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Citation Codes
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Case Number
Attorney(S)
  • H.L.Sarain
  • M.L.Sarin
  • J.S.Narang
Judges
  • R.N Mittal, J.
Acts
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Citation Codes
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citation codes
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Attorney(S)
  • H.L.Sarain
  • M.L.Sarin
  • J.S.Narang
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  • R.N Mittal, J.
Acts
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Smart Summary

Judgment Summary — Petition under Section 155 of the Companies Act (R.N. Mittal, J.)

Factual and Procedural Background

This is a petition under section 155 of the Companies Act for rectification of the register of shareholders of the respondent company.

The petitioner was a promoter director of a company engaged in manufacturing sports goods, with offices in India and Indonesia. He averred that he held 95 shares of Rs.100 each, shown in his name in the return filed with the Registrar of Companies on 23 September 1964, and that he continued as director until his removal in June 1969.

A dispute arose between shareholders and directors and some matters were referred to an arbitrator at Surabej (Indonesia), who gave an award against the petitioner which, inter alia, provided that a company shop would be given to the petitioner and in lieu thereof his shares would be cancelled. The petitioner asserted he had not signed any agreement submitting to arbitration and that the award was therefore not binding on him. The award was challenged by Mangal Singh (whose interests had been bracketed with the petitioner’s) and others up to the Supreme Court of Indonesia at Jakarta; the award was set aside by that Court.

After obtaining the Indonesian judgment, the petitioner sent it to the Registrar of Companies at Jullundur seeking rectification because he learned the company had changed the register in view of the arbitrator's award; the Registrar replied that the matter had been taken up with the company but no rectification followed.

The company later transferred the petitioner’s shares into the names of Karam Singh and Ujagar Singh without obtaining the petitioner’s signature on the transfer form (allegedly required by the Companies Act). The petitioner claimed entitlement to bonus shares in proportion to his alleged holding and sought rectification showing him as holder of 95 shares and corresponding bonus shares.

The respondent contested the petition, pleading that the petitioner’s name did not appear on the members’ register from 1968 onwards and that the shares had been earlier transferred (first as a gift to Mangal Singh Teneja and subsequently by transfers resulting in the current registered holders). The respondent also pleaded delay (no action for more than twelve years) and limitation.

Procedurally, various related proceedings occurred: Mangal Singh’s application before the Companies Tribunal, New Delhi, was dismissed under Order 17, Rule 3 CPC by order dated 17 October 1966 and a restoration application was dismissed; T.D. Kundan (an arbitrator in Indonesia) rejected Mangal Singh’s claim by three successive awards; the Supreme Court of Indonesia set those awards aside (but the respondent contended that decision was not binding on it). The petitioner also filed a suit in the Court of Subordinate Judge First Class, Jullundur, against Mangal Singh for declaration of ownership, but that civil court returned the plaint for presentation to a court of proper jurisdiction (finding no part of the cause of action arose within its jurisdiction); no appeal was filed against that order.

Legal Issues Presented

  1. Whether the petition under section 155 of the Companies Act is liable to be dismissed because it involves disputed questions of fact which cannot be decided in summary proceedings under section 155.

Arguments of the Parties

Petitioner's Arguments

  • The petitioner was a promoter director and registered holder of 95 shares (return filed 23-9-1964) and entitled to those shares and proportional bonus shares.
  • The arbitrator's award cancelling his shares was not binding on him because he had not signed any arbitration agreement, and the award was set aside by the Supreme Court of Indonesia.
  • The Registrar of Companies failed to rectify the register after being furnished with the Indonesian judgment.
  • The company transferred his shares without his signature on the transfer forms, which he averred was essential under the Companies Act, so such transfers were improper.

Respondent's Arguments

  • The petitioner’s name did not appear in the register of members from 1968 onwards; consequently he had no right to move under section 155 of the Act.
  • The shares were earlier transferred by the petitioner (first by gift to Mangal Singh Teneja and later transfers) and are now registered in other persons’ names.
  • The petitioner failed to protect his rights for more than twelve years; the claim is barred by limitation.
  • Mangal Singh’s related proceedings were dismissed by the Companies Tribunal; the matter proceeded through arbitration (which rejected Mangal Singh’s claims), and while those awards were set aside by the Supreme Court of Indonesia, the respondent contended that decision was not binding on it.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
S. Bhagat Singh etc. v. The Piar Bus Service Ltd., AIR 1959 Punj 352 Explained object of Section 38 of the Indian Companies Act 1913 (analogous to section 155 of the Companies Act 1956): to provide a summary remedy in non-controversial matters or where quick decision is necessary; not intended for setting controversies under several heads requiring regular investigation. The Court relied on this precedent to support the proposition that section 155 is a summary remedy unsuited to serious disputes requiring full investigation; such disputes belong to a civil court.
Smt. Soma Vati Devi Chand v. Krishna Sugar Mills Ltd., AIR 1966 Punj 44 Held that the remedy under section 155 is summary and can be invoked in non-controversial matters requiring quick decision; not meant for disputes necessitating investigation; complicated disputes should proceed by regular suit. The Court followed this authority to reinforce that section 155 should not be used where complicated controversies and investigations are necessary and that the petitioner should be directed to file a regular suit.
Rakesh Kumar Malik etc. v. Rohtak Ashoka Theaters Pvt. Ltd., C.P. No. 12 of 1980 (decided 31-3-1983) Applied the view that section 155 is a summary remedy and is not appropriate for complex, contested matters needing detailed inquiry. The Court noted that in that earlier decision the same view was followed and cited it as consistent authority for treating section 155 proceedings as summary in nature.
Shri Joginder Singh v. Shri Basowa Singh, R.S.A. No. 1221 of 1973 (decided 3-6-1983) Confirmed that the scope of enquiry under section 155 is summary and the company court may refuse discretionary relief where serious disputes and complicated questions are involved. The Court relied on the Division Bench’s observations to conclude that serious disputes should not be resolved under section 155 and that the petition could be refused on that basis.
Public Passenger Service Ltd., Chidambaram v. M.A. Khadar, AIR 1966 SC 489 Case considered by the Bench and placed before the Court (counsel for the petitioner relied on it); relates to principles governing summary remedies (as discussed in the opinion). The Court considered this case among others relied upon by the petitioner but reached the conclusion that section 155 is summary in nature and not appropriate for the present complicated dispute.
People's Insurance Co. Ltd. v. C.R.E. Wood and Co. Ltd. Case cited by counsel for the petitioner and considered in the course of discussing the scope of summary relief. The Court noted this case was among those considered and observed that, despite reliance on such authorities by the petitioner, the correct position is that section 155 proceedings are summary and unsuited to complex disputes.

Court's Reasoning and Analysis

The Court began by examining the legal position on section 155, relying on prior Punjab High Court decisions and later decisions including a Division Bench decision. Those authorities established that section 155 (analogous to section 38 of the 1913 Act) provides a summary remedy appropriate for non-controversial matters or where a quick decision is required to prevent irreparable injury. The provision was not intended to resolve serious disputes involving multiple contentious issues that require a full investigation.

The Court summarized and applied these principles: because proceedings under section 155 are summary in nature, the company court is not bound to decide serious questions of title or complex controversies; in such cases, a civil court is the proper forum.

Turning to the facts, the Court found the present case involved complicated questions. Although the petitioner alleged that the Indonesian Supreme Court had set aside the arbitrator’s award, the surrounding matters (prior transfers, arbitration awards, tribunal proceedings, and a civil suit returned for want of jurisdiction) required detailed consideration and proof. The petitioner had earlier instituted proceedings in various fora and had not pursued a civil suit in a competent court after an adverse jurisdictional ruling. The respondent produced company returns from 1968 onwards showing the petitioner’s name absent from the register. The Court observed there would be voluminous evidence to be recorded and many intricate disputed facts to be resolved.

On that factual and legal analysis, the Court held that the petition involved serious and complicated disputes inappropriate for the summary procedure under section 155 and therefore the section 155 petition ought not to be allowed to decide those matters.

Holding and Implications

Holding: The petition under section 155 of the Companies Act is dismissed.

Implications: The direct effects of the decision are that the petition for rectification is dismissed and the petitioner was advised that he may file a civil suit if so advised. The Court made no order as to costs. The opinion confines itself to applying established principles about the summary nature of section 155; it does not purport to create a new legal precedent beyond applying and following existing case law in refusing summary relief where serious disputes and complicated questions of fact are involved.

Disposition: Petition dismissed. (Per judgment: "Petition dismissed. The petitioner may file a civil suit, if so advised. No order as to costs.")

Show full summary ...

    S. Gurcharan Singh Mahant v. Rattan Sports Pvt. Ltd. .

    R.N Mittal, J.:— This is a petition under section 155 of the Companies Act for rectification of the register of share-holders of the respondent Company

    2. It is averred that the petitioner was a promoter Director of the Company which was engaged in the business of manufacturing sports goods. It had its offices in India as well as in Indonesia. The petitioner had 95 shares of Rs. 100/- each. The shares were shown in his name in the return filed with the Registrar of Companies on 23rd September, 1964. He continued to hold office of the Director till June, 1969, when he was removed as a Director. At that time, some dispute arose between the share-holders and the Directors which was referred to the Arbitrator at Surabej (Indonesia), who gave his award against the petitioner and inter alia stated that the shop belonging to the Company would be given to the petitioner and in lieu thereof his shares would be cancelled. The petitioner had not signed any agreement for referring the matter to arbitration and thus the award was not binding on him. It was also challenged by Sh. Mangal Singh (whose interests had been bracketed with the interests of the petitioner) and some others, upto the Supreme Court of Indonesia at Jakarta. The petitioner was impleaded as a proforma respondent along with his wife in the appeal before the Supreme Court. The award was set aside by that Court

    3. The petitioner, after obtaining a copy of the judgment of the Supreme Court of Indonesia, sent it to the Registrar of Companies at Jullundur, for rectification of the register of shareholders as he came to know that the Company had changed the register in view of the award given by the Arbitrator. He received a reply from the Registrar of Companies that the matter had been taken up with the Company and he would be informed of the developments in due course. However, nothing was done by the Registrar.

    4. The Company latter transferred the shares of the petitioner in the names of Karam Singh and Ujagar Singh without obtaining his signatures on the Transfer Form which is essential under the provisions of the Companies Act. It is averred that in the circumstances the shares could not be transferred to the said Karam Singh and Ujagar Singh by the Company. The Company has been allotting bonus shares to the shareholders to the extent of their individual share-holdings and the petitioner is also entitled to claim the bonus shares commensurate with his holding. It is consequently prayed that the register of the share holders of the Company be rectified and the petitioner be shown as a share holder of 95 shares and the bonus shares in the same ratio in which these were allotted to the other share-holders.

    5. The petition has been contested by the respondent. It is inter-alia pleaded that the petitioner's name did not appear in the register of the members of the Company with effect from the year commencing from 1968 upto-date. Consequently, he has no right to move an application under section 155 of the Act. The shares were transferred by him earlier than 1968 in the first instance by making a gift thereof to one Mangal Singh Teneja and later these were transferred by him and/or Mangal Singh Taneja in favour of other parties in whose names the shares are now registered. He has not taken interest in protecting his right for the last more than twelve years and consequently the petition is liable to be dismissed as barred by limitation.

    6. Mangal Singh, it is further averred, moved an application before the Companies Tribunal, New Delhi, which was dismissed under Order 17, Rule 3, Code of Civil Procedure, vide order dated 17th October, 1966. An application for restoration by him was also dismissed. All through the trial, the petitioner continued to attend the hearings before it. It is pleaded that the order ended the claim of Mangal Singh. Meanwhile, the matter was referred to T.D Kundan of Indonesia as Arbitrator. He also rejected the claim of Mangal Singh by three successive awards. The matter went upto the Supreme Court of Indonesia, which set aside the awards, but it is alleged that the order of the Supreme Court it not binding on the respondent

    7. The petitioner also filed a suit in the Court of Subordinate Judge Lst Class, Jullundur, against Mangal Singh for declaration that he was the registered owner of 95 shares, in which it was held that the Civil Court at Jullundur had no jurisdiction Consequently, the plaint was returned to be presented to the Court having jurisdiction to try the same. No appeal was filed against that order.

    8. It is next averred that the matter involves complicated questions of law and fact and therefore, a petition under section 155 of the Act is not maintainable. On the pleadings of the parties, P.C Jain, J., framed the following preliminary issue:—

    “Whether the petition is liable to be dismissed as it involves disputed questions of fact which cannot be decided in summary proceedings under section 155 of the Companies Act, 1956 ?”

    9. Before dealing with the factual aspect, it will be appropriate to deal with the legal position. In S. Bhagat Singh etc. v. The Piar Bus Service Ltd, Amritiar . AIR 1959 Punj 352. this very question was raised before this Court. The learned Judge, while dealing with the matter, observed as follows:—

    “The object of enacting Section 38 of the Indian Companies Act of 1913, which is analogous to section 155 of the Companies Act of 1956, was to provide a summary remedy in non-controversial matters or in matters where a quick decision was necessary in order to obviate an irreparable injury to a party. This provision was not intended for setting controversies under several heads necessitating a regular investigation. When serious disputes are involved as in this case, the proper forum for their adjudication is a civil Court”

    10. It was followed in Smt. Soma Vati Devi Chand v. Krishna Sugar Mills Ltd., Delhi . AIR 1966 Punj 44. wherein H.R Khanna, J., as he then was, observed that the law seems to be well settled that the remedy provided in section 155 of the Companies Act is summary. It can be invoked in noncontroversial matters requiring quick decision. Section 155 is not meant to be used for deciding disputes requiring investigation. In the case of a dispute of complicated nature involving controversy under several heads and necessitating a regular investigation, the section ought not to be allowed to be used and the party concerned should be directed to proceed by way of a regular suit. Similar matter came up before me in Company Petition No. 12 of 1980 (Rakesh Kumar Malik etc. v. Rohtak Ashoka Theaters Pvt. Ltd. etc. . C.P No. 12 of 1980.,) decided on 31st March, 1983, wherein I followed the above view.

    11. This question was recently examined by a Division Bench of this Court in R.S.A No. 1221 of 1973, Shri Joginder Singh v. Shri Basowa Singh etc . R.S.A No. 1221 of 1973., decided on 3rd June, 1983. The learned Bench, after considering the various cases, including Public Passenger Service Ltd Chidambaram v. M.A Khadar . AIR 1966 SC 489. and People's Insurance Co. Ltd., v. C.R.E Wood and Co. Ltd6, on which reliance has been placed by the counsel for the petitioner, arrived at the lame conclusion. The following observations of the learned Bench may be read with advantage:—

    “As a result of the aforesaid discussion, I find no escape from the conclusion that the scope of enquiry under section 155 of the Act is of a summary nature and that the company court may refuse and decline to grant the discretionary relief where serious disputes and complicated questions are involved.”

    12. From the above observations, it emerges that the proceedings under Section 155 ibid are of summary nature and the Court is not bound to decide serious question of title. The proper course in the cases where such questions are involved is to go to the Civil Court.

    13. Now, adverting to the facts of the present case, it is evident from the foregoing paras that the questions involved are of complicated nature. According to the petitioner, the shares were shown in his name in the returns filed with the Registrar of Companies in 1964 and that he held office of the Director till 1969. During that period, it appears that the disputes arose between the parties. Some of the matters were referred to the Arbitrator who gave an award against the petitioner. No doubt it is alleged that the award was set aside by the Supreme Court of Indonesia while deciding the controversy between the parties, but all these matters will require consideration. It is also evident that the shares were earlier transferred in the name of one Mangal Singh and the plaintiff Instituted a suit against him in the year 1964 for declaration that he was still the owner of those shares, in the Court of Subordinate Judge 1st Class, Jullundur. In that suit, an objection was taken that the Civil Court at Jullundur had no jurisdiction to try the suit as no part of cause of action arose there. The learned Subordinate Judge decided the suit on 8xth August, 1965, holding that no part of cause of action arose within the jurisdiction of the Court Consequently, be ordered that the plaint be returned to the petitioner for presentation to the proper Court. It is ture that on merits he returned a finding in favour of the petitioner but the petitioner cannot derive any benefit from those findings as the Court had no jurisdiction to decide the case.

    14. It may be highlighted that in spite of the fact that the findings on merit were returned in favour of the petitioner, he did not choose to institute the suit in the Court of competent jurisdiction. It is also relevant to point out that the dispute between Mangal Singh and the petitioner had been before the Companies Tribunal as well. The shares now stand in the cames of some other persons who have not been made parties to the present proceedings for the reasons best know to the petitioner. The respondent has produced copies of the returns filed before the Registrar of Companies by it for various years starting with 1968 wherein the name of the petitioner is not mentioned as a shareholder. All these facts show that though the petitioner was deprived of these shares long back yet he did not take action under section 155 of the Act till 1980. It is also not out of place to mention that voluminous evidence shall have to be recorded by the Court in the case as all the above facts shall be proved by the parties concerned. Proceedings under section 155 ibid, as already mentioned above, are of summary nature wherein the Court is not expected to go into all such intricate and disputed questions of fact. Consequently, I decide the issue in favour of the respondent.

    15. For the aforesaid reasons, I dismiss the petition. The petitioner may file a civil suit, if so advised. No order as to costs.

    H.L.S
    Petition dismissed.

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    Comments

    S. Gurcharan Singh Mahant v. Rattan Sports Pvt. Ltd. .
    (Nov 2, 1983)