CA No. 339/2011 in CP No. 3/2010. Case: Asset Reconstruction Co. (India) Ltd. Vs Uniworth Textiles Ltd., [Alongwith CA No. 484/2010 in CP No. 4/2010]. Company Law Board
| Case Number | CA No. 339/2011 in CP No. 3/2010 |
| Judges | D.R. Deshmukh, Chairman |
| Issue | Companies Act, 1956 - Sections 124, 125(a), 235, 237, 237(6), 237(b), 247, 247, 248, 249, 247(1)(a), 247(1A), 248, 249, 250, 250(1), 388B, 408, 409; Monopolies And Restrictive Trade Practices Act, 1969 - Sections 2A, 4(1) |
| Citation | 2012 (110) CLA 253, 2012 (175) CompCas 407 (CLB) |
| Judgement Date | May 29, 2012 |
| Court | Company Law Board |
Order:
D.R. Deshmukh, Chairman, (New Delhi Bench)
1. This common order governs identical CA Nos. 339/2011 and 484/2010 filed by the respondent-company in CP No. 3/2010 and 4/2010, respectively. Both CP Nos. 3/2010 and 4/2010 have been filed before the Principal Bench, Company Law Board ('CLB') under section 247 along with section 237(b) of the Companies Act, 1956 ('the Act').
2. The registered office of the company, i.e., Uniworth Textiles Ltd. (CP No. 3) is situated at Calcutta (West Bengal) while the registered office of the company, i.e., Indoworth India Ltd. (CP No. 4/2010) is situated in Nagpur (Maharashtra).
3. It is not in dispute that if both CP Nos. 3 and 4 were stand alone petitions under section 237-B the territorial jurisdiction to hear CP Nos. 3 and 4 under the distribution of work order would have been with the Eastern Bench, Kolkata and the Western Bench, Mumbai, respectively.
4. The only premise on which CA Nos. 484 and CA No. 339 have been argued before me by both counsel appearing for the company is that the words " in the course of any proceedings before it" appearing in section 247(1A) of the Act should be interpreted as "in the course of any proceedings other than under section 247(1A)". In other words according to the respondent a stand alone application under section 247(1A) does not lie before the CLB. It was argued that even if the Bench having jurisdiction to hear a petition under section 237(6) arrived at a conclusion that an investigation as contemplated by section 247(1A) should be ordered it would have to refer such petition to the Principal Bench of the CLB which alone has, under the distribution of work order, jurisdiction to pass an order under section 247(1A). Reliance was placed on Birla Corporation Ltd. v. East India Investment Co. Ltd. [2006] 71 CLA 181 (Cal.)/ [2006] 133 CC 515; Alaknanda Manufacturing v. Bahubali Services [1994] 13 CLA 41 (CLB)/[1996] 86 CC 291; Mirza Mohd. Afzal Beg v. State of Jammu and Kashmir AIR 1960 J&K 1/ 1960 Crl. LJ 62 and K U Kulkarni v. Ganpat Hiraji Tell AIR 1942 Bom. 191/ [1942] 44 Bom. LR 264.
5. On the other hand learned counsel for the petitioner argued that section 247 is an enabling provision conferring inquisitorial powers on the CLB to act in public interest and should not be construed narrowly and pedantically and the overall endeavour of the Legislature is to confer powers of enquiry on the CLB to pass orders to protect status quo in the course of enquiry. An independent enquiry power has been conferred on the CLB on relevant facts being brought to its notice by a complainant. The provisions of section 247(1A) should not be read restrictively as the section does not provide the circumstances in which the CLB might pass orders for investigation into the affairs of the company. The legislative intent appears to be to create a quasi judicial forum which could hear complaints which might alert them against covert changes in beneficial interest and to equip such authority with inquisitorial powers so that public interest is not put into jeopardy. Reliance was placed on Bakhtawar Construction Co. (P.) Ltd. v. Blossom Breweries Ltd. [1998] 32 CLA 267 (Bom.)/[1999] 95 CC 28 and Padma Taparia v. Assam Brook Ltd. [1996] 21 CLA 339 (CLB)/ [1996] INDLAW CLB 9.
6. I have considered the arguments advanced by learned counsel for the parties and perused the case law cited. Section 247(1A) was inserted by the amending Act No. 31 of 1998 with effect from 31st May, 1991 and reads as under:-
247. Investigation of ownership of company. -.... (1A) Without prejudice to its powers under this section, the Central Government shall appoint one or more Inspectors under sub-section (1), if the CLB in the course of any proceedings before it, declares by an order that the affairs of the company ought to be investigated as regards the membership of the company and other matters relating to the company, for the purposes of determining the true persons-
(a) who are or have been financially interested in the success or failure, whether real or apparent, of the company; or
(b) who are or have been able to control or materially to influence the policy of the company.
7. A reading of the above provision shows that section 247(1A) does not lay down the circumstances in which the CLB might pass orders for investigation into the affairs of the company. In para 35 of the decision rendered by the High Court of Calcutta in Birla Corporation Ltd. (supra) it was stated as under:
35. The essential ingredients of sub-section (1A) of section 247 of the Companies Act are (i) there should be...
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