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Gulabrai Kalidas Naik and ors. Vs. Laxmidas Lallubhai Patel of Baroda and ors. - Court Judgment

LegalCrystal Citation
Overruled ByAmmonia Supplies Corp. Pvt. Ltd. v. Modern Plastic Containers Pvt. Ltd.
SubjectCompany
CourtGujarat High Court
Decided On
Case NumberCompany Petition No. 36 of 1975
Judge
Reported in[1978]48CompCas438(Guj); (1977)GLR42; (1978)0GLR192; (1977)47CompCas151
ActsCompanies Act, 1956 - Sections 114, 116, 150, 155, 155(3), 397, 398 and 643
AppellantGulabrai Kalidas Naik and ors.
RespondentLaxmidas Lallubhai Patel of Baroda and ors.
Advocates: B.R. Shah, Adv.
Cases ReferredIn Babubhai Muljibhai Patel v. Nandlal Khodidas Barot
Excerpt:
(i) company - maintainable - sections 114, 116, 150, 155, 155 (3), 397, 398 and 643 of companies act, 1956 - petition filed under section 155 praying for rectification of register and for relief under sections 397 and 398 - whether petition maintainable against respondent - under section 155 (3) court has power to decide question of title when arises between members or alleged members - under section 155 (3) (b) court can decide question necessary to decide in connection with application for rectification. (ii) jurisdiction - whether court can entertain petition for relief if it involves disputed question of fact - petition under section 155 cannot be disposed of on pretext of complex and complicated questions - no complex or complicated questions raised in petition - high court better.....d.a. desai, j. 1. a question touching the jurisdiction of this court is raised at this state by way of preliminary objection in this petition. the petition is filed under section 155 of the companies act, 1956, prying for rectification of the register and for reliefs under sections 397 and 398. after the notices were issued to the company and other respondents calling upon them to show cause why the petition would not be admitted, respondents who were then on record appeared, and raised contentions that a composite petition for relief under section 155 and sections 397 and 398 of the companies act would not lie because the relief under sections 397 and 398 is only available to a member of a company whose membership is not in dispute and as the petitioner in this petition also seek a.....
Judgment:
D.A. Desai, J.

1. A question touching the jurisdiction of this court is raised at this state by way of preliminary objection in this petition. The petition is filed under section 155 of the Companies Act, 1956, prying for rectification of the register and for reliefs under sections 397 and 398. After the notices were issued to the company and other respondents calling upon them to show cause why the petition would not be admitted, respondents who were then on record appeared, and raised contentions that a composite petition for relief under section 155 and sections 397 and 398 of the Companies Act would not lie because the relief under sections 397 and 398 is only available to a member of a company whose membership is not in dispute and as the petitioner in this petition also seek a relief by way of rectification of register, their membership being in dispute in dispute, such a composite petition cannot be entertained by the court.

2. The contention was overruled as per decision a dated 26th June, 1975 [vide Gulabrai Kalidas Naik v. Laxmidas Lallubhai Patel [1977] 47 Comp Cas 151 (Guj)] admitting the petition for relief under section 155 and keeping the prayer for relief under sections 397 and 398 a in a abeyance till relief under section 155 is determined. Directors were given for filing affidavit-in-reply and date was fixed for admission documents. Thereafter, the court, after taking into consideration rival contentions, framed the issues that arise for determination in the present petition in the presence of the parties. Issues Nos. II and III are as under :

'II. Whether a petition is maintainable against the person who are neither directors nor shareholders, having regard to the provisions of section 155 of the Companies Act

III. Would the court entertain a petition for relief under section 155 of the Companies Act, if it involves disputed questions of fact ?'

3. These two issues cover the preliminary objection raised on behalf of the respondents and they were set down for preliminary hearing.

4. At the hearing Mr. A. H. Mehta, learned causal representing on behalf of the respondents, framed his preliminary objection as under :

'On the facts and in the circumstances of this case, court should not permit the petitioners to seek relief by invoking summary remedy under section 155 of the Companies Act, especially when the question of title to shares depends upon disputed questions involving and touching transfer of shares by the petitioners to respondent No. 4 in the first case as being nominal and further questioning the validity of transfer of shares by respondent No. 4 to respondents Nos. 3 and 8, as having been brought about by undue influence and fraud and taking advantage of the weak mental condition of respondent No. 4, pursuant to a conspiracy hatched by respondents Nos. 1, 2, 3, 5, 8 and 9 and with that end forged the bank transfer forms alleged to have been handed over the petitioners to respondent No. 4 and simultaneously fabricating the minutes of the meeting of the board of directors alleged to have been held on 23 February, 1974, and 13th June, 1974.'

5. In fact, various allegation made by the petitioners form the subject-matter of different issues framed by the court. It is indisputable that the petition involves disputed questions of fact. It is beyond the pale of controversy that there are serious allegations of fraud, forgery, undue influence and it is alleged that all this was done of perpetrated pursuant to a conspiracy. It cannot be gainsaid that the petition involves disputed questions of fact, on which oral evidence will have to led, though in the concluding stage of arguments, Mr. B. R. Shah, learned advocate for the petitioners, stated that he is prepared to proceed on the affidavits and the court need not record oral evidence. It is not possible to accept this last submission, because when such serious allegations are made which would depend upon not merely documents, but on some oral evidence and when oral evidence has to be relied upon one way or the other, sworn affidavits from either side, asserting and denying allegations of fact, hardly furnish reliable piece of evidence, unless tested by cross-examination. Therefore, I am prepared to proceed on the footing and assuming that the petition does involve serious allegations of fraud, undue influence and even conspiracy, fabrication of documents such as minutes of the meeting of the board of directors, and that investigation would be necessary by way of oral evidence tested by cross-examination. Let there be no doubt in the mind of anyone that after this petition is set down for hearing, whatever Mr. B. R. Shah has stated, presumably in the heat of arguments, that he is willing to proceed on affidavits, it would hardly be satisfactory. In order to reach a just decision, court must permit oral evidence to be led and in that behalf also direction was given that a list of witnesses should be filed. I am told that they have already been filed.

6. Therefore, the question which I must post is whether the arena of dispute involves such disputed questions of fact, which involve allegation and counter-allegations and which requires to be determined so as to find out the title to shares in the presence other than the members of the company, would preclude me from proceedings with the petition within the four corners of section 155 of the Companies Act. That simultaneously raises the more important and incidental question whether the court should forbid itself jurisdiction under section 155, more often described loosely as summary jurisdiction, so as not to investigate such question and relegate the parties to the normal method of obtaining relief through ordinary civil court

7. It was very strenuously contended before me that section 155 confers jurisdiction on the court for rectification of register albeit only in those cases where relief can be granted in summary manner. It precludes or forbids examination of intricate and complex questions of title to shares. Section 150 casts an obligation of a company to maintain a register of members. 'Member' is negatively defined as not to include a bearer of a share-warrant of the company issued in pursuances of section 114 of the Act. Ordinarily, in a company limited by shares, a shareholder is member of the company. Entry of the name of shareholder in the register of company is conclusive proof of the title accepted and recognised by a company of shareholder to the shares he holds. As there is obligatory duty to maintain a register of members, section 155 provides for rectification of register, and court can exercise jurisdiction for directing rectification of register, if it is shown to the court that the name of any person, (i) is without sufficient cause, entered in the register of members of a company, or (ii) after having been entered in the register, is, without sufficient cause, omitted therefrom; or default is made or unnecessary delay takes place in entering on the register the fact of any person having become, or ceased to be, a member. The power to apply for rectification is conferred on the person aggrieved, or any member of the company, or the company, and application has to be made to the court prying for rectification of register. On such an application being made, court has power under sub-section (2) either to reject the application or order rectification of the register; and, in the latter case, may direct the company to pay the damages, if any, sustained by any party aggrieved. The court has further discretion in the matter of costs. Then comes sub-section (3) which is material. It reads as under :

'(3) On an application under this section, the court -

(a) may decide any question relating to the title of any person who is a party to the application to have name entered in or omitted from the register, whether the question arises between members or alleged members, or between members of alleged members on the one hand and the company on the other hand; and

(b) generally, may decide any question which it is necessary of expedient to decide in connection with the application for rectification.'

8. Sub-section (4) provides for an appeal against any order made by a court on application or on any issue raised therein and tried separately and it also provides a forum for it.

9. A bare perusal of section 155 on its own language does one indicate that jurisdiction conferred by the section is one hedged in with a condition that it can only be exercised when relief can be granted in summary manner. There is nothing in the language of section 155 which excludes decision of questions of title to shares that may arise in an application for rectification of register. On the contrary, the language of sub-section (3) makes it abundantly clear that in such application, court has power to decide any question relating to the title of any person who a party to the application to have his name entered in or omitted from the register and the court would have further jurisdiction to decide the question of title even when it arises between members or alleged members, or between members or alleged on the one hand and the section on the other. Sub-clause (b) of sub-section (3) further widens the jurisdiction of the court under section 155 when it permits or enables the court generally to decide any question which it is necessary or expedient to decide in connection with the application for rectification.

10. Now, on a conspectus of various clauses of section 155, it becomes crystal clear that when an application for rectification of register is made, alleging that the petitioner is a shareholders and in respect of his holding, his name is required to be entered in the register of members, or that his name has been omitted without sufficient cause, and in such an application, if a dispute if raised, that the petitioner is not entitled to the shares, or the petitioner's title disputed, then not only the court can examine the question of title, which examination must involve assertion of the petitioner as to how he claims title to the shares, and grounds on which respondents deny the title to the petitioner. A clear controversy about title of the share is bound to arise. More often when, in a special statues, there is special forum on which limited jurisdiction is conferred, a question is more often raised : whether such a forum created by a special statute, with a special limited jurisdiction, court decide the question incidentally arising while exercising the limited jurisdiction. To thwart such a controversy, it is made crystal clear that not only the court can examine the question of title that may arise in an application under section 155, but it would also have the jurisdiction to decide other questions which may arise as ancillary of incidental to the main controversy and the court cannot be asked not to decide them on the ground of lack or want of jurisdiction because the statute specifically confers such wide jurisdiction. There was definite purpose behind enacting sub-clause (b) to sub-section (3), namely, to thwart any suggestion that the court cannot clutch at jurisdiction and decide the question which do not directly fall under section 155, or, for that matter, under any other provisions of the Companies Act. In order to make section 155 an effective remedy for a relief, for placing one's name on the register of members or for compelling the company to omit some name, which name has been wrongly placed, not only the Companies Act has conferred right on aggrieved person, to move the court under section 155, but created a forum, namely, the court hearing matters under the Companies Act, and widened the jurisdiction by conferring power on the court not only to decide the question of title, but also to decide all questions which are ancillary and incidental to the main question. Even there, Parliament did not use the well-known expression 'questions which are ancillary or incidental to the main question', but used the expression of wider amplitude when it leaves to the court 'to decide all and every questions that may arise in such a petition and which the court considers necessary or expedient to decide in connection with application for rectification'. When it is said that the court may decide the question ancillary or incidental to the main dispute, while exercising jurisdiction conferred by a special statute, it would always be necessary to decide whether other questions are ancillary or incidental to the main question. You cannot exercise collateral jurisdiction for collateral purpose. But sub-clause (b) of sub-section (3) confers a much wider jurisdiction when it leaves to the court's discretion to decide all those questions which the court considers necessary or even expedient to decide in connections with application for rectification. In other words, jurisdiction conferred by section 155(3) is comprehensive jurisdiction which enables the court in application under section 155 to examine all questions, complex, intricate or otherwise, relating to the title to the shares, and further enlarges the jurisdiction of the court set up under the Companies Act to decide all those questions, which the court considers necessary or expedient to decide in connection with application for rectification. In the words, when an application for rectification of register is made, it would be open to the court while considering the main relief to decide all questions that may arise in such an application on rival contention. To illustrate, if a petitioner asserts title to the shares and the respondent contends that title was acquired by a forged document, forgery would be put in issue and it would be necessary to decide the issue of forgery before the main prayer for rectification of register can be granted. Take another illustration, if a petitioner claims that he is the owner of certain number of share and his name must appear on the register of members and the respondents come and contend that the transfer is be name or without consideration or in fraud of creditor, all those questions will have to be determined before the main relief is granted. To look at the problem other way would be to deny jurisdiction of such a widest amplitude conferred on the court. If a mere assertion on the part of the respondent that the issue of fraud will have to be decided or the issue of forgery will have to be determined, or the issue of want of consideration will have to be examined or the issue as to conspiracy will have to be examined, by mere assertion in the affidavit-in-reply these persons would be able to oust the jurisdiction of the court because it can be safely stated that these questions are bound to arise and the court cannot examine them in an application under section 155. If the jurisdiction under section 155 is limited to those case where there is not much of a dispute, where parties agree, where there is consent, where there is formal objection, what purpose was there to be achieved introducing sub-section (3) in which it is made abundantly clear that a question relating to the title of person claiming share being put in issue can be examined by court and Parliament did not stop at that, but went further and said that not only examine the question of title which the court would have jurisdiction to examine, but the court may also examine all those questions which the court considers necessary and expedient to decide in order to grant or refuse the main relief. If any given respondent were to come and say that the transfer form lodged by the petitioner who claims to be a member is a forged one, such mere assertion itself would be sufficient to throw out the petitioner, because an issue as to forgery would raise intricate or complex questions of civil law and cannot be examined in a petition under section 155. I am afraid, such a jurisdiction of wide amplitude would be rendered fruitless and nugatory, and the purpose behind introducing a section like 155 would stand defeated. It would be a teasing illusion of doubtful legal utility. This becomes crystal clear for it can be said that if the company admits the dispute, why force the petitioner to come to the court. If the claim is lodged with the company, board of directors is absolutely powerful to decide the issue, and if the company through its board of directors accepts the claim lodged by the petitioner, nothing further is required to be done. Would it be a fair proposition to assert that a mere dispute is sufficient to oust the jurisdiction of the court under section 155 Answer must obviously be in the negative.

11. It must be made distinctly clear the there is nothing in the language of section 155 which even remotely suggests that jurisdiction conferred upon the court is of a summary inquiry, and that it precludes or forbids a full thorough inquiry in respect of the title to shares claimed one way or the other. On the contrary, there is clear inherent evidence in the provisions contained in sub-section (3) to show that the jurisdiction is not of summary or limited nature. Now, if wider jurisdiction is conferred on the court, would it be proper to limit it to make it fruitless by a process of interpretation It was then said that a long line of decisions has clinched the issue and the matter is no more res integra. Matter having been examined on principle, I would now turn to the authorities relied upon on either side to show whether the conclusion reached by me on the language of section 155 is in any way in conflict with the legal position which was more often repeated to me to be a settled legal position.

12. It is a trite saying that our company law is a mirror reflection of the English company law in force at the relevant time and our obedience to English law is so much that we have fallen in line more often by carrying out amendments which is carried out in the company law of U.K. Therefore, it has almost become an adage that whenever a question of construction of the provisions of the Companies Act is raised we first fall back upon the decisions under the English company law. Section 155 of the Companies Act, 1956, is in pari materia with section 116 of the Companies Act, 1948, of the U.K. After comparing the language of the two provisions, a very unequivocal submission was made on behalf of the respondents that I should not in any way be led away by the provisions contained in sub-section (3) of section 155, because there is an exactly identical provision in sub-section (3) of section 116 of the U.K. Act and even with the provision in sub-section (3) there is a long line of decisions that jurisdiction conferred by section 116 of the U.K. Act of a summary nature and complicated and complex questions, if they raise in a petition for rectification are not determined in exercise of the summary jurisdiction and parties are relegated to a suit. Undoubtedly, sub-section (3) of section 116 of the U.K. Act is in pari materia with sub-section (3) of section 155 of our Act. It was, therefore, said that the interpretation put on sub-section (3) of section 116 of the U.K. Act should more or less guide our approach in the matter. I would bear that in my mind with this reservation that there is material difference in the procedural part ordained by the U.K. law and our law with regard to approaching the court for rectification of register.

13. Let me at the outset notice relevant rules of the Supreme Court (1965 revision) framed under the Companies Act, 1948, and styled as Court Procedure (England). Rule 3 provisos that an application under section 116 of the Act for rectification of the register of members of a company may be made by originating summons or originating motion. Rule 4 provides for those applications which ought to be made by originating motion. Rule 4 provides for those applications which ought to be made by originating motion. Rule 5 provides for those applications which must be made by petition. It may be noted in passing that in England an application for rectification of register under section 116 has to be made by an originating summons or originating motion. Under our Companies Act, section 643 confers power on the Supreme Court to frame rules and in exercise of those powers the Supreme Court has framed the Companies (Court) Rules, 1959, which came into force on 1st day of October, 1959. Rule 10 provides that, unless otherwise provided by the rules or permitted by the judge, all applications under the Act shall be made by petition or by a judge's summons as hereinafter provided. Rule 11 provides those application which ought to be made by petition. Item (6) of rule 11(a) provides that an application under section 155 for rectification of the register of members shall be made by petition. Sub-clause (b) of rule 10 provides that all other applications under the Act or under the Rules shall be made by a judge's summons, returnable to the judge sitting in court or chambers as hereinafter provided. First distinction which, therefore, comes to surface on comparison of the provisions is that in England an application for rectification of register has to be made by an originating summons or originating motion, though my attention was also drawn to the provisions prior to the 1965 Rules. I do not propose to take them at present into consideration, because for the purpose of the present contention under examination rules as are found in 1965 rule are sufficient to bring out the distinction herein above pointed out by me.

14. Originating Summons has been defined in Order I, rule 3(U.K.), as every summons, other than summons in a pending cause or matter. Order VII, rule 2 (U.K.), makes provision with respect to originating summons. It provides that every originating summons must be in the form prescribed and the party taking out an originating summons has to be described as plaintiff and the other party shall be described as defendant. Order VII, rule 3 (U.K.), provides that every originating summons must include a statement of the questions on which the plaintiff seeks the determination or direction of the High Court or, as the case may be, a concise statement of the relief or remedy claimed in the proceedings begun by the originating summons with sufficient particulars to identify the cause or causes of action in respect of which the plaintiff claims that relief or remedy. Order XXI, rule 1 of U.K. 1959 Annual Practice, page 681, says that a petition is a cause or matter and, therefore, inspection may be had under rules 15 to 18 of Order XXXI. It further reads to the effect that the petitioner as plaintiff may interrogate. Rule 1 also provides for inspection of documents referred to in the pleadings or affidavits. Rule 19-A provides for supplying of verified copies instead of inspection of original documents. On an application of a party, the court or a judge has power to order discovery of particular document or class of documents. Order IX (U.K.) (1965) sets out general provisions with respect to petitions. Rule 5 may be taken into consideration with advantage because it clearly makes out a distinction between an application and a petition when it provides that no application in any cause or matter may be made by petition. Petition, therefore, stands by itself as special kind of pleading in respect of certain specified matters. Now, below rule 5, there is a note that even in a petition evidence can be given by affidavit. That aspect need not detain me because it would only mean that ordinarily in a petition parole evidence can be given but that can be departed from by permitting party to give evidence by affidavit. If such a permission is given, Order IX, rule 1, enables the court on a motion of party or on its own to call upon the person who has filed affidavit to stand the test of cross-examination. Therefore, the important thing to be noted is that in England under the relevant Rules an application for rectification of register of members under section 116 of the U.K. Act can be made by originating summons or originating motions while in India it has to be made by petition. There is understandable and appreciable difference between a petition and an originating summons which would be clearly discernible from the various provisions herein before set out. The marked difference lies in how the court has to deal with an originating summons or originating motion and a petition.

15. In this connection, however, Mr. Mehta, learned counsel who led on behalf of the respondents, urged with considerable emphasis that the court should attach no importance to the procedural wrangle by which a party can come to the court and invoke its jurisdiction under section 155. It was said that form of pleadings is not determinative of the jurisdiction conferred on the court. The proposition is not open to such over-simplification. On the technicalities of procedure, English law is rather very precise. In India we have a different outlook, because of our local conditions and especially our standard of literacy and development of masses in rural areas. If we were to attach importance to form of pleadings we may be faced with a situation where we may have to reject 101 out of 100 cases. We are long since attended to the legal adage that pleading in mofussil need not be strictly construed or examined. Therefore, here at any rate we are not obsessed by this wangle of form of pleadings or procedural angularities unless they impinge upon justice or overlooking it may leas to miscarriage of justice. But when the view taken by the court with regard to jurisdiction in certain matters in England is pressed in to service, this court cannot sidetrack highly technical approach of English courts and emphasis placed on the form of pleadings directly related to the jurisdiction of the court. To some extent because of our historical and long connection with Anglo-Saxon jurisprudence by which we are governed for nearly two centuries we also sometimes pay undue and undeserved respect to the form rather tenth substance. Consequently, we have, in our Companies (Court) Rules, provision for applications that can be made by petition and those which can be made by judge's summons returnable to the judge in court or in the chambers. In any event, as we have borrowed this distinction, we must stand by. The Supreme Court must not have made any exercise in futility when it said that certain applications enumerated in rule 11 must be made by petition. If the body of our Companies Act provide a mirror reflection of English law and also follow to see extent its pattern and yet the Supreme Court has made a notable departure, such noticeable difference, the court must bear in mind. While in England under the rules hearing above quoted it is made distinctly clear that an application for rectification under section 116 of the U.K. Act can be made by originating summons or originating motion, in India it has to be made by petition. Why did the Supreme Court make this departure It must be with some purpose. The Supreme Court has before it rules prior to 1965 U.K. Rules which also had identical provision, namely, that an application for rectification of register in England may be made by originating summons or originating motion. Even with that experience in mind and distinction made by the rule-making authority in England, the Supreme Court deliberately provided in rule 11 that a petition for rectification must be made by petition. Departure being conscious must be given due weight and effect.

16. Now, if an application for rectification of register has to be made by way of petition and if a form is prescribed which refers to the nature of allegations that are required to be made and controversy on such allegations is likely to arise, and if it is said that the petition is more or less analogous to a suit where there would be a defendant, where there would be discovery and inspection and where there would be issues to be settled and decided and yet, if the petition is to be made to the court set up under the Companies Act, there is no question of then urging that jurisdiction conferred on the court with all these procedural niceties would be a jurisdiction of summary nature as to exclude any examination by court the intricate and complex questions of title. Therefore, before bodily importing English concept of court's jurisdiction in respect of a petition under section 116 (U.K.) for dealing with a petition under section 155 this procedural distinction must be clearly borne in mind and English decisions may be examined with this reservation.

17. Mr. A. H. Mehta, however, urged that apart from English decisions even the decisions of different High Courts in India have more or less toed the same line. Before examining these authorities one aspect should be made crystal clear. Under the Indian Companies Act, 1913, power was conferred on the different High Courts to make their own rules regulating its practice and procedure in matters arising under the Indian Companies Act, 1913. The Bombay High Court made rules under the Indian Companies Act, 1913, both for the High Court and courts subordinate thereto. These rules continued to remain in force until displaced by the rules enacted by the Supreme Court which came into force on 1st October, 1959. Rule 89(y) provides that applications in all matters arising under the Indian Companies Act, the Indian Trusts Act, etc., unless otherwise provided in the Act itself or by the rules thereunder or by these rules, may be disposed of by a judge in chambers. Rule 729 in Chapter XXXV provides that all petitions shall be presented under the direction of the judge who may be sitting in Chambers for the time being, except in company winding-up business as provided in rule 60. There is a proviso which is not very material. Rule 733 provides for presentation of a petition praying for reduction of capital. There was no specific rule that an application for rectification of register that can be made under section 38 of the Indian Companies Act, 1913, was required to be made by a petition. It can, therefore, be made by way of an application to the judge in chambers. That was the position under the Original Side Rules of the Bombay High Court and that position prevailed till 1st October, 1959. This aspect has to be borne in mind while appreciating the ratio of some of the decisions of the Bombay High Court on which reliance was placed to canvass a proposition that jurisdiction under section 155 is of a summary nature.

18. With this statutory position being kept in the background let me turn to some of the diffusion to which my attention was drawn at the hearing of this matter. Before I advert to these decisions, I would start by referring first to Halsbury's Laws of England, fourth edition, volume 7, page 178, para. 309, wherein the following is to be found :

'The application must be made to the court having jurisdiction to wind up the company. It may be initiated by originating summons or originating motion or by an action commenced by writ. If by reason of its complexity or on the ground that there are matters requiring investigation or otherwise the court thinks that the case could more satisfactorily be dealt with by and action, it will decline to make an order on a motion, without prejudice to the right of the applicant to institute an action. An action may be instituted for rectification of the register without any direction by the court, a course which should be followed where there is much complexity, or where other relief is required. The court will not give substantive relief by way of rectification of the register on an interlocutory application in an action, nor will it rectify the register in the absence of third parties whose rights will be affected by the rectification.' The last line in the quotation will be sufficient to reject one of the contentions of the respondents that as a relief is sought also against some persons who are non-members, the petition is not maintainable, because it in terms says that if relief cannot be granted without the presence of third party, the court will not rectify the register in the absence of third party, meaning that if those third parties are impleaded as respondents, the court could proceed to inquire into the allegation of the petitioner and court's jurisdiction would not be lost merely because third parties are required to be impleaded. Now, let it be remembered that an application for rectification has to be initiated by originating summons or originating motion or by an action commenced by a writ. Ordinarily, in such proceedings parole evidence is generally avoided. Where disputed questions of fact arise in a proceedings before a court exercising writ jurisdiction, it would ordinarily decline to examine them leaving the party to the ordinary remedy of a suit though the recent trend is that the court should not avoid examining it if it is necessary to do justice between the parties. At an appropriate stage in this judgment I will refer to one decision of the Supreme Court against the judgment of this High Court wherein the Division Bench of this High Court has heard parole evidence for a good number of days and that aspect was sought to be commented upon in the Supreme Court and the decision of this High Court was affirmed. Therefore, merely because parole evidence may become necessary that itself would not deprive jurisdiction if the court otherwise possess it. But in England where the prescribed procedure required that an application for rectification must be made by an originating summons or motion or by an action commenced by writ, it brought within its wake the limitations imposed upon courts that in such proceedings disputed questions of facts are not investigated and the party is relegated to a suit and the court may decline to make an order on motion. The court would thus decline jurisdiction as the matter was commenced by originating motion. It is not said that such would be the approach of the court in the matter brought before it by way of petition. Therefore, the proposition hearing above quoted cannot be construed to mean that as soon as some complex questions arise even when action is commenced by a petition for rectification of register, the court on that ground alone has no jurisdiction to proceed with the matter or in its discretion and wisdom must decline to proceed with the matter. Bearing in mind the relevant important distinction about how the action for rectification in England and in India is to be commenced, which again suggests the procedure the court must adopt in dealing with such action, it is not correct to accept the view that the jurisdiction of the court while dealing with a petition under section 155 is of a summary nature. Same would be the position while dealing with decisions of courts in India and especially the Bombay High Court prior to 1st October, 1959, when the Companies (Court) Rules came into force.

19. Turning now to the decisions, in Jayashree Shantaram Vankudre v. Rajkamal Kalamandir [1960] 30 Comp Cas 141 (Bom), the petition was made prior to 1st October, 1959, because the date of the court's judgment is 19th January, 1959, meaning thereby prior to the enactment of the Companies (Court) Rules, which made it obligatory to commence action for rectification by way of a petition. The matter till then was governed by the Original Side Rules of the Bombay High Court. The petitioner had sought rectification of register in respect of 251 shares in respect of which the company had registered a transfer in favour of respondent No. 2. Petitioner and respondent No. 2 were wife and husband at some point of time in their life, though possible they had parted company when the dispute came to the court. Transfer was made pursuant to a resolution adopted at a meeting of the board of directors, which found its place in the minute book, and it was urged that the minute book in respect of the relevant entry is fabricated. It was also urged that the transfer deed was a fabricated document. Mr. Mehta said that in that case the two important allegations were that the minute book was fabricated and transfer deed was forged and that these contentions are identical with those which arise in the petition before me and that in such a situation, the Bombay High Court declined to entertain the petition and directed the party to a suit. In reaching this conclusion, the court first referred to the question set out above from the earlier edition of Halsbury's Laws of England. After examining the quotation and decision in Matheran Steam Tramway Co. v. B. N. Lang [1931] 1 Comp Cas 206 (Bom), the learned judge came to the conclusion that the matter is entirely in the discretion of the court to examine the contention or to direct a party to regular suit. This decision is not an authority for the proposition that the court has no jurisdiction to entertain a petition when complex and intricate questions of title are raised. Mr. Mehta fairly conceded that it is not his submission that the court has no jurisdiction, but the court in its discretion and wisdom should decline to exercise the jurisdiction. That is entirely a different thing from saying that the court in such a situation has no jurisdiction under section 155 of the Act. If may also be borne in mind that while declining to entertain the petition, it was observed in that case that in all matters arising under the Companies Act the rules provide that the application must be by a petition and, therefore, it is not envisaged that complicated questions of facts must be tried on a petition where remedy for action is available to a party. Now, with great respect, it is difficult to understand how it could have been said at the relevant time that an application for rectification ought to have been made by a petition. Such a provision was not there. The distinction between the matter brought before the court by a judge's summons and matter brought before the court by a petition did not fall for consideration. But it was further observed that the English decisions in this connection are relevant and that where discovery and inspection are necessary and complicated questions such as forgery and fabricated documents arise, that summary procedure of trial by petition under section 155 should not be allowed to be pursued. With respect, it is crystal clear from the English practice pointed out in the earlier portion of this judgment that where action is brought by way of petition, discovery and inspection can be asked and taken and evidence may have to be offered, may be by way of affidavit or parole evidence as the exigency of the case requires. Therefore, it cannot be said that wherever discovery and inspection are necessary or complicated questions arise, they by themselves should be sufficient to come to the conclusion that the court should deny to itself jurisdiction under section 155. To say that party has remedy by way of a suit is to ignore the special provisions of the Companies Act, and special forum created by the Companies Act for enforcement of right conferred by the Companies Act and to read into these special provisions a limitation or fetter is to bring in something which is not in the section. Where a special statute creates right, also sets up a forum and provide a procedural method for enforcing the right and obtaining relief, that forum and remedy has to be preferred to the normal remedy of suit which any one can institute and it should all the more be so where technical questions arising under the Companies Act may have to bedside which a judge exercising company jurisdiction may be expected to examine and decide with a specialised knowledge which may not be readily available to ordinary civil courts before whom hardly questions under the Companies Act would arise. Therefore, this decision while recognising the discretion in the court, does not lay down the proposition that in such a situation as discussed in that case, the court must decline itself jurisdiction to entertain and dispose of the petition.

20. In Manilal Gangaram Sindore v. Western India Theatres Ltd. [1963] 33 Comp Cas 826(Bom), it was on served that the provision made in section 155 for a procedure by way of an application is only a provision for a summary procedure. But is does not whittle down or abrogate the provision by way of a suit for getting the relief contemplated by that section. In that case, the matter was brought before the court for rectification of register of the members maintained by the defendant-company, alleging that the latter has wrongfully refused to register in their name certain shares in respect of which they has submitted to the company duly completed transfer form. A preliminary objection was raised that the subject-matter of the suit has been valued by the plaintiff at Rs. 1,300, and the High Court on its original side will have no jurisdiction to entertain the suit. While examining this contention, it was said that civil court has jurisdiction to decide all questions of title to property and that the shares being one such property, civil court can entertain the suit where title to property is disputed and that remedy under section 155 is a summary remedy. In fact that question hardly fell for consideration and it appears to have been decided on the concession. This becomes distinctly clear from the observation that : 'Mr. Gupta himself quite frankly and fairly did not dispute the proposition that the procedure laid down in section 155 of the Companies Act, 1956, was only a summary procedure and that the relief provided for in that section was available also at common law in a common law action.' Relief at common law is available is not in dispute. Is it because such a relief is available that the court could decline to exercise jurisdiction under section 155 And let it be remembered in that case that suit was filed by the plaintiff for rectification of register. The jurisdiction question arose on the ground that the High Court lacked pecuniary jurisdiction to entertain the suit.

21. In this connection my attention was also drawn to People's Insurance Co. Ltd. v. C. R. E. Wood & Co. [1961] 31 Comp Cas 61 (Punj). This judgment was also pronounced before the Companies (Court) Rules came into force. In that case an application was made by the People's Insurance Company Ltd. in liquidation through its official liquidator under section 155 of the Companies Act for rectification of the member's register. This petition was contested by four different sets of respondents. Grievance was that title to the shares was claimed under a forged document and transfer was alleged as fraudulent. After stating the position of law that fraud or fraudulent transfer does not defeat title of the true owner and that person defrauded has a right to require the company to restore his name to the register, the court proceeded to examine the objection whether in an application under section 155 inquiry should be held whether the allegations of fraudulent transfer were accompanied by forged transfer deeds. After referring to the earlier decision of the Punjab High Court, it was observed that when serious disputes were involved the proper forum for their adjudication was a civil court, and that summary remedy under section 155 was not available to the litigant as of right without the court having discretion to refuse it. After re-stating this position of law, it was observed that the matter before the court was comparatively a simple one, and the court proceeded to examine the contentions and said that there was no reason to abstain from proceeding under section 155. Now, it must be confessed that the court undertook to examine the contention in the petition observing that the matter was comparatively a simple one. Mr. Mehta emphasised the fact that the court re-stated the position of law that when complicated and/or complex questions arise the proper forum would be the civil court. No exception can be taken to this submission, that being thereto of the judgment under discussion. The fact, however, remains that all these cases proceed on the assumption that a remedy under section 155 is a summary one of jurisdiction conferred by section 155 on the court is a summary jurisdiction. This assumption can even be stated to be well founded as the law stood prior to 1st October, 1959, when the Companies (Court) Rules came into force. The judgment under discussion appears to have been pronounced on 25th August, 1959. Same view appears to have been reaffirmed in Smt. Soma Vati v. Krishna Sugar Mills Ltd., AIR 1966 Punj 44. But while stating this position of law, observation is made that power conferred by section 155 on the court is very wide, but having so observed, it was taken as well settled that remedy provided by section 155 is a summary one. With greatest respect, it is difficult to envisage how a very wide jurisdiction can be whittled down to enquiry in a summary way in which ordinarily the court does not undertake to examine complicated questions of title or serious allegations of fraud or forgery which may entail examining parole evidence. Same view appears to have been taken in In re Dhelakhat Tea Co. [1958] 28 Comp Cas 62 (Cal), a judgment delivered on 18th March, 1957. In Punjab distilling Industries v. Biermans Paper Coating Mills Ltd. [1973] 43 Comp Cas 189 (Delhi), the earlier view of the Punjab High Court as expressed in Smt. Soma Vati's case, AIR 1966 Punj 44, was reaffirmed, though the Division Bench of the High Court directed the learned single judge of the court to entertain a petition under section 155 and deal with it on merits.

22. Now, as against these decisions, Mr. B. R. Shah, learned advocate, drew my attention to Matheran Steam Tramway Co. v. B. N. Lang [1931] 1 Comp Cas 206 (Bom). A petition for rectification of register was made which was accepted by Taraporewala J. In an appeal against the decision granting rectification of register, Marten C.J., speaking for the Division Bench, while negativing the contention that a petition involving complicated questions should not be entertained under section 38 of the Indian Companies Act, 1913, observed that at the most it is a matter of decoration for the court whether in any particular case it will hear the petition or leave the parties to a separate suit. It was further observed that an express issue on this point was raised and as the learned single judge exercised his discretion by deciding to hear the petition, no case was made out to overrule him and force the parties to begin de novo. A submission that suit would involve long-protracted and expensive litigation was also taken into consideration, while negativing contention for directing the party to a suit. In a concurring judgment Kemp J. first referred to the relevant considerations that in England an application for rectification may be made by motion or by originating summons and, in such a proceeding, making an order under section 116 is in the discretion of the court and where there is conflict of evidence the order may be refused without prejudice to the applicant's right to bring an action for rectification. It was then observed that in the case before the court there was no conflict of evidence. Incidentally reference was also made to Sadashiv Shanker Dandige v. Gandhi Seva Samaj [1958] 28 Comp Cas 137; AIR 1958 Bom 247, wherein it is also observed that jurisdiction of the court under section 155 is of a summary nature and, therefore, obviously detailed investigation cannot be entered into. Then comes an observation which is very material. It reads as under (page 142) :

'The jurisdiction is of a summary nature and, therefore, obviously a detailed investigation cannot be entered into. Now, if in such circumstances, if the fact of transfer is denied by the company the courts will have to investigate the matter and the objection will be raised that that cannot be done in a summary proceeding. Thus, the provision will be rendered otiose in most cases. This could not be the intention of the legislature.'

23. A. H. Mehta, however, said that, apart from the authorities here in before discussed by me, the point is no more res integra and is finally clinched by a decision of the Supreme Court in Public Passenger Services Ltd. v. M. A. Khader [1966] 36 Comp Cas 1; AIR 1966 SC 489. The pertinent observation specifically relied upon reads as under (page 6) :

'Counsel for the appellant contended that the relief under section 155 is discretionary, and the court should have refused relief in the exercise of its discretion. Now, where by reason of its complexity or otherwise the matter can more conveniently be decided in a suit, the court may refuse relief under section 155 and relegate the parties to a suit. But the point as to the invalidity of the notice, dated January 20, 1957, could well be decided summarily, and the courts below rightly decided to give relief in the exercise of the discretionary jurisdiction under sections 155. Having found that the notice was defective and the forfeiture was invalid, the court could not arbitrarily refuse relief to the respondents.'

24. Now, with great respect, it is not possible to agree with Mr. Mehta that the question that remedy under section 155 is of summary nature and that as soon as compiled or complicated questions are raised the party ought to be relegated to a suit is conclude by this decision. In the initial part of the question there is submission of the counsel. While disposing of the contention the court observed that where a matter can be more conveniently decided in a suit the court may refuse relief under section 155. It is more a matter of convenience and less a matter touching the jurisdiction. The form in which the contention is now raised was not canvassed before the Supreme Court and a passing observation was made that jurisdiction under section 155 is of a summary nature. True, even the passing observation of the Supreme Court is binding and may conclude the point, yet the ratio is not to the effect that as soon as complex or complicated question is raised in a petition under section 155, the court becomes functus officio. Hence, it is not possible to accept the submission of Mr. Mehta that the matter is no more res integra and this court cannot undertake examination of the contention whether section 155 is only limited to cases where relief can be granted in a summary way.

25. Therefore, both on principle and on authority, it becomes crystal clear that a petition under section 155 cannot straightway be disposed of by merely saying that as complex and complicated questions of title are raised, the matter ought to be decided by way of a suit and the party ought to be relegated to a suit. At best it can be said that the question is addressed to the discretion of the court and if the court exercises desertion one way, namely, to undertake to hear the petition, its decision cannot be said to be one without jurisdiction. The Companies Act, 1956, is a very comprehensive statute. It is possible one of the lengthiest statutes. There are as many as 658 sections. It has created certain rights. It creates a special machinery for enforcement of these rights and resolution of disputes arising in respect of rights under the Act. Membership of a company confers right and right is created by the Companies Act. To exercise the right, evidence of membership is necessary and the Act casts an obligation to maintain register of members. These provisions comprehend a possible dispute. The Act creates a machinery and forum for resolution of dispute. If such be the comprehensive legislation and if the dispute involves interpretation of some of the provisions of the Companies Act, when a right to shares is asserted and denied, it would be rather inappropriate to say that a civil judge who is ordinarily not called upon in his work-a-day life to deal with the provisions of the Companies Act to deal with and decide it. Therefore, in my opinion, even the complex and complicated questions of title can be appropriately examined in a petition for rectification made under section 155 of the Companies Act.

26. We need not import in our country where pleadings are not strictly construed and form is not strictly insisted upon, the English jargon of originating summons and originating motion or action commenced by writ and each method of commencing proceeding deciding the nature of proceeding and method of dealing with it. In our country with our percentage of illiteracy a slightly informal approach on the part of the court would advance justice. It would be too much to attach sanctimonious reverence to the form impinging upon the jurisdiction of the court and, therefore, with great respect, it is not possible to accept the submission of Mr. A. H. Mehta that I should not undertake examination of the complex and complicated questions arising in this petition.

27. Having examined the contention threadbare ignoring the facts let me examine what is the width and ambit of so-called complicated, complex and intricate questions of title arising in this petition as contended for on behalf of the contending respondents. The petitioners contend that the shares were transferred by them to respondent No. 4 on an understanding that Shri Manubhai and brother while agreeing to invest funds in this company desired that control of the affairs of the company should be with respondent No. 4. The petitioners, therefore, gave blank transfer forms in respect of their shares to respondent No. 4 to make his control effective. However, their case is that it was a nominal transfer. I would express no opinion on this crucial point save saying that respondents say that transfers were substantive transfers by way of sale for consideration and the price quoted and paid is Rs. 200 per share. It is only to be mentioned without any expression of opinion that the share certificates, though they were the subject-matter of two independent and separate transfers, one initially by petitioners to respondent No. 4 and, secondly, by respondent No. 4 to respondents Nos. 3 and 8, yet, they were always with the petitioners who produced them in the court. This is a relevant aspect. The question posed is whether transfer was nominal or substantial. But urged Mr. Mehta that if blank transfers were given and if now the transfer forms show that they were filled in, it would be a case of forgery and the court would have to investigate forgery. It is incidentally question which court may have to investigate but investigation of forgery does not call for any intricate or complex problem. This is undertaken by a magistrate as part of his routine work. What greater importance has to be attached to it that it cannot be examined on the original side of this High Court. It was then said that charge of conspiracy is made. This high-sounding word need not mislead anyone. Someone can invoke section 120-B of the Indian Penal Code. Here the suggestion is that those who are charged with conspiracy gathered together with common object to deprive the petitioners of their shares. This is to may mind a simple proposition which can well be examined on evidence. But somehow or other, when a matter is heard in the High Court the very idea of parole evidence is anathema to counsels and reverence is for affidavits. It was said that allegation may necessitate parole evidence. What does it matter In Babubhai Muljibhai Patel v. Nandlal Khodidas Barot [1974] 2 SCC 706; AIR 1974 SC 2105, a Division Bench of this High Court recorded parole evidence in a petition under article 226 for two weeks and adverse comment against this procedure before the Supreme Court failed to carry conviction. That aspect should not deter me at all from exercising jurisdiction. What is there to run away from it. Therefore, again with respect, I find no complicated or complex questions raised in this petition. There are some questions of law. But without any arrogance I must say that the High Court would be better suited to decide these questions. Taking the other view, these petitioners who are fighting from 1975 will have to go to the city civil court, then come by way of appeal. It is merely adding to the hierarchy of litigation and when charge is being leveled that litigation in our country is protracted, one need not add argument in favour of it by resorting to the suggestion made on behalf of the respondents. Therefore, examining the matter from all possible angles, the preliminary objection must be overruled and the petition must be set down for final hearing. Costs of this hearing should be taken into consideration while determining the costs which would finally abide the outcome of the petition.


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