Companies Act Case Law Satish Chandra Vs Union Of India






1995 AIR 138 1994 SCC (5) 495
JT 1994 (5) 110 1994 SCALE (3)644




The Judgment of the Court was delivered by
HANSARIA, J.- This petition under Article 32 of the
Constitution challenging certain provisions of the Companies
(Amendment) Act, 1988, hereinafter ‘the Act’, by which an
independent Company Law Board (for short ‘the Board’) was
constituted has served its purpose well on framing of the
Company Law Board (Qualifications, Experience and other
Conditions of Service of Members) Rules, 1993, which were
published in the Extraordinary Gazette of Government of
India dated 28-4-1993, followed by amendment of these rules
by notification dated 3-6-1994 which, inter alia,
substituted a new Rule 8 in place of original Rule 8. We
have said so because the provisions of the Act assailed,
namely, Sections 4, 5, 16, 21 and 27 do not suffer from any
constitutional infirmity. The challenge to the aforesaid
sections has, however, been on the ground of legislative
incompetence as well as lack of valid classification in
having conferred the power visualised by Section 397 of the
principal Act on the Board, as would appear from what has
been stated under serial number 14 in the Table to Section
67 of the Act, leaving power under Section 443 with the High
2. The legislative incompetence is sought to be sustained by
Shri Satish Chandra, who has appeared in person, by seeking
to draw some assistance from the decision by a Constitution
Bench of this Court in Sampath Kumar case1. That case has,
however, no relevance because the Administrative Tribunals
which had been set up by the Administrative Tribunals Act,
1985, were taken as substitutes of the High Court, whereas
the Board is not so, which would be apparent from the fact
that an appeal from the orders of Board has been provided to
the High Court by Section 10-F inserted in the principal Act
by Section 5 of the Act, whereas from the judgment and order
of the Administrative Tribunals as set tip by the aforesaid
Act no appeal lies
1 S.P. Sampath Kumar v. Union of India, (1987) 1 SCC 124:
(1987) 2 ATC 82: AIR 1987 SC 386
to the High Court. Moreover, the Administrative Tribunals
Act has even taken away the constitutional power of the High
Courts under Articles 226/227 of the Constitution because of
what has been provided by Article 323-A; and so, this Court
felt called upon to examine the legislative competence of
the Administrative Tribunals Act. The position here is
entirely different. Sampath Kumar case’ is, therefore, out
of bounds.
3. Insofar far as lack of valid classification is
concerned, this argument too has not appealed to us,
because, even according to Shri Satish Chandra the power of
winding up conferred by Section 443 of the principal Act,
which still rests with the High Court, is more drastic. The
submission by learned Additional Solicitor General Shri
Ahmed has, therefore, more merit the same being that as the
winding up power has more serious consequences the same has
been retained with the High Court while clothing the Board
with a less drastic power visualised by Section 397. This
difference does provide a good ground of distinction,
according to us. We are, therefore, not impressed with the
argument of lack of intelligible and acceptable differentia
in having two for a for the aforesaid two purposes.
4. Shri Satish Chandra has taken pains to try to persuade
us to find fault with the provision concerned of the Act
because it does not protect minority shareholders who would
normally like to invoke power of Section 397 inasmuch as
these minority shareholders would be required to approach
benches of the Board which do not function in all the States
as do the High Courts, because of which the minority
shareholders would not be able to obtain relief against the
oppression by the majority. This argument has no teeth in
it inasmuch as Regulation 7 of the Company Law Board
Regulations, 1991 shows that the Benches of the Board are
ordinarily required to have sittings at places mentioned in
sub-regulation (2) these being in Northern, Southern,
Eastern and Western regions. Sub-regulation (1) has further
stated that all proceedings, other than those required to be
before the principal bench under Regulation 4, shall be
instituted before the bench within whose jurisdiction
registered office of the company is situated. It is well
known that registered office of the vast majority of
important companies are either in Calcutta, Bombay, Madras
or New Delhi, which have been named, by sub-regulation (3),
as the places where the regional benches of the Board shall
ordinarily sit. The proviso has further stated that the
bench may, at its discretion, hold its sitting in any other
city or town falling within the region. This type of
litigation has, therefore, been well taken care of by
providing sittings of the, benches in the four metropolitan
cities of the country in which very large percentage of
important companies have their registered offices. The
minority, therefore, need not feel neglected, not to speak
of stifled or suppressed.
5. Only other argument of Shri Satish Chandra which needs
mention is that Parliament itself had once made an
experiment with establishment of such a Board earlier by
enacting Amendment Act of 1963, which experiment did not
succeed because of which the Board came to be abolished in
1967. The failure of the experiment may not be treated
sufficient by Parliament not
to try again. In any case, this is a question relatable to
the wisdom of Parliament which is not amenable to
examination by a court when seized with the
constitutionality of the provision.
6. The petition has, therefore, ceased to be of any
importance because of the aforesaid rules having been famed.
It may be pointed out here that proceedings of this Court
would show that this case was being adjourned from time to
time to enable the Government to finalise the aforesaid
rules which having been done in 1993 and having undergone
amendment in 1994, the grievance about the qualifications of
the members of the Board, about which the Act when enacted
was silent inasmuch as it left the qualifications and
experience to be prescribed, has been well met. So the
petition has served its purpose well, as stated in the
opening paragraph of the judgment. It may be put on record
that the qualifications as amended in 1994 do leave
sufficient room for appointment of persons with judicial
experience as a Judicial Member of the Board. This has not
been disputed by Shri Satish Chandra.
7. In the result, the petition having served its purpose
is required to be closed, which we hereby do. The petition
stands disposed of accordingly.



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