In two recently delivered orders of the National Company Law Tribunal (NCLT), the question under consideration was whether a person who is unable to demonstrate having an ‘interest’ in the affairs of a company, is entitled to obtain copies of such company’s statutory registers. This question gives rise to the related concern of what qualifies as having ‘sufficient’ interest in a company’s affairs to be able to exercise the right of inspection of statutory registers.

Relevant Section of the Companies Act, 1956 (1956 Act):

Section 163(2)(b) of the 1956 Act provides that the registers, indices, returns and copies of certificates and other documents shall be open for inspection during business hours to (a) any member or debenture holder without fee; and (b) any other person on payment of fee. Extracts of any such record, register, etc., may also be obtained by member or debenture holder or by any other person on payment of fee.

Relevant Section of the Companies Act, 2013 (2013 Act):

The right of inspection and right to obtain extracts under Section 94(2) and 94(3) of the 2013 Act, although materially similar to the above-mentioned provisions of the 1956 Act, also include ‘other security holders’ and ‘beneficial owners’ within its ambit.

In Anilkumar Poddar v. Futura Commercials Pvt. Ltd., [2017] 201 Comp Cas 12 (NCLT) and Anilkumar Poddar v. Reliance Corporate IT Park Ltd. And Others [2017] 201 Comp Cas 23 (NCLT), the term ‘any other person’ as used in Section 163(2)(b) of the 1956 Act has been interpreted. The facts in both the cases are identical. Briefly, the Petitioner (being an outsider and having no interest in the respondent companies), had applied for copies of statutory registers of the respondent companies, which request was denied by the respondent companies. Aggrieved by the denial, the Petitioner approached NCLT under Section 163 of the 1956 Act for issue of directions to furnish copies of statutory registers. Admittedly, the Petitioner neither spelt out the reasons for which he sought the copies from the companies nor explained the interest he had in them.

The NCLT held that the phrase ‘any other person’ derives its meaning from the preceding words used in Section 163(2)(b) of the 1956 Act, i.e., members, debenture holders, other security holders or beneficial owners - the presence of a commercial interest in the company being a commonality amongst such persons. NCLT held that the term ‘any other person’ in relation to a company should therefore include any person who has a business interest in such company, such as a creditor, investor, banker, customer, etc., and who is not a rank outsider to the company. 

In an earlier case, the Company Law Board (CLB) in HB Stockholdings Limited v. Jaiprakash Industries Ltd. (2003) 116 Comp Cas 28 (CLB), had an opposing view. In this case, CLB observed that the Register of Members is a document which is available not only to the members of a company but also to any other person. In other words, it is a public register and that the purpose or motive to obtain the copies is irrelevant.

To analyze NCLT’s recent Orders, the statutory provision may be examined in context of the ‘Ejusdem Generis’ rule of construction. Per the ‘Rule of Ejusdem Generis’, general words that follow specific words derive their meaning and take the colour of the specific words that precede it. The specific words constituting a genus will be applied to understand the meaning of the succeeding general terms. The Hon’ble Supreme Court has applied the rule of ‘ejusdem generis’ in various cases.

The Hon’ble Supreme Court in Ishwar Singh Bagga & Ors., v. State of Rajasthan [1987] 1 SCC 101, while interpreting the phrase ‘other person authorized in this behalf by the State Government’ as provided under Section 129A of the Motor Vehicles Act, 1939, held that this phrase has to be interpreted in line with the term it succeeds, that is ‘any police officer authorized in this behalf’, and therefore the phrase ‘other person’ had to be read with the expression ‘any police officer’.

The phrase ‘other person’ also came up for consideration before the Hon’ble Apex Court in The Mysore Electricity Board v. Bangalore Woollen, Cotton and Silk Mills Ltd., & Ors., 1963 AIR 1128, wherein the word ‘other person’ as appearing in Section 76 of the Electricity Act, 1948, was interpreted. The said Section provides that all questions arising between the State Government or the Board and a licensee or other person shall be determined by arbitration, and whether such other person includes a consumer or not. Though the Hon’ble Supreme Court did not conclusively decide the issue, it observed that the term ‘other person’ as used in the whole Act, refers to persons who generate and supply electrical energy and not those who consume it.

Other Provisions of the 2013 Act:

The observation of the Hon’ble Supreme Court in relation to ‘other person’, may be applied to the provisions of the 2013 Act, to determine whether a rank outsider has any role to play under the said Act vis-à-vis a company. Although the phrases ‘other person’ and ‘any other person’ have been referred to in various provisions under the 2013 Act, our analysis focuses on those provisions where the phrase is preceded by the words ‘members’, ‘debentures’, ‘creditors’ or ‘any other person’.

  • Firstly, Section 13(5) dealing with alteration of memorandum of association, provides that the Central Government shall dispose of the application for alteration after satisfying that such alteration has the consent of the creditors, debenture holders and other person concerned with the company – The section makes it clear that the term ‘other person’ refers to the category of persons ‘concerned’ with the affairs of the company;
  • Section 147(3) dealing with liability of the auditor on its conviction for contravention of the provisions of the Act, provides that the auditor shall be liable for damages to company, statutory bodies, or authorities or to any other person for loss arising out of incorrect or misleading statements – Here, the term ‘any other person’ refers to the category of persons who have suffered losses arising out of any incorrect or misleading statement of the statutory auditor of the company;
  • Section 213(b)(i) provides that an application for investigation into the affairs of a company can be made if the business of the company is being conducted with intent to defraud its creditors, members or any other person – Here, ‘any other person’ refers to the category of persons having interest in the company and who may potentially have been defrauded by such company;
  • Section 224(5) provides that after an investigation into the affairs of a company, if the Inspector’s report states that fraud has taken place in a company and due to such fraud, any director, KMP, other officer of the company or any other person or entity has unduly benefited, such benefit shall be restored back – This Section indicates the category of recipients of wrongful gain.

Clearly, the amplitude of the phrase ‘other person’ or ‘any other person’ referred to in these sections strengthens the view that in the general scheme of the 2013 Act, the phrase denotes a person having commercial and/or legal interest in the affairs of a company.

Provisions of Indian Evidence Act, 1872:

The proposition whether the registers of members, and such documents of a company are ‘public documents’ allowing unrestricted access to everyone or a ‘private document’, granting limited access only to certain persons, can be analyzed in reference to Section 74 of the Indian Evidence Act, 1872 (Evidence Act).

Section 74 of the Evidence Act, states that documents forming the acts or records of the sovereign authority, official bodies and tribunals, and public officers, legislative, judicial and executive and public records kept in any state of private documents, are in the nature of public documents and Section 75 of the Evidence Act provides that all other documents are private. Section 76 of the Evidence Act casts a duty on every public officer having custody of a public document to allow inspection to public and issue certified copies.

Evidently, the 2013 Act does not specify that statutory registers are public documents. Nevertheless, once filed with the Ministry of Corporate Affairs (MCA), they become public documents and certified copies can be issued by the Registrar of Companies.

In Re, Butt (Deceased), (1952) 1 All ER 167 (CA), it was held that if shares are registered in the names of the trustees, the beneficiaries of the trust are not entitled to exercise the right to inspect documents as shareholders.

Possibility of opposite view:

There is also a plausible argument that the 1956 Act or the 2013 Act, in their wisdom, have included the term ‘other person’ only to distinguish from members, debenture holders, etc., who have vested interest in a company. This view can also be gathered from the provisions of Section 81(2) of the 2013 Act, wherein, the right to inspect the Register of charges was provided to ‘any person’ without specifying any other category of persons. Should the intention of the legislature be to exclude ‘other person’ from this right, it should have defined the said term specifically or restricted the right to say that persons who are interested in the company are only allowed, as used in Section 294(4) of 2013 Act, where in the audited accounts filed with the Tribunal shall be open to inspection by creditor, contributory or person interested.

Provisions of UK Companies Act, 2006:

A parallel may also be drawn to the Companies Act, 2006 of United Kingdom (‘UK Act’). Section 116 (1) (b) of the UK Act stipulates that the register and index of members’ names of a company is open to inspection for ‘any other person’ on payment of prescribed fee, provided the said person also discloses the ‘purpose’ in the request for inspection. However, this requirement of stating the ‘purpose’ in the application has not been provided neither under the 1956 Act nor under the 2013 Act.

Conclusion:

Importantly, the CLB in Jaiprakash Industries case did not deal with the question of eligibility of an ‘other person’ to inspect and take copies. Rather, the question was that before taking extracts, whether inspection of the company’s statutory register is a condition precedent. This question was answered in the affirmative by the CLB, and it was also held that the person inspecting the register need not specify the purpose for which he is inspecting it.

Although the views expressed by NCLT favour a narrower scope for interpreting the term ‘other person’ as referred to in Section 94 of the 2013 Act and Section 163 of the 1956 Act, these provisions do not explicitly impose the limitation that the ‘other person’ should be related and/or have a vested interest in the company. While contradictory views were expressed by the CLB earlier in Jaiprakash Industries case, and Courts have permitted access to ‘outsiders’ to company information by allowing applications in this regard after due consideration of the ‘proper purpose’, it would be interesting to see how this long-standing issue evolves in the Indian scenario.