JAGISHCHANDRA CHAMPAKLAL PAREKH Vs. KANTILAL PRABHUDAS MEHTA

JUDGEMENT

(1.) The respondent No. 4 - Deccan Paper Mills Co. Ltd. is a public limited company registered under the Indian Companies Act, 1913. 16,440 shares of respondent No. 4 - company - were held by respondent Nos. 1 to 3. The appellant - original defendant No. 1 - claims that a loan of Rs. 1,50,000 was advanced to respondent Nos. 1 to 3 and, as a security, a demand promissory note was obtained. The respondent Nos. I to 3 also pledged 16,440 shares along with the transfer forms. The appellant claims that an oral agreement was reached between the appellant and respondent Nos. I to 3 that in case the amount of loan along with interest was not repaid within a stipulated period, the pledged transaction would amount to sale of the shares in favour of the appellant. The appellant claims that as the amount was not paid by respondent Nos. 1 to 3, the appellant served notice on 2-6-1987 that the shares stand transferred in favour of the appellant. The appellant then lodged the shares on 16-9-1987 with the company for registration. The request of the appellant was rejected by the board of directors in the meeting held on 14-1 1-1987. The grounds for rejection were :

(2.) Shri Mehta, the learned counsel appearing on behalf of the appellant, reiterated the contentions raised before the learned Single Judge. Before examining the contentions, we wish to make it clear that the appeal is preferred at an interim stage and any observations made by the learned Single Judge and in this judgment are merely prima facie observations. Shri Mehta submitted that the CLB was competent to decide the question of title while exercising powers under section 111 and has indeed decided the issue of title to the disputed shares and that decision must operate as res judicata and the learned Single Judge was not entitled to grant interim relief. We are unable to accept the contention urged by the learned counsel. The powers under section 111 are conferred upon the Central Government to entertain the appeal against the order of the company declining to register the shares. The Central Government, though a Tribunal, as held by the Supreme Court in Harinagar Sugar Mills Ltd. Vs. Shyam Sunder Jhunjhunwala (1961) 31 Comp. Cas. 387 , cannot be equated with a civil court. The right to decide issue of title to movable or immovable property vests in the civil court and the civil court is not divested of that right unless and until specific provision is found in some statute or such a provision can be gathered by implication. The provisions of section 111 do not provide that the Central Government can determine the issue of title. Shri Mehta submitted that section 155 of the Act confers power for deciding issue of title and the ambit of section 111 and section 155 is almost similar. The submission overlooks that the powers conferred under section 155 are on the High Court and not on the Central Government in respect of rectification of register. It is not permissible to equate the High Court to the Central Government. The reliance on the decision of the Supreme Court is not accurate because the Supreme Court was concerned with the issue as to whether an appeal is competent against the decision of the Central Government under section 111 in accordance with the powers conferred under article 136 of the Constitution. The Supreme Court held that the Central Government had all the trappings of judicial Tribunal while deciding the appeal and, therefore, the appeal is perfectly competent to the Supreme Court under article 136. Shri Mehta referred to the observations of the Supreme Court that the powers to entertain appeal under section 111 is not unrestricted being an alternative to the right to approach the civil court and is subject to the same limitations which are implicit in the exercise of power by the civil court under section 155. It is not possible to accept the contention of the learned counsel that these observations should be construed as to mean that the powers of the Central Government under section 111 and the High Court under section 155 are identical. The question of title cannot be decided by the Central Government and there is nothing in section 111 to warrant a contrary conclusion.

(3.) Even assuming that the CLB, while exercising powers under section 111, can determine issue of title to the disputed shares, the question which requires determination is whether in fact the CLB has determined such issue. The perusal of the order passed by the CLB on 31-1-1991 makes it clear that the CLB has not even considered whether there was oral agreement between the appellant and respondent Nos. I to 3 that the pledged shares would automatically stand transferred in favour of the appellant. The CLB has also not examined whether the alleged notice claimed to have been given by the appellant under section 176 was at all served upon the respondent Nos. 1 to 3. The CLB in paragraph 10"of the order observes that no evidence had come to the knowledge of the Board to indicate that the shares were handed over to the transferee as a security without authority to the transferee to fill in the blanks. The Board then observed that "even accepting the arguments advanced by the transferor, it is an admitted fact that there was physical delivery of shares along with the transfer forms...." We fail to appreciate how this observation can at all enable the appellant to claim that the question of title was determined by the CLB. The fact that the shares were initially pledged with the appellant is not in dispute and the appellant's claim that the transfer of pledged shares automatically becomes a transaction of sale because of oral agreement or in the alternative because of notice given under section 176, was not at all examined by the CLB. It is, therefore, futile to suggest that the CLB has determined the issue of title to the disputed shares and consequently civil court cannot re-examine the question. In our judgment, the contention of the appellant that the plea of the respondent Nos. 1 to 3 is barred by principles of res judicata is prima facie not acceptable.