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Shree Shridharkrupa Builders and Realtors P. Ltd. Vs. Mr. Mahen J. Dholam - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Case NumberCompany Appeal No. 25 of 2008 in CLB Company Petition No. 7 of 2008
Judge
Reported in2009(5)BomCR383; 2009(111)BomLR1197; [2009]91SCL372(Bom)
ActsCompanies Act - Sections 10F, 159, 160, 161, 163, 163(6), 621, 629
AppellantShree Shridharkrupa Builders and Realtors P. Ltd.
RespondentMr. Mahen J. Dholam
Appellant AdvocateMilind Sathe, Adv., i/b., Sunanda Kumbhat, Adv.
Respondent AdvocateSanober Nanavati, Adv.
DispositionAppeal allowed
Excerpt:
- - 9. after noting the case of both the parties the learned member came to the conclusion that the record of the company was not in the petitioner's possession and that the company for reasons best known to it was not giving inspection thereof to the petitioner falsely contending that the record was with the petitioner. the petitioner has not got the inspection and the company for the best of its knowledge has not given the inspection. 17. the submission is not well founded......this is an appeal under section 10f of the companies act against an order and judgment of the company law board. the order was passed in a petition filed by the respondent for reliefs under section 163 of the companies act. (for convenience i will refer to the respondent herein as the petitioner and to the appellant as the company).3. this appeal raises the following questions of law :(i) whether a shareholder of a company has no locusstandi to maintain a petition for reliefs under section 163 of the companies act if he is also a director of the company.(ii) whether the company law board has the power and jurisdiction in a petition for reliefs under sections 163, 621 or 629 of the companies act to advise the registrar of companies to take necessary action as per law in the event of.....
Judgment:

S.J. Vazifdar, J.

1. The appeal is admitted. With the consent of the parties the appeal is heard finally.

2. This is an appeal under Section 10F of the Companies Act against an order and judgment of the Company Law Board. The order was passed in a petition filed by the Respondent for reliefs under Section 163 of the Companies Act. (For convenience I will refer to the Respondent herein as the Petitioner and to the Appellant as the company).

3. This appeal raises the following questions of law :

(i) Whether a shareholder of a company has no locusstandi to maintain a petition for reliefs under Section 163 of the Companies Act if he is also a Director of the company.

(ii) Whether the Company Law Board has the power and jurisdiction in a petition for reliefs under Sections 163, 621 or 629 of the Companies Act to advise the Registrar of Companies to take necessary action as per law in the event of the Petitioner in a petition for reliefs under Section 163 making an application under Section 629 of the said Act.

(iii) Whether the Company Law Board on finding that a company has not been given inspection as required by Section 163 has the power or jurisdiction to advise the Registrar of Companies to initiate prosecution proceedings against the company for contravention under Section 163 of the Companies Act. I have answered the first question in the affirmative and the second and third questions in the negative.

4. The Petitioner admittedly holds 27.78 % of the equity shares of the company. The remaining shares are held by two other members. The Petitioner was also, at least at the material time, a Director of the company. It is necessary to note that the Petitioner was a Director of the company in view of the contention raised by Mr. Sathe regarding the interpretation of Section 163.

5. By a letter dated 20.2.2007, the Petitioner called upon the company to furnish him certified copies of various documents maintained by the company. The Petitioner enclosed a pay order in favour of the company in this regard. He further undertook to reimburse the company for any additional costs that the company may incur in furnishing him the said documents. He raised certain other contentions regarding the management of the company which are not relevant for the purpose of this appeal. The Petitioner alleged that though a Director of the company, he had been deprived of his duties as a Director of the company and that the company had transferred all the accounts and cheque books at an unknown place without his consent.

6. The company by its letter dated 22.2.2007 alleged that the Petitioner had taken away the records and the registers of the company. The company therefore called upon the Petitioner to return all the books of the company.

7. The further correspondence between the parties was to the same effect. It is not necessary to deal with the disputes between the Petitioner and the other shareholders as the petition was filed for the limited purpose of seeking inspection of the records of the company in exercise of the petitioner's rights under Section 163 of the Companies Act.

8. In view of the above, the Petitioner filed the above petition for an order directing the company to furnish him the certified copies of all the documents requested for by him under Section 163(6) of the Companies Act.

9. After noting the case of both the parties the learned Member came to the conclusion that the record of the company was not in the Petitioner's possession and that the company for reasons best known to it was not giving inspection thereof to the Petitioner falsely contending that the record was with the Petitioner. Having come to this conclusion the judgment however does not decide the petition at all. The learned member ought either to have granted the relief sought or rejected the same. He has done neither. He has merely purported to advice the parties and the Registrar of Companies.

It would be convenient to set out the operative part of the judgment of the Company Law Board which reads and under:

The Counsel for the petitioner during the arguments repeatedly demanded the prosecution of the respondent under Section 629 of the Act for telling blatant lies. I have considered the request of the petitioner's counsel but I find as per Section 621 the offences against the Companies Act to be cognizable only on the complaint made by the Registrar of Companies/shareholder of the company or a special officer so permitted by the Central government. This Bench has no such power. However, the petitioner if he feels so, may make a specific complaint to the Registrar of Companies specifying the false worthiness of respondent in the affidavits before this Bench in the present proceedings and request the Registrar to take up the necessary prosecution proceeding or he being a shareholder he himself can initiate such action as provided by the law. Therefore, I advise the petitioner to decide himself which way he likes the action under Section 629 to be initiated. However, if the petitioner approaches the Registrar of Companies, Mumbai for necessary action under Section 629 against the respondent, he is advised to examine the evidence produced by the petitioner and take necessary action as per law. The petitioner has not got the inspection and the Company for the best of its knowledge has not given the inspection. Therefore the Registrar of Companies, Maharashtra is advised to initiate prosecution proceedings against the respondent for contravention under Section 163 of the Act. Accordingly the petition is disposed of with no order to cost.

10. Both the learned Counsel was unable to indicate any provision of law under which the Company Law Board has the jurisdiction to merely advise parties and other authorities. Understandably, both the parties are aggrieved by the judgment of the Company Law Board. The judgment of the Company Law Board does not decide whether the company ought to give inspection of the records or whether the Petitioner is not entitled to inspection of the records. Thus, the matter has not been decided in the judgment at all. The order merely advices the parties and the Registrar of Companies to initiate prosecution proceedings against the company for contravention of Section 163 of the Act.

11. Even assuming that the Company Law Board has the jurisdiction to so advise the Registrar of Companies, the Company Law Board ought to have decided the application under Section 163. Section 163 of the Companies Act reads and under:

163. Place of keeping, and inspection of registers and returns.- (1) The register of members commencing from the date of the registration of the company, the index of members, the register and index of debenture holders, and copies of all annual returns prepared under Sections 159 and 160, together with the copies of certificates and documents required to be annexed thereto under Sections 160 and 161, shall be kept at the registered office of the company :

[Provided that such registers, indexes, returns and copies of certificates and documents or any or more of them may, instead of being kept at the registered office of the company, be kept at any other place within the city, town or village in which the registered office is situate, if-

(i) such other place has been approved for this purpose by a special resolution passed by the company in general meeting, [and]

(ii) [* * *]

(iii) the Registrar has been given in advance a copy of the proposed special resolution.]

[(1-A) Notwithstanding anything contained in subsection (1), the Central Government may make rules for the preservation and for the disposal, whether by destruction or otherwise, of the registers, indexes returns, and copies of certificates and other documents referred to in Sub-section (1).]

(2) The registers, indexes, returns, and copies of certificates and other documents referred to in subsection (1) shall, except when the register of members or debenture holders is closed under the provisions of this Act, be open during business hours (subject to such reasonable restrictions, as the company may impose, so that not less than two hours in each day are allowed for inspection) to the inspection-

(a) of any member,or debenture holder, without fee; and

(b) of any other person, on payment of [such sum as may be prescribed] for each inspection.

(3) Any such member, debenture holder or other person may-

(a) make extracts from any register, index, or copy referred to in Sub-section (1) without fee or additional fee, as the case may be; or

(b) Require a copy of any such register, index or copy or of any part thereof, on payment of [such sum as may be prescribed] for every one hundred words or factional part thereof required to be copied.

(4) The company shall cause any copy required by any person under clause (b) of Sub-section (3) to be sent to that person within a period of ten days, exclusive of non-working days, commencing on the day next after the day on which the requirement is received by the company.

(5) If any inspection, or the making of any extract required under this section, is refused, or if any copy required under this section is not sent within the period specified in Sub-section (4), the company, and every officer of the company who is in default, shall be punishable, in respect of each offence, with fine which may extend to [five hundred] rupees for every day during which the refusal or default continues.

(6) The [Central Government] may also, by order, compel an immediate inspection of the document, or direct that the extract required shall forthwith be allowed to be taken by the person requiring it, or that the copy required shall forthwith be sent to the person requiring it, as the case may be.

12. Section 163 does not confer jurisdiction upon the Company Law Board to advice the Registrar of Companies to initiate prosecution for a contravention of Section 163. Nor do Sections 621 and 629 confer such power on the Company Law Board.

13. Further even assuming that the Registrar of Companies has the power to issue directions to the company to comply with any requisition under Section 163 the judgment of the Company Law Board does not direct the Registrar of Companies to in turn direct the company to furnish the information sought by the Petitioner. This is even assuming that such directions could have been given. Thus whichever way the matter is viewed the application/petition has not been decided.

14. In the circumstances, it is necessary to set aside the order and judgment of the Company Law Board and to remand the matter for a fresh consideration thereof.

15. The judgment of the Company Law Board is also liable to be set aside as it has exercised jurisdiction by advising the Registrar of Companies, Maharashtra to initiate prosecution proceedings against the company for contravention of Section 163. As observed earlier the Company Law Board does not have the power or the jurisdiction to issues such advice.

16. Mr. Sathe submitted that the petition under Section 163 is, in any event, not maintainable and that the Petitioner has no locus-standi to maintain the petition. The submission was based on the fact that the Petitioner is a Director of the company. Mr. Sathe submitted that Section 163 must be construed to exclude shareholders who are also directors of the company especially when such a Director is in charge of the affairs of the company.

17. The submission is not well founded. As noted earlier, the Petitioner is also a shareholder of the company. The mere fact that he is also a Director of the company would not affect his right under Section 163 as a shareholder. I see no warrant for restricting the scope of Section 163 in this manner. It would really involve the court rewriting the section. Under Section 163, it is the company and not any individual Director that is bound to give inspection of the records mentioned therein. Thus, even if a Director desires inspection of the records referred to in Section 163, it is always open to him to apply to the company for the same by invoking the provisions of that section.

The petition is maintainable and that the Petitioner has locus-standi to maintain the same.

18. From the judgment of the Company Law Board, it appears that all the facts and circumstances have not been considered while coming to the conclusion that the company is in fact in possession of the records and that the Petitioner is not in possession of the same. This is probably because the learned Member had decided ultimately not to pass any orders under Section 163 either directing the company to give inspection or rejecting the Petitioner's application for the same.

19. Mr. Sathe stated that the company is in possession of the reconstructed record for the period prior to February 2007 and the original record for the period after February 2007. He stated that the Petitioner may take inspection of the same at any time. The Petitioner is at liberty to do so without prejudice to his rights and contentions in the petition before the Company Law Board.

20. The Appeal is therefore allowed. The order and judgment of the Company Law Board is set aside. The matter is remanded to the Company Law Board for a fresh decision. All the contentions of the parties are kept open. In the circumstances of the case there shall be no order as to costs.


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