TaxTMI 
TaxTMI 
1965 (11) TMI 153
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....having its registered office at Nagpur in Maharashtra State. The main object of the Company, as mentioned in the Memorandum, is the printing and publishing of a news-paper called 'Nagpur Times' at Nagpur. The second petitioner, the Nagpur Times Trust, was brought into existence under a trust deed, dated the 9th May 1957 and is the managing agent of the Nava Samaj Ltd. The third and fourth petitioner, Shri K. K. Thakur and Dr. M. B. Niyogi, are the trustees of the Nagpur Times Trust. The fifth petitioner is the Chairman of the Board of Directors of the Nava Samaj Ltd. The Company has an authorised capital of Rs. 10 lacs divided into (a) 38,000 ordinary shares of Rs. 25 each, and (b) 25,000 deferred shares of Rs. 2 each. Out of the authorised capital, the total subscribed and paid-up capital of the Company is (a) 31,527 ordinary shares of Rs. 25 each of the total value of Rs. 7,88,175, and (b) 25,000 deferred shares of Rs. 2 each of the total value of Rs. 50,000. The deferred shares of Rs. 2 each and the ordinary shares carried equal voting rights. The deferred shares were held by five share-holders. On 22nd August 1947 the Company entered into an agreement of managing agency....
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....1962 was invalid and of no effect and issued a writ of mandamus against the Registrar of Companies. Bombay and the Union of India restraining them from enforcing the order of revocation The applicants state that in the proceedings under Article 226 initiated in the High Court of Bombay, the third respondent, Shri Vidya Charan Shukla, intervened and opposed the petition of the Company for the quashing of the order of the Central Government rescinding its earlier order granting exemption. Thereafter, as stated by the petitioners and admitted by Shri Vidya Charan Shukla in his return to this petition, an application under Article 226 of the Constitution was filed by him and other persons in the Punjab High Court on 19th January 1965 challenging the validity of the order of the Central Government, dated the 29th July 1957 granting exemption under Section 89(4) of the Act and praying for the issue of a writ of certiorari for quashing that order. This petition was admitted by a Division Bench of the Punjab High Court consisting of Falshaw, C. J. and Mehar Singh, J. It appears that Shri Vidya Charan Shukla and other petitioners to the application under Article 226 filed in the Punjab H....
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....al meeting of the Company, including the one convened for 22nd January 1965, or any adjourned meeting thereof, "save and except in accordance with the provision of Section 87 read with Section 89 of the Companies Act, 1956". He has also prayed that the defendants in the suit be restrained by a permanent injunction from sponsoring, supporting, putting to vote or passing resolutions specified in items 4 and 5 of the agenda of the annual general meeting of the Company convened for 22nd January 1965 or any subsequent meeting thereto. The plaintiff-respondent No. 2 also claimed an interim injunction, The petitioners have alleged that the plaintiff, Hajarimal has filed the suit in collaboration with Shri Vidva Charan Shukla and at his instance. The teamed Civil Judge made an ex parts interim injunction on 21st January 1965 restraining the petitioner No 5, Shri G. M. Balraj, Chairman of the Board of Director "from exercising the voting rights under the deferred shares in respect of any resolution before any general meeting of the 1st defendant company including the meeting convened for 22-1-65 and except in accordance with the provisions of the Section 87 read with Section 89 of the Co....
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....notice of the annual general meeting fixed for 22nd January 1965 only in regard to items 4 and 5 of the agenda of that meeting. Item 4 of the agenda dealt with the passing of a resolution with regard to the approval and confirmation of the appointment of the petitioner Shri K. K. Thakur, Managing Trustee of the Nagpur Times Trust, who completed 68 years of age on 16th April 1964, as an ex officio Director, and for a declaration that the age-limit prescribed by Section 280 of the Act shall not apply to him. Item 5 of the agenda made a mention about the passing of a resolution under Section 326 of the Act for reappointment as managing agents of the Company for a further period of five years of the petitioners Dr. Niyogi and Shri K. K. Thakur, and Shri Badkas, trustees of the Nagpur Times Trust. The averment of Shri Hajarimal is that the notice of the meeting scheduled for 22nd January 1965, which he received, and the explanatory note attached to it under Section 173 of me Act are vitiated in regard to items 4 and 5 of the agenda for the reason that they are "fraudulent, mischievous and tricky". On this point, Para. 13 of the plaint concludes thus- "The said notice and the sa....
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....emed to have ceased to hold their office for the reason that the approval of the Central Government to the reconstitution of the managing agents and to the variation in the terms of the managing agency was not obtained. He also complained that the exercise by the Managing Agents of the deferred share voting rights contrary to Sections 87 and 89 of the Act is illegal and constitutes a gross violation of the rights of the ordinary share-holders. On the above allegations, the respondent Shri Hajarimal has claimed the several reliefs adverted to earlier. It was argued by Shri Phadke, learned counsel for the applicants that the subject-matter of the suit filed by Shri Hajarimal relates solely to the voting rights of certain class of share-holders and the validity and continuance of the managing agency agreement; that under the Companies Act the "Company Court", as defined by Section 10, has exclusive jurisdiction to deal with matters involved in Shri Hajarimal's suit; that the Court of the Civil Judge, First Class, Rajnandgaon, is not a Court falling under Section 10 of the Act; and that consequently that Court has no jurisdiction to entertain and try the plaintiff-Shri Hajarimal....
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.... Act, the Court means "the Court" as defined in Section 2(11)(b). The decisions in British India Corporation Ltd. v.Robert Menzies, AIR 1938 All 568: ILR 58 All 988, Harish Chandra v. Kavindra Narain Sinha, AIR 1936 All 830, In re: Aryya Insurance Co. Ltd. AIR 1937 Cal 81, Nawabshah Electric Supply Co. Ltd. v. Hariram S. Ahuja, AIR 1947 Sind 31 and Sree Krishna Jute Mills Ltd., Ellore v. Krishna Rao AIR 1947 Mad 322, given with reference to a somewhat analogous provision contained in Section 3 of the Indian Companies Act, 1913, fully support the proposition that the jurisdiction conferred on the Courts mentioned in Section 2(11) and Section 10 of the Act is the jurisdiction to deal with matters provided for by the Act. The Courts nominated under the Act have exclusive jurisdiction to take cognizance of the matters covered by the Companies Act. This follows from the well-settled principle that where a particular Court is specified or a special tribunal is created, by or under authority of an Act of Legislature, for the purpose of determining questions as to rights which are the creation of the Act, then the jurisdiction of that Court or tribunal is, unless otherwise provided, exclus....
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.... specified the Courts having jurisdiction under the Companies Act, the said Act contains an "otherwise" provision excluding the jurisdiction of the Company Court in matters falling under the Companies Act. The same criticism applies to the decision in Star Tile Works, Kallai v. N. Govindan,: AIR 1959 Ker 254, where, following the decision in AIR 1947 Mad 322: ILR (1947) Mad 546, it has been held that even in respect of matters provided in the Companies Act, the jurisdiction of the civil Court is not taken away. It may be mentioned that the Kerala High Court referred to Ram Kissendas v. Satya Charan, AIR 1950 PC 81, as supporting this proposition. As I read the Privy Council decision, it does not lay down any such rule. The observations of the Privy Council, which were referred to by the learned Judges of the Kerala High Court, only say that where the matter is one concerning the internal management of a company, the Court will not on principle interfere. In the Privy Council case, no controversy at all was raised as to whether in matters provided in the Companies Act the Court having jurisdiction under that Act has exclusive jurisdiction. If the subject-matter of the plaintif....
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....ly in regard to items 4 and 5 of the agenda on the ground that the managing agents already having ceased to hold office the resolutions mentioned in items 4 and 5 of the agenda could not be considered It is true that in Para 13 of the plaint, the plaintiff has characterised the notice and the explanatory note attached to it under Section 173 of the Act as "fraudulent, mischievous and tricky" and has narrated some of "suppressions" found by him in the notice and the explanatory note. But the validity of the notice has not been attacked by the plaintiff on the ground of any "fraud". The "fraudulent, mischievous and tricky" nature of the notice and the explanatory note stated by the plaintiff consists in the alleged failure of the petitioners to comply fully with the provisions of Section 173 of the Act, and in the alleged non-compliance of Sections 87 and 89 of the Act. In essence, the plaintiffs suit is for certain reliefs founded on the allegations that there has been non-compliance with Sections 87, 89, 329 and 346 of the Act and that the managing agents have ceased to hold office. This real nature of the suit is in no way affected or altered by the use of the words fraudulent", "....
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....d office and are not entitled to continue, he has the remedy of approaching the Court having jurisdiction under Section 10 for the redress of his various complaints. It is true that the right to move under Section 398 the Court having jurisdiction under Section 10 has been given only to the members of the company mentioned in Section 399. But, as stated by the plaintiff himself in Para 22 of the plaint, his suit being a representative suit on behalf of all the equity share-holders of the company, it cannot be maintained that the suit is barred under Section 399. Even if it be taken that the plaintiff's suit is in his individual capacity and in that capacity he has no right to apply under Section 398, still the plaintiff's suit cannot be entertained by a Court which does not fall under Section 10 of the Act. The reason is that in regard to matters falling under Section 398 the Court specified in Section 10 of the Act has exclusive jurisdiction and under Section 399 that jurisdiction can be invoked only by the members indicated therein. A member of a company, who has not under Section 399 the right to apply under Section 398, cannot, in respect of matters falling under Sectio....
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....e notice of the meeting convened on 22nd January 1965, then the cause of action for that claim may be said to have arisen at Rajnandgaon where the notice of the meeting was served on Shri Hajarimal. But in regard to the reliefs of prohibitory injunctions claimed by Shri Hajarimal restraining the petitioners Nos. 2, 3 and 4 from functioning as managing agents and from exercising voting rights under the deferred shares in respect of any resolution, the cause of action, if any, cannot be said to have arisen at Rajnandgaon. It can only arise at Nagpur. Now, it is well settled that the right to Join in one suit several causes of action against a defendant cannot be exercised unless the Court to which the plaint is presented has jurisdiction over all causes of action. Where the Court in which the suit is filed has jurisdiction over some causes of action and not others then the proper procedure is to return the plaint to the plaintiff (see Jivraju v. Purushotam ILR (1884) Mad 171). Thus even if it be assumed that the subject-matter of the suit wholly or partly fell outside the Companies Act, 1956, the Court of the Civil Judge, First Class, Rajnandgaon, had no jurisdiction to entertain the....
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....d for the hearing of the petition. Later on, on 16th August 1965 an application was again made on behalf of the respondent No. 3 for the hearing of the petition in the first week of September on the ground that Shri N. De, Additional Solicitor-General of India, would be appearing for the said respondent. To accommodate both the petitioners' counsel and the respondent No. 3's counsel, it was ordered that the case be posted for 21st September 1965. A day before the hearing of the petition, that is, on 20th September 1965, Shri Vidya Charan Shukla sent a telegram from New Delhi addressed to the Registrar expressing the inability of the Additional Solicitor-General to appear on 21st September 1965 and also his own inability to be present on account of his preoccupation with other work. Again, when this petition came up for hearing on 21st September 1965 a request was made by Sarvashri Baghel and Kaushal, learned counsel appearing for the respondents Nos. 2 and 3, for adjourning the hearing of the petition. They stated that they had been instructed by the respondents only to seek an adjournment. They, therefore, declined to address any arguments on the merits of the petition.....
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.... in matters falling under the Act. As I read the definition of "the Court" in Clause (a) of Section 2(11) of the Act (the one in Clause (b) not being material for this case), it merely enacts that, for determining the Court competent to deal with any matter relating to a company (other than an offence against the Act), one must refer to Section 10 of the Act for ascertaining which Court has jurisdiction under that Act with respect to that matter relating to that company. The reason for this is obvious from the provisions of Section 10. Where the jurisdiction in regard to the particular matter under consideration has been conferred on District Courts under Sub-section (2) of Section 10, the District Court within whose territorial jurisdiction the registered office of the company is situate will be the Court having jurisdiction to deal with that matter. Again, as provided by Sub-section (3) of Section 10, the jurisdiction to wind up a company will be in that High Court or District Court, as the case may be, within whose territorial jurisdiction its registered office remained located for the longest period during the six months immediately preceding the presentation of the winding ....
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....n fact has no jurisdiction to do so.......... These cardinal principles are laid down in the well-known cases of (1843) 2 Hare 461 and Mozley v. Alston (1847) 1 Ph 790 and in numerous later cases which it is unnecessary to cite." A recent case, where the rule was applied, is Pavlides v. Jensen 1956 2 All ER 518. But this rule is subject to several important qualifications which have been elaborately considered in Nagappa v. Madras Race Club (AIR 1951 Mad 831 (2)):ILR (1949) Mad 808. The Madras High Court pointed out in mat case that a shareholder has a right to bring an action- (i) in respect of matters which are ultra vires the company; (ii) where the action of the majority if illegal; (iii) where a special resolution is required by the articles of the company to do a particular thing and It is done either without such resolution or the assent of the majority to such resolution is obtained by a trick; and (iv) where the act complained of constitutes a fraud on the minority. The further question is whether the Company Court has. or does not have, exclusive jurisdiction with respect to those matters relating to a company which are r....
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.... of the Civil Court is not excluded. So, although a petition under Section 155 of the Act corresponding to Section 38 of the 1913 Act is the normal way for moving the Company Court for rectification of the register, a suit can also be filed for that relief; AIR 1928 Mad 571; ILR (1957) Mad 1058: ((S) AIR 1957 Mad. 702); Bhagat Singh v. Piar Bus Service Ltd., AIR 1959 Punj 352; People's Insurance Co. Ltd. v. Wood and Co., Ltd. AIR 1960 Punj 388 and Manilal v. Western India Theatres Ltd., AIR 1963 Bom 40. In the last-mentioned case. Shah, J. (as he then was) pointed out that Section 155 of the Act provided for a summary remedy which did not whittle down or abrogate the primary remedy of a suit under the general law and accordingly dismissed a suit for rectification of the register filed in the Company Court on the ground that it did not have, and the City Civil Court had, jurisdiction to entertain it. Again, Section 543 of the Act relating to compensation for misfeasance provides for a remedy of a summary character which does not exclude the remedy of a regular suit. In regard to the nature of misfeasance proceedings under the statute, I may recall the observations in Halsbury....
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.... the Act. There is no doubt about the general principle, which is that the jurisdiction of the ordinary Courts is only barred where this is expressed in a statute or necessarily implied, and while there are no doubt instances of cases being tried by the ordinary civil Courts for the determination of rights or obligations created by the provisions of the Act, there is not, so far as I am aware, any precedent for matters relating to the winding up of a company, even a voluntary winding up, being decided by the ordinary Courts. In my opinion, there is a good deal to be said for the argument, of the learned counsel for the petitioners that even in a case of a voluntary winding up. It is necessarily implied that proceedings by shareholders against liquidators in respect of the conduct of winding up proceedings are intended to be dealt with by the Court under the Act, i.e. the High Court particularly in case where allegations of misfeasance and non-feasance are being made against the liquidators, as in the present case." (Page 25). It is not necessary for purposes of this case to examine which of the two views in regard to the effect of the provisions of Section 543 of the Act is corr....