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" It was also observed by James L.J.: " I am of opinion that we cannot sit as a Court of Appeal from the conclusion which the directors have arrived at if we are satisfied that the directors have done that which alone they could be compelled by mandamus to do, to take the matter into their consideration". Ratio |
Mellish L.J. observed: "But it is further contended that in order to secure the existing shareholder against being deprived of the right to sell his shares, the directors are 355 bound to give their reason why they reject the transferee, and if they reject him without giving a reason that is a ground from which the Cou... |
I cannot agree with that. PRE |
It appears to me that it is very important that directors should be able to exercise the power in a perfectly uncontrollable manner for the benefit of the shareholders; but it is impossible that they could fairly and properly exercise it if they were compelled to give the reason why they rejected a particular individua... |
I am therefore of opinion that in order to preserve to the company the right which is given by the articles a shareholder is not to be put upon the register if the board of directors do not assent to him, and it is absolutely necessary that they should not be bound to give their reasons although I perfectly agree that ... |
A similar view was also expressed in In re, Smith and Fawcett Ltd. (1) where the Court of Appeal held that where the directors of the company had uncontrolled and absolute discretion to refuse to register any transfer of shares, while such powers are of a fiduciary nature and must be, exercised in the interest of the c... |
Rectification of the register under section 155 can therefore be granted only if the transferor establishes that the directors had, in refusing to register the shares in the names of a transferee, acted oppressively, capriciously or corruptly, or in some way mala fide and not in the interest of the company. Ratio |
Such a plea has, in a petition for rectification, to be expressly raised and affirmatively proved by evidence. Ratio |
Normally, the court would presume that where the directors have refused to register the transfer of shares when they have been invested with absolute discretion to refuse registration, that the exercise of the power was bona fide. Ratio |
When (1) 356 the new Companies Act was enacted, it was well settled that the discretionary power conferred by the articles of association to refuse to register would be presumed to be properly exercised and it was for the aggrieved transferor to show affirmatively that it had been exercised mala fide and not in the int... |
Before the Committee appointed by the Government of India under the Chairmanship of Mr. C. H. Bhabha representation was made by several bodies that this power which was intended to be exercised for the benefit of the company was being misused and the Committee with a view to afford some reasonable safeguards against su... |
The Legislature, it appears, ,accepted this suggestion and provided a right of appeal. Ratio |
But the power to entertain the appeal is not unrestricted: being an alternative to the right to approach the civil court, it must be subject to the same limitations which are implicit in the exercise of the power by the civil court under section 155. Ratio |
The Central Government may therefore exercise the power to order that the transfer which the directors have in their discretion refused, be registered if it is satisfied that the exercise of the discretion is mala fide, arbitrary or capricious and that it is in the interest of the company that the transfer should be re... |
Relying upon el.(7) of section 111 which provided that the proceedings in appeals under sub section(3) or in relation thereto shall be confidential, it was urged that the authority hearing the appeal is not obliged to set out reasons in support of its conclusion and it must be assumed that in disposing of the appeal, t... |
But the provision that the proceedings are to be treated as confidential is made with a view to facilitate a free disclosure of evidence before the Central Government which disclosure may not, in the light of publicity which attaches to proceedings in the ordinary courts, be possible in a petition under section 155 of ... |
The mere fact that the proceedings are to be treated as confidential does not dispense with a judicial approach nor does it obviate the disclosure of sufficient grounds and evidence in support of the order. Ratio |
In the present case, the position is somewhat un satisfactory. Ratio |
The directors passed a resolution declining to register the shares and informed the transferor and the transferees of that resolution. Ratio |
The transferees in their petition stated that the refusal to register transfer was without any reason, arbitrary and untenable and in the grounds of appeal they stated that they did not know of any reasons in sup port of the refusal and reserved liberty to reply thereto if any such reasons were given. Ratio |
The company in reply merely asserted that the refusal was not without any reason or arbitrary or untenable. Ratio |
The transferees in their rejoinder made a curious statement of which it is difficult to appreciate the import that they had "nowhere stated in the memoranda of appeals that the refusal to transfer shares was capricious or mala fide" and all that they "had stated was that the refusal was without any reason, arbitrary or... |
The Deputy Secretary who decided the appeals chose to give no reasons in support of his orders. Ratio |
There is nothing on the record to show that he was satisfied that the action of the directors in refusing to register the shares "was arbitrary and untenable" as alleged. Ratio |
If the Central Government acts as a tribunal exercising judicial powers and the exercise of that power is subject to the jurisdiction of this court under article 136 of the Constitution, we fail to see how the power of this court can be effectively exercised if reasons are not given by the Central Government in support... |
In the petition under section 38 of the Indian Companies Act, 1913, the Bombay High Court declined to order rectification on a summary proceeding and relegated the parties to a suit and a similar order was passed by the Joint Secretary, Ministry of Finance. Ratio |
These proceedings were brought to the notice of the Deputy Secretary who heard the appeals. Ratio |
Whether 46 358 in spite of the opinion recorded by the High Court and by the Joint Secretary, Ministry of Finance in respect of another block out of shares previously attempted to be transferred, there were adequate grounds for directing registration, is a matter on which we are unable to express any opinion. Ratio |
All the documents which were produced before the Deputy Secretary are not printed in the record before us and we were told at the bar that there were several other documents which the Deputy Secretary took into con sideration. Ratio |
In the absence of anything to show that the Central Government exercised its restricted power in hearing an appeal under section 111(3) and passed the orders under appeal in the light of the restrictions imposed by article 47B of the articles of association and in the interest of the company, we are unable to decide wh... |
We are however of the view that there has been no proper trial of the appeals, no reasons having been given in support of the orders by the Deputy Secretary who heard the appeals. Ratio |
In the circumstances, we quash the orders passed by the Central Government and direct that the appeals be re heard and disposed of according to law. RPC |
Costs of these appeals will be costs in the appeals before the Central Government. RPC |
HIDAYATULLAH, J. I have had the advantage of reading the judgment just delivered by my brother, Shah, J. Ratio |
In view of the strong objection to the competence of the appeals under article 136 by the respondents, to whom liberty was reserved by the order granting special leave, I have found it necessary to express my views. Ratio |
The facts have been stated in detail by my learned brother, and I shall not repeat them in full. Ratio |
Very shortly stated, the facts are that the second respondent, Banarsi Prasad Jhunjhunwala, transferred 2500 shares to his son, and 2100 shares to his daughter in law, in the appellant Company in 1953. Ratio |
The appellant Company declined to register these transfers. Ratio |
Proceedings for rectification of the Register under section 38 of the Indian Companies Act, 1913, followed 359 in the High Court of Bombay, but the High Court referred the disputants to the Civil Court. Ratio |
In the petition before the High Court, the respondents had charged the Directors of the appellant Company with bad faith and arbitrary dealing. Ratio |
The respondents renewed their requests for registration, but they were again declined, and appeals were filed before the Central, Government under section 111(3) of the , which had come into force from April 1, 1956. Ratio |
These appeals were heard by Mr. K. R. P. Aiyengar, Joint Secretary, Ministry of Finance, who dismissed them, holding that only a suit was the appropriate remedy. Ratio |
Banarsidas Prasad then made a fresh transfer of 100 shares each to his son and daughter in law, and requests for registration of these shares were made. Ratio |
The appellant Company again declined to register the shares, but gave no reaons. Ratio |
Under cl. 47 B of the Articles of Association of the appellant Company, it is provided: "The Directors may in their absolute discretion and without giving any reason refuse to register any transfer of any shares whether such shares be fully paid or not. Ratio |
If the Directors refuse to register the transfer of any shares, they shall, within two months after the date on which the transfer was lodged with the company, send to the trans feree and the transferor notice of the refusal. Ratio |
" The appellant Company was prima facie within its rights when it did not state any reasons for declining to register the shares in question. Ratio |
Appeals were again taken to the Central Government under section 111(3). Ratio |
It was alleged that the refusal to register the shares without giving any reasons was "arbitrary and untenable". Ratio |
In accordance with the provisions of the section, representations were filed by the appellant Company and rejoinders by the opposite party. Ratio |
The transferees made it clear that they did not charge the appellant Company with "capricious or mala flee conduct" but only with arbitrary any reasons. Ratio |
The appeals 360 succeeded, and the shares were ordered to be registered. Ratio |
The Deputy Secretary, who heard and decided the appeals, gave no reasons for his decision. Ratio |
Against his order, the present appeals have been filed with special leave. Ratio |
The preliminary objection is that the appeals are incompetent, because the Central Government, which heard them, is not a tribunal muchless a Court, and the action of the Central Government is purely administrative. Ratio |
It is, therefore, submitted that article 136 does not apply, because special leave can only be granted in respect of a determination by a Court or a tribunal, which the Central Government is not. ARG |
This is not the only provision of law, under which the Central or State Governments have been empowered to hear appeals, revisions or reviews, and it is thus necessary to find out the exact status of the Central Government when it hears and decides appeals, etc., for the application of article 136. Ratio |
Article 136(1) reads as follows: "Notwithstanding anything in this Chapter, the Supreme Court may in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any Court or tribunal in the territory of India. STA |
" The orders which the Central Government passes, certainly fall within the words "determination" and "order". Ratio |
The proceeding before the Central Government also falls within the wide words "any cause or matter". Ratio |
The only question is whether the Central Government, when it hears and decides an appeal, can be said to be acting as a Court or tribunal. Ratio |
That the Central Government is not a Court was assumed at the hearing. Ratio |
But to ascertain what falls within the expression "Court or tribunal", one has to begin with "Courts". Ratio |
The word "Court" is not defined in the . Ratio |
It is not defined in the Civil Procedure Code. Ratio |
The definition in the Indian Evidence Act is not exhaustive, and is for the purposes of that Act. Ratio |
In the Now English Dictionary (Vol. II, pp. 1090, 1091), the meaning given is: 361 "an assembly of judges or other persons legally appointed and acting as a tribunal to hear and determine any cause, civil, ecclesiastical, military or naval. Ratio |
" All tribunals are not Courts, though all Courts are tribunals. Ratio |
The word "Courts" is used to designate those tribunals which are set up in an organised State for the administration of justice. Ratio |
By administration of justice is meant the exercise of judicial power of the State to maintain and uphold rights and to punish "wrongs". Ratio |
Whenever there is an infringement of a right or an injury, the Courts are there to restore the vinculum juris, which is disturbed. Ratio |
Judicial power, according to Griffith, C. J. in Huddart, Parker & Co. Proprietary Ltd. vs Moorehead (1) means: "the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property. PRE |
The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action. PRE |
" When rights are infringed or invaded, the aggrieved party can go and commence a querela before the ordinary Civil Courts. PRE |
These Courts which are instrumentalities of Government, are invested with the judicial power of the State, and their authority is derived from the Constitution or some Act of legislature constituting them. PRE |
Their number is ordinarily fixed and they are ordinarily permanent, and can try any suit or cause within their jurisdiction. PRE |
Their numbers may be increased or decreased, but they are almost always permanent and go under the compendious name of "Courts of Civil Judicature". PRE |
There can thus be no doubt that the Central Government does not come within this class. Ratio |
With the growth of civilisation and the problems of modern life, a large number of administrative tribunals have come into existence. Ratio |
These tribunals have the authority of law to pronounce upon valuable (1) ; , 357.362 rights; they act in a judicial manner and even on evidence on oath, but they are not part of the ordinary Courts of Civil Judicature. Ratio |
They share the exercise of the judicial power of the State, but they are brought into existence to implement some administrative policy or to determine controversies arising out of some administrative law. Ratio |
They are very similar to Courts, but are not Courts. Ratio |
When the Constitution speaks of 'Courts ' in article 136, 227 or 228 or in Art,% 233 to 237 or in the Lists, it contemplates Courts of Civil Judicature but not tribunals other than such Courts. Ratio |
This is the reason for using both the expressions in articles 136 and 227. Ratio |
By "Courts" is meant Courts of Civil Judicature and by "tribunals", those bodies of men who are appointed to decide controversies arising under certain special laws. Ratio |
Among the powers of the State is included the power to decide such controversies. Ratio |
This is undoubtedly one of the attributes of the State, and is aptly called the judicial power of the State. Ratio |
In the exercise of this power, a clear division is thus noticeable. Ratio |
Broadly speaking, certain special matters go before tribunals, and the residue goes before the ordinary Courts of Civil Judicature. Ratio |
Their procedures may differ, but the functions are not essentially different. Ratio |
What distinguishes them has never been success fully established. Ratio |
Lord Stamp said that the real distinction is that Courts have "an air of detachment". Ratio |
But this is more a matter of age and tradition and is not of the essence. Ratio |
Many tribunals, in recent years, have acquitted themselves so well and with such detachment as to make this test insufficient. Ratio |
Lord Sankey, L.C. in Shell Company of Australia vs Federal Commissioner of Taxation (1) observed: "The authorities are clear to show that there are tribunals with many of the trappings of a Court, which, nevertheless, are not Courts in the strict sense of exercising judicial power. PRE |
In that connection it may be useful to enumerate some negative propositions on this subject: 1. PRE |
A tribunal is not necessarily a Court in this strict sense because it gives a final decision. PRE |
Nor because it hears (1) [1931] A.C.275.363 witnesses on oath. PRE |
Nor because two or more contending parties appear before it between whom it,, has to decide. PRE |
Nor because it gives decisions which affect the rights of subjects. PRE |
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