Judgment:
1. Smt. Trishla Jain, wife of Shri P. D. Jain, resident of 113, Atkins Road, London SW 12 OL, has filed this petition against the Oswal Agro Mills Ltd., G.T. Road, Sherpur, Ludhiana, under Section 113 of the Companies Act, 1956 (hereinafter called "the Act"), praying for an order for (a) payment of dividend on her shares remaining unpaid for the financial years 1988-89, 1989-90 and 1990-91 and the dividend payable for the year 1991-92, (b) payment of interest remaining unpaid on the debentures held by the petitioner for the period 1986 onwards, (c) payment of interest at the rate of 18% per annum for delayed payment of interest/dividend, (d) delivery of bonus share certificates, (e) delivery of income-tax deduction certificates, and (f) payment of amounts equivalent to the loss suffered on account of default by the respondent-company.
The petitioner applied for rights shares and debentures in January/ February, 1986. The respondent-company allotted 25,782 equity shares and 8,594 debentures against her application. However, repeated requests by the petitioner as well as her bankers to deliver the share certificates did not evoke any response from the respondent-company. The matter was also taken up through different Government departments but with no effect. Ultimately, a petition was filed under Section 113(3) of the Act before the High Court of Delhi in 1988. This petition was disposed of by the High Court in September, 1989, by an order directing that the share and debenture certificates be delivered and the dividends paid to the petitioner.
3. After the amendments in 1991, in Section 113(3) of the Act the petitioner has now preferred before the Company Law Board the present petition with regard to the delivery of bonus share certificates besides payment of unpaid dividends on shares and unpaid interest on debentures. In addition the petitioner has also prayed for delivery of income-tax deduction certificates and for payment of compensation and of interest at 18% per annum due to the delay in payment of interest/dividend.
4. The reply filed by the company states that the petition is misconceived and barred by the principles of res judicata. It is also stated that the reliefs sought by the petitioner cannot be granted by the Company Law Board as they are not in accordance with the provisions of Section 113 of the Act. The company has also narrated the background of the dispute between the company on the one hand and the petitioner, her husband and a closely held private company on the other. It is stated that the Delhi High Court has already granted a decree in May, 1989, for Rs. 3.83 crores against the private company of the petitioner and her husband and another claim of Rs. 7.66 crores is pending for arbitration before the Grain Feed and Trade Association in England. As such according to the company it has a lien over all these amounts towards dividend, interest on debentures as well as shares and securities held by the petitioner and her family members to secure their outstanding dues.
5. During the hearing held on September 19, 1995, Shri T. K. Ganju, advocate for the respondents, raised major objections, namely, (1) the petitioners cannot seek multiple reliefs as per Order 2, Rule 2(3) of the Civil Procedure-Code, 1908, (2) the petitioner has already withdrawn the application filed in this regard before the Delhi High Court, (3) the power of the Company Law Board under Section 113(3) is confined to ordering delivery of share/debenture certificates and cannot extend to the dividend and interest, and (4) the petitioners owe substantial sums to the company for which the company has a lien on the claims of the petitioners. Since the advocate for the petitioner could not react to these objections immediately an opportunity was provided to make written submissions and, accordingly, Shri Deepak Prakash, advocate for the petitioner, made his written submissions.
6. Order 2, Rule 2(3) of the Civil Procedure Code, 1908, prevents seeking multiple remedies from different forums on the same cause of action. In the present case, the petitioner had prayed before the Delhi High Court for delivery of 25,782 equity share certificates and 8,594 debenture certificates. It is evident from the judgment of the High Court that the petitioner could not have made a prayer for the issue of bonus share certificates as they were allotted later. However, by a subsequent Application No. 1124 of 1989 she sought an order for issue of bonus share certificates. Another application, namely, Company Application No. 1546 of 1993, was also filed before the High Court praying for the same reliefs as in the present petition. The earlier application, namely, Company Application No. 1124 of 1989 and the subsequent application, namely, Company Application No. 1524 of 1993 were stated to have been withdrawn later. As such the prayer no longer subsisted. Further, Section 115(3) related to a default committed by a company in delivering the share certificates with respect to each allotment/transfer. In the present case, the company had made an allotment of right shares/debentures in 1986. The petition before the Delhi High Court relates to the non-delivery in respect of such allotment. The subsequent issue of bonus shares is yet another allotment made by the company. Since the obligation of delivery is linked to every allotment, the non-delivery in respect of each allotment has to be construed as an independent default. The company has admitted in its reply that bonus shares were allotted but the bonus share certificates have been withdrawn and retained by the company for its own reasons. As such the petitioners are not seeking multiple remedy as contemplated under Order 2, Rule 2(3) of the Civil Procedure Code, 1908. The same applies to reliefs claimed in respect of dividends and tax deduction certificates. However, in respect of interest on debentures a prayer was already made before the Delhi High Court, as such to this extent the respondents submission is valid that the petitioner cannot seek multiple remedy through different forums.
However, the prayers of the petitioner regarding interest and dividend for subsequent periods, bonus share certificates and income-tax deduction certificates were not before the High Court.
7. Consequently, it would not be appropriate to non-suit the petitioners on the ground of Order 2, Rule 2(3) of the Civil Procedure Code, 1908.
8. With regard to the prayer contained in Company Applications Nos.
1124 of 1989 and 1524 of 1993, these applications were withdrawn for valid reasons. It is evident from the prayers in the original petition that there was no reference to bonus share certificates and since the prayer in an application cannot transgress beyond the original petition it was only appropriate that the petitioners withdrew Application No.1124. As regards withdrawal of Application No. 1524 of 1993, it is very obvious that the jurisdiction of the High Court under Section 113(3) has been transferred to the Company Law Board. It is also evident from the copy of the application produced before me that the prayers were exactly the same.
9. In the circumstances, the objections of counsel for the respondent-company on this ground are not sustainable.
10. The plea of the respondents with regard to the jurisdiction of the Company Law Board under Section 113(3) of the Act needs careful consideration. As already referred, Section 113(3) is concerned with an order directing the company to make good the default under Section 113(1). The default referred to in that sub-section relates to one under Section 113(1), namely, default in delivering the share/debenture certificate. As such any order by the Company Law Board in relation to any other alleged defaults on the part of the company does not fall within our jurisdiction. There is also no scope for passing any incidental orders as the same has been restricted by Section 113(3) to costs incidental to the application. Moreover, there are separate provisions governing payment of dividend which may have to be invoked by the petitioner before the appropriate forum. The opportunity granted by the Delhi High Court as stated by the petitioner to initiate proceedings in respect of the same prayers cannot be interpreted as a bar for us to consider the petition under Section 113(3). The contention of the respondents that the jurisdiction of the Company Law Board under Section 113(3) does not extend to payment of interest, dividend or other such reliefs, however is a valid one. As such our order under Section 113(3) shall be confined to the delivery of bonus share certificates only.
11. The plea of the respondents that the petitioner along with her husband in association with a closely held private company is liable to the company in a suit already decreed by the Delhi High Court and the plea that certain arbitration proceedings are pending and, consequently, the company has a lien on the share certificates cannot be accepted as justification for holding on to the share certificates.
Firstly, the dues to the company are from another separate legal entity and not from the petitioner herself. Secondly, holding on to the share certificates of a shareholder due to any loan outstanding from him/her is not permissible either under the Act or under the articles of association of the company. The right to get delivered the share certificate within two months of allotment is an irrevocable right vested in every share/debenture holder and is enforceable through the Company Law Board by virtue of Section 113(3). This right cannot be taken away by unilateral action of the company. As such the plea of outstanding dues to the company is not valid and sustainable.
12. In view of the above and as decided by the Delhi High Court in respect of the same parties in 1989, it is hereby ordered that the company shall deliver within 10 days from the date of receipt of a copy of this order all the bonus share certificates in respect of the petitioner either to the petitioner directly or to her duly constituted attorney. No order as to costs.