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(Mr.) M.G Doshit (Party-In-Person) v. Reliance Petrochemicals Ltd. .
Factual and Procedural Background
The applicant, a shareholder and member of the respondent company, challenged the validity of an annual general meeting (AGM) held at Surat on the ground that it violated section 166(2) of the Companies Act, 1956. The applicant sought a declaration of illegality and that the business transacted at the meeting be declared null and void. Section 166(2) requires that every annual general meeting be held either at the registered office of the company or at some other place within the city, town, or village in which the registered office is situated (subject to certain provisos).
The applicant's factual contention was that the company’s registered office was at Village Mora, Post Bhatha (Surat-Hajira Road, Dist. Surat, pin 394 510), whereas the AGM was held in Surat city and not in Village Mora/Post Bhatha, and therefore outside the place permitted by section 166(2).
The respondent-company contended there was no breach. It argued that the relevant test is postal limits (not municipal or revenue limits), produced a Central Government circular (dated February 16, 1981) which it relied upon, and relied on a communication from the Senior Superintendent of Post Offices, Surat Division, confirming that Village Mora falls within the postal limits of Surat. The company also produced a communication from the Ministry of Company Affairs indicating the same, subject to the registered office falling within the postal limits of Surat.
The applicant disputed the postal-limits contention, pointing out that Surat city postal limits and Surat Division postal limits differ, that the Senior Superintendent subsequently wrote that Bhatha Post Office does not fall within Surat city postal limits, and that the pin codes differ (Surat city 395 001; Bhatha 394 510) indicating different sorting districts.
The respondent raised a preliminary contention that the High Court is a court of special/company jurisdiction under the Companies Act and that its jurisdiction is limited to matters specifically conferred by the Act; accordingly, the respondent questioned whether the High Court had jurisdiction to entertain the present challenge under section 166. The court proceeded (for the purposes of the preliminary objection) on the assumption that there was a violation of section 166(2) to examine whether the High Court had jurisdiction to grant relief.
Legal Issues Presented
- Whether the annual general meeting held at Surat was in violation of section 166(2) of the Companies Act, 1956, given that the company's registered office was stated to be at Village Mora, Post Bhatha.
- Whether the High Court has jurisdiction under the Companies Act to grant relief or pass orders in respect of an alleged breach of section 166(2), in the absence of any specific provision conferring such jurisdiction.
Arguments of the Parties
Applicant's Arguments
- The AGM must be held either at the registered office or at some other place within the city, town or village where the registered office is situated, per section 166(2).
- The registered office is at Village Mora, Post Bhatha (pin 394 510), and the AGM was held in Surat city, which is outside the village location; therefore the meeting contravened section 166(2).
- The postal limits relied upon by the respondent are not identical: Surat city postal limits differ from Surat Division postal limits; Bhatha Post Office does not fall within Surat city postal limits (as per a letter dated November 16, 1990). The differing pin codes and sorting districts (Surat 395 001 vs Bhatha 394 510; different sorting numbers) reinforce this point.
- The company obtained or relied on communications from postal authorities at the Surat Division rather than Surat city, and this was relied upon by the company to hold the meeting in Surat city.
Respondent's Arguments
- The requirement in section 166(2) should be read with reference to postal limits rather than municipal or revenue limits; where postal and local limits do not coincide, the wider of the two limits should be taken (relying on a Central Government circular dated February 16, 1981).
- The Senior Superintendent of Post Offices, Surat Division, confirmed by letter dated June 6, 1990, that the registered office at Village Mora, Post Bhatha falls within the postal limits of Surat.
- The Ministry of Company Affairs, by letter dated June 26, 1989, had also confirmed that meeting in Surat would be in order "provided your registered office falls within the postal limits of Surat".
- Preliminarily, the respondent contended that the High Court is a court of special/company jurisdiction under the Companies Act and that its jurisdiction is limited to specific matters provided by the Act; the High Court therefore may not have jurisdiction to entertain the present claim absent a specific provision.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Municipal Corporation v. Premchand Manasukhram [1964] 5 GLR 847 | Consideration of jurisdictional principles in a different context; used to examine allocation of jurisdiction. | The court referred to this case when discussing jurisdictional limits and used it as part of the support for the proposition that, where the Act does not provide a special remedy, the common-law remedy (civil court jurisdiction) remains available. |
| Wolverhampton New Water Works Co. v. Hawkesford (6 C.B. (N.S.) 336) | A classical passage on jurisdiction quoted in the Municipal Corporation case and relied upon for jurisdictional analysis. | The court noted the quotation and treated it as illustrative in concluding that, because section 166 furnishes no special remedy under the Act for its breach, the remedy lies in the civil court (common law) rather than under the High Court's special Companies Act jurisdiction in the absence of a specific statutory provision. |
Court's Reasoning and Analysis
The court proceeded on the assumption (for the narrow purpose of addressing the preliminary objection) that there was a breach of section 166(2) and analysed whether the High Court had jurisdiction to grant relief for such a breach.
The court observed that the application cited only section 166 of the Companies Act and the judge's summons was also said to be under section 166. The court noted that section 166 itself does not contemplate or provide for legal proceedings in any court.
The court then examined section 10 and section 2(11) of the Companies Act. Section 10 identifies the High Court having jurisdiction with respect to the place at which the registered office of the company is situated, but the court noted that section 10 speaks to territorial jurisdiction only and cannot be read as conferring jurisdiction in respect of all matters relating to that company. Section 2(11) defines "the court" with reference to the court having jurisdiction under the Act "with respect to that matter relating to that company," emphasizing that jurisdiction must be traced to specific provisions for particular classes of matters.
The court pointed to the Companies (Court) Rules, 1959 (in particular Rule 11) as illustrative of the specific and enumerated matters in respect of which the High Court has jurisdiction under the Act—23 specific items show that the High Court's jurisdiction is special and must be found in specific statutory provisions. From this, the court drew the general principle that the High Court does not possess a general plenary or residuary jurisdiction under the Companies Act to deal with all matters arising under the Act.
The court observed that learned counsel for the applicant could not point to any specific provision under which the High Court would have jurisdiction to deal with the present question (an alleged breach solely of section 166(2)). The court then relied on authority (Municipal Corporation v. Premchand Manasukhram, quoting Wolverhampton New Water Works Co. v. Hawkesford) to support the proposition that where the Companies Act creates a provision (such as section 166) but does not provide a special remedy for its breach, the common-law remedy through the civil courts remains available. Thus, the alleged breach of section 166 would fall into the category of matters for which the civil court has jurisdiction unless the Act specifically confers jurisdiction elsewhere.
On that basis, the court concluded that the High Court had no jurisdiction, in the absence of any specific statutory provision, to pass orders in respect of the alleged breach of section 166(2) in the present proceedings. Because of this jurisdictional finding, the court expressly declined to decide the substantive question whether there was in fact any breach of section 166(2) or whether any such breach would nullify the meeting given the circumstances (including the company's reliance on the Central Government circular and postal communications).
Holding and Implications
Holding: The application is dismissed on the ground that the High Court has no jurisdiction to pass orders with respect to the alleged breach of section 166(2) of the Companies Act in these proceedings.
Implications:
- The direct effect is that the applicant's challenge to the AGM (and the prayers for declaration of illegality and nullification of business transacted thereat) fails in this forum: the application is dismissed.
- The court did not decide the substantive question of whether section 166(2) was actually breached or whether any breach would nullify the meeting; no final opinion on that substantive issue was expressed because of the jurisdictional conclusion.
- The court's analysis indicated that, where the Companies Act does not provide a special statutory remedy for a breach, the common-law/civil court remedy remains available (i.e., jurisdiction in the civil court would be appropriate for such matters), but the High Court cannot exercise company-specific jurisdiction in the absence of a specific provision under the Act conferring such jurisdiction for the matter in question.
1. The applicant is a shareholder and member of the respondent-company and he has challenged the validity of the annual general meeting of the company held at Surat on the ground that it is in violation of the provisions of section 166 of the Companies Act, 1956, and has prayed for a declaration of illegality and for declaring all the business transactions at the said meeting as null and void. section 166(2) of the Companies Act reads as under :
"166. (2) Every annual general meeting shall be called for a time during business hours, on a day that is not a public holiday, and shall be held either at the registered office of the company or at some other place within the city, town, or village in which the registered office of the company is situated :
Provided that the Central Government may exempt any class of companies from the provisions of this sub-section subject to such conditions as it may impose :
Provided further that :
(a) a public company or a private company which is a subsidiary of a public company, may by its articles fix the time for its annual general meetings and may also by a resolution passed in one annual general meeting fix the time for its subsequent annual general meetings, and
(b) a private company which is not a subsidiary of a public company, may in like manner and also by a resolution agreed to by all the members thereof, fix the times as well as the place for its annual general meetings."
2. The petitioner submits that the annual general meeting of the company must be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated. The registered office of the company is situated at village Mora, Post Bhatha, Surat-Hajira Road, Dist. Surat, pin 394 510, Gujarat State. The annual general meeting in question was held in Surat city and not in village Mora, Post Bhatha, where the registered office of the company is situated.
3. On behalf of the respondent-company, it is submitted that there is no breach of section 166(2) of the Act. It is not the revenue limits or municipal limits which is required to be taken into consideration, but the postal limits of the city are required to be considered and it is submitted that the postal department has confirmed that village Mora falls within the postal limits of Surat and reliance is placed on a Central Government Circular, dated February 16, 1981, wherein it is clarified that a company can hold its annual general meeting at any place within the postal limits of the city where its registered office is situated if it is more convenient to its shareholders. That circular is produced along with part of that circular which reads as follows :
"Section 166(2) may be taken to mean both the postal limits and local limits of the city in which the registered office of the company is situated and where the two do not coincide, the wider of the two. A company can, therefore, hold its annual general meeting at any place within the postal limits of the city in which its registered office is situated, if it is more convenient to its shareholders."
4. It is further submitted that the Senior Superintendent of Post Offices, Surat Division, Surat, has confirmed by letter dated June 6, 1990 (page 26), that the situation of the registered office of the company at Village Mora, postal Bhatha, Dist. Surat, falls within the postal limits of Surat. Even previous to this the company had written a letter to the Ministry of Company Affairs on June 9, 1989, on the basis that the registered office falls within the postal limits of Surat and, therefore, the holding of the annual general meeting in Surat would be in order. The Ministry of Company Affairs, by their letter dated June 26, 1989, have confirmed the same "provided your registered office falls within the postal limits of Surat".
5. In the affidavit-in-rejoinder, it is pointed out that the postal limits of Surat city and Surat Division are altogether different. The postal limits of the Surat city and postal limits of Surat Division are not the same and the Senior Superintendent of Post Offices, Surat Division, has written to the petitioner by letter dated November 16, 1990, that the ares of Bhatha Post Office does not fall within the postal limits of Surat city. It is also noted that the pin code number of Surat city is 395 001 whereas Bhatha post Office has the pin code number 394 510. The third digit pinpoints the sorting district which is different in the present case. Post Bhatha is in sorting No. 4, whereas Surat is in sorting district No. 5. It is, therefore, submitted by the petitioner that the postal limits of Surat city also do not cover village Bhatha and, therefore, the holding of the meeting outside the postal limits of village Bhatha would be a violation of section 166(2) of the Companies Act.
6. The respondent-company has also raised a preliminary contention that the High Court is a court of special jurisdiction in the matter of the Companies Act and its jurisdiction is limited to certain matters specified under the Companies Act and there is no general jurisdiction over any matter arising under the Companies Act. For the purpose of the preliminary objection, I will proceed on the allegation and assumption that there is violation of section 166(2) of the Companies Act and examine the question as to whether the High Court has jurisdiction to grant any relief or pass any orders.
7. In the application, the only provision cited is section 166 of the Companies Act and the judge's summons is also said to be under section 166 of the Companies Act. As far as section 166 itself is concerned, it does not contemplate or mention any legal proceedings in any court. Section 10 provides that the court having jurisdiction under this Act shall be the High Court having jurisdiction in relation to the place at which the registers office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court. This section speaks only of territorial jurisdiction of the High Court as it provides that the location of the registered office of the concerned company would determine the territorial jurisdiction. This provision cannot be construed to mean that the High Court has jurisdiction with respect to the matters relating to that company.
8. Section 2(11) defines "the court" which reads as under :-
'the court' means -
(a) with respect to any matter relating to a company (other than any offence against this Act), the court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10;
(b) with respect to any offence against this Act, the court of a Magistrate of the First Class or, as the case may be, a Presidency Magistrate, having jurisdiction to try such offence."
Therefore, we will have to find out which is the court having jurisdiction with respect to that matter relating to the company. It is not the case of the applicant that the civil court has no jurisdiction in respect of this matter or that the jurisdiction of the civil court is implicitly barred. According to the respondent, it is only the civil court which has the jurisdiction. According to the applicant, the jurisdiction would be concurrent both in the civil court as well as in the High Court.
9. Under the Companies Act, several kinds of questions and matters arise and it is not that all matters are within the jurisdiction of the Central Government, some are within the jurisdiction of the Company Law Boards, some are within the jurisdiction of the Companies Tribunal. It is, therefore, not a correct proposition of law that with respect to any matter relating to a company in a State, the High Court has jurisdiction under the Companies Act with respect to that matter. These words "with respect to that matter" in section 2(11) are crucial. Some illustrative cases can be immediately seen by reference to the Companies (Court) Rules, 1959.
10. Rule 11 illustrates the matters with respect to which the High Court has jurisdiction. All the twenty-three items illustrate the jurisdiction of the High Court conferred by the various provisions of the companies act in respect of specific matters relating to the companies situated within its jurisdiction. The High Court is a special court or a company court with special company jurisdiction and that jurisdiction has to be found from specific provisions of the Act and the High Court does not have any general plenary or residuary jurisdiction to deal with all matters and all questions arising under the Companies Act.
11. Learned counsel for the applicant has not been able to point out any specific provision under which the High Court has jurisdiction to deal with the present question.
12. In the case of Municipal Corporation v. Premchand Manasukhram [1964] 5 GLR 847, the question of jurisdiction was considered in a different context and a classical passage from the case of Wolverhampton New Water Works Co. v. Hawkesford (6 C.B. (N.S.) 336) was quoted. The provision of section 166 is created by the Companies Act. However, for breach of section 166, no special remedy is provided under the Act, and, therefore, the common law remedy of jurisdiction of the civil court would remain and this will fall within the second class of the cases referred to above.
13. In view of the above, it is to be held that the High Court has no jurisdiction in the absence of any specific provision to pass orders in respect of the alleged breach of section 166(2) of the Companies Act in the present proceedings which is only for the purpose of section 166(2).
14. In view of the above finding, it would not be necessary to decide as to whether in fact and in law, there is any breach of the provisions of section 166(2) and even if there is such a breach, whether it has any nullifying effect on the meting held in the peculiar circumstances and the knowledge and guidance that was obtained by the company at that time. The company was guided by the circular of the Central Government and guided or misguided by the letter of the Senior Superintendent of Post Office, Surat. According to the applicant, the company has conveniently and deliberately misguided itself by approaching the postal authorities at Surat division instead of Surat city. Now that the division between Surat city postal limits and Surat division postal limits is clear, there may not be any confusion or even bona fide action under some guidance or misguidance. Since this court has no jurisdiction, no final opinion need be expressed by this court.
15. In the result, the application fails and is dismissed.
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