Supreme Court Allows Appeal and Sets Aside Company Law Board Order Holding Special Court Has Exclusive Jurisdiction Under Section 9-A(2) of Special Court Act, 1992. Company Law Board is a Court for Transfer of Pending Securities Claims Involving Notified Persons, Overriding Companies Act, 1956 Jurisdiction.

Case Note & Summary

Background: The appeal arose from a dispute over the registration of bonds of Nuclear Power Corporation of India Ltd. purchased by Canara Bank. Canara Bank had filed an application before the Company Law Board under Section 111 of the Companies Act, 1956 seeking registration of the bonds in its name, but the Nuclear Power Corporation refused to register them because Standard Chartered Bank also claimed ownership. The bonds were acquired through broker Hiten P. Dalal, a notified person under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. Facts: Canara Bank alleged it purchased the bonds from Andhra Bank Financial Services Ltd. through Hiten P. Dalal. While the application was pending before the Company Law Board, the Special Court Act was amended on 25 January 1994 by the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Ordinance, 1994, which inserted Section 9-A. Canara Bank and Nuclear Power Corporation took the stand that the application stood transferred to the Special Court by virtue of Section 9-A(2). Standard Chartered Bank contended that the Company Law Board retained jurisdiction. The Company Law Board held that it was not a court within the meaning of the Companies Act nor a civil court, and its jurisdiction was unaffected by Section 9-A(2). Legal Issues: The core question was whether the Company Law Board is a 'court' for purposes of Section 9-A(2) of the Special Court Act, 1992, and whether the pending application stood transferred to the Special Court. Arguments: Canara Bank and Nuclear Power Corporation argued that the application fell within Section 9-A(2) because it was a legal proceeding pending before a court and its cause of action arose out of transactions in securities involving a notified person. Standard Chartered Bank argued that the Company Law Board was not a court and therefore the transfer provision did not apply. The Company Law Board reasoned that it was not a civil court and its special statutory jurisdiction under Section 111 of the Companies Act remained intact. Court's Analysis: The Supreme Court analysed Section 9-A of the Special Court Act. Section 9-A(1) confers on the Special Court all jurisdiction, powers and authority exercisable by a civil court in relation to claims relating to attached property or arising from securities transactions between 1 April 1991 and 6 June 1992 involving a notified person. Section 9-A(2) transfers every suit, claim or other legal proceeding pending before any court immediately before the commencement of the Amendment Ordinance if its cause of action would have been within the Special Court's jurisdiction. The court held that the words 'civil court' in Section 9-A(1) define the extent of jurisdiction and powers, not the nature of the forum. The Company Law Board, while exercising powers under Section 111 of the Companies Act, 1956, acts as a court for the purposes of Section 9-A(2). The non obstante clause in Section 13 of the Special Court Act gives overriding effect to its provisions notwithstanding anything inconsistent in any other law, including the Companies Act, 1956. Decision: The Supreme Court allowed the appeal, set aside the Company Law Board's order, and held that the Company Law Board is a 'court' within the meaning of Section 9-A(2) of the Special Court Act, 1992. Consequently, the application pending before the Company Law Board stood transferred to the Special Court, which has exclusive jurisdiction to deal with the matter.

Headnote

Issue of Consideration

Final Decision

Supreme Court allowed the appeal, set aside the Company Law Board order, and held that the Company Law Board is a court within the meaning of Section 9-A(2) of the Special Court Act, 1992; the application pending before it stood transferred to the Special Court.

Law Points