TaxTMI 
TaxTMI 
2005 (11) TMI 261
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....s formally known as Modi Luft Ltd. Sometime in or about 20-6-1994 a collaboration agreement was executed between erstwhile company known as Modi Luft with Lufthansa under which it was agreed that the operation and management of the airlines will be taken over by Lufthansa. However it seems that in 1996 the said arrangement between Modi Luft and Lufthansa came to an end and there were litigations filed between the defendant No. 7-company which was then known as Modi Luft and Lufthansa. Ultimately an out of court settlement was arrived at between the defendant No. 7 and Lufthansa on 13-8-1997. On 26-12-1997 the promoters of the defendant No. 7 received an approval from Foreign Investment Promotion Board to raise U.S. $ 50 million for the issue and sale of cumulative redeemable convertible preference shares (shortly known as C.R.C.P.S.). In June 1998 a fresh business plan was prepared by the defendant No. 7 to relaunch the airlines. On 29-6-1998 the defendant No. 7 received a no objection certificate from the Indian Ministry of Civil Aviation to import aircrafts. There were also proceedings between the defendant No. 7 and various creditors in the Delhi High Court in which the Delhi Hi....
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....r of the interest in the first defendant company the ownership rights in C.R.C.P.S. of 17.5 million U.S. Dollar which was issued pursuant to the special resolution dated 27-8-1999 in favour of the defendant No. 1 stood transferred alongwith beneficial interest therein in favour of the Kansagra Brothers from Ajmal Khan. On 17-10-2000 the defendant No. 1 remitted the amount of 17.5 U.S. Dollar and on the same day the defendant No. 7 issued 8,10,77,500 14 per cent C.R.C.P.S. to defendant No. 1. This allotment was pursuant to the said resolution dated 27-8-1999 passed under section 81(1)(a) of the Companies Act. On 28-2-2001 the said 8,10,77,500 C.R.C.P.S. were converted into equity shares of defendant No. 7. Thus in effect the defendant No. 1 acquired 50 per cent stake in the 7th defendant company. 3. Thereafter in 2005 out of the shareholding of 8,10,77,500 shares the defendant No. 1 sold 25,68,111 shares to the 2nd defendant 63,95,643 shares to the 3rd defendant, 44,45,586 shares to 4th defendant, 43,35,000 shares to the 5th defendant and 29,01,563 shares to 6th defendant. Thus the holdings of the defendant No. 1 in defendant No. 7 was reduced by the sale of the aforesaid shares f....
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.... once the controlling interest was transferred in favour of the Kansagra Brothers then fresh resolution was required to be passed under section 81(1)(a) authorising the allotment of C.R.C.P.S. in favour of the defendant No. 1. It is further the case of the plaintiff that once the controlling interest in the defendant No. 1 is transferred in favour of the Kansagra Brothers the exemption available under the regulation 3(1)(c) is not available and thus the resolution passed under section 81(1)(a) is in effect contrary to regulations 10 and 12 of the said Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) being the Takeover code. Thus in effect the plaintiffs are challenging in the present suit the preferential allotment of 8,10,77,500 C.R.C.P.S. by 7th defendant to 1st defendant by passing a special resolution in October 2000. By prayer (a) of the suit a declaration is sought that the said resolution passed in October 2000 be declared invalid and in violation of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. By prayer (b) of the suit it is claimed that there should be a direction to the defendant No. 7 to cancel the s....
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.... equity shares of Rs. 10 each. (v) Defendant No. 5 qua its shareholding of 43,25,000 equity shares of Rs. 10 each. (vi) Defendant No. 6 qua its shareholding of 29,01,563 equity shares of Rs. 10 each. (vii) Defendant No. 8 qua its shareholding of 50,00,000 convertible warrants of Rs. 10 each. (viii) Defendant No. 9 qua its shareholding of 50,00,000 equity shares of Rs. 10 each and holding of 50,00,000 convertible warrants of Rs. 10 each. (ix) Defendant No. 10 qua its shareholding of 50,00,000 equity shares of Rs. 10 each and holding of 50,00,000 convertible warrants of Rs. 10 each. (x) Defendant Nos. 11 and 12 qua its holding of 1.53 million unsecured fully convertible debentures of Rs. 100 each, convertible into 3.7 million shares of Rs. 10 each. 5. Prayer (j) onwards are the interim prayers in the present suit. Thus in effect in the present suit what is sought is a cancellation of various allotment of shares in the 7th defendant company and subsequent transfer thereof and also further allotment of the share as in violation of the SEBI Act and the said Takeover Regulations which is popularly known as 'Takeover Code'. After seeking declaration that allotment and/or tran....
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....ction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. Section 21 Savings Nothing in this Act shall exempt any person from any suit or other proceedings which might, apart from this Act, be brought against him. Section Application of other laws are not Application of other laws are not Application of other laws are not Barred. The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force. SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997 3. Applicability of the regulation. Applicability of the regulation. Applicability of the regulation. (1) Nothing contained in regulations 10, 11 and 12 of these regulations shall apply to: (a) allotment in pursuance of an application made to a public issue : Provided that if such an allotment is made pursuant to a firm allotment in the public issues, such allotment shall be exempt only if full disclosures are made in the prospectus about the identity of the acquirer who has agreed to acquire the share....
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....such person makes a public announcement to acquire shares and acquire such shares in accordance with the regulations : Provided that nothing contained herein shall apply to any change in control which takes place in pursuance to a [special] resolution passed by the shareholders in a general meeting : [Provided further that for passing of the special resolution facility of voting through postal ballot as specified under the Companies (Passing of the Resolutions by Postal Ballot) Rules, 2001 shall also be provided.] [Explanation - For the purpose of this regulations, acquisition shall included direct or indirect acquisition of control of target company by virtue of acquisition of companies, whether listed or unlisted and whether in India or abroad.] 44. Directions by the Board. Without prejudice to its right to initiate action under Chapter VIA and section 24 of the Act, the Board may, in the interest of securities market or for protection of interest of investors, issue such directions as it deems fit including:- (a) directing appointment of a merchant banker for the purpose of causing disinvestment of shares acquired in breach of regulation 10, 11 or 12 either through p....
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....ature of offence alleged to have been committed by him. (3) If, after considering the cause, if any, shown by such person, the adjudicating officer is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of that person either personally or through his lawyer or other authorised representative. (4) On the date fixed, the adjudicating officer shall explain to the person proceeded against or his lawyer or authorised representative, the offence, alleged to have been committed by such person indicating the provisions of the Act, rules or regulations in respect of which contravention is alleged to have taken place. (5) The adjudicating officer shall then give an opportunity to such person to produce such documents or evidence as he may consider relevant to the inquiry and if necessary the hearing may be adjourned to a future date and in taking such evidence the adjudicating officer shall not be bound to observe the provisions of the Evidence Act, 1872 : Provided that the notice referred to in sub-rule (3), and the personal hearing referred to in sub-rules (3), (4) and (5) may, at the request of the person concerned, be waived. (6....
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....7. (p) the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 1998. (q) the Securities and Exchange Board of India (Cerdit Rating Agencies) Regulations, 1999. (r) the Securities and Exchange Board of India (Collective Investment Scheme) Regulations, 1999. (s) the Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 1992. 5. Appointment of enquiry officer (1) Where it appears to the chairman or a member designated in this behalf that an intermediary has contravened any of the provisions of a Regulation referred to in Regulation 4, the Chairman or the member, as the case may be, may appoint an enquiry officer for the purpose of holding an enquiry into the matter : Provided that the Chairman or the member, as the case may be, may appoint more than one enquiry officers if the subject-matter of enquiry contains technical or complicated questions of facts or law who will function as a bench to be presided by the senior amongst them. (2) No officer who has dealt with the matter or who is directly or indirectly interested, or has an interest, in that intermediary or who has conducted an investigation or inspection ....
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....of brevity referred to as Takeover Regulations). It has been contended that for breach of any such Takeover Regulation under sections 15H and 15-I the Adjudicating Officer has been appointed to take cognizance thereof. Apart therefrom under regulation 44 of the Takeover Regulations the power is conferred on the board to pass necessary directions including direction to cancel the shares when acquisition of shares is pursuant to an allotment in breach of the said Takeover Regulations and in cases of a transfer according to the learned counsel the said clause (d) of the regulation 44 provides the remedy for violation of the said Takeover Regulations. The learned counsel has contended that in view of the express bar contained under sections 15Y and 20A of the SEBI Act this court has no jurisdiction to entertain the suit which is based on a sole contention that in allotment and/or transfer of shares there has been a breach of the Takeover Regulations and thus allotment and/or transfer is illegal, unlawful and or nullity. 10. Dr. Abhishek Singhvi, learned counsel for the respondent No. 7 has also supported the contention of the learned counsel for the defendant No. 4 and has contended t....
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....f the said Act which provides inter alia for breach of Takeover Regulation and consequent inquiry and penalty. He has thereafter drawn my attention that after the order is passed under section 15-I the remedy of a person is by way of appeal to the Securities Appellate Tribunal under section 15-I and appeal therefrom lies to the Supreme Court under section 15Z of the said Act. Learned counsel has thus contended that the scheme by itself provides for a complete code and therefore, this court ought not to entertain any suit pertaining to the subject-matter which is arising under the SEBI Act and for which the SEBI is empowered to take action. He has further contended that the provisions of sections 15Y and 20A which contain an express bar by itself are sufficient to non-suit the plaintiff in the present case but he contends that in any event the bar contained under sections 15Y and 20A must be looked into the context of the provisions which are set out hereinabove so as to indicate that the bar provided under the aforesaid sections 15Y and 20A from civil court entertaining any issue because the scheme of the Act itself provides for rights as well as remedies thereunder. Learned counse....
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....rly paras 17 and 18 of the judgment : "17. All communal lands, porambakes, tanks, etc., in inam villages shall vest in the Government under section 2A; of Inams Act free from all encumbrances. Section 3 determines the inam lands whether held by the individual or the institution, provides procedure for determination and section 3(4) gives right of appeal. Section 4 converts those lands into ryotwari lands and accords entitlement to grant of ryotwari patta. Section 5 gives power to restitute the lands to the tenants in occupation though they were ejected between specified dates. Section 7 gives power to grant ryotwari patta to the tenants to the extent of two-thirds share in the land and one-third to the landholder. If it was held by the institution, two third shares would be to the institution and one-third to the tenants. Section 8 grants right of permanent occupancy to the tenants in inam lands held by institutions. Section 9 prescribes procedure for eviction of the tenants having right of permanent occupancy. Section 10A provides right to ryotwari patta to tenants in a ryotwari or zamindari village with the right of permanent occupancy, even in the lands, held under customary r....
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.... implication. The Inam Act is a step in that direction as part of Estate Abolition Act. Therefore, departure in the allocation of the judicial functions would not be viewed with disfavour for creating the new forums and entrusting the duties under the statutes to implement socio-economic and fiscal laws. We have to consider, when questioned, why the Legislature made this departure. The reason is obvious. The tradition bound civil courts gripped with rules of pleading and strict rules of evidence and tardy trial, four tier appeals, endless revisions and reviews under CPC are not suited to the needed expeditious dispensation. The adjudicatory system provided in the new forums is cheap and rapid. The procedure before the Tribunal is simple and not hide-bound by the intricate procedure of pleadings, trial, admissibility of the evidence and proof of facts according to law. Therefore, there is abundant flexibility in the discharge of the functions with greater expeditions and inexpensiveness." (p. 245) 13. He has also drawn my attention to the judgment of S. Vanathan Muthuraja v. Ramalingam alias Krishnamurthy Gurukkal in 1997 (6) SCC 143 and, particularly para 3 of the judgment : "Wh....
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....unsel for defendant No. 1 has supported the argument of Mr. Tulzapurkar and Mr. Singhvi and has taken me throughout the following averments of the plaint, which are as under : "It is submitted that no such resolution having been passed by the members/shareholders of defendant No. 7, the acquisition of shareholding by defendant No. 1, which was at the time of the acquisition admittedly under the control of the Kansagra Brothers was and is, illegal void ab initio and non est being ex facie in flagrant contravention of regulation 10 read with the Explanation to regulation 11 of the Takeover Code. The plaintiffs state and submit that by acquiring control over defendant No. 7 sometime in October, 2000, defendant No. 1 has also violated regulation 12 of the Takeover Code, rendering the same illegal, void ab initio and non est." "The plaintiffs state and submit that defendant Nos. 8 to 10 have violated regulation 12 of the Takeover Code by illegally acquiring control over defendant No. 7 without making a public announcement as envisa- ged under the Takeover Code. Such an announcement, as envisages under the Takeover Code, is a statutory mandatory condition precedent to a Takeover. Vio....
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....e, contended by supporting the arguments of defendant Nos. 4 and 8 that this court has no jurisdiction to entertain and try the present suit. 16. Mr. Seervai learned counsel for the plaintiff has on the other hand contended that this court has jurisdiction to entertain and try the present suit. He has contended that the nature of cause of action and the nature of the suit as framed by the plaintiff in the present suit is identical to the nature of the suit and nature of cause of action which came up for consideration before this court in the case of M. Sreenivasulu Reddy v. Kishore R. Chhabria [2002] 109 Comp. Cas. 18 (Bom.). He has further contended that the issue as to the jurisdiction of this court vice versa sections 15Y and 20A of the SEBI Act was also raised before the learned Single Judge and the Division Bench of this court. He has further relied upon the judgment of the Division Bench in the case of Shirish Finance & Investment (P.) Ltd. v. M. Sreenivasulu Reddy [2002] 109 Comp. Cas. 913 (Bom.) and has contended that in a detailed judgment of the learned Single Judge it has been held that this court has jurisdiction to entertain and try the present suit of identical natur....
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..... He has contended that in the present case also he has raised the issue as to the interpretation of the regulation 3(1)(c) of the Takeover Regulations and to determine the said interpretation of the regulation, it is only the civil court who has jurisdiction and not the SEBI Board. It has been contended that in the judgment of the learned Single Judge in the case of M. Sreenivasulu Reddy (supra) this court has already held that SEBI has no jurisdiction to interpret the provisions of the Act and Regulations and/or to determine the frontiers of the SEBI Board to exercise the power under the Act. Similarly he has also drawn by attention to the judgment of the Division Bench where also the provisions of sections 15Y and 20A of the SEBI Act were noticed by the Division Bench in the judgment of Shirish Finance & Investment (P.) Ltd.'s case (supra). The provisions of the said section are set out at pages 944, 945 of the judgment. 17. He has thus contended that both the aforesaid judgments are the authority on the proposition that irrespective of the express bar contained under the provisions of sections 15Y and 20A of the SEBI this court still has jurisdiction to entertain and try the p....
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....rded, alternatively, the defendants must agree that they were not pressing the issue in the manner in which it was worded in para 1(g) of the above referred affidavit in reply of defendant No. 11. In view of the objections raised by Mr. Nariman and after due deliberations and instructions, the defendant filed a joint affidavit of defendant No. 1 and defendant No. 11 affirmed on March 16, 1999, stating therein that for the reasons contained therein clause G of para 1, was not being pressed. The said affidavit of defendant No. 1 reads as follows : 1. I say that I have filed an affidavit dated December 21, 1998, in reply to Notice of Motion No. 3120 of 1997. In that affidavit in reply, in clause G of paragraph 1 have stated as under : This Hon'ble court does not have jurisdiction to try, entertain and disposed of this suit. 2. Similarly, in the affidavit to oppose grant of ad interim relief filed by me in Notice of Motion No. 3932 of 1998 also dated December 21, 1998, in paragraph 1A, I have stated as under : '1A. I submit that this Hon'ble court does not have jurisdiction to entertain, try and dispose of this suit'. 3. In connection with the above submissions in the said a....
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....s the competent authority to go into those allegations particularly when the proceedings was arising out of the notices issued by it. When this question of jurisdiction was raised, Mr. Nariman, learned counsels appearing on behalf of the plaintiffs, sought clarification from defendant Nos. 1 to 11 as to their stand on the question of jurisdiction, viz., whether the defendants were pressing the plea of jurisdiction. According to Mr. Nariman, if the plea of lack of jurisdiction was to be urged and decided, an issue had to be framed and decided at that stage itself. He, therefore, insisted that if the court was required to frame an issue on the question of jurisdiction, the same may be framed and decided as a preliminary issue having regard to the specific provisions of section 9A of the Code of Civil Procedure, 1908, as amended by a Maharashtra State amendment. Unless an issue was framed, the court could not go into the question of jurisdiction and record a finding thereon. At, best the court could record submissions of rival parties without recording its finding on the issue of jurisdiction. If the plaintiffs insisted that a finding be recorded on the question of jurisdiction, the c....
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....aintiffs as shareholders had filed the suit alleging violation of civil rights, such a suit can be filed before a civil court which has territorial and pecuniary jurisdiction. The defendants, therefore, urged that an interlocutory stage this honourable court should not exercise its discretion to grant interim relief to the plaintiffs, since there is another forum which could be moved by the company for rectification of the register. Moreover, Mr. Reddy (plaintiff) is only a name lender for the company and since no civil rights of Mr. Reddy are infringed, no relief should be granted to him. These are some of the factors amongst others which the court should consider while exercising its jurisdiction in refusing the interim relief. At the trial of the suit, however the defendants would urge that the defendants do not have any right to oppose registration or to have the register rectified; and hence, the suit should be dismissed. In the light of the above submissions, ground (g) of para 1 and para 1A of the two aforementioned affidavits both dated December 21, 1998 were not pressed." (p. 958) 21. The aforesaid paragraphs in both the judgments makes it clear that though the said iss....
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....tion are noticed by the learned Single Judge and the Division Bench but both the learned Single Judge and the Division Bench refrained itself from considering the said provisions because the said issue was expressly given by the defendant in that case and thus the said judgments cannot be authority for the proposition as to the jurisdiction of this court in the light of the express bar contained under sections 15Y and 20A of the SEBI Act. It has been further contended that even in the light of the judgment therein discussion and/or analysis of the aforesaid provisions of law and the arguments and contentions advanced and decided by the court only pertains to the appro-priate exercise of jurisdiction and does not pertain to lack of jurisdiction. It has been contended by the learned counsel for the defendants that undoubtedly the court has considered the jurisdictional aspect vice-versa the provisions of section 111A but the court has not considered the issue of jurisdiction vice-versa the provisions of sections 15Y and 20A of the SEBI Act. It has been thus contended that the issue or jurisdiction is not determined by either of the judgments of this court and issue is at large which ....
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....m stage and the view of the interim stage does not bind the learned Single Judge at the final hearing of the suit. Mr. Dvitre appearing for defendant No. 7 has supported the argument of the learned counsel for defendant No. 4 and in fact relied upon the judgment of the Division Bench of Himachal Pradesh in the case of Kanshi Ram v. Bansi Lal AIR 1977 HP 61 and particularly para 6 of the said judgment which reads as under : "6. Now therefore this court was called upon to decide the question whether the order of the controller was a nullity and a prima facie cases existed in favour of the tenant. The question whether the order of the controller was a nullity had received the detailed consideration of both of the learned Subordinate Judge and of the learned District Judge, and this court was called upon to determine that point. The Court found it necessary to consider the point in depth. Nonetheless, having regard to the nature of the jurisdiction exercised and the stage at which the suit then stood, we are of opinion that the finding of this court that the order of the controller was a nullity must be regarded as a finding in regard to a prima facie case only. It was not intended, ....
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....may meanwhile have expressed a contrary opinion on the point of law, or the statutory law itself may have altered retrospectively. Considerations such as these and many others can come into existence after the application for interim injunction has been disposed of." (p. 63) 23. He has contended that Justice R.S. Pathak (as he then was) has held that the findings given even on a point of law at the interim stage are only prima facie and cannot bind the learned Single Judge while determining the issue of law finally. He has contended that when the court determines the issue of jurisdiction under section 9A it decides the preliminary issue finally and thus while doing so the prima facie observation at the interim stage cannot be an obstacle. Learned counsel for the plaintiff has drawn my attention to the judgment of the learned Single Judge of this court in the case of Arantee Mfg. Corpn. v. Bright Bolts (P.) Ltd. [1967] 37 Comp. Cas. 758 particularly pages 771 and 772 and has contended that the view taken by this court that the issue of law even if determined at the interim stage is binding on the final hearing of the matter and cannot be disregarded merely because the matter was h....
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....that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all.' It is not a profitable task to extract a sentence here and there from a judgment and to build upon it." 25. This golden rule of Quinn's case (supra) has been consistently followed by the Supreme Court even in the latest cases of Bharat Forge Co. Ltd. v. Uttam Manohar Nakate [2005] 2 SCC 4891, Kalyan Chandra Sarkar v. Rajesh Ranjan [2005] 2 SCC 42, Cement Corpn. of India Ltd. v. Purya [2004] 8 SCC 2702 and the Judgment of Amrendra Pratap Singh v. Tej Bahadur Prajapati [2004] 10 SCC 65. The Apex Court in the aforesaid judgments has held as under : "A judicial decision is an authority for what it actually decides and not for what can be read into it by implication or by assigning an assumed intention to the Judges, and inferring from it a proposition of law which the Judges have not specifically laid down in the pronouncement." 26. In the light of the said golden rule the question arising before me is whether the judgment of the learned Single Judge in the case of M. Sreenivasulu Reddy (supra) and the judgment of the Division Bench in the case of Shirish ....
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....20A are not pressed. However both the judgments of the learned Single Judge and the Division Bench have undoubtedly considered the jurisdiction aspect from two different angles. First from the angle that whether this court's jurisdiction is barred in view of the provisions of section 111A of the Companies Act (1 of 1956) because the said provision is a complete code and scheme by itself for rectification of register of members and thus by necessary implication this court's jurisdiction to entertain the application for rectification of share register is barred. The second angle on which the Single Judge and the Division Bench both have decided the matter is that whether even if any court has jurisdiction would it be appropriate to grant necessary interim reliefs and exercise necessary jurisdiction because if an expert body like SEBI is conferred with the power to take cognizance of the breach of the Takeovers Regulations then in that event whether this court ought to exercise the jurisdiction even if it does possess the same. The court has considered both these angles and given a finding that in a given case the court would be entitled to exercise jurisdiction and give relief to the....
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....ction itself. The question about the exclusion of the jurisdiction of civil courts either expressly or by necessary implication must be considered, in every case, in the light of the words used in the statutory provision on which the plea is rested, the scheme of the relevant provisions, their object and their purpose. Whenever a plea is raised before a civil court that its jurisdiction is excluded either expressly or by necessary implication to entertain claims of a civil nature, the court naturally feels inclined to consider whether the remedy afforded by an alternative provision prescribed by a special statute is sufficient or adequate. Where the exclusion of the civil courts jurisdiction is expressly provided for, the consideration as to the scheme of the statute in question and the adequacy or the sufficiency of remedies, provided for by it may be relevant, it cannot, however, be decisive. But when exclusion is pleaded as a matter of necessary implication, such considerations would be very important, and in conceivable circumstances, might even become decisive. If a statute creates a special right or a liability and provides for the determination of the right and liability t....
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....ari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit. (5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected, a suit lies. (6) Questions of the correctness of the assessment apart from it constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry. (7) An exclusion of jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply." (p. 78) 29. The aforesaid view of the 7 Judges bench and of the constitution bench has been subsequently and consistently followed by the supreme in the case of Vatticherukuru Village Panchayat v. Nori V. Deekshithulu 1991 Suppl. (2) SCC 228. "22. Section 9 of the Civil Procedure Code, 1908 provides that whenever a question arises before the civil court whether its jurisdiction....
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.... the aforesaid judgments that where there is an express bar the question whether the Act also provides the right as well as remedy and/or the scheme of the Act is a complete code by itself is not very determinative factor though may be relevant. Learned counsel for the plaintiff has contended that the provisions of sections 15Y and 20A of the SEBI Act cannot bar the jurisdiction of this court for a shareholder to apply for rectification of the shares. He has contended that the right of the shareholder to maintain purity of the register is a common law right and thus he has also common law right of rectification of the shares register if the same is illegal and unlawfully altered. It has been his contention that such a kind of a suit is not barred by the provisions of sections 15Y and 20A. It is his contention that the provisions of sections 15Y and 20A only bars those kind of suits which are covered by the adjudication proceedings and where the jurisdiction is conferred on the adjudicating officer for the purpose of levelling penalty and imposing fine. It has been contended that the Legislature never intended to bar the suit of a shareholder for rectification of the shares under se....
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....ply to the nature of the case as presented before this court by the plaintiff. Learned counsel for the plaintiff has also drawn my attention to the provisions of SEBI (Procedure of Holding Inquiry) Rules, 1995 and has contended that the power of adjudication conferred on SEBI is not a matter of right for the plaintiff. He contended that there is no provision in law under which the plaintiff can file any application or a suit before the SEBI and can seek relief of rectification of the register and/or declaration that the shares allotted in favour of the defendant No. 1 and subsequent transfer and sale thereof and/or further allotment are bad in law and therefore, the share register must be rectified. It has been contended that the remedy provided by the statute is more of a generic nature the vindication of individual right of the shareholder for rectification of the said register. It has been contended therefore, that the provisions of sections 15Y and 20A of the SEBI must be so read down on the principles of strict construction and that this court ought not to hold that by virtue of the aforesaid provisions this court has no jurisdiction to entertain and try the present suit. 32.....
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....ng has his election to pursue either that or the statutory remedy. The second class of cases is, where the statute gives the right to sue merely, but provides no particular form of remedy : there, the party can only proceed but action at common law. But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same times gives a special and particular remedy for enforcing it. The present case falls within this latter class, if any liability at all exists. The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class." 33. He has also cited before in the judgment of the Supreme Court in the case of Shiv Kumar Chadha v. Municipal Corpn. of Delhi [1993] 3 SCC 161 and particularly the following para's of the said judgment : "6. The Delhi Municipal Corporation Act, 1957 (hereinafter referred to as 'the Corporation Act') has made provisions for the constitution of the Corporation and has prescribed the procedure for election of the councillor, levy of taxes, sanitation and public health. Chapter XVI contains provisions regarding erection of bui....
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.... After the commencement of section 7 of the Delhi Municipal Corporation (Amendment) Act, 1984, no court shall entertain any suit, application or other proceedings in respect of any order or notice appealable under section 343 or section 347B and no such order or notice shall be called in question otherwise than by preferring an appeal under these sections. (2) Notwithstanding anything contained in sub-section (1), every suit, application or other proceeding pending in any court immediately before the commencement of sub-section (7) of the Delhi Municipal Corporation (Amendment) Act, 1984, in respect of any order or notice appealable under section 343 or section 347B, shall continue to be dealt with and disposed of by that court as if the said section had not been brought into force.' 10. Section 9 of the Code of Civil Procedure (hereinafter referred to as 'the Code') says that courts shall have jurisdiction to try all suits of civil nature "excepts suits of which their cognizance is either expressly or impliedly barred". According to the corporation once the jurisdiction of the Court to try a suit in which the validity of any order passed under the provisions of the Corporation....
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....ka raised an objection that this court had no jurisdiction to entertain any appeal against the impugned order of the Tribunal. It was submitted that article 262 of the Constitution clearly provided that in respect of adjudication of disputes relating to waters of interstate river has to be decided by law made by Parliament in this regard. Clause (2) of article 262 further provided that Parliament may by law provide that neither the Supreme Court nor any other court shall exercise jurisdiction in respect of any such dispute or complaint as is referred to in clause (1), notwithstanding anything contained in this Constitution. It was submitted that the Interstate Water Disputes Act, 1956 was enacted by the Parliament, to provide for adjudication of disputes relating to waters of interstate rivers, and river valleys, section 11 of this Act provided as under : '11. Bar of jurisdiction of Supreme Court and other courts-Notwithstand-ing anything contained in any other law, neither the Supreme Court nor any other court shall have or exercise jurisdiction in respect of any water dispute which may be referred to a Tribunal under this Act.' It was thus contended that the above section 11 ....
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.... regulation 3(1)(c). In support of the aforesaid argument he has also relied upon the judgment of the learned Single Judge and the Division Bench in the case of M. Sreenivasulu Reddy (supra). 35. On the other hand the learned counsel for the defendants has vehemently contended that each of the arguments advanced by the learned counsel for the plaintiff has no basis whatsoever in the facts of the present case. It has been contended that as it has been well-settled that wherever there is an express bar as to the jurisdiction of the civil court under the statute then in that event it is not necessary to determine whether the Act provides for a remedy or the scheme of the Act is a complete code by itself. It has been contended that as held by the Supreme Court in large number of authorities these factors are not the determina- tive test in the light of the express bar contained under the statute and are merely relevant factors. It has been contended that this court cannot hold that this court has jurisdiction to entertain and try the suit in spite of the express bar contained under the statute merely because the Act does not provide for a remedy of rectification. However alternatively....
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....rned Single Judge and the Division Bench were considering the provisions of the SEBI and Takeover Regulations in the aforesaid judgment of M. Sreenivasulu Reddy's case (supra) one of the fact which weighed with the court was that there was no provision for the rectification of the share register in the SEBI Act or Takeover Regulations at that point of time. It has been contended by the learned counsel for the defendant that subsequent to the judgment of M. Sreenivasulu Reddy's case (supra) there has been an amendment in the provisions of the Takeover Regulations and by amending the Act namely SEBI (Substantial Acquisition of Shares and Takeovers) and Second Amendment Regulation, 2002 which has been brought in force with effect from 9-9-2002 the provisions of regulation 44 has been amended and expressly the provisions of sub-clauses (d) and (e) thereof has been inserted so as to provide for a remedy of rectification of the register by providing for cancellation of the said allotment and/or freezing the transfer in contravention of the said Takeover Regulations. Thus the basis on which the learned Single Judge and the Division Bench held that the remedy of rectification of the shares....
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....medy is expressly provided prima facie that was intended to be the only remedy and by implication it excludes the resort to common law. But this is also by no means conclusive. The consideration would be whether the statute intends to award damages for breach of statutory duty. Though general rule is that where a statute creates an obligation and enforce performance in a specified manner, performance cannot be enforced in any other manner. It depends the scope of the Act which creates the obligation and on consideration of the underlying policy of the statute, effect on the individuals is to be carefully examined and analysed as to what the statute has expressly laid down or probably what the statute aims to achieve. The action for damages will not lie if the damages suffered by him is not of the type intended to be guarded against." 37. Thereafter learned counsel Mr. Dwarkadas has relied upon the judgment of Scott v. Frank F. Scott (London), Ltd. 3 All ELR. Mr. Dwarkadas thereafter relying upon the words 'rectification' and 'cancellation' has contended that the remedy provided under regulation 44(c) and (d ) is nothing but identical to the rectification of the share register. He ....
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.... judgment of the Apex Court in the case of B. Prabhakar Rao v. State of Andhra Pradesh AIR 1986 SC 210. Learned counsel has thereafter contended that in the present suit the relief which has been sought is in essence in terms of prayer clause (a) which is that allotment of the contravention of the Takeover Regulations is bad in law and that relief is covered by the provisions of regulation 44(c). The other reliefs in the present suit are consequently to the declaration in prayer clause (a) of the said suit. He has brought to my attention the Division Bench order in the present proceedings arising out of an ad interim order in which the ad interim was refused. The Division Bench in Appeal (L) No. 973 of 2005 in an order dated 29-9-2005 has held as under : "The suit filed by the plaintiffs inter alia seeks various reliefs. The main relief is for a declaration that the preferential allotment of 8,10,77,500 CRCPS by defendant No. 7 to defendant No. 1 in October, 2000 and the subsequent conversion thereof to equivalent equity shares to defendant No. 1 is in violation of the provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regul....
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.... order which includes direction as contemplated under regulation 44 of the Takeover Regulations. Apart therefrom while interpreting section 15Y the court must take into consideration that what is barred by section 15Y is all those matters where the power of adjudication is conferred only on adjudicating authority under section 15-I. The adjudicating power is also conferred on the inquiry officer in case of a breach of the Takeover Regulations. The provisions of section 15H provide for penalty on non-disclosure of acquisition of shares and take- over of the companies in breach of the Takeover Regulations and under section 15-I power is conferred on the adjudicating authority to determine : First whether there is any breach of the Takeover Regulations and if there is any such breach whether penalty should be imposed as contemplated under section 15H of the said Act. However it does not end there. Even after imposition of penalty the board has been conferred with the power under regulation 44 to provide for cancellation and allotment of shares contrary to the Takeover Regulations and if there is a transfer of shares contrary to such regulation then there is power to freeze the said sh....
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....in the exclusive jurisdiction of SEBI and not within the jurisdiction of this court in view of the express bar contained under the aforesaid statute. I am of the further opinion that the enactment of the amendment of Takeover Regulations of amending provisions of SEBI (Substantial Acquisition of Shares and Takeover) Second Amendment Regulation, 2002 with effect from 9-9-2002 by providing for the remedy under sub-clauses (c) and (d) of the regulation 44 the board has been empowered to give effective relief of Rectification of Share Register by declaring cancellation of the allotment and/or by directing the company not to give an effect to the transfer if they are found to be in contrary to the Takeover Regulations. 44. I am also of the opinion that once the remedy is provided under the Rule itself then to read down the provisions of section 15Y and section 20A in such a narrow manner so as to exclude the case of the plaintiffs from within the purview of the said section is not permissible even on strict construction principle. I am of the opinion that provision of sections 15Y and 20A bars the suit which has been filed by the plaintiffs in the present court and the remedy of the pl....