Dr. Nasreen Taj
Professor of Law Saveetha University, Saveetha School of Law, Chennai
Court as defined in the Companies Act
The court is defined in section 2 (11) of the Companies Act. The Court means “with respect to any matter relating to a company (other than any offence against the Act), the Court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10”. But the court means “with respect to any offence against this Act, the Court of a Magistrate of the First Class (now called the Court of Judicial Magistrate of the First Class) or, as the case may by, a Presidency Magistrate (now called Metropolitan Magistrate) having jurisdiction to try such offence”. In this definition the former part refers to civil jurisdiction of the court and the latter part to criminal jurisdiction of the court. As regards civil jurisdiction the court having jurisdiction of the court, and the court having jurisdiction under this Act must be either the High Court or the District Court.
The High Court has jurisdiction in relation to the place at which the registered office of the company concerned is situated. But the High Court will not exercise jurisdiction to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2) of section 110 of the Act (Section 10 (1) (a)) Where the jurisdiction has been so conferred, the District Court has jurisdiction in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.
The district Court will have power to exercise jurisdiction by virtue of the above provisions provided the Central Government, by notification the official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empowers the District Court to exercise all or any of the jurisdiction conferred by this Act upon the court. In any event the District Court will not be empowered to exercise jurisdiction in respect of companies generally, by sections 237, 391, 394 and 327 to 407. Further, the District Court is barred from exercising jurisdiction in respect of companies with a paid up share capital not less than one lakh of rupees, by part VII (sections 425 to 560) and the other provisions of this Act relating to the winding up of companies. When a District Court is empowered under the company law to exercise its power, it then possess jurisdiction for trying suits as a civil court.
The High Court can exercise both original and appellate jurisdiction in respect of company matters. In other words, by the expression “High Court” it means all sides of the High Court, and equally applies to the High Court’s having original side, as well as those having no original side. An appeal from appealable decisions of a High Court Judge exercising original jurisdiction lies to the High Court division Bench or Full Bench and not to the Supreme Court.
The company courts are empowered to entertain actions in certain matters relating to company. Theses courts cannot be regarded as courts of exclusive jurisdiction in all matters pertaining to companies. Even where special remedies are provided by an Act, there are many of them, which can be equally, be enforced by a suit in other courts.
The Tribunal was constituted with powers and procedures for dealing with company matters under Sections 10A, 10B, 10C and 10D by the Companies (Amendment) Act, 1963. But these sections were repealed by the Companies Tribunal (Abolition) Act, 1967. That act came into effect on and from July 1, 1967. The amended Section 10E authorized the Central Government and also effected certain other changes in the section. In matters other than those so handed over the care of special jurisdictions, the ordinary civil courts have jurisdiction to provide remedies. In other words, the jurisdiction of ordinary civil courts is applicable except to the extent to which it has been excluded. Now in accordance with the new amendment act of 2002, the National Company Law Tribunal is to be established, which would have the complete authority to decide company matters.
As regards jurisdiction of criminal offences committed by a company, or any person against this Act, no court inferior to that of a Presidency (now called Metropolitan) Magistrate or of a Judicial Magistrate of the first class shall try that offence. These courts are special courts conferring on them special powers relating to criminal offences under the Act. By the above provisions, the jurisdiction with regard to criminal offences can be exercised only by a Presidency (now called Metropolitan) Magistrate or a Judicial Magistrate of the first class.
Company Law Board (S.10E)
Establishment of the Board of Company Law Administration was one of the important effects of the Amendment Act of 1963. Section 10E authorized the Central Government to constitute the Board. Later on the amendment of 1988 renewed the power of the Central Government and also effected certain other changes in the section. The Company Law Board was re-constituted by the Central Government as an independent quasi-judicial body w.e.f.31.05.1991 under Section 10E of the Companies Act,1 956 replacing the erstwhile Company Law Board which was primarily as a delegate of the Central Government since 1.2.1964. The Company Law Board has framed Company Law Board Regulations 1991 wherein all the procedure for filling the applications petitions before the Company Law Board has been prescribed. The Central Government has also prescribed the fees for making applications/ petitions before the Company Law Board under the Company Law Board (Fees on applications and Petitions) Rules 19917.
The Board has its Regional Benches at Mumbai, Calcutta, Chennai & New Delhi besides the Principal Bench at New Delhi and the Additional Principal Bench at Chennai. The matters falling under section 235, 237, 247, 248, 250, 388B, 408 & 409 and matters falling under Chapter VI of part VI of the Companies Act , 1956 and under section 2 A of the Monopolies Act are dealt with by the Principal Bench at New Delhi and the matters also falling under Chapter VI of part VI of the Act in so far as they relates to Southern Region are dealt with by the Additional Principal Bench at Chennai. The Regional Benches are mainly concerned with petitions / applications under sections 17, 18, 19, 58A, 80A, 111, 111A, 113, 141, 163, 167, 186, 196, 219, 269, 614, 621A, 634A of the companies Act 1956 and section 45QA of the Reserve Bank of India Act, 1934. The matters falling under section 45QA of the Reserve Bank of India Act, which were earlier within the purview of the RBI, have now been entrusted to the Company Law Board. The Central Government have accordingly amended RBI Act giving powers to the Company Law Board to deal with the applications filed by the aggrieved depositors of Non-Banking Financial Companies (NBFCs) under section 45QA of the RBI Act 1934.
The function of the Board is to exercise the powers and discharges the functions as may be conferred on it under the Act or under any other law and has also to exercise and discharge such other powers and functions of the Central Government under the Act or any other law as may be conferred on it by the Central Government.
Constitution of the Board
The Board is to consist of such number of members, not exceeding nine, as the Central Government deems fit. One of the members is appointed by the Government as the chairman of the Board. The board may delegate any of its powers to the chairman or any member or its principal officer. This power was conferred on the Board by S.10E (4A) introduced by the Amendment Act of 1965, and as further amended in 1988.
The members of the Board shall possess such qualifications and experience as may be prescribed. Acts done by the Board cannot be called in question only on the grounds of any defect in the constitution of the Board.
The composition of the Board was increased from five to nine members. This became necessary to enable the board to deal with the new business, which is being transferred to it under the Amendment Acts.
Power of the Board
The power of the Court under Section 17 to confirm alterations in memoranda, to sanction under section 73 issue of shares at a discount, to call a general meeting under section 186, to order rectification of the register of charges, to order ratification or register of members under section 111 and to provide relief against oppression and mismanagement under section 397-409 have been transferred to the Board. The Board is also to share the power of the Central Government under section 637-A to grant approvals, etc.
Three new sub-sections have been added to Section 10E to facilitate the handling of the new business. Sub-section (4B) empowers the board, to form one or more benches to exercise special functions. Any act of a bench shall be deemed to be an act off the Board.
Most of the powers transferred to the Board being of judicial nature, sub- section (4C) provides that every bench shall have the powers of the court under the Civil Procedure Code, 1908, in respect of the following matters:
- Discovery and inspections of documents or other material objects produced as evidence;
- Enforcing the attendance of witnesses and requiring the deposit of the their expenses;
- Compelling the production of documents or other material objects producible as evidence and impounding the same;
- Examining witness on oath;
- Granting adjournments;
- Reception of evidence on affidavits
Sub-section (4-D) further declares that every bench shall be deemed to be a civil court (for the purpose of section 195 of chapter 35 of the criminal procedure code) and every proceeding before it shall be a judicial proceeding. This will enable the Board to punish any person for its contempt.
By the amendment of 1977 the Board has been given the power of an execution court; section 634-A has been added for the purpose. The section authorizes the Board to execute or enforce its orders in the same manner as if it were a decree issued by a court; where the Board is not able to execute an order, it may send the order to the court within whose jurisdiction the company’s office falls or the individual against whom the order is issued resides or works.
The Board with the previous approval of the Central Government may, by order in writing, authorize the Chairman or any of its members of its principal officers or exercise or discharge such order or act done in the exercise of such powers must then be deemed to be the order to act of the Board. In other words, powers, under section 237 delegated by the central government of the company Law Board can be exercised by the Chairman on behalf of the Board. But one defect in the amended provision of this section was pointed put by the Supreme Court that by that provision no acts done by the Chairman or any other members of the Board prior to the commencement of the 1965 Act could be regarded as valid by virtue of this amendment. It means that so far as section 10E (4A) of the Act of 1965 is concerned, it is nit retrospective in effect. In view of this observation the President promulgated an Ordinance to plug this loophole, which was subsequently replaced by the companies (Second Amendment) Act of 1966. In the exercise of the powers and discharge of the functions of the company Law Board, it must be subject to control of the Central Government.
Procedure followed by the Company Law Board
The amendment of 1988 declares that the Company Law Board shall, in the exercise of its powers and discharge of its functions under the Act or under any other law, be guided by the principles of natural justice and shall act in the discretion. The amendment also provides that subject to the provisions of the section, the Board shall have the power to regulate its own procedure.
The company Law Board has to act in accordance with the principles of natural justice and also its own Regulations. The provisions of the Indian Evidence Act 1872 and those of the Code of Civil Procedure do not apply to the proceeding before the Board.
The company Law Board does not have the power to review its own decisions under the existing provisions of eh Companies Act.
Where an Act, constitution special courts for trying cases arising out of the securities scam related transfer of securities, excluded the jurisdiction of all other courts, it was held that the jurisdiction of all other courts, it was held that the jurisdiction of the Company Law Board was not thereby affected because it is neither a court nor a civil court. This decision of the Company Law Board was reversed appeal to the High Court of Delhi. The High Court was of the view that the very purpose of the special courts is such that the jurisdiction of all courts and tribunals over the same subject matter is necessarily excluded.
Appeals against orders of the Board (S.10F)
The amendment of 1988 has introduced a new section to provide about appeals. Since the Board has been taken out of the controlling hand of the state and has been made independent and its powers and functions have been enlarged by conferring upon its jurisdiction in many company matters, which has being exercised by the High Court, an express provision as to appeals, became necessary. Section 10F provides that any person aggrieved any decision or order of the Company Law Board may file an appeal to the High Court on any question of law arising out of such order. Thus there can be no appeal on a question of fact. The Board has become the final authority so far as question of fact are concerned. Since facts are discovered by appreciation of evidence and if the appreciation has gone wrong, factual matters can also be reopened in appeal. The words “any decision or order” would include an order, which does finally decide the rights of the parties. In an petition by a director who was taken to have vacated his office by reason of non-attendance, the new appointee in his place was not imp leaded and without any information to him an order was passed for the management of the company by the first directors. This order was held to be appeal able. The order was set aside because it violated natural justice.
The time for filing appeals has been fixed to be 60 days, which are to be counted from the date of the communication of an order or decision to the appellant. The High Court has been empowered on sufficient cause to extend the time for a further period of 60 days.
An appeal would lie before the High Court where the registered office of the company is situated and not at the place where a decision of the Company Law Board or any of its Benches was delivered.
Advisory Committee (S.40)
Under the Indian Companies (Amendment) Act of 1951 an Advisory Commission consisting of not more than three person was set up to advise that Government in respect of the exercise of powers conferred on them by that Act. The Companies (Amendment) Act, 1965, abolished the Advisory Commission. Instead we now have an Advisory Committee. The Amendment says that ‘ in the heading of Chapter VII” of Part VI for the words “Advisory Commission”, the words “Advisory Committee”, shall be substituted. All the sections of this Chapter were repealed and only one section remained, namely section 410. This section reads: “For the purpose of advising the Central Government and the Company Law Board on such matters arising out of the administration of this act as may be referred to it by that Government or Board, the Central Government may constitute an Advisory Committee consisting of the not more than five persons with suitable qualifications.” Thus the Advisory Committee has the dual function of advising the Central Government and the Board on the maters referred to it for advice.
The Advisory Committee differs in important respects from its predecessor, the Advisory Commission. The function of the Advisory Committee is to advise the Government and this was also the function of the Commission. But the Commission had the duty and power to inquire into matters enumerated in the now repealed section 411. Further the commission had, under section 413 (now repealed) the powers of a court for the production of evidence and witnesses whenever necessary for the purpose of an inquiry. Such powers have not been conferred on the Advisory Committee.
Company Law Board (Bench) Rules, 1975
In exercise of the powers conferred by section 642 read with section 10E (4B) of the companies Act, 1956 the Central Government has made rules called the Company Law Board (Bench) Rules, 1975. Rule 4 lays down the matters, which may be dealt with by a Bench consisting of not less than 2 members. Rule 8 lays down that the general heading in all proceedings shall be in Form No. 1 Rule 9 lays down that every application and every petition shall be verified by an affidavit as in Form No.2. Rule 11 provides for rate of fees to be paid on an application or in relation to petition. Rule 15 provides that there shall be two separate register 5 s ion the office of the Bench, one of the applications and the other for petitions field before the bench. Chapter IV containing rules 17 to 20 deals with service of notice. Rule 21 provides that the Bench shall conduct its hearings in sessions open to the public. Rule 28 lays down that every party may appear before a deal with special provisions relating to certain matters, such as procedures to be followed for petitions under sections, 17, 79 141 and 186 of the Companies Act. Rule 41 confers inherent power on the Bench. Rule 45 empowers the Bench to review its own order.
Recommendations of the Sachar Committee
The Committee recommends that the Company Law Bard should be an independent quasi-judicial body on the pattern of the Income-tax Appellate Tribunal with permanent Benches in the different regions. Matters of purely administrative nature should continue to be exercised by the Central Government. Procedure for recruitment of members to the Company Law Board should be on the lines of recruitment of Chairman and members of the Income-tax tribunal and rules should be made fir this purpose under Article 309 of the Constitution of India. Professional qualification and experience in law or accountancy should be prescribed for eligibility of membership of the Board. The Board alone should have powers to frame rules and procedure for the conduct of its business. The Chairman of the Board should be a person with legal background. The power of the Central Government Law Board and the Court should be reallocated. There should be right of appeal against all original orders of the Register of Companies imposing fine beyond certi9 an limits of the Company Law Board and against all original orders of the Company Law Board imposing fine to the High Court. No appeal should be admitted unless the penalty imposed against which the appeal is preferred is first deposited. Appeal against order of the Company Law Board should only be on question of law.
Theses recommendations are aimed at achieving the uploading of public interest and social justice as enshrined in the Constitution of India.
 Section 2 (11) (a) as amended by Act 65 of 1960.
 Section 2 (11) (b) ibid
 Act 53 of 1963
 Act 17 to 1967
 The amendment has been enforced w.e.f.4-8-1989, GSR 139 (E) of 4-8-1989
 . Section 622.
 The amendment has been enforced w.e.f.4-8-1989, GSR 139 (E) of 4-8-1989
 S 10E (6). See Alak Prakash Jain v Union of India, (1973) 43 Company Cases 68, 99-100.
 . Qualification have been prescribed under CLB (Qualifications, Experience and other conditions of Service of members) rules 1993 (w.e.f 28-4-1993) and the same have been found to be constitutionally valid. Satish Chandra V Union of India, (1994) 81 comp Cas 482 SC: AIR 1995 SC 142.
 Section 10E (4A) as inserted by Act 31 of 1965
 Baruim Chemicals Ltd.v.The Company Law Board A.I.R 1967 S.C 295
 II of 1966
 Act 37 of 1966
 Section 10E (5)
 CLB Regulations, 1991. The constitutional validity of Ss. 10E and 10F was upheld by the Madras High Court in V.Balachandran v Union of India (1993) 76 Comp Cas 67 Mad. The right of appeal against the decision of the Board as also under writ jurisdiction are sufficient checks upon the powers of the Board
 Rajinder Kumar Malhotra v Harbans Lal Malhotra & Sons Ltd., (1996) 87 comp cas 146 CLB
 Canara Bank V Nuclear Power Corpn of India (1995) 84 Comp Cas 62 CLB
 . ABN Amro Bank v Indian Rly Finance Corp.Ltd., (1996) 85 Comp Cases 716 Del.
 Mohd Zafar V Nahar Industrial Enterprises Ltd, (1998) 28 Corpt LaA 251 Delhi, where a question of law was neither raised before the CLB not taken up by the CLB it could not be said to be question arising out of CLB order.
 Stridewell Leathers P Ltd V Bhankerpur Simbhaoli Beverages P Ltd (1994) 79 comp Cas 139 SC