Abdul Mohit and others Vs. Social Investment Bank Ltd & ors.

Abdul Mohit and others (Petitioner)

Vs.

Social Investment Bank Ltd & ors. (Respondent)

Supreme Court

Appellate Division

(Civil)

Present:

Mohammad Fazlul Karim J

Syed J.R. Mudassir Husain J

Abu Sayeed Ahammed J

Md. Fazlul Haque J

Judgment

November 3, 2002.

Cases Referred To-

British India Corporation vs. Robert Menzies, 1936 Company Cases 250; Kishore Y. Patel Vs. Patel Engineering Co Ltd., AIR 1992; Md. Shamsuzzaman Khan Vs. M.S. Islam and others, 28 DLR 101; Chahia Fibre Co vs. Abdul Jabbar 20 DLR (SC) 335.

Lawyers Involved:

Shafique Ahmed, Senior Advocate (A.K.M. Nazrul Islam, Senior Advocate and Rafiqul Islam Mehdi, Advocate with him), instructed by A.K.M. Shahidul Huq, Advocate-on-Record- For the Appellants (In both the appeals) 

Raflque-Ul-Huq, Senior Advocate (Zafarullah Chowdhury, Advocate with him), instructed by Md. Ataur Rahman Khan, Advocate-on-Record- Respondent No. 4 (In both the appeals) 

Ex-parte- Respondent Nos.1-3 and 5 (In both the appeals)

Civil Appeal Nos. 93 and 94 of 2002

(From the judgment and order dated 11th December 2001 passed by the High Court Division in Matter Nos.78 and 86 of 2001).

Judgment:

                 Mohammad Fazlul  Karim J.-These appeals by leave arose out of the impugned judgment and order dated 11th December, 2001 passed by the learned Company Judge of the High Court Division dismissing the Company Matter Nos.79 and 86 of 2001 holding the same to be not maintainable in the Company Court rejecting an application for direction upon the respondents to serve notice of Board meeting to the appellants-Directors in compliance of section 95 of the Companies Act, 1994 to enable the appellants to attend the meeting of the Board of Directors of the respondent no. 1 Social Investment Bank Ltd. The appeals involve same question of law on the self-same fact and disposed of by the same judgment by the High Court Division, and have been taken up together for hearing and accordingly, disposed of by this single judgment.

2. The facts relevant for disposal of these appeals are as under:-

The said applications were filed in the High Court Division stating, inter alia, that the Social Investment Bank Ltd. hereinafter called “the Bank” was incorporated under the Companies Act with 4 types of directors namely, Group-A Bangladesh sponsor directors, group-B foreign sponsor directors, Group-C Government nominated directors and Group-D member of general public. The Bank had four foreign sponsor-directors in Group-B, who live outside Bangladesh namely, Mr. Ahmed Saleh jamjoom, Mr. Md. Aminuddin, Dr. Abdullah Omar Naseef and Dr. Hamid Al Gabid holding shares at 7592, 4492, 449 and 1997 respectively. At present the Bank has three foreign sponsor-directors in Group-B namely, Mr. Ahmed Saleh Jamjoom, Mr. Abdullah Omar Naseef and Dr. Hamid Al Gabid, who were re-elected as directors in the 5th Annual General Meeting of SIBL held on 1st August, 2000. In the said Annual General Meeting it was resolved that the Board of Directors would nominate 5 persons to represent the said foreign sponsor-directors as alternate directors (Annexures-B-B-1). Accordingly, in the Board of Directors of the Bank the appellant No.1, Abdul Muhit, appellant No. 2, Major (Rtd.) Ekhtiar Hossain, appellant no. 3, Dr. Ataur Rahman Talukder, appellant no.4,Nargis Mannan and one Abul Bashar Bhuiyan were nominated to represent the  original directors (Annexure-C). Since then the appellants as alternate directors had been receiving notices for attending meetings of Board of Directors. But by four separate letters dated 8.5.2001 the Bangladesh Bank directed the appellants under section 45 of the Banking Companies Act not to act as alternate directors (Annexure-E, E-1, E-2 and E-3) and pursuant to that direction the Bank, the respondent no.1, also issued letters dated 9.5.2000 asking the appellants not to act as alternates to the foreign directors (Annexures-F to F-3). Being aggrieved by the said letters of Bangladesh Bank dated 8.5.2001 and of the Bank dated 9.5.2001 the appellants separately filed writ petition Nos.1889 of 2001, 1873 of 2001, 1872 of 2001 and 1871 of 2001 and obtained Rules and ad-interim orders staying the operation of Bangladesh Bank’s letters dated 8.5.2001 but no stay was given against the letters of the Bank (Annexure G, G-1, G-2 and G3) pending hearing of the rule. On the basis of the stay order in the aforesaid writ petitions, two Board Meeting of the Bank were held on 8.7.2001 and 11.7.2001 without giving any notice to the appellants. The appellants, however, managed to obtain copies of the said notices (Annexures-H and I). Despite the Court’s order of stay, the Bank at the initiative of its present Chairman illegally called 64th Board Meeting on 8.7.2001 (Annexure-J) and in that meeting a resolution was adopted to cancel the directorship of the aforesaid original directors. Upon receiving the information about holding of the Board Meeting on 8.7.2001, the appellants went to attend the meeting but the Chairman of the Bank did not allow them to attend it. Thereafter, the appellants separately moved Contempt Petition Nos. 73, 74, 75 and 72 of 2001 against the respondents for violating the order of stay dated 21.6.2001 and rules were issued directing the Chairman and Managing Director of the Bank to show cause as to why contempt proceedings should not be drawn up against them (Annexure-K, K-1, K-2 and K-3). The respondents again called a meeting of the Board of Directors on 25.8.2001 without giving notices to the appellants, though they were entitled to such a notice as the Bangladesh Bank’s direction has been stayed by an order of the Court. Therefore, the appellants moved this application on the last day before summer vacation and the matter was admitted. By an order dated 23.8.2001 the Court stayed the meeting of the Board of Directors of the Bank scheduled to be held on 25.8.2001 and all other meetings to be held later on.

3. In Matter No.78  of  2001  an application was filed tinder section 95 read with section 233 of the Companies Act for allowing the appellants to attend the meeting of the Board of Directors and in Matter No.86 of 2001 the application was filed under section 95 read with Article 72 of the Memorandum of Articles of Association.

4. The matters have been contested by respondents stating, inter alia, that the Directors of the Bank are not classified into four groups as contended by the appellants. All the four foreigners mentioned in the petition are no longer directors of the Bank as they have vacated their office by reason of absence from Board meetings for a continuous period of three months and/or for not attending three consecutive Board meetings under section 108 of the Companies Act, 1994 read with Article 82 of the Articles of Association of the Bank. The office of the above mentioned directors falling vacant was confirmed in a resolution at the 64th Board meeting of the Bank held on 8.7.2001 (Annexure-J). Consequently the appointment of the appellants as alternate directors are no longer valid. Section 101(2) of the Companies Act provides that an alternate director appointed under sub-section (1) shall not hold office for a period longer than that permissible to the original director in whose place he has been appointed and shall vacate the office. Sub-section (3) further provides that if the term of the original directors is determined, any provision for reappointment of retiring directors in default of another appointment, shall apply to the original and not to the alternate directors. The last Annual General meeting in which the original directors retired and got re-elected was held on 1.8.2000 but there was no authorisation from the original directors for the appellants to act as alternate directors for them. The appellants also by letter dated 3.12.2000 admitted that they have been holding the appointment as alternate directors for the original directors since 1997 on the basis of letter issued in the year 1997 (Annexure-X, XI, X2 & X3). Since there was no fresh nomination from the original directors in favour of the appellants after their election as directors there was no appointment of the appellants as alternate directors. The annual general meeting has no authority tinder the law and the Articles of Association to appoint alternate directors and as such the proceeding of the AGM held on 1.8.2000 is to that extent ultra vires the section 101 of the Companies Act. There was no need for such a resolution to be passed in the AGM as the Articles have authorised the Board to appoint an alternate director for a director who is absent for more than 3 months. Therefore, the Board resolution dated 1.8.2000 in respect of appointment of alternate directors is not valid. It was merely a rectification of the appointment of alternate directors by the Annual General Meeting, which had no authority to make such an appointment. In the circumstances, by the retirement and the re-election of the original directors at the 5th Annual General Meeting the alternate directors were not automatically re-appointed.

5. The learned Company Judge rejected the application with direction:-

“that the Companies Act specifically provided the jurisdiction of the Company Court to be applied under specific provisions the Court does not have any general, plenary or residuary jurisdiction to deal with other matters and questions arising under the Companies Act. Section 95 does not specifically provide jurisdiction to this Court. Therefore, the only remedy available to the petitioners is the Civil Court and not this Court.”

6. Leave was granted upon the submission of the learned Counsel as to whether  considering the applications made to the Company Court under the substantive provision of the Companies Act, the Company Court is entitled to exercise its inherent jurisdiction wherever there is manifest breach of law and Article to  prevent  injustice and the provisions of the Companies Act are not subservient to proceedings in any other forum and pendency of civil litigation is held to be no bar to initiate proceedings under the Companies Act inasmuch as section 3 of the Companies Act has not barred rather gives certain jurisdiction to High Court in order to resolute dispute under  the Companies Act under its original jurisdiction. Though section 9 of the Code  of  Civil Procedure gives jurisdiction to Civil Court to try all civil dispute unless they are expressly or impliedly barred but in view of the provision of section 3 of the Companies Act direction by the Company Court could be given to enforce the provision of section 95  of the Companies Act to resolve the dispute which is not a civil dispute but to enforce the said provision under inherent jurisdiction inasmuch the said dispute not being a civil dispute has not barred the jurisdiction of the Company Court.

7. Mr. Shafique Ahmed, the learned Counsel appearing for the appellants has submitted with reference to the order granting leave that the right that has been sought to be enforced in an application under section 95 of the Company Act is a right conferred by the Companies Act i.e. a right secured to the director under the Act to get a notice of the Board’s meeting and if the same is denied the appellant has right to move the High Court Division to vindicate his right inasmuch as section 95 of the Companies Act specifically provides that the High Court Division unless otherwise provided by gazette notification the dispute not being a civil dispute the Court could direct issuance of a notice which the appellant is entitled in law, the learned Judge of the High Court Division erred in law in holding that these applications are not maintainable before the Company Court inasmuch as the Court lost sight of inherent jurisdiction to see compliance or due observance of mandatory provision of Company Act while considering the application made to it under section 95, a substantive provision of the Company Act.

8. Mr.Rafique-Ul-Huq, the learned Counsel appearing for the respondents has, however, submitted that the issuance of a notice under section 95 of the Companies Act not being a substantive provision of the Company Act and there is no reference to the Court i.e., the High Court Division for enforcement of the right to receive the notice, the Company Court could not exercise its inherent jurisdiction. The learned Counsel has further submitted that section 95 of the Company Act is not an enactment conferring jurisdiction on the High Court Division like other sections in the Companies Act providing for resort to the Court i.e., the High Court Division and as such could not invoke the said provision or complaint regarding non-compliance of the provision of section 95 of the Companies Act.

9. As  regards  the  provision  under section 95  of  the  Companies Act providing notice to be given is a right to be enforced by or /under section 95 of the Companies Act by resorting to the jurisdiction of by the High Court Division or on the Civil Court, the learned Counsel for the appellants has referred to a decision in the case of British India Corporation Vs. Robert Menzies reported in 1936 Company Cases 250 wherein a special Bench held that “the Courts referred in section 3 of the Company Act have inherent jurisdiction to compel due observance of the mandatory provisions of the Act and thus the Company Judge, therefore, order a company to deliver to a shareholder a copy of its register of members on payment of copying charges even though there is no express provision in the Companies Act authorising the Court to make such an order”.

10. The learned Counsel has referred to a decision in the case of Kishore Y. Patel vs. Patel Engineering Co Ltd reported in AIR 1992 Bombay 114 wherein it has been held that Rule 9 of Companies (Court) Rules 1959 has to be interpreted in the light of the enabling provision of section 643 of the Act. While considering applications made to the Company Court under the substantive provisions of the Act, the Company Court is entitled to mould the relief and exercise its inherent jurisdiction whenever found necessary to prevent injustice.

11. Mr.Rafique-Ul-Huq, the learned Counsel appearing for the respondents has, however, submitted  that  the application  under section  95 of  the Companies Act is not a substantive one but a procedural one and with reference to rule 10 of Companies Rules providing for substantive provision authorising the Court to assume jurisdiction to decide the disputes inasmuch as sub-section (3) of section 233 of the Companies Act provided that the remedy sought could be given by the Court under section 2D of the Companies Act but the learned Judges have lost sight of the said provision in the case of British India Corporation Co V Mengies that under section 95 of the Companies Act, no inherent power could be resorted to ever for any relief by the Company Judge, for the Company Court could not invoke the provision of section 151 of the Code of Civil Procedure regarding enforcement of the provision of section 95 itself.

12. Mr.Rafique-Ul-Huq has next submitted that section 3 of the Companies Act mentioned about the Court having power under its statutory jurisdiction and referred to a decision in the case of Dhaka Jute Mills Ltd and others Vs.  Satish Chandra Banik reported 19 DLR 735 which arose out of an application under section 76(3) and 79(3) of the Companies Act wherein it has been held that the High Court Division does not exercise any ordinary original civil jurisdiction and cases under the Companies Act are decided by way of special statutory jurisdiction conferred upon the High Court Division by the Act itself and it would be a misnomer to describe such jurisdiction as ordinary original civil jurisdiction.

13.Mr.Rafique-Ul-Huq has next referred to a decision in the case of Md. Sharnsuzzaman Khan Vs. M.S. Islam and others reported in 28 DLR 101 and submitted that section 3 of the Companies Act only gives certain jurisdiction to the High Court for resolution of the disputes under Companies Act under its original jurisdiction and section 9 of the Code of Civil Procedure has expressly provided that all civil disputes should be tried by civil Courts unless the jurisdiction is expressly or impliedly barred and in that view of the matter the relief under section 95 of the Companies Act cannot be grounded on any provision under the Companies  Act in order to  take  the dispute to the jurisdiction of the company court and has relied also upon a decision in the case of Chahia Fibre Co Vs. Abdul Jabbar reported in 20 DLR (SC) 335 wherein Mr. Hamoodur Rahman, J. as his Lordship then was stated that:

“It is a well-settled rule that the ouster of jurisdiction of a civil Court in respect of a civil suit is not to be readily inferred. Unless that jurisdiction has been either expressly or impliedly taken away by some other law it will continue to vest in the civil Court.”

14. Section 2(a) of the Companies Act 1994 provides that ‘the Court means the Court having jurisdiction under this Act. Section 3 of the Companies Act provides that the Court having jurisdiction under this Act shall be the High  Court Division provided that the Government  mail, by notification in the Official Gazette and subject to such restrictions and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction by this Act conferred upon the Court, and in that case such District Court shall, as regard the jurisdiction so conferred, be the Court in respect of all companies having their registered office in the district.

15. Section 2(g) of the Companies Act 1994 provides that “District Court” means the Principal Civil Court of original jurisdiction in a district, but does not include the High Court Division in the exercise of its ordinary civil jurisdiction.

16.  Even by analogy to Rule 9 of the Companies Rules 2000 which has not yet been given effect to which provides that:

“In all Courts having jurisdiction under this Act shall be kept and maintained a book called “the Register of Company Matters” in which shall be entered and numbered serially all applications made under sections 13,15, 41, 43, 59, 71, 81, 82, 85,89,115,151,153,171, 175,176, 193, 203, 228, 229, 230, 231, 233, 245, 248, 251, 253, 255, 258, 259, 261, 262, 263, 264, 265, 293, 294, 296, 299, 300, 301, 302, 303, 305, 309, 311, 312, 314, 316, 326, 328, 331, 333, 338, 339, 340, 342, 346, 349, 395, 396 and any other original proceeding under the Act in relation to a company.”

17. The said Rule though has not yet given effect to but goes to show that the jurisdiction arising out of any dispute regarding section 95 of the Companies Act is not conferred on the High Court Division but the disputes being a civil dispute the ordinary civil Court namely, District Court has been vested with the jurisdiction.

18. From the above discussion, it is dear that unless section 9 of the Code of Civil Procedure bars the jurisdiction of the Civil Court expressly or impliedly under any enactment, the said provision gives jurisdiction to file a suit/litigation of any civil nature in any civil Court of competent jurisdiction. Thus section 95 of the Companies Act providing no forum thereunder, any dispute arising thereto is to be resolved as a civil dispute resorting to the ordinary civil Court of competent jurisdiction and as such the inherent jurisdiction under the Companies Act in the absence of any specific provision therein would not be invoked to enforce the provision of section 95 of the Companies Act, as the said provision is providing procedural matters only and not substitutive provision. It is also clear that under section 95 of the Companies Act, the High Court Division could not also invoke the provision of section 151 of the Code of Civil Procedure sitting as a Company Court under the Companies Act, 1994.

19. In view of the above, we do not find any substance in the submission of the learned Counsel for the appellants for our interference with the impugned order.

These appeals are accordingly dismissed without any order as to costs.

Ed.

Source : 61 DLR (AD) (2009) 82

Disclaimer:

The information contains in this web-site is prepared for educational purpose. This site may be used by the students, faculties, independent learners and the learned advocates of all over the world. Researchers all over the world have the access to upload their writes up in this site. In consideration of the people’s participation in the Web Page, the individual, group, organization, business, spectator, or other, does hereby release and forever discharge the Lawyers & Jurists, and its officers, board, and employees, jointly and severally from any and all actions, causes of actions, claims and demands for, upon or by reason of any damage, loss or injury, which hereafter may be sustained by participating their work in the Web Page. This release extends and applies to, and also covers and includes, all unknown, unforeseen, unanticipated and unsuspected injuries, damages, loss and liability and the consequences thereof, as well as those now disclosed and known to exist.  The provisions of any state’s law providing substance that releases shall not extend to claims, demands, injuries, or damages which are known or unsuspected to exist at this time, to the person executing such release, are hereby expressly waived. However the Lawyers & Jurists makes no warranty expressed or implied or assumes any legal liability or responsibility for the accuracy, completeness or usefulness of any information, apparatus, product or process disclosed or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product process or service by trade name, trade mark, manufacturer or otherwise, does not necessarily constitute or imply its endorsement, recommendation or favouring by the Lawyers & Jurists. The views and opinions of the authors expressed in the Web site do not necessarily state or reflect those of the Lawyers & Jurists. Above all, if there is any complaint drop by any independent user to the admin for any contents of this site, the Lawyers & Jurists would remove this immediately from its site.