D.R Deshmukh J., Chairman:— This common order governs identical C.A Nos. 339 of 2011 and 484 of 2010 filed by the respondent-company in C.P Nos. 3 of 2010 and 4 of 2010 respectively.
2. Both C.P Nos. 3 of 2010 and 4 of 2010 have been filed before the Principal Bench, Company Law Board under section 247 along with section 237(b) of the Companies Act, 1956 (henceforth “the Act”). The registered office of the company, i.e, M/s. Uniworth Textiles Ltd. (C.P No. 3) is situated at Calcutta (West Bengal) while the registered office of the company, i.e, M/s. Indoworth India Ltd. (C.P No. 4 of 2010) is situated in Nagpur (Maharashtra).
3. It is not in dispute that if both C.P Nos. 3 and 4 were stand alone petitions under section 237(b) of the 1956 Act the territorial jurisdiction to hear C.P 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 C.A Nos. 484 and 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) of the Act does not lie before the Company Law Board. It was argued that even if the Bench having jurisdiction to hear a petition under section 237(b) of the Act arrived at a conclusion that an investigation as contemplated by section 247(1A) of the Act should be ordered it would have to refer such petition to the Principal Bench of the Company Law Board which alone has, under the distribution of work order, jurisdiction to pass an order under section 247(1A) of the Act. Reliance was placed on Birla Corporation Ltd., In re, [2006] 133 Comp Cas 515 (Cal), Alaknanda Manufacturing and Finance P. Ltd. v. Bahubali Services Ltd., [1996] 86 Comp Cas 291 (CLB), Mirza Mohd. Afzal Beg v. State of jammu and Kashmir, AIR 1960 J&K 1; [1960] Cri. LJ 62 and K.U Kulkarni v. Ganpat Hiraji Teli, AIR 1942 Bom 191; [1942] 44 Bom. LR 264.
5. On the other hand learned counsel for the petitioner argued that section 247 of the Act is an enabling provision conferring inquisitorial powers on the Company Law Board 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 Company Law Board to pass orders to protect status quo in the course of enquiry. An independent enquiry power has been conferred on the Company Law Board on relevant facts being brought to its notice by a complainant. The provisions of section 247(1A) of the Act should not be read restrictively as the section does not provide the circumstances in which the Company Law Board 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. Ltd. v. Blossom Breweries Ltd., [1999] 95 Comp Cas 28 (Bom) and Padmd Taparia v. Assam Brook Ltd., [1996] Ind. Law 9 (CLB); [1997] 88 Comp Cas 838 (CLB).
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 May 31, 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 Company Law Board, 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 Company Law Board might pass orders for investigation into the affairs of the company. In paragraph 35 of the decision rendered by the High Court of Calcutta in Birla Corporation Ltd., In re, [2006] 133 Comp Cas 515, it was stated as under (page 523):
“The essential ingredients of sub-section (1A) of section 247 of the Companies Act are : (i) there should be proceedings before the Company Law Board; (ii) in course of those proceedings, the Company Law Board should form an opinion that the ‘true persons’ who are or have been financially interested in the success or failure of the company, are different from the persons who appear to be the members of the company; (iii) the ‘true persons’ who are or have been able to control or materially influence the policy of the company, are different from the persons who appear to be in the control of the company; and (iv) a probe into the company's affairs is desirable in the interest of the company itself, and/or in public interest.”
8. In Alaknanda Manufacturing and Finance P. Ltd. v. Bahubali Services Ltd., [1996] 86 Comp Cas 291 (CLB), the need for introducing the amendment to section 247 of the Act by insertion pf section 247(1A) was reproduced from the notes to the amending Act as-under (page 323) :,
“The provisions of section 247 “were incorporated in the Companies Act in 1956. The provisions of sub-sectn (1A) of section 247 were introduced by the Companies (Amendment) Act, 1988, with, effect from May 31, 1991, in order to give powers to the Company Law Board also which were earlier vested only in the Central Government under section 247. Notes on clauses 41, to 43 of the Amendment Bill which amended sections 247, 248 and 250 stated the powers to impose restrictions and prevent change in the management under section 250 which is presently with the Central Government is sought to, be transferred to the Company Law Board. In order that the Company Law Board may not be handicapped in its proceedings under section 250 of the Act on transfer of the power to it, it is necessary to empower the Board, without prejudice to the existing powers of the Central Government, to cause investigation into the ownership of a company and to call for information in respect of ownership of shares and debentures without prejudice to the powers of the Central Government to do so as enjoined by present sections 247 and 248 of the Act. Hence the amendments'. From this, it seems that the powers under section 247(1A) have been given to the Company Law Board so that it is not handicapped in the proceedings under section 250 which was recast by the same Amendment Act giving the Company Law Board exclusive jurisdiction.”
9. In Padma Taparia v. Assam Brook Ltd., [1996] Ind. Law 9; [1997] 88 Comp Cas 838, a Division Bench of the Company Law Board held that an independent complaint under section 250(1) of the Act could be filed and that the Company Law Board exercises inquisitorial jurisdiction under section 247(1A) of the Act conferring” specific power on the Company Law Board to declare that the affairs of the company ought to be investigated as regards the members of the company. In this decision also while considering the notes on clauses with, regard to the amendment introducing section 247(1A) of the Act it was stated as under (page 853 of 88 Comp Cas):
“The notes on clauses with regard to the amendment in 1988 make it explicit that the object of the amendment was to transfer the present power to impose restrictions from the Central Government to the Company Law Board. While doing so as per the notes there does not appear to be any intention to abridge that power. However, the substitution of the words ‘or otherwise’ by the words or on a complaint made by any person in this behalf have to be interpreted in the context in which these Words are used. As Shri Salve has suggested the legislative intent appears to be to transfer the power to impose restrictions from the Central Government to the Company Law Board: However, the substitution of the words ‘or otherwise’ is not supported by any notes on clauses. All the same the new word or on a complaint made by any person in this behalf has to be read as an abridgement of the power to confine it only on a complaint by any person, The words inserted have to be interpreted in the context in which the amendment was made. The words in this behalf cannot be read to mean in connection with a reference under the Central Government, but has to be read with the legislative intent.
If the interpretation is attempted without this background it may appear as if the complaint should be in connection with the reference by the Central Government. This will, however, convey no meaning since there should be no cause for complaint when the Central Government itself has made a reference to the Company Law Board under sections 247/248 and 249. As such the complaint contemplated obviously has to be with reference to ‘situations’ in which a reference could be made by the Central Government as well. In our view, this is the most appropriate interpretation of the amendment in 1988. According to Shri Salve, the Legislature has conferred on the Company Law Board inquisitorial jurisdiction to prevent such situation as contemplated in sections 247 to 249. We are in full agreement with this interpretation. In that case, the Company Law Board could exercise the powers under section 247(1A) which is again a specific power conferred to make a declaration that the affairs of the company ought to be investigated as regards the members of the company. Thus, as regards the first question we are of the opinion that an independent complaint under section 250(1) is entertainable.”
10. In Bakhtawar Construction Co. Ltd. v. Blossom Breweries Ltd., [1999] 95 Comp Cas 28 (Bom) the words “in any proceedings before it” appearing in section 248 of the 1956 Act, came up for consideration before the Bombay High Court. Section 248 of the 1956 Act, (as, it then stood before its repeal by the Companies (Amendment) Act, 2000 (53 of 2000) section 124 with effect from December 13, 2000) was as under (page 31):
“248. Information regarding persons having an interest in company.—(1) Where it appears to the Central Government, or to the Company Law Board in any proceedings before it, that, there is good reason to investigate the ownership of, any shares in or, debentures of a company and that it is unnecessary to appoint an Inspector for the purpose, the Central Government or the, Company. Law Board, as the case may be, may ‘require’ any person whom it has, reasonable cause, to believe—
(a) to be, or to have been, interested in those shares or, debentures; or
(b) to act, or to have acted, in relation to those shares or debentures, as the legal adviser or agent of someone interested, therein; to give the Central Government or the Company Law Board/as the case may be, any information which he has; of can reasonably be expected to obtain, as to the present and past interests in those shares or debentures and the names and addresses of the persons interested and of any persons who act or have acted on their behalf-in relation to the shares or debentures.”
11. In the above decision, while considering the area of enquiry under sections 247 and 248 of the Act it was observed as under (page 32 of 95 Comp Cas):
“Perusal of the provisions of section 247(1)(a) makes it clear that power is vested under that provision to the Company Law Board to issue directions to the Central Government for appointment of an inspector for investigation into the affairs of the company and that investigation is to be ordered as regards the membership of the company or other matters relating to the company for the purpose of determining the true persons who are or have been financially interested in the success or failure whether real or apparent of the company or who are or have been able to control or materially influence the policy of the company whereas under section 248, the investigation can be ordered by the Central Government qr by the Company Law Board to investigate ownership of any shares or debentures of a company. Thus, from a reading of these two provisions, it is clear that the area of enquiry under section 247 is different and more wider than the area of enquiry under section 248.”
12. In Bakhtawar Construction Co. Ltd. v. Blossom Breweries Ltd., [1999] 95 Comp Cas 28 (Bom) the question whether the words “in any proceedings before it” would indicate that the powers can be exercised by the Company Law Board only in case proceedings, were initiated before it invoking that power was answered as under, (page 32).:
“Now, taking up the question whether the Company Law Board can issue directions under section 248 without there being any other proceedings before it, in my opinion, it depends on the meaning to be attached to the words, in any, proceedings before it appearing in subsection (1) of section, 248, of the Act. In the submission of learned counsel for respondent No. 1, these above-quoted words clearly indicate, that, an order under sub-section (1) of section 248 can be., made by the. Company Law Board only in case there are proceedings pending before it for some other relief than mere investigation into affairs of (the company. However, in my opinion, such a meaning cannot be attached to these words, It is to be seen here that section 248 creates the, power to order investigation into the ownership of any shares or debentures of, a company and this power is vested by section 248 in the Central, Government as also the Company Law Board. The content of the power of the, Central Government and the Company Law Board under section 248 is the same. To say that in case the Central Government exercises the power under section 248 of the Act, then that power can be exercised by the Central Government as an end in itself and, to say that, however, the Company Law Board cannot do it only because the words ‘in any proceedings before if are used after the words ‘the Company Law Board’”. To my mind, it appears that the words ‘in any proceedings before it’ have been used in sub-section (1) of section 248 of the Act to indicate that the powers can be exercised by the Company Law Board only in case proceedings were initiated before it invoking that power.”
13. The answer to the moot question posed by learned counsel appearing for the respondent-company in C.P No. 3 of 2010 and C.P No. 4 of 2010 is to be found in section 250 of the Act and in the notes on clauses Nos. 41 to 43 of the amendment Bill which amended sections 247, 248 and 250 of the Act in the year 1998 with effect from May 31, 1991. Section 250, sub clause (1) reads as under:
“250. Imposition of restrictions upon shares and debentures and prohibition of transfer of shares or debentures in certain cases.— (1) Where it appears to the Company Law Board, whether on a reference made to it by the Central Government in connection with any investigation under section 247, of on a complaint made by any person in this behalf that there is good reason to find out the relevant facts about any shares (Whether issued or to be issued) and the Company Law Board is of the opinion that such facts cannot be found out unless the restrictions specified in sub-section (2) are imposed, the Company Law Board may, by order, direct that the shares shall be subject to the restrictions imposed by sub-section (2) for such period not exceeding three years as maybe specified in the” order.”
14. A plain reading of the above leaves no room for any doubt that under section 250(1) of the Act, on a complaint made by any person in connection with any investigation under section 247 of the Act, the Company Law Board finds good reason to find out the relevant fact about any shares and is Of the opinion that such facts cannot be found out unless the restrictions specified in sub-section (2) are imposed the Company Law Board, may by order direct that the shares shall be subject to the restriction imposed by sub-section (2) of section 250 Of the Act for such period not exceeding three years as may be specified in the order. It would thus be seen that prior to the amendment to section 247 of the Act the Central Government was the sole repository of the power to order investigation into the ownership of a company. The amended section 250 of the Act specifically permitted any person to make an application to the Company Law Board in connection with any investigation under section 247 of the Act. In Padma Taparia v. Assam Brook Ltd., [1996] Ind. Law 9 (CLB); [1997] 88 Comp Cas 838 (CLB) also it was held that an independent complaint under section 250(1) of the Act is entertainable. However the powers of the Company Law Board under section 250(1) of the Act were limited to the extent of imposing restrictions on shares as provided by sub-clause (2) of section 250 of the Act. The Company Law Board did not have the power under section 250 of the Act to order investigation into the ownership of a company which was exclusively the domain of the Central Government. It would not be correct therefore to read the words “in the course of any proceedings before it” appearing in section 247(1A) in a restricted sense. It has also to be borne in my mind that as held in Bakhtawar Construction Co. Ltd. v. Blossom Breweries Ltd., [1999] 95 Comp Cas 28 (Bom) the area in which section 247 of the Act operates is much broader than the erstwhile section 248 of the Act. The notes on clauses 41 to 43 of the Amendment bill introducing section 247(1A) of the Act clearly stated that the powers to impose restrictions and prevent change in the management under section 250 of the Act which is presently with the Central Government is sought to be transferred to the Company Law Board. It was further stated therein that in order that the Company Law Board may not be handicapped in its proceedings under section 250 of the Act on transfer of the power to it, it is necessary to empower the Board, without prejudice to the existing powers of the Central Government, to cause investigation into the ownership of a company and to call for information in respect of ownership of shares and debentures without prejudice to the powers of the Central Government to do so as enjoined by present sections 247 and 248 of the Act.
15. The well established rule of interpretation of statutes, i.e the mischief rule propounded by Lord Coke as far back as 1854 in the Heydon's case, [1584] 3 Co. Rep. 7; (76 ER 637) was explained in Bengal Immunity Co. Ltd. v. State of Bihar, [1955] 6 STC 446; [1955] 2 SCR 603, by S.R Das, C.J.I, as follows (page 467 of 6 STC):
“It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon's case, [1584] 3 Co. Rep. 7; (76 ER 637) was decided that—
‘… for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered:
1st—What was the common law before the making of the Act;
2nd—What was the mischief and defect for which the common law did not provide;
3rd—What remedy Parliament hath resolved and appointed to cure the disease of the Commonwealth; and
4th—The true reason of the remedy; and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro private commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, Pro bona publico.”
16. It is true that while the erstwhile section 248 contained the words “in any proceedings before it” section 247(1A) of the Act uses the words “in the course of any proceedings before it”. It is now well-settled that an interpretation which suppresses the mischief by advancing the remedy and does not defeat the legislative intent for introducing section 247(1A) of the Act should be adopted. If the words “in the course of any proceedings before it” are to be read as “in the course of any other proceedings” it would defeat the very purpose of introducing the amendment to sections 247 and 250 of the Act. As held in Bakhtawar Construction Co. Ltd. v. Blossom Breweries Ltd., [1999] 95 Comp Cas 28 (Bom) the words “in any proceedings before it” were used in sub-section (1) of section 248 of the Act to indicate that the powers could be exercised by the Company Law Board only in case proceedings were initiated before it invoking that power. Section 247 of the Act also finds place in section 250 of the Act which also allows any person to make a complaint to the Company Law Board regarding any investigation under section 247 of the Act. The notes on clauses with regard to the amendment in 1988 make it explicit that the object of the amendment was to transfer the present power to impose restrictions from the Central Government to the Company Law Board. While doing so as per the notes there does not appear to be any intention to abridge that power. The legislative intent, in my considered opinion, in using the words “in the course of any proceedings before it” The therefore to give the Company Law Board the widest powers to order investigation irrespective of the nature of proceeding pending before it.
17. The interpretation by me of the words “in the course of any proceedings” used in section 247(1A) of the Act is thus not only consistent with the legislative intent but also with the established rule of interpretation of statutes propounded in the Heydon's case, [1584] 3 Co. Rep. 7; (76 ER 637). Regulation 4(1) of the Company Law Board Regulations, 1991, provides as under:
“4. Power of the chairman to specify matters which may be dealt with by a Bench.—(1) It shall be lawful for the chairman to provide that matters falling under sections 235, 237, 247, 248, 250, 388B, 408 and 409 and matters falling under Chapter VI of Part VI of the Act and under section 2A of the Monopolies Act shall be dealt with by a Bench consisting of not less than two members including the chairman or the vice chairman (which shall be known as the principal Bench).”
18. The work distribution order dated January 28, 2010, also provides that matters under sections 247, 248, 250 of the Act shall be heard exclusively by the Principal Bench of the Company Law Board. Thus, regulation 4(1) and the work distribution order are also consistent with the above interpretation of the words “in the course of any proceedings before it” appearing in section 247(1A) of the Act.
19. I, therefore, hold that under section 247(1A) of the Act, a petition would lie before the Company Law Board.
20. Since a composite petition under section 247 of the Act along with section 237(b) has been filed both in C.P No. 3 and C.P No. 4 the jurisdiction rests solely with the Principal Bench of the Company Law, Board under regulation 4(1) of the Company Law Board Regulations, 1991, read with the work allocation order dated January 28, 2010.
21. No other ground contained in C.A No. 339 of 2011 and C.A No. 484 of 2010 was canvassed before me by counsel for the respondent in C.P No. 3 of 2010 and C.P No. 4 of 2010 respectively.
22. C.A Nos. 339 of 2011 and 484 of 2010 are accordingly dismissed.
23. The respondent shall file response to the petition within four (4) weeks with an advance, copy the petitioner., Rejoinder if any, within four (4) weeks thereafter with an advance copy, to the respondent. The matter is now listed for completion of pleadings on July 30, 2012, at 3.30 p.m
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