- Bookmark
- Share
- CaseIQ
General Assurance Society Ltd., In Re
Factual and Procedural Background
Eight petitions were before the Rajasthan High Court after being referred by a learned Single Judge. The factual and statutory backdrop given in the opinion is:
- The Indian Companies Act (1913) was applied to Rajasthan with certain modifications by the Rajasthan Adaptation of Central Laws Ordinance (No. 4 of 1950) promulgated 24 January 1950; Section 3 of the Act was modified to substitute the Government of United State of Rajasthan for the Central Government under the proviso to Sub-section (1) of Section 3.
- On 9 August 1950, the Government of Rajasthan issued a notification empowering the District Courts (District Judges) in Rajasthan to exercise jurisdiction conferred by the Indian Companies Act.
- On 1 April 1951 the Part B States Laws Act came into force, applying the Indian Companies Act (No. 7 of 1913) in its entirety to Part B States with certain amendments (including Section 2(b) deeming certain companies to be incorporated under the Act).
- Section 6 of the Part B States Laws Act repealed the Rajasthan law relating to companies but its second proviso preserved anything done under the repealed law, deeming it done under the corresponding provision of the Act unless superseded.
- The eight petitions involved applications under Sections 153/153A or Section 162 of the Indian Companies Act (1913) and concerned matters including winding-up (Petitions Nos. 3, 7, 8, 1 of 1955), sanctioning schemes/transfers and amalgamation (Petitions Nos. 4, 5, 6), and transfer of registered office (Petition No.10 of 1954). Specific filing dates and parties are given in the opinion (e.g., Petition No. 3 of 1954 by The General Assurance Society Ltd. on 1-5-1954 under Section 162).
- While proceedings were pending, the Deputy Registrar discovered the 9-8-1950 notification and reported that the District Judges had been empowered to exercise Companies Act jurisdiction; the learned Single Judge referred three specific questions to a Division Bench concerning the continuing force of the notification, whether the High Court could also entertain such applications, and whether Sub-section (3) of Section 3 permitted proceedings in the High Court if it was not authorised by the notification.
Legal Issues Presented
- Whether after the coming into force of the present Companies Act, the notification No. F.1 (28) Judicial/50 dated 9th August 1950 is still in force and whether the District Courts have powers to entertain applications under the Indian Companies Act, 1913.
- If the District Courts have such powers, can the High Court also entertain applications under the said Act?
- If the High Court is not authorised to entertain applications under the Companies Act by virtue of the aforesaid notification, can it proceed with the applications by virtue of Sub-section (3) of Section 3 of the Indian Companies Act?
Arguments of the Parties
Petitioners' Arguments
- It was contended that the proviso to Sub-section (1) of Section 3 of the Indian Companies Act empowered only the Central Government to empower District Courts; because the Rajasthan Adaptation conferred the corresponding power on the Government of Rajasthan, the authority exercising the power under the Rajasthan Act did not correspond to the authority in the Indian Companies Act (i.e., that the Rajasthan Government could not validly exercise the power the Central Government alone had under the original Act).
- Mr. Gauba (for the petitioner in Petition No. 1 of 1955) argued that the Rajasthan Adaptation Ordinance adapted the Central Act without any modification of Section 3 in the schedule, and therefore the notification of 9-8-1950 was ultra vires (invalid) because Section 3 had not been expressly modified in the schedule.
Other Parties / Government
The opinion records that counsel for the parties and the learned Government Advocate were heard, but it does not set out detailed arguments advanced by the Government Advocate or other respondents in the text provided.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| British India Corporation v. Shanti Narain, AIR 1935 All 310 (A) | Observed that when power is conferred on a District Court under the proviso to Sub-section (1) of Section 3 of the Indian Companies Act that District Court has the exclusive jurisdiction to deal with the matters. | The Court noted the observation but did not adopt it as an absolute rule; it considered the language of Section 3 and concluded that conferment of powers on a District Court does not necessarily oust High Court jurisdiction. |
| Canara Bank Ltd., Cochin Branch v. Official Liquidator, 1949-4 DLR (TC) 105 (Full Bench, Travancore-Cochin High Court) | Held that the High Court did not lose its jurisdiction in company matters even when a notification is issued empowering a District Court to be the Court. | The Division Bench agreed with this opinion (noting it was for different reasons) and relied on the scheme of Section 3 and related principles to hold that High Court jurisdiction is not ousted by the notification. |
| Craies on Statute Law (5th Ed.) with reference to Albon v. Pyke (1842) 4 M & G 421 | Principle that the jurisdiction of superior courts is not taken away except by express words or necessary implication. | Used to interpret the proviso's language ("such District Court shall ... be the Court") as not expressly excluding the High Court's jurisdiction; supported the view that the District Court should ordinarily be approached first but that the High Court retains jurisdiction unless expressly ousted. |
| Halsbury's Laws of England (note at page 530, Third Edn.) | Explains that Sub-section (3) saves proceedings taken in a wrong court only where there is no inherent want of jurisdiction in that court. | Relied upon to explain the limited operation of Sub-section (3): proceedings are saved only if the wrong court merely was inappropriate, not where the court inherently lacked jurisdiction. |
| Palmer's Company Precedents, Part II, 3rd Edn., p. 16 | Authority cited regarding transferring petitions to the court of the District Judge where that court is the appropriate forum. | Cited to support the statement that petitions should be transferred to the District Judge's court if that is the appropriate forum, subject to the High Court's residual powers. |
Court's Reasoning and Analysis
The Division Bench addressed the three referred questions by applying statutory construction to the adaptation and repeal provisions and by analysing the structure and language of Section 3 of the Indian Companies Act and the saving provision in the Part B States Laws Act.
On Question (1) (validity and continuing force of the 9-8-1950 notification):
- The Court observed that the second proviso to Section 6 of the Part B States (Laws) Act expressly preserves delegations of power made under the corresponding previous law in force in a Part B State; the corresponding law was the adapted Indian Companies Act as modified by the Rajasthan Adaptation Ordinance.
- The petitioners' argument that only the Central Government could empower District Courts under the original Act was rejected because, once adapted to Rajasthan, references to the Central Government were to be read as references to the Government of the United State of Rajasthan (by virtue of the general modifications in Section 5, Clause (iv) of the Ordinance). Thus the adapted Act permitted Rajasthan's Government to make the delegation and the 9-8-1950 notification was intra vires and preserved by the Part B States Laws Act.
On Question (2) (whether the High Court can also entertain applications when a District Court is empowered):
- The Court analysed the scheme of Section 3: the High Court is declared to be the court having jurisdiction under the Act in the first instance, and the proviso authorises the appropriate government to empower a District Court to exercise all or any jurisdiction conferred upon the Court by the Act.
- The language of the proviso ("such District Court shall as regards the jurisdiction so conferred be the court in respect of all companies having their registered offices in the district") does not expressly exclude High Court jurisdiction. The Court relied on the principle (from Craies and Albon v. Pyke) that superior courts' jurisdiction is not taken away except by express words or necessary implication.
- The Court inferred a procedural/administrative principle: in cases of co-ordinate jurisdiction the litigant should ordinarily approach the lowest competent court; accordingly, where a District Court is empowered, the High Court will not, as a matter of practice, entertain petitions that the District Court is authorised to deal with, even though the High Court retains the statutory power under the Act.
On Question (3) (application of Sub-section (3) of Section 3 if the High Court is not authorised):
- The Court noted that Sub-section (3) preserves proceedings taken in a wrong court only where the wrong court does not suffer from an inherent want of jurisdiction. This indicates that conferment of powers on a District Court does not amount to an inherent ouster of High Court jurisdiction.
- Therefore, the High Court can proceed with applications before it by virtue of Sub-section (3) since the High Court does not suffer from an inherent want of jurisdiction merely because a District Court has been empowered.
- The Court also observed that under Section 17 of the Rajasthan High Court Ordinance the High Court may assume or transfer suits and other civil proceedings from subordinate courts; this power provides an additional statutory basis for transfer or for the High Court to try matters that might otherwise be within a District Judge's competence. The practical effect is that the Single Judge has discretion either to continue proceedings in the High Court or to transfer them to the District Court having jurisdiction.
Holding and Implications
The Division Bench's answers and final decision are:
- Question (1): The notification dated 9-8-1950 is in force and the District Courts were validly empowered to exercise jurisdiction under the Indian Companies Act (the answer to Question No. (1) is in the affirmative).
- Question (2): While District Courts authorised under the notification are to be approached for matters they are empowered to deal with, the High Court retains statutory power under the Act; however, as a matter of practice and principle of co-ordinate jurisdiction the High Court will not entertain applications that can properly be dealt with by the empowered District Court.
- Question (3): The High Court can proceed with applications before it by virtue of Sub-section (3) of Section 3 of the Act because the High Court does not suffer from an inherent want of jurisdiction; nevertheless, the High Court may transfer any of the cases to the subordinate court and it is within the discretion of the learned Single Judge either to carry on with the proceedings in the High Court or to transfer them to the District Court having jurisdiction.
Core Ruling: The notification empowering District Courts is valid and operative; District Courts have jurisdiction over matters conferred on them, but the High Court retains residual jurisdiction and may either hear the matters or transfer them in the exercise of its discretion.
Direct Consequences for the Parties
The immediate practical effects are that the petitions before the High Court fall within a framework where the District Courts are the ordinarily appropriate forum for matters covered by the notification; the learned Single Judge may therefore decide, in his discretion, whether to continue to hear any of these matters in the High Court or to transfer them to the relevant District Court. The Court also indicated that transferring to a District Court and subsequently retransferring to the High Court (if thought proper) would be a procedural possibility.
Broader Implications
The opinion does not assert the creation of a new legal precedent beyond the application of established principles of statutory construction and jurisdictional practice; it applies existing authorities to the Rajasthan context and leaves the procedural disposition of these petitions to the discretion of the Single Judge.
1. In these 8 cases a reference has been made by the learned Single Judge.
2. The Indian Companies Act was applied to Rajasthan with certain modifications by the Rajasthan Adaptation of Central Laws Ordinance (No. 4 of 1950 promulgated on 24th January, 1950) and Section 3 of the Act was modified so as to substitute Government of United State of Rajasthan for Central Government under the proviso to Sub-section (1) of Section 3 of the Act.
On 9-8-1950, the Government of Rajasthan in exercise of the powers conferred by the modified proviso to Sub-section (1) of Section 3 of the Act issued a notification empowering the District Courts (District Judges) in Rajasthan to exercise all the jurisdiction conferred by the Indian Companies Act, upon the Court.
3. On 1-4-1951, the Part B States Laws Act came into force and the Indian Companies Act (No, 7 of 1913) was applied in its entirety subject to certain amendments. One of such amendments was insertion of Section 2 (b) by which the companies registered under any law in a Part B State corresponding to the Indian Companies Act immediately before the commencement of the Part B States Laws Act, 1951, were to be deemed for the purposes of the Act to be companies incorporated and registered under the Act. Certain other modifications were made which are not relevant for the purpose of this case.
4. By Section 6 of the Part B States Laws Act the Rajasthan Law relating to companies was repealed and the second proviso in Section 6 provided that in spite of the repeal anything done or any action taken (including any appointment or delegation made, notification, order, instruction or direction issued, rule, regulation form, bye-law or scheme framed, certificate obtained, patent, permit or licence granted or registration effected) under any such repealed law shall be deemed to have been done or taken under the corresponding provision of the Act or Ordinance as now extended to that State and shall continue to be in force accordingly, unless and until superseded by anything done or any action taken under the said Act or Ordinance.
5. The eight petitions relate to different matters and may be briefly described here :
Petition No. 3 of 1954 : The General Assurance Society Ltd. of Ajmer filed this petition on 1-5-1954, under Section 162 of the Companies Act for winding up the Rajasthan Agricultural Livestock & General Insurance Co. Ltd., Jaipur, on the ground that the company was unable to pay its debts.
Petition No. 4 of 1954 : This petition was made by the Shekhawati Agencies Ltd., Jaipur, on 14-6-54 under Section 153 and Section 153A of the Indian Companies Act for sanction of a scheme by which the assets and liabilities of the Shekhawati Agencies Ltd. were sought to be transferred to Rajasthan Stores Ltd. on certain terms and conditions.
Petition No. 5 of 1954 : The Greater Rajasthan Investment Trust Ltd., Jaipur, applied on 14-6-54 under Sections 153 and 153A of the Indian Companies Act to transfer their assets and liabilities to the Rajasthan Stores Ltd, under certain terms and conditions.
Petition No. 6 of 1954 : The Bullion Exchange Ltd. and Gold and Silver Merchants Association Ltd., Jaipur, applied on 4-9-1954, for amalgamation so as to form a new company, namely, the Bullion Association Ltd., Jaipur, under Sections 153 and 153A of the Indian Companies Act.
Petition No. 7 of 1954 : This petition was presented on 10-9-1954, by Shri Purna Chandra Kesliwal for winding up of the Bharat Precious Metal Industries Ltd., Jaipur, under Section 162 of Indian Companies Act for failure to pay its debts.
Petition No. 8 of 1954 : This petition was presented by Ram Kumar on 22-11-1954, under Section 162 of the Indian Companies Act for winding up of the Bharat Electrical and Industrial Corporation Ltd., Alwar, on the allegations of gross mis-management and irregularities by the Chairman and Directors of the Corporation under Clause (6) of Section 1'62 of the Act.
Petition No. 10 of 1954 : In this petition which was presented on 26-3-1954, the Kejriwal Commercial Corporation Ltd., Churi Ajitgarh (West Bengal) requested for sanction for transferring the registered office of the Corporation to Churi Ajitgarh in West Bengal.
Petition No. 1 of 1955 : This is a petition by Rani Ajit Kanwar Ba for winding up of the Man Radio and Electricals Ltd., under Section 162 of the Companies Act.
6. While proceedings were being taken in this Court on the aforesaid applications, the Deputy Registrar on 18-1-1955, came across notification of 9-8-1950 and reported that the District Judges having been empowered by the Government to exercise powers under the Indian Companies Act, all these cases were not triable in this Court. The matter came before the learned Single Judge and he has referred the! following questions to a Division Bench;
1. Whether after the coming into force of the present Companies Act, the notification No. F.1 (28) Judicial/50 dated the 9th August; 1950, published in the Rajasthan Gazette Part I dated the 19th of August, 1950, page 359, is still in force and the District Courts have powers to entertain applications under the Indian Companies Act, 1913.
2. If the District Courts have such powers can this Court also entertain applications under the said Act.
3. If this Court is not authorised to entertain applications under the Companies Act by virtue of the aforesaid Notification can it proceed with these applications by virtue of Sub-section (3) of Section 3 of the Indian Companies Act.
7. We have heard counsel for the parties and the learned Government Advocate and our answers to the questions are as follows :
Question No. (1) : The second proviso to Section 6 of the Part B States (Laws) Act specially preserves the delegation of powers made under the corresponding previous law in force in a Part B State. The corresponding law was the same Indian Companies Act but as modified by the Rajasthan Adaptation of Central Laws Ordinance.
It was argued by learned counsel for the petitioners that while the proviso to Sub-section (1) of Section 3 empowered only the Central Government to empower the District Courts, the adapted Companies Act in Rajasthan conferred that power on the Government of Rajasthan, and, therefore, the authority exercising power under the Rajasthan Act did not correspond to the authority in the Indian Companies Act.
This argument has no substance for by the very nature of things the Rajasthan Act could not provide for the power to be exercised by the Central Government. The adapted Companies Act was, however, the corresponding Law and Section 3 was the corresponding provision of the Act and whosoever authority exercised power according to the provisions of that Act was the corresponding authority with reference to Section 3 of the Indian Act. The delegation of the power made by the Rajasthan Government was thus preserved by the second proviso to Section 6 of the Part B States (Laws) Act.
8. An ingenious argument was raised by Mr. Gauba on behalf of petitioner in Petition No. 1 of 1955 that the Rajasthan Adaptation of Central Laws Ordinance adapted the Central Act without any modification of Section 3, and, therefore, the notification of 9-8-1950, was ultra vires. There is no doubt that in the Schedule there is no mention of any modification of Section 3, but in Section 5, Clause (iv), containing the general modifications in respect of all Acts adapted, it is provided that the references to Provincial Government or any other Government in the adapted Act will be deemed to be references to the Government of the United State of Rajasthan.
This general adaptation modified Section 3, and the "Central Government" was to be read as the "Government of the United State of Rajasthan". The notification of 9-8-1950, was therefore, intra vires. Our answer to the first question is, therefore, in the affirmative.
9. Question No. (2) : It has been observed in -- 'British India Corporation v. Shanti Narain', AIR 1935 All 310 (A), that when power is conferred on the District Court under the proviso to Sub-section (1) of Section 3 of the Indian Companies Act that District Court has the exclusive jurisdiction to deal with the matters. The Full Bench of the Travancore-Cochin High Court in a recent case of the -- 'Canara Bank Ltd., Cochin Branch v. Official Liquidator', 1949-4 DLR (TC) 105, observed that the High Court did not lose its jurisdiction in company matters even when a notification is issued by the appropriate Government empowering a District Court to be the Court.
We agree with the opinion expressed in the 'Canara Bank Ltd. v. Official Liquidator', though for different reasons. The scheme of Section 3 is that the High Court is declared in the first instance to be the court having jurisdiction under the Act in respect of all matters mentioned in the Act. The proviso authorises the Central Government to empower any District Court to exercise all or any of the jurisdiction conferred upon the Court by the Act. The words in the proviso that in the case of conferment of powers
"such District Court shall as regards the jurisdiction so conferred be the court in respect of all companies having their registered offices in the district"
do not expressly exclude the jurisdiction of the High Court in company matters. Craies on Statute Law (Fifth Edn.), observes at page 116 after reference to the judgment of Tindal, C. J. in -- 'Albon v. Pyke', (1842) 4 M & G 421 at p. 424 (B), that "the general rule undoubtedly is that the Jurisdiction of Superior Courts is not taken away except by express words or necessary implication". The words 'such District Court shall be the Court" do not mean that it would be the exclusive court. The definite article "the" before "Court" has no more significance than pointing to the Court authorised to deal with company matters. What is intended seems to be that the District Court in such cases should in ordinary course be approached, and on the principle that in case of co-ordinate jurisdiction the litigant should first approach the lowest court of competent jurisdiction, the High Court will not entertain a petition in respect of which a District Court has jurisdiction.
10. Sub-section (3) which provides that nothing in the section shall invalidate a proceeding by reason of its being taken in a wrong Court, indicates that by conferment of the powers on the District Court the jurisdiction of the High Court is not ousted, because Sub-section (3) of Section 3 of the Indian Companies Act only applies where there is no inherent want of jurisdiction in the wrong Court.
Validity of the proceedings would only be saved if the proceedings are taken in an inappropriate court but not in a court which suffers from an inherent want of jurisdiction. See note on page 530 Halsbury's Laws of England Third Edn. If the conferment of powers on a District Court under the proviso to sub-section (1) was to result in the conferment of exclusive jurisdiction to the District Court, sub-section (3) will only have a restricted application.
It may be pointed out that Sub-section (3) cannot be said to be applicable only in the case of duality of jurisdiction referred to in Sub-section (2) for, in that case, Sub-section (3) would have appeared as a proviso to Sub-section (2) and not as an independent sub-section. It can very well be understood to apply in cases covered by Sub-section (1) and its applicability would be more consistent if the jurisdiction of the High Court does not cease by conferment of powers on the District Court.
11. Our answer to the second question is, therefore, that on conferment of powers on the District Court the applications under the Companies Act in respect of matters in which the District Court is authorised to act are to be entertained by the District Court and under the Companies Act in respect of matters in which the District Court is authorised to act are to be entertained by the District Court and although the High Court would undoubtedly possess the power to be exercised by the Court under the Act it will not entertain applications in respect of matters which can be dealt with by the District, Court.
12. Question No. (3) : As observed above the High Court does not suffer from Inherent want of jurisdiction even when a District Court is authorised to exercise jurisdiction under the Act. The High Court can, therefore, proceed with the applications before it by virtue of Sub-section (3) of Section 3 of the Act. On a view that the appropriate court is the court of District Judge the petitions are to be transferred to the Court of District Judge having jurisdiction. See Palmer's Company Precedents Part II, 3rd Edn. page 16.
But it may be pointed out that under Section 17 of the Rajasthan High Court Ordinance the High Court is empowered to remove and to try and determine as a Court of extraordinary Original jurisdiction any suit being or falling within the jurisdiction of any Court subject to its superintendence when the High Court may think proper to do so either on the agreement of the parties to that effect, or for purposes of justice the reasons for so doing being recorded on the proceedings of the High Court.
Even, therefore, if it be assumed for the sake of discussion that the High Court has no original jurisdiction, Section 17, authorises transfer of any case to itself falling within the jurisdiction of any subordinate court. The word "suit" in Section 17 has a wide meaning and would include all civil proceedings pending in the subordinate courts. It would be a mere formality to transfer the cases to a District Court and thereafter to retransfer them to the High Court should the High Court think it proper to try the cases Itself.
Our answer to Question No. (3), therefore, is that the High Court has power to proceed with the applications presented before it but it may transfer any of the cases to the subordinate court on the broad view that the matter should be dealt with by the lowest court of competent jurisdiction and it would be in the discretion of the learned Single Judge either to carry on with the proceedings in this Court or to transfer any of them to the District Court having jurisdiction.
Alert