Bhankerpur Simbhaoli Beverages ... vs The Company Law Board And Ors.
1993 Latest Caselaw 432 Del

JUDGMENT

Usha Mehra, J.

(1) The appellant, M/s. Bhankerpur Simbhaoli Beverages Pvt. Ltd. and another, have assailed the order dt. 28th May, 1993 passed by the Principal Bench, of the Company Law Board, at Delhi (hereinafter called the Board) under Section 1 Of of the Companies Act (hereinafter called 'the Act'). The grievances of the appellant, in short are, that by the impugned order, the Board exceeded its jurisdiction in deciding the questions and issues, without recording evidence and without testing the allegations of the parties. Furthermore by the impugned decision, the Board could not have struck down the decision of the Shoe Specialities Pvt. Ltd. dated 30th April, 1992 of issuing additional shares and the allotment thereof in favor of appellant No. 1. , decision of the Board regarding the mis-management arising out of the allotment of shares in favor of respondent No.1 and non-allotment of shares in favor of respondents 2 and 3 cannot stand the test of scrutiny. By the impugned order, the Board has granted certain relief in favor of respondents 2,3,4 and 5 without deciding the locus standi of the said respondents to file the petition bearing No.C.P 29/92. The complaint made and relief sought in C.P. 29/92 were directly and substantially in issue before the Madras High Court. Hence the Board could not and ought not to have entertained the petition much less granting the relief therein. The Board without verifying the correctness of Form No.32 gave its verdict which is contrary to the facts on record. It arrived at a wholly unwarranted inference that the petitioner had been holding parallel meetings claiming to be continuing as Director of respondent No.2. According to the appellants, the impugned order suffered in law, hence the appeal.

(2) Before the question of issuance of show cause notice could be taken up, the respondents represented by Mr. F.S.Nariman, Sr. Advocate raised a preliminary objection regarding the maintainability of this appeal in this High Court. Office had also raised similar objection but on a different ground. Mr. Nariman took objection to the maintainability of this appeal before Delhi High Court, on two accounts; firstly that no cause of action arose at Delhi and secondly the Registered office of Shoe Specialities whose shares are under question has its registered office at Madras. Hence it is the Madras High Court which will have the jurisdiction under Section 1 Of of the Act.

(3) In order to appreciate the objection, we have to analyze the scheme of the Act. The Act was amended from time to time, and lastly, it was amended in 1988 called the Companies (Amendment)Act 1988. BytheamendingActof1988,the powers of the Court under Part Vi Chapter Vi with which we are concerned, vested with the Company Law Board. The formation of the Board and its power, by virtue of the amendment of the Act are given in anew chapter i.e. part I-A. The said Part 1-A deals with the Board of Company Law Administration. Section 10E in part 1-A confers power on the Board to exercise and discharge such powers and functions as may be conferred on it, by or under this Act or in any other law, and also the powers and functions entrusted to it by the Central Government under this or any other law by notification in the Official Gazette. Section 10E(4C) provides that the Bench constituted under the Board shall exercise certain powers under the Code of Civil Procedure. Section 10E(4D) indicates that every Board shall be deemed to be a civil court and every proceeding before the Board shall be deemed to be judicial proceeding. Further Section 10E(6) gives power to the Board to regulate its own procedure. The object and reason for the amendment was to set up an independent company law board to exercise such judicial and quasi judicial function as were exercised either by the court or the Central Government. After coming into force of the Amended Act, 1988, the Company Law Board started exercising wider jurisdiction under various provisions of the Act. The powers were also given to the board to constitute Benches and the said Benches were delegated the powers and the functions by the Board. These Benches exercise powers of a civil court under the Code of Civil Procedure in respect of the matters specifically mentioned under Section 10E(4C).

(4) The Board has also formulated its. regulations known as Company Law Board Regulation 1991 which came into force with effect from 31st May, 1991. With the coming in force of these regulations, the earlier rules of the- Board stood recinded. Now all the petitions wherever powers are vested with Board have to be filed before the Principal Bench or before another Bench notified for that purpose.

(5) It is in pursuance to this amendment in the Act that C.P. 29/92 under Section 397 and 398 of the Act was filed before the Board. The Chairman exercising its power under the Regulations kept the case with the Principal Bench at Delhi, The Principal Bench at Delhi has delivered the impugned order.

 (6) Section 634A of the Act provides for the enforcement of the order of the Board. Section 634A reads as under:    "SECTION 634A Enforcement Of Orders Of Company Law Board - Any order made by the Company Law Board may be enforced by that Board in the same manner as if it were a decree made by a Court in a suit pending therein, and it shall be lawful for that Board to. send, in the case of its inability to execute such order, to the Court within the local limits of whose jurisdiction, - (a) in the case of an order against a company, the registered office of the company is situated, or (b) in the case of an order against any other person, the person concerned voluntarily resides, or carries on business or personally works for gain."  

 (7) The perusal of this Section shows that the order passed by the Board will be treated as a decree made by a court in a suit pending therein , meaning thereby that the company petition which is pending before the Board and in which order has been made, will be equated with a suit pending before a civil court and order passed therein as a decree. Now the question arises if the proceedings before the Board are equated to a suit pending before a Civil Court and its order as decree, then where will the aggrieved party file the appeal?  

 (8) The provisions of appeal have been.given in newly inserted Part 1 -A of the Act, and Section 10F provides the remedy for appeal against the order of the Board to the High Court. Section 10 lays down the jurisdiction of the court. Both these sections are relevant for our purpose. These are reproduced as under:-     

"SECTION10 Jurisdiction Of COURTS: (1) The Court having jurisdiction i 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 tiling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district. (2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred - . . (a) in respect of companies generally, by sections 237,391,394,395 and 397 to 407 both inclusive; (b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part Vii (Sections 425 to 560) and the other provisions of this Act relating to the winding up of companies. (3) For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up."

SECTION10F Appeals Against The Orders Of The Company Law Board - Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the. Company Law Board to him on any question of law arising out of such order; provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days."

(9) According to Mr. Narihman, Section 10F provides the remedy of appeal to the High Court, and the High Court exercising the jurisdiction has been defined under Section 10 of the Act to be that High Court within whose jurisdiction the cause of action arose and the- registered office of the company concerned is situated. In this case according to him, the cause of action arose at Madras as well as the registered office of the Shoe Specialities is situated at Madras, hence the Madras High Court alone would .have the jurisdiction to entertain this appeal. According to Mr. Narihman the harmonious reading of Sections 10 and 10F would lead to Only one conclusion, and that, to determine the High Court, we have to keep in mind as to where the Registered office of the company is situated. Meaning thereby that while interpreting Section 10F, the expression, the High Court has to be the same as appearing under Section 10 of the Act. In order to strengthen his argument, he drew my attention to Sections 634A and 635(4) of the Act. So far as Section 634A is concerned, that deals with the enforcement of the order of the Board. Relying on this section, Mr. Narihman contended that in order to execute the order, the Board has to sent the decree within the local limits of that court in whose jurisdiction the registered office of the company is situated. Similarly under Section 635(4) of the Act, where any order made by the court is required to be enforced by the court, it has to be got transferred to a court where it can be executed and enforced. This means that the impugned order cannot be executed at Delhi, it has to be transferred to Madras for the purposes of endorsement and execution. Therefore, that High Court will have the order executed or enforced. The appeal would therefore lie to that High Court.

(10) On the other hand, Mr. Shanti Bhushan, Senior Advocate appearing for the appellants, contended that Section 10 has no bearing on Section 10F of the Act. These sections provide independent remedies. Section 10 defines "The Court" whereas Section 10F deals with remedy of appeal before the High Court and not before the Court. The intention of the legislature can be inferred when it inserted Part I A separately by the Amended Act of 1988. Section 10E and 10F will go together. Section 10 cannot be read with Section 10F. Section 10 defines the Court whereas the legislation has not used the expression the court under Section 10F. The expression 'the High Court' under Section 10F would mean that High Court within whose territorial jurisdiction the Board rendered the decision.

(11) Arguments on both sides at the first blush appear very convincing but little deep reading of the scheme of the Act and the Regulations provided therein, would lead to the conclusion that Section 10 has no bearing on Section 10F. The expression used under Section 10, "the court having jurisdiction" cannot be construed as conferring jurisdiction on a particular court in regard to all matters referred to in the Act. If a petition is to be filed under the Act, in a court then Section 10 will become relevant to determine as to in which court the petition has to be filed. The expression 'the High Court' under Section 10F does not mean 'the court'. These are two independent expressions and have to be understood accordingly. Drawing the analogy from the Civil Court, because Section 10E(4D) equates the Board with a Civil Court, therefore it is to be presumed that where the Civil Court is located, the appeal will lie to that High Court. The legislature in its wisdom provided the remedy of appeal against the order of the Board to the High Court. The High Court will have relevance with the decision or order of that Board as mentioned in Section 10E. If the Board rendered the decision at Delhi then this High Court will have the jurisdiction and if the decision was rendered at Madras in that case it will be that High Court. Since the decision of the board is equated to be a decree passed in a pending suit, hence such a decree can only be assailed in that High Court within whose territorial jurisdiction that decree was passed. The word the High Court, therefore, appearing in Section 10F cannot be equated with the word "the court" appearing under Section 10. Regulation 4 of the Company Law Board Regulation 1991 lays down that with regard to the provision of Setion 235,237,247,248 etc. and the matter falling under Chapter Vi of Part Vi of the Act shall be dealt with by the Principal Bench. Regulation 4 is reproduced as under:- "REGULATION4 Power Of The Chairman To Specify Matters Which May Be Dealt With By A BENCH-(1) It shall be lawful for the Chairman to provide that matters falling under Section 235, 237,247,248,250,388B, 408 and 409 and matters falling under Chapter Vi of Part Vi of the Act and under Section 2A of the Monopolies Act and all other matters falling under Chapter Vi of Part Vi of the Act and under Section 2A of the Monopolies Act and all other matters incidental thereto shall be dealt with by a Board consisting of not less than two members including the Chairman (which shall be known as the Principal Board.) (2) The Principal Board shall be at New Delhi but the Principal Board may sit at such places in India and at such time as may be most convenient in exercise of its powers and functions in India. (3) It shall be lawful for the Chairman to provide that matters falling under Section 111 and 269 of the Act and under Section 22A of the Securities Act shall be dealt with by a Board consisting of not less than two members and all other matters not falling under sub-regulations (1) and (3\ of this regulation including issuing of directions and interlocutory matters may be dealt with by a Board consisting of a single member;"

(12) The reading of this regulation further fortifies that when the Principal Bench tries a matter under Chapter Vi of Part Vi of the Act then the question of jurisdiction based on the principle of the Registered office of the company looses its significance. Comparison can be drawn to regulation 7 which clearly stipulates that all proceedings except those which are before the Principal Bench, shall be instituted before the Board within whose jurisdiction the registered office of the company is situated, but no such restriction has been imposed on the Principal Bench. Therefore reading Section 10F with Regulation 4, it is clear that wherever the Principal Bench will render its decision, the party aggrieved against the same, shall file the appeal to that High Court within whose territorial jurisdiction that decision was rendered. The phrase used in Section 10F of the Act and under section 256 of the Income Tax Act 1961 is identical or para materia the same. If instead of providing appeal under Section 10F, the expression used had been "reference" then naturally it would have been referred to this High Court because question of law requiring interpretation arose within the jurisdiction of this High Court. The appeal under Section 10F is to be from the order of the Board ''on any question of law arising out of such order". Similarly under Section 256 of the Income Tax Act, 1961 a reference to the High Court from the Appellate Tribunal can be made "on any question of law arising out of such order". Hence the appeal under Section 10F is analogous to a reference under Section 256 of the Income Tax Act 1961. Hence the appeal could be filed to the High Court by a person aggrieved from the order of the Board on any question of law arising out of such order. It may be noted that the appeal will lie to the High court only ''on any question of law arising out of such order" of the Board. The expression the High Court under Section 10F would therefore mean in this case, the Delhi High Court, under whose territorial jurisdiction the Principal Bench has rendered the decision. I am, therefore, of the opinion that the appeal would lie to the High Court at Delhi. For the reason stated above, the objection raised by the office is also rejected.