Sunday, 28 May 2017

Whether civil court has jurisdiction to try cases if relief is claimed against companies?

 In Santosh Poddars’ case (supra), the Division
Bench of this court was dealing with a suit where
the plaintiffs had prayed for a declaration that 
defendant 1 therein had ceased to be a director of
Poddar Tyres Limited, defendant 3 therein, with
effect from 31/12/1990. They sought a further
declaration that all meetings of the Board of
Directors of defendant 3 company held after
31/12/1990 and in particular, the meetings allegedly
held on 23/3/1991 and 10/6/1991 are illegal,
invalid, nonest and the resolutions passed at these
meetings are illegal, invalid and nonest and not
binding on defendant 3 company or the plaintiffs. A
further declaration was sought that they continued
to be the directors of defendant 3 company and
their purported cessation as such directors is
invalid, illegal, nonest and void. In yet another suit,
similar declaration was sought. The suits were filed
in the City Civil Court at Bombay. The plaintiffs
had taken out a notice of motion for interim relief.
In the affidavits in reply filed by the defendants, a
preliminary objection was taken to the jurisdiction
of the City Civil Court to entertain and try the suits.
The City Civil Court framed a preliminary issue as
to whether it has jurisdiction to entertain and try the
suit in view of the provisions of section 10 of the
said Act read with the Notification dated 29/5/1959.
This court referred to sections 2(11) and 10
of the said Act and came to the conclusion that
whenever there is any reference under the said Act
to any proceedings before a Court under that Act,
(other than proceedings relating to an offence under 
the Act), the court which will have jurisdiction shall
be the High Court or, if there is the requisite
Notification, the District Court. However, there is
no ouster of the jurisdiction of the City Civil Court
in all cases where the provisions of the said Act
may be attracted. It was further observed that it is
only in respect of those proceedings which are
expressly contemplated under the said Act under
any specific provision that the court which is
referred to in that section would be the special
court, namely the High Court or the Notified
District Court. In all other cases, ordinarily the civil
courts would continue to have jurisdiction. In this
behalf, the Division Bench placed reliance on the
judgment of the single judge of this court in Rao
Saheb Manilal Gangaram Sindore v. M/s.
Western India Theatres Ltd., LXIV Bom.L.R.
532.
9. The Division Bench also referred to Dhulabhai’s
case (supra) and finally observed as under:
"From the provisions of the Companies
Act, we do not find anything by which
we can infer that the jurisdiction of the
Civil Court is ousted. The very fact that
section 2(11) is part of the definition
clause under the Companies Act under
which a Court is defined to mean the
Court as prescribed under section 10,
clearly shows that whenever the term
‘the court’ is used in any section of the
Companies Act, the term ‘Court’ will
have to be interpreted with reference to
section 10. These sections will have no
application where any general civil suit
is filed. The definition clause is attracted
only when resort is had to a proceeding
under the Companies Act under a
section which prescribes resort to a
Court. Under the Companies act, powers
are conferred not only on Courts but
also on other authorities like the
Company Law Board, the Central
Government and the Registrar. Where a
power is vested by the Act in a Court,
that Court has to be ascertained with
reference to section 10. Beyond so
specifying the Court competent to deal
with such a matter, section 10 cannot
be construed as investing the Company
Court with jurisdiction over every
matter which may arise in respect of a
Company or as divesting Civil Courts of
their jurisdiction."
10. The trial court has placed reliance on this
judgment and I find the reliance placed on this
judgment to be apt. It is pertinent to note that in that
case also, the declaration was sought that all
meetings of the Board of Directors of defendant 3
company and the resolutions passed at these
meetings are illegal, invalid and nonest and not
binding on defendant 3 company or the plaintiffs
and defendant 1 had ceased to be a director of
Poddar Tyres Limited. A further declaration was
also sought that the plaintiffs continued to be the
directors of defendant 3 company and their
purported cessation as such directors is invalid,
illegal, nonest and void. In the present case also, a
declaration is sought that the appointment of 
defendants 3 and 4 as directors of defendant 1 is
illegal, null and void and of no consequence
whatsoever and any acts, deeds and/or things of any
nature whatsoever done by defendant 1 company in
pursuance of the alleged appointment of defendants
3 and 4 as the directors and/or any other act, deed,
thing done by defendants 3 and 4 in exercise of
powers in the alleged capacity as directors of
defendant 1 is illegal, null and void and not
binding. A similar declaration is sought that any
resolutions allegedly passed in any purported
meeting of shareholders or of Board of Directors of
defendant 1 allegedly held by the Kapoor family or
any of them is illegal, null and void and of no
consequence whatsoever.
13. In that case, the Division Bench was
considering section 155 of the said Act. Section 155
of the said Act vests jurisdiction in the company
judge, and impliedly ousts the jurisdiction of the
civil court in respect of rectification. After referring
to Raja Ram Kumar Bhargava v. Union of
India, AIR 1988 SC 752, this court observed that
this judgment is an authority for the proposition that
if a pre-existing right in common law is recognised
by the statute and a new statutory remedy for this
enforcement provided, without expressly excluding
the civil court’s jurisdiction, then both the common
law and the statutory remedies might become 
concurrent remedies. 
IN THE HIGH COURT OF BOMBAY AT GOA
FIRST APPEAL NO. 62 OF 2016
 M/s. Candolim Developers Pvt. Ltd.,
V
Mr. Pravin Grover,


Coram:- F. M. REIS &
 NUTAN D. SARDESSAI, JJ.
 Date:- 13th October, 2016
Citation: 2017(2) ALLMR117

Heard Mr. J. E. Coelho Pereira, learned Senior Counsel
appearing for the appellants and Mr. A. D'Silva, learned counsel
appearing for the respondent nos. 1(a), 2 and 3.
2. Admit. Heard forthwith with the consent of the learned
counsel.
3. The notice indicated that the matter would be disposed of
finally at the stage of admission.
4. On the last date of hearing, an opportunity was given to the
respondent no.4 who was not represented to appear but however, none 
appears for the said respondent today as well.
5. The challenge in the above appeal is to the order passed by
the learned Civil Judge Senior Judge, Panaji, dated 12.11.2013 whereby
the plaint filed by the appellants against the respondents came to be
rejected in terms of Order VII Rule 11(d) of the CPC.
6. Mr. Coelho Pereira, learned Senior Counsel appearing for
the appellants has pointed out that the learned Judge has misconstrued
the provisions of Section 10GB of the Companies Act, 1956 to come to
the conclusion that the jurisdiction of the Civil Court is barred. The
learned Senior Counsel further pointed out that the suit filed by the
Company as well as two directors of the Company is on the ground that
there was a fraud committed by the respondent no.1 whilst running the
affairs of the plaintiff no.1/Company. It is further pointed out that
documents were not available but however documents were fabricated
to defraud. Accordingly, the following reliefs were sought.
(a) For a decree and order of this Hon'ble Court
declaring that Form No.5 filed by the
defendant no.1 at annexure-Q before the
Registrar of Companies, purporting to be the 
Share Capital from 51% to 70% as null and
void and/or inoperative and order, it to be
cancelled.
(b) For a Judgment and decree declaring that
Form No.32 filed at Annexure-T and AnnexureU
by the defendant no.1, before the Registrar of
Companies, purporting to intimate the Registrar
of Companies, that plaintiffs no.2 and 3
resigned as Directors and purporting to appoint
defendant no.2 and defendant no.3 as Directors
of the said Company, as null and void and/or
inoperative and order it to be cancelled.
(c) For a judgment and decree, directing the
defendant no.1 to recoup and/or pay to the said
Company an amount of Rs.6,53,35,699.01
detailed at Annexure-Z-17 along with interest
due thereon at the rate of 18% as from the date
of institution of the suit until its effective
payment to the Company.
(d) For a Mandatory injunction directing the
defendant no.1 to hand over the vehicle bearing
no.GA-01-C-8001 belonging to the said
company forthwith. 
(e) For a permanent injunction, restraining the
defendants no.1, 2 and 3 from acting and/or
posing themselves as Directors of the Company
and/or causing any interference to plaintiff no.2
and 3 in the management of the affairs of the
said company as its directors.
(f) For a Mandatory injunction directing the
defendant no.1 to hand over the documents
listed at Annexure-Z-18 to the plaintiffs.
7. The defendants filed an application for rejection of plaint on
the ground that the jurisdiction of the Civil Court is barred under Order
VII Rule 11(d) of the CPC which came to be allowed by the impugned
order dated 12.11.2013.
8. Mr. D'Silva, learned counsel appearing for the respondent
nos. 1(a), 2 and 3 has pointed out that the suit is barred under Section
10GB of the Companies Act as according to him on plain reading of the
plaint, the allegations by the Company cannot be adjudicated under
Sections 397 and 398 of the Companies Act. The learned counsel further
pointed out that the learned Judge has rightly passed the impugned 
order. In support of his submissions, the learned counsel has relied
upon the judgment of the Apex Court reported in (2008) 3 SCC 363 in
the case of V. S. Krishnan and others V/s Westfort Hi-tech Hospital
Ltd.,& Ors.
9. On the other hand, Mr. Coelho Pereira, learned Senior
Counsel has relied upon the judgment reported in (2003) 6 SCC 220 in
the case of Dwarka Prasad Agarwal and Anr. V/s Ramesh Chander
Agarwal and others.
10. We have considered the submissions of the learned Counsel
and we have also gone through the records. Whilst examining an
application under Order 7 Rule 11 of the Civil Procedure Code, the
defence of the defendants in the W.S. cannot be looked into but only the
plaint. The suit is filed for the aforesaid reliefs by the Company as well
as other Directors of the Company. It is the contention of the appellants
that the plaintiff no. 2 has blood relationship with the Respondent no. 1
and that he had issued a General Power of Attorney which has been
misused. It is also contended that the Respondent no.1 represented to the
Appellant no.2 that the Company required money to complete the
project as there was good demand for Block A. The main contention 
prima facie is to claim that there was mistrust and misuse of the
authority by the Respondent no.1. Looking into the allegations in the
plaint, the reliance to the provisions of the Companies Act and the
judgment in the case of V. S. Krishnan & Ors ( supra ) is not applicable
to the facts of the present case. The exclusion of jurisdiction cannot be
readily inferred. Section 10GB has been inserted by the Companies
(Second Amendment) Act, 2002 in order to provide for two main matters.
One of them is that no Civil Court is to have any jurisdiction to entertain any
suit or proceeding in respect of any matter vested in the Tribunal or Appellate
Tribunal for its determination. The second is that no injunction is to be
granted by any Court or other authority in respect of any action taken or
proposed to be taken in exercise of powers conferred on the Tribunal or
Appellate Tribunal. The Code of Civil Procedure, states in Section 9 that the
Civil Courts shall have jurisdiction to try all suits of a civil nature except
suits of which cognizance is expressly or impliedly barred. The scope of an
exclusion of jurisdiction of the Civil Code is not to be readily inferred but
that such exclusion must either be explicit, expressed or clearly implied.
11. The learned Single Judge of this Court in the Judgment
reported in (2006) 1 Bom. C.R. 328 in the case of Sahara Fabrics Pvt.
Limited & Ors V/s Smt. Kailash w/o Ramprashad Mehra & Anr., it has
been observed at paras 7, 8, 9, 10, 13 and 14 thus : 
“ 7. In Dhulabhai’s case (supra) the Supreme Court
was considering the question of exclusion of
jurisdiction of the civil court to entertain a suit in the
context of section 17 of the M.B. Sales Tax Act which
bars the jurisdiction of the civil court to entertain
certain proceedings. The principles laid down by the
Supreme Court which have a bearing on the present
case are as under:
"(1) Where the statute gives a finality
to the orders of the special tribunals
the civil courts’ jurisdiction must be
held to be excluded if there is
adequate remedy to do what the civil
court would normally do in a suit.
Such provision, however, does not
exclude those cases where the
provisions of the particular Act have
not been complied with or the
statutory tribunal has not acted in
conformity with the fundamental
principles of judicial procedure.
(2) Where there is an express bar of
the jurisdiction of the court, an
examination of the scheme of the
particular Act to find the adequacy or
the sufficiency of the remedies
provided may be relevant but is not
decisive to sustain the jurisdiction of
the civil court. Where where there is
no express exclusion, the
examination of the remedies and the
scheme of the particular Act to find
out the intendment becomes
necessary and the result of the
inquiry may be decisive. In the latter
case, it is necessary to see if the
statute creates a special right or a
liability and provides for the
determination of the right or liability
and further lays down that all
questions about the said right and
liability shall be determined by the
tribunals so constituted, and whether,
remedies normally associated with
action in civil courts are prescribed
by the said statute or not.
(3) x x x x x x
(4) x x x x x x
(5) Where the particular Act contains
no machinery for refund of tax
collected in excess of constitutional
limits or illegally collected, a suit
lies.
(6) Questions of the correctness of the
assessment apart from its
constitutionality are for the decision
of the authorities and a civil suit does
not lie if the orders of the authorities
are declared to be final or there is an
express prohibition in the particular
Act. In either case the scheme of the
particular Act must be examined
because it is a relevant enquiry.
(7) An exclusion of jurisdiction of the
civil court is not readily to be inferred
unless the conditions above set down
apply.
8. In Santosh Poddars’ case (supra), the Division
Bench of this court was dealing with a suit where
the plaintiffs had prayed for a declaration that 
defendant 1 therein had ceased to be a director of
Poddar Tyres Limited, defendant 3 therein, with
effect from 31/12/1990. They sought a further
declaration that all meetings of the Board of
Directors of defendant 3 company held after
31/12/1990 and in particular, the meetings allegedly
held on 23/3/1991 and 10/6/1991 are illegal,
invalid, nonest and the resolutions passed at these
meetings are illegal, invalid and nonest and not
binding on defendant 3 company or the plaintiffs. A
further declaration was sought that they continued
to be the directors of defendant 3 company and
their purported cessation as such directors is
invalid, illegal, nonest and void. In yet another suit,
similar declaration was sought. The suits were filed
in the City Civil Court at Bombay. The plaintiffs
had taken out a notice of motion for interim relief.
In the affidavits in reply filed by the defendants, a
preliminary objection was taken to the jurisdiction
of the City Civil Court to entertain and try the suits.
The City Civil Court framed a preliminary issue as
to whether it has jurisdiction to entertain and try the
suit in view of the provisions of section 10 of the
said Act read with the Notification dated 29/5/1959.
This court referred to sections 2(11) and 10
of the said Act and came to the conclusion that
whenever there is any reference under the said Act
to any proceedings before a Court under that Act,
(other than proceedings relating to an offence under 
the Act), the court which will have jurisdiction shall
be the High Court or, if there is the requisite
Notification, the District Court. However, there is
no ouster of the jurisdiction of the City Civil Court
in all cases where the provisions of the said Act
may be attracted. It was further observed that it is
only in respect of those proceedings which are
expressly contemplated under the said Act under
any specific provision that the court which is
referred to in that section would be the special
court, namely the High Court or the Notified
District Court. In all other cases, ordinarily the civil
courts would continue to have jurisdiction. In this
behalf, the Division Bench placed reliance on the
judgment of the single judge of this court in Rao
Saheb Manilal Gangaram Sindore v. M/s.
Western India Theatres Ltd., LXIV Bom.L.R.
532.
9. The Division Bench also referred to Dhulabhai’s
case (supra) and finally observed as under:
"From the provisions of the Companies
Act, we do not find anything by which
we can infer that the jurisdiction of the
Civil Court is ousted. The very fact that
section 2(11) is part of the definition
clause under the Companies Act under
which a Court is defined to mean the
Court as prescribed under section 10,
clearly shows that whenever the term
‘the court’ is used in any section of the
Companies Act, the term ‘Court’ will
have to be interpreted with reference to
section 10. These sections will have no
application where any general civil suit
is filed. The definition clause is attracted
only when resort is had to a proceeding
under the Companies Act under a
section which prescribes resort to a
Court. Under the Companies act, powers
are conferred not only on Courts but
also on other authorities like the
Company Law Board, the Central
Government and the Registrar. Where a
power is vested by the Act in a Court,
that Court has to be ascertained with
reference to section 10. Beyond so
specifying the Court competent to deal
with such a matter, section 10 cannot
be construed as investing the Company
Court with jurisdiction over every
matter which may arise in respect of a
Company or as divesting Civil Courts of
their jurisdiction."
10. The trial court has placed reliance on this
judgment and I find the reliance placed on this
judgment to be apt. It is pertinent to note that in that
case also, the declaration was sought that all
meetings of the Board of Directors of defendant 3
company and the resolutions passed at these
meetings are illegal, invalid and nonest and not
binding on defendant 3 company or the plaintiffs
and defendant 1 had ceased to be a director of
Poddar Tyres Limited. A further declaration was
also sought that the plaintiffs continued to be the
directors of defendant 3 company and their
purported cessation as such directors is invalid,
illegal, nonest and void. In the present case also, a
declaration is sought that the appointment of 
defendants 3 and 4 as directors of defendant 1 is
illegal, null and void and of no consequence
whatsoever and any acts, deeds and/or things of any
nature whatsoever done by defendant 1 company in
pursuance of the alleged appointment of defendants
3 and 4 as the directors and/or any other act, deed,
thing done by defendants 3 and 4 in exercise of
powers in the alleged capacity as directors of
defendant 1 is illegal, null and void and not
binding. A similar declaration is sought that any
resolutions allegedly passed in any purported
meeting of shareholders or of Board of Directors of
defendant 1 allegedly held by the Kapoor family or
any of them is illegal, null and void and of no
consequence whatsoever.
13. In that case, the Division Bench was
considering section 155 of the said Act. Section 155
of the said Act vests jurisdiction in the company
judge, and impliedly ousts the jurisdiction of the
civil court in respect of rectification. After referring
to Raja Ram Kumar Bhargava v. Union of
India, AIR 1988 SC 752, this court observed that
this judgment is an authority for the proposition that
if a pre-existing right in common law is recognised
by the statute and a new statutory remedy for this
enforcement provided, without expressly excluding
the civil court’s jurisdiction, then both the common
law and the statutory remedies might become 
concurrent remedies. This court then referred to
Rao Saheb’s case (supra) and held that for the
relief contemplated by section 155, a suit was the
primary remedy under the general law. The relief
contemplated by that section was one which was
available at common law. Section 155 merely
provided a statutory remedy. Its object was not to
whittle down or abrogate the procedure by way of
suit for getting the relief contemplated by that
section.
14. After taking a resume of several judgments
on the point, this court observed that the authorities
on the subject do recognise the common law right
of a shareholder to seek rectification of the register
of members, and the jurisdiction of the civil court in
appropriate cases is not barred where complicated
questions of law and fact arise in an application for
rectification under section 155 of the said Act and it
is not possible for the court to grant relief without
first adjudicating the disputed questions of law and
fact. Relying on these observations, it was urged by
the learned counsel for the petitioners that the
plaintiffs have to first go to the Company Law
Board and if the Company Law Board comes to
the conclusion that disputed questions of law and
facts arise then the Company Law Board can
relegate the plaintiffs to the civil court.” 
12. Looking into the observations made in the said Judgment
based on the Judgment of the Division Bench of this Court and the
allegations made in the plaint, we find that the learned Trial Judge was
not justified to come to the conclusion that the suit is barred in terms of
Order 7 Rule 11 of the Civil Procedure Code. The jurisdiction of the
Civil Court is not barred taking into account the relief sought by the
Appellants which, prima facie, suggests that they are under the general
law applicable to the facts of the case. The suit is also filed on on behalf
of the Complainant who is the Appellant no. 1 herein. Whether the
Company has been duly represented is a matter which has to be
examined on its own merits in accordance with law and not while
examining the application for rejection. The question as to whether the
suit itself is maintainable will have to be considered looking into the
defence of the Respondents which exercise cannot be carried out whilst
considering an application under Order 7 Rule 11. In such
circumstances, the learned Judge was not justified to pass the impugned
Order and, as such, the impugned Order 12.11.2013 deserves to be
quashed and set aside.
13. In view of the above, we pass the following 
O R D E R
(i) The appeal is partly allowed.
(ii) The impugned order dated 12.11.2013 is quashed
and set aside.
(iii) The Special Civil Suit No.122/2000 is restored to
the file of the learned Civil Judge Senior Division,
Panaji.
(iv) The learned Judge is directed to proceed and
decide the suit in accordance with law.
(v) Needless to say that all the contentions of the
respondents on merits are left open.
(vi) The appeal stands disposed of accordingly.
NUTAN D. SARDESSAI, J. F. M. REIS, J.

Print Page

No comments:

Post a Comment