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2017 (7) TMI 467 - MADRAS HIGH COURT

2017 (7) TMI 467 - MADRAS HIGH COURT - Tmi - Rectification of register of members of second respondent substituting his name in the place of petitioner's name and issue share certificates in his name - Held that:- The first respondent while he was minor filed C.S.No.412 of 2008 in this Court through his mother for partition of properties of HUF, which are with the petitioner as kartha. In the present suit, the first respondent claiming that the shares do not belong to HUF, but it belongs to him .....

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f the Specific Relief Act. In view of the above reasons, both the above contentions of the petitioner are untenable, unsustainable and hence they are hereby rejected. Thus, points 1 and 2 are answered against the petitioner. - 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 merits. As already .....

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o the facts of the present case. In view of the judgments relied on by the learned Senior Counsel for the first respondent as well as the judgment dated 10.03.2017 made in S.L.P.No.4388 of 2017 and for the reasons stated above, hold that this Civil Revision Petition is liable to be dismissed and it is hereby dismissed.Consequently, connected Miscellaneous Petition is closed. - C.R.P.(PD).No.670 of 2017, And and C.M.P.No.3412 of 2017 - Dated:- 7-6-2017 - MR. V.M.VELUMANI, J. For The Petitioner : .....

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ndant in O.S.No.1618 of 2016 on the file of the XII Assistant City Civil Court, Chennai. The first respondent filed the suit for the following reliefs: (i) Mandatory injunction directing the first defendant to rectify its Register of Members to substitute the name of the plaintiff in suit schedule shares in place of second defendant and issue fresh share certificates to the plaintiff; (ii) for permanent injunction restraining the second defendant from claiming any right, title or interest in res .....

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ying the averments made in the affidavit. The learned Judge by order dated 10.01.2017 dismissed the application. 4. Against the order dated 10.01.2017 made in I.A.No.7540 of 2017, the present civil revision petition is filed by the petitioner. 5. The facts of the case is as follows: (i) First respondent is the son of petitioner and Mrs.Sharmila Ramji. The petitioner is the great grand son of T.V.Sundaram Iyengar (TVS). From his childhood, the first respondent used to get gifts from time to time .....

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ing Account No:SB 02710100014018. The petitioner used these funds to acquire shares and make investments in fixed deposits in first respondent name in the second respondent. The shares were purchased from various third parties including the second respondent in the name of first respondent represented by the petitioner. The first respondent had 20180 equity shares in the second respondent in his individual name and 1973 equity shares as second holder along with the petitioner. Bonus shares 1:1 w .....

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time, filed C.S.No.412 of 2008 in this Court against the petitioner for partition of joint family properties. In the interim application taken out by him, this Court granted an interim injunction restraining the petitioner from alienating the HUF properties held by him as kartha; (iv) The first respondent intended to do higher education in a foreign country. When he acquired the details of his assets, he came to know that the petitioner fraudulently in collusion with the directors of second res .....

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special remedy is available under the provisions of the Companies Act. The relief sought for cannot be entertained by the Civil Court, as the suit is expressly and impliedly barred. The suit is not maintainable either in law or on facts; (b) The suit is barred under Section 38 of the Specific Relief Act; (c) First respondent filed C.S.No.412 of 2008 before this Court in the very same issue and deliberately did not include the present relief and thereby, relinquished the present claim. The prese .....

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ther of the first respondent is not cordial and it is estranged relationship. To harass the petitioner only, the first respondent has filed the suit at the instigation of his mother. The relief for rectifying the register of members of second respondent is not maintainable in the Civil Court and the present suit is abuse of process of the Court; (g) The first respondent is indulging in forum shopping and the plaint is liable to be rejected; 7. First respondent filed counter affidavit and denied .....

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en filed. The objections raised by the petitioner are not the grounds mentioned in the Order VII Rule 11 of C.P.C.; (ii) While considering the application under Order VII Rule 11 of C.P.C., the averments in the plaint alone have to be taken into consideration. The contentions of the petitioner contrary to the averments in the plaint are not relevant. The power under this provison has to be exercised sparingly and cautiously. In the present case, the petitioner has not made out any case for rejec .....

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12 of 2008 on the file of this Court relate to HUF properties and shares in the present suit are the individual shares of the first respondent. The issues involved in both the suits are different and the present suit is not barred by the provisions of Order II Rule 2 of C.P.C. The facts of the case in C.S.No.412 of 2008 and petitions before the Family Court are entirely different from the facts of the present case; (vi) Section 58 of the Companies Act, 2013 deals with refusal by a company to reg .....

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the parties and the Civil Court is the appropriate forum to decide the issue. The proceedings in the forum established in the provisions of the Companies Act is summary in nature and the forum has no jurisdiction or power to decide the issue of fraud in a summary proceedings. 8. Before the learned Judge, both the petitioner and the first respondent did not let in any oral evidence. The petitioner marked four documents as Exs.P1 to P4. The first respondent marked seven documents as Exs.R1 to R7. .....

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decided only by the Civil Court and Sections 58 and 59 of the Companies Act are not applicable to the facts of the present case; (iii) The petitioner has not stated under which sub-section of Order VII Rule 11 of C.P.C., the application has been filed. The first respondent stated that as to how the cause of action for the suit arose, in para-18 of the plaint, the cause of action is a bundle of facts. The relief sought for is to substitute the name of the first respondent and issue fresh share c .....

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learned Judge dismissed the application filed by the petitioner considering the provisions of old Companies Act, 1956 and failed to consider the provisions of the Companies Act, 2013; (ii) The order of the learned Judge is contrary to the averments in the plaint, fact and law and suffers from error apparent on the face of the record; (iii) The learned Judge failed to see that the National Company Law Tribunal has been constituted under Section 408 of the Companies Act, 2013 and as per Section 42 .....

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d Judge without considering this fact has dismissed the application; (v) Sections 58 and 59 of the Companies Act, 2013, which are equivalent to Sections 110 and 111A of the Companies Act, 1956, came into force on 12.09.2013 and these sections deal with rectification of register of members, a refusal of registration and appeal; (vi) As per the Section 430 of the Companies Act, 2013, the jurisdiction of the Court is ousted in respect of the matters, which National Company Law Tribunal is empowered .....

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panies Act, 1956 and the proceeding before the Company Law Board and failed to consider the provisions of the Companies Act, 2013; (viii) The allegation of fraud made by the first respondent can be decided by the National Company Law Tribunal and the Tribunal has power to decide the said issue. The findings of the learned Judge that only the Civil Court has jurisdiction to decide the issue on fraud is contrary to Section 424 of the Act and jurisdiction of the Civil Court is ousted by Section 430 .....

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has instigated the first respondent to file the present suit to harass the petitioner. In view of this fact, the present suit is barred by the provisions of Order II Rule 2 of C.P.C.; (x) Admittedly, the shares were transferred in the name of the petitioner in the year 2006 to the knowledge of the mother of the first respondent. Hence, the suit filed in the year 2016 is barred by limitation; (xi) Section 10GB was inserted by the Companies (Second Amendment) Act, 2002. It barred the jurisdiction .....

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, 2013 was enacted on 29.08.2013. Many provisions including Sections 407 to 414 constituting the Tribunal and remedying the defects were rectified and came into force with effect from 12.09.2013. In view of the Repeal and Savings clause in Section 465, Section 10GB came into operation till Section 430 was notified on 01.06.2016, which bars jurisdiction of the Civil Court and Section 10GB is equivalent to Section 430. As per the Section 424 of the Companies Act, 2013, the Tribunal and the Appella .....

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rts ought to be transferred to the Tribunal, the present suit, which is pending before the Assistant City Civil Court, this sub judge has to be transferred to the Tribunal, even though it is not barred when it was filed in the City Civil Court. (xiii) As per the judgment reported in (1993) 3 SCC 123 (Inacio Martins (deceased through legal heirs) v. Narayan Hari Naik and others), when the Tribunal is constituted with power to decide the matters mentioned therein, only the said Tribunal is empower .....

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excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. (2) Where there is an express bar of the jurisdiction of the Court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remed .....

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he said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not. (3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals. (4) When a provision is already declared unconstitutional or t .....

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. The impact of the fifth amendment may give rise to a situation where the remedy lies entirely under the Act and may have to be taken in the manner prescribed by or under the Act. For example, where a person who is a deemed tenant under section 4 of the Act if evicted from the land on or after July 1, 1962 his remedy under section 8(2) is to approach the authority under the Act for recovery of possession of the land of which he has been dispossessed. In such a situation the remedy may not be th .....

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medy would, therefore, to be entirely under the Act. This is just by way of an illustration. If such a situation arises what procedure should the court follow in a pending suit which was instituted in a competent court having jurisdiction at the date of its institution. It would seem unfair to non-suit the plaintiff altogether for no fault of his own. We think, in such a situation where the entire dispute falls outside the Civil Court's jurisdiction on account of the change in law the proper .....

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s and jurisdiction exercised by the High Court in regard to company law matters, are not unconstitutional. (ii) We declare that Parts 1B and 1C of the Act as presently structured, are unconstitutional for the reasons stated in the preceding para. However, Parts IB and IC of the Act, may be made operational by making suitable amendments, as indicated above, in addition to what the Union Government has already agreed in pursuance of the impugned order of the High Court. (iv) (1998) 7 Supreme Court .....

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l filed of rectification, it is the Court under Section 155 alone which would have exclusive jurisdiction. 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 .....

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ification or is of such a nature that unless decided first it would not come within the purview of rectification. The word rectification itself connotes some error which has crept in requiring correction. Error would only mean everything as required under the law has been done yet by some mistake the name is either omitted or wrongly recorded in the Register of the company. In T.P.Mukherjee's Law Lexicon, Fifth Revised Edition: The expression rectification of the Register used in Section 155 .....

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section is the 'rectification' of the Register, a term which itself implies that the Register, either in what is, or what is not upon it, is wrong; but the Register cannot be wrong unless there has been a failure on the part of the company to comply with the directions in the Act as to the kind of Register to be kept: for if the Act has been complied with, the Register must be right and not wrong. (v) (2012) 8 Supreme Court Cases 706 (Church of Christ Charitable Trust and Educational Ch .....

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ey when the plaint is presented by him and if he is not in possession of the same, he has to state as to in whose possession it is. In the case on hand, only the agreement between the plaintiff and the second defendant has been filed along with the plaint under Order VII Rule 14(1). As rightly pointed out by the learned senior counsel for the appellant, if he is not in possession of the power of attorney, it being a registered document, he should have filed a registration copy of the same. There .....

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e which are statutory in nature, we hold that the learned single Judge of the High Court has correctly concluded that in the absence of any cause of action shown as against the 1st defendant, the suit cannot be proceeded either for specific performance or for the recovery of money advanced which according to the plaintiff was given to the 2nd defendant in the suit and rightly rejected the plaint as against the 1st defendant. Unfortunately, the Division bench failed to consider all those relevant .....

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e, while the first respondent was a minor and first respondent did not rectify the same, when he attained majority. The first respondent came to know the fraud played by the petitioner, when he was collecting the details of his assets to proceed abroad for his higher education. Immediately, first respondent filed the suit. The limitation is a mixed question of fact and law, which can be decided only by appreciation of evidence let in during trial. This question cannot be decided in a summary pro .....

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to by the petitioner has no relevance to the issue in the suit and the petitioner has not stated as to how the said provision is applicable to the facts of the present case; (iii) The various provisions of the Companies Act, 1956 and 2013 referred to by the petitioner are not applicable to the facts of the present case, especially, Section 58 of the Act, 2013. Section 58 is applicable to a case, where the company refused to rectify register of members. In the present case, first respondent is s .....

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d in the suit. The Tribunal has no power and capacity to decide the issues on fraud, collusion and permanent injunction. Only the Civil Court is the competent forum to decide all these issues; (iv) Section 58 and 59 of the Companies Act, 2013 corresponds to Sections 111 and 111A of the Companies Act, 1956. As per Section 111(7) of the Companies Act, 1956, the Company Law board has power to decide the issue of title also. The Hon'ble Apex Court considering the scope of Section 111(7) of 1956 .....

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ment reported in (2016) 198 CompCas 481 (Kar) in (K.Ravinder Reddy v. Alliance Business School and others), held that if question of title in whose favour the shares ought to be transferred, adjudication power under Section 58 is not available to the Tribunal or Company Law Board. The contention of the petitioner that Section 10GB would prevail till Section 430 of the Companies Act, 2013 was notified, is devoid of merits. Section 10GB forming part of 1C, even though inserted on 01.04.2003 by the .....

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n 01.06.2016 and is not applicable to the suit already instituted. Even if Section 430 is applicable to the pending suits also, the same is not applicable to the present suit in view of the fact that the first respondent is seeking rectification of register of members alleging fraud and collusion on the part of the petitioner and second respondent. In view of these allegations, the relief sought for amounts to question of title, which can be decided only by the Civil Court as per the judgment of .....

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Supreme Court dealt with the scope of section 10GB of the Companies Act, and declared that Parts I-B and I-C of the Act viz., section 10FD to 10GF as presently structured are unconstitutional and they can be made operational by making suitable amendments, in that judgment. Admittedly, the amendments or suggestions laid down in that judgment are not carried out as on date and therefore, as per the judgment of the Honourable Supreme Court, section 10GB of the Companies Act, as on date is unconsti .....

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rred, adjudication power may not be available to the Tribunal/CLB to exercise power under Section 58 of the Act, 2013. (iii) (2016) 1 Supreme Court Cases 423 in (Jai Mahal Hotels Private Limited v. Devraj Singh and others), wherein in paras 17 and 18, it is held as follows: 17. Thus, there is a thin line in appreciating the scope of jurisdiction of the Company Court/Company Law Board. The jurisdiction is exclusive if the matter truly relates to rectification but if the issue is alien to rectific .....

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the jurisdiction 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 also the general jurisdiction to decide any question which it is necessary or expedient to decide in connection with such an application. It has been held in Ammonia Supplies Corpn. (P) Ltd. v. Modern Plastic Containers (P) Ltd. that the jurisdiction exercised by the Company Court under Section 155 of the Companies Act, 1956 .....

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in (K.Saravanan and another V. M/s.Cosmopolis Properties Pvt. Ltd. and others), rendered before the Companies Act, 2013 whereby the defects pointed out by the Hon'ble Apex Court had been rectified. In the judgment reported in (2016) 198 CompCas 481 (Kar) in (K.Ravinder Reddy v. Alliance Business School and others), the Division Bench of the Karnataka High Court held only the Tribunal or the Company Law Board has power to decide the issue on rectification of register of members and only when .....

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cuniary jurisdiction. 16. I have heard the submissions made by both sides and perused the materials available on record. 17. The points for consideration of the civil revision petition are as follows: (i) Whether the suit is barred by limitation by the provisions of Order II Rule 2 of C.P.C.? (ii) Whether Section 38 of the Specific Relief Act is applicable to the facts of the present case? (iii) Whether the suit for the reliefs sought for is maintainable in Civil Court or the issue can be decide .....

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am etc. The petitioner as his father and natural guardian invested these amounts and purchased the shares from and out of the amounts received by the first respondent as gifts. When misunderstanding arose between the petitioner and his wife/mother of the first respondent and when both of them filed separate petitions for divorce. The petitioner fraudulently in collusion with the officials and directors of second respondent getting shares transferred in his name. 19. According to the first respon .....

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ontended that the first respondent knew about the shares in his name in the year 2006 itself and the suit filed in the year 2016 is barred by limitation. 21. It is pertinent to note that the first respondent was a minor in the year 2006 and first respondent contended that after attaining majority, he did not ratify the transfer of shares in the name of the petitioner. In view of the above contention and failure on the part of the petitioner to state whether the shares were in the name of the fir .....

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er as kartha. In the present suit, the first respondent claiming that the shares do not belong to HUF, but it belongs to him as his individual capacity. A reading of the plaint in C.S.No.412 of 2008 pending before this Court and the present suit reveal that the cause of action as well as the reliefs sought for are entirely different. Hence, the present suit is not hit by the provisions of Order II Rule 2 of C.P.C. The petitioner has not stated as to how the Section 38 of the Specific Relief Act .....

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cond respondent to substitute the name of the first respondent in the shares mentioned in the schedule to the plaint in the place of the petitioner and issue fresh share certificates to him. First respondent also prayed for permanent injunction restraining the second respondent claiming any right, title or interest in the said shares. 24. The petitioner filed I.A.No.7540 of 2017 under Order VII Rule 11 of C.P.C. to reject the plaint. The main contention of the petitioner is that the suit is for .....

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to rectification of register of members only before the National Company Law Tribunal. The National Company Law Tribunal is validly constituted as per Sections 407 to 414 of the Companies Act, 2013. 25. Section 430 bars jurisdiction of the Civil Court and as per Section 434(1)(c), proceedings pending before the High Courts and District Courts have to be transferred to the National Company Law Tribunal. To substantiate this claim, the learned senior counsel for the petitioner relied on the judgme .....

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shares mentioned in the suit schedule. In view of the relief of permanent injunction sought for in the suit, the title of the shares in question has to be decided. The Tribunal has no power to decide the title of the shares in a summary proceedings. Once the Tribunal comes to the conclusion that the title of the shares is involved, the issues have to be decided only by the Civil Court. For this, the learned Senior Counsel appearing for the first respondent relied on the decision reported in (20 .....

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titioner and first respondent, it is clear that the Tribunal has a power only to decide the issue of rectification of register of members as per Section 58 of the Act and has no power to decide the issue of title. It is relevant to note that as per Section 111A of the Companies Act, 1956, the Company Law Board was empowered to decide the issue of title also. The word 'title' was not included in Section 58 of the Companies Act, 2013. Even while considering the Section 111A, it was held by .....

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rd as the case may be can decide only the rectification of register of members with regard to shares and connected incidental issues. In the present suit, a reading of the averments in the plaint as well as the relief sought for by the first respondent shows that to decide the issue raised by the first respondent, the title to the shares in question has to be considered. The first respondent has not only prayed for rectification of register of members by substituting his name in the place of the .....

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r fraudulently in collusion with the officials of the second respondent got transferred the shares in his name due to estranged relationship between the petitioner and his wife, mother of the first respondent, the first respondent cannot succeed in the claim of the rectification of register of members of the second respondent. The petitioner has not stated that first respondent is not the owner of shares at any point of time and that there was no fraudulent transfer in collusion with the officia .....

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94, held that a seriously disputed question of title could be left to be decided by the Civil Court. In para-31 of the judgment reported in (2016) 198 CompCas 481 (Kar) in (K.Ravinder Reddy v. Alliance Business School and others), the Division Bench of Karnataka High Court held that if the question arises with regard to title of the person in whose favour, the shares are to be transferred, the Tribunal/Company Law Board has no power to adjudicate the issue. 30. The learned Senior Counsel for th .....

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