. No exception can be taken to this submission, that being the ratio of the judgment under discussion. The fact, however, remains that all these cases proceed on the assumption that a remedy under section 155 is a summary one or jurisdiction conferred by section 155 on the court is a summary jurisdiction. This assumption can even be stated to be well founded as the law stood prior to 1st October, 1959, when the Companies (Court) Rules came into force. The judgment under discussion appears to have been pronounced on 25th August, 1959. Same view appears to have been reaffirmed in Smt. Soma Vati v. Krishna Sugar Mills Ltd., AIR 1966 Punj. 44. But while stating this position of law, observation is made that power conferred by section 155 on the court is very wide, but having so observed, it was taken as well settled that remedy provided by section 155 is a summary one. With greatest respect, it is difficult to envisage how a very wide jurisdiction can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to Sadashiv Shankar Dandige v. Gandhi Seva Samaj [1958] 28 Comp. Cas.137; AIR 1958 Bom. 247, wherein it is also observed that jurisdiction of the court under section 1 55 is of a summary nature and, therefore, obviously detailed investigation cannot be entered into. Then comes an observation which is very material. It reads as under (page 142): "The jurisdiction is of a summary nature and, therefore, obviously a detailed investigation cannot be entered into. Now, if in such circumstances, if the fact of transfer is denied by the company the courts will have to investigate the matter and the objection will be raised that that cannot be done in a summary proceeding. Thus, the provision will be rendered otiose in most cases. This could not be the intention of the legislature". A.H. Mehta, however, said that, apart from the authorities hereinbefore discussed by me, the point is no more res integra and is finally clinched by a decision of the Supreme Court in Public Passenger Services Lid. v. M. A. Khader [1966] 36 Comp. Cas.1 ; AIR 1966 SC 489. The pertinent observation specifically relied upon reads as under (page 6): "Counsel for the appellant contended that the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretion one way, namely, to undertake to hear the petition, its decision cannot be said to be one without jurisdiction. The Companies Act, 1956, is a very comprehensive statute. It is possibly one of the lengthiest statutes. There are as many as 658 sections. It has created certain rights. It creates a special machinery for enforcement of these rights and resolution of disputes arising in respect of rights under the Act. Membership of a company confers right and right is created by the Companies Act. To exercise the right, evidence of membership is necessary and the Act casts an obligation to maintain register of members. These provisions comprehend a possible dispute. The Act creates a machinery and forum for resolution of dispute. If such be the comprehensive legislation and if the dispute involves interpretation of some of the provisions of the Companies Act, when a right to shares is asserted and denied, it would be rather inappropriate to say that a civil judge who is ordinarily not called upon in his work-a-day life to deal with the provisions of the Companies Act to deal with and decide it. Therefore, in my opinion, even the complex and complicated questions of title can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to investigate forgery. It is an incidental question which court may have to investigate but investigation of forgery does not call for any intricate or complex problem. This is undertaken by a magistrate as part of his routine work. What greater importance has to be attached to it that it cannot be examined on the original side of this High Court. It was then said that charge of conspiracy is made. This high-sounding word need not mislead anyone. Someone can invoke section 120-B of the Indian Penal Code. Here the suggestion is that those who are charged with conspiracy gathered together with common object to deprive the petitioners of their shares. This is to my mind a simple proposition which can well be examined on evidence. But somehow or other, when a matter is heard in the High Court the very idea of parole evidence is anathema to counsels and reverence is for affidavits. It was said that allegation may necessitate parole evidence. What does it matter ? In Babubhai Muljibhai Patel v. Nandalal Khodidas Barot [1974] 2 SCC 706 ; AIR 1974 SC 2105, a Division Bench of this High Court recorded parole evidence in a petition under article 226 for two weeks and adverse comment a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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