1. This is a petition filed on January 11, 1996, under Sections 111(4), (5) and (6) of the Companies Act, 1956 (hereinafter called "the Act"), by Trade Links Limited (hereinafter called "Trade Links") and three others against Mount Shivalik Breweries Limited (hereinafter called "MSBL") and six others. Subsequent to the filing of the petition two more parties were also impleaded as it transpired that the shares in question which are the subject-matter of the petition now stood in the name of these two impleaded parties.
2. It is an admitted fact that Trade Links and MSBL are public limited companies. It is also admitted that Trade Links was the holder of 1,10,000 equity shares of Rs. 10 each in MSBL which constituted 33.33 per cent, of the total paid-up capital, the total paid-up capital being 33,30,000 equity shares of Rs. 10 each. Petitioners Nos. 2, 3 and 4 are the shareholders in Trade Links and are also members of the MSBL.
3. The complaint of the petitioners is that both Trade Links and MSBL have been part of the group of companies belonging to the Mohan family and the second respondent came to be associated with the family after his marriage with the daughter of the late Shri N. N. Mohan, who founded the family business. Members of the Mohan family and in particular the three sons of the late Shri N. N. Mohan have at all times held controlling interest in all the companies of the family including Trade Links and MSBL.
4. Trade Links has been holding 1,10,000 shares constituting 33 per cent, in MSBL since its incorporation. Coupled with the holding of the other family members the aggregate percentage holding in MSBL by the Mohan family amounts to 58.3 per cent. The family is in complete control of Trade Links with a holding of 89.4 per cent. Thus, the family controls both Trade Links and MSBL.
5. After the marriage in the family, respondent No. 2 was appointed as a director of Trade Links by virtue of the controlling interest of the Mohan family in that company. The family reposed confidence and trust in respondent No. 2 and he was designated as chairman and managing director of Trade Links and MSBL. His position was in the nature of trustee of the family to conduct the affairs of the two companies in the best interest of the companies and its shareholders.
6. During the last three years the family noticed that the two companies were not doing well and as such they enquired from respondent No. 2 the reasons for the bad performance. At this stage according to the petition, respondent No. 2 with the support of respondent No. 3 conspired to take control of MSBL by transferring the 1,10,000 shares held by Trade Links to two private limited companies controlled by respondent No. 2 and his family members thereby increasing his shareholding in MSBL from 9.5 per cent, to 42.5 per cent. The allegation is that respondent No. 2 managed to transfer the shares from Trade Links by a resolution at a board meeting in which only respondent No. 2 and respondent No. 3 were present. According to the petition this transfer has been done with the active connivance of the company secretary of Trade Links.
7. As regards the grounds, the resolution of the board of Trade Links for transfer is invalid because of lack of quorum. Further, the transfers are vitiated by breach of fiduciary duties and trust by respondent No. 2. The transfers have been effected to purposely convert the minority interest of respondent No. 2 in MSBL to majority holding.
The transfers are fraudulent and have been arranged through a broker to conceal the real purchasers. After achieving their clandestine objective respondent No. 2 and respondent No. 3 resigned their directorships in Trade Links. In the circumstances as mentioned above, the registration of the transfer of the above shares by MSBL is wrong and is liable to be rectified, as the name of Trade Links has been deleted without sufficient cause. The petition, therefore, prayed for rectification of the register of members of MSBL and after such rectification to call a general meeting of MSBL under an independent chairman to reconstitute the board. It also prayed for exemplary damages against respondents Nos. 2, 3, 5 and 6.
8. Prior to the filing of this petition the petitioners had also filed before the Principal Bench of the Company Law Board a petition under sections 397 and 398 of the Act wherein also the same facts constituted the subject-matter of the petition. For quite some time the two petitions were considered by a common Bench which constituted the Principal Bench as well as the Northern Bench. During the course of those hearings an interim order also came to be passed restraining the company from transferring the shares further. Certain applications with regard to the annual general meeting were also heard and certain interim orders passed.
9. Subsequently, though directions were issued for completing the pleadings in this case the respondents filed an application, namely, C.A. No. 324 of 1996 on October 8, 1996, raising a preliminary objection and praying for dismissal of this petition as being barred by law.
While denying the allegations in the main petition and reserving their right to file detailed reply the respondents prayed for adjudication of the preliminary issue raised in the application. According to the application the petition is not maintainable in view of the Depositories Act, 1996. This Act which was preceded by the Depositories Ordinance, 1995, promulgated on September 20, 1995, and re-promulgated on March 27, 1996, and August 12, 1996, ultimately became an Act with the assent of the President. By this, the scope of Section 111 of the Companies Act has been restricted to private companies and deemed public companies only. A new Section 111A has been introduced in the Companies Act to bring within its ambit companies other than those covered under Section 111. In the circumstances, all public companies are to be covered by Section 111A and not by Section 111. Thus, as on the date of the petition, there was no law permitting rectification of register of public companies as prayed for in the petition.
10. According to the application in the case of public companies as per the provisions of Section 111, shares or debentures and any interest therein shall be freely transferable. However, the Company Law Board may on an application made by a depository company, participant or investor or the SEBI within two months from the date of transfer of any shares or debentures held by the depository or from the date on which the instrument of transfer or the intimation of transmission was delivered to the company as the case may be, after such inquiry as it thinks fit, direct any company or depository to rectify the register, if the transfer is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992, or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). According to the application, therefore, the transfer can only be challenged on an application made by either (a) a depository, (b) company, (c) participant, (d) investor, or (e) SEBI. This can be done within two months from the date of transfer or from the date on which the instrument of transfer or the intimation of the transmission was delivered to the company as the case may be after such enquiry as it thinks fit. In such a case the Company Law Board may direct any company or depository to rectify the register or records, if the transfer is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992, or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
In the instant case the respondent company is a public company and its shares are freely transferable. According to the Companies Act, the petition cannot lie under Section 111 at all and even assuming without admitting that it can be read as a petition under Section 111A there is no allegation that there is a contravention of the Securities and Exchange Board of India Act or regulations or of the Sick Industrial Companies (Special Provisions) Act. It is further stated that the powers vested in the Company Law Board under Section 111A to enquire into the transfer of shares of a public company arise only if the transfer is in contravention of the Securities and Exchange Board of India Act, 1992 or the SICA and on no other ground though one more ground was added much later. In the absence of the transfer being in contravention of any of the two provisions there is no occasion for investigation into or interference with the transfer of the shares.
Since there is no challenge that the transfer is being in contravention of the two statutes this is not a fit case to be entertained by the Company Law Board. Even otherwise the petition is barred by limitation as it has been filed beyond the period prescribed by Section 111A(3) of the Act. The application, therefore, prayed for dismissal of the petition as being non-maintainable in view of the Depositories Act, 1996, and the corresponding amendment to the Companies Act, 1956. At the stage of arguments, however, this objection regarding limitation was not stressed by the respondent.
11. Arguments were advanced initially by Shri Dushyant A. Dave, senior advocate and subsequently by Ms. Ritu Bhalla, advocate on behalf of respondents Nos. 1 and 2. It was argued that after the promulgation of the Depositories Ordinance, in 1995, the scope of Section 111 of the Act is limited to private companies and deemed public companies only.
Even the provisions of Section 111A(3) as it stood on the date of filing of the petition, namely, January 11, 1996, did not provide for rectification except on transfer of shares and debentures. Even here the rectification can only be ordered by the Company Law Board in case the transfer is in violation of the SEBI Act and regulations or the SICA and for no other reason. In this connection a decision of the Company Law Board, Southern Region Bench in Shashi Prakash Khemka v.NEPC Micon Ltd. [1997] 90 Comp Cas 228 ; [1997] 26 CLA 316 was cited.
Our attention was drawn to para. 2 read with para. 19 of the judgment wherein it was ruled that rectification through the Company Law Board as contained in Section 111(4) is not available in respect of a public company. It is further ruled that any right to move the Company Law Board in respect of a public company could only be under the provisions of Section 111A(3).Canara Bank v. Mahanagar Telephone Nigam Ltd. [1998] 93 Comp Cas 60 ; [1998] 2 Comp LJ 359 to state that the Company Law Board cannot appropriate jurisdiction to itself when it is no longer available with it. Since the power to create or enlarge jurisdiction is legislative in character it cannot be exercised by the court by its order.
13. Shri Dave drew our attention to the Objects and Reasons as set out in the relevant Bill and stated that safe and speedy transfer has been sought to be achieved through the Depositories Act, 1996. Hence, in the case of public companies all impediments to free transferability of shares have been sought to be removed by withdrawing the power of rectification from the jurisdiction of the Company Law Board excepting on transfer and that too in case such transfer is in contravention of the SEBI Act and regulation or the SICA. The advocates also clearly set out the three stages through which the legislation has finally taken the present shape, namely, the Depositories Ordinance No. 4 (which was promulgated three times commencing from September, 1995), the Depositories Act, 1996, and the Depositories (Amendment) Act, 1997.
Since the petition was filed on January 11, 1996, the law as it stood on that day has to be taken into the account. It would not be appropriate to construe any retrospective application of a third ground for rectification, viz., the transfer being in violation of any other law which was added only in January, 1997. This argument was to dispel the petitioner from taking up a plea that a rectification could be considered on the ground of violation of any other law. A distinction was also drawn between retrospective and retroactive statute. While the provisions of the legislation may be retroactive, i.e., to cover the transactions which have taken place before the enactment it cannot have a retrospective effect, i.e., it cannot be deemed to have come into force from a backdate. In this connection, the Supreme Court's observation in Paripoornan (K. S.) v. State of Kerala, AIR 1995 SC 1012, is that an amendment will usually take effect only from the date of its enactment and will have no retrospective effect in the absence of an express intent or an intent clearly implied to the contrary.
Indeed there is a presumption that an amendment usually operates prospectively. The apex court has also observed that a statute dealing with substantive rights differs from a statute which relates to procedures or evidence or is declaratory in nature inasmuch as while a statute dealing with substantive rights is prima facie prospective unless it is expressly or by necessary implication made to have retrospective effect, a statute that concerns mainly matters of procedure or evidence or which is declaratory in nature has to be construed as retrospective unless there is a clear indication that such was not the intention of the Legislature. It was further argued that a declaratory amendment is normally intended to set aside what Parliament considers to be a judicial error in the interpretation of statutes, whereas remedial amendment is an intentional enactment which is not necessarily retrospective. According to the advocates, the amendment in the Depositories Act particularly on January 15, 1997, was remedial in nature and not declaratory. Thus, the argument of the respondents was to confine if at all the consideration of the petition under Section 111A as it stood on January 11, 1996, when a transfer could be challenged only on the basis of violation of the SEBI Act/Regulations and the SICA which have not been alleged at all.
14. It was also argued that the intention of the Legislature is to be gathered from the language used, object intended, the nature of right affected and circumstances in which the statute is enacted. The words of the statute have to be given their clear meaning and plain language.
The golden rule of interpretation is that "when the language is plain and unambigious and admits of only one meaning the courts are bound to give effect to that meaning irrespective of the consequences". It was further stated that "when the language is plain and unambiguous and admits of only one meaning no question of construction of a statute arises for the Act speaks for itself. In this context the following Supreme Court decisions were cited, namely, (a) Nelson Motis v. Union of India AIROswal Agro Mills v. Collector of Central Excise, AIRPrecision Steel and Engineering Works v. Prem Deva Niranjan Deva Tayal, AIR 1982 SC 1518. The respondents, therefore, submitted that the Company Law Board has no jurisdiction to entertain this petition and hence the petition is not maintainable.
15. On behalf of the petitioners, Shri M. G. Ramachandran, Advocate, strenuously argued on the interpretation of Section 111A(3) of the Act.
At the outset he stated that the caption that the petition is under Section 111 is a technical error which needs to be ignored. He stated that he is not insisting that the petition falls under Section 111 but stressed that it certainly falls under Section 111A(3). He stated that Sub-section (3) of Section 111A is not happily worded. On a superficial reading it may appear that the power to rectify the register is there only if there is a contravention of the SEBI Act or regulations or SICA. This would mean that the Company Law Board has no power to direct rectification of the register in other circumstances. According to him this could not be the intention of the Legislature. Such an interpretation would not serve the object and purpose of rectification provisions. Shri Ramachandran traced the history of the rectification provision up to the Companies (Amendment) Act, 1988, under Section 155 and later under Section 111 and stated that it is an important power to maintain the purity of the register of members through a summary procedure. In the absence of such a power substantial time may be spent in civil courts in getting the register rectified.
16. Shri Ramachandran, thereafter, dealt with the object of the Depositories Act, namely, to provide for regulation of depositories in securities and matters connected therewith or incidental thereto. From this the intention of the Legislature is clear, namely, to provide for an automatic registration of transfer of securities with the depository wherever the depository scheme has come into existence. The object as is very clear was not to withdraw/curtail the jurisdiction of the Company Law Board to order rectification. Rectification may be required for any number of reasons not necessarily limited to violation of law.
In this connection he cited at least nine situations where though there is no violation of law rectification is warranted. Hence according to him Section 111A(3) should be interpreted in such a manner that the jurisdiction of the Company Law Board does not cease.
17. Shri Ramachandran also attempted to interpret the sub-section by dividing the provision into two parts, namely, Part 'A', the substantial power of the Company Law Board to direct rectification and Part 'B' the situation when the Company Law Board may allow rectification. Dealing with the three situations, namely, on transfer in contravention of the SEBI Act or regulations or the SICA or any other law he stated that in such situations the application by persons listed therein have to be made within two months. According to him, therefore, the persons who can apply, the time limit in which the application should be made, etc., are relevant in case of transfer in contravention of law as listed out whereas the first part, namely, the general power of the Company Law Board to order rectification--the same is preserved. This interpretation according to him is consistent with the provisions of Section 111(4)(a). He further substantiated the above interpretation in view of the incidental powers which are contained in Sub-sections (5), (7), (9), (10) and (12) of Section 111 which are also applicable to proceedings under Section 111A.18. Keeping in view the background of rectification provisions Section 111A(3) should be interpreted liberally as covering not only cases of contravention of any law but also other circumstances where the Company Law Board considers it necessary. This was obviously the intention of the Parliament. Any other contrary interpretation will lead to absurdity. He also stated that the Amendment in 1997, was clarificatory and, therefore, retrospective. Shri Ramachandran also cited the following cases with regard to the question of interpretation of statutes :Directorate of Enforcement v. Deepak Mahajan, AIR 1994 SC 1775; [1995] 82 Comp Cas 103.
Court can look into and sometimes may even go behind words and enactment to give effect to legislative intention (paras. 24 to 34 pages 1784-1786) (pages 115-118 of 82 Comp Cas).Kehar Singh v. State (Delhi Administration), AIR In the past the judges and lawyers spoke of a "golden rule" by which statutes were to be interpreted according to grammatical and ordinary sense of the word . . . During the last several years, the "golden rule" has been given a go-by. We now look for the intention of the Legislature or the 'purpose' of the statute ... we will consider the provisions to ensure coherence and consistency within the law as a whole and to avoid undesirable consequences (paras. 227 and 228, page 1945).Union of India v. Filip Tiago De Gama of Vedem Vasco De Gama, AIR 1990 SC 981.
If the strict grammatical interpretation gives rise to absurdity or inconsistency, the court could discard such interpretation and adopt an interpretation which will give effect to the purpose of the Legislature. That could be done, if necessary even by modification of the language used. The legislators do not always deal with specific controversies which the courts decide. They incorporate general purpose behind the statutory words and it is for the courts to decide specific cases. If a given case is well within the general purpose of the Legislature but not within the literal meaning of the statute, then the court must strike a balance (page 985).Atma Ram Mittal v. Ishwar Singh Punia, AIR 1988 SC 2031. In interpreting the statutes the language, background, context, purpose all have to be borne in mind (para. 9, page 2034).State of Kerala v. Mathai Verghese, AIR 19. The court should make purposeful interpretation so as to effectuate the intention of the Legislature and not a purposeless one in order to defeat the intention of the legislators wholly or in part (page 357).
20. We have carefully considered the pleadings and the arguments on maintainability of this petition from both the sides. Admittedly the petition has been filed on January 11, 1996, under Section 111(4)(a), (5), (6) of the Companies Act, 1956. The contention of the respondents is that the provisions of Section 111 are no longer applicable to public companies (whether listed or unlisted) excepting in case of deemed public companies, with the promulgation of the Depositories Ordinance, 1995, with effect from September 20, 1995. It is also not the case of the petitioners that the petition is maintainable under Section 111(4) but they insist that this is a technical objection and the petition is still maintainable under Section 111A of the Act. Since the new Section 111A provides for rectification of the register, on the same cause of action the petition can be maintained 'Under this new section. In the case of Shashi Prakash Khemka [1997] 26 CLA 316 ; [1997] 90 Comp Cas 228 (CLB) as cited by the respondents, the Southern Bench of the Company Law Board had to deal with a case where the cause of action arose before the promulgation of the Ordinance and the petitioners insisted on consideration of the case under Section 111. In the present case, however, it is not the petitioners' contention that the petition is still maintainable under Section 111.
21. Since the respondent company is a public company the petition has to be considered under Section 111A(3) and the petitioners also do not insist on it being considered under Section 111. After going through the facts in the Southern Bench case as referred to above we are convinced that the petition can be considered under Section 111A(3) of the Act and it is purely technical that the cause title shows that the petition is under Section 111. Accordingly, both the parties have submitted arguments on the maintainability under the new provisions, namely, Section 111A(3) of the Act.
22. Section 111A which was introduced by the Depositories Ordinance, with effect from September 20, 1995, has undergone changes subsequent to the filing of the petition, As already stated the petition was filed on January 11, 1996, the Depositories Ordinance originally having been promulgated on September 20, 1995, repromulgated in March 1996, and further repromulgated on August, 1996, contained the following provisions as on the date of filing the petition ; "111A. Rectification of register on transfer.-(1) In this section, unless the context otherwise requires, 'company' means a company other than a company referred to in Sub-section (14) of Section 111 of this Act.
(2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable.
(3) The Company Law Board may, on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of transmission was delivered to the company, as the case may be, after such inquiry as it thinks fit, direct any company or depository or rectify register or records if the transfer of the shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)." 23. Thus on the date of filing of the petition the law on the subject was as stated above. Later the Depositories Act of 1996, was passed and enacted as a separate piece of legislation when also the same provisions as set out above were legislated as regards Section 111A of the Act. Though the Depositories Act brought about amendment to various legislations like the Stamp Act, the Securities Contracts (Regulation) Act, the Income-tax Act, etc., we are concerned with the relevant amendment to the Companies Act, 1956.
24. After the Depositories Act came into force, on January 15, 1997, certain amendments to that Act were promulgated by a presidential Ordinance. The two important amendments relevant to Section 111A of the Companies Act are ; (a) the addition of a proviso to Sub-section (2) of Section 111A as follows : "Provided that if a company without sufficient cause refuses to register transfer of shares within two months from the date on which the instrument of transfer or the intimation of the transfer as the case may be is delivered to the company, the transferee may appeal to the Company Law Board and it shall direct such company to register the transfer of shares." (b) the provisions of Sub-section (3) of Section 111A were recast to read as follows and while doing so has included one more ground for seeking rectification of register before the Company Law Board, namely, "the transfer is in contravention of any other law for the time being in force." The rearrangement of the words in Sub-section (3) while adding the above additional ground according to Shri M. G. Ramachandran has lot of significance in conveying the intention of Parliament : "(3) The Company Law Board may on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India, if the transfer of shares or debentures, is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), or any other law for the time being in force, within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of the transmission was delivered to the company^ as the case may be, after such inquiry as it thinks fit, direct any depository or company to rectify its register or records." 25. Subsequent to the above Ordinance on March 19, 1997, the amendments were legislated upon by both the Houses of Parliament and as such these amendments have also become part of the statute. The Amendment Act recognized the amendments with effect from January 15, 1997. Thus we have the provisions of Section 111A as originally introduced by the Ordinance of September 20, 1995, and as amended with effect from January 15, 1997. Since the petition was filed on January 11, 1996, the law as it stood on that day did not carry the above two amendments. It is on these provisions, the arguments on retrospective application were advanced while contesting the main objection on maintainability.
26. Elaborate arguments were advanced by Shri M. G. Ramachandran, advocate for the petitioners, to state that the amendments brought about on January 15, 1997, are clarificatory in nature to reflect the intention of Parliament in amending the Companies Act with regard to a right available to the investor to seek rectification of the register.
According to him the subsequent amendment in January, 1997, by rearrangement of the words in Sub-section (3) has clarified the intention of Parliament, namely, not to take away the jurisdiction of the Company Law Board when an investor seeks rectification of the register. He would like us to read the amended Section 111A(3) to consist of two parts as follows : Part "A".--The Company Law Board may, on an application by the specified persons and after such enquiry as it thinks fit, direct any depository or company to rectify its register or records.
Part "B".--The Company Law Board may, on an application by specified persons and if the transfer is in contravention of any of the provisions of the SEBI Act or regulations or the SICA or any other law for the time being in force within two months from the date of transfer or from the date of lodgment of the instrument of transfer or the intimation of the transmission as the case may be and after such enquiry as it thinks fit direct any depository or company to rectify its register or records. Shri Ramachandran's arguments are two-fold, namely, (a) the amendment made on January 15, 1997, has retrospective effect, and (b) they are also to be interpreted in such a manner that it does not delimit the existing powers of the Company Law Board to rectify the register of members on any valid ground apart from rectification on transfer in violation of certain legislations for which alone the time limit, etc. are prescribed.
According to him, on other grounds other than on transfer there is no time limit for seeking rectification as is the present position under Section 111(4). This interpretation, according to the learned advocate, is absolutely in line with the objectives of the Depositories Act which provides for automatic registration on transfer of securities under the depositories mode and does not conflict with the objective of the amendments.
27. As regards retrospective effect of the amendment, Shri Ramachandran has cited the decision of the Supreme Court in CIT v. Poddar Cement P.Ltd. [1997] 226 ITR 625 : [1997] 5 SCC 482 and stated that if a new Act is to expand an earlier Act, it would be without object unless construed retrospectively. He also drew our attention to a Division Bench judgment of the Andhra Pradesh High Court in Varalakshmi v.Viramulu, AIR 1956 Hyd. 75, wherein it is stated that 'where a statutory provision is in its nature declaratory it will be presumed to be retrospective unless the contrary intention is clearly indicated by the Legislature, the reason being that its underlying purpose of explaining or clarifying the existing law will be effectively served only by giving it such a retrospective construction.' 28. As against this argument, the respondents have cited a decision of the Supreme Court in Paripoornan (K. S.) v. State of Kerala, AIR 1995 SC 1012, in a special leave petition with regard to compensation payable on acquisition of property and stated that unless Parliament specifically gives indication of its intention with regard to retrospective applicability of the provisions it cannot be interpreted as having any retrospective effect.
29. Mr. Ritu Bhalla, Advocate, also submitted a decision of the Supreme Court in Central Bank of India v. Their Workmen [1959] 29 Comp Cas 367 ; AIR 1960 SC 12, on the question of retrospective effect with regard to declaratory and remedial acts. In the headnote to that decision summarizing para 29 it is stated : "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error in the interpretation of statutes. Usually if not invariably such an Act contains a preamble and also the word 'declared' as well as the word 'enacted'. A remedial Act, on the contrary, is not necessarily retrospective, it may be either enlarging or restraining and it takes effect prospectively, unless it has retrospective effect by express terms or necessary intendment".
30. The arguments from both the sides seem to agree on one thing, namely that if the amendment introduced in 1997, is declaratory or clarificatory in nature it will have retrospective effect and if the amendment is remedial in nature it can have only a prospective effect unless specifically expressed to the contrary. We have therefore to examine whether the amendment of 1997, is declaretory/clarificatory or remedial.
31. The object of the amendments made to the Depositories Act on January 15, 1997, are two-fold in nature. Though the explanatory memorandum to the amendment spells out only one object, namely, that it is proposed to include securities of statutory bodies like the Industrial Development Bank of India, etc., besides securities of companies to be dealt in the depository mode, a study of the amendments with reference to Section 111A of the Companies Act indicates yet another purpose. Though the amendment to include securities of statutory bodies can be considered as remedial in nature the amendments to Section 111A of the Companies Act appear to stand on a different footing. Though, normally, a legislation should be construed to be prospective unless by clear intendment or necessary implication, it has to be construed as retrospective, if the circumstances so warrant to attribute retrospective application such circumstances should be considered. This approach has emerged from a decision in Channan Singh v. Jai Kaur, AIR 1970 SC 349, apart from the other cases cited by Sh.
Ramachandran. We are conscious of the adverse implications of retrospective interpretation of statutes, However, in the light of the above decisions of the Supreme Court and other courts one has to keep in view (a) what was the object of the Act (b) what was the evil that was intended to be cured by the Act and (c) what is the machinery for achieving the object. In this context the reference of the Supreme Court in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; AIR 1987 SC 1023, as cited before the Southern Bench as reported in Shashi Prakash Khemka v. NEPC Micon Ltd. [1997] 90 Comp Cas 228 ; [1997] 26 CLA 316 (CLB) is also relevant. According to the apex court in that case in interpreting statutes both the text and context are important. A statute is best interpreted when we know why it was enacted. No part of a statute and no word of a statute can be construed in isolation. In the present case the Depositories Act was intended to provide a speedy mechanism for automatic registration of transfer of securities with the depository and the Act is intended to provide for regulating depositories in securities and matters connected therewith and incidental thereto.
After the enactment of the Depositories Act it is evident from the objects and reasons for the amendment dated January 15, 1997, that the system of depositories need to be extended to securities of statutory bodies as well. To this extent the amendment is curative or remedial in nature and cannot be retrospective. While this being so the amendment to the Schedule to the Depositories Act by which Section 111A of the Companies Act is sought to be further amended appears to retain the right of appeal against refusal or delay in registration in case of securities of companies in the non-depository or physical mode (through the proviso to Sub-section (2)) as well as to retain the rectification remedy on transfer in case of a contravention of any other law (through the amendment to Section 111A(3)). The two remedies were available in the erstwhile Section 111 of the Act which could have been substantially deleted if the entire securities of public companies had come to the depositories mode. While introducing the Depositories Act, it is evident that the provisions were made as if all securities of public companies shall be in the depositories mode. However, this could not be practicable. The Section had therefore contemplated provision for transfer of securities in the physical mode also (as it provides for time limits for petition from the date of lodgment of documents).
The possibility of refusal by companies and registration of transfers in violation of law were also present but such eventuality was obviously overlooked. In the circumstances it is only obvious that opportunity was taken by the Legislature to clarify and declare that the right of appeal originally vested with regard to refusal or delay and for rectification in violation of any other law are not intended to be omitted by the new law. This interpretation does not do any violence to the objective of the Depositories Act or the Companies Act. This also ensures the proper use of the machinery for grievance redressal.
32. Let us look at the contrary situation. In case the interpretation is that the amendment is prospective in nature what is the consequence It means that any refusal or delay, in transfers on the part of companies and any transfer in violation of any law will go unchallenged if it had happened during the period from September 20, 1995, to January 15, 1997, and could not be considered by the Company Law Board if a petition had been lodged during that period. Could the Legislature have contemplated permission to allow transfers in violation of any law or a complete liberty to companies to refuse registration without a remedy. It is such a situation which arose in the Southern Region Bench case with regard to CP No. 18/111 the third in the bunch'of three cases as Shashi Prakash Khemka v. NEPC Micon Ltd, [1997] 90 Comp Cas 228 ; [1997] 26 CLA 316 (CLB). In that case though the petition was dismissed on a technical ground since the amendment was not in force on the date of filing of the petition, while disposing of the petition, liberty was granted to the petitioner to file a fresh petition if he so desires.
The dismissal was done on the ground of lack of jurisdiction by the Company Law Board under Section 111. Since such jurisdiction was vested subsequently on the Company Law Board under Section 111A(2), which was retroactive and since such a petition could be filed by withdrawing the existing petition the liberty was granted. Further, in the case before the Southern Bench, the question whether the amendment is clarificatory and declaratory and its retrospective effect were not argued. Taking into account the declared object of the 1997 amendment and the mischief sought to be plugged by the legal provisions we are convinced that these amendments in Section 111A(3) are clarificatory in nature.
Obviously, there had been no intention to deny appeal or permission to register transfer in violation of any law. We have also kept in view the argument of Ms. Ritu Bhalla, advocate for the respondents, that the amendment's prospective and definitely not retrospective but can be retroactive, i.e., the amendment can cover events which have happened before the amendment was made effective. Hence, if the present petition had been filed after January 15, 1997, it would be maintainable if a case could be made out on violation of any other law. Hence, on this ground alone we are not inclined to dismiss the petition with regard to the applicability of the amendments under Section 111A. If we do so we will be hyper-technical in our interpretation of the law.
33. What is the import of recognising the amendment of January, 1997, as clarificatory and retrospective If the petitioners challenge the transfer on the ground of violation of any other laws and establish their case under this ground, then the merits of the petition could be gone into and cannot be dismissed on maintainability. For this purpose the burden is on the petitioners to establish that some law has been violated. The petitioners however have failed to bring any instance of violation of any law in the registration of the transfer. The only legal issue raised by the petitioners is that the board resolution of Trade Links for transfer is not va'lid because of lack of quorum. This is irrelevant for registration of the shares by MSBL. It is for the petitioners to establish that the registration by MSBL is in violation of any law. Nothing has been set out in the petition nor any arguments advanced as to which law had been contravened in the registration. It is not possible to maintain the petition with the hope that the petitioner may be able to bring out any violation of law subsequently.
Hence, even if we agree on the retrospectivity of the amendment or presuming that the petition is filed after January 15, 1997, unless the ground as set out in Section 111A(3) is established the petition cannot be maintained. As such retrospectivity per se does not help the petitioners in establishing the maintainability.
34. The next question to be considered by us is with regard to the interpretation of the contents of Section 111A(3). The arguments from the petitioners' side are to the effect that our powers of rectification under Section 111(4) have not been taken away and what the amendment has attempted to do is to superimpose additional grounds for rectification on transfer of securities keeping in view the various grounds for rectification which are used to be taken up under Section 111(4) of the Act. For this purpose we are required to read the provisions of Section 111A(3), as it stood before January 15, 1997, and thereafter.
"The Company Law Board may on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of transmission was delivered to the company, as the case may be, after such enquiry as it thinks fit, direct any company or depository to rectify register or records if the transfer of the shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)." "The Company Law Board may on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India, if the transfer of shares or debentures is in contravention of any of the Provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), or any other law for the time being in force within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of transmission was delivered to the company, as the case may be, after such inquiry as it thinks fit, direct any depository or company to rectify its register or records." 37. A careful study of the two versions of Section 111A(3) as narrated above shows that (a) one more ground for rectification, namely, contravention of any law for the time being in force is added ; (b) After the words, the "Securities and Exchange Board of India" a "comma" has been added ; (c) the words "within two months from the date of transfer of any shares, etc.", up to the words "as the case may be" have been shifted from its original position to a subsequent part of the sentence ; (d) the words "if the transfer of shares or debentures is in contravention, etc.," has been brought forward to the earlier part of the sentence.
38. The common feature in both the provisions is that the whole sub-section is couched in one running sentence. The provision has five components, namely, (a) the authority of the Company Law Board (b) the procedure to be adopted by it (c) the parties who can make an application (d) the situation when such application can lie, and (e) the time limit for making the applications. The provision, as it stood before January 15, 1997, does not appear to be happily worded inasmuch as the situation when the applications would be made were pushed to the end of the sentence. In the amended Section the powers of the Board and the procedure to be adopted by the Board remain prominently at the beginning and end of the sentence whereas the time limits and situations have been built inside the sentence. If we venture to read the two provisions as they are as a running sentence, they both convey only one impression very prominently that the Company Law Board has the jurisdiction to order rectification based on an application in the three situations mentioned therein. The substance of the law does not appear to have undergone any change. The only change seems to be the recasting of the words within the sentence. It is difficult to read the amended provision to convey any impression that the Company Law Board has the general power of rectification in all situations. However, in transfer cases the applications can be entertained only if the contraventions as dealt with in the sub-section have occurred. Apart from this no general power of rectification has been contemplated. If this be the intention, certain words to the effect that "apart from other grounds for rectification, in the event of transfer the prescribed specific conditions have to be complied with" could have been found. There are no such words to make the "rectification on transfer" as something over and above the general power of rectification. We do not read any general power of rectification conferred specifically on the Company Law Board as it has been done in the case of Section 111(4). Where the legislation has not granted any authority and where such powers for granting jurisdiction are specifically missing the court would not supply such words in order to grant jurisdiction for itself. Moreover, we would not enter into the arena of interpretation of any provision so long as the language is plain and unambiguous and admits of only one meaning. As referred to by the respondent's advocate in Precision Steel and Engineering Works v.Prem Deva Niranjan Deva Tayal, AIR 1982 SC 1518, "when the language is plain and unambiguous and admits of only one meaning no question of construction of a statute arises for the Act speaks for itself".
39. Yet another reason why we should not get into an interpretation exercise is because the amendment brought about by the Depositories Act, 1996, by Section 111(14) by one clear stroke has taken away the public companies (other than deemed public companies) out of the purview of Section 111. This means that there is a positive divestment of the power of jurisdiction from the Company Law Board. Having done that there is need for specific investment of jurisdiction on Company Law Board by means of Section 111(A)(3) which the language of the sub-section does not grant. It is a different matter as to what are the consequences of such an amendment. It is also unnecessary for us to venture into an interpretation based on surrounding circumstances like the incidental powers with regard to investigation, rectification, etc., and to come to the conclusion that we continue to have the power of rectification. The power has been specifically taken away by Section 111(14) of the Act. We have to give a meaning to this amendment based on the text and the context in which the amendments were made. In this connection, the reference made by the Southern Region Bench of the Company Law Board in the decision in Shashi Prakash Khemka v. NEPC Micon Ltd. [1997] 90 Comp Cas 228 ; [1997] 26 CLA 316 quoting the observations of the Supreme Court in Reserve Bank of India v. Peerless General Finance Industries Ltd. [1987] 61 Comp Cas 663, 692 ; AIR 1987 SC 1023, 1042, is relevant : "The interpretation must depend on the text and context . . . Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge the statute must be read first as a whole and then Section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at in the context of its enactment, with the glasses of the statute maker provided by such context, its scheme the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With those glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation." 40. The context in which the amendment was made is the introduction of depository system in India as well as to make the shares and securities freely transferable. The objective behind this provision is that there should be no impediment in the transfer of securities of public companies. As such the role of the Company Law Board is contemplated only with regard to securities of private companies. In case of public companies, however, no role for the Company Law Board with regard to rectification was contemplated because the transfer of securities was considered as an automatic process. However, during the transition period and during automatic transfer in the depository mode difficulties were contemplated particularly in the three situations where contravention of laws were sought to be avoided. Hence, the jurisdiction was specifically invested in respect of those situations only. Though in this process the Legislature might have left certain situations where rectification would be warranted and which could have been done, if the earlier law had not been amended as pointed out by Shri M. G. Ramachandran with nine intsances the court cannot intervene to restore jurisdiction based on an apprehended inconvenience to the investors consequent to the amendment. As pointed out by the respondents in their written statement "the words of a statute when there is doubt about their meaning are to be understood in the sense in which they best harmonise with the subject of the enactment and the objective which the Legislature has in view. Their meaning is found not so much in a strict grammatical or an etymological propriety of language nor even in its popular use as in the subject or in the occasion in which they are used and the object to be attained". As stated by the respondents courts cannot in the guise of interpretation of a provision be urged to supply "Casus-omissus" whatever the hardship or consequences. Natural and plain meaning are to be given to statutes always and every time irrespective of the consequence or hardship.
41. We had already dealt with the provisions of Section 111A(3) in the case of Vijay Remedies Limited (C. P. Nos. 4 to 7/111 of 1997 of Northern Bench) since reported in [1998] 93 Comp Cas 547 (CLB) wherein also we had taken a similar view that the powers of the Company Law Board are restricted in case of rectification to instances of transfers and that too in case such transfers are in contravention of the laws as already set out. The entire scheme of Section 111 as applied to public companies is now taken care of by Section 111A in two parts, namely, (a) Section 111A(2) proviso which deals with appeals on refusal or delay, (b) Section 111A(3) which deals with rectification on transfers in certain circumstances. Barring the above, the general tenor of law as applied to public companies is that securities shall be freely transferable. The above interpretation is also in line with the decisions of the Southern Bench of Company Law Board in Shashi Prakash, Khemka v. NEPC Micon Ltd. [1997] 90 Comp Cas 228 ; [1997] 26 CLA 316.
Since, in the present petition the prayer for rectification on transfer does not fall within any of the three grounds as specified under Section 111A(3) we have no hesitation in coming to the conclusion that the petition is not maintainable and is liable to be dismissed in limine. Accordingly, we dismiss this petition as not maintainable.
42. Before the final orders on maintainability were passed, the petitioners have filed an application seeking to amend the petition in view of certain new evidence which has come to light from the reply filed by respondent No. 7 in the main petition. The petitioners have prayed to allow them to amend the petition by incorporating the amendments as set out in the application Though we had already recorded conclusion of arguments on maintainability, on argument in case retrospective application is not accepted. According to him, it is only then a decision on maintainability could be given.
43. In our view this question raised by Shri Sawhney does not arise at all. Irrespective of establishing the actual date of transfer in view of the amendment being clarificatory in nature as held by us, it has retrospective application. Hence, the new facts as sought to be brought out by petitioners have no implications on maintainability, since irrespective of the date of transfer we have applied Section 111A(3) to this case. In view of this it is unnecessary for us to consider this application while adjudicating on the maintainability of the petition based on the legal provision.
44. In view of our findings as already set out, the petition is dismissed as not maintainable. We, however, do not vacate the interim order as it has been passed by a common Bench, comprising the Principal Bench also.