AI Drafter 
TaxTMI 
TaxTMI 
2022 (12) TMI 1337
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....000 equity shares of Rs. 10/- each and also have a nominee Director on the Board of said company. TCL was declared as a sick company and consequently, proceedings were pending before the Board for Industrial and Financial Reconstruction (hereinafter referred to as 'BIFR'). The plaintiff companies applied for impleadment as a party to such proceedings to which the Respondent No.1 and 2 through TCL opposed but the BIFR allowed the impleadment application. This order allowing impleadment was challenged by TCL before the Appellate Authority for Industrial and Financial Reconstruction, Delhi (hereinafter referred to as 'AAIFR') which was dismissed and a further appeal to the Delhi High Court in W.P. (C) No. 11327/2015 was also dismissed by the Division Bench of this Court. 3. During the pendency of the proceedings before BIFR, the plaintiff companies entered into a Memorandum of Understanding (hereinafter referred to as 'MoU') dated 25th January 2011 with Respondent No.3 to transfer the said 50.21% of the issued share capital of TCL to the Respondent No.3, and the Respondent No.3 in return agreed to deposit Rs. 60 lakhs with the plaintiff companies as security for the performance of ....
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....e email dated 5th September 2013, that by mistake he has entered into a transaction with them as the plaintiff companies had already entered into a MoU with the Respondent No.3 in respect of the 50.21% shareholding in TCL and that, the plaintiff companies are ready to refund the entire sum of Rs.90.00.000/- (ninety lakhs rupees) to the Respondent No.2 along with interest. In response to this email, the Respondent No.2 addressed an email to Mr. Dhoot that the transaction between the plaintiff companies and Respondent No.2 hold good and the referred transaction between the plaintiff companies and Respondent No.3 is void. 7. Subsequent to this correspondence, the Respondent No.1 called for a meeting of the Board of Directors of TCL on 27th August 2013, at which meeting resolutions were passed to the effect that the duplicate share certificates be issued in respect of shareholding of the plaintiff companies and the said shares be transferred in favour of the Respondent No.1 and 2 jointly. 8. On 3rd September 2013, TCL wrote another email to the plaintiff companies thereby, demanding the original share certificates of the said 30 lakhs shares with a condition that, in case the ori....
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....appeal impugning the order of the rejection of the plaint. SUBMISSIONS On behalf of the Appellants: 12. Mr. Jayant Mehta, learned senior counsel in support of the averments made in the instant appeal has submitted that in the peculiar facts and circumstances of the instant case, the bar under Section 430 of the Act, 2013 is not attracted. He has submitted that Section 430 is pregnant with the phrase 'in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine' and in the present case, the NCLT is not empowered to adjudicate upon the issue of disputed title of share in addition to the relief of permanent mandatory injunction and prohibitory injunction, so by no stretch interpretation such powers can be read into the powers and functions of the NCLT to attract the bar envisaged under Section 430 of the Act, 2013. 13. Mr. Mehta has also submitted that the proceedings before the NCLT are only summary in nature and hence, the NCLT is not empowered to adjudicate upon the prayers sought in the instant case as it requires leading of evidence at length. It is submitted that on a bare perusal of Section 58 of the Act, 2013 it can be deciphered ....
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.... of any court or authority. There is thus, no complicated question of title. Moreover, there is no bar to adjudication for purposes of transfer of shares unless the court finds otherwise. The stay order obtained by GD herself could not debar her from making a statement to settle the matter. The judgments relied upon by the appellants have no application to such a fact situation. 16. In Ammonia [(1998) 7 SCC 105], the scope of jurisdiction of the Company Court to deal with an issue of rectification in the Register of Members maintained by the Company was considered. Following Public Passenger Service Ltd. v. M.A. Khadar [AIR 1966 SC 489], it was held that jurisdiction under Section 155 was summary in nature. If for reasons of complexity or otherwise, the matter could be more conveniently decided in a suit, the Court may relegate the parties to such remedy. Subject to the said limitation, jurisdiction to deal with such matter is exclusively with the Company Court. It was observed: (Ammonia case [(1998) 7 SCC 105] , SCC p. 122, para 31) "31. ... It cannot be doubted that in spite of exclusiveness to decide all matters pertaining to the rectification it has to act wit....
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....rt should relegate the parties to a suit, which was the more appropriate remedy for investigation and adjudication of such seriously disputed question of title." (iii) N. Ramaji Vs. Ashwath Narayan Ramji & Anr. (2017) SCC Online Mad 37591; "30. The learned Senior Counsel for the petitioner contended that the judgment rendered by the Division Bench of Karnataka High Court in (2016) 198 CompCas 481 (Kar) in (K. Ravinder Reddy v. Alliance Business School), was challenged in the Apex Court and by order dated 10.03.2017, it was held that the question of law with regard to Section 58 of the Companies Act is kept open. The learned Senior Counsel for the first respondent in reply submitted that the Hon'ble Apex Court has held in the said judgment that there is no reason to interfere with the impugned order passed by the High Court of Karnataka and further submitted that the said judgment of Hon'ble Apex Court support the case of the first respondent as the judgment of the Karnataka High Court has been confirmed by the Hon'ble Apex Court. 31. The contention of the learned counsel for the petitioner is that as per Section 10GB of the Companies Act, 1956, whic....
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....aw, CLB.will have power to direct the company to transfer the share in favour of the appellant but until such declaration is granted by the civil,court, CLB may not be in a position to issue direction to the company to transfer the share for the simple reason that unless the documents are found to be genuine including the signature thereof, the question of effecting transfer of shares or issuance of directions for transfer of shares may not arise. Under these circumstances, we do not find that CLB has committed any error in exercise of discretion in relegating the appellant to approach before the civil court for getting appropriate declaration about the genuineness of the documents for transfer of the shares in their favour." (v) Jai Kumar Arya vs Chhaya Devi, (2017) SCC Online Del 11436. "118. We are constrained, therefore, to observe that it is not possible to accept Mr. Chandhiok's submission that the reliefs claimed by the plaintiffs in CS (OS) 285/2017 fall, statutorily, within the purview of jurisdiction of the NCLT. 119. There is, in fact, no provision, in the Act, whereunder the claim contained in CS (OS) 285/2017, as made by the plaintiffs - irresp....
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....6. It is not in dispute that were a dispute to arise today, the civil suit remedy would be completely barred and the power would be vested with the National Company Law Tribunal (NCLT) under Section 39 of the said Act. We are conscious of the fact that in the present case, the cause of action has arisen at a stage prior to this enactment. However, we are of the view that relegating the parties to civil suit now would not be the appropriate remedy, especially considering the manner in which Section 430 of the Act is widely worded. (ii) SAS Hospital Pvt. Ltd. & Anr. vs Surya Construction Pvt. Ltd. & Ors., CS (Comm) No. 1496/2016 decided on 6th October 2018 (Del HC). "28. If these two tests are applied i.e., as to whether the Tribunal's order is attributed finality and as to whether the Tribunal would be able to do what a Civil Court could do, it is clear that an order under Section 59 of the 2013 Act has specific consequences for non-compliance. The order is appealable to the appellate tribunal. The Tribunal has to apply the principles of natural justice. Under Section 242(2)(d) of the 2013 Act, the Tribunal can impose restrictions on the transfer or allotment o....
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....spondent No.13 with even Investor Directors opposing and at the penultimate stage resigning from the Board, but that contesting Respondents still went ahead to convert the CCDs. 23. Undisputedly, the Appellant has had held one share in the Company. Its grievance is regarding making entry in the Register of Members showing another 906599 equity shares treating the same as having been converted from CCDs. As per Section 59, the only question relevant is whether the name of Appellant has been entered regarding shares said to have been issued against CCDs to be "without sufficient cause". In this matter although there is Investment Agreement, we will not dwell much on the Agreement as admittedly, the protection sought by the Appellant and Respondent No.13 while entering into the Investment Agreement was translated into amendment of the Articles of Association which clearly has a higher binding nature and protection as the Company as well as all the shareholders including Directors become bound by the same. 31. The contesting Respondents have relied on Judgement in the matter of "Ammonia Supplies Corporation (P) Ltd. Versus Modern Plastic Containers Pvt. Ltd. and other....
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....t the power was fairly wide, but in case of a serious dispute as to title, the matter could be relegated to a civil suit. The submission of the learned counsel is that the subsequent legal developments to the impugned order have a direct effect on the present case as the Companies Act, 2013 has been amended which provides for the power of rectification of the Register under Section 59 of the said Act. Learned counsel has also drawn our attention to Section 430 of the Act, which reads as under:- "430. Civil court not to have jurisdiction.- No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction 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 or any other law for the time being in force, by the Tribunal or the Appellate." The effect of the aforesaid provision is that in matters in respect of which power has been conferred on the NCLT, the jurisdiction of the civil cour....
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....i Golyan & Ors. vs. Nulon India Ltd., Company Appeal (AT) 222 of 2018. 20. Thus considering the disputes raised in the present matter and the evidence available, keeping in view observations in the matter of "Ammonia Supplies", we have considered the same and find that the learned NCLT rightly decided the matter. We have purposely used the word "prima facie" in the above paragraph analysing the mattar on tlie basis of law as it stood before coming into force of New Act. 21. In para - 31 of the Judgement in the matter of "Ammonia Supplies" portions of which we have reproduced above, the Hon'ble Supreme Court had observed that there was nothing under the Companies Act expressly barring the jurisdiction of the Civil Court and thus mandated that the "Court" should examine whether prima facie what is said is a complicated question or not. The earlier Section 10 GB of the companies Act, 1956 relating to Civil Court not to have jurisdiction, does not appear to have been enforced but the position has now changed with coming into force of Company Appeal (AT) N0.222 of 2018 Companies Act, 2013 and Section 430 of the Act providing that Civil Court would not have jurisdic....
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....ivil courts to be inferred? a) Whether in the facts and circumstances of the present case bar under Section 430 is attracted? b) Does liquidation of TCL have an impact on the outcome of the instant appeal? Answer to Issue I. 24. Learned senior counsel for the plaintiff companies has taken a stand that the learned trial Court has failed to appreciate that the provisions of the Companies Act, 2013 are not applicable in the facts and circumstances of the case. It is submitted that the facts of the suit CS No. 5700/2016 relate to the period when even the Companies Act, 2013 was not notified. It is submitted that the relevant provisions of Companies Act, 2013 pertaining to issue of duplicate share certificate were not even notified at the time of date of filing of suit CS No. 5700/2016. 25. The learned trial Court while adjudicating the instant plea of the plaintiff companies, held as follows: "Insofar as the third objection qua non applicability of provisions of the Companies Act, 2013 is concerned, same is meritless because the said Act came into force in the August, 2013 and present suit had been filed in the year 2015. Further, the nominee directo....
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....within a maximum period of two months from today." 28. Accordingly, I do not find any merit in the contentions of the learned senior counsel and hence, the present case will be governed by the provisions of the Companies Act, 2013 and not Companies Act, 1956. The instant issue is answered accordingly. Answer to Issue II. 29. Section 9 of the Code is also symbolised as the gateway to the civil Courts as it envisages not only the inherent powers of the Civil Courts to entertain any suit of a civil nature, but also the inherent rights of the disgruntled yet hopeful litigants to approach the civil Courts with a huge expectation that they will get justice from this forum, which would adjudicate upon their infracted legal rights and will invoke the legal machinery to protect and vindicate such rights. It is a settled proposition of law that the exclusion of the jurisdiction of a civil Court is not to be readily inferred. But law cannot be unreasonable, as the law prevailing in a region cannot divorce from the societal requirements. In other words, law and societal advancements go hand in hand and the law has to be modified/adjusted in a way so as to always cater to the ever dyna....
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....civil courts have jurisdiction to try all suits of civil nature except those of which cognizance by them is either expressly or impliedly excluded as provided under Section 9 of the Code of Civil Procedure but such exclusion is not readily inferred and the presumption to be drawn must be in favour of the existence rather than exclusion of jurisdiction of the civil courts to try civil suit. The test adopted in examining such a question is: (i) whether the legislative intent to exclude arises explicitly or by necessary implication, and; (ii) whether the statute in question provides for adequate and satisfactory alternative remedy to a party aggrieved by an order made under it." 33. The Hon'ble Supreme Court in a classic decision in the case of Ganga Bai vs. Vijay Kumar, AIR 1974 SC 1126, held that: "15. There is an inherent right in every person to bring suit of a civil nature and unless the suit is barred by statute one may, at one's peril, bring a suit of one's choice. It is no answer to a suit howsoever frivolous the claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough t....
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....ted in excess of constitutional limits or illegally collected a suit lies. (6) Questions of the correctness of the assessment apart from its 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 the jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply." 35. A suit is said to be expressly barred when it is barred by any enactment for the time being in force. Indisputably, it is open for a competent legislature to bar the jurisdiction of civil Courts in respect of a particular class of suits of a civil nature, provided that in doing so it acts within the four corners of the legislative powers conferred upon it and does not violate the letter and spirit of the Constitutional provisions. It is a settled proposition that every presumption should be made in favour of the jurisdiction of a civil Court and the provisions of exclusion of jurisdiction of ....
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....y company.-(1) No allotment of any securities of a company offered to the public for subscription shall be made unless the amount stated in the prospectus as the minimum amount has been subscribed and the sums payable on application for the amount so stated have been paid to and received by the company by cheque or other instrument. (2) The amount payable on application on every security shall not be less than five per cent of the nominal amount of the security or such other percentage or amount, as may be specified by the Securities and Exchange Board by making regulations in this behalf. (3) If the stated minimum amount has not been subscribed and the sum payable on application is not received within a period of thirty days from the date of issue of the prospectus, or such other period as may be specified by the Securities and Exchange Board, the amount received under sub-section (1) shall be returned within such time and manner as may be prescribed. (4) Whenever a company having a share capital makes any allotment of securities, it shall file with the Registrar a return of allotment in such manner as may be prescribed. (5) In case of any defau....
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....re holders residing outside India, for rectification of the register. (2) The Tribunal may, after hearing the parties to the appeal under sub-section (1) by order, either dismiss the appeal or direct that the transfer or transmission shall be registered by the company within a period of ten days of the receipt of the order or direct rectification of the records of the depository or the register and in the latter case, direct the company to pay damages, if any, sustained by the party aggrieved. (3) The provisions of this section shall not restrict the right of a holder of securities, to transfer such securities and any person acquiring such securities shall be entitled to voting rights unless the voting rights have been suspended by an order of the Tribunal. (4) Where the transfer of securities is in contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992) or this Act or any other law for the time being in force, the Tribunal may, on an application made by the depository, company, depository participant, the holder of the securities or the Secur....
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....as it may specify: Provided further that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or the placing of monies on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of monies or, as the case may be, a making of loans by a banking company within the meaning of this section. Explanation I.-Nothing in clause (d) shall apply to borrowings by a banking company from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks established by or under any Act. Explanation II.-In respect of dealings between a company and its bankers, the exercise by the company of the power specified in clause (d) shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day-to-day operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of. ....
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....r on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. (2) Without prejudice to the generality of the powers under sub-section (1), an order under that sub-section may provide for- (a) the regulation of conduct of affairs of the company in future; (b) the purchase of shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) restrictions on the transfer or allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; (f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to....
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....then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make, without the leave of the Tribunal, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles. (6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum or articles of a company shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act and the said provisions shall apply accordingly to the memorandum or articles so altered. (7) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same. (8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable 345[* * *] with fin....
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....xtend to 350[five lakh rupees]." "244. Right to apply under Section 241.-(1) The following members of a company shall have the right to apply under Section 241, namely:- (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members: Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply under Section 241. Explanation.-For the purposes of this sub-section, where any share or shares are held by two or more persons jointly, they shall be counted only as one member. (2) Where any members of a company are entitled to make an application under s....
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....e, we permit the appellants to file a fresh petition within a maximum period of two months from today." 38. The NCLT is a specialised agency created for the purpose of a speedier and efficient regulation of the management of a company. Its powers are much broader than what are vested in the civil courts by virtue of Section 9 of the Code. 39. In Union of India vs. R. Gandhi, (2010) 11 SCC 1, the Hon'ble Supreme held as under: "33. The argument that there cannot be 'whole-sale transfer of powers' is misconceived. It is nobody's case that the entire functioning of courts in the country is transferred to Tribunals. The competence of the Parliament to make a law creating Tribunals to deal with disputes arising under or relating to a particular statute or statutes cannot be disputed. When a Tribunal is constituted under the Companies Act, empowered to deal with disputes arising under the said Act and the statute substitutes the word 'Tribunal' in place of 'High Court' necessarily there will be 'whole-sale transfer' of company law matters to the Tribunals. It is an inevitable consequence of creation of Tribunal, for such disputes, and wi....
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.... was till then dealing with such matters and the members of the Tribunal should have the independence and security of tenure associated with Judicial Tribunals. (c) Whenever there is need for 'Tribunals', there is no presumption that there should be technical members in the Tribunals. When any jurisdiction is shifted from courts to Tribunals, on the ground of pendency and delay in courts, and the jurisdiction so transferred does not involve any technical aspects requiring the assistance of experts, the Tribunals should normally have only judicial members. Only where the exercise of jurisdiction involves inquiry and decisions into technical or special aspects, where presence of technical members will be useful and necessary, Tribunals should have technical members. Indiscriminate appointment of technical members in all Tribunals will dilute and adversely affect the independence of the Judiciary. (d) The Legislature can re-organize the jurisdictions of Judicial Tribunals. For example, it can provide that a specified category of cases tried by a higher court can be tried by a lower court or vice versa (A standard example is the variation of pecuniary limits o....
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....but in my opinion, such a decision would render the Appellants herein remediless as TCL has been dissolved and is no more in existence. The fundamental principle behind the bar on the jurisdiction of the civil court is that the there must adequacy of remedy being available to the parties who are relegated out of the civil Courts and they must not be rendered remediless. Among other relevant sections of the Companies Act, 2013 governing the dispute at hand, a glance at Section 241 read with Section 244 requires the following essentials to be satisfied before an application can be made to the Tribunal: a) In case the company does not have a share capital, an application under Section 241 can be made by not less than 1/5th of the total number of its members. b) In case the company does have a share capital, an application under Section 241 can be made by not less than 100 members or not less than 1/10th of the total number of its members, whichever is less; or any member(s) of the company holding not less than 1/10th of the issued share capital of the company. 43. In case the company has been dissolved by the NCLT, there exists no corporate entity which can be pro....