Valentino International (P.) Ltd. vs Dugar Securities Ltd., New Delhi

Ajay Rastogi, J.—Instant Company Appeal u/s 10F of the Companies Act, 1956 (''Co.Act'') is directed against order dt. 5-3-2010 passed by Company Law Board (''CLB'') in Co.Appl.-232/2008 & 313/2009 filed by M/s Valentino Laboratories Ltd., (appellant herein) in Co.Petition-11/2008.

However, despite notices being served upon the appellant, reply to Company Petition was not filed for almost two years before the CLB, but Company application was filed raising preliminary objections that the composite company petition is not maintainable and what has been alleged by the petitioner in his Company petition are disputed questions of fact, which cannot be examined by CLB while holding summary proceedings u/s 111 of the Companies Act, and appropriate recourse available for Company petitioner is to question it by filing civil suit and being not a Member as per the Register of Members of the Company and title of shareholding being disputed, Company petitioner has no locus standi to maintain company petition. However, objection was further raised that he has to first establish that he is holding 10 per cent or more shares of subscribed capital to maintain company petition. While case of Company petitioner was that he is in possession of more than 10 per cent of original share certificates of subscribed capital which itself is a prima facie evidence of title of such shares and in absence of the reply being filed, no presumption can be drawn of disputed questions of fact & law, and cannot be adjudicated in summary proceedings u/s 111 of the Companies Act and the remedy regarding rectification of the Register is exclusively available with the CLB u/s 111 and the Company petition is maintainable for examining the grievance being raised under sections 397 and 398 of the Companies Act.

However, learned CLB after taking note of objections raised by present appellant in para 22 of its order impugned, observed that application filed before CLB declares facts seeking recognition of the Register and indisputably the respondents hold 10 per cent of original share certificates of subscribed capital of the Company and what has been contended by present appellant raising preliminary objection before CLB could be examined only after the reply to the Company petition being filed and the matter is examined; and taking note whereof, application raising preliminary objections regarding maintainability of Company Petition of respondent herein u/s 111 read with sections 397 and 398 of the Companies Act was rejected and the liberty was granted to the present appellant to file reply to the Company petition, vide order dated 5-2-2010. However, as informed in course of arguments that after rejection of their preliminary objection, reply to the Company petition has been filed by present appellant and pleadings of Company petition are complete and the matter has ripen for final hearing, which has been fixed before CLB on 11-5-2011.

Counsel for appellant basically reiterated what has been contended before the CLB and has tried to convince that composite petition under sections 111 and 397 and 398 of the Companies Act is not maintainable since serious disputed questions of fact have been raised which could not be examined by CLB in summary proceedings and placed reliance upon judgment of Apex Court in M/S. Ammonia Supplies Corporation (P) Ltd. Vs. M/S. Modern Plastic Containers Pvt. Ltd. and Others, and Standard Chartered Bank Vs. Andhra Bank Financial Services Ltd. and Others, Counsel submits that claim based on disputed civil rights is beyond the scope of rectification of the Register of members, as prayed for; and what is to be examined in Company Petition filed u/s 111 of the Companies Act, in the facts of instant case could be adjudicated only by civil court where alongwith inter se dispute of civil rights could be resolved.

Per contra, Shri UN Bhandari, learned Senior Counsel for respondent while supporting the order impugned submits that in absence of the reply to Company petition being filed by present appellant, it could not have presupposed that there were serious disputed questions of fact or could only be examined by the civil court but, after the reply to the company petition being filed and examined by CLB; objection regarding disputed questions of fact, as alleged, could not be recorded and will be open to be considered in the summary proceedings provided u/s 111 of the Companies Act.

Counsel further submits that it is not the stage for learned CLB to examine as to whether there are disputed questions of fact which could relegate the parties to approach civil court or could be examined in summary proceedings provided the reply is filed and the adjudication on the company petition filed u/s 111 read with sections 397 and 398 of the Companies Act is taken place. Counsel further submits that composite Company petition u/s 111 read with sections 397 and 398 is maintainable before the CLB and further submits that appeal u/s 10F of the Companies Act is maintainable only if one is aggrieved by any decision or order of CLB arising any question of law out of such decision/order requiring consideration; while in instant case, there is neither any decision nor order being passed by which the appellant could be said to be a person aggrieved and what has been observed by the CLB in its order impugned do not involve any question of law which may require consideration by this Court in appeal u/s 10F of the Companies Act.

This Court has considered contentions advanced at the bar and with their assistance examined material on record. A bare perusal of the order impugned clearly manifest that the CLB has not expressed any opinion on the preliminary objections raised; contrarily, after objections raised by present appellant being noticed, the CLB has observed that merely because objections raised in regard to disputed questions of fact being involved, it would not non-suit the company petitioner; and what has been contended in Company petition cannot be held to be disputed questions and that could be examined only after the reply being filed to the company petition; and it has been observed in para 33 of the impugned order ad infra:

Register of Members produced at the time of hearing is not free from controversies. Any question relating to title in respect of the impugned shares involving substantial factual issues cannot be adjudicated as preliminary issue, but only while disposing the company petition on merits. If petitioner succeeded in its charges levelled against the respondents in the matter of owning of the impugned shares it will qualify to agitate its grievances before petitioner shall not have any right to maintain the company petition. The whole issue revolving around ownership of the impugned shares in view of the rival claims is shrouded with innumerable controversies, involving seriously disputed facts which cannot be resolved in isolation without going into the larger issues invoked in the company petition which have bearing on the maintainability of the company petition and, therefore, the question of maintainability ought not to be adjudicated at this stage. It is a composite petition attracting the provisions of section 111(111A seems to have been wrongly mentioned) of the Act as well. In the facts and circumstances of this case, the petitioner cannot be non-suited on the ground that section 111 is a separate provision. It is settled position that in these equitable proceedings only delay an latches apply and not the limitation as per the limitation Act and that too has to be examined in the facts and circumstances of the case. It is not justifiable to dismiss the petitioner''s claim at the threshold on the ground of any maintainability of main petition in terms of section 399 of the Act.

From what has been observed (supra), the CLB has refrained from expressing any opinion obviously for the reason that it has not reached that stage, as yet.

However, it is not the case of present appellant; that the company petition u/s 111 and under sections 397 and 398 of the Companies Act could not have been filed. Indisputably when company petitioner holds 10 per cent of original share certificates of subscribed capital of the Company, which is prima facie an evidence of title of the members of such original shares in terms of section 84 of the Companies Act and what has been contended by appellant that there are certain disputed questions of fact and company petition filed u/s 111 read with sections 397 and 398 of the Companies Act could not be examined by CLB in the light of judgments in Ammonia Supplies Corpn. (P.) Ltd. ''s case (supra), in the opinion of this Court does not hold good in the facts of the instant case.

This Court finds substance in the submissions made by Senior Counsel for respondent that the present order pursuant to which preliminary objection has been rejected is neither a decision nor any order by which any person including present appellant could be said to be aggrieved and obviously for the reason that no finding either way has been recorded and what has been observed by learned CLB in its order impugned is that the matter could be examined only after the reply to Company petition being filed by present appellant and merely because the objection has been raised by appellant, that in no manner will non-suit the company petitioner from the mechanism to examine the dispute raised as provided under the law. In the opinion of this court, in the absence of there being any decision or order deciding the right of the parties either way and by which one could be said to be aggrieved and at the same time, arising any question of law, which may at all require determination, this Court has to refrain from entertaining the appeal.

That apart, as informed in course of arguments, reply to the company petition has been filed by present appellant and the matter has ripen for final hearing before the CLB, it would be otherwise not appropriate for this Court to record any finding on merits since it may either way adversely affect rights of parties while the matter is still to be adjudicated before the CLB.

Consequently, the appeal being devoid of merit, fails and is hereby dismissed.