“Sec. 434 (1)(c) of the 2013 Act carries an absolutely clear mandate that all proceedings under the Companies Act, 1956 including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies before the date of coming into operation of that Section in the High Court shall stand transferred to the NCLT. The word all means all. It admits of no exception.”
The Calcutta High court has upheld a single bench order that held that the High court has lost jurisdiction from 15th December 2016 to entertain all proceedings under Companies Act, 1956 and the same stood transferred to the National Company Law Tribunal.
While considering a company petition instituted in 1988 Justice Arijit Banerjee considered the preliminary issue as to whether or not the High Court still has jurisdiction to hear and dispose of the said company petition in view of Section 434 of the Companies Act, 2013. The company petition pertained to an alleged mismanagement of the affairs of a company by the name of India Steam Laundry (P) Ltd. and alleged oppression of the shareholders by the shareholders in control of the affairs of the company.
The petitioners had placed reliance on Sec. 68 of the Companies (Amendment) Act, 1988, which retained jurisdiction to the courts with regard to proceedings pending before it when the 1988 Act came into force on 31 May, 1991. It was also submitted that Sec. 68 of the 1988 Amendment Act was never repealed and is still in force.
The Court observed that Section 68 of Amendment Act only provided that proceedings pending in the High Court just before the commencement of the Amendment Act, 1988 would continue in the High Court notwithstanding that the Company Law Board would have exclusive jurisdiction to entertain and dispose of such applications from the date of commencement of the Amendment Act, 1988.
“However, Sec. 434 (1)(c) of the 2013 Act carries an absolutely clear mandate that all proceedings under the Companies Act, 1956 including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies before the date of coming into operation of that Section in the High Court shall stand transferred to the NCLT. The word all means all. It admits of no exception. The use of the word including in the said sub-Section cannot by any stretch of imagination mean that the words ‘all proceedings under the Companies Act’ have to be understood as proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies.”, the Judge had said.
Justice Banerjee, had observed: “I have no doubt in my mind that each and all proceedings instituted under the Companies Act, 1956 including the proceedings like the present one, pending in the High Court as on 15 December, 2016 stand transferred to the NCLT. It is an automatic transfer by operation of law. No sanction of the court is required. It is a statutory mandate and has to be followed whether such mandate is wise or not. All that the Court is required to do is to send the records of this Court to the NCLT.”
Division Bench Upholds Order
The Division bench comprising of Chief Justice Jyotirmay Bhattacharya and Justice Shekhar B. Saraf, upholding the single bench order, held as follows:
- 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, the same can always be ousted by the amendment of the enactment that conferred the said jurisdiction. Hence, no express repealing is required and the same can be repealed by implication
- Change of forum is not a choice of parties, but is the choice of the legislature. The parties cannot contend that they have a vested right to continue in the forum the lis was initiated. The legislature can always change the forum. Forum is a matter of procedure and change of the same does not result in change of substantive rights of parties
- The term ‘including’ in Section 434(1)(c) of the 2013 Act is extensive and expansive and not restrictive in nature. Accordingly, Section 434(1)(c) of the 2013 Act that states “all proceedings under the Companies Act 2013 including proceedings relating to….” would include all matters, without any exception, pending before the District Courts and High Court and all such matters would have to be transferred to the NCLT.
- 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. As held in (c) above, Section 434(1)(c) deals with all proceedings under the 1956 Act. Therefore, there is a clear inconsistency between the said provision and Section 68 of the Amendment Act, 1988. Consequentially, since the transitional provision is inconsistent with the new provision, it is impliedly repealed.
To arrive at these conclusions regarding ouster of jurisdiction, the bench, mainly referred to section 434 and observed: “In the present case the word “including” has been used in a sentence preceded by the term “all proceedings”. In the event the legislature wanted to only refer to proceedings relating to arbitration, compromise, arrangement and reconstruction and winding up of companies, there was no need to add the word “including proceedings”. The very fact that the legislature chose to add these words means that the legislature was aware of the other proceedings that were pending in the High Court and accordingly intended to transfer even those proceedings to the NCLT.”