Appeals Nos 33 and 34 of 1959
Appeal by special leave from the order dated May 291957 of the Central Government Ministry of Finance New Delhi in Appeal Cases Nos 24 and 33 of 1957
A V Viswanatha Sastri and Ganpat Rai for the appellants
B P Maheshwari for the respondents
M C Setalvad Attorney General for India B B L Iyengar and T M Sen for Union of India
April 25
The Judgment of section K Das Kapur Shah and Venkatarama Ayyar JJ was delivered by Shah J Hidayatullah J delivered a separate Judgment
SHAH J MsHarinagar Sugar Mills Ltd is a public limited company incorporated under the Indian Companies Act 1913 7 of 1913
Article 47B of the Articles of Association of the company invests the 44 342 directors of the company with absolute discretion to refuse to register any transfer of shares
That Article is in the following terms The directors may in their absolute discretion and without giving any reason refuse to register any transfer of any shares whether such shares be fully paid or not
If the directors refuse to register the transfer of any shares they shall within two months after the date on which the transfer was lodged with the company send to the transferees and the transferor notice of the refusal
 One Banarasi Prasad Jhunjhunwala is the holder of a block of 9500 fully paid up shares of the company
In January 1953 he executed transfers in respect of 2500 out of those shares in favour of his son Shyam Sunder and in respect of 2100 shares in favour of his daughter in law Savitadevi and lodged the transfers with the company for registration of the shares in the names of the transferees
The directors of the company by resolution dated August 1 1953 in purported exercise of the powers under Article 47B of the Articles of Association declined to register the shares in the names of the transferees
Petitions were then filed by Banarasi Prasad and the transferees in the High Court of Judicature at Bombay for orders under section 38 of the Indian Companies Act 1913 for rectification of the register of the company maintaining that the refusal by the board of directors to register the transfer of the shares was mala fide arbitrary and capricious and that the directors had acted with improper and ulterior motives
The High Court rejected these petitions holding that in summary proceedings under section 38 controversial questions of law and fact could not be tried and that the proper remedy of the transferees if so advised was to file suits for relief in the civil court
Requests were again made by the transferees to the company by letters dated February 29 1956 to register the transfers made by Banarasi Prasad in 1953
The directors of the company in their meeting of March 15 1956 reiterated their earlier resolution not to register the shares trans ferred in the names of the transferees
Against this 343 action of the company appeals were preferred to the Central Government under section 111 el3 of the Indian  which had since been brought into operation on April 1 1956
K R P Ayyangar Joint Secretary Ministry of Finance who heard the appeals declined to order registration of transfers because in his view the questions raised in the appeals could as suggested by the High Court of Bombay be decided only in a civil suit
Thereafter Banarasi Prasad transferred a block of 100 shares to his son Shyam Sunder and another block of 100 shares to his daughter in law Savitadevi and the transferees requested the company by letters dated November 21 1956 to register the transfers
In the meeting dated January 12 1957 the directors of the company resolved not to register the transfers and informed the transferees accordingly
Against this resolution separate appeals were preferred by Shyam Sunder and Savitadevi under section 111 el3 of the Indian to the Central Government
It was submitted in para 4 of the petitions of appeal that the refusal to register the transfer of shares was without any reason arbitrary and untenable
The company filed representations submitting that the refusal was bona fide and was not without any reason arbitrary and untenable as alleged
Shyam Sunder and Savitadevi filed rejoinders to the representations submitting that they had never alleged that refusal to transfer the shares was capricious or mala fide and that all they had alleged was that the refusal was without any reason arbitrary and untenable
By separate orders dated May 29 1957 the Deputy Secretary to the Government of India Ministry of Finance set aside the resolution passed by the board of directors in exercise of the powers conferred by sub sections5 and 6 of section Ill of the Indian  and directed that the company do register the transfers
In so directing the Deputy Secretary gave no reasons
Against the orders passed by the Deputy Secretary with special leave under article 136 of the Constitution these two appeals are preferred by the company
Two questions fall to be determined in these appeals 1 whether the Central Government exercising appellate powers under section 111 of the before its amendment by Act 65 of 1960 is a tribunal exercising judicial functions and is subject to the appellate jurisdiction of this court under article 136 of the Constitution and 2 whether the Central Government acted in excess of its jurisdiction or otherwise acted illegally in directing the company to register the transfer of shares in favour of Shyam Sunder and Savitadevi
Article 136 of the Constitution by the first clause provides Notwithstanding anything in this Chapter the Supreme Court may in its discretion grant special leave to appeal from any judgment decree determination sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India
The Central Government exercising powers under section Ill of the is not a court that is common ground
The Attorney General intervening on behalf of the Union of India submits that the Central Government merely exercises administrative authority in dealing with an appeal under section 111 of the Indian and is not required to act judicially
He submits that the authority of the directors of the company which is in terms absolute and is not required to be exercised judicially when exercised by the Central Government under section 111 does not become judicial and subject to appeal to this court
But the mere fact that the directors of the company are invested with absolute discretion to refuse to register the shares will not make the jurisdiction of the appellate authority administrative
In a recent case decided by this court Shivji Nathu bhai vs The Union of India 1 it was held that the Central Government exercising power of review under r 54 of the Mineral Concession Rules 1949 against an 1  345 administrative order of the State Government granting a mining lease was subject to the appellate jurisdiction of this court because the power to review was judicial and not administrative
In that case the action of the State Government granting the mining lease was undoubtedly an administrative act but r 54 of the Mineral Concession Rules 1949 granted a right of review at the instance of an aggrieved party to the Central Government and authorised it to cancel the order of the State Government or to revise it in such manner as it deemed just and proper
The exercise of this power was held by this court to be quasi judicial
Before it was amended by section 27 of Act 65 of 1960 section III of the Indian Companies Act 1956 omitting parts not material provided 1 Nothing in sections 108 109 and 110 shall prejudice any power of the company under its articles to refuse to register the transfer of or the transmission by operation of law of the right to any shares or interest of a member in or debentures of the company
2 If in pursuance of any such power a company refuses to register any such transfer or transmission of right it shall within two months from the date on which the instrument or transfer or the intimation of such transmission as the case may be was delivered to the company send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission as the case may be
3 The transferor or transferee or the person who gave intimation of the transmission by operation of law as the case may be may where the company is a public company or a private company which is a subsidiary of a public company appeal to the Central Government against any refusal of the company to register the transfer or transmission or against any failure on its part within the period referred to in sub section
2 either to register the transfer or transmission or to send notice of its refusal to register the same
4         5 The Central Government shall after causing reasonable notice to be given to the company and 346 also to the transferor and the transferee or as the case may require to the person giving intimation of the transmission by operation of law and the previous owner if any and giving them a reasonable opportunity to make their representations if any in writing by order direct either that the transfer or transmission shall be registered by the company or that it need not be registered by it and in the former case the company shall give effect to the decision forthwith
6 The Central Government may in its order aforesaid give such incidental and consequential directions as to the payments of costs or otherwise as it thinks fit
7 All proceedings in appeals under sub section
3 or in relation thereto shall be confidential and no suit pro secution or other legal proceeding shall lie in respect of any allegation made in such proceedings whether orally or otherwise
8 In the case of a private company which is not a subsidiary of a public company where the right to any shares or interest of a member in or debentures of the company is transmitted by a sale thereof held by a court or other public authority the provisions of sub sections 3 to 7 shall apply as if the company were a public company Provided that the Central Government may in lieu of an order under sub section
5 pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid within such time as may be allowed for the purpose by the order on payment to the purchaser of the price paid by him therefor or such other sum as the Central Government may determine to be a reasonable compensation for the right in all the circumstances of the case
Against the refusal by a company to register the transfer or transmission of a right to the shares an appeal lies to the Central Government
The Government after giving notice of the appeal and hearing the parties concerned may order that the shares be registered if it thinks that course is in the circumstances proper
The Central Government may 347 by the proviso to sub section
8 in lieu of an order under sub section 5 directing a private company to register transmission of shares sold by a court or public authority order that any member or members of the company specified in the order do acquire the right on payment to the purchaser of the price paid by him or such other sum as the Central Government determine to be reasonable compensation
In exercise of the powers under section 642 rules called The Companies Appeals to the Central Government Rules 1957 have been framed by the Central Government
By cl 3 of the rules the form of the petition of appeal is prescribed
Clause 4 provides that the memorandum of appeal shall be accompanied by an affidavit and documentary evidence if any in support of the statements made therein including a copy of the letter written by the appellant to the company for the purpose of registration of the shares
Clause 5 pres cribes the mode of service of notice of appeal to the company and el6 authorises the Central Government before considering the appeal to require the appellant or the company to produce within a specified period such further documentary or other evidence as it considers necessary
Clause 7 enables the parties to make representations if any in writing accompanied by affidavits and documentary evidence
Clause 8 authorises the Central Government after considering the representations made and after making such further enquiries as it considers necessary to pass such orders as it thinks fit under sub section5 of section 111 of the Act
By the appendix to the rules the form in which notice is to be given to the company is prescribed
Paragraph 2 of the form states that the company shall be called upon to make its representations in writing against the appeal and be informed that if no representation is received the appeal will be determined according to law
There was no provision similar to section Ill of the Indian  in the Act of 1913 nor is our attention invited to any provision in the English on which our Act is largely based to a similar provision
Prior to 1956 if transfer of 348 shares was not registered by the directors of a company action under the of 1913 could only be taken under section 38 of the Indian Companies Act 1913 by petition for rectification of the share register
As we will presently point out the power to refuse to register a transfer granted by the Articles of Association if challenged in a petition for rectification of register was to be presumed to have been exercised reasonably bona fide and for the benefit of the company and unless otherwise provided by the Articles the directors were not obliged to disclose reasons on which they acted
The power had to be exercised for the benefit of the company and bona fide but a heavy onus lay upon those challenging the resolution of the directors to displace the presumption of bona fide exercise of the power
The discretion to refuse to register transfers was not liable to be controlled unless the directors acted oppressively capriciously or corruptly or in some way mala fide Re Bell Brothers Ltd ex parte Hodgson 1
Power to refuse to register transfer of shares without assigning any reasons or in their absolute and uncontrolled discretion is often found in the Articles of Association and exercising jurisdiction under section 38 of the Indian Companies Act 1913 the court may not draw unfavourable inferences from the refusal to disclose reasons in support of their resolution
The power given to the court under section 38 is now confirmed with slight modification by section 155 of the Indian 
Under that section the court may rectify the register of shareholders if the name of any person is without sufficient cause entered in or omitted from the register of members of a company or default is made or unnecessary delay has taken place in entering on the register the fact of any person having ceased to be a member
The court is in exercising this jurisdiction competent to decide any question relating to the title of the person claiming to have his name registered and generally to decide all questions which may be necessary or expedient to decide for the rectification
A person aggrieved by the refusal to 1 349 register transfer of shares has since the enactment of the  therefore two remedies for seeking relief under the  1 to apply to the court for rectification of the register under section 155 and 2 to appeal against the resolution refusing to register the transfers under section 111
It is common ground that in the exercise of the power under section 155 the court has to act judicially to adjudicate upon the right exercised by the directors in the light of the powers conferred upon them by the Articles of Association
The respondents however submit and they are supported by the Union of India that the authority of the Central Government under section Ill is nevertheless purely administrative
But in an appeal under section 111 el3 there is a lis or dispute between the contesting parties relating to their civil rights and the Central Government is invested with the power to determine that dispute according to law ie it has to consider and decide the proposal and the objections in the light of the evidence and not on grounds of policy or expediency
The extent of the power which may be exercised by the Central Government is not delimited by express enactment but the power is not on that account unrestricted
The power in appeal to order registration of transfers has to be exercised subject to the limitations similar to those imposed upon the exercise of the power of the court in a petition for that relief under section 155 the restrictions which inhere the exercise of the power of the court also apply to the exercise of the appellate power by the Central Government ie the Central Government has to decide whether in exercising their power the directors are acting oppressively capriciously or corruptly or in some way mala fide
The decision has manifestly to stand those objective tests and has not merely to be founded on the subjective satisfaction of the authority deciding the question
The authority cannot proceed to decide the question posed for its determination on grounds of expediency the statute empowers the Central Government to decide the disputes arising out of the claims made by the transferor or transferee which claim is opposed by the company 45 350 and by rendering a decision upon the respective con tentions the rights of the contesting parties are directly affected
Prima facie the exercise of such authority would be judicial
It is immaterial that the statute which confers the power upon the Central Government does not expressly set out the extent of the power but the very nature of the jurisdiction requires that it is to be exercised subject to the limitations which apply to the court under section 155
The proviso to sub section8 of section III clearly indicates that in circumstances specified therein reasonable compensation may be awarded in lieu of the shares
This compensation which is to be reasonable has to be ascertained by the Central Government and reasonable compensation cannot be ascertained except by the application of some objective standards of what is just having regard to all the circumstances of the case
In The Province of Bombay vs Kusaldas section Advani1 this court considered the distinction between decisions quasi judicial and administrative or ministerial for the purpose of ascertaining whether they are subject to the jurisdiction to issue a writ of certiorari
Fazl Ali J at p 642 observed The word decision in common parlance is more or less a neutral expression and it can be used with reference to purely executive acts as well as judicial orders
The mere fact that an executive authority has to decide something does not make the decision judicial
It is the manner in which the decision has to be arrived at which makes the difference and the real test is Is there any duty to decide judicially The court also approved of the following test suggested in The King vs London County Council 2 by Scrutton LJ It is not necessary that it should be a court in the sense in which this court is a court it is enough if it is exercising after hearing evidence judicial functions in the sense that it has to decide on evidence between a proposal and an opposition and it is not necessary to be strictly a court if it is a tribunal which has to 1 T 2  233351 decide rights after hearing evidence and opposition it is amenable to the writ of certiorari
 In The Bharat Bank Ltd Delhi vs Employees of the Bharat Bank Ltd Delhi 1 the question whether an adjudication by an industrial tribunal functioning under the Industrial Disputes Act was subject to the jurisdiction of this court under article 136 of the Constitution fell to be determined Mahajan J in that case observed There can be no doubt that varieties of administrative tribunals and domestic tribunals are known to exist in this country as well as in other countries of the world but the real question to decide in each case is as to the extent of judicial power of the State exercised by them
Tribunals which do not derive authority from the sovereign power cannot fall within the ambit of article 136
The condition precedent for bringing a tribunal within the ambit of article 136 is that it should be constituted by the State
Again a tribunal would be outside the ambit of article 136 if it is not invested with any part of the judicial functions of the State but discharges purely administrative or executive duties
Tribunals however which are found invested with certain functions of a Court of Justice and have some of its trappings also would fall within the ambit of article 136 and would be subject to the appellate control of this Court whenever it is found necessary to exercise that control in the interests of justice
 It was also observed by Fazl Ali J at p 463 that a body which is required to act judicially and which exercises judicial power of the State does not cease to be one exercising judicial or quasi judicial functions merely because it is not expressly required to be guided by any recognised substantive law in deciding the disputes which come before it
The authority of the Central Government entertaining an appeal under section 1113 being an alternative remedy to an aggrieved party to a petition under section 155 the investiture of authority is in the exercise of the judicial power of the State
Clause 7 of section III 1  352 declares the proceedings in appeal to be confidential but that does not dispense with a judicial approach to the evidence
Under section 54 of the Indian Income tax Act which is analogous all particulars contained in any statement made return furnished or accounts or documents produced under the provisions of the Act or in any evidence given or affidavit or deposition made in the course of any proceedings under the Act are to be treated as confidential but that does not make the decision of the taxing authorities merely executive
As the dispute between the parties relates to the civil rights and the Act provides for a right of appeal and makes detailed provisions about hearing and disposal according to law it is impossible to avoid the inference that a duty is imposed upon the Central Government in deciding the appeal to act judicially
The Attorney General contended that even if the Central Government was required by the provisions of the Act and the rules to act judicially the Central Government still not being a tribunal this court has no power to entertain an appeal against its order or decision
But the proceedings before the Central Government have all the trappings of a judicial tribunal
Pleadings have to be filed evidence in support of the case of each party has to be furnished and the disputes have to be decided according to law after con sidering the representations made by the parties
If it be granted that the Central Government exercises judicial power of the State to adjudicate upon rights of the parties in civil matters when there is a lis between the contesting parties the conclusion is inevitable that it acts as a tribunal and not as an executive body
We therefore over rule the preliminary objection raised on behalf of the Union of India and by the respondents as to the maintainability of the appeals
The Memorandum and Articles of Association of a company when registered bind the company and the members of the company to the same extent as if they respectively had been signed by the company and each member and contained covenants on its and 353 his part to observe all the provisions of the Memorandum and of the Articles
Clause 47B of the Articles of Association which invests the director with discretion to refuse to register shares is therefore an incident of the contract binding upon the transferor and registration of transfer or transmission cannot therefore be insisted upon as a matter of right
The conditions subject to which a party can maintain a petition for an order for rectification of the register of shareholders have been settled by a long course of decisions
Two of those may be noticed
In In re Gresham Life Assurance Society Ex parte Penney 1 the deed of settlement of a life insurance company provided that any shareholder shall be at liberty to transfer his shares to any other person who was already a shareholder or who should be approved by the board of directors and that no person not being already a shareholder or the executor of a shareholder should be entitled to become the transferee of any share unless approved by the board
One J R De Paiva who was the holder of ten shares of the company sold them to W J Penney and lodged the transfer with the shares for registration at the company s office
The directors in exercise of the powers conferred upon them by the deed of settlement refused to register the shares
In a joint summons taken out by Paiva and Penney under section 35 of the Companies Act 1862 the Master of the Rolls directed the transfer to be registered the directors of the company having failed to submit any reasonable ground or objection to the purchaser
In the view of the Master of the Rolls it was for the court to judge whether the objection was reasonable and that objection must be disclosed to the court
Against this order the company approached the Court of Appeal
James L J in dealing with the contention raised by the appellant observed that the directors were in a fiduciary position both towards the company and towards every shareholder and that it was easy to conceive of cases in which the court may interfere with any violation of the fiduciary duty so 1 1872 Law Rep 8 Ch
354 reposed in the directors
It was observed by James L J But in order to interfere upon that ground it must be made out that the directors have been acting from some improper motive or arbitrarily and capriciously
That must be alleged and proved and the person who has a right to allege and prove it is the shareholder who seeks to be removed from the list of shareholders and to substitute another person for himself  this Court would have jurisdiction to deal with it as a corrupt breach of trust but if there is no such corrupt or arbitrary conduct as between the directors and the person who is seeking to transfer his shares it does not appear to me that this court has any jurisdiction whatever to sit as a Court of Appeal from the deliberate decision of the board of directors to whom by the constitution of the company the question of determining the eligibility or non eligibility of new members is committed
If the directors had been minded and the Court was satisfied that they were minded whether they expressed it or not positively to prevent a shareholder from parting with his shares unless upon complying with some condition which they chose to impose the Court would probably in exercise of its duty as between the cestui que trust and the trustees interfere to redress the mischief either by compelling the transfer or giving damages or in some mode or other to redress the mischief which the shareholder would have had a just right to complain of
 It was also observed by James LJ  I am of opinion that we cannot sit as a Court of Appeal from the conclusion which the directors have arrived at if we are satisfied that the directors have done that which alone they could be compelled by mandamus to do to take the matter into their consideration
Mellish LJ observed But it is further contended that in order to secure the existing shareholder against being deprived of the right to sell his shares the directors are 355 bound to give their reason why they reject the transferee and if they reject him without giving a reason that is a ground from which the Court ought to infer that they were acting arbitrarily
I cannot agree with that
It appears to me that it is very important that directors should be able to exercise the power in a perfectly uncontrollable manner for the benefit of the shareholders but it is impossible that they could fairly and properly exercise it if they were compelled to give the reason why they rejected a particular individual
I am therefore of opinion that in order to preserve to the company the right which is given by the articles a shareholder is not to be put upon the register if the board of directors do not assent to him and it is absolutely necessary that they should not be bound to give their reasons although I perfectly agree that if it can be shown affirmatively that they are exercising their power capriciously and wantonly that may be a ground for the Court interfering
A similar view was also expressed in In re Smith and Fawcett Ltd 1 where the Court of Appeal held that where the directors of the company had uncontrolled and absolute discretion to refuse to register any transfer of shares while such powers are of a fiduciary nature and must be exercised in the interest of the company the petition for registration of transfer should be dismissed unless there is something to show that they had been otherwise exercised
Rectification of the register under section 155 can therefore be granted only if the transferor establishes that the directors had in refusing to register the shares in the names of a transferee acted oppressively capriciously or corruptly or in some way mala fide and not in the interest of the company
Such a plea has in a petition for rectification to be expressly raised and affirmatively proved by evidence
Normally the court would presume that where the directors have refused to register the transfer of shares when they have been invested with absolute discretion to refuse registration that the exercise of the power was bona fide
When 1 356 the new Companies Act was enacted it was well settled that the discretionary power conferred by the articles of association to refuse to register would be presumed to be properly exercised and it was for the aggrieved transferor to show affirmatively that it had been exercised mala fide and not in the interest of the company
Before the Committee appointed by the Government of India under the Chairmanship of Mr C H Bhabha representation was made by several bodies that this power which was intended to be exercised for the benefit of the company was being misused and the Committee with a view to afford some reasonable safeguards against such misuse of the power recommended that a right of appeal should be provided against refusal to register transfer of shares
The Legislature it appears accepted this suggestion and provided a right of appeal
But the power to entertain the appeal is not unrestricted being an alternative to the right to approach the civil court it must be subject to the same limitations which are implicit in the exercise of the power by the civil court under section 155
The Central Government may therefore exercise the power to order that the transfer which the directors have in their discretion refused be registered if it is satisfied that the exercise of the discretion is mala fide arbitrary or capricious and that it is in the interest of the company that the transfer should be registered
Relying upon el7 of section 111 which provided that the proceedings in appeals under sub section3 or in relation thereto shall be confidential it was urged that the authority hearing the appeal is not obliged to set out reasons in support of its conclusion and it must be assumed that in disposing of the appeal the authority acted properly and directed registration of shares
But the provision that the proceedings are to be treated as confidential is made with a view to facilitate a free disclosure of evidence before the Central Government which disclosure may not in the light of publicity which attaches to proceedings in the ordinary courts be possible in a petition under section 155 of the 357 Companies Act
The mere fact that the proceedings are to be treated as confidential does not dispense with a judicial approach nor does it obviate the disclosure of sufficient grounds and evidence in support of the order
In the present case the position is somewhat un satisfactory
The directors passed a resolution declining to register the shares and informed the transferor and the transferees of that resolution
The transferees in their petition stated that the refusal to register transfer was without any reason arbitrary and untenable and in the grounds of appeal they stated that they did not know of any reasons in sup port of the refusal and reserved liberty to reply thereto if any such reasons were given
The company in reply merely asserted that the refusal was not without any reason or arbitrary or untenable
The transferees in their rejoinder made a curious statement of which it is difficult to appreciate the import that they had nowhere stated in the memoranda of appeals that the refusal to transfer shares was capricious or mala fide and all that they had stated was that the refusal was without any reason arbitrary or untenable
The Deputy Secretary who decided the appeals chose to give no reasons in support of his orders
There is nothing on the record to show that he was satisfied that the action of the directors in refusing to register the shares was arbitrary and untenable as alleged
If the Central Government acts as a tribunal exercising judicial powers and the exercise of that power is subject to the jurisdiction of this court under article 136 of the Constitution we fail to see how the power of this court can be effectively exercised if reasons are not given by the Central Government in support of its order
In the petition under section 38 of the Indian Companies Act 1913 the Bombay High Court declined to order rectification on a summary proceeding and relegated the parties to a suit and a similar order was passed by the Joint Secretary Ministry of Finance
These proceedings were brought to the notice of the Deputy Secretary who heard the appeals
Whether 46 358 in spite of the opinion recorded by the High Court and by the Joint Secretary Ministry of Finance in respect of another block out of shares previously attempted to be transferred there were adequate grounds for directing registration is a matter on which we are unable to express any opinion
All the documents which were produced before the Deputy Secretary are not printed in the record before us and we were told at the bar that there were several other documents which the Deputy Secretary took into con sideration
In the absence of anything to show that the Central Government exercised its restricted power in hearing an appeal under section 1113 and passed the orders under appeal in the light of the restrictions imposed by article 47B of the articles of association and in the interest of the company we are unable to decide whether the Central Government did not transgress the limits of their power
We are however of the view that there has been no proper trial of the appeals no reasons having been given in support of the orders by the Deputy Secretary who heard the appeals
In the circumstances we quash the orders passed by the Central Government and direct that the appeals be re heard and disposed of according to law
Costs of these appeals will be costs in the appeals before the Central Government
HIDAYATULLAH J I have had the advantage of reading the judgment just delivered by my brother Shah J
In view of the strong objection to the competence of the appeals under article 136 by the respondents to whom liberty was reserved by the order granting special leave I have found it necessary to express my views
The facts have been stated in detail by my learned brother and I shall not repeat them in full
Very shortly stated the facts are that the second respondent Banarsi Prasad Jhunjhunwala transferred 2500 shares to his son and 2100 shares to his daughter in law in the appellant Company in 1953
The appellant Company declined to register these transfers
Proceedings for rectification of the Register under section 38 of the Indian Companies Act 1913 followed 359 in the High Court of Bombay but the High Court referred the disputants to the Civil Court
In the petition before the High Court the respondents had charged the Directors of the appellant Company with bad faith and arbitrary dealing
The respondents renewed their requests for registration but they were again declined and appeals were filed before the Central Government under section 1113 of the  which had come into force from April 1 1956
These appeals were heard by Mr K R P Aiyengar Joint Secretary Ministry of Finance who dismissed them holding that only a suit was the appropriate remedy
Banarsidas Prasad then made a fresh transfer of 100 shares each to his son and daughter in law and requests for registration of these shares were made
The appellant Company again declined to register the shares but gave no reaons
Under cl 47 B of the Articles of Association of the appellant Company it is provided The Directors may in their absolute discretion and without giving any reason refuse to register any transfer of any shares whether such shares be fully paid or not
If the Directors refuse to register the transfer of any shares they shall within two months after the date on which the transfer was lodged with the company send to the trans feree and the transferor notice of the refusal
 The appellant Company was prima facie within its rights when it did not state any reasons for declining to register the shares in question
Appeals were again taken to the Central Government under section 1113
It was alleged that the refusal to register the shares without giving any reasons was arbitrary and untenable
In accordance with the provisions of the section representations were filed by the appellant Company and rejoinders by the opposite party
The transferees made it clear that they did not charge the appellant Company with capricious or mala flee conduct but only with arbitrary any reasons
The appeals 360 succeeded and the shares were ordered to be registered
The Deputy Secretary who heard and decided the appeals gave no reasons for his decision
Against his order the present appeals have been filed with special leave
The preliminary objection is that the appeals are incompetent because the Central Government which heard them is not a tribunal muchless a Court and the action of the Central Government is purely administrative
It is therefore submitted that article 136 does not apply because special leave can only be granted in respect of a determination by a Court or a tribunal which the Central Government is not
This is not the only provision of law under which the Central or State Governments have been empowered to hear appeals revisions or reviews and it is thus necessary to find out the exact status of the Central Government when it hears and decides appeals etc for the application of article 136
Article 1361 reads as follows Notwithstanding anything in this Chapter the Supreme Court may in its discretion grant special leave to appeal from any judgment decree determination sentence or order in any cause or matter passed or made by any Court or tribunal in the territory of India
 The orders which the Central Government passes certainly fall within the words determination and order
The proceeding before the Central Government also falls within the wide words any cause or matter
The only question is whether the Central Government when it hears and decides an appeal can be said to be acting as a Court or tribunal
That the Central Government is not a Court was assumed at the hearing
But to ascertain what falls within the expression Court or tribunal one has to begin with Courts
The word Court is not defined in the 
It is not defined in the Civil Procedure Code
The definition in the Indian Evidence Act is not exhaustive and is for the purposes of that Act
In the Now English Dictionary Vol II pp 1090 1091 the meaning given is 361 an assembly of judges or other persons legally appointed and acting as a tribunal to hear and determine any cause civil ecclesiastical military or naval
 All tribunals are not Courts though all Courts are tribunals
The word Courts is used to designate those tribunals which are set up in an organised State for the administration of justice
By administration of justice is meant the exercise of judicial power of the State to maintain and uphold rights and to punish wrongs
Whenever there is an infringement of a right or an injury the Courts are there to restore the vinculum juris which is disturbed
Judicial power according to Griffith C J in Huddart Parker  Co Proprietary Ltd vs Moorehead 1 means the power which every sovereign authority must of necessity have to decide controversies between its subjects or between itself and its subjects whether the rights relate to life liberty or property
The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision whether subject to appeal or not is called upon to take action
 When rights are infringed or invaded the aggrieved party can go and commence a querela before the ordinary Civil Courts
These Courts which are instrumentalities of Government are invested with the judicial power of the State and their authority is derived from the Constitution or some Act of legislature constituting them
Their number is ordinarily fixed and they are ordinarily permanent and can try any suit or cause within their jurisdiction
Their numbers may be increased or decreased but they are almost always permanent and go under the compendious name of Courts of Civil Judicature
There can thus be no doubt that the Central Government does not come within this class
With the growth of civilisation and the problems of modern life a large number of administrative tribunals have come into existence
These tribunals have the authority of law to pronounce upon valuable 1   357362 rights they act in a judicial manner and even on evidence on oath but they are not part of the ordinary Courts of Civil Judicature
They share the exercise of the judicial power of the State but they are brought into existence to implement some administrative policy or to determine controversies arising out of some administrative law
They are very similar to Courts but are not Courts
When the Constitution speaks of Courts  in article 136 227 or 228 or in Art 233 to 237 or in the Lists it contemplates Courts of Civil Judicature but not tribunals other than such Courts
This is the reason for using both the expressions in articles 136 and 227
By Courts is meant Courts of Civil Judicature and by tribunals those bodies of men who are appointed to decide controversies arising under certain special laws
Among the powers of the State is included the power to decide such controversies
This is undoubtedly one of the attributes of the State and is aptly called the judicial power of the State
In the exercise of this power a clear division is thus noticeable
Broadly speaking certain special matters go before tribunals and the residue goes before the ordinary Courts of Civil Judicature
Their procedures may differ but the functions are not essentially different
What distinguishes them has never been success fully established
Lord Stamp said that the real distinction is that Courts have an air of detachment
But this is more a matter of age and tradition and is not of the essence
Many tribunals in recent years have acquitted themselves so well and with such detachment as to make this test insufficient
Lord Sankey LC in Shell Company of Australia vs Federal Commissioner of Taxation 1 observed The authorities are clear to show that there are tribunals with many of the trappings of a Court which nevertheless are not Courts in the strict sense of exercising judicial power
In that connection it may be useful to enumerate some negative propositions on this subject 1
A tribunal is not necessarily a Court in this strict sense because it gives a final decision
Nor because it hears 1 1931 AC275363 witnesses on oath
Nor because two or more contending parties appear before it between whom it has to decide
Nor because it gives decisions which affect the rights of subjects
Nor because there is an appeal to a Court
Nor because it is a body to which a matter is referred by another body
See Rex vs Electricity Commissioners In my opinion a Court in the strict sense is a tribunal which is a part of the ordinary hierarchy of Courts of Civil Judicature maintained by the State under its constitution to exercise the judicial power of the State
These Courts perform all the judicial functions of the State except those that are excluded by law from their jurisdiction
The word judicial be it noted is itself capable of two meanings
They were admirably stated by Lopes LJ in Royal Aquarium and Summer and Winter Garden Society vs Parkinson 2 in these words The word judicial  has two meanings
It may refer to the discharge of duties exercisable by a judge or by justices in court or to administrative duties which need not be performed in court but in respect of which it is necessary to bring to bear a judicial mind that is a mind to determine what is fair and just in respect of the matters under con sideration
 That an officer is required to decide matters before him judicially in the second sense does not make him a Court or even a tribunal because that only establishes that he is following a standard of conduct and is free from bias or interest
Courts and tribunals act judicially in both senses and in the term Court are included the ordinary and permanent tribunals and in the term tribunal are included all others which are not so included
Now the matter would have been simple if the had designated a person or persons whether by name or by office for the purpose of hearing an appeal under section 111
It would then have been clear that though such person or persons were not Courts in the sense explained they were clearly 1 2  452 364 tribunals
The Act says that an appeal shall lie to the Central Government
We are therefore faced with the question whether the Central Government can be said to be a tribunal
Reliance is placed upon a recent decision of this Court in Shivji Nathubai vs The Union of India 1 where it was held that the Central Government in exercising power of review under the Mineral Concession Rules 1949 was subject to the appellate jurisdiction conferred by article 136
In that case which came to this Court on appeal from the High Court s order under article 226 it was held on the authority of Province of Bombay vs Kushaldas section Advani 1 and Rex vs Electricity Commissioners 3 that the action of the Central Government was quasi judicial and not administrative
It was then observed It is in the circumstances apparent that as soon as r 52 gives a right to an aggrieved party to apply for review a lis is created between him and the party in whose favour the grant has been made
Unless therefore there is anything in the statute to the contrary it will be the duty of the authority to act judicially and its decision would be a quasi judicial act
 This observation only establishes that the decision is a quasi judicial one but it does not say that the Central Government can be regarded as a tribunal
In my opinion these are very different matters and now that the question has been raised it should be decided
The function that the Central Government performs under the Act and the Rules is to hear an appeal against the action of the Directors
For that purpose a memorandum of appeal setting out the grounds has to be filed and the Company on notice is required to make representations if any and so also the other side and both sides are allowed to tender evidence to support their representations
The Central Government by its order then directs that the shares be registered or need not be registered
The Central Government is also empowered to include in its orders directions as to payment of costs or otherwise
The 1  2  3 365 function of the Central Government is curial and not executive
There is provision for a hearing and a decision on evidence and that is indubitably a curial function
Now in its functions Government often reaches decisions but all decisions of Government cannot be regarded as those of a tribunal
Resolutions of Government may affect rights of parties and yet they may not be in the exercise of judicial power
Resolutions of Government may be amenable to writs under articles 32 and 226 in appropriate cases but may not be subject to a direct appeal under article 136 as the decisions of a tribunal
The position however changes when Government embarks upon curial functions and proceeds to exercise judicial power and decide disputes
In these circumstances it is legitimate to regard the officer who deals with the matter and even Government itself as a tribunal
The officer who decides may even be anonymous but the decision is one of a tribunal whether expressed in his name or in the name of  the Central Government
The word tribunal is a word of wide import and the words Court and tribunal embrace within them the exercise of judicial power in all its forms
The decision of Government thus falls within the powers of this Court under article 136
It is next argued by the learned Attorney General that there is no law to interpret or to apply in these cases
He argues that since there are no legal standards for judging the correctness or otherwise of the order of the Central Government and the decision being purely discretionary it is neither judicial nor quasi judicial but merely administrative and that no appeal can arise from the nature of things
Such a line was taken before the Committee on Ministers  Powers by Lord Hewart and the argument reminds one of what he then said that such decisions are purely discretionary and the exercise of such arbitrary power is neither law nor justice or at all
Sir Maurice Gwyer also was of the opinion that an appeal could not be taken to Court against a Minister s 47 366 decision even on the ground of miscarriage of justice because that in his opinion was putting a duty on the Court which was not the concern of the Court
This argument takes me to the heart of the controversy and before I give my decision I wish to say a few preliminary things
Article 47 B gives to the Directors a right to refuse to register shares in their absolute discretion without giving reasons
In In re Gresham Life Assurance Society Ex Parte Penney James LJ observed No doubt the directors are in a fiduciary position both towards the company and towards every shareholder in it
It is very easy to conceive cases such as those cases to which we have been referred in which this Court would interfere with any violation of the fiduciary duty so reposed in the directors
But in order to interfere upon that ground it must be made out that the directors have been acting from some improper motive or arbitrarily and capriciously
That must be alleged and proved and the person who has a right to allege and prove it is the shareholder who seeks to be removed from the list of shareholders and to substitute another person for himself
But if it is said that wherever any shareholder has proposed to transfer his shares to some new member the Court has a right to say to the directors We will presume that your motives are arbitrary and capricious or that your conduct is corrupt unless you choose to tell us what your reasons were and submit those reasons to our decision  it would appear to me entirely altering the whole constitution of the company as provided by the articles
That shows that the Directors are presumed to have acted honestly in the interests of the company and a case has to be made out against them
I shall only quote from another case which summarises the position very aptly
In In re Hannan s King Browning Gold Mining Company Limited 2 Lindley MR is reported to have decided the case thus Their Lordships did not sit there as a Court of 1 1872 Law Rep 8 Ch2  367 honour the question was whether the applicants had made out that the transferee was being improperly kept off the register
There was no evidence of that 
The Court ought as a matter of honesty between man to man to presume that the directors were acting within their powers unless the contrary was proved but that was not proved by casting unfounded aspersions upon them
Thus the matter comes to this that the Directors have a presumption in their favour and the opposite party must prove that there was want of good faith
The right of appeal which is given under the  allows the Central Government to judge this issue
For that purpose parties are required if they desire to make representations and to put in evidence
But to enable the parties to have a free say the proceedings are made confidential by law and there is protection against action both civil and criminal
The appeal is disposed of on the basis of the representations and the evidence
A decision of a tribunal on a dispute inter partes in the light of pleadings and evidence is essentially a judicial one and this Court ought to be able on the same material to decide in an appeal whether the decision given was correct
If no substantive law is applicable there are questions of evidence of burden and adequacy of proof and of the application of the principles of justice equity and good conscience to guide the Court
Once it is held that the decision is that of a tribunal and subject to appeal it is manifest that an appeal may lie unless there be some other reason
The difficulty which arises in these cases is whether it was not the intention of the law that the decision of the Central Government was to be final
The law makes all allegations and counter allegations confidential
If Courts cannot compel disclosure of these allegations and the veil of secrecy drawn by law is not rent then it appears to me that a further appeal can hardly be efficacious
In this view in my opinion this Court should not grant special leave in such cases
The situation which arises is not very different from what arose before the Judicial Committee in Moses vs 368 Parker Ex Parte Moses 1
The headnote adequately gives the facts and may be quoted By Tasmanian Act No 10 of 1858 section 5 disputes concerning lands yet ungranted by the Crown are referred to the Supreme Court whose decision is to be final and by section 8 the Court is directed to be guided by equity and good conscience only and by the best evidence procurable even if not required or admissible in ordinary cases and not to be bound by strict rules of law or equity or by any legal forms Held that the Crown s prerogative to grant special leave to appeal is inapplicable to a decision so authorised
In dealing with the case Lord Hobhouse observed at p 248 The Supreme Court has rightly observed that Her Majesty s prerogative is not taken away by the Act of 1858 but intimates a doubt whether it ever came into existence
Their Lordships think that this doubt is well founded
They cannot look upon the decision of the Supreme Court as a judicial decision admitting of appeal
The Court has been substituted for the commissioners to report to the governor
The difference is that their report is to be binding on him
Probably it was thought that the status and training of the judges made them the most proper depositaries of that power
But that does not make their action a judicial action in the sense that it can be tested and altered by appeal
It is no more judicial than was the action of the commissioners and the governor
The Court is to be guided by equity and good conscience and the best evidence
So were the commissioners
So every public officer ought to be
But they are expressly exonerated from all rules of law and equity and all legal forms
How then can the propriety of their decision be tested on appeal What are the canons by which this Board is to be guided in advising Her Majesty whether the Supreme Court is right or wrong It seems almost 1 369 impossible that decisions can be varied except by reference to some rule whereas the Court making them is free from rules
If appeals were allowed the certain result would be to establish some system of rules and that is the very thing from which the Tasmanian Legislature has desired to leave the Supreme Court free and unfettered in each case
If it were clear that appeals ought to be allowed such difficulties would doubtless be met somehow
But there are strong arguments to show that the matter is not of an appealable nature
See also The  berge vs Laudry 1
The exercise of the powers under article 136 is a counterpart of the royal prerogative to hear appeals in any cause or matter decided by Courts or tribunals
But where the Articles of Association of a company give absolute discretion to the Directors and empower them to withhold their reasons the appeal taken to the Central Government would involve decision on such material which the parties place before it
If the allegations are made confidential by law and the Central Government in giving its decision cannot make them public it is manifest that the decision to borrow Lord Hobhouse s language is not of an appealable nature
Whether the right to hear appeals generally against decisions of the Central Government acting as a tribunal be within article 136 in my opinion and I say it with great respect special leave to appeal should not be granted in such cases unless this Court is able to rend the veil of secrecy cast by the law without rending the law itself
The argument is that the allegations are confidential only so far as the public are concerned but not confidential where Courts are concerned
The question is not that but one of practice of this Court
This Court should intervene only when practicable and that can only arise if the parties agree not to treat the allegations as confidential
That however does not end the present appeals
Special leave has been granted and I have held that the appeals are competent even though such cases 1 370 often may not be fit for appeal
In this case there is no claim that any allegation was confidential
In fact the appellants before the Central Government made it clear that they did not charge the Directors with capricious or mala fide conduct but only with arbitrary refusal without stating any reasons
The appellant Company in its representation set out the history of previous refusals and the decisions of the High Court of Bombay and the Central Government and made it clear that the action was taken in the interest of the Company
There are indications in the representation to show that on the previous occasion when these claimants were referred by the High Court and by Mr K R P Aiyengar Joint Secretary to the Civil Court they did not go to Court to establish that the action was mala fide and capricious
Before the Central Government they dropped that allegation and confined the case to one of refusal without giving any reasons and that was the plain issue before the Central Government
There was no evidence for the Central Government to consider and the Articles of Association give the Directors an absolute discretion to refuse to register shares without giving any reasons and on the authorities quoted earlier the Directors must be presumed to have acted honestly
There was thus no reason for the Central Government to reverse the decision of the Directors and the fact that no reasons have been given when nothing was confidential leads to the only inference that there was none to give
In my opinion these appeals must succeed
I would therefore set aside the order of the Central Government and allow the appeals with costs here and before the Central Government if an order to that effect was passed by the Central Government
Before parting with the case I may say that the Report of the Amendment Committee had recommended amendment of section 111 and it has been amended inter alia by the addition of sub section 5A which reads Before making an order under sub section 5 on an appeal against any refusal of the company to 371 register any transfer or transmission the Central Government may require the company to disclose to it the reasons for such refusal and on the failure or refusal of the company to disclose such reasons that Government may notwithstanding anything contained in the articles of the company presume that the disclosure if made would be unfavourable to the company
That would stop the blind man s buff under the unamended law
By COURT
In view of the majority judgment of the Court we quash the orders passed by the Central Government and direct that the appeals be reheard and disposed of according to law
Costs of these appeals will be costs in the appeals before the Central Government


Summary:
One B who held a large number of shares in the appellant company transferred two blocks of 100 shares each to his son and daughter in law
The transferees applied to the company to register the transfers
Purporting to act under article 47B of the Articles of Association of the company the directors of the company resolved not to register the transfers
Against this resolution the transferees preferred appeals to the Central Government under section III3 of the 
The Central Government without giving any reasons for its decision set aside the resolution of the directors and directed the company to register the transfers
The company obtained special leave to appeal against the decision of the Central Government under article 136 of the Constitution and appealed to the Supreme Court on the ground that the Central Government acted in excess of its jurisdiction or otherwise acted illegally in directing the company to register the transfers
The respondents raised a preliminary objection that the Central Government exercising appellate powers under section III of the Act before its amendment in 1960 was not a tribunal exercising judicial functions and was not subject to the appellate jurisdiction of the Supreme Court under article 136
Held that the appeal was competent to the Supreme Court by special leave against the decision of the Central Government under section III 3 Of the 
The Central Government when exercising powers under section III was a tribunal within the meaning of article 136 and was required to act judicially
A person aggrieved by the refusal to register transfer of shares had two remedies under the Act viz 1 to apply to the court for rectification of the register under section 155 or 2 to prefer an appeal under section III
The power of the Court under section 155 which has necessarily to be exercised judicially and the power of the Central Government under section III have to be exercised subject to the same restrictions
In both cases it has to be 340 decided whether the directors have acted oppressively capriciously corruptly or malafide
The decision has manifestly to stand those objective tests and has not merely to be founded on the subjective satisfaction of the authority
In an appeal under section III3 there is a lis or dispute between the contesting parties relating to their civil rights and the Central Government has to determine the dispute according to law in the light of the evidence and not on grounds of policy or expediency
There was thus a duty imposed on the Central Government to act judicially
The proviso to sub section
8 of section III which provided for the award of reasonable compensation in lieu of the shares in certain circumstances also fortifies that view
Shivji Nathubhai vs The Union of India   Re Bell Brothers Ltd Ex Parte Hodgson  The Province of Bombay vs Kusaldas section Advani 1950 SCR 621 The King vs London County Council and The Bharat Bank Ltd Delhi vs Employees of the Bharat Bank Ltd Delhi   referred to
In an appeal under section 1113 of the Act the Central Govern ment has to determine whether the exercise of the discretion by the directors refusing to register the transfer is malafide arbitrary or capricious and whether it is in the interest of the company
The decision of the Central Government is subject to appeal to the Supreme Court under article 136 the Supreme Court cannot effectively exercise its power if the Central Government gives no reasons in support of its order
The mere fact that the proceedings before the Central Government are to be treated as confidential does not dispense with a judicial approach nor does it obviate the disclosure of sufficient grounds and evidence in support of the order
In the present case no reasons have been given in Support of the orders and the appeals have to be remanded to the Central Government for rehearing
In re Gresham Life Assurance Society Ex Parte Penney 1 872 Law Rep 8 Ch
446 and In re Smith and Fawcett Ltd L R  referred to
Per Hidayatullah J
The appeal to the Supreme Court under article 136 was competent
The Act and the Rules showed that the function of the Central Government under section 113 was curial and not executive there was provision for filing a memorandum of appeal setting out the grounds for the company making representations against the appeal for tendering evidence and award of costs
There was provision for a hearing and a decision on evidence
The Central Government acted as a tribunal within the meaning of article 136
Huddart Parker  Co Pyoprietar Ltd vs Moorehead 108   Shell Company of Australia vs Federal Commissioner of Taxation  Rex vs Electricity Commissioners Royal Aquarium and Summer and Winter Garden 341 Society vs Parkinson  Shivji Nathubai vs The Union of India  and Province of Bombay vs Kushaldas section Advani   referred to
But special leave should not ordinarily be granted in such cases
The directors were not required to give reasons for their decision and there was a presumption that they had acted properly and in the interest of the company
In the appeal under section 111 of the Act all allegations and counter allegations were confidential and the Central Government could not make them public in its decision
An appeal against such a decision could rarely be effective
In the present case the appeal under section III3 was confined to the ground that the refusal to register was without giving any reasons there was no question of confidential allegations and there was no evidence to consider
The Articles of Association gave the directors absolute discretion to refuse to register the transfers without giving any reasons and there was a presumption that the directors had acted honestly
There was thus no reason for the Central Government to reverse the decision of the directors
In re Gresham Life Assurance Society Ex Parte Penney 1872 Law Rep 8 Ch
446 In re Hannan s King Browning Gold Mining Company Limited and Moses vs Parkar Ex parte Moses  referred to