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Judgment
Sunil Gaur, J.—Rejection of plaint of the plaintiff/appellant brings him to this Court in appeal. Defendant/Respondent''s application under Order VII Rule 11 CPC has been allowed vide impugned order dated 14th July 2006 and appellant''s/plaintiff''s plaint has been held to be barred by Section 111 of the Companies Act, 1956 by the trial Court. In a suit for declaration, permanent and mandatory injunction, plaintiff/appellant had sought a declaration that fifty four shares of respondent No. 2 transferred by the predecessor in interest of the plaintiff and the defendant No. 1, vide share transfer deed dated 20th November, 1977 was a forged and fabricated transaction. Appellant had also sought injunction against respondent No. 2 company to restrain it from further transferring the aforesaid shares.
The stand taken by the appellant/plaintiff before the trial Court was that the question of share transfer deed dated 20th November 1977 being forged and fabricated document cannot be decided without evidence and so the application under Order VII Rule 11 of CPC was resisted. Whereas, the stand of the respondent/defendant before the trial Court was that the tribunal constituted u/s 111 of the Companies Act 1956 has the exclusive jurisdiction to decide the controversy regarding the title of shares and so the jurisdiction of the civil Court to entertain such matters is barred.
After having heard both the sides at length and upon perusal of the record of this case, we find that after the amendment of the Companies Act, 1956 w.e.f. 31st May, 1991, earlier Section 155 of the Companies Act stood substituted with Section 111 of the Companies Act, 1956 and the tenor of both these sections is the same. Trial Court in the impugned order had noticed the scope of Section 155 of the Companies Act, 1956 and has observed that the object of Section 155 of the Companies Act (now amended as Section 111 of the Companies Act) is to provide a remedy in non controversial matters or in the matters where a quick decision is necessary and can be rendered in order to obviate irreparable injury to a party and Section 155 of the Companies Act is ordinarily not intended for settling controversies necessitating a regular investigation and in such cases, the company Court can decline to entertain petition in exercise of its discretionary power and say that since serious disputes are involved, the proper forum for their adjudication is a civil Court.
The judgment of the Apex Court on this aspect rendered in the case of M/S. Ammonia Supplies Corporation (P) Ltd. Vs. M/S. Modern Plastic Containers Pvt. Ltd. and Others, has been relied upon by the trial Court. So far, it is so good for the appellant. However, in the later part of the impugned order, the trial Court takes a ''U'' turn by being unduly influenced by order dated 12th April, 2005 of the Company Law Board vide which, respondent/defendant No. 2 was directed to release the bonus shares to respondent/defendant No. 1 in respect of fifty four equity shares in question. It has been observed by the trial Court in the impugned order that it cannot sit as an appellate Court over the aforesaid order dated 12th April 2005 of the Company Law Board and without commenting upon the validity/legality of the order dated 12th April, 2005 of the Company Law Board, trial Court has given liberty to the appellant to initiate and pursue appropriate remedies in appropriate forum. Trial Court has gone to the extent of observing in the impugned order that if any fraud has been played upon by respondent/defendant No. 1, then appellant/plaintiff should initiate appropriate proceedings before the appropriate forum as provided u/s 111 of the Companies Act, 1956.
The pertinent observations made in M/S. Ammonia Supplies Corporation (P) Ltd. Vs. M/S. Modern Plastic Containers Pvt. Ltd. and Others, reads as under:
In order to qualify for rectification, every procedure as prescribed under the Companies Act before recording the name in the register of the Company has to be stated to have been complied with by the applicant at least that part as required by the Act and assertion of what not complied with under the Act and rule by the person or authority of the Respondent company before applicant to claim for the rectification of such register. The Court has to examine on the facts of each case, whether an application is for rectification or something else. So field or peripheral jurisdiction of the Court under it would be what comes under rectification not projected claims under the garb of rectification. So far exercising of power for rectification within its field there could be no doubt the Court as referred u/s 155 read with Section 2(1) and Section 10, it is the Company Court alone which has exclusive jurisdiction. Similarly, u/s 146 the ''Court'' refers to the Company Judge which has exclusive jurisdiction to decide matters what is covered under it by itself. But this does not mean by interpreting such "Court'' having exclusive jurisdiction to include within it what is not covered under it, merely because it is cloaked under the nomenclature rectification does not mean Court cannot see the substance after removing the cloak.
The remedy provided u/s 155 (now Section 111) of the Companies Act, 1956 is summary in nature. What remains to be seen is as to whether the issue of share transfer deed dated 20th November, 1977 being forged and fabricated document can be adjudicated upon in summary proceedings u/s 111 of the Companies Act. To establish that the share transfer deed in question is forged and fabricated, evidence is required to be led which may include the evidence of hand writing expert and the detailed examination and cross-examination required would obviously bring out this case from the purview of summary proceedings and in our considered opinion, the disputed question of title involved in respect of the shares in question cannot be decided in summary proceedings as envisaged u/s 111 of the Companies Act, 1956.
All that is provided in Section 111 of the Companies Act, 1956 is that the company has power to refuse registration and the said refusal is appealable and as per Sub-section 7 of this section, the Tribunal may decide the question of title of any person, who comes up in appeal against such refusal. In the instant case, unless and until, the Appellant gets a declaration from competent Civil Court that the share transfer deed in question already made in favour of the Respondent is forged and fabricated, the Appellant has no basis to approach the Respondent No. 2 company to register the disputed shares in his favour. Therefore, we are of considered opinion, the Appellant cannot be relegated to avail of the remedy u/s 111 of the Companies Act, 1956 at this stage and the Appellant is well within its right to maintain his civil suit to seek the declaration as prayed for by him in the present suit. Reliance placed upon case of Canara Bank v. Nuclear Power Corporation of India Ltd. and Ors. 1995 (84) Comp Cas 70, by the Respondent is misplaced as in the above said case, it was held that the Company Law Board did not have the jurisdiction to decide petition u/s 111 of the Companies Act, 1956, where persons notified under the Special Court Act, 1992 are involved. Company Law Board''s order dated 12th April 2005 cannot afford any precedent nor be of any assistance in determining the controversy in question as in aforesaid order, it is noticed that no proceedings in any court were pending then in respect of the shares in question.
For the aforesaid reasons, appeal of the Appellant is allowed and impugned order dated 14th July 2006 is set aside and the application under Order 7 Rule 11 of CPC of the Respondent is dismissed and the Suit No. 72/2005, of the Appellant stands restored. Trial Court record be sent back.
Both the sides are directed to appear before the trial Court on 15th September, 2008 for further proceedings in accordance with the law. With the aforesaid directions, the appeal stands disposed of leaving the parties to bear their own costs.