National Insurance Co. Ltd. . vs Glaxo India Ltd.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1999 Supreme(Bom) 112

IN THE HIGH COURT OF BOMBAY
F.I. Rebello, J.
National Insurance Company Ltd...... Appellant.
Versus
Glaxo India Ltd. ..... Respondent.
Company Appeal No. 8 of 1998 in Petition No. 14/111/C.L.B. .WR/95, decided on 16-2-1999.
Advocates appeared :
A.Y. Bookwala, Ashwin Ankhad M/s. Swapnila Rane, for the appellant.
P.K. Samdani with Rajeev Menon S.H. Merchant i/b. M.M. Legal Venture, for respondent.

Headnote:Section 111- Transfer of shares-Dispute as to-Jurisdiction of Company Law Board-Dispute arose as to whether appellants are owners of shares-Such dispute not being mere matter for redification - Held, Company Court has no jurisdiction but the Civil Court has - It is, therefore, now clear from the judgment of the Apex Court in M/s A.S. Corporation (p) Ltd., AIR 1998 SC 3153 (supra) the Apex Court has held that in so far as the matters of rectification are concerned, it is the Company Court alone which would have jurisdiction. If issues which have to be answered are not peripheral to rectification but issues regarding title, etc. then such other issues will have to be decided by the Civil Court. The Apex Court- has not recognised that it is the Company Court which would be the Court of exclusive jurisdiction in so far as rectification is concerned. However, if issues arise, whether the applicant is the owner of the shares, whether there is fraud or forgery in holding the shares or the very title to the shares then such issues will be beyond the jurisdiction of the Company Court and will have to be decided by the Civil Court.
       Section 111(2)-Grounds for rejection-Application for transfer of shares-Decision of Board of Directors to be examined by applying the tests.- The Company Law Board in exercise of its power conferred under sub-section (2) of Section 111 has to examine the decision of the Board of Directors in the light of these legal principles and not as an Appellate Court from the decision of the Court of the original jurisdiction.
       Section 111(4)-Jurisdiction of Company Law Board-Case pertaining to rectification only can be decided by Board-Not the dispute whether appellants are owners of shares or not.- The respondent company at the threshold had informed the appellants that they had not received 6050 shares. In other words there is a dispute as to the very transaction itself which is not merely a matter for rectification. Secondly, there are disputes whether the persons who are holding the shares are holding the shares on account of forged document. In other words it is not merely the case of the appellant being the owner of the shares and the company for wrong reasons refusing to rectify the Register without cause. When there are disputes as to whether the appellants are the owners of the shares will not be a case exclusively pertaining to rectification which could be decided by the Company Law Board. In that light of the matter though the reasons given by the Company Law Board cannot be sustained its ultimate conclusion cannot be set aside.
       Sections 111(4) and 10-F(4) - Jurisdiction of Company Law Board relating to rectification matters is exclusive-Issues such as title of shares etc. are beyond jurisdiction of Company Law Board-In those matters Civil Court has jurisdiction.-Insofar as the matters of rectification are concerned, it is the Company Court alone which has jurisdiction. If issues which have to be answered are not peripheral to rectification but issues regarding title, etc. then such other issues will have to be decided by the Civil Court. If issues arise, whether the applicant is the owner of the shares; whether there is fraud or forgery in holding the shares or the very title to the shares, then such issues will be beyond the jurisdiction of the Company Court and will have to be decided by the Civil Court.
       Sections 111 and 155-Jurisdiction-Issues relating to ownership of shares, fraud or forgery in holding shares or very title to shares-Company Court has no jurisdiction to decide these issues-But can be decided by Civil Court-Company Court has jurisdiction to decide issues peripheral to rectification.-It is, therefore, now clear from the judgment of the Apex Court in M/s. A.S. Corporation (P) Ltd., in which it is has held that in so far as the matters of rectification are concerned, it is the Company Court alone which would have jurisdiction. If issues which have to be answered are not peripheral to rectification but issues regarding title, etc. then such other issues will have be decided by the Civil Court. The Apex Court has now recognised that it is the Company Court which would be the Court of exclusive jurisdiction in so far as rectification is concerned. However, if issues arise, whether the applicant is the owner of the shares, whether there is fraud or forgery in holding the shares or the very title to the shares, then such issues will be beyond the jurisdiction of the Company Court and will have to be decided by the Civil Court.

JUDGMENT - F.I. REBELLO, J.:---The appellants aggrieved by the order dated 24th July, 1988 passed by the Company Law Board, Western Region Bench, Mumbai, have preferred the present appeal. The main contention urged on behalf of the appellants is that the Company Law Board erred in holding that the disputes raised in the petition raise complicated questions which could not be decided by the Company Law Board in exercise of its jurisdiction under section 111 of the Companies Act. In addition, it is also submitted that no reasons have been given by the Board for the order passed and consequently the matter must be remanded to the Board for disposing of the matter by giving reasons for its order.

2. The short facts which are necessary for disposal of the appeal may now be stated.

It is the case of the appellants that the Stock Holding Corporation of India Limited (SHCIL.) had sent 10,750 equity shares of the respondent company for transfer in the name of the appellants on 15th March, 1991. The respondent company transferred only 4700 shares. The respondent company also had issued rights issue in the ratio of 1: 5 in the years 1993 and had also issued Bonus shares in the ratio of 1:1. The appellants felt that the shares issued as rights shares and bonus shares would not be allotted to the appellants and consequently the name of the appellants will not be entered in the Register of Members of respondent company in respect of 14,520 shares. It is their case that the Register should be rectified in respect of 14,520 shares by entering the name of the appellants.

The respondent company filed their reply dated 6th July, 1995. The respondent company stated that they received a letter dated 15th March, 1991 from SHCIL giving the details of 10,750 shares. The respondent company, however, received only 4,700 shares. A letter dated 13th May, 1991 was addressed to SHCIL The respondent company also sent an acknowledgment dated 16th May, 1991 for the receipt of 4,700 shares. SHCIL made enquiries as late as in December, 1993 after the rights issue. The respondent company did not admit that the petitioner is a lawful owner of the said 6050 shares. It is thereafter set out that as the respondent company did not receive the missing shares it cannot under any circumstances be made responsible for the same. The 6050 missing shares were not lodged with the company for transfer and this was intimated to the appellants time and again. It is also pointed out that the appellants had filed a civil suit and in view of that the petition ought not to be entertained.

At this stage it may be pointed out that the appellants have averred that though they had filed a suit on account of some observation made by the Company Law Board the suit was withdrawn. It may further to be noted that in respect of these very 6050 shares there are subsequent transfers effected by the respondent company.

3. The Company Law Board after considering the matter arrived at a conclusion that the matter involve complicated questions of fact which could not be decided in a petition under section 111 of the Companies Act, 1956 and the controversy could be decided only by a Civil Court. With the above background the points urged cannot be decided. It may be relevant to mention at this stage that section 111 was substituted by the Companies (Amendment) Act, 1988 with effect from 31st May, 1991. Pursuant to this section 155 was omitted from the Companies Act. Section 111 thereafter was again amended by introduction of sub-section (4) which came into effect from 20th September, 1995. By virtue of the said amendment section 111 applies only to a private company which includes a private company which had become a public company by virtue of section 43-A of this Act. The appellants are a Public Limited Company. However, the petition was filed before the said amendment. There is no dispute at the Bar that the provisions of section 111 would be applicable in so far as the petition filed before th

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