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While interpreting provisions of the old and new Companies Act, a division bench of the Calcutta High Court has held that all matters that were pending before High Courts under the old law will be transferred to the NCLT.
The division bench comprising Chief Justice Jyotirmay Bhattacharya and Justice Shekhar B. Saraf has upheld the single judge bench ruling in the same matter.
The case in question is of oppression and mismanagement, which was filed under provisions of the Companies Act, 1956.
In 1988, the 1956 Act was amended to transfer cases to the Company Law Board. Cases which were pending before the High Court prior to enforcement of 1988 amendment, were however retained with the High Courts.
The Companies Act, 2013 (which repealed the 1956 law) then inserted Section 434 which expressly transferred, “all proceedings under the Companies Act, 1956, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court” to NCLT.
The appellants argued that the legislature did not intend to transfer the proceedings pending prior to 1988, which continued to be with the High Courts. They argued that only proceedings which were filed before the CLB would be transferred to the NCLT.
And while Section 434 expressly transfers ‘all’ proceedings under the 1956 law to the NCLT, the appellants sought to take advantage of the language that follows in the provision, which limits those proceedings to: compromise, arrangements and winding-up. They then asserted that the word ‘all’ in several instances has been interpreted in a restrictive manner depending on the context and subject, and also sought to apply a restrictive meaning to the term ‘includes’.
The appellants also argued that Section 68 of the Amendment Act, 1988 being a transitional provision, which stands independently, would remain as long as the matters contemplated therein are not heard and disposed of by the High Court.
With this backdrop, the division bench divided the dispute into the following four issues:
(a) Whether the ouster of the jurisdiction of the High Court in relation to company matters needs to be express or the same may be ousted by implication?
The Court held that the no express repealing of the jurisdiction is required and the same can be repealed by implication. It said the jurisdiction of the High Court in company matters being a special jurisdiction conferred by the 1956 Act, and not being a civil jurisdiction under the Code of Civil Procedure,1908, can always be ousted by a subsequent amendment.
(b) Whether parties to a lis can insist on continuing their dispute in the forum the same was initiated or have to bow down to the wishes to the legislature for transfer of the said jurisdiction to another forum?
On this point, the Court ruled that a change of forum is not a choice of parties, but is the choice of the legislature. It further said the parties cannot contend that they have a vested right to continue in the forum the lis was initiated.
“Forum is a matter of procedure and change of the same does not result in change of substantive rights of parties”, the Court ruled.
(c) Whether the term “all” and “including” in Section 434(1)(c) of the 2013 Act are expansive in nature or the same is to be read in a restrictive manner?
The Court found the term ‘including’ used in Section 434 of the 2013 Act to be expansive and not restrictive in nature. Accordingly, it ruled that all matters, without any exception, pending before the District Courts and High Courts would have to be transferred to the NCLT.
(d) Whether Section 68 of the Amendment Act, 1988 continues to subsist regardless of the coming into force of Section 434(1)(c) of the 2013 Act in relation to matters that were filed in the High Court prior to coming into force of the Amendment Act, 1988?
“The moment a new enactment comes into the statutory books, dealing with the same subject matter and specifically dealing with the same issue, and the transitional provision becomes inconsistent with the new enactment, the transitional provision has to go due to repugnancy”, the Court ruled.
Accordingly, it ruled that Section 68 of the Amendment Act, 1988 would be (impliedly) repealed in view of the clear inconsistency.
(Read the judgment)