TMI Blog1981 (12) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the review application made by the petitioners. It has further been prayed that the respondent-company be directed to restore the names of the petitioners in the records of the respondent company as shareholders of 4,000 shares and to restrain respondents Nos. 4 and 5 from acting in any manner or exercising any right as owners and holders of the aforesaid 4,000 shares. The connected Special Appeal No. 30 of 1979 is directed against the order of the learned company judge dated August 13, 1979, dismissing the application of the petitioners under section 155 of the Companies Act for rectification of the register of members of K. M. Sugar Mills Ltd. The case set up by the petitioners was that K. M. Sugar Mills Ltd. was incorporated on December 17, 1971, as a private limited company under the Companies Act, 1956. On September 13, 1974, it was converted into a public limited company with its registered office at 11, Moti Bhawan, Collectorganj, Kanpur. The authorised capital of the company is ₹ 25,00,000 consisting of eighteen thousand equity shares of ₹ 100 each and seven thousand 10 per cent cumulative redeemable preference shares of ₹ 100 each. The paid up ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r favour between June, 1976, and October, 1976. Thereupon, the petitioners made an application to the Company Law Board on June 6, 1978, for reviewing the order of the Regional Director, dated May 5, 1978. The Company Law Board dismissed the review application by an order dated August 5, 1978. On the basis of the order of the Regional Director, the names of the petitioners in relation to the four thousand equity shares in dispute have been deleted and the shares have been fraudulently registered in the names of respondents Nos. 4 and 5. The legality of the order of the Regional Director has been challenged on the ground that he passed the impugned orders without any notice to the petitioners and in violation of the principles of natural justice and without applying his mind to the allegations contained in the applications under section 108(1D) of the Companies Act. The order of the Company Law Board has been assailed on the ground that the Board has illegally refused to entertain the review application and gave no reasons for refusing to interfere in the matter. Section 108(1D) provides : Notwithstanding anything in sub-section (1A) or sub-section (1B) or sub-section (1C) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs relating to 4,000 equity shares of the company as detailed in the order. It was specified in the order that the extension of time does not affect the rights and liabilities of the parties under the instrument of transfer in question. Learned counsel for the petitioners contended that before passing the impugned order, the Regional Director did not afford any opportunity to the petitioners to contest the applications and thereby acted in violation of the principles of natural justice. It was further urged that the requirement of law regarding formation of opinion of the authority concerned that it was necessary so to do to avoid hardship clearly indicated that the authority concerned should afford an opportunity before passing an order to the parties concerned. In support of the plea that principles of natural justice were attracted to the proceedings before the Regional Director, a large number of Supreme Court decisions were placed before us wherein it has been laid down that principles of natural justice are applicable not only to quasi-judicial orders but also to administrative orders and that where an order is passed in breach of the principles of natural justice, the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the passport to go abroad and entails adverse civil consequences. The right to go abroad was held to be included in the expression personal liberty in article 21 of the Constitution. In Mohinder Singh Gill v. The Chief Election Commissioner, New Delhi, AIR 1978 SC 851, the dispute related to election to Parliament. Dealing with the nature of electoral right and whether it involved civil consequences , it was observed that civil consequences undoubtedly cover infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages as well. In its comprehensive connotation, everything that affects a citizen in his civil life inflicts civil consequences. The expression civil rights as defined by Black (Law Dictionary, 4th Edn.), is such as belongs to every citizen of the State or country, or, in a wider sense, to all its inhabitants, and are not connected with the organisation or administration of government. They include the right to property, marriage protection by the laws, freedom of contract, trial by jury, etc. As otherwise defined, civil rights are rights appertaining to a person by virtue of his citizenship in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uences so as to justify an insistence upon the observance of the principles of natural justice before an order of supersession is passed. The rule of audi alteram partem was again considered by the Supreme Court in Swadeshi Cotton Mills Co. Ltd. v. Union of India [1981] 51 Comp Cas 210 with regard to the taking over of an undertaking without investigation under the provisions of the Industries (Development and Regulation) Act. It was observed that this maxim has many facets. Two of them are : (a) notice of the case to be met ; and (b) opportunity to explain. In the words of Lord Loreburn, the duty to afford a fair hearing is a duty lying upon every one who decides something in the exercise of legal power. The basic question for consideration is whether these principles are attracted to the exercise of power under section 108(1D) of the Companies Act. That provision comes into play where, in the opinion of the authority concerned, it is necessary to extend the period prescribed for presentation of the instrument of transfer in order to avoid hardship in any case. If, in the opinion of the authority concerned, non-extension of time would entail hardship to a party, it has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an opportunity to the other party to have its say in the matter. In the case in hand, the applications for extension of time, which were supported by affidavits, did contain material which could legitimately be taken into consideration in forming the opinion that it would cause hardship to the transferee if time was not extended. The opinion formed by the Board could not be characterised as arbitrary or capricious. As noted earlier, while granting the prayer for extension of time, the Board made it explicitly clear that the order of extension of time does not affect the rights and liabilities of parties under the instrument of transfer in question. Since no adjudication on the rights of parties was made by the order granting extension of time, no element of the principles of natural justice was attracted in the case. The legality of the order of the Central Government dated August 6, 1978, has been challenged on the ground that it illegally refused to entertain the review petition. It was urged that the order of the Regional Director was subject to the control of the Company Law Board and consequently, the Company Law Board was competent to review the order. Neither any prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 108A of the Act have not been put forward in the application. At the time of framing of the issues, the applicants did not press any specific issue on this aspect of the case. The order of the learned company judge does not indicate that this aspect of the case was pressed for consideration during the course of arguments. Even in the memorandum of appeal, no ground touching on the provisions of section 108A of the Act has been taken. The appellants are, therefore, not entitled to raise this question at the hearing of the appeal. In the earlier part of the judgment, we have given a summary of the case set up by the appellants. Their basic plea undisputedly is that the instrument of transfer did not relate to the shares in dispute and respondents Nos. 4 and 5 committed fraud and wrongfully and illegally deprived the appellants of their shares in the respondent company. The circumstances in which the contesting respondents came in possession of the transfer deeds have been set out in detail. It cannot possibly be disputed that in order to substantiate the allegations made by the appellants, a lot of oral and documentary evidence will be required. The question is whether such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relief which he seeks in the summary proceeding. H. R. Khanna J., in Smt. Somavati Devi Chand v. Krishna Sugar Mills Ltd., AIR 1966 Punj. 44, following the decision in Delakhant Tea Co. Ltd.'s case, AIR 1959 Cal 476, the judgment of Tek Chand J. in the case of S. Bhagat Singh v. Piar Bus Service Ltd. [1960] 30 Comp Cas 300 , and other cases, held that where complicated matters like fraud, etc., are involved, they can only be adjudicated after recording evidence and that it would not be proper to go into them in a summary proceeding under section 155 of the Act. Satish Chandra J., as he then was, in Mahendra Kumar Jain v. Federal Chemical Works Ltd. [1969] 35 Comp Cas 651 (All.) also declined to interfere under section 155 of the Act since, in that case, several disputed questions of fact arose which involved a detailed and thorough investigation on conflicting oral testimony as well as documentary evidence. The Calcutta High Court, in the case of Daddy S. Mazda v. K. R. Irani [1977]47Comp Cas 39 (Cal.), after sitting out the disputes involved in the case, observed (page 53) : In our view, the intensity, the depth and the sweep of the allegations are such that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court. In this case, there was no dispute that a transfer deed was executed by the registered shareholders in the name of the transferee and there was also transmission of shares by operation of law. The ratio of this case is also of no assistance to the appellants. Learned counsel lastly referred to the decision of the Gujarat High Court in Gulabrai Kalidas Naik v. Shri Lakshmidas Lallubhai Patel [1978] 48 Comp Cas 438. Certain observations in that case do lend support to the contention raised by the appellants that even complex and complicated questions of title can be appropriately examined in a petition for rectification made under section 155 of the Act. The learned judge further observed that (p. 456) : a petition under section 155 cannot straightaway be disposed of by merely saying that as complex and complicated questions of title are raised, the matter ought to be decided by way of a suit and the party ought to be relegated to a suit. At best it can be said that the question is addressed to the discretion of the court and if the court exercises the discretion one way, namely, to undertake to hear the petition, its decision cannot be said to be one without jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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