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Issues: (i) Whether the provisions of the Companies (Amendment) Act, 1988 creating an independent Company Law Board were constitutionally invalid for want of legislative competence or for absence of valid classification in distributing jurisdiction between the Board and the High Court; (ii) Whether the grievance regarding access of minority shareholders to the Board survived in view of the Company Law Board Regulations, 1991 and the amended service rules governing the Board.
Issue (i): Whether the provisions of the Companies (Amendment) Act, 1988 creating an independent Company Law Board were constitutionally invalid for want of legislative competence or for absence of valid classification in distributing jurisdiction between the Board and the High Court.
Analysis: The challenge based on legislative incompetence was rejected because the Company Law Board was not a substitute for the High Court in the sense in which administrative tribunals had been treated in earlier precedent. An appeal lay from the Board to the High Court under section 10F, whereas the Board did not displace the constitutional jurisdiction of the High Court. The challenge based on classification also failed because the power of winding up, being more drastic, was retained by the High Court, while the Board was entrusted only with the less drastic oppression and mismanagement jurisdiction. That distinction furnished a rational basis for treating the two fora differently.
Conclusion: The provisions creating the Company Law Board and the allocation of jurisdiction were held constitutionally valid and the challenge failed.
Issue (ii): Whether the grievance regarding access of minority shareholders to the Board survived in view of the Company Law Board Regulations, 1991 and the amended service rules governing the Board.
Analysis: The objection that minority shareholders would be left without effective access was negatived because the regulations provided for regional Benches at the principal commercial centres, with institution of proceedings before the appropriate regional Bench and flexibility for sittings in other cities within the region. The later framing and amendment of the service rules also addressed the earlier silence on qualifications and experience of members, including adequate scope for judicial members.
Conclusion: The access-based objection was rejected and the grievance was treated as substantially satisfied by the regulatory framework.
Final Conclusion: The petition lost its substantive force after the framing and amendment of the Company Law Board rules, and the constitutional challenge to the impugned provisions did not succeed; the proceeding was closed as having served its purpose.
Ratio Decidendi: A statutory scheme is not invalid merely because jurisdiction is divided between a specialized tribunal and the High Court, where the tribunal is not a substitute for the High Court and the distribution of powers rests on a rational distinction in the seriousness of the remedies.
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