Jurisdiction in company matters

It is commonly perceived that the High Court Division (HCD) has original statutory jurisdiction in company matters and the perception is right. However, it may not be so well-known that the HCD in its special statutory jurisdiction does not deal with all matters pertaining to the Companies Act, 1994.

This has been clarified in, inter alia, Abdul Mohit and Others v Social Investment Bank Ltd. and others, (2009) 61 DLR (AD) 82. In this case, the appellants, under Section 95 of the Companies Act, 1994, sought a direction from the Company Bench to allow them to attend the board meeting of the respondent company, Social Investment Bank Ltd. Their petition was rejected by the Company Bench of the HCD as it observed that Section 95 does not provide for any jurisdiction of the Company Bench. On appeal, the Appellate Division (AD) agreed with the HCD. The AD took note of the definition of 'Court' as per the wordings of Sections 2 (a), 2 (g), and 3 of the Companies Act, 1994. It observed that the provision of Section 9 of the Code of Civil Procedure, 1908 expressly provides that civil courts are granted jurisdictions to try all suits of a civil nature except those suits the taking cognizance of which is either expressly or impliedly barred by any statute.

The AD also referred to the Draft Companies Rules, 2000 (Rules) and observed that as Section 95 is not explicitly mentioned in the Rules within the list of Company Bench's 'Registrar of Company Matters', the matter involved in this case would not fall under the jurisdiction of the Company Bench. For these reasons, the AD agreed with the Company Bench and observed that when a Section of the Act provides for only procedural matters, in the absence of any express provision in the Act providing otherwise, it is not the Company Bench exercising its special company jurisdiction, but rather the ordinary civil courts of competent jurisdiction which would be the proper forum. The AD and HCD's decision on this point follows a line of precedents beginning from the Pakistani era (under a similar provision contained in the Companies Act, 1913). For instance, the AD's judgement, in this case, refers to Dacca Jute Mills Ltd. & others V Satish Chandra Banik and others (1967) 19 DLR (DAC) 735; Messrs Chalna Fibre Company Ltd., Khulna v Abdul Jabbar and others (1968) 20 DLR (SC) 335; Md. Shamsuzzaman Khan v M. S. Islam & others (1976) 28 DLR (HCD) 101. Although an argument can be proffered that Section 3 of the Companies Act, 1994 draws no distinction between procedural and substantive matters and envisages the HCD as the court of competent jurisdiction for resolving all matters under this Act, in view of the established line of precedents, it is difficult to disagree with the AD's conclusion in this case.

Again, from a policy point of view, there may be cogent reasons to not to encumber the HCD with procedural matters pertaining to the Companies Act, 1994. If litigants could seek relief from the Company Bench of the HCD for petty procedural company matters, the Company Bench could have been clogged up with a potentially higher number of cases. However, at least on one point, it is difficult to not disagree with the AD. This is the reference to the Company Rules by the AD to ascertain the jurisdiction of the HCD. Surely, the Company Rules is the outcome of the exercise of powers granted by the Parliament under a law, namely Section 345 of the Companies Act, 1994. It is a well-established principle of interpretation of statutes that delegated laws cannot be used to interpret a primary law passed by the Parliament.

For instance, in Mansur Ali v The Member, Board of Revenue, East Pakistan and others (1959) 11 DLR 412, in essence, the issue before the court was whether or not Rule 50(3) of the Schedule of II to the Public Demands Recovery Act, 1913 (PDR Act) could oust the application of Section 22 of the PDR Act. According to the Board of Revenue (BR), it could. However, the then Dacca High Court rejected the finding of the BR. The Dacca High Court held that 'by rules or regulations you cannot affect a provision of the Act, even though it has to be considered as embodied in the Act and forming part of it'. (Para 7)

In Muhit's case, one may argue that the AD was merely reinforcing its findings and not affecting a provision of the Companies Act. Having said that, it is clear that by using the Rules, the AD, in this case, was, in fact, interpreting the provisions of the Companies Act which amounts to affecting the provisions of the Act. And it would be respectfully submitted that this is against the rules of interpretation.

The writer is an Associate Professor at School of Law, BRAC University.