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TMI Blog1998 (9) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Court under this is exclusive in respect of all the matters raised therein. In order to appreciate the point it is necessary to refer to certain facts. 2. Ammonia Supplies Corpn. (P.) Ltd. (an appellant-company) went in liquidation and was directed to be wound-up by the Punjab High Court Circuit Bench at Delhi. By order dated 24-12-1962, the said High Court was pleased to transfer all proceedings to the Court of District Judge, Delhi. It is said Shri Murarilal Bhargava is the sole beneficiary of the said company. He filed an application for absolute stay of the liquidation proceedings which was granted on 1-2-1978 till further orders. He was authorised to carry on the business of the company. The stay order was in respect of all the affairs except with regard to the assessment and of income-tax payment thereof in respect of which it was directed that the same shall be prosecuted by the Official Liquidator. 3. On 3-1-1977 the appellant-company made investment in the shares of Modern Plastic Containers (P.) Ltd. (the respondent-company) to the extent of 50 per cent shares that is to say 1,265 shares of Rs. 100 each amounting to Rs. 1,26,500. Shri O.P. Bhargava S/o Shri M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom the sole beneficiary is Shri M.L. Bhargava and ultimately Shri O.P. Bhargava - son should have 50 per cent shares by purchasing the shares belonging to Mittal Group. On account of this the appellant-company sent the aforesaid amount to Shri V.K. Bhargava for purchasing the shares in the name of the appellant-company. Reliance is placed on the basis of various letters, some of which according to the appellant are admission for the appellant-company being entitled to the shares holding of 50 per cent. According to the facts as recorded by the Company Judge in its order dated 4-3-1994 refers to the averment in the petition before him, that 1265 shares belonging to Mittal Group were to be transferred in the name of the appellant-company in the records of the respondent-company but due to fraudulent intentions the same was not done. The alternative plea was taken that Shri V.K. Bhargava has no fund to acquire the said 1265 shares in January and February 1977 and it should be held that said Shri V.K. Bhargava held those shares benami in his name for the benefit of the appellant-company. In other words, the money was given by the appellant-company though the shares were purchased in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate transaction between them and the respondent-company has nothing to do with the same. In fact, shares purchased by Shri V.K. Bhargava from Mittal Group had always been shown in the income-tax return of Shri V.K. Bhargava as his personal assets. The respondent-company further plead- ed that the appellant had forged letter dated 7-6-1984 as much as the said letter was never issued by the respondent-company. Further, there is no entry in the books of account for the aforesaid amount. In fact the various documents filed by the appellant-company apart from the forged letter including 25 other letters are also denied by the respondent-company. 5. It is also necessary to record certain facts as recorded in the proceedings before the Company Judge. These facts are recorded in the impugned order of the High Court. On 30-4-1985 the Court directed the parties to file affidavits and minute books. This exercise started for considering the plaint of the appellant-company for the rectification as aforesaid. Liberty was given to each party to cross-examine the witnesses. The case was listed for cross-examination of the defendant on 2-8-1985 and 5-8-1985. On the various dates the matter was l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger Service Ltd. (supra), notice was not drawn to the defini-tion of 'Court' as defined under section 2(11) and section 10 of the Act. If that would have been considered a different interpretation would have followed. If that definition is read into section 155 the 'Court' would only be a Company Judge and not Civil Court. Further, submission is even if it could be said the jurisdiction of the Court under section 155 is summary in nature, an applicant cannot be driven to file civil suit only because one raises such dispute for dispute sake to harass an applicant with an object to delay the proceedings. The Court has to examine its sustainability at least prima facie. By merely saying complicated questions of fact and law are involved and there being challenge of any document to be forged, a party should not be driven to file civil suit. Even if such a plea is taken the court should scrutinise the objections to reach to a prima facie finding before drawing conclusion of jurisdiction. The argument is various doc-uments itself prima facie prove the appellant having become shareholder of the respondent-company and bare perusal of the document shows it not being forged a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the view of various High Courts in Smt. Soma Vati Devi Chand v. Krishna Sugar Mills Ltd. AIR 1966 Punj. 44; Dhelakhat Tea Co. Ltd., In re AIR 1957 Cal. 476; Punjab Distilling Industries Ltd. v. Biermans Paper Coating Mills Ltd. [1973] 43 Comp. Cas. 189 (Delhi); Public Trustee v. Rejeshwar Tyagi [1973] 43 Comp. Cas. 371 (Delhi); Anil Gupta v. Delhi Cloth & General Mills Co. Ltd. [1983] 54 Comp. Cas. 301 (Delhi); Vishnu Dayal Jhunjhunwalla v. Union of India [1989] 66 Comp. Cas. 684 (All.); Rao Saheb Manilal Gangaram Sindore v. Western India Theatres Ltd. AIR 1963 Bom. 40. 11. On the other hand a contrary view has been taken by the Gujarat High Court in Gulabrai Kalidas Naik v. Laxmidas Lallubhai Patel [1978] 48 Comp. Cas. 438 when it is held that section 155 does not indicate the jurisdiction conferred by the section is one hedged in with a condition that it can only be exercised when relief can be granted in summary manner, also by Kerala High Court in Mathew Michael v. Teekoy Rubbers India Ltd. [1983] 54 Comp. Cas. 88 and Madras High Court in Mrs. E.V. Swaminathan v. K.M.M.A. Industries & Roadways (P.) Ltd. [1993] 76 Comp. Cas. 1. In order to resolve this conflict as aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Court having jurisdiction under this Act shall be- (a)the High Court having jurisdiction in relation to the place at which the registered office of the Company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and (b)where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction con-ferred, in respect of companies having their registered offices in the district." 14. He also relied on the case of State of Orissa v. Indian Chemical Products Ltd. AIR 1957 Ori. 203 dealing with rectification under old section 38 of the Companies Act, 1930. 15. Now we proceed to examine the submissions for the appellant in the light of various aforesaid decisions referred to by the learned counsel keeping in mind the interpretation of 'Court' in the Act. 16. In the case of Canara Bank (supra) the question of jurisdiction was tested inter se between the Court under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 and the Court under the Indian Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in to security scam even in respect of matter covered by section 111, the Special Court would have jurisdiction. This case has no relevance for deciding the controversy in the present case. This decision holds 'the word 'court' must be read in the context in which it is used in a statute'. 18. Next reliance was on the case in Sudarsan Chit (I.) Ltd. ( supra). This was a case where on a petition by certain creditors, the appellant company was ordered to be wound-up by the Company Judge and an official liquidator was appointed. Pending appeals against this order the Division Bench approved a scheme of arrangement and kept in abeyance the winding-up order. During implementation of this scheme an application was filed before the Division Bench for a direction to the provisional liquidator to file claim petition under section 446(2). This was rejected on the ground that it had no jurisdiction to entertain such a petition as there was no winding-up proceedings either before the Company Judge or the Division Bench. This Court held : "... that the winding-up order made by the Company Judge had not been quashed, set aside, cancelled, revoked or recalled. On the contrary, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 446(2) having exclusive jurisdiction instead of sending it to the Civil Court. For this it is necessary to refer to the short background of section 446. Earlier under section 171 of the Indian Companies Act, 1913 there was no similar provision as section 446(2). It only provided no suits or proceedings pending could proceed nor fresh suit could be filed without leave of the Court. This provision was re-enacted with little modifications in section 446(1). After winding-up order a company may have many subsisting claims and in order to recover it, he may have to file suits. It is to avoid this eventuality for a long arduous procedure before the Civil Court the jurisdiction of the Company Judge was enlarged even to entertain such petition for recovering the claims of the company. The purpose of various amendments brought in the Act is to centralise as far as possible all proceedings to the Court created under this Act for adjudication of various claims. It is in this background section 446(2) was brought in, based on the recommendation of Company Law Committee Report through an amendment of the Companies (Amendment) Act, 1960. In this background the Sudarshan Chit (I) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the power of the Court to stay or restrain proceedings against the company, at any stage after the petition for winding-up is filed but before a winding-up order is made. A creditor or a company may apply to the Court having jurisdiction to wind-up the company to restrain all further proceedings in any suits or proceedings against the Company. Section 443 deals with powers of Court to hear such petition, section 444 entrusts the Court after the winding-up order to communicate the same to the Official Liquidator. Section 445 directs that a copy of the winding-up order to be filed with the Registrar. Then comes section 446. Sub-section (1) is after winding-up order has been passed or the Official Liquidator has been appointed, it puts an embargo on any suit to be instituted or if pending against the company on that date to be proceeded with except with the leave of the Court. Use of the words, ".....no suit .....' shall be commenced '......proceeded with........' except by leave of the court......." spells out that the jurisdiction of the Civil Court is not ousted to adjudicate matter between the parties but embargo is to be controlled at the discretion of the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By this deletion, submission is that the Company Court now itself has to decide any question relating to the rectification of the register including the law and not to send one to the Civil Court. There could be no doubt any question raised within the peripheral field of rectification, it is the Court under section 155 alone which would have exclusive jurisdic- tion. However, the question raised does not rest here. In case any claim is based on some seriously disputed civil rights or title, denial of any transaction or any other basic facts which may be the foundation to claim a right to be a member and if the Court feels such claim does not constitute to be a rectification but instead seeking adjudication of basic pillar some such facts falling outside the rectification, its discretion to send a party to seek his relief before Civil Court first for the adjudication of such facts, it cannot be said such right of the Court to have been taken away merely on account of the deletion of the aforesaid proviso. Otherwise under the garb of rectification one may lay claim of many such contentious issues for adjudication not falling under it. Thus in other words, the Court under it has discr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction. Similarly, under section 446 the 'Court' refers to the Company Judge which has exclusive jurisdiction to decide matters what is covered under it by itself. But this does not mean by interpreting such 'Court' having exclusive jurisdiction to include within it what is not covered under it, merely because it is cloaked under the nomenclature rectification does not mean Court cannot see the substance after removing the cloak. 27. Question for scrutiny before us is the peripheral field within which Court could exercise its jurisdiction for rectification. As aforesaid the very word 'rectification' connotes something what ought to have been done but by error not done and what ought not to have been done was done requiring correction. Rectification in other words, is the failure on the part of the company to comply with the directions under the Act. To show this error the burden is on the applicant, and to this extent any matter or dispute between persons raised in such Court it may generally decide any matter which is necessary or expedient to decide in connection with the rectification. 28. Both under the 1913 Act and 1960 Act a procedure is prescribed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any person having become, or ceased to be, a member; the person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the register." 30. Sub-section (1)(a ) of section 155 refers to a case where the name of any person without sufficient cause entered or omitted in the register of member's of a company. The word 'sufficient cause' is to be tested in relation to the Act and the Rules. Without sufficient cause entered or omitted to be entered means done or omitted to do in contradiction of the Act and the rules or what ought to have been done under the Act and the rules but not done. Reading of this sub-clause spells out the limitation under which the Court has to exercise its jurisdiction. It cannot be doubted in spite of exclusiveness to decide all matter pertaining to the rectification it has to act within the said four corners and adjudication of such matter cannot be doubted to be summary in nature. So, whenever a question is raised court has to adjudicate on the facts and circumstance of each case. If it truly is rectification all matter raised in that connection should be decided by the Court under section 155 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld proceed to decide the matter and not reject it only because fraud is stated. Further on the other hand the learned counsel for the respondent totally denies any share having been purchased by the appellant-company or any amount paid to it. No transfer of any such share was ever approved by the Board of directors. It is urged the money even if advanced to Shri V.K. Bhargava by the appellant-company, if at all was a private transaction between the two to which respondent-company has no concern. So we find there is total denial by the respondent. 31. We have gone through the judgment of the High Court. It has rightly held the law pertaining to the jurisdiction of 'Court' under section 155 and even referred to some of the documents of the appellant but concluded since they are disputed and said to be forged hence directed for seeking leave if advised for suit. We feel it would have been appropriate if the Court would have seen for itself whether these documents are disputed and any document is alleged to be forged whether it said to be so only to exclude the jurisdiction of the court or it is genuinely so. Similarly we feel appropriate while deciding this the court should t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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