1998 Supreme(SC) 944

1998(7) Supreme 191
Supreme Court of India
(From Delhi High Court)
G.B. Pattanaik & A.P. Misra, JJ.
M/s. Ammonia Supplies Corporation (P) Ltd. -Appellant
versus
M/s. Modern Plastic Containers Pvt. Ltd. & Ors. -Respondents
Civil Appeal No. 5152 of 1995
Decided on 4-9-1998
Counsel for the Parties :
For the Appellant : Satish Chandra and Sarat Chandra, Advocates.
For the Respondents : A.T. Ansari, Advocate for S.K. Kaul, Advocate.

Important Point
The principle of law as decided by the High Court that jurisdiction of Court under Section 155 Companies Act, 1956 (as amended in 1960) is summary in nature cannot be faulted. But court ought to have seen itself whether alleged documents are disputed and any document is alleged to be forged to see whether they come within the scope of rectification or not in the light of Supreme Court’s observations.

Headnote:Companies Act, 1956-Section 155 (as amended in 1960)-Rectifi­cation of Register of a Company-Remedy available under-Whether of summary nature and hence com­plicated questions be sent for adjudication to Civil Court? (Yes)-Whether High Court ought to have seen itself that alleged documents are disputed one and any document is alleged to be forged to determine whether it is just to exclude jurisdiction of Court or it is genuinely so and further whether it would fall within the scope of rectification or not? (Yes)-Effect-Supreme Court directed the High Court to decide this question and as case is very old to get it decided by Company Judge itself instead of sending back to Civil Court-Appeal allowed partly.

       Held : Now we proceed to examine the power of the Court to rectify the register of members of a company under Section 155. The question raised for the appellant is that the Court under this Act cannot direct an applicant to seek his remedy by way of suit but the Court under the Act having exclusive jurisdiction should decide itself. (Para 25)

       There could be no doubt any question raised within the peripheral field or 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 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 discretion to find whether the dispute raised are really for rectification or is of such a nature, 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 means everything as required under the law has been done yet by some mistake the name is either committed or wrongly recorded in the regis­ter of the Company. (Para 26)

       In other words, in order to qualify for rectification, every procedure as prescribed under the Companies Act before recording the name in the register of the company has to be stated to have been complied with by the applicant at least that part as required by the Act and assertion of what not complied with under the Act and rule by the person or authority of the respondent company before applicant to claim for the rectification of such register. The Court has to examine on the facts of each case, whether an application is for rectification or something else. So field or peripheral jurisdiction of the Court under it would be what comes under rectification not projected claims under the garb of rectification. So far exercising of power for recti­fication within its field there could be no doubt the Court as re­ferred under Section 155 read with Section 2(11) and Section 10, it is the Company Court alone which has exclusive jurisdiction. 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. Question for scrutiny before us is the peripheral field within which could 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. Both under the 1913 Act and 1960 Act a procedure is prescribed for admitting a person as member by purchase or transfer of shares of that company. With reference to 1913 Act under Section 29, a certificate of shares or stock shall be prima facie evidence of the title of the number of the shares or stock therein. Section 30 defines “member” to be one who agrees to become a member of a company and whose name is entered in its register. Section 31 is to keep register of its mem­bers. Section 34 deals with transfer of shares and application for the registration of the transfer of shares is to be made either by the transferor or the transferee. Where such application is made by the transferor for registration of his share a registered notice is to be sent to the transferee. Section 34(3) restricts to register a transfer share until the instrument of transfer duly stamped and executed by the transferor and transferee has been delivered to the company. Thus before the name of any transferee is registered these procedure has to be shown to have been followed, which is an obligation of any such applicant under the Act. This shows an application is to be made either by the transferor or transferee for registering the name of the transferee as members or share holders of the company by placing before the company duly stamped and signed document both by the transferor and transferee. Similarly is the position under Section 155 of Indian Companies Act, 1960 before power is exercised for rectification essential ingredients are to exist. Section 100 gives mandate to a Company not to register transfer of shares, unless proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee has been delivered to the company along with certifi­cates relating to the shares. All the above indicates the limitation and the peripheral juris­diction with which court has to act. In spite of its exclusiveness it cannot take within its lap outside this scope of rectification. This is indicated even by Section 155 itself. (Paras 27 to 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 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 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 if it finds adjudication of any matter not falling under it, it may direct a party to get his right adjudicated by civil court. Unless jurisdiction is expressly or implicitly barred under a Statute, for violation or redress of any such right civil court would have jurisdiction. There is nothing under the Companies Act expressly barring the jurisdiction of the civil court, but the jurisdiction of the ‘court’ as defined under the Act exercising its powers under various Sections where it has been invested with exclusive jurisdiction, the jurisdic­tion of the civil court is impliedly barred. We have already held above the jurisdiction of the ‘court’ under Section 155 to the extent it has exclusive, the jurisdiction of civil court is impliedly barred. For what is not covered as aforesaid the civil court would have juris­diction. Similarly we find even under Section 446(1), its words itself indicate jurisdiction of civil court is not excluded. This sub section states, ‘...... no suit or legal proceedings shall be commenced.......or proceeded with ........ except by leave of the court’. The words ‘except by leave of the court’ itself indicate on leave being given the civil court would have jurisdiction to adjudi­cate one’s right. Of course discretion to exercise such power is with the ‘court’. Similarly under Section 446(2) ‘court’ is vested with powers to entertain or dispose of any suit or proceedings by or against the company. Once this discretion is exercised to have it decided by it, it by virtue of language therein excludes the jurisdic­tion of the civil court. So we conclude the principle of law as decid­ed by the High Court that jurisdiction of Court under Section 155 is summary in nature cannot be faulted. Reverting to the second limb of submission by learned counsel for the appellant that court should not have directed for seeking permission to file suit only because a party for dispute sake states that the dispute raised is complicated ques­tion of facts including fraud to be adjudicated. The court should have examined itself to see whether even prima facie what is said is com­plicated question or not. Even dispute of fraud, if by bare perusal of the document or what is apparent on the face of it on comparison of any disputed signature with that of the admitted signature the Court is able to conclude no fraud, then it should proceed to decide the matter and not reject it only because fraud is stated. Further on the other hand 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 Director. It is urged the money even if advanced to Sri 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. 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 take into consideration the submissions for the respondents, whether it would come within the scope of rectification or not in the light of what we have said above. Since the High Court has not examined this case in the aforesaid light, we feel it appropriate to direct the High Court to decide this question in the light of what we have said afresh, without prejudice to any party of any observation made by us above. In case High Court comes to the conclusion that any issue raised does not come within Section 155 then we feel it appropriate on the facts and circumstances of this case, as it is pending since 1984, that High Court exercises its discretion under Section 446(2) to get it adjudicated by the court (Company Judge) itself instead of sending back to the civil court to which we order. With the aforesaid findings the appeal is partly allowed. Costs on the parties. (Paras 30 to 33)