Vikram Jairath And Ors vs Middleton Hotels Private Limited And Ors

Soumen Sen, J

This appeal arises from an order dated 13th March 2019 passed by the learned Single Judge rejecting the prayer of the appellant for an ad-interim order of injunction.

The reason for refusal to pass an order has been summarized in the penultimate paragraph of the order, which is reproduced below:-

"18. In conclusion, as indicated below, the present application for an ad interim order of injunction cannot be allowed on two counts - (a) suppression of material facts and (b) the plaintiff praying for similar reliefs simultaneously before this Court and NCLT that would require adjudication on the identical core issue. In light of the same, this matter needs to be decided upon exchange of affidavits."

In order to appreciate the finding it is necessary to consider the case made out by the appellants in their pleadings.

The plaint states that the respondent no. 1, a company, owns an immovable property, popularly known as "Middleton Chambers". The respondent no. 1 is owned, directly or indirectly, by the respondent no. 2 and 3. It is stated that the respondent no. 2 and 3 obtained loans and advances from the appellants at various instances; and that, as on 31st March 2018, a sum of Rs. (approximately) 29,27,00,000 remained due and payable by the respondent no. 2 and 3 to the appellant no. 1 and 2. The plaint states that the respondent nos. 2 and 3 have acknowledged payments received by them from the plaintiffs.

It is stated that towards the end of June 2018, the respondent no. 2 and 3 approached the appellants with the promise to make payment of a part of their dues within the next six months, and offered to secure such payment by depositing with the appellants the entire shareholding of the respondent no. 2, 3, 4 and 5 in the respondent no. 1 company; and in the event of failing to make payment of a part of the plaintiff's dues within the next six months, to transfer the entire shareholding of the respondent no. 2 to 5 in the respondent no. 1 company to the appellants at their face value, which would serve to set off a portion of their debt to the appellant.

The plaint states that the appellants agreed to accept the terms mentioned above and consequently, on 25th July 2018, the respondent no. 2 to 5 made over to the appellants the original share scrips and certificates of all 12,00,806 shares of the respondent no. 1 company. The receipt was acknowledged by the appellants. With the transfer of the share scrips, it is stated, the outstanding debt now stood at Rs. 1,20,08,060.

The plaint states that on becoming 'absolute owners' by virtue of having had the entire shares of the respondent no. 1 company transferred to them, the appellants became entitled to have their names recorded as the owners thereof in the records of the company and accordingly, on 27th December 2018 they made an application for transfer of shares in their names. However, the application was rejected by the director of the company. The appellants wrote to the respondent no. 2 and 3 on 10th January 2019 asserting their ownership of shares representing the entire issued and paid-up capital of the respondent no. 1 and calling upon the respondent no. 2 and 3, as person in control of the company, to act on the application already received by the company. The respondent no. 2 and 3 replied by a letter dated 16th January 2019. In the letter, they accepted that the transfer deeds had been handed over; but contended that only "blank signed transfer deeds" had been handed over and were only meant to give "comfort".

The plaint states that the letter dated 16th January 2019 amounted to a refusal to register the transfer of the shares in favour of the appellant. It is stated that in the course of further action in accordance with Section 58 and 59 of the Companies Act 2013, the appellant found out from the Registrar of Companies that the respondent no. 1 had, on 15th November 2018, filed a Form MGT-14 and on 27th December 2018 filed a form SH-7, giving intimation of amendment of its Memorandum of Association, of increase of its authorized capital and issuance of bonus shares in favour of the respondent no. 2 to 5. It also came to the appellants' knowledge that a board resolution had been passed on 15th October 2018 authorizing the increase of authorized share capital of the company and issuance of bonus shares to the holders of equity shares of the company. An Extraordinary Board Meeting had also been held on 14th November 2018 to increase the authorized capital of the respondent no. 1 and a further meeting had been held on 1st December 2018 allotting bonus shares.

This, the appellants allege, is in contravention of an agreement between the parties while getting the appellants to agree on part payment within six months during the end of June 2018 referred to hereinabove. The appellants contend that this amounted to a fraud played by the respondent no. 2 to 5 on the appellants; and the particulars of the fraud have been set out in paragraph 23 of the plaint.

In these circumstances, the appellants approached this court, seeking the following reliefs -

"(a) Declaration that the purported amendment of the Memorandum of Association of the defendant no. 1 company providing for enhancement of its authorized capital, the purported enhancement of the authorized capital of the defendant no. 1 from Rs. 1.5 crores to Rs. 3 crores, the purported issuance of the bonus shares and the purported allotment of the same to the defendant no. 2 to 5 is illegal and void ab initio, and in any event has been avoided by the plaintiff being manifestly fraudulent and in breach of the agreement between the parties and particularly the negative covenant contained in the same;

(b) Declaration that the board meetings dated 15th October 2018 and 1st December 2018 and the extraordinary general meeting dated 14th November 2018 of the defendant no. 1 are illegal and have been wrongly and fraudulently held;

I Decree for delivery up and cancellation of the resolutions passed at the board meetings dated 15th October 2018 and 1st December 2018 and the extraordinary general meeting dated 14th November of the defendant no. 1;

(d) Decree for delivery up and cancellation of the Forms MGT-14 and SH-7 filed by the defendant no. 1 with the Registrar of Companies, West Bengal on 15th November 2018 and 27th December 2018;

(e) Decree for mandatory injunction directing the rectification of the register of members of the defendant no. 1 by deleting therefrom all entries relating to allotment of bonus shares to the defendant no. 2, 3, 4 and 5;

(f) Decree for perpetual injunction restraining the defendants from giving any effect or further effect to the purported resolutions dated 15th October 2018 and 1st December 2018 or from in any manner representing or holding out that the authorized capital of the defendant no. 1 company has been increased from its authorized value of Rs. 1.5 crores or that any bonus shares have been issued or allotted to the defendant no. 2,3,4 and 5 or any of them, consequent on increase of the authorized capital of the company or otherwise;

(g) Decree for perpetual injunction restraining the defendants or any of them from issuing or allotting any share in the defendant no. 1 or from transacting any business of the said defendant or from in any manner dealing with any of its assets or properties or from convening any meeting of the defendant no. 1 or passing any resolution thereat or to deal with, dispose of, alienate, encumber or part with possession of any part of portion of the property of the defendant no. 1 at 10, Middleton Street, Kolkata - 700 071;

[other incidental reliefs]"

The appellants had also filed a petition before the National Company Law Tribunal (hereinafter referred to as "NCLT"). In the said petition, the appellants has prayed for similar reliefs as prayed for in the suit. The reliefs claimed are as follows -

"a. An order directing the respondent to register the transfer the 81,633 shares transferred by Prabha in the name of the petitioner no.1 and, upon delivery of the balance 11,19,173 shares to it, to register the transfer of the same as well as in the name of the petitioners in the manner following and to direct consequent rectification of the share register of the respondent:- 500000 shares transferred by Prabha in the name of the Petitioner no.2 -

3000233 shares transferred by Prabha in the name of the Petitioner no.1

11600 shares transferred by Shanti in the name of the Petitioner no.1

100400 shares transferred by Moksh in the name of the Petitioner no.1

74200 shares transferred by Moksh in the name of the Petitioner no.1

29100 shares transferred by Moksh in the name of the Petitioner no.1

140 shares transferred by Moksh in the name of the Petitioner no.1

100 shares transferred by Pawan in the name of the Petitioner no.1;

b. An order be made directing rectification of the register of members of the respondent to reflect the transfer of the shares in the names of the Petitioners as in prayer (a) above;

c. Such further or other order or Orders be made and/or direction or directions be given as to this Hon'ble Tribunal may seem fit and proper.

INTERIM RELIEFS:-

a. An order be made restraining the respondent from in any manner dealing with or disposing off or alienating or encumbering or parting with possession of its fixed assets or from in any manner altering its shareholding till the disposal of the instant appeal.

b. Such further or other order or orders be made and/or direction or directions be given as to this Hon'ble Tribunal may seem fit and proper."

Paragraph 33 of the stay application, which is relevant for the present appeal, states -

"33. In this context it is relevant to mention that consequent on the refusal of the defendant no. 1 company to register the transfer of the said 1200806 shares in favour of the plaintiffs, the plaintiffs have already taken steps to initiate an appropriate proceeding before the National Company Law Tribunal under section 58 and 59 of the Companies Act 2013."

It is stated by the appellants, in their appeal, that the plaint to be filed in this court and the petition before the NCLT were being drafted simultaneously. It is stated that the suit, however, came to be filed earlier with the presentation of the plaint on 18th February 2019 as the NCLT only accepts filing of a petition upon prior service on the respondents.

Mr. Jishnu Saha, learned senior counsel appearing on behalf of the appellants, submits that the bar under section 430 of the 2013 Act applies to the Civil Court only in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under the Act or any other law for the time being in force. The question that therefore arises is whether the issues can be determined or the reliefs sought can be granted by the NCLT or the NCLAT under the 2013 Act.

Mr. Saha submits that the appellants' cause of action in the present suit in C.S. No. 34 of 2019 is entirely different from the appellants' cause of action in the application preferred before the NCLT under sections 58 and 59 of the Companies Act 2013 being Appeal No. 312/KB/2019. It is submitted that the appellants' cause of action in the present suit is one of breach of agreement, of breach of negative covenant of the agreement, breach of trust, and fraud. The appellants' cause of action in the NCLT petition being Appeal No. 312/KB/2019 is simply the failure on the part of the respondent no. 1 company to register the shares in the appellants' names in its register of members.

Mr. Saha submits that the plaint case is that the respondent no. 2, 3, 4 and 5 had made over the entire shareholding of the respondent no. 1 company to the appellants and despite doing so, they thereafter proceeded to enhance the authorized capital and paid up capital of the respondent no. 1 and issued and allotted to themselves bonus shares. The respondent has challenged the same as being contrary to the terms of the agreement entered into by the respondent no. 2 and 3 with the appellants, the express and/or implied negative covenant in the same, and on the ground of fraud. It is submitted that the only provision under the Companies Act 2013 under which an application could have been made was section 241 but the section is only available to a "member" of a company. This is clear from section 241(1) of the 2013 Act. Further, section 244, which lays down the eligibility qualifications to maintain an application under section 241 also limits the right to apply to "members". It is submitted that from a plain reading of the sections, it is clear that only "members" of a company have the locus standi to approach the NCLT with an application under section 241. It is submitted that to be a "member" as defined in section 2(55) of the 2013 Act, the name of the person who acquires shares in a company must be entered in the company's register of shares. Additionally, a beneficial owner may also become a 'member' but only if his name is recorded as a beneficial owner in the records of the depository. According to Mr. Saha, this, therefore, means that to be accorded the status of a 'member', the company must include the name of the person acquiring shares or a beneficial interest in shares in the register of member or in the records of the depository. It is submitted that since this has not happened in the instant case, and the company has refused to enter the appellants' name in the register of the company, the appellants cannot maintain an application under section 241 of the Companies Act 2013. For the proposition that a shareholder who is not a member cannot maintain an application under section 241 of the Companies Act 2013 and could not have maintained an application under sections 396 and 397 of the 1956 Act, reliance is placed on Howrah Trading Co. Ltd. v. Commissioner of Income Tax Calcutta reported at AIR 1959 SC 775 (paragraphs 8, 9, 10-15), J.P. Srivastava & Sons (P) Ltd. v. Gwalior Sugar Co. Ltd. reported at (2005) 1 SCC 172 (paragraphs 47) and Asansol Electric Supply Co. v. Chunilal Daw reported at 75 CWN 704 (paragraph 23). Therefore, the appellants contend that this court is empowered to determine the suit under section 9 of the Code of Civil Procedure. In this context, reference is made to Secretary of State v. Mask and Company reported at AIR 1940 PC 105 for the proposition that exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied.

In rebuttal to the contention about the maintainability of a combined application before the NCLT, Mr. Saha submits that section 241 and 244 clearly bar a non-member from approaching the NCLT for reliefs under section 242 of the 2013 Act; and therefore, what cannot be done directly cannot also be done indirectly. For the proposition that what cannot be done directly cannot be done indirectly, reliance is placed on State of Haryana v. M.P. Mohla reported at (2007) 1 SCC 457 (paragraph 15) and Rashmi Rekha Thatoi v. State of Orissa reported at (2012) 5 SCC 690 (paragraph 37). It is submitted that as a transfer of shares is completed with the execution of share transfer deeds and the delivery of shares, where they are in physical form, the transferee of shares, as such, always becomes a shareholder before he becomes a member - which, before his name is registered in the register of members, confers to him the beneficial interest in the shares transferred. A shareholder having such beneficial interest in shares has a right to protect his beneficial interest in such shares even before his name is entered in the register of members or pending the consideration of his application under section 58 or 59 for having his name entered in the register of members. It is settled law that a shareholder who is not a member cannot maintain an application under section 241 of the Companies Act 2013 and could not earlier have maintained an application under section 396 and 397 of the Companies Act 1956. A shareholder who is not a member but has applied under sections 58 and 59 of the Companies Act 2013 can only become a member once his application is allowed during which period his rights may require protection. Rebutting the contention that Rule 70 of the NCLT Rules could adequately safeguard the appellants' interests, it is submitted that Rules must sub-serve the purpose of the Act. Section 58 and 59 of the 2013 Act are confined only to the grant of reliefs under section 58(5) and 59(2), that is, directing registration of transfer or transmission or directing rectification of the register. Rule 70(4) only vests with the NCLT the power to pass interim orders while dealing with a petition under section 58 or 59 while Rule 70(5) vests with it the jurisdiction to decide questions relating to title and other incidental questions, not extending to conduct of affairs of a company in a manner prejudicial to public interest, or in a manner prejudicial or oppressive to any member or members, or in a manner prejudicial to the interest of the company, or relating to a material change in the management or alteration of the company by alteration in its board of directors or change in the ownership of the company's shares. In this context, reliance has been placed on Ispat Industries Ltd. v. Commissioner of Customs Mumbai reported at (2006) 12 SCC 583 (paragraphs 19-24), for the proposition that "if there are two possible interpretations of a rule, one which sub-serves the object of a provision in the parent statute and the other which does not, the courts have to adopt the former, because adopting the latter will make the rule ultra vires the Act". Consequently, it is submitted that the powers of the NCLT under section 58 and 59 of the Companies Act 2013 are limited and are not as expansive as its powers under section 242 of the 2013 Act.

It is submitted that it is well settled that the transferee of shares acquires a beneficial interest in the shares transferred even before his name is registered in the register of members. Reference in this regard is made to Mathalone v. Bombay Life Insurance Company reported at AIR 1953 SC 385, Killick Nixon Ltd. v. Bank of India reported at (1985) 57 Comp Cas 831 and National Travel Services v. Commissioner of Income Tax Delhi reported at (2018) 3 SCC 95 (paragraphs 12, 18 and 19). Mr. Saha states that the appellants are, as such, already the beneficial owners of the entire shares of the respondent no. 1 company. As the transferor of the said shares, the respondent nos. 2 to 5 are in the position of trustees of the appellants and are obliged to act only as per the instructions of the appellants. They cannot in any event act in a manner detrimental to the beneficial interest of the appellants in the shares. In fact, even the voting rights in respect of the said shares, could, if at all, be exercised only in accordance with the wishes of the appellants. This is the right which the appellants, even as non-members, are entitled to assert and to protect and this is what they have sought to do by filling the instant suit. In this context, Mr. Saha has also referred to section 2(27) of the Companies Act 2013, which envisages, in the definition of "control", the right of persons other than shareholders to appoint majority directors of a company or to control the management of policy decisions, by virtue of a shareholder's agreement, voting agreements or in any other manner. It is submitted that owing to the appellants' beneficial interest in the 12,00,806 equity shares in the respondent no. 1 company, the appellants are entitled, even as non-members, to participate in the management and affairs of the company, if necessary through the respondent no. 2 to 5, who must act as trustees of the appellants and exercise the voting rights in respect of the said shares in accordance with the interest of the appellants and not otherwise. The reliefs claimed are essentially due to acts that have occurred in breach of this trust.

Mr. Saha further submits that the respondents no. 2 and 3, having admittedly made over the share scrips and having admittedly executed and made over the share transfer deeds in respect of 12,00,806 equity shares of the respondent company to the appellants, representing it to be the entire paid up capital, the voting rights in respect the shares could, if at all, until registration of the same in the names of the appellants, be exercised only in accordance with the wishes of the appellants, in a manner conducive to their best interest, and not otherwise. The respondents, however, wrongfully and unlawfully proceeded to reject the appellants' application for registration of the transfer of the shares of the respondent No.1 company in their names or to enter the names of the appellants in the register of members of the company, thereby preventing the appellants from approaching the learned Tribunal with an application under section 241 of the Companies Act, 2013 complaining of acts as acts of oppression by the respondents. The respondent nos. 2 and 3 have thus taken and are continuing to take advantage of their own wrong to deprive the appellants of their rights remedy before the NCLT thereby forcing the appellants to approach this Court with the instant suit. In this context, it is submitted that regard must be had of the jurisprudential doctrine of 'ubi jus ibiremedium', that is there can be no wrong without a remedy.

It is submitted that the fact that the appellants are in possession of the share certificates and signed share transfer forms in respect of 12,00,806 equity shares of the respondent no. 1 company, represented to be the entire paid up capital of the said company, is evidence of the fact that the appellants are the 100% shareholders of the respondent no.1 company. As such, the grant of the interim reliefs sought by the appellants in G.A. No. 552 of 2019 need not await any declaration from the learned NCLT that the appellant's are the shareholders of the respondent no.1 company, or have a beneficial interest in the said shares, thereby entitling them to participate in the management of the company as per the provisions of section 2(27) of the Companies Act, 2013. It is submitted that the respondents have acted in breach of trust by attempting to prejudicially alter the authorised share capital and shareholding pattern of the respondent no.1 company, despite being under an obligation to exercise the voting rights in respect of the 12,00,806 equity shares transferred to and held by the appellants, in consonance with the interests of the appellants and not otherwise. Under the circumstances, the appellants are entitled to the reliefs sought in G.A. No. 522 of 2019.

It is submitted that subsequent to the institution of the said civil suit in this court, the appellants, discovered that in further derogation of the terms of the agreement between the appellants and the respondent nos.2 to 5, even after having transferred the entire shareholding of the respondent no.1 company to the appellants, the respondents nos. 2 and 3, in collusion and conspiracy with the respondent nos. 4 and 5 had thereafter caused the respondent company to execute a deed of sub-lease and to enter into two several development agreements in respect of portions of the property/asset owned by the respondent no. 1, which is the sole asset of the company. In the circumstances, upon coming to learn of the said agreements, the appellants have sought to amend the plaint in C.S. no.34 of 2019 before this Court to bring on record the fraudulent execution of the said agreements and to seek their delivery up and cancellation. It is submitted that the respondents have attempted to the fraudulently transfer the sole asset of the respondent no. 1 company by entering into the said development agreements in respect of portions thereof and the said deed of sub-lease. It is submitted that such cause of actions of fraud and breach of trust are beyond the purview of the jurisdiction of the learned NCLT under sections 58 and 59 of the Companies Act 2013. It is accordingly submitted that such causes of action do not attract the bar of the Civil Court's jurisdiction under section 430 of the Companies Act, 2013. Further, there exists no bar against similar interim reliefs being sought in different proceedings arising out of the same cause of action. It is stated that while some of the interim reliefs prayed for in the civil suit before this Court overlap with some of the interim reliefs sought in the Appeal no. 312/KB/2019 pending before the NCLT, the appellants are entitled to claim such similar interim reliefs in different proceedings arising out of separate and distinct causes of action. In paragraph 17 of the impugned judgment and order the learned Single Judge has proceeded to deny the interim reliefs sought in G.A. no.552 of 2019 upon holding that the interim reliefs sought both in the suit and in the application under section 58 and 59 before the NCLT are the same and that a litigant cannot be allowed to seek similar reliefs in different forums at the same time. The learned Single Judge has erred in failing to appreciate that the appellants' cause of action in the suit is entirely different and distinct from the cause of action in the application under sections 58 and 59 before the NCLT. The learned Single Judge further erred in failing to appreciate that it is settled law that while section 10 of the Code of Civil Procedure, 1908 prohibits the Court from proceeding with the 'trial' of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit, the word 'trial' for the purposes of section 10 of the Code must be construed to mean a judicial examination and determination of the issue in civil or criminal court by competent tribunal. It is settled law that section 10 of the Code of Civil Procedure, 1908 is not a bar to the institution of the suit. Neither can it be construed to be a bar against passing of interlocutory orders such as orders for appointment of receiver, injunction or attachment before judgement. Reference in this regard is made to Indian Bank v. Maharashtra State Cooperative Marketing Federation Limited, reported at (1998) 5 SCC 69 (paragraphs 7 to 10), Sujanbai v. Motilal Gopal Saraf & Anr. Reported at 1980 MHLJ 578 (paragraphs 10,11), andSennajiKapurchand v. PannajiDevichandreported at AIR 1922 Bom 276. It is submitted that in light of the aforementioned decisions, there can be no doubt that similar prayers for interim relief sought by the appellants in two different proceedings emanating out of entirely different and distinct causes of action cannot not disentitle the appellant to the grant of the interim reliefs sought. The decision of the learned Single Judge in this regard thus suffers from an error of law.

Mr. Ratnanko Banerjee, learned senior counsel appearing on behalf of the respondent no. 1, submits that this court does not have the jurisdiction to receive, try or determine the suit in view of section 430 of the Companies Act 2013. Mr. Banerjee has drawn the attention of the court specifically to section 58, more particularly section 58(2), of the Companies Act 2013 and Rule 70, more particularly Rule 70(4) and 70(5), of the National Company Law Tribunal Rules 2016, and submitted that the NCLT is empowered to determine the issues raised and therefore this court ought not to entertain the suit.

Mr. Banerjee contends that the NCLT is empowered, pursuant to Rule 70(4) of the NCLT Rules 2016, while considering applications under section 58 and 59 of the Companies Act 2013, to pass any interim order of injunction or stay as it may deem fit and just and to make incidental or consequential orders regarding payment of dividend or allotment of bonus or rights shares. Therefore, the NCLT can grant the appellants the reliefs it has claimed in this suit. Mr. Banerjee has also brought to our attentions certain decisions rendered in cases wherein joint applications have been made by the parties under section 111 of the Companies Act 1956 (which was the precursor of section 58 and 59 of the 2013 Act) along with sections 396, 397 of the 1956 Act (which are the precursors of section 241, 242 of the 2013 Act). Reference, in this context, is made to Cheran Properties Ltd. v. Kasturi Sons Ltd. reported at (2018) 208 Comp Cas 496 (paragraphs 5, 10, 27, 28 and 35) and M. Square Caterers and Hospitality Pvt. Ltd. reported at 2012 SCC Online CLB 109 (paragraph 1 and 7). It is submitted that since the NCLT is empowered to determine the question under section 58 or 59 of the 2013 Act, a combined application could also be made in the instant case; and if the NCLT found in favour of the appellants on the issue of section 58-59 of the 2013 Act, it could then go on to try the issues under section 241-242 of the 2013 Act.

It is submitted that section 430 of the 2013 Act is a complete bar on the civil court on issues which the NCLT is empowered to determine. For this proposition, reference is made to Shashi Prakash Khemka v. NEPC Micon reported at 2019 SCC Online SC 23, SAS Hospitality Pvt. Ltd. v. Surya Constructions Pvt. Ltd. reported at 2018 SCC Online Del 11909, Viji Joseph v. P. Chander (decision by the Madras High Court in Original Side Appeal Nos. 29 and 30 of 2019 and C.M.P. Nos. 1884 and 1904 of 2019) (paragraphs 8.6, 8.14, 9, 13-17), and Chiranjeevi Rathnam v. Ramesh (decision by the Madras High Court, Madurai Bench, in C.R.P.(PD)(MD) No. 870 of 2017 and C.M.P.(PD)(MD) No. 3846 of 2017) (paragraphs 6, 9, 11, 16, 18, 19, 21, 24-28). In relation to treatment of a similar exclusion clause as section 430 of the 2013 Act in section 34 of the SARFAESI Act 2002, reliance is placed on a decision of our court in Delta International Limited v. Smt. Nupur Mitra reported at AIR 2018 Cal 8 (paragraphs 18-22 and 31-32).

On the aspect of the share scrips/certificates, it is submitted that the contention of the respondent no. 2 and 3 is that the shares scrips were only for "comfort" and the transfer forms were not to be used for the purpose of the transfer of shares. It is also submitted that the appellants have been inconsistent in their averments in relation to the alleged security created and there is no uniformity in the pleadings. It is the case of the respondent no. 2 and 3 that there was no sale of the shares as well as no consideration received for sale of such shares. Further, Moksh Investors Private Limited and Pawan Surana who are shareholders of the respondent no. 1 and are alleged to have also made over their share scrips to the appellants were not even recipient of any loan from the appellants.

Mr. Banerjee submits that the suit and the reliefs claimed in this court are misconceived. The appellants will be entitled to such reliefs, relating to the affairs of the company, only if they are shareholders or members of the respondent no. 1. Such relief, of being designated a member, could not be claimed in this court in view of the bar under section 430 of the 2013 Act. It is submitted that if the petition before the NCLT, relating to proceedings under section 58 and 59 of the 2013 Act fail, then the consequence will be that the suit would automatically be rendered infructuous. It is submitted that if the suit is proceeded with, it may result in a situation wherein reliefs are granted to the appellants in relation to the affairs of the company, under the assumption that the appellants are shareholder or beneficial owners of shares, but the NCLT arrives at a finding in the petition before it that the appellants are not entitled to be recognized as members of the company. It is thus submitted that both the issues are intricately connected.

Furthermore, it is submitted that no money was advanced by the appellants to the respondent no. 1 company. Thus, even if the appellants are deemed to be the shareholders of the company, they cannot obtain any order of injunction against the properties of the respondent no. 1 company as shareholders are not the owners of the properties of the company. Any order to be obtained by a shareholder as against the company's assets will have to necessarily be regarding the affairs of the company and therefore, within the jurisdiction of the NCLT.

Before I go on to analyse the present case, it is important to broadly understand the contours and effect of Section 430 of the Companies Act 2013. Section 430 of the Companies Act 2013 was notified by MCA

Notification S.O. 1934(E) dated 1st June 2016 (w.e.f. 1st June 2016). The section states -

"Section 430. Civil Court not to have jurisdiction - No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force an no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal."

Under the old regime, the High Court as the Company Court entertained matters in respect of the Companies Act. With the constitution of the present NCLT, and its predecessor the Company Law Board, the jurisdiction, powers and functions hitherto exercised by the CLB and the High Court as company court under various sections of the 1956 Act have now been conferred on the NCLT under 2013 Act.

However, the jurisdiction or powers hitherto exercised by the High Court as a company court under section 10 of the 1956 Act or by the CLB under section 10E of the 1956 Act are now essentially exercised by NCLT constituted under section 408 of the 2013 Act only in respect of matters for which the jurisdiction is specifically conferred by The Companies Act 2013 or any other law in force. Section 9 of the CPC states that "the courts shall have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred". Thus, all residuary claims, for which an express provision has not been made in the Companies Act conferring jurisdiction on the NCLT, can be tried by a civil court (See Prakash Timbers P. Ltd. v. Smt. SushmaShingla reported at (1997) 89 Comp Cas 770 (All.)(DB), Minno H. Mody v. Hemant D. Vakil reported at (1997) 89 Comp Cas 456 (Bom), and Tin Plates Dealers Association Pvt. Ltd. v. Satish Chandra Sanwalka (2002) 108 Comp Cas 295 (Cal)).

Section 430 merely says that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is "empowered to determine by or under this Act". It naturally flows from such a wording that if the Tribunal or the Appellate Tribunal has not been empowered to determine a matter by the Act then it is a residuary claim that the civil court will have jurisdiction over.

The principles behind section 9 of the CPC have been explained by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford [1859] 6 C. B. (NS) 336 by delineating certain category of cases as hereunder -

"One is where there was a liability existing at common law, and that liability is affirmed by a statute which gives a special and peculiar form of remedy different from the remedy which existed at common law: there, unless the statute contains words which expressly or by necessary implication exclude the common law remedy the party suing has his election to pursue either that or the statutory remedy. The second class of cases is, where the statute gives the right to sue merely, but provides, no particular form of remedy : there, the party can only proceed by action at common law. But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it........The remedy provided by the statute must be followed and it is not competent to the party to pursue the course applicable to cases of the second class."

The scope of an exclusion clause or an ouster clause has been explained by the Privy Council in Secretary of State v. Mask & Co. AIR 1940 PC 105, wherein it is stated -

"It is settled law that the exclusion of the jurisdiction of civil courts is not to be readily inferred, but that such exclusion must be either explicitly expressed or clearly implied. It is also well settled that even if the jurisdiction is so excluded, the civil courts have jurisdiction to examine into cases where provisions of the Act have not been complied with, or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure."

The power exercised by a company court (now the Tribunal) is in respect of corporate rights and not individual rights of a citizen (See Poonamchand Kothari v. Rajasthan Tube Mfg. Co. Ltd. reported at (1996) 87 Comp Cas 842 (Raj), Avanthi Explosives P. Ltd. v. Principal Subordiante Judge reported at (1987) 62 Comp Cas 301 (AP), and Dr. T.M. Paul v. City Hospital (Pvt. Ltd.) (1999) 97 Comp Cas 216 (Ker)(DB)).

The principles regarding the exclusion of the jurisdiction of civil courts have been discussed by the Supreme Court in certain cases. In Dhulabhai v. State of M.P. reported at AIR 1969 SC 78 and Union of India v. Tara Chand Gupta & Bros. reported at AIR 1971 SC 1558. In Dhulabhai, the Supreme Court laid down the following guidelines -

"Neither of the two cases of Firm of IlluriSubayya [1964] 1 S. C. R. 752 or Kamla Mills [1966] 1 S. C. R. 64 can be said to run counter to the series of cases earlier noticed. The result of this inquiry into the diverse views expressed in this Court may be stated as follows :-

(1) Where the statute gives finality to the orders of the special tribunals the Civil Courts' jurisdiction must be held to be excluded if there is adequate remedy to do what the Civil Courts would normally do in a suit. Such provision,however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.

(2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.

Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in Civil Courts are prescribed by the said statute or not.

(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals.

(4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.

(5) Where the particular Act contains no machinery for refund' of tax collected in excess of constitutional limits or illegally collected a suit lies.

(6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry.

(7) An exclusion of the jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply."

The principles laid down in Dhulabhai (supra) and followed in Tara Chand Gupta (supra) were used in a number of cases under the old Act to determine if a remedy lay in the civil courts. It is also appropriate to refer to the following observation made by the Supreme Court in Raja Ram Kumar Bhargava (dead) by LRs., v. Union of India reported at AIR 1988 SCC 752:

"......The question turns on the scope of the exclusionary clause in the statute. The effect of clauses excluding the civil courts' jurisdiction are considered in several pronouncements of the judicial committee and of this Court (See Secretary of State v. Mask & Co., AIR 1940 P.C. 105; K.S. Venkataraman& Co. v. State of Madras, [1966] 2 SCR 299: Dhulabhai& Ors. V. The State of Madhya Pradesh & Anr, [1968] 3 .SCR 662. The Premier Automobilies Ltd. v. KamlakarShantaramWadke& Ors., AIR 1975 SC 2238).Generally speaking. The broad guiding considerations are that wherever a right, not pre-existing in common law, is created by a statute and that statute itself provided a machinery for the enforcement of the right, both the right and the remedy having been created uno-flatu and a finality is intended to the result of the statutory proceedings, then, even in the absence of an exclusionary provision the civil courts' jurisdiction is impliedly barred. If, however, a right pre-existing in common-law is recognised by the statute and a new statutory remedy for its enforcement provided, without expressly excluding the civil courts' jurisdiction, then both the common-law and the statutory remedies might become concurrent remedies leaving open on element of election to the persons of inherence. To what extent, and on what areas and under what circumstances and conditions, the civil courts' jurisdiction is preserved even where there is an express clause excluding their jurisdiction, are considered in Dhulabhai's case."

In Ravinder Kumar Jain v. Punjab Registered (Iron & Steel) Stockholders Association reported at (1978) 48 Comp Cas 401 (P&H), it held that a civil suit lay for a declaration that a meeting was illegal. In Oriental Benefit and Deposit Society Ltd. v. Bharat Kumar K. Shah reported at (2001) 103 Comp Cas 947 (Mad)(DB), it was held that a civil suit lay for restraining consideration of agenda item of a meeting. In Niranjan Singh v. Edward Ganj Public Welfar Association Ltd. reported at (1977) 47 Comp Cas 285 (P&H), it was held that a civil suit lay to challenge the validity of a notice calling a meeting. In Prakasam (R.) v. Sree Narayana Dharma Paripalna Yogamreported at (1980) 50 Comp Cas 611 (Ker), it was held that the validity of an Annual General Meeting can only be questioned in a civil suit and the company court has no jurisdiction to grant relief in such matters. Lastly, in a suit relating to the validity of forfeiture of shares, where a notice of forfeiture was published in a newspaper and the validity of the same was under question, it was held in Tej Prakash S. Dangi v. Coromandal Pharmaceuticals Ltd.reported at (1997) 89 Comp Cas 270 (AP) that such a matter could not go to the company court. However, this view was reversed in K. Venkat Rao v. Rockwool (India) Ltdreported at (2002) 108 Comp Cas 494 (AP)(DB) wherein it was held that the director in question was entitled to go before the company court.

In Vithalrao Narayanrao Patil v. Maharashtra State Seeds Corporation Ltd. reported at (1990) 68 Comp Cas 608 (Bom), the Bombay High Court followed a decision of the Calcutta High Court in Hirendra Bhadra v. Triton Engineering Co. P. Ltd. reported at (1975-76) 80 CWN 242and held that except where jurisdiction has been specifically conferred on the district courts by the central government, the High Court is the proper court to entertain any dispute in respect of the affairs of a company. However, in Santosh Poddar v. Kamal Kumar Poddarreported at (1992) 3 BomCR 310 (Bom)(DB) wherein the Division Bench overruled Vithalrao (supra) and disagreed with Hirendra Bhadra (supra) and held that there is no ouster of the jurisdiction of a Civil Court in all cases where the provisions of the Companies Act may be attracted. It held that it is only in respect of those proceedings which are expressly contemplated under the Companied Act under any specific provision that the Court which is referred to in that section would be the special court. In all other cases ordinarily the Civil Courts would continue to have jurisdiction.

It has been held that the ouster of the civil court is not to be readily inferred as a provision seeking to bar the jurisdiction of the civil court requires strict interpretation (See Abdul Waheed v. Bhawani reported at AIR 1966 SC 1718. In Abdul Waheed (supra), it was observed that "It is settled principle that it is for the party who seeks to oust the jurisdiction of a civil court to establish his contention. It is also equally well settled that a statute ousting the jurisdiction of a civil court must be strictly construed." The court would normally lean in favour of the construction which would uphold retention of jurisdiction of the civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is ousted. Where the civil court was concerned with the rival claims of the parties as to whether one party had illegally been dispossessed by the other or not, the dispute between the parties was held to be eminently a civil dispute and not a dispute under the provisions of the Companies Act. There were rival claims between the parties to run and manage a newspaper/press business. One party filed a suit for eviction and a permanent injunction against the other. But objections were subsequently raised about the jurisdiction of the civil court to hear the matter. It was held that the disputes relating to the question as to whether the parties were illegally disposed are disputes of a civil nature and therefore maintainable before the civil court. It was held that such a suit, apart from the general law, would also be maintainable under section 6 of the Specific Relief Act 1963. In such matters, the court would not be concerned even with the question as to title/ownership of the property. (See Dwarka Prasad Agarwal v. Ramesh Chandra Agarwal reported at (2005) 6 SCC 220.)

Section 58 of the 2013 Act envisages that if a private company limited by shares refuses, whether in pursuance of any power of company under its articles or otherwise, to register transfer of, or transmission by operation of law of right to, any securities or interest of a member in the company, it shall within a period of thirty days from date on which instrument of transfer, or intimation of such transmission, as the case may be, was delivered to company, send notice of refusal to transferor and transferee or to person giving intimation of such transmission, as the case may be, giving reasons for such refusal. Subsection (2) of Section 58 envisions that without prejudice to subsection (1) of Section 58, securities or other interest of any member in a public company shall be freely transferable; provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract. Subsection (3) of Section 58 provides that transferee may appeal to Tribunal against refusal within a period of thirty days from the date of receipt of notice or in case no notice has been sent by company, within a period of sixty days from the date on which instrument of transfer or intimation of transmission, as the case may be, was delivered to company. Sub-section (4) of Section 58 says that if a public company without sufficient cause refuses to register transfer of securities within a period of thirty days from the date on which instrument of transfer or intimation of transmission, as the case may be, is delivered to company, transferee may, within a period of sixty days of such refusal or where no intimation has been received from company, within ninety days of delivery of instrument of transfer or intimation of transmission, appeal to the Tribunal. Subsection (5) of Section 58 provides that the Tribunal, while dealing with an appeal made under subsection (3) or sub-section (4) of Section 58 of Act of 2013, may, after hearing parties, either dismiss the appeal, or by order either direct that transfer or transmission shall be registered by company and the company shall comply with such order within a period of ten days of receipt of order; or direct rectification of register and also direct company to pay damages, if any, sustained by any party aggrieved. Subsection (6) of Section 58 says that if a person contravenes order of Tribunal, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

Section 59 of Act of 2013 provides that if name of any person is, without sufficient cause, entered in register of members of a company, or after having been entered in register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in register, fact of any person having become or ceased to be a member, person aggrieved, or any member of the company, or company may appeal in such form as may be prescribed, to Tribunal, or to a competent court outside India, specified by Central Government by notification, in respect of foreign members or debenture holders residing outside India, for rectification of the register. Subsection (2) of Section 59 envisages that the Tribunal may, after hearing parties to appeal under subsection (1) of Section 59 of Act of 2013 by order, either dismiss appeal or direct that transfer or transmission shall be registered by company within a period of ten days of receipt of order or direct rectification of records of depository or register and in latter case, direct company to pay damages, if any, sustained by party aggrieved. Subsection (3) of Section 59 of Act of 2013 envisions that provisions of Section 59 shall not restrict right of a holder of securities, to transfer such securities and any person acquiring such securities shall be entitled to voting rights unless voting rights have been suspended by an order of the Tribunal. Subsection (4) of Section 59 of Act of 2013 provides that where transfer of securities is in contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992) or Act of 2013 or any other law for the time being in force, the Tribunal may, on an application made by depository, company, depository participant, holder of securities or Securities and Exchange Board, direct any company or a depository to set right the contravention and rectify its register or records concerned. Subsection (5) of Section 59 of Act of 2015 instructs that if any default is made in complying with the order of the Tribunal under section 59, company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees, or with both.

Section 61 of Act of 2013 stipulates that a limited company having a share capital may, if so authorised by its articles, alter its memorandum in its general meeting to: increase its authorised share capital by such amount as it thinks expedient; consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares, provided that no consolidation and division which results in changes in the voting percentage of shareholders shall take effect unless it is approved by the Tribunal on an application made in the prescribed manner; I convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination; (d) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; (e) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. Subsection (2) of Section 61 of Act of 2013 says that cancellation of shares under sub-section (1) shall not be deemed to be a reduction of share capital.

While considering Section 111A of the 1956 Act, it was held by the Supreme Court that a seriously disputed question of title cannot be decided by the Company Court or Company Law Board. This conclusion was arrived at by the Supreme Court by taking into consideration jurisdiction of the Company Law Board being summary in nature. However, the rationale of the old line of cases, including Ammonia Supplies Corporation (PT) Limited v. Modern Plastic Containers (P) Ltd. reported at 1998 (7) SCC 105, Public Passenger Service Limited v. M.A. Khadar reported at AIR 1966 SC 489, and Standard Chartered Bank v. Andhra Bank Financial Services Limited reported at (2006) 6 SCC 94 (paragraph 29 and 32), was on the lines that difficult questions could not be answered. This delineation has however now been done away with. In the Companies Act 2013, section 407 onwards deal with the constitution of the Tribunal. Section 420 has vested the Tribunal with powers to 'pass such orders thereon as it thinks fit'. The Tribunal is also vested with the power of review. Section 424 provides the Tribunal the same powers and functions as are vested with a civil court. In addition thereto, the Tribunal also has the power to punish for contempt. Both the learned senior counsel before us have accepted that the rationale of the Division Bench of the Delhi High Court in Ammonia Supplies Corporation Pvt. Ltd. v. Modern Plastic Containers reported at (1993) 52 DLT 252 that the Tribunal cannot adjudicate on difficult or complex questions is no longer relevant or applicable. The basis for the Division Bench to have said so was that at the time when that case had come to be filed, the powers of the Tribunals were summary in nature. Under the 2013 Act, as enunciated hereinabove, the NCLT has been given very wide powers akin to that of a civil court and can also punish for contempt. Therefore, in view of the wide powers given to the NCLT and these powers not being merely summary in nature, the basis of the Division Bench's judgment in Ammonia Supplies (Delhi High Court) (supra) withers away and thus its rationale, that the Tribunal cannot decide difficult or complex questions, has no legs to stand on.

In Ammonia Supplies (supra), the Supreme Court in paragraph 27 observed that so far as exercise of power of rectification within its field there could be no doubt the Court as referred under Section 155 read with Section 2(11) and Section 10, it is the Company Court alone which has exclusive jurisdiction. Further in paragraph 31 it has further been observed that whenever a question is raised Court has to adjudicate on the facts and circumstance of each case. If it truly is rectification all matter raised in that connection should be decided by the Court under Section 155 and if it finds adjudication of any matter not falling under it, it may direct a party to get his right adjudicated by Civil Court. Unless jurisdiction is expressly or implicitly barred under a statute, for violation or redress of any such right Civil Court would have jurisdiction. There is nothing under the Companies Act expressly barring the jurisdiction of the Civil Court, but the jurisdiction of the 'Court' as defined under the Act exercising its powers under various sections where it has been invested with exclusive jurisdiction, the jurisdiction of the Civil Court is impliedly barred. It was held that the jurisdiction of the Court under Section 155 to the extent it has exclusive, the jurisdiction of Civil Court is impliedly barred. For what is not covered under Section 155, the Civil Court would have jurisdiction. Paragraph 27 of the Supreme Court judgment in Ammonia Supplies (supra) is illuminating and instructive for two reasons. Firstly, it delineates out what rectification proceedings are and what its ambit covers. Secondly, as pointed out in the wonderful judgment by Justice Prathiba Singh in SAS Hospitality (supra), the courts have always consistently "made it clear that if the jurisdiction of the Company Court was exclusive, the jurisdiction of the Civil Court was barred in respect of power to rectify the register of members".

The decision of the Supreme Court in Canara Bank v. Nuclear Power Corporation of India Ltd., 1995 (3) JT SC 42 is also noteworthy though it has not directly dealt with the question of exclusion of jurisdiction. In paragraph 16 it was observed as under:-

"16. It will be seen that the CLB now exercises the powers that were exercisable by the Court under Section 155. It is entitled to direct rectification of the register and the payment of damages by the company. It is entitled to decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register and to decide any question which it has necessary or expedient to decide in this connection. An appeal to the High Court against any decision or order of the CLB on a question of law is available to any person aggrieved thereby under the provisions of Section 10F."

In paragraph 31 it is observed as follows:-

31.Now, under Section 111 of the Companies Act as amended with effect from 31st May, 1991, the CLB performs the functions that were therefore performed by courts of civil judicature under Section 155. It is empowered to make orders directing rectification of the company register, as to damages, costs and incidental and consequential orders. It may decide any question relating to the title of any person who is a party before it to have his name entered upon the company's register; and any question which it is necessary or expedient to decide. It may make interim orders. Failure to comply with any order visits the company with a fine. In regard to all these matters it has exclusive jurisdiction (except under the provisions of the Special Court Act, which is the issue before us). In exercising its function under Section 111 the CLR must, and does, act judicially. Its orders are appealable. The CLR, further, is a permanent body constituted under a statute. It is difficult to see how it can be said to be anything other than a court, particularly for the purposes of Section 9A of the Special Act.

In a later decision in Jai Mahal Hotels (P) Ltd. vs. Devraj Singh reported at 2016 (1) SCC 423, the Supreme Court on analysis of the earlier decisions on the jurisdiction of CLB vis-a-vis Civil court in paragraphs 16 to 19 of the report has stated that -

"the nature of proceedings under Section 111 is slightly different from a title suit, although, sub section (7) of Section 111 gives to CLB/Tribunal the jurisdiction to decide any question relating to the title of any person who is a party to the application, to have his name entered in or omitted from the register and also the general jurisdiction to decide any question which it is necessary or expedient to decide in connection with such an application. In spite of exclusiveness to decide all matters pertaining to the rectification of the register, it has to act within the said four corners and adjudication of such matters cannot be doubted to be summary in nature. So, whenever a question is raised CLB/Tribunal/Company Court has to adjudicate on the facts and circumstances of each case. If it truly is rectification, all matters raised in that connection should be decided by the Company Court/CLB and if it finds adjudication of any matter not failing under it, it may direct a party to get his right adjudicated by a civil court. Thus, there is a thin line in appreciating the scope of jurisdiction of the Company Court/Company Law Board in rectification matters. The rectification jurisdiction is exclusive if the matter truly relates to rectification but if the issue is alien to rectification, such matter may not be within the exclusive jurisdiction of the Company Court/Company Law Board. Thus, the jurisdiction under Section 111 is somewhat summary in nature and that if a seriously disputed question of tile arose, the Company Court should relegate the parties to a suit, which was the more appropriate remedy for investigation and adjudication of such seriously disputed question of title."

The issue as to whether there has been a proper lodgement of shares and under the articles the company was obliged to record transfer of the shares and carry out necessary rectification of the share register are matters which the NCLT is empowered to determine under the Act. In the interlocutory application the court has to prima facie return a finding that the plaintiffs are entitled to rectification of the share register. This exercise by reason of Section 430 of the Companies Act read with Section 59 and Rule 70 sub-Rule 5(a) of the NCLT Rules 2016 are matters which the tribunal is exclusively empowered to decide under the Companies Act, 2013. It is possible as held in Cheran Properties Ltd. (supra) (paragraphs5, 10, 27, 28 and 35) relied upon by Mr. Ratnanko Banerjee, learned Senior Counsel appearing on behalf of the respondent that a combined application under sections 58, 59, 241 and 242 can be made before the NCLT. Once the tribunal comes to a finding in favour of the appellants that rectification is necessary, the appellants may seek further reliefs that are available to the appellants under Section 241 and 242 of the Companies Act with or without a prayer for exemption under Section 244 of the companies Act, 2013 if occasions so arise. In course of hearing if the Tribunal is satisfied that the petitioners/appellants have met the three-fold criteria, their rights and interests under section 58 and 59 and consequential interests under section 241 and 242 could have adequately been protected by the Tribunal under the powers given to it by Rule 70(4) and Rule 70(5) of the NCLT Rules 2016. The rules are as follows -

"70. Appeal under sections 58 and 59.-...

(4) The Tribunal may, while dealing with a petition under section 58 or 59, at its discretion, make-

(a) order or any interim order, including any orders as to injunction or stay, as it may deem fit and just;

(b) such orders as to costs as it thinks fit; and I incidental or consequential orders regarding payment of dividend or the allotment of bonus or rightsshares.

(5) On any petition under section 59, the Tribunal may-

(a) decide any question relating to the title of any person who is a party to the petition to have his nameentered in, or omitted from, the register;

(b) generally decide any question which is necessary or expedient to decide in connection with theapplication for rectification.

(6) the decision of the Tribunal on any such petition shall be final."

In fact, the reliefs claimed before the NCLT and the reliefs claimed in the suit are same and/or have same and/or similar effect. The appellants, before filing of the suit, appears to have taken steps to initiate appropriate proceedings on 15th February 2019 before the NCLT under Section 58 and 59 of the 2013 Act and before waiting for the outcome of the result of the said proceeding rushed to the High Court on 18th February 2019 by presenting a plaint and moved the interlocutory application on 26th February 2019 by which time their prayer for interim orders was refused by the NCLT. Three-fourth of the plaint is a reproduction of the petition filed before the NCLT. The plaintiff in our view has taken a chance before this court after having failed to obtain a similar relief before the tribunal.

In the plaint, it is stated that as on 31st March 2018, a sum of (approximately) Rs. 29,27,00,000 remained due and payable by the respondent no. 2 and 3 to the appellant no. 1 and 2. It is stated that towards the end of June 2018, the respondent no. 2 and 3 approached the appellants with the promise to make payment of a part of their dues within the next six months, and offered to secure such payment by depositing with the appellants the entire shareholding of the respondent no. 2, 3, 4 and 5 in the respondent no. 1 company; and in the event of failing to make payment of a part of the appellants' dues within the next six months, to transfer the entire shareholding of the respondent no. 2 to 5 in the respondent no. 1 company to the appellants at their face value, which would serve to set off a portion of their debt to the appellants. The plaint states that the appellants agree to accept the terms aforementioned; and consequently, on 25th July 2018, the respondent no. 2 to 5 made over to the appellants the original share scrips and certificates of all 12,00,806 shares of the respondent no. 1 company. The receipt was acknowledged by the appellant.

In late December 2018, the six month period envisaged under the aforementioned oral agreement expired but the dues were not paid. Therefore, the appellants proceeded to get the share scrips/certificates registered with the company and get the shares formally transferred in their name. For this, they wrote to the company on 27th December 2018. The details of this is stated in paragraph 11 of the plaint, as herein below -

"11. In view of the transfer of the said 12,00,806 equity shares of the defendant no. 2 to 5 to the plaintiffs at their face value of Rs. 10/- per share, the total debt owed by the defendant no. 2 and 3 to the plaintiffs stood reduced to Rs. 1,20,08,060/-. Upon becoming the absolute owners of the entire shares of the defendant no. 1 company consequent on their transfer, the plaintiffs became entitled to have their names recorded as the owners thereof in the records of the defendant no. 1. Accordingly, on 27th December 2018, the plaintiffs visited the registered office of the defendant no. 1 with applications for transfer of the said shares in their names along with the original share scrips/certificates and the transfer deeds thereof. Much to the surprise of the plaintiffs, upon approaching Mr. JoydeepNath, one of the directors of the defendant no. 1, with a request to accept their applications for transfer of the shares of the defendant no. 1 company in their names and to do the needful in that regard, the said Mr. JoydeepNath expressed his unwillingness to accept the same, without, however, providing any reason therefor. In the circumstances, in the afternoon of 27th December 2018 itself, the plaintiffs sent to the defendant no. 1 the share scrips/certificates of the lot of 81633 shares transferred to them by the defendant no. 3 along with their transfer deeds by registered post with acknowledgement due. This was done to place on record the making of an application by the plaintiffs for the transfer of the said shares in the face of refusal by the said JoydeepNath to accept their applications. Documents evidencing such fact are annexed hereto and collectively marked "F"." (emphasis supplied)

However, it appears that the company did not reply to the letter dated 27th December 2018. This is stated in paragraph 12 of the plaint, as herein below -

"12. Although the defendant no. 1 duly received and accepted the share scrips/certificates of the said lot of 81633 shares and their transfer deeds at its office at Middleton Street, Kolkata within the aforesaid jurisdiction on 28th December 2018, it failed to take any step in this regard. This despite the fact that the said JoydeepNath had himself executed the transfer deeds along with each of the defendant no. 2 to 5 and was as such well and fully aware that the shares pertaining to the same had been transferred to the plaintiffs." (emphasis supplied)

Thirteen days after the letter dated 27th December 2018 was sent to the company, the appellants wrote to the respondent no. 2 and 3, who were the shareholders of the company and who had handed over the purported share scrips/certificates to the appellants. The plaint states that in the letter dated 10th January 2019, the appellants wrote to the respondent no. 2 and 3 "as the person in control of the defendant no. 1 company to forthwith instruct the said defendant and its directors to immediately act on the application already received for the transfer of the said 81633 shares in the favour of the plaintiffs". This is stated in paragraph 13 of the plaint, as herein below -

"13. In the circumstances as aforesaid, on 10th January 2019, the plaintiffs wrote to the defendant no. 2 and 3 asserting their ownership of shares representing the entire issued and paid-up capital of the defendant no. 1 and calling upon the defendant no. 2 and 3, as the person in control of the defendant no. 1 company to forthwith instruct the said defendant and its directors to immediately act on the application already received for the transfer of the said 81633 shares in the favour of the plaintiffs and also to signify their willingness to accept similar other applications in respect of the remaining shares, whereupon the plaintiffs would once again forward to the defendant no. 1 company the remaining shares for recording the transfer of the same as well in their names. A copy of the said letter dated 10th January 2019 is annexed hereto and marked "G"." (emphasis supplied)

The letter dated 10th January 2019 was replied to by the respondent no. 2 and 3 on 16th January 2019. The contents of the reply dated 16th January 2019 are stated in paragraph 14 of the plaint, as herein below -

"14. The plaintiffs' letter dated 10th January 2019 was replied to by the defendant no. 2 and 3 by a letter dated 16th January 2019, a copy whereof is annexed hereto and marked "H". As will appear from the said letter, in the same the defendant no. 2 and 3 accepted the fact that the plaintiffs had lent and advanced moneys to them and they had acknowledged such debts by signing statements and accounts confirmations. The said defendant further acknowledged the fact that the original share scrips of the equity shares held by them and their associates, namely, the defendant no. 3 and 4, had been made over to the plaintiffs along with the transfer deeds of the same. In the letter dated 16th January 2019, the defendant no. 2 and 3, however, attempted to allege that along with the shares only blank signed transfer deeds had been made over to the plaintiffs, and that the same had been made over only to give the plaintiffs comfort. It also alleged that such blank transfer deeds had been executed by the defendant no. 2 and 3 and their associates on 25th July 2018 and had been handed over to the plaintiffs in trust and good faith without any intention of actually transferring the shares to the plaintiffs. The letter further proceeded to allege that in breach of the understanding on the basis whereof the share scrips had been made over and the transfer deeds had been executed, the plaintiffs had forwarded the same to the defendant no. 1 to have the shares registered in their names." (emphasis supplied)

The plaint asserts that the reply letter dated 16th January 2019 "amounted to a refusal to register the transfer of the said 1200806 shares in the plaintiffs' favour". The plaint states that as a result of this act of "refusal to register the transfer of the ... shares", the appellants became "entitled to ... take appropriate steps ... in accordance with the provisions of sections 58 and 59 of the Companies Act 2013". This is stated in paragraph 15, as herein below -

"15. As the said letter dated 16th January 2019 written by the defendant no. 2 and 3, inter alia, as the persons in control of the defendant no. 1 company amounted to a refusal to register the transfer of the said 1200806 shares in the plaintiffs' favour notwithstanding delivery of the original share scrips/certificates and the duly executed and stamped transfer deeds in respect thereof, the plaintiffs became entitled to and as such were advised to take appropriate steps against the defendant no. 1 in accordance with the provisions of sections 58 and 59 of the Companies Act 2013, for which they were advised to once again visit the website of the Registrar of Companies, West Bengal to ascertain, inter alia, as to whether the defendant no. 1 had complied with its statutory obligations including filing of balance sheets and annual returns. ......" (emphasis supplied)

In paragraph 15 of the plaint, the appellants have asserted that the reply letter dated 16th January 2019 "amounted to a refusal to register the transfer of the said 1200806 shares in the plaintiffs' favour". The plaint states that as a result of this act of "refusal to register the transfer of the ... shares", the appellants became "entitled to ... take appropriate steps ... in accordance with the provisions of sections 58 and 59 of the Companies Act 2013". Therefore, according to the plaint case, the cause of action arises from the reply letter dated 16th January 2019 as it contained the "refusal to register the transfer of the ... shares".

Under section 58 as well as section 59 of the Companies Act 2013, the application for registration of shares must be made to the company. A core principle of company law is that the company and its shareholders (including majority shareholders) are separate juristic entities. The letter dated 27th December 2018 was made to the company. The letter dated 10th January 2019 was, however, made to the shareholders of the company.

Under section 58(1) of the Act, on receiving the letter dated 27th December 2018, the company had an obligation to "send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal". This was required to have been done "within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company". Section 58(1) is extracted herein below for convenience -

"58. Refusal of registration and appeal against refusal (2) If a private company limited by shares refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in the company, it shall within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal."

As far as the letter dated 27th December 2018 is concerned, the 30 day period requirement under section 58(1) of the Act was to expire on 29th January 2019. In between this period, the appellant wrote the letter dated 10th January 2019 to the respondent no. 2 and 3, in their capacity as the shareholders of the respondent no. 1 company, "to forthwith instruct the said defendant and its directors to immediately act on the application already received for the transfer of the said 81633 shares in the favour of the plaintiffs". Firstly, this letter dated 10th January 2019 cannot be construed as an application made to the company under section 58(1) of the Act since it is a letter to the shareholders of the company. Secondly, this letter dated 10th January 2019 was only to instruct the respondent no. 1 company to act on the application that the respondent no. 1 had already received under section 58(1) of the Act.

The 30 day period envisaged under section 58(1) of the Act came and went. The procedure under section 58(1) of the Act was not complied with. The company, as per the documents on record, did not reply to the letter dated 27th December 2018. This meant that on the date after the 30 day period ended, the procedure envisaged under section 59(1) of the Act kicked in.

Since 58(1) of the Act envisages a positive act on the part of the company, that is, the company must ordinarily register the shares on the application being made before it; and only if it has a reason to refuse the same, it must communicate the decision to the applicant. Since it did not communicate a reason for refusal within the 30 day period, it must be assumed that the application for registration of shares automatically succeeded.

Thereafter, if there is a "default" or an "unnecessary delay" that takes place in the registration of the name of any person, "the person aggrieved" "may appeal in such form as may be prescribed, to the Tribunal". This is the recourse that immediately can set in motion Section 59(1) of the Act, which is a herein below -

"59. Rectification of register of members

(1) If the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company, or the company may appeal in such form as may be prescribed, to the Tribunal, or to a competent court outside India, specified by the Central Government by notification, in respect of foreign members or debenture holders residing outside India, for rectification of the register.

(2) The Tribunal may, after hearing the parties to the appeal under sub-section (1) by order, either dismiss the appeal or direct that the transfer or transmission shall be registered by the company within a period of ten days of the receipt of the order or direct rectification of the records of the depository or the register and in the latter case, direct the company to pay damages, if any, sustained by the party aggrieved." (emphasis supplied)

From the facts pleaded in paragraphs 11 to 15 of the plaint and the recourse available under sections 58(1) and 59(2) of the Act, it is clear that the application for non-registration of the shares of the appellant had to be made before the Tribunal under section 59(1) of the Act as this was something that the NCLT was expressly "empowered to determine".

Once the tribunal receives the application under section 59(1) of the Act, it is empowered, under section 59(2) of the Act extracted herein above, to either dismiss the appeal or "direct that the transfer or transmission shall be registered by the company within a period of ten days of the receipt of the order". If the appellant succeeds in this application, the natural corollary would be that it would then be deemed to be a 'member' within the meaning of section 2(55) of the 2013 Act. In that eventuality, the other reliefs that it is seeking, under sections 241 and 242 of the 2013 Act, could then be granted. Therefore, there would be no bar on a combined application being filed, as is the prevailing norm.

The concept of "member", "shareholder" and "holder of a share" as appeared in the Companies Act, 1913 and 1956 came up for consideration in Howrah Trading Co. vs. Commissioner of Income Tax reported at AIR 1959 SC 775 where it is stated:

"The words "member", "shareholder" and "holder of a share" have been used interchangeably in the Companies Act. The words "holder of a share" are equal to the word "shareholder", and the expression "holder of a share" denotes, in so far as the company is concerned, only a person who, as a shareholder, has his name entered on the register of members.

The right of a transferee of a share is only to call upon the company to register his name and no more. No rights arise till such registration takes place. The completion of the transaction by having the name entered in the register of members relates it back to the time when the transfer was first made.

Transfers of shares of a company take place either by a fully executed document such as is contemplated by Regulation 18 of Table A of the Companies Act, 1913, or by what are known as 'blank transfers'. In such blank transfers, the name of the transferor is entered, and the transfer deed signed by the transferor is handed over with the share scrip to the transferee, who, if he so chooses, completes the transfer by entering his name and then applying to the company to register his name in place of the previous holder of the share. The company recognises no person except one whose name is on the register of members, upon whom alone calls for unpaid capital can be made and to whom only the dividend declared by the company is legally payable. Of course, between the transferor and the transferee, certain equities arise even on the execution and handing over of 'a blank transfer', and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee. These equities, however, do not touch the company, and no claim by the transferee whose name is not in the register of members can be made against the company, if the transferor retains the money in his own hands and fails to pay it to him."

It, therefore, follows that the equitable right of the transferee gets metamorphosed into the absolute right of a shareholder only when the names of the transferees after the recognition of the transfer, are entered on the register. This can be viewed from another angle and it is this: when once the transferee does everything that he is required to do under law, to get his name entered on the register by proper lodgement of the instruments of transfer and no other obstacles remain in enforcement of the said right, the transfer becomes effective as against the company also. Thereafter, the company cannot unilaterally alter its articles affecting the aforesaid right of the transferee.

Mr. Saha, the learned Senior Counsel appearing on behalf of the appellant, has contended that the appellants have beneficial interest in the shares as the blank transfer deeds duly signed by the respondent nos. 2 and 3 have been made over to the appellants in lieu of repayment of loan granted by the appellants in favour of the respondents nos. 2 and 3. Whether the said shares were given as a security for the loan or is applied towards reduction of the liability of the respondent nos. 2 and 3 towards the appellants is a vexed question. However, the fact remains that the appellants alleged that the said shares were part of the consideration amount in which case once there was a refusal to register the said shares the parties had to follow the procedure contemplated under the Companies Act, 2013 for redressal of such grievance. The Companies Act, 2013 is a complete code. Section 59 of the Companies Act, 2013 read with Rule 70 of the NCLT Rules empowers the tribunal to decide this issue raised in the plaint.

However, there may be exceptional situations where, notwithstanding Section 430 of the companies Act, a civil suit may be maintainable. The exercise required to be undertaken in all such cases would be to analyse the plaint to find out if the matters in issue in the suit could be a matter which the NCLT is empowered to decide. The court is required to find the real cause of action. A dispute between a member and non-member of a company or a dispute between a director and the company relating to his status could be matters which may not fall foul with Section 430 of the Companies Act, 2013. Section 430 of the Act is widely worded and absolute in terms. The dispute raised in this plaint can only be decided by the NCLT. In Jai Kumar Arya v. Chhaya Devi reported at (2014) 142 CLA 365: 2017 SCC Online Del 11436 (DB), the court was concerned with the power of removal of directors, which is distinct from the disputes involved in the present case. However, by applying the tests laid down therein, it is clear in the facts of this case that involve issues relating to registration of shares and oppression and mismanagement, the NCLT is 'empowered to determine' the issues - leading to the conclusion that this court has no jurisdiction.

Mr. Saha's contention in favour of this court exercising jurisdiction rests on the argument of a trust relation. When the six month period envisaged under the supposed oral agreement of June 2018 ended in December 2018, the share scrips/certificate along with the supposedly signed transfer deeds that were furnished and made over to the appellants, in their understanding, as a security, stood enchased, so to say. Mr. Saha contends that at this point, the appellants became the beneficial owners of the shares even though they were not yet registered on the books of the company as a member. He contends that at this point a relationship of trustee and cestui que trust was established between the respondent no. 2 to 5 and the appellants. As the transferor of the said shares, the respondent nos. 2 to 5 are in the position of trustees of the appellants and are obliged to act only as per the instructions of the appellants. They cannot in any event act in a manner detrimental to the beneficial interest of the appellants in the shares. In fact, even the voting rights in respect of the said shares, could, if at all, be exercised only in accordance with the wishes of the appellants. It is submitted that owing to the appellants' beneficial interest in the 12,00,806 equity shares in the respondent no. 1 company, the appellants are entitled, even as non-members, to participate in the management and affairs of the company, if necessary through the respondent no. 2 to 5, who must act as trustees of the appellants and exercise the voting rights in respect of the said shares in accordance with the interest of the appellants and not otherwise. This is the right which the appellants, even as non-members, are entitled to assert and to protect and this is what they have sought to do by filling the instant suit. Mr. Saha's submission is that the reliefs claimed are essentially due to acts that have occurred in breach of this trust since before the appellants could be registered as members of the company, the company had gone on to take certain acts that would have ordinarily been classic cases where petitions for oppression and mismanagement could have been filed by the appellant. Mr. Saha contends that since the respondents, however, wrongfully and unlawfully proceeded to reject the appellants' application for registration of the transfer of the shares of the respondent No.1 company in their names or to enter the names of the appellants in the register of members of the company, the appellants were prevented from approaching the Tribunal with an application under section 241 and 242 of the Companies Act, 2013 complaining of acts as acts of oppression by the respondents. The respondents have thus taken and are continuing to take advantage of their own wrong to deprive the appellants of their rights remedy before the NCLT and have left them without a remedy, thereby forcing the appellants to approach this court with the instant suit. Mr. Saha contends that these are reliefs that are separate from the issue of, broadly, rectification, for which a separate petition has been under sections 58 and 59 in the NCLT. He contends that these are issues that can be decided by this court and where reliefs can be granted sans the petition already filed before the NCLT.

With regard to the relationship between the trustee and the cestui que trust, Mr. Saha has relied on Mathalone (supra). In Mathalone (supra), one Sir Padampat Singhania had acquired certain shares in the Bombay Life Assurance Co. Ltd. and the shares belonged to one Mr. Reddy. Sir Padampat had however not made an application for registration of his name in the register of the company. Subsequently, the company approved a resolution for increasing the capital of the company and issued shares in a proportion to the shares already held by the shareholders. Mr. Reddy complied with the necessary formalities required for the additional shares owed to him but did not do so for the shares which he had sold to Sir Padampat and supposedly held in trust on behalf of him. Sir Padampat's agents called on Mr. Reddy to furnish details and asked him to purchase the additional shares on behalf of Sir Padampat, promising to indemnify him for any liability he incurred. Mr. Reddy refused to do so for a number of reasons. The question before the court was whether Mr. Reddy was under a legal obligation as a trustee to apply for and obtain on behalf of Sir Padampat the additional shares which appertained to the shares sold by Mr. Reddy to him. The Supreme Court accepted and held that there was a relationship of a trustee and a cestui que trust between Sir Padampat and Mr. Reddy but ultimately held that Mr. Reddy was under no obligation to obtain the additional shares on behalf of Sir Padampat since it would have meant Mr. Reddy having to bear a "heavier pecuniary burden than he undertook to bear as a constructive trustee by reason of the sale of his shares in favour of the cestui que trust" since it would have required him to buy the shares in his own name and incur significant personal expenses. The Court however noted that the situation would have been different if the shares had been fully paid up and no liability was attached to them.

Mr. Saha has also referred to and relied on Killick Nixon (supra) where a Division Bench of the Bombay High Court "read down" the term "member" for the purposes of section 397 and 393 of the Companies Act 1956 "in order to exclude from its ambit "bare" members whose names continue on the Register of Members although they have sold their shares". In Killick Nixon (supra), the transferee had preferred a separate application under section 111 and 155 of the 1956 Act for registration of their shares but had filed the company petition that was in appeal in the case through the transferor under sections 397 and 398 of the 1956 Act. In Killick Nixon (supra), arguments were made to the effect that the transferee could not compel the transferor to file a petition under section 397 and 398 of the 1956 Act but that issue was not conclusively answered since the transferor in that case, and unlike the present case, had agreed to exercise all its rights at the behest of the transferee. Unlike Killick Nixon (supra) where the transferor accepted it was filing the petition under 397 and 398 of the 1956 Act at the behest of the transferee and was willingly acting at the transferee's behest, in the present case, the transferee, being the appellants, and the transferor, being the respondent nos. 2 and 3, appear to be at loggerheads. However, if Killick Nixon (supra) is to be read as a whole, it may appear that the transferor would be under an obligation to file the petition for oppression and mismanagement on behalf of the transferee. This may be relevant in the modern day since a large number of shares of various persons are today held collectively by various kinds of asset management firms who may be holding these shares as trustees and various actions like invoking the provisions of the Insolvency and Bankruptcy Code 2016 could only be performed by the trustee. For convenience, the relevant paragraph of Killick Nixon (supra) is reproduced below -

"14. The company, however, recognises only the person who is its member as a shareholder. In other words, the rights that may exist between the company and its members or shareholders can be exercised only by members. Similarly the company can only look to its members for the discharge of their obligations to the company as its shareholders. The only person, therefore, who is entitled to exercise these rights and privileges or discharge these obligations is the transferor. The transferee is an outsider as far as the company is concerned and his only right is to have the transfer registered and thus to get himself accepted as a member and shareholder of the company. If the transferee is denied this right, he has a remedy under ss. 111 and 155 of the Companies Act. Cf. Ved Prakash v. Iron Traders (P.) Ltd. [1961] 31 Comp Cas 122 (Punj). He cannot, however, claim to exercise the rights or privileges as a member of the company or to discharge any obligations as a member or as a shareholder of the company. He can only exercise such rights through the transferor who is his constructive trustee. Applying this principle, the Supreme Court, in the case of Howrah Trading Co. Ltd. v. CIT [1959] 356 ITR 215; 29 Comp Cas 282, observed that the transferee cannot claim any benefit which a shareholder may be having. We have been addressed at length on the question whether a transferor can be compelled by the transferee to file a portion under ss. 397 and 398 of the Companies Act. It was submitted before us that the transferor can only be compelled by the transferee to perform those acts and duties which are attached to the holding of shares; for example, the transferee can compel the transferor to hand over to him dividends received in respect of such shares. He can also compel the transferor to hand over any benefits received in respect of these shares because these are rights of property which are attached to the shares. It was submitted that the transferee cannot compel the transferor to do anything more or to perform on his behalf or to exercise at his behest his other rights which are the rights arising from the membership of the company. More specifically, a transferee cannot compel a transferor to file a petition under ss. 397 and 398. It is not necessary to go into this aspect because in the present case the transferor has not resisted any demand made by the transfer to file a petition under ss. 397 and 398 of the Companies Act. In the present case, the transferor has agreed to exercise all his rights as a holder of shares in question at the behest if the transferee and has in fact given power of attorney for this purpose to the transferee. We may, however, point out that basically a constructive trustee is required to carry out all just and reasonable requests of the beneficiary. In so far as the rights pertaining to the property in the shares are concerned, there can be no doubt that all demands pertaining to the exercise of these rights would ordinarily be considered as just demands, though there may be special circumstances in a given case which may make the demand made by a beneficiary unreasonable, e.g., if a trustee is required to spend a large amount of money out of his own pocket in order to carry out the directions of the beneficiary. Broadly speaking, however, all the rights which are given to a member under the companies Act are rights given to him in his capacity an a shareholder of the company. These rights enable him to participate in the worming of the company as its shareholder. It is possible to say that the trustee can be asked by the beneficiary to exercise on his behalf not merely all rights and privileges attached to the shares but also conferred on the trustee by virtue of his being a shareholder so long as a trustee is not thereby asked to assume additional obligations or burdens, to spend any money from his own pocked or is put to any hardship. In the present case, the constructive trustee has not been put to any loss or hardship in filing the present petition because everything in connection with the filing of the petition has been cone by the transferees who hold a power of attorney from the transferors. Anyway, in view of the facts in the present case, we are not required to consider for the purpose of this present petition whether a transferee can compel a transferor to file a petition under ss. 397 and 398 of the Companies Act."

Transferring a share involves a series of steps - first the parties must have an agreement to sell (Share Transfer Deed), then there must be an execution of a deed of transfer and finally registration of the transfer. The first two steps are not enough to make the transferee a member of a company. Neither the agreement to transfer nor the delivery of the signed transfer form and share certificate (or share scrips) will pass legal title to the transferee (though it may pass an equitable interest in the shares to the transferee). The normal rule is that a person becomes a member of a company and the legal owner of the shares when they have agreed on the transfer, and the transfer has been subsequently carried out and the transferee's name has been entered into the register of members of the company (See Gower Principles of Modern Company Law (Tenth Edition)

Chap 27-8 (pg. 902)). It follows from this that the mere transfer of the share certificate (or share scrip) without the registration of the transferee in the register of members does not make the transferee a member of the company. If the company rejects or refuses to register a person who seeks to be registered, an appeal mechanism is provided for under limited grounds in section 59 of the Companies Act 2013. For the instant proceeding, however, it may be important to determine the precise legal position of the transferor and transferee pending registration of the transfer which, for a number of reasons (like, the internal policies of the company on restrictions and transferability), may never occur. As noted hereinabove, only if and when the transfer is registered will the transferor cease to be a member and the transferee will become a member and a shareholder. However, notwithstanding that registration has not occurred, the beneficial interest in the shares may have passed from the transferor to the transferee. The English courts have held that if an agreement is followed by the delivery of the signed transfer forms, a beneficial interest would accrue in favour of the transferee, if the agreement is one which the courts would order to be specifically enforced (See Re Kilnoore Ltd (In Liquidation) Unidare Plc v. Cohen [2006] 1 Ch. 489). In Wood Preservation Ltd v. Prior reported at [1969] 1 W.L.R. 1077 CA, it was held that the fact that the agreement is subject to fulfilment of a condition beyond the control of the parties will not prevent it from being specifically enforceable, notwithstanding that the condition has not been fulfilled, if the party for whose benefit the condition was inserted is prepared to waive it. It has been held in Hardoon v. Belilios [1901] AC 118 PC, that where the beneficial interest has passed, in terms of what has been discussed hereinabove, without the transferee's name being registered, the seller/transferor then becomes a trustee for the buyer and must account to him for any dividends he receives and vote in accordance with his instructions. This principle has also been taken note of and approved by our Supreme Court in Howrah Trading (supra).

The relationship between a trustee and cestui que trust as recognized in Mathalone (supra) is quite well established today. Killick Nixon (supra) has also recognized it. However, there are several distinguishing features and differences between Killick Nixon (supra) and the present case. Significantly, the proceeding in the instant case is initiated by filing a suit. The proceeding in Killick Nixon (supra) started with a petition under section 397 and 398 of the Companies Act 1956. At the time when Killick Nixon (supra) was decided, there was no provision analogous to section 430 of the 2013 Act and the company court of the Bombay High Court had the jurisdiction to entertain the petition under section 397 and 398 of the 1956 Act. However, that is not the case today. If the appellant, who claims to be the transferee of the shares, wanted to file an action for oppression and mismanagement through the constructive trustee/respondent nos. 2 to 5, like was done in Killick Nixon (supra), that application would today have to be filed by the constructive trustee/respondent nos. 2 to 5 before the NCLT under sections 241 and 242 of the Companies Act 2013. For this reason, the reliefs claimed in the present suit cannot be granted by this court. The proper application would have to be made before the NCLT.

In saying so, we must also add that, in addition to the above, it appears that in the present case, the reliefs claimed are being sought directly against the company/respondent no. 1. In Mathalone (supra) as well as in Killick Nixon (supra), the transferee or the cestui que trust was seeking directions against the company through the transferor/constructive trustee. In Mathalone (supra), Sir Padampat sought reliefs against Mr. Reddy to act on his behalf with respect to the company. In Killick Nixon (supra), the transferee, Dhanraj Mills Pvt. Ltd., was acting through the transferor, Bank of India, and the transferor had stated that it was acting at the behest of the transferee. It can be garnered from these two cases cited by Mr. Saha that the reliefs as sought in this suit could not be granted against the respondent no. 1 at the behest of the appellant, since, to use the phrase from paragraph 14 of Killick Nixon (supra) which is extracted herein above, "the company... recognises only the person who is its member as a share-holder. In other words, the rights that may exist between the Company and its members or shareholders can be exercised only by members." Therefore, for the transferee to have maintained an action against the company for oppression and mismanagement, the reliefs would have had to be couched in terms through the transferor. However, even then, for the reasons indicated in the preceding paragraph, the proper forum to grant those reliefs would be the NCLT. This is another reason, in addition to the reason given in the paragraph above, for the suit to not be maintainable.

Additionally, Mr. Banerjee was quick to point out that if the suit were to be entertained by this court, an anomalous situation could possibly arise. The rights of the appellants as the supposed transferees of shares are predicated on them being able to prove that there was an oral agreement in June 2018 and that signed transfer deeds had been made over to them as security. The respondent no. 2 and 3 had contended first that the transfer deeds were merely for comfort and later that they were not signed. From the records herein, it appears that these were the reasons, amongst others, that weighed with the respondent no. 1 in its refusal to register the shares when called upon by the appellants to do so. Under section 58(5) or 59(2) of the 2013 Act, the NCLT could either dismiss the appeal or it could direct the respondent no. 1 to register the shares. The NCLT would do this after following the procedures and making an inquiry into matters of fact. Towards this end, an application has already been filed by the appellants and the reliefs sought in that application has been reproduced herein above. If the present suit was to be decided by this court, in order to answer the question about whether the appellants are entitled to the reliefs sought in the suit, the court would have to go into an inquiry as to the very same facts which the NCLT is already looking into in the application under section 58 and 59 of the 2013 Act. This may result in a situation where, hypothetically, the NCLT could dismiss the application and hold that the appellants are not entitled to be registered as members of the company but the court finds, after an inquiry into the facts, that the appellants ought to be deemed as members and then go on to the grant the reliefs claimed in the suit. This would result in an anomalous situation where even though the appellants have been deemed to not be members by the proper forum, it gets the consequential reliefs in the suit. It results in conflict of decision. In order to become eligible and qualify for any reliefs claimed in the petition, the appellant must pass muster the test of establishing a strong prima facie finding that the appellant has now become a beneficial owner of the shares, which finding can be arrived at necessarily by the NCLT for granting any interim relief to the appellant as prayed for in the said proceeding. It was possible for the appellant to claim relief of oppression and mismanagement under sections 241 and 242, with a prayer for exemption under section 244 by way of amendment of the existing pleadings to demonstrate that the transferor is holding the shares in trust for the appellant and any dilution of the present shareholding at present would adversely affect the rights of the appellant as shareholders of the company. It is on demonstration of such an unimpeachable right to the shares that the NCLT may read down sections 241, 242 and 244 of the 2013 Act for the limited purposes of granting interim reliefs as claimed in the company petition. In fact, all the reliefs claimed in the present proceeding can be considered and allowed in the proceeding pending before the NCLT. The NCLT proceeding is a prior proceeding. In Mathalone (supra) and Killick Nixon (supra), the transferor-transferee relationship was clearly established. All parties had understood the relationship between the constructive trustee and the cestui que trust to have been in place. However, in the present case, the respondent no. 2 and 3 deny that such a relationship exists. This is another reason why it is difficult to adjudicate the issues in the suit in light of the reliefs claimed. If, however, the NCLT does return a positive finding in favour of the appellants in their application under section 58 and 59 of the 2013 Act and directs the company to register them as members of the company, the NCLT could then also adjudicate and decide on the reliefs sought in this suit on the grounds of oppression and mismanagement.

For the aforesaid reasons, no reliefs as prayed for by the appellant can be granted at this stage since the court is of the prima facie view that if does not have the jurisdiction to try, receive and entertain the suit. During the hearing of the appeal, Mr. Saha submitted that after the filing of the civil suit, the appellants discovered that the respondent nos. 2 to 5 had caused the respondent no. 1 company to execute a deed of sub-lease and to enter into two several development agreements in respect of the Middleton Chambers property, which is the sole asset of the respondent no. 1 company. Mr. Saha submitted that the company petition before the NCLT was listed to be heard out sometime in the middle of November 2019 and that this court ought to protect the appellant, in light of such fraud, from having the company proceedings or the suit proceedings being rendered infructuous. In view of my prima facie finding that this court does not have the jurisdiction to grant any of the reliefs prayed for in the plaint and having regard to the fact that all the reliefs claimed in the plaint could be claimed before the NCLT in the pending proceeding and in fact if the prayer made before the NLCT is allowed it could have the same effect or consequence or bearing, I am not inclined to pass any interim order at this stage. The NCLT is in seisin over the matter. I am of the view that the matter in issue in the suit can be more appropriately and effectively decided and adjudicated by the NCLT. Additionally, in the present case, section 430 of the Companies Act 2013 itself provides an additional bar by stating that no injunction shall be granted by any civil court in respect of any action taken or to be taken in pursuance of any power conferred on the NCLT by the Companies Act 2013.

Accordingly, the appeal and the applications are dismissed. Consequently, the interim order passed by the order dated 14th June 2019 and extended by the orders subsequently passed stand vacated.

However, there shall be no order as to costs.

Urgent certified copy of this judgment, if prayed for, be given to the parties on the usual undertakings.

I agree