Bombay High Court
Vitthalrao Narayanrao Patil vs Maharashtra State Seeds Corporation ... on 30 August, 1989
Equivalent citations: 1990(1)BOMCR60, [1990]68COMPCAS608(BOM)
JUDGMENT M.M. Qazi, J.
1. The applicant in C.R.A. No. 885 of 1989, who is the non-applicant in C.R.A. No. 723 of 1989 (hereinafter referred to as "the plaintiff"), filed a suit for a declaration and injunction before the Second Joint Civil Judge, Senior Division, Akola, against the non-applicants in C.R.A. No. 885 of 1989, who are the applicants in C.R.A. No. 723 of 1989 (hereinafter referred to as "the defendants").
2. According to the plaintiff, he was a duly elected director of the Maharashtra State Seeds Corporation Ltd., Akola (hereinafter referred to a "the corporation"), which is a public limited company registered under the provisions of the company law. The sixty-ninth meeting of the board of director was Scheduled to be held at Akola on June 15, 1989. On June 14, 1989, he received a letter from the managing director of the corporation (defendant No. 1) intimating that he has ceased to be a director of the company with effect from November 12, 1987. The plaintiff challenged this letter by way of a civil suit on the ground that, in view of section 284 of the Companies Act, he could not be removed without a resolution of the board of directors. It was further contended that the principles of natural justice were violated, inasmuch as no show-cause notice was given before removing the plaintiff. In substance, the letter dated June 14, 1989, issued by defendant No. 1 was illegal and ultra vires and that the plaintiff was entitled to attend the meeting dated June 15, 1989. The plaintiff also filed an application (exhibit-5) for an ad interim injunction seeking a direction that he be permitted to attend the annual general scheduled to be held on June 15, 1989. The learned Second Joint Civil Judge was pleased to issue the ad interim injunction as prayed for.
3. The defendants appeared before the trial court and applied for vacation of the injunction. One of the main contentions of the defendants was that the civil court had no jurisdiction to entertain the suit in view of section 10 of the Companies Act. According to the defendants, the plaintiff had taken certified seeds from the corporation on credit in between November 12, 1987, and July 9, 1988, without the permission of the Central Government under section 295 of the Companies Act, and hence the post of director had fallen vacant in view of section 283(1)(h) of the Companies Act, 1956, which reads as under :
"283(1) The office of a director shall become vacant if - ...
(h) he (whether by himself or by any person for his benefit or on his account), or any firm in which he is a partner or any private company of which he is a director, accepts a loan, or any guarantee or security for a loan, from the company in contravention of section 295;"
4. It is not in dispute that the plaintiff had taken certified seeds from the corporation. However, according to him, he had already cleared the dues on April 24, 1989, and, therefore, the notice dated June 14, 1989, given to him was illegal.
5. The trial court held that it had jurisdiction to try the suit and consequently granted an interim injunction as prayed for. This order was challenged by way of an appeal before the Joint District Judge, Akola. The defendants also challenged that order by way of revision (C.R.A. No. 723 of 1989) before this court since no appeal was maintainable on the finding of jurisdiction. While the revision was pending, the appeal filed by the defendants was allowed by the Joint District Judge, Akola, and hence Civil Revision Application No. 885 of 1989 has been filed by the plaintiff in this court. The appellate court has recorded a finding that the civil court had no jurisdiction to entertain the suit in view of section 10 of the Companies Act, and, consequently, vacated the interim injunction which was granted by the trial court in favour of the plaintiff.
6. Several challenges have been raised before me in these two revisions, but, in my view, it is not necessary to decide those challenges since I am of the view that the trial court had no jurisdiction to entertain the suit. Section 10 of the Companies Act, which is relevant for our purpose, is reproduced below :
"10. (1) The court having jurisdiction under this Act shall be -
(a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any district court or district courts subordinate to that High Court in pursuance of sub-section (2); and
(b) where jurisdiction has been so conferred, the district court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.
(2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any district court to exercise all or any of the jurisdiction conferred by this Act upon the court, not being the jurisdiction conferred -
(a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive; ......"
7. In the Companies Act by Ramaiya, Notification dated may 29, 1959, is quoted, wherein several sections of the Companies Act are mentioned in respect of which power has been conferred on district courts. However, it is not in dispute that it does not include section 283 with which we are concerned. As I have observed above, the plaintiff has challenged the letter dated June 14, 1989, issued by defendant N. 1 informing him that he has ceased to be the director of the company with effect from November 12, 1987, in view of section 283 of the Companies Act.
8. Mr. Madkholkar vehemently argued that the civil court has jurisdiction to entertain the suit even in respect of a dispute under section 283 of the Companies Act. However, he could not show if the Central Government has conferred that power on the district courts. From the very language of section 10 of the Companies Act, it would appear that essentially it is the jurisdiction of the High Court to entertain any dispute in respect of the affairs of the company, except such disputes in respect of which powers have explicitly been conferred on the district court by the Central Government. The appellate court has relied on the decision of the Calcutta High Court in Hirendra Bhadra v. Triton Eng. Co. (P.) Ltd. [1975-76] 80 CWN 242, which is applicable on all fours. The appellate court has dealt with this aspect quite exhaustively and has has, in my view, rightly found that the trial court had no jurisdiction to try the suit. Mr. Madkholkar has referred to R. Prakasam v. Sree Narayana Dharma Paripalana Yogam [1980] 50 Comp Cas 611 (Ker) and Panipat Woollen and General Mills Co. Ltd. v. R. L. Kaushik [1969] 39 Comp Cas 249 (P&H), which, in my view, are quite distinguishable and not relevant to the controversy involved in these revisions.
9. Having regard to these facts, Civil Revision Application No. 885 of 1989 filed by the original plaintiff is dismissed and the Civil Revision Application No. 723 of 1989 filed by the original defendants is allowed and the order passed by the Second Joint Civil Judge, Senior Division, Akola, on July 7, 1989, is quashed. The status quo granted by this court on August 28, 1989, to continue till September 11, 1989.