Moqbul Ahmed and another (Appellants)
Ahmed Impex (Pvt.) Ltd. and ors. (Respondents)
ATM Afzal CJ
Mustafa Kamal J
Latifur Rahman J
Md. Abdur Rouf J
May 20th, 1996.
Cases Referred to-
Dacca Jute Mills Ltd. vs Satish Chandra Banik, 19 DLR 735; Jabed Ali Sarkar vs. Dr. Sultan Ahmed, 26 DLR 196; (Whatson vs Winch (1916)1 KB 688).
Dr. M. Zahir, Senior Advocate, instructed by Sharjfuddin Chaklader, Advocate-on -Record —For the Appellants.
M. Nurullah, Senior Advocate, instructed by Shamsul Haque Siddique, Advocate-on -Record—For the Respondents.
Rafique-ul-Huq, Senior Advocate — Amicus Curiae.
Civil Appeal No. 20 of 1995.
(From the Judgment and Order dated 12-7-94 passed by the High Court Division in Company Appeal No. 1 of 1993).
Mustafa Kamal J: This appeal by leave raises a point of law of public importance, namely, whether a decision of a Single Company Judge under section 38 of the Companies Act, 1913 (rectification of share register) is appealable to a Division Bench of the High Court Division. The appellants filed an application under section 38 of the Companies Act for rectification of share register which was allowed by the learned Company Judge of the High Court Division in Matter No. 34 of 1989 by judgment and order dated 13-8-92. The respondents preferred an appeal, Company Appeal No. 1 of 1993, before a Division Bench of the High Court Division which, by judgment and order dated 12-7-94, allowed the appeal and set aside the judgment and order of the learned Company Judge.
2. Leave was granted to the petitioner appellants, inter alia, to consider the appellants submission that the appeal before the Division Bench was incompetent.
3. On this all important question o elaborate arguments were advanced by Dr. M. Zahir, learned Counsel for the appellants and by Mr. M.Nurullah, learned Counsel for the respondents. Mr. Rafique-ul-Huq, learned Counsel, appeared as Amicus Curiae and made elaborate submissions on this point.
4. Facts of the case have receded into the background because of the preponderance of the question of law involved in this case, but since all decisions are based on facts, a short recounting of the facts will necessary question of law involved in this case, but since all decisions are based on facts, a short recounting of the facts will be necessary.
5. The appellants’ case in their application under section 38 of the Companies Act, 1913 was, that appellant Nos. 1 and 2 are husband and wife. Deceased respondent Tofayel Ahmed (now substituted by his heirs respondent Nos. 2-9) was the younger brother of appellant No. 1. Respondent No. 2 herein is Tofayel Ahmed’s wife. She was respondent No. 3 in the petition before the Company Judge. In the said petition respondent No. 4 was the wife of another younger brother of appellant No. 1. The appellants and the said respondents formed a Private Limited Company limited by shares, namely, Ahmed Impex (Pvt) Ltd., Chittagong which was incorporated under the Companies Act. The authorised capital was Taka 20 lakh divided into 20,000 shares of Taka 100.00 each. Subscribed capital consisted of 500 shares of Taka each fully paid-up. Except deceased Tofayel Ahmed who owned 200 shares, all other share-holders held 100 shares each. Appellant No. 1 was appointed permanent Chairman of the company and deceased Tofayel Ahmed became its Managing Director. The Company was formed in 1978, but in 1987 deceased Tofayel Ahmed filed with the Registrar of Joint Stock Companies a list of share-holders upto 15-7-87 showing himself to be the holder of 900 paid-up shares, his wife respondent Ab Na 3 (respondent No. 2 herein) as the holder of 200 paid-up shares and his minor son respondent No. 5 (respondent No. 3 herein) as the holder of 100 paid-up shares, further disclosing that appellant No. 1 transferred his 100 shares to Tofayel Ahmed’s wife the and that appellant No. 2 transferred her 100 shares to on the said minor son of deceased Tofayel Ahmed, all an on 3-1-87. The names of the appellants were accordingly excluded from the register of shareholders of the company. The appellants contended that they did not transfer their shares either to the wife or to the minor son of deceased Tofayel Ahmed who fraudulently omitted the appellants’ names from the register of share-holders. Appellant No. 1 being elder brother reposed faith in deceased Tofayel Ahmed, the company being a family concern and appellant No. 1 was always kept in the dark about the affairs of the company. On 16-11-86 deceased Tofayel Ahmed obtained signatures of the appellants upon some blank forms, stamp papers and other papers and also received the appellants’ original share certificates on the representation that a loan for the company was to be secured from a bank against was the said papers. He gave an undertaking (Ext. A) to that effect. By way of assurance for payment of the share of profits he gave an undated cheque for Taka 5,00,000.00 in favour of appellant No. 1 giving out that there was an arbitration proceeding between the company and the Power Development Board on determination of which he expected to finalise the accounts and make all payments. Appellant No. 1 granted a receipt in acknowledgement of the cheque. In August, 1988 appellant No. 1 came to learn that Tofayel Ahmed converted the documents and papers containing the signatures of the appellants into a valuable security and got their 200 shares transferred in the names of his wife and minor son. Appellant No. 1 asked for return of the share certificates and other papers but Tofayel Ahmed did not comply with the same. The appellants therefore prayed for other rectification of the share register restoring the ownership of appellant No. 1 and appellant No. 2 to their 100 shares each and directing that the shares of Tofayel Ahmed be reduced by 100 shares and that the name of respondent No. 5 (respondent No. 3 herein), the minor son of Tofayel Ahmed, be struck off.
6. Shortly after service of notice of the said self to be application original respondent No. 2 Tofayel Ahmed died and in his place his wife respondent No. 3 (respondent No. 2 herein) became the Managing Director of the company. On behalf of the company, respondent No. 1, her minor son and on her behalf she filed an affidavit-in-opposition denying the appellants’ claim and stating that the appellants on 16-11-86 verbally agreed to transfer their shares and resigned from the directorship if an undated cheque for Taka 5,00,000.00 be given to them representing the value of their shares and claim on appellants profits in the business of the company and they promised to return the cheque for an equivalent cash amount when the company would receive full amount of its claim from the Power Development Board. Accordingly, an undated cheque for Taka in deceased 5,00,000 was handed over to appellant No. 1. The appellants however went on pressing for kept in the immediate payment of the cash consideration of their shares and claim on profit. Eventually the appellants settled for a cash of Taka 5,60,000.00 and transferred their shares to the wife and minor son of Tofayel Ahmed and resigned from the directorship on 31-12-86 upon receipt of the said amount in cash. In due time they executed two instruments of transfer of shares in favour of the wife and minor son of Tofayel Ahmed and two receipts for cash consideration and handed over their origin share certificates to the transferees. They also wrote letters to the company relinquishing their directorship and appellant No. 1 himself executed an acknowledgment dated 31-12-86 for the receipt of the cash consideration upon a non-judicial stamp. The transfer of shares and resignation of the appellants from the directorships were accepted at a meeting of the Board of Directors held on 3-1-87 when the appellants were present.
7. The appellants examined appellant No. 1 himself as PW 1, a handwriting expert as PW 2 and the respondents examined 3 witnesses including respondent No. 2 herself.
8. While the learned Company Judge allowed the application of the appellant, the Division Bench on appeal rejected their application, mainly on an appreciation of the evidence on record.
9. The main issue is as to whether an appeal lies from the decision of a Single Company Judge of the High Court Division to a Division Bench of the same Division, Dr. M. Zahir, learned Counsel for the appellants made elaborate submissions and argued that no such appeal lies, which was supported by an able and exhaustive submission by Mr. Rafique-ul-Huq, learned Counsel, who appeared as Amicus Curiae. Mr. M. Nurullah, learned Counsel for the respondents, feebly tried to argue that an appeal lies but ultimately veered round the points of view of Dr. M. Zahir and Mr. Rafique-ul-Huq.
10. Section 2(3) of the Companies Act, 1913 defines the words “the Court”. It says, “the Court” means the Court having jurisdiction under this Act”. Section 3(1) of the Companies Act provides as follows:
“3. (1) The Court having jurisdiction under this Act shall be the High Court Division:
Provided that the Government may, by notification in the official Gazette and subject lo 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 regards the jurisdiction so conferred, be the Court in respect of all companies having their registered offices in the district.”
11. Uptill now the Government has not empowered any District Court to exercise any of the jurisdiction under the Companies Act and the High Court Division remains the only Court having jurisdiction under the Companies Act.
12. The provision for appeal against the power of the High Court Division to rectify the share register under section 38 of the Companies Act, is provided in the proviso to section 38(3) which is as follows:
“Provided that the Court may direct an issue to be tried in which any question of law may be raised; and an appeal from the decision on such an issue shall lie in the manner directed by Code of Civil Procedure, 1908, on the grounds mentioned in section 100 of that Code.”
13. Throughout the Companies Act, 1913, however, it has nowhere been indicated as to where and in which forum the appeal will lie when the Court exercising its jurisdiction under this Act is a Single Company Judge of the High Court Division.
14. Section 151 of the Companies Act, 1913 confers power on the Government to make rules providing for all or any matters which by this Act are to be prescribed by its authority. The Companies Act does not make the Government the authority to prescribe the appellate forum and the Government has also framed no rules as far as the appellate forum is concerned.
15. Section 246 of the Companies Act, 1913 empowers the Supreme Court to make rules from time to time consistent with this Act and the Code of Civil Procedure, 1908, but the rule making-power of the Supreme Court does not extend to providing an appellate forum from the decision of a Single Company Judge of the High Court Division acting under section 38 of the Act. The Calcutta High Court framed rules under the powers conferred under section 246 of the Companies Act 1913 as amended by the Indian Companies (Amendment) Act (Act XXII of 1936). These rules are called Rules under the Companies Act, 1939. These rules had been adopted by the erstwhile Dhaka High Court and continue till today, but nowhere in these rules any appellate forum has been provided from a decision of a Single Company Judge acting under section 38, nor could the Rules so provide in the absence of a specific rule making authority in this behalf under section 246 of the Companies Act.
16. As both the Companies Act, 1913 and the Rules framed thereunder are silent as to where the appeal lies from a decision of a Single Company Judge acting under section 38, a practice has developed to prefer an appeal to a Division Bench of the then Dacca High Court and now to the High Court Division, on reliance upon Rule 1 of Chapter XXXI of the Original Side Rules which provides as follows:
“1. Appeals from the judgment of a Judge sitting on the Original Side shall be heard by a Division Bench (in this Chapter called “The Appellate Court”) consisting of two or more Judges as the Chief Justice may determine.”
17. It may be stated that the Original Side Rules were framed by the Calcutta High Court in exercise of powers conferred upon the Calcutta High Court under clause 37 of the Letters Patent, 1865. The erstwhile Dacca High Court and later High Court Division inherited the Original Side Rules as long as Letters Patent, 1865 was in the statute book.
18. Various controversies raked the higher Courts of the then Pakistan as to whether Rule 1 of Chapter XXXI of the Original Side Rules are at all applicable to a proceeding under the Companies Act. As far back as in 1967 Murshed, CJ of the erstwhile Dacca High Court delivering the judgment of a Division Bench in the case of Dacca Jute Mills Ltd. vs Satish Chandra Banik, 19 DLR 735, observed that matters decided under the Act by a Single Bench are not disposed of in the exercise of the ordinary original civil jurisdiction of this Court which has not yet exercised such jurisdiction. This Court (meaning the then Dacca High Court) does not exercise any ordinary original civil jurisdiction, although it has powers to do so, after necessary formalities, in connection therewith, have been complied with. Cases under the (Companies) Act are decided by way of a special statutory jurisdiction conferred upon this Court by the Act itself. It would be a misnomer to describe such jurisdiction as ordinary original civil jurisdiction. The reported case was a Company Matter under sections 76(3) and 79(3) of the Companies Act and Murshed, CJ held that a judgment given by a Single Company Judge on such matters is not a “judgment” within the meaning of clause 15 of the Letters Patent, 1865. As such, among other reasons, the Division Bench held that the appeal from a Single Company Judge to a Division Bench was incompetent. Murshed, CJ further observed:
“As we have stated above, this High Court derives jurisdiction to try matters relating to the Companies Act under the provisions of section 3 of the Act itself, and not under the Letters Patent. The necessary corollary, therefore, is that such jurisdiction must be exercised subject to the provision of the Act with regard to appealable or non-appealable orders made thereunder. A special jurisdiction must be subject to a special code relating to appeals as provided by the statute which creates the said jurisdiction. The law which must govern the situation is the Companies Act itself. To our mind, this is a point which settles the question. A special law must prevail over what is general law, even if it is held that the general law, as enunciated by clause 15 of the Letters Patent, provides for such an appeal.”
19. The above decision was followed by a Division Bench of the High Court Division in 1973 in the case of Jabed Ali Sarkar vs. Dr. Sultan Ahmed, 26 DLR 196, but taking a view that the dispute between the parties is over a question of title under section 38 of the Companies Act the appeal was directed to be admitted under section 38 of the Companies. Act. With respect, the ultimate decision does not accord with the earlier decision of the Division Bench that the letters patent appeal under clause 15 of the Letters Patent does not lie to a Division Bench.
20. Whether the letters patent appeal to a Division Bench lies or not is now a purely academic question because the Letters Patent, 1865 has been repealed by section 3 of the Law Reforms Ordinance, 1978 (Ordinance No. XLIX of 1978) as follows:
“3. Repeal of Letters Patent. –The Letters Patent insofar as they may have any application in relation to Bangladesh, or to, or in respect of jurisdiction, power and authority of, the Supreme Court of Bangladesh are hereby repealed.”
21. Maxwell says in his book, On the Interpretation of Statutes (12th Edition) at page 18,
“When an Act is repealed, any delegated legislation made under the Act falls to the ground with the statute unless it is expressly preserved (Whatson vs. Winch (1916) 1 KB 688).”
22. The Original Side Rules framed by the Calcutta High Court under Clause 37 of Letters Patent, 1865 have not been preserved by the Law Reforms Ordinance, 1978. The Original Side Rules therefore have no existence now in the eye of law. Therefore there can be no manner of recourse to Rule 1 of Chapter XXXI of the Original Side Rules for preferring an appeal to a Division Bench from the decision of a Single Company Judge under section 38 of the Companies Act, 1913.
23. Now the question is, where the appeal lies and on what grounds.
24. It the District Courts are specially empowered under the proviso to section 3(1) of the Companies Act, 1913 to exercise all or any of the jurisdiction under the Companies Act conferred upon the Court, then an appeal will lie to the Court having the pecuniary jurisdiction to hear appeals from the decision of the District Court and the ground of appeal shall be limited to the grounds mentioned in the proviso to Section 38(3) of the Act.
25. But when a Single Company Judge of the High Court Division is exercising the power under section 38 of the Companies Act an appeal from its decision has to be taken by way of leave to the Appellate Division under Article 103(1) of the Constitution. The grounds of appeal mentioned in the proviso to section 38(3) of the Companies Act are not binding on the Appellate Division exercising its constitutional jurisdiction under Article 103(1) of the Constitution, because a subordinate legislation like Companies Act cannot prevail over the constitutional provisions. The Appellate Division may or may not grant leave on any ground or grounds whatsoever.
26. That being the position under the law as it stands today ‘ do not propose to deal with the elaborate submissions made by Dr. M. Zahir with regard to the merit of the decision of the Division Bench, namely, that in any view of the matter the Division Bench exceeded its jurisdiction in entertaining an appeal against the entire judgment of the learned Company Judge without regard to the proviso to section 38(3) of the Companies Act and that the Division Bench also decided certain question of fact wrongly, because we take the impugned judgment of the Division Bench to be non est, having been passed completely without jurisdiction, a classic case of coram non judice.
27. Mr. M. Nurullah has however argued that the learned Single Company Judge has erred variously in disposing of the matter, in that Ext the undertaking, was not scrutinised with a view probing its genuineness insofar as it was signed by deceased Tofayel Ahmed on 16-11-86 on a letterhead which on the very face of it was a letterhead used during the seventies. The elaborate precautiousness of Ext. A was not considered to determine whether it was subsequently created. Ext. A was not considered in juxtaposition with Ext. A(1), also signed by deceased Tofayel Ahmed on 16-11-86 on a fresh letterhead which was in use by the company in the eighties. The learned Company Judge did not ask itself as to why two different letterheads were used a on the same date by late Tofayel Ahmed, when one letterhead was in disuse and the other was in use. Mr. Nurullah further submits that the debit vouchers Exts. I and J were disbelieved on mere surmise and not on the evidence on record. He also submits that the learned Company Judge did not deal with Ext. 3, a written statement filed by the appellants in a money suit in which they clearly acknowledged on 10-6-87 that they resigned from the directorship of the company and transferred their shares to others and had no connection with the company any more. Also he submits that the learned Company Judge did not correctly construe Ext. 10 a written objection filed by late Tofayel Ahmed on 16-3-89 in a suit.
28. Dr. M. Zahir, on the other hand, takes a stand on law and submits that the sheet anchor of the appellants’ case, namely, Exts. I and J, debit vouchers, showing payment of Taka 5,60,000.00 to the appellants in consideration of the sale of shares to the wife and minor son of late Tofayel Ahmed and profits, are legally unentertainable documents because these vouchers show that it is the company which made payments to the appellants. A company, he submits, cannot purchase the shares of its share-holders on payment from its own fund. If the appellants had taken or borrowed money from the company they are liable to pay back the amount to the company but payment by the company to appellants does not at all establish the sale of shares to the wife and minor son of late Tofayel Ahmed.
29. All these submissions and counter submissions on the merit of the judgment of the learned Company Judge have been heard by us with a view to seeing whether the respondents have a case for obtaining a leave from this Court even at this stage from the decision of the learned Single company Judge. We express no opinion on the submissions and counter-submissions of the two sides which we may consider if an application for leave to appeal is filed by the respondents against judgment and order of the learned Single Company Judge, if so advised.
The appeal is therefore allowed without any order as to costs.
Source: 48 DLR (AD) (1996) 82