* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO 347-48/2005
Reserved on : 25.11.2010
Date of Decision : 08.12.2010
VISHNU MANGLANI & ANR ..... Appellants
Through Mr. Pawan Mathur, Adv.
versus
M/S RELIANCE INDUSTRIES ... Respondent
Through Mr. Somiran, Mr Sidharth, Mr
R.S.Prabhu, Advs.
CORAM:
HON'BLE MR. JUSTICE MOOL CHAND GARG
1. Whether the Reporters of local papers may be allowed Yes
to see the judgment?
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
: MOOL CHAND GARG,J
1. This appeal arises out of judgment/order passed by the Addl.
District Judge Delhi dated 02.09.2005 whereby in a suit/plaint filed for
declaration/cancellation of transfer deed, mandatory and permanent
injunction filed by the appellant has been directed by the Addl. District
Judge to be returned for presentation before the Court of competent
jurisdiction. The impugned order has been passed on the basis of the
findings returned on issue No.1 which was as follows “whether this Court
has got no territorial jurisdiction to entertain the present suit for the
reasons stated in paragraph 2 & 3 of the written statement (preliminary
objections)”.
2. The suit in question was filed by the appellant with the following
prayers:
“(a) That a decree for declaration declaring the plaintiffs to be
the owners of the shares, details of which are given hereunder
be passed in favour of the plaintiffs and against the
defendants:-
Distinctive Record No. Certificate No. No. of
Nos Shares
--- 930251955 09195779 50
--- 930252005 09195779 50
FAO 347/2005 Page 1 of 9
133452933 ----- 06307612 50
--- 907158829 08070715 50
(b) A decree for cancellation of the Transfer Deeds bearing
No. 4994198, 4994199, 4994201 and 4994203 be passed in
favour of the plaintiff and against the defendants and direction
be issued to defendant No.3 to deliver the original share scripts
detailed in para No.1 above to defendant No.2 who in turn be
directed to transfer the said shares in favour of the plaintiffs
and deliver the same to the plaintiffs;
(c) a decree for permanent injunction be passed in favour of
the plaintiffs and against the defendants restraining the
defendants No.1 and 2 to transfer the said shares in favour of
any one else and against the defendant No.3, his servants and
agents from transferring, alienating, encumbering or parting
with possession of shares bearing Nos. the details of which are
given below:
Distinctive Record No. Certificate No. No. of
Nos Shares
---- 930251955 09195779 50
--- 930252005 09195779 50
Distinctive Record No. Certificate No. No. of
Nos Shares
133452933 --- 06307612 50
--- 907158829 08070715 50
(d) Cost of the suit be awarded;
(e) such other orders be passed as this hon‟ble Court deems
fit and proper."
3. The facts in brief are that the appellants purchased 200 shares of
respondent No 1 from respondent No 4 on 29.03.1993 vide intimation
letter No TX-29006 dated 20.03.1993 for a total consideration of Rs
35,526/- which were delivered by respondent No 4 vide bill dated
12.04.1993 along with transfer deeds. The appellants have stated to have
sent the said shares to respondent No 1 and 2 for carrying out ratification
in the register of members vide letter dated 27.04.1993 and having not
received any response from the respondents sent a fax message dated
25.09.1993 which was replied by the respondents through reply fax
message and also vide letter dated 20.12.1993 stating that the shares
stood transferred to respondent No 3 on transfer deeds lodged.
4. It is thereafter appellants filed the suit in question before the District
judge on the ground that the respondent No 3 had no title, right or interest
in the said shares and also the transfer deed alleged to have been executed
FAO 347/2005 Page 2 of 9
in favour of respondent no 3 is forged and fabricated document and hence
needs to be cancelled by transferring those shares in the name of the
appellant.
5. The Respondents No 1 & 2 have contested the suit on the grounds
that the registered office of the respondents is located in Mumbai, hence
the courts in Delhi have no territorial jurisdiction to try the suit as no
cause of action arose here. Further respondents have also taken a stand
that the issue relates to the rectification in the register of the shareholders
U/s 155 of the Companies Act and hence either The Company Law Board
can decide this issue or by the virtue of Section 10 of Companies Act , it is
the Mumbai High Court or the District Courts at Mumbai U/s 10(a) who
have the jurisdiction to try the suit.
6. The Appellants on the other hand have submitted that the subject
matter does not fall under the jurisdiction of the Companies Act inas much
as the jurisdiction exercised by the Company Court U/s 155 of the Act is
discretionary and of summary nature, and if the title to the holding of the
shares is challenged, then the Company Court will not inquire into such a
dispute under Section 155 of the Act and for such an inquiry, a civil suit is
the proper forum.
7. Further regarding the aspect that the Mumbai Courts have
jurisdiction to entertain the issue as the registered office of the
respondents is located in Mumbai, appellants contend that the
respondents have their corporate office in Delhi and the share certificates
were sent from Delhi and were delivered back to Delhi, as such a part of
cause of action arose in Delhi and hence this court has jurisdiction to try
the suit.
8. On the pleadings of the parties the Addl. District Judge to whom the
suit was marked for trial framed following issues:-
1. Whether this court has got no territorial jurisdiction to
entertain the present suit for the reasons stated in paras
2 and 3 of the written statement (Preliminary
Objections)?
2. Whether the defendants No 1 and 2 did not receive the
share certificates and the transfer deeds from the
plaintiff as alleged in paras 6 (i) to (iii) of the written
statement (reply on merits)? If so, its effectFAO 347/2005 Page 3 of 9
3. Whether defendant No 3 in connivance with other
defendants forged and fabricated transfer deeds in
respect of 200 shares belonging to the plaintiff as alleged
in para 1 of the plaint?
4. To what relief, if any, are the plaintiffs entitled?
9. The Addl. District Judge decided issue No.1 against the appellant
and returned the plaint for filing the same before the competent Court by
holding that the Court of District Judge Delhi had no jurisdiction to
entertain the suit. Primarily it is the finding of the Addl. District Judge
that the dispute raised by the appellant is required to be adjudicated by
the Company Law Board under Section 155 of the Companies Act and
therefore the objection ought to have been filed before the Company Law
Board. It has been observed by the Addl. District Judge that:-
In the present case the plaintiffs seek entering of their names in
the register of shareholders which as per them should have
been done but has not been done and instead the name of
defendant No 3 has been entered in the register. In sum &
substance the relief claimed by the plaintiffs is the rectification
of register of shareholders which is covered U/s 155 of
Companies Act.
Section 10 of Companies Act reads as follows:-
Jurisdiction of courts- (1) The 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
situated, except to the extent to which the 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 conferred, in respect of companies having their
registered offices in the district
(2)
(3)In the present case, it is the admitted case of the parties that
the registered office of the defendant No 1 is situated in
Mumbai.
The Companies Act is admittedly a special enactment and the
territorial jurisdiction has to be decided with reference to the
special enactment. And that being so Section 20 CPC has no
application.
10. I have heard the parties. I have examined the written synopsis filed
by respondent. No written synopsis has been filed by the appellant It may
FAO 347/2005 Page 4 of 9
be observed here that Section 155 of the Companies Act has come into
being after the amendment of Section 111 of the Companies Act w.e.f.
31.05.1991. According to the aforesaid provision the Company Law Board
performs the functions that were here-to-before performed by the Court of
Civil Judicature under Section 155. As per the aforesaid provisions of
Company Law Board “It is empowered to make orders directing rectification
of the Company‟s register as to damages, costs and incidental and
consequential orders. It may decide any question relating to the title of any
person who is a party before it to have his name entered upon the
company‟s register; and any question which it is necessary or expedient to
decide, it may make interim orders. Failure to comply with any order visits
the company with a fine. In regard to all these matters it has exclusive
jurisdiction (except under the provisions of the Special Court Act). Its orders
are appealable. The CLB, further, is a permanent body constituted under a
statute. The CLB performs functions which are administrative, as under
Sections 224 and 269, and curial, as under Section 111. In exercising its
function under Section 111 the CLB must, and does, act judicially. It cannot
be said to be anything other than a court, particularly for the purpose of
Section 9-A of the Special Court Act.”
11. The aforesaid observations were made by the Supreme Court in the
judgment delivered by it in the case of Canara Bank Vs. Nuclear Power
Corporation of India Ltd. & Ors.1995 Supp (3) SCC 81. In view of the
aforesaid, the issues raised by the appellant are required to be determined
by the Company Law Board.
12. Another aspect of the matter is as to whether Delhi Courts have the
jurisdiction to try the disputes or not. In this regard, in the case of
Pandian Graphities (India) Ltd. Vs Louvumi Lakshmi and another (1996) 87
Comp. cases 323 (AP), the Apex Court has held that the location of the
registered office of the company has to be taken into consideration for
deciding the question of territorial jurisdiction with reference to the special
statue, and held that since the registered office of the company is situated
in Madras, the High Court of Madras has the jurisdiction to entertain
matters relating to Company Court i.e. Company Law Board after the
amendment of Section 111 of the Act.
FAO 347/2005 Page 5 of 9
13. At this juncture, it may also be relevant to take note of Section 155
of the Company Act, which reads as under:
“155 : Power of Court to rectify register of members–
(1) If–
(a) the name of any person–
(i) is without sufficient cause, entered in the register or
members of a company, or
(ii) after having been entered in the register, is, without
sufficient cause, omitted therefrom, or
(b) default is made, or unnecessary delay takes place, in
entering on the register the fact of any person having
become, or ceased to be, a member:
the person aggrieved, or any member of the company, of the
company, may apply to the Court for rectification of the
register.
(2) The Court may either reject the application or order
rectification of the register; and in the latter case, may
direct the company to pay the damages, if any, sustained
by any party aggrieved.
In either case, the Court in its discretion may make such
order as to costs as it thinks fit.
(3) On an application under this Section, the Court
(a) may 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 whether
the question arises 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.
(4) From any order passed by the Court on the application,
or on any issue raised therein and tried separately an
appeal shall lie on the grounds mentioned in section 100 of
the Code of Civil Procedure, 1908 (5 of 1908)–
(a) if the order be passed by a District Court, to the High
Court;
(b) if the order be passed by a single Judge of a High Court
consisting of three or more Judges, to a Bench of that High
Court.
(5) The provisions of sub-sections (1) to (4) shall apply in
relation to the rectification of the register of debentures
holders as they apply in relation to the rectification of the
register of members.”
FAO 347/2005 Page 6 of 9
13. Interpreting the aforesaid provisions, the Apex court, in the case of
Ammonia Supplies Corporation (P) Ltd. Vs Modern Plastic Containers Pvt.
Ltd. AIR 1998 SC 3153.
“The proviso gave discretion to the court to direct an issue of
law to be tried, if raised. 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
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
the rectification, its discretion to send a party to seek his
relief before the 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.
Sub-section (1)(a) of Section 155 refers to a case where the
name of any person is without sufficient cause entered or
omitted in the Register of Members 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 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. So, whenever a question is
raised the court has to adjudicate on the facts and
circumstances of each case. If it truly is rectification, all
matters raised in that connection should be decided by the
court under Section 155 and if it finds adjudication of any
matter not falling under it, it may direct a party to get his right
adjudicated by a civil court.”
14. The Addl. District Judge has taken note of the provisions contained
under Section of the Companies Act as also the judgment delivered by the
Apex Court in the Case of Pandian Graphities (India) Ltd. Vs Louvumi
Lakshmi and another, Canara Bank Vs. Nuclear Power Corporation of India
Ltd. & Ors (supra) and has held that as opined by the Hon‟ble Supreme
Court in Canara Bank‟s case the word „Court‟ must be read in the context
FAO 347/2005 Page 7 of 9
in which it has been used in the Statute. And it has been observed that
the „Court‟ means CLB hereinafter which now exercises the powers that
were exercisable by the Court u/s 155. It is entitled to direct rectification
of register and the payment of damages by the company. It is entitled 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 to
decide any question which it considers necessary or expedient in this
connection.
15. The Court has also taken note of the judgments delivered by the
Hon‟ble Supreme Court in Ammonia Supplies Corporation (P) Ltd. Vs.
Modern Plastic Containers Pvt. Ltd. AIR 1998 Supreme Court 3153 where
also it has been held that the Court referred to under S.155 read with S.2
(11) and S.10 of the Companies Act, it is the company Court alone which
has exclusive jurisdiction. And the jurisdiction of the Court u/s 155 to the
extent it has exclusive, the jurisdiction of civil Court is impliedly barred.
16. It is in these circumstances, the Addl. District Judge decided issue
No.1 against the appellant and held that the Court of Addl. District Judge
Delhi neither has the territorial jurisdiction nor the subject matter of
jurisdiction to try and entertain the present suit and accordingly has
directed the Registry to return the plaint to the appellant for presentation
before the Court of competent jurisdiction.
17. The learned counsel for the appellant has relied upon a judgment of
a full Bench of the Apex Court given in the case of M/s. Ammonia Supplies
Corporation Private Ltd. Vs. M/s. Modern Plastic Containers (Pvt.) Ltd. & Ors.
AIR 1994 DELHI 51 where it has been held that:
The jurisdiction exercised by the Company Court under S.155
of the Act is discretionary and summary in nature. In exercise
of discretionary and summary jurisdiction the Company Court
can decline to entertain petition involving disputed and
complicated questions requiring examination of extensive oral
and documentary evidence. The remedy of suit for adjudication
of disputes relating to title to shares is not barred.
18. On the other hand, respondents have also relied upon a Single
Bench judgment of Rajasthan High Court in the case of Eternit Everest Ltd.
Vs. Neelmani Bhartiya AIR 1999 RAJASTHAN 235 wherein it has been
observed:
FAO 347/2005 Page 8 of 9
“10. The relief claimed by the plaintiff that he should be
declared to be the owner of the above 300 shares and duplicate
shares be issued to him cancelling the transfer of these shares
in favour of the transferees. All other reliefs are consequential.
In the circumstances of the case when the plaintiff himself has
stated that he had signed the transfer deeds and kept them
along with the share certificates and ultimately it is found that
some one has come to possess the transfer deeds and original
shares and put them up before the Company for the shares
being registered in their names, it is clearly a case of
cancellation of such registration of shares in the name of the
transferees obtained by misrepresentation or fraud or any other
reason. There is no question of declaration because when the
register is rectified, automatically, the shares would revert back
to the plaintiff. Moreover, the transferees would be necessary
parties to suit for any such declaration and they are not
impleaded.”
19. In the light of the law as discussed above and particularly
observation made by the Apex Court in the case of Canara Bank Vs.
Nuclear Power Corporation of India Ltd. & Ors. the jurisdiction is that of the
Company Law Board to decide the lis which has been raised by the
appellant, of course it is the Board which can decide even to direct the
parties to approach the Civil Court in case they find that the claim was
based upon some seriously disputed civil rights or title. However, before
such a power is exercised by the Company Law Board and directions are
given to the parties to approach the Civil Court it cannot be said that civil
Court will have the jurisdiction which is sought to be pressed in service by
the appellant. Consequently, the appeal filed by the appellant is dismissed
with no orders as to costs.
20. TCR, if summoned, be sent back along with a copy of this order.
MOOL CHAND GARG, J
DECEMBER 08, 2010
„sg/anb‟
FAO 347/2005 Page 9 of 9