HIGH COURT OF PUNJAB

Jullundur District Registered Factory Owners’ Association

Registrar of Companies, Punjab and Himachal Pradesh

TEK CHAND, J.

Civil writ No. 1845 of 1960

MAY 23, 1961

TEK CHAND J. - The petitioners, 11 in all including the Jullundur District Registered Factory Owners’ Association, Railway Road, Jullundur City, have filed a writ against 12 respondents including the Registrar of Companies. The first petitioner is a company registered under section 25 of the Companies Act, 1956, with its registered office at Jullundur. It has no share capital and its members pay subscription. The executive committee of this Association consists of 21 members who elect five office-bearers, namely, president, vice-president, secretary, joint secretary and treasurer. The status of the members of the executive committee is at par with that of directors of a company and the executive committee is analogous to a board of directors. On September 14, 1960, the executive committee of 21 members was elected by the members of the association consisting of petitioners Nos.2 to 11 and respondents Nos.2 to 12.

The case of the petitioner is that on October 12, 1960, a meeting of the executive committee was called in order to elect the five office-bearers. There were actually present at the meeting only 19 out of 21 members, the absentees being Satya Paul and Sadhu Singh who are respondents Nos.2 and 3. The proceedings book bore the signatures of 19 members of the executive committee and petitioner No.2, Shri Alakh Prakash Mayor, was unanimously elected to be the chairman of the meeting. He invited proposals for the election of the president and his name was proposed and seconded and in the absence of any other proposal he was elected as the president by a unanimous vote. There were two contestants for the office of the vice- president. Before their election could be held, there was a difference of opinion between the members on the question that a certain member (respondent No.4) was not entitled to vote in the absence of a written consent filed by him with the Registrar of Companies. As the dispute could not be resolved, respondents Nos.5 to 12 walked out in sympathy with respondent No.4. The meeting was continued in the presence of petitioners Nos.2 to 11. Sarvshri Charan Singh, petitioner No.11, Charan Dass, petitioner No.4, Onkar Nath Sharma, petitioner No.3, G.L. Kakkar, petitioner No.7, were unanimously elected to the respective offices of vice-president, secretary, joint secretary and treasurer. Charan Dass, the newly elected secretary, filed the returns in the office of the Registrar of Companies on October 13, 1960, in accordance with the requirements of section 303 of the Companies Act. The Registrar wrote back to say that the matter was being considered and a further communication would follow.

The respondents Nos.2 to 12 gave a different version of what transpired at the meeting of the executive committee on October 12, 1960. They maintained that all the 21 members were present and that Shri Satya Paul was elected as chairman of the meeting as against Shri Alakh Prakash by 11 votes to 10. Shri K.K. Sehgal was elected president by 11 votes to 3 as against Shri Alakh Prakash Mayor.

The respondents’ version is that petitioners Nos.2 to 11 walked out of the meeting and C.D. Sharma took away the proceedings book with him. Respondents Nos.2 to 12 are stated to have started a new proceedings book and recorded the minutes of the meeting which they continued to hold.

Shri L.N. Raina, respondent No.10, filed a return under section 303 to the Registrar styling himself as secretary of the company and also gave the names of the office-bearers according to the respondents’ version. Thus at this stage the Registrar of Companies had two separate returns filed indicating the names of the office-bearers with respect to whom there was a sharp difference between the two groups of petitioners and respondents. It is not necessary for purposes of the decision of this petition to refer in detail to the correspondence that passed between the Registrar and the petitioners. On November 1, 1960, C.D. Sharma, petitioner No.4, as secretary of the association, wrote to the Registrar of Companies reminding him of the filing of the returns and desired to know if that had been brought on the file (vide annexure “H”). He was informed by the Registrar that the matter was still under consideration and he would be informed of the position in due course (vide annexure “I”). On November 27, 1960, a detailed communication was addressed by Shri C.D. Sharma to the Registrar giving the petitioners’ version of what had happened at the election of the office-bearers at the meeting of October 12, 1960. Annexure “K-1” is a letter addressed to the Registrar bearing signatures of 102 members requesting him to confirm by entering on file the names of the elected office-bearers according to the petitioners’ version. The Registrar of Companies addressed a letter dated 1st/2nd December, 1960, to Shri L.N. Raina. In view of its importance it is reproduced below in extenso :

“Subject :- Jullundur District Registered Factory Owners’ Association Jullundur - Validity of the Annual General Meeting etc.

Dear Sir,

In continuation of this office letter No.T/14734 dated the 10th November, 1960, on the subject noted above, I am directed to inform you that the meeting called on 12th October, 1960, at the registered office of the said Association in the presence of all the 21 members wherein Shri Satya Paul had been elected as the Chairman has been validly held. The decision of the Chairman about the election of Shri K.K. Sehgal has also been held to have become final under section 178 of the Companies Act, 1956.

The documents filed by you are under consideration and they will be taken on record if they are found otherwise in order subject to any contrary decision by a competent court at any time.”

A copy of this letter was endorsed to Shri C.D. Sharma for information with the remarks that “the returns filed herein by him are returned herewith.” The controversy before me principally centers on the legality and propriety of this communication.

On December 5, 1960, Shri L.N. Raina, respondent No.10, styling himself as secretary of the association sent a circular letter to all members of the Association (vide annexure “O”), stating that the Registrar by his letter dated December 1, 1960 (annexure “L”), was pleased to confirm the election of Messrs. K.K. Sehgal, Rajinder Kumar, L.N. Raina, Ajit Singh and R.D. Dhawan, as the respective president, vice-president, secretary, joint secretary and treasurer. The relevant portion of the letter of the Registrar was quoted in the circular letter. Annexure “P” is a communication from Shri L.N. Raina as secretary to Messrs. Himalaya Potteries Limited, Phillaur, intimating that in pursuance of the resolution passed by the executive committee as its meeting dated December 3, 1960, their names had been removed from the membership of the association and, therefore, their representative, Onkar Nath Sharma, had subsequently ceased to be member of the executive committee from that date. It is stated that similar letters were addressed to a number of petitioners and those who were in sympathy with them removed their names from the membership. Exhibit “Q-1” is a copy of the letter dated December 2, 1960, received from Shri K.K. Sehgal addressed to the Punjab National Bank along with a copy of the letter of the Registrar of Companies requesting the bank to issue a cheque book.

On December 17, 1960, the present writ petition was filed in this court. In a written statement filed by Shri L.N. Raina, respondent No.10, a preliminary objection was raised that as there were adequate remedies available under the Indian Companies Act the writ was not competent. While this petition remained pending, a new petition was made by the petitioners under section 186 of the Companies Act. By my order dated February 28, 1961 (in C.O.No. 4 of 1961), I gave directions for calling a meeting of the members of the association on April 9, 1961, for consideration of resolutions proposed by the petitioners. I also indicated that it would be open to any other member to propose any other resolution. This order of mine was challenged in appeal by the respondents to the Letters Patent Bench. The appeal was allowed and the Letters Patent Bench expressed the view that at the present stage of the dispute it would serve no useful purpose if a meeting of the company is held. The Bench observed that the dispute can be settled either by the members themselves or after a proper enquiry in the courts if appropriate proceedings for the purpose are taken. In view of the decision of the Letters Patent Bench in C.O. No.4 of 1961, no further action was called for on the petition under section 186 of the Companies Act. The present petition which remained pending has now to be disposed of.

The main contention of the petitioners is that it was no part of the statutory duties of the Registrar to give a decision that a particular person had been elected as a chairman at a meeting which had been validly held. Under section 303, sub-section (2), of the Companies Act, the company has to send to the Registrar a return in the prescribed form containing the particulars specified in the said register and a notification in the prescribed form of any change among its directors, managing directors, managing agents, secretaries and treasurers, managers or secretaries, or in any of the particulars contained in the register specifying the date of the change. This is a duty cast upon the company and in case of default the company and every officer in default are punishable with fine. Under section 306 the Registrar is required to keep a separate register or registers in which the particulars received by him under section 303, sub- section (2), are to be entered. Section 306 runs as under :

“Register to be kept by Registrar and inspection thereof - (1) The Registrar shall keep a separate register or registers in which there shall be entered the particulars received by him under sub-section (2) of section 303 in respect of companies, so however that all entries in respect of each such company shall be together.

(2) The register or registers aforesaid shall be open to inspection by any member of the public at any time during office hours, on payment of the prescribed fee.”

On behalf of the Registrar it is stated that up till now no particulars have been entered on the register. The position taken up by the Registrar in his affidavit, dated 10th January, 1961, is that the appointment of C.D. Sharma as secretary of the association was not accepted by him and he, therefore, returned the forms submitted to him on 2nd December, 1960. The Registrar then said that on 2nd December, 1960, he conveyed “my decision” by his letter (annexure “L”) but that was not an adjudication between the rival claims. According to him it was “only an executive decision” and was made subject to any decision to the contrary by a competent court at any time. He maintained that he applied his mind to the validity and legality of the election of respondents Nos.4 to 8 and that he had fully considered all the facts and law on the point. He also said that the orders made by him regarding acceptance of papers received from Shri L.N. Raina were in no way against the principles of natural justice as the papers represented the “support of the majority of the members of executive committee.” Throughout his affidavit the Registrar referred to his action as “my decision.”

The argument raised on behalf of the petitioners is that under section 306 a duty is cast upon the Registrar to enter the particulars received by him under section 303, sub-section (2), from the company in a separate register or registers. It is not for him to decide whether the meeting of the executive committee had been validly held or whether a particular office- bearer or office-bearers had been duly elected. Under section 306, it was maintained, the Registrar had no power to give any decision.

Shri A.P. Roy, counsel for the Registrar, stated at the Bar that the first portion of annexure “L” in which the Registrar said that the meeting at which Shri Satya Paul had been elected as the chairman has been validly held was not justified. He also conceded that the Registrar could not give any decision on the matter as maintained by him in his affidavit.

Mr. S.M. Sikri maintained that it was a wrong concession made by Mr.Roy, counsel for the Registrar. The argument of Mr.Sikri is that section 303 casts an obligation on a company to send returns and under section 306 a duty is cast on a Registrar to enter the particulars on the register and while discharging such an obligation the Registrar has to decide between conflicting versions. He also argued that the present petition infringes no right of the petitioners even if it be assumed that the decision of the Registrar was wrong in effect. He also maintained that the decision of the Registrar was not quasi judicial but only administrative. If the respondents at all misused the letter of the Registrar, no relief should be granted to the petitioners under article 226 and in such a case the suit by the petitioners is a more appropriate remedy. Mr. Tuli contended that the Registrar was in error in returning the papers filed by Shri C.D. Sharma under section 303. Under section 306, the Registrar is not required to satisfy himself as to the correctness of the representation made.

Under section 33(3) of the Companies Act, which deals with registration of the memorandum and articles of a company, the words are “if the Registrar is satisfied that all the requirements aforesaid have been complied with by the company and that it is authorised to be registered under this Act, he shall retain and register the memorandum and articles, if any.....” Section 33 calls for subjective satisfaction of the Registrar when registering the memorandum of a company or its articles but the language of section 306 does not call for the satisfaction of the Registrar with respect to any requirements. Under section 33 the Registrar is not competent to refuse registration on any extraneous consideration or for any reason other than non-compliance with the provisions of sub-sections (1) and (2) of section 33. The duty cast on him is to see, before he registers, that the requirements prescribed by sub-sections (1) and (2) are complied with. Even under section 33 it is not within his province to make enquiries into the matters which are not connected with the conditions enumerated in sub- sections (1) and (2) or into collateral matters : vide T.V. Krishna v. Andhra Prabha Private Ltd. But, so far as section 306 is concerned, it is no part of the functions of the Registrar to pronounce as to the meeting having been validly held or a particular office-bearer having been duly elected. He cannot even return the papers which had been sent to him under section 303 as has been done in this case. It seems that the Registrar under a mistaken view of his power arrogated to himself a jurisdiction which was not conferred upon him by the statute. Again it was an error on his part to maintain that he could give any decision in the matter. The Registrar is an important officer and an unauthorised decision by him seems to have been exploited by the respondents to their own advantage and to the detriment of the petitioners. It is true that the Registrar’s wrong decision can in law confer no advantage on the respondents, but under the garb of this decision the respondents exercised certain rights impinging upon the rights of the petitioners adversely affecting the petitioners’ status. Fortified by the so-called decision of the Registrar, the respondents started expelling the petitioners and their sympathisers from the membership of the Association. According to the Registrar, the orders made by him regarding the papers received from Shri L.N. Raina, respondent, were in accord with the principles of natural justice. If it is possible to probe into the working of the mind of the Registrar, it seems that he was exercising what he considered to be a power vested in him admittedly subject to a decision of a competent court. According to his own notions, as can be gathered from his affidavit, he thought that he was exercising powers which could only be considered from his point of view to be quasi judicial. But whether his decision was quasi judicial according to his notions or merely an administrative decision is not very material. He has assumed certain powers which the statute did not confer upon him, and armed with such a decision the respondents acted in a manner resulting in prejudice to the status and rights of the petitioners. In my view, a case is made out for this court to exercise its powers under article 226 of the Constitution. The Registrar has, in my view, acted beyond the scope of the functions which he is called upon to discharge under section 306 the result of which is that the status of the petitioners has been adversely affected. The so-called decision of the Registrar as conveyed in his letter No.T/1896/15870 dated 1st/2nd December, 1960 (annexure “L”), and his endorsement No.T/15871 returning the papers filed by C.D. Sharma is manifestly wrong and is, therefore, quashed being of no legal effect. The Registrar is directed to receive the returns which had been sent by Shri C.D. Sharma. As the two versions of the two groups are sharply conflicting, he may not make entries on the register as required under section 306 till the respective claims of the contestants are decided by a court of competent jurisdiction.

In the result, the petition succeeds and the recognition given by the Registrar in his communication, annexure “L”, is held to be of no legal effect whatsoever. In the circumstances there will be no order as to costs.

Petition allowed.