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2021 DIGILAW 880 (RAJ)

J. S. W. Steel Limited v. Abhishek Kumar

2021-04-27

ARUN BHANSALI

body2021
JUDGMENT 1. These appeals have been filed against the judgments & decrees dated 18.07.2019 passed by the Additional District Judge No.2, Sriganganagar, whereby the learned Judge allowed the appeals filed by the plaintiffs-appellants against the judgments & decrees dated 19.09.2016 passed by the Additional Civil Judge No.2, Sriganganagar, dismissing the suits filed by the plaintiffs seeking declaration, mandatory & perpetual injunction against the appellants. 2. The suits were filed by the plaintiffs (i)- Abhishek Kumar; (ii)- Ram Pratap and (iii)- Ram Pratap & Smt. Anju Bala as legal representatives of the deceased unmarried daughter Santosh Bala, inter-alia, with the averments that each plaintiff had applied for and were allotted 100 Secured 'Zero' interest Fully Convertible Debentures CFCD') of Jindal Iron & Steel Company Limited. The plaintiffs were required to pay the value of debentures in three installments of Rs.2,000/- each. The debentures were to be converted in 100 shares of face value of Rs.10/- with Rs.50/- as premium. The first installment was paid alongwith the application and the second installment was also paid on receiving notice in this regard. Both the installments were received by the defendant. 3. Suddenly, on 14.06.2004, a letter was received, whereby the plaintiffs were informed that the Company has forfeited plaintiffs' right to receive the equity shares and the principal amount paid by the plaintiffs thereof. 4. The plaintiffs contested the action of the defendant, however, no action was taken by the defendant - Company. It was claimed that the amount of second call was sent by cheque, however, the cheque was returned and therefore, the amount was sent by the draft and as such, the defendant was not entitled to forfeit the right to receive shares. 5. Based on the above submissions, it was prayed that the orders dated 14.06.2004 forfeiting the right to receive equity shares in respect of FCDs be cancelled and the defendant be directed to issue 100 shares alongwith consequential benefits. Permanent injunction was sought not to implement the communication dated 14.06.2004 forfeiting the shares arising out of the FCDs. 6. Though the Company appeared through counsel, however, as the counsel was not present on 10.03.2006, ex-parte proceedings were initiated. The appellants-plaintiffs filed applications under Order IX, Rule 7 r/w Section 151 CPC, however, the said applications were rejected by the trial court on 26.09.2011. 7. 6. Though the Company appeared through counsel, however, as the counsel was not present on 10.03.2006, ex-parte proceedings were initiated. The appellants-plaintiffs filed applications under Order IX, Rule 7 r/w Section 151 CPC, however, the said applications were rejected by the trial court on 26.09.2011. 7. On part of the plaintiffs, the plaintiffs filed their affidavits in evidence and exhibited 08 documents. 8. After hearing the parties, the trial court came to the conclusion that the plaintiffs have not indicated that when did they receive the information and demand for the third installment and that the payment of the third installment was made, has not been proved by producing copy of the cheque / draft and therefore, only on account of the proceedings being ex-parte, the plaintiffs cannot succeed and consequently, dismissed the suits. 9. Feeling aggrieved, the plaintiffs filed first appeals. 10. The first appellate court, after hearing the parties, came to the conclusion that from Ex.-8, it is apparent that the Company had sent notices dated 01.12.2003 & 28.02.2004 and the amount of third installment was to be paid by 13.03.2004; and from Ex.-3, it is apparent that the Company had received the cheque, which letter is dated 16.03.2004, which means that the cheque was received prior to 16.03.2004 and therefore, the burden was on the Company to prove that the cheque was not received prior to 13.03.2004. The appellate court also came to the conclusion that there was no material available on record to indicate that the amount was to be paid by a particular mean and that as the Company had power under Section 122 of the Companies Act, 1956 ('the Act') to file civil suits for recovery of the outstanding amount of debentures, the same could not have been forfeited and consequently, accepted the appeals and decreed the suits directing payment of the balance installment alongwith interest @ 15.5% p.a. with consequential benefits. 11. Feeling aggrieved, the present second appeals have been filed by the defendant - Company. 12. Learned Senior Counsel appearing for the appellants submitted that he was pressing proposed substantial questions No.(Ill), (IV) & (V), which pertain to the right of the present appellants to receive a fresh notice as the original defendant Jindal Iron & Steel Limited had merged with Jindal Vijay Nagar Steel Limited. 12. Learned Senior Counsel appearing for the appellants submitted that he was pressing proposed substantial questions No.(Ill), (IV) & (V), which pertain to the right of the present appellants to receive a fresh notice as the original defendant Jindal Iron & Steel Limited had merged with Jindal Vijay Nagar Steel Limited. Whereafter, the name of the Company was changed to JSW Steel Limited during pendency of the suits; the civil court had no jurisdiction in the matter and that the trial court wrongly rejected the applications filed by the appellants -plaintiffs under Order IX, Rule 7 CPC. 13. It was emphasized with reference to provisions of Section 111A of the Act that the jurisdiction in relation to the subject matter at the relevant time lay with the Company Law Board and as such, the jurisdiction of civil court to deal with the matter was impliedly barred and therefore, the first appellate court was not justified in accepting the appeals filed by the plaintiffs. 14. Further submissions were made that the suits were originally filed against Jindal Iron & Steel Limited, who had issued FCDs, however, the said Company got merged with Jindal Vijay Nagar Steel Limited and later on, the name was changed to JSW Steel Limited. The plaintiffs filed applications under Order VI, Rule 17 CPC, which were accepted by the trial court and the name of the defendant No.1 was changed from Jindal Iron & Steel Limited to JSW Steel Limited. However, a fresh notice was not issued to the defendant - JSW Steel Limited, to which, it was entitled, which deprived the Company of appearing and contesting the suits. It was further submitted that the rejection of applications filed by the appellants under Order IX, Rule 7 CPC, in the circumstances of the case, were not justified, however, it was conceded that neither the orders rejecting the applications under Order IX, Rule 7 CPC were challenged during the pendency of the suits nor any cross-objections were filed in the appeals preferred by the plaintiffs after dismissal of their suits. 15. Reliance was placed on Eternit Everest Limited v. Neelmani Bhartiya: AIR 1999 (Raj.) 235 ; Shashi Prakash Khemka v. NEPC MICON & Ors. : 2019 (212) CompCas 385 . 16. Learned counsel for the respondents-plaintiffs vehemently opposed the submissions. 15. Reliance was placed on Eternit Everest Limited v. Neelmani Bhartiya: AIR 1999 (Raj.) 235 ; Shashi Prakash Khemka v. NEPC MICON & Ors. : 2019 (212) CompCas 385 . 16. Learned counsel for the respondents-plaintiffs vehemently opposed the submissions. It was submitted that none of the questions sought to be agitated by the appellant are substantial questions of law and as such, the appeals deserve to be dismissed. 17. Submissions were made that the applications under Order IX, Rule 7 CPC were filed after merger of Jindal Iron & Steel Limited with Jindal Vijay Nagar Limited and change of its name as JSW Steel Limited and as such, as the appellant-Company had already put in appearance in the suits and therefore, the plea sought to be raised regarding entitlement to receive a fresh notice after name of the defendant was amended in view of the averments made in the applications under Order IX, Rule 7 CPC, has no substance. 18. Further submissions were made that the provisions of Section 111A of the Act have no application to the present case and the civil courts, thus, have the jurisdiction to deal with the matter. It was submitted that the orders passed by the trial court under Order IX, Rule 7 CPC has attained finality as the appellant did not question the validity of the said orders either during the pendency of the suits or in the appeals by filing cross-objections and therefore, now it is not open in the present second appeals to question the validity of the orders passed on application under Order IX, Rule 7 CPC besides the fact that the same also does not give rise to any substantial question of law. 19. Reliance was placed on Bhagwan Dass Chopra v. United Bank of India & Ors. : AIR 1988 SC 215 . 20. I have considered the submissions made by learned counsel for the parties and have perused the material available on record, wherein the appellant has produced the plaint as well as the documents exhibited by the plaintiffs. 21. The challenge laid in the suits pertain to the forfeiture of right to receive equity shares in respect of Secured 'Zero' Fully Convertible Debentures ('FCD'). 21. The challenge laid in the suits pertain to the forfeiture of right to receive equity shares in respect of Secured 'Zero' Fully Convertible Debentures ('FCD'). The submissions made that the jurisdiction to deal with the subject matter of the suits lay with the Company Law Board under the provisions of Section 111A of the Act, apparently have no substance. 22. Section 111A of the Act, insofar as, relevant reads as under :- "111A. Rectification of register on transfer.-(l) In this section unless the context otherwise requires, "company" means a company other than a company referred to in sub-section (14) of section 111 of this Act. (2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable: Provided that if a company without sufficient cause refuses to register transfer of shares within two months from the date on which the instrument of transfer or the intimation of transfer, as the case may be, is delivered to the company, the transferee may appeal to the Company Law Board and it shall direct such company to register the transfer of shares. (3) The Company Law Board may, on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India, if the transfer of shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 or regulations made thereunder or the Sick Industrial Companies (Special provisions) Act, 1985 or any other law for the time being in force, within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or intimation of the transmission was delivered to the company, as the case may be, after such inquiry as it thinks fit, direct any depository or company to rectify its register or records. (4) The Company Law Board while acting under sub-section (3), may at its discretion make such interim order as to suspend the voting rights before making or completing such inquiry. (5) .......................................... (6) .......................................... (7) .........................................." (emphasis supplied) 23. A perusal of the above provision reveals that in a case where the Company refuses to register transfer / transmission of shares or debentures, the transferee could appeal to the then Company Law Board. (5) .......................................... (6) .......................................... (7) .........................................." (emphasis supplied) 23. A perusal of the above provision reveals that in a case where the Company refuses to register transfer / transmission of shares or debentures, the transferee could appeal to the then Company Law Board. However, the provision does not deal with a case of forfeiture of either shares or debentures and as such, the power in this regard lies only with the civil courts. 24. Bombay High Court in Morgan Ventures Ltd. v. Blue Coast Hotels and Resorts Ltd. & Ors. : (2010) 3 CompLJ 33 following the judgment in Gopal Krishan Baliga v. Poona Industrial Hotel Ltd.: AIR 1999 Bom. 302 , came to the conclusion that there would be no room to infer that the right of appeal provided by sub-section (4) of Section 111 is to be read in consonance with sub-sections (2) & (3) of Section 111A of the Act by equating transfer of shares with the allotment of shares and that the civil court has jurisdiction to entertain the civil suit in this regard. 25. Following the judgment in the case of Morgan Ventures Ltd. (supra), the Company Law Board in Re: Larsen & Tourbo Ltd.: (2014) 182 CompCas 43 (CLB) came to the conclusion that the appeal under Section 111A of the Act against forfeiture of debentures lying in the name of the appellant cannot be decided by Company Law Board. 26. As the jurisdiction under Section 111A of the Act has been consistently held to be limited to transfer and transmission of shares / debentures, challenge laid to forfeiture cannot obviously be entertained by the Company Law Board as determined by the Bombay High Court and the Company Law Board itself (supra) and as such, the plea raised pertaining to lack of jurisdiction of the civil courts apparently has no substance. 27. So far as the judgments cited by learned counsel for the appellant herein are concerned, both the judgments in the case of Shashi Prakash Khemka (supra) and Eternit Everest Limited (supra) pertain to transfer of the shares and not allotment / forfeiture of the shares / debentures and as such, the same have no application to the facts of the present case. 28. 28. Besides the above fact, as provisions of Section 122 of the Act provide for specific performance of contract to subscribe for debentures and the same can be enforced by a decree, the same necessarily means that the action pertaining to the allotment or forfeiture of debentures can be questioned before the civil courts. 29. So far as the issue sought to be raised regarding right to get another notice in the suits after the plaintiffs were permitted to change the name of the defendant is concerned, it is apparent from what has been noticed herein-before that the appellant JSW Steel Limited had itself filed applications under Order IX, Rule 7 CPC and as such, once the company had the notice of the pending suits and the plaintiffs had filed applications in the pending suits, merely based on the averments made in the applications, seeking change in the name of the defendant, cannot entitle the appellant to get a fresh notice. 30. Besides the applications were filed under Order VI, Rule 17 CPC and not under Order I, Rule 10 CPC, therefore, as it was not a case of impleading a new party and the applications were only to bring the cause title of the suits in consonance of the present status of the defendant-Company as such, the plea in this regard also has no substance. 31. The attempt to question the validity of orders passed under Order IX, Rule 7 CPC, has been noticed only to be rejected as the appellant had the opportunity to question the validity of the orders during pendency of the first appeals by filing cross-objections in the appeals filed by the respondents-plaintiffs, however, no such attempt was made either by filing cross-objections or by raising issue in this regard during course of hearing in the appeals and as such, the said orders having attained finality, cannot be made subject matter of challenge in the present second appeals. 32. No other point was pressed by the appellant. 33. In view of the above discussion, the appeals do not give rise to any substantial question of law. There is no substance in the appeals, the same are, therefore, dismissed.