Gujarat High Court
Snehalbhai Jaykantbhai Shah vs The New India Industries Ltd. on 12 June, 2018
Author: M.R. Shah
Bench: M.R. Shah, A.Y. Kogje
C/FA/218/2018 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 218 of 2018
With
CIVIL APPLICATION NO. 1 of 2018
In
R/FIRST APPEAL NO. 218 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE A.Y. KOGJE
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India or any
order made thereunder ?
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SNEHALBHAI JAYKANTBHAI SHAH
Versus
THE NEW INDIA INDUSTRIES LTD.
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Appearance:
MR MIHIR THAKORE, SENIOR ADVOCATE with MR PARTHIV B SHAH, ADVOCATE for the
Appellant(s) No. 1
MR KAMAL TRIVEDI, SENIOR ADVOCATE with MR AMIT V THAKKAR, ADVOCATE with MR
SATYAM THAKKAR with MR MADAN BABU for the Defendant(s) No. 4
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CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE A.Y. KOGJE
Date : 12/06/2018
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] ADMIT. Shri Amit Thakkar, learned Advocate waives service of notice of Admission on behalf of the contesting respondent No.4.
Page 1 of 38 C/FA/218/2018 CAV JUDGMENTIn the facts and circumstances of the case and with the consent of learned Advocates appearing for respective parties, present First Appeal is taken up for final hearing today.
[2.0] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 29.11.2017 passed by the learned Judge, Commercial Court, Vadodara (hereinafter referred to as "learned Commercial Judge") below Exh.49 in Commercial Civil Suit No.44/2017 by which the learned Judge has allowed the said application submitted by the original defendant No.4 and has rejected the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 (hereinafter referred to as "CPC"), the original plaintiff has preferred the present First Appeal.
[3.0] The facts leading to the present First Appeal in nutshell are as under:
[3.1] That the appellant herein - original plaintiff has instituted the Commercial Civil Suit No.44/2017 in the Commercial Court, Vadodara for seeking the relief of specific performance of the Memorandum of Understanding dated 09.09.2004 (hereinafter referred to as "the said MOU") executed between the plaintiff and defendant Nos.1 and 2 in respect of the suit properties situated at Vadodara. It was the case on behalf of the plaintiff that the defendant agreed to sell 4 lakh Sq. Feet of land to the plaintiff at the rate of Rs.411 per Sq. Feet for a total sum of Rs.16,44,00,000/. It was the case of the plaintiff that original defendant No.1 Company vide its Resolution dated 15.09.2004 passed in meeting Page 2 of 38 C/FA/218/2018 CAV JUDGMENT of Board of Directors authorized the defendant No.2 to execute the said MOU. It was the case on behalf of the plaintiff that as per the agreed terms of the said MOU, the defendant Company was to clear its all liabilities of the suit properties and thereafter to hand over the suit properties with clear and marketable title by January 2006. The amount of consideration was to be paid by the plaintiff to the defendant No.1 Company and the defendant No.1 Company was required to transfer the suit properties in the name of the plaintiff Company or other person as suggested by the plaintiff into two separate piece of land parcel by executing the sale deed or by any other mode / way. It was the case on behalf of the plaintiff that in respect of the suit properties, the original defendant No.2 - Chairman and Director of the defendant No.1 Company was paid Rs.31 lakh pursuant to the said MOU and thus, total Rs.56 lakh was paid. It was also the case on behalf of the plaintiff that thereafter the defendant No.2 had taken total 15 cheques each of Rs.17 lakh totalling to Rs.2,55,00,000/ towards the suit properties in order to clear the litigation of ONGC and it was agreed by the defendant No.2 that he will not deposit the cheques in the bank. It was also the case on behalf of the plaintiff that in addition to the aforesaid further 11 cheques of Rs.10 lakh were given and it was agreed by the defendant No.2 that he will not deposit the cheques in the bank. It was the case on behalf of the plaintiff that inspite of the aforesaid fact, with a malafide intention, the defendant No.2 has deposited cheques in the bank, as a result of which, all the said cheques have been dishonored due to which the plaintiff failed to perform its part of the said MOU. It was also the case on behalf of the plaintiff that as per instruction of defendant No.2, on Page 3 of 38 C/FA/218/2018 CAV JUDGMENT 21.08.2007, the plaintiff issued cheque No.842891 dated 21.08.2007, drawn on State Bank of Indore for Rs.10,90,000/ in favour of one Jahnvi Developers and Finance Ltd., but the defendant No.2 did not deposit the said cheque in the bank. But thereafter the defendant No.2 demanded for cash payment of Rs.10,90,000/ and also threatened if the plaintiff fail or refuse to pay the amount in cash then the defendant will proceed for selling the suit properties to any other person and also gave threats for terminating the said MOU. Therefore, the plaintiff instituted the aforesaid suit in the Court of learned Civil Judge, Senior Division, which was numbered as Special Civil Suit No.541/2017. That thereafter on establishment of the Commercial Court, at Vadodara and as the amount involved was above Rs.1 Crore, the aforesaid suit came to be transferred to the Court of learned Commercial Judge which was numbered as Commercial Civil Suit No.44/2017.
In the suit the plaintiff has prayed for relief of specific performance of the said MOU and had asked for the relief for giving direction to the defendant to execute the sale deed. The plaintiff also had prayed for injunction restraining the defendants jointly through their Chairman, Managing Director, Directors, Authorized Signatory, agents from entering into sale transaction, mortgage, gift, exchange and transfer by any means with any person and to restrain the defendants from acting in any manner contrary to the said MOU.
[3.2] On summons of the suit being served upon the defendants, the original defendant No.4 submitted the application Exh.49 requesting to reject the plaint under Order VII Rule 11 of the CPC Page 4 of 38 C/FA/218/2018 CAV JUDGMENT contending inter alia that the suit is barred by limitation as well as no cause of action has been disclosed in the plaint and that the suit amounts to gross abuse of judicial process. It was also submitted that the suit is ex facie barred in law as the said MOU is void ab initio and contrary to the provisions of the Companies Act, 1956. That the said application was opposed by the original plaintiff by filing the reply at Exh.51. That considering the averments in the plaint and the averments and allegations in the application Exh.49 and the reply Exh.51 and the said MOU of which the specific performance was sought, by impugned order the learned Commercial Judge has allowed the said application and has rejected the plaint under Order VII Rule 11 of the CPC by observing that in view of the bar under Section 293(1)(a) of the Companies Act, 1956, the suit filed by the plaintiff on the basis of the said MOU is not maintainable as the said MOU has been executed without any authority from the Company as no resolution was passed by the defendant No.1 Company in the general meeting of the Company to transfer the suit properties in question in favour of the plaintiff.
[3.3] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Commercial Judge below Exh.49 in rejecting the plaint under Order VII Rule 11 of the CPC, the original plaintiff has preferred the present First Appeal.
[4.0] Shri Mihir Thakore, learned Senior Advocate has appeared on behalf of the appellant - original plaintiff and Shri Kamal Trivedi, Page 5 of 38 C/FA/218/2018 CAV JUDGMENT learned Senior Advocate has appeared on behalf of the respondent No.4 herein - original defendant No.4.
[5.0] Shri Thakore, learned Counsel appearing on behalf of the appellant has vehemently submitted that in the facts and circumstances of the case the learned Commercial Judge has materially erred in rejecting the plaint under Order VII Rule 11 of the CPC.
[5.1] It is further submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that as such the learned Commercial Judge has rejected the plaint under Order VII Rule 11 of the CPC solely considering section 293 of the Companies Act, 1956 and all the contentions raised in the application are neither considered nor discussed nor even argued before the learned Commercial Judge as can be seen from the order passed by the learned Commercial Judge. It is submitted that the learned Commercial Judge has held the said MOU as void ab initio considering section 293 of the Companies Act, 1956 and solely on the ground that the Company has not passed a resolution in its general meeting authorizing the original defendant No.2 to transfer / dispose of the properties of the Company and therefore in absence of any resolution of the general board of the Company, the Director cannot execute the said MOU and therefore, the original defendant No.2 had no authority to execute the said MOU.
[5.2] It is further submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that the learned Commercial Page 6 of 38 C/FA/218/2018 CAV JUDGMENT Judge has passed the impugned order by observing that in the plaint the plaintiff has not averred and/or pleaded that the said MOU was backed by the resolution of the General Board of the Company and/or that the original defendant No.2 who executed the said MOU had a valid authority to transfer and/or alienate the suit properties of the defendant No.1 Company. It is vehemently submitted by Shri Thakore, learned Advocate appearing on behalf of the appellant that as such the plaintiff is not required to plead in the suit as to whether the resolution as per section 293 of the Companies Act, 1956 is passed by the defendant No.1 Company or not.
[5.3] It is vehemently submitted by Shri Thakore, learned Advocate appearing on behalf of the appellant that as per the law laid down by the Division Bench of this Court in the case of Trust of Laxminarayan Dev Temple and its subordinate temple and Others vs. Ajendraprasadji Narendraprasadji Pandey reported in 2013 (2) GLH 559, it is not required for the plaintiff to plead the performance of the condition precedent in the plaint. It is submitted that as held by the Division Bench in the aforesaid decision while considering the plaint under Order VII Rule 11 of the CPC, the Court has to consider the pleadings made in the plaint and Court cannot overlook the fact that there is no admission on the part of the plaintiff that they did not take permission and at the same time, the absence of averment in the plaint that such permission was taken, does not enable the Court to reject the plaint and the plaintiff have no duty to aver in the plaint the performance of condition precedent. In support of his above submissions, Shri Page 7 of 38 C/FA/218/2018 CAV JUDGMENT Thakore, learned Counsel appearing on behalf of the appellant has heavily relied upon paras 11, 12, 14.1, 15 and 18 of the aforesaid decision.
[5.4] It is submitted that therefore as per the law laid down by the Division Bench of this Court in the aforesaid decision the plaintiff was not required to plead that whether the resolution dated 15.09.2004 is passed by the Company or not? It is submitted that therefore absence of such pleading in the plaint, cannot be a ground for allowing the application for rejecting the plaint under Order VII Rule 11 of the CPC.
[5.5] It is further submitted that as such the order VI Rule 6 of the CPC makes it quite clear and plain that averment of performance of any condition precedent shall be implied in any pleading and it is for the party who wishes to contest the fact of performance to plead so distinctly and specifically.
[5.6] It is further submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that even otherwise the suit properties / land of the defendant No.1 Company cannot be said to be an "undertaking" of the Company and therefore, the bar under Section 293 of the Companies Act shall not be applicable. It is submitted that as per section 293 of the Companies Act, 1956, when the Company sells, leases or otherwise disposes of whole or substantially the whole of the "undertaking" of the Company or where the Company owns more than one undertaking of the whole or substantially the whole of any of such undertaking, the Page 8 of 38 C/FA/218/2018 CAV JUDGMENT resolution is required to be passed in the General Board Meeting of the Company. It is submitted that therefore, for pleading the requirement of section 293 of the Companies Act, 1956, the original defendant No.4 has to establish that the land of the Company (suit properties) for which the said MOU was executed, was "undertaking" of the Company. It is submitted that in the present case above ingredients are not satisfied by the defendant No.4 and therefore, the learned Commercial Judge has erred in rejecting the plaint and allowing the application filed by the original defendant No.4 under Order VII Rule 11 of the CPC. It is further submitted that for applying section 293, the original defendant No.4 has to prove that the land on which the Company is constructed, amounts to "undertaking" of the Company. It is submitted that on reading Clause 1 of the said MOU, it is clear that factory of the Company is closed and there are no workers working in the Company and the labour cases of the workmen are pending in the Industrial Court and this Court. It is submitted that the Company unit which has not been in production for more than 5 years, cannot be said to be an "undertaking" of the Company which has been sold.
In support of his above submissions, Shri Thakore, learned Counsel appearing on behalf of the appellant has heavily relied upon the following decisions.
1. Sree Yellamma Cotton, Woollen and Silk Mills Co. Ltd. vs. Bank of Maharashtra Ltd., Poona (1970) 40 Company Cases 466
2. International Cotton Corporation Ltd. vs. Bank of Maharashtra (1970) 40 Company Cases 1154 Page 9 of 38 C/FA/218/2018 CAV JUDGMENT
3. Pramodkumar Mittal vs. Andhra Steel Corporation Ltd. (1985) 58 Company Cases 772 (Cal)
4. P.S. Offshore Inter Land Services vs. Bombay Offshore Suppliers (1992) 75 Company Cases 583 [5.7] It is further submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that in light of the aforesaid decisions, the learned Commercial Judge has materially erred in relying upon the decision of this Court in the case of Y.S. Spinner Limited vs. Official Liquidator, Ambica Mills Limited reported in (2000) 100 Company Cases 547. It is submitted that as such the decision of this Court in the case of Y.S. Spinner Limited (Supra) shall not be applicable to the facts of the case on hand.
[5.8] It is further submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that even otherwise reading the said MOU, it can be said that the said MOU is nothing but an agreement to sell. It is submitted that assuming for the sake of argument and without admitting that the suit properties / land of the Company can be said to be part of an "undertaking", then also, the said MOU is nothing but more than an agreement to sell. It is submitted that as per the settled principle of law and even considering section 54 of the Transfer of Property Act, agreement to sell does not amount to create any interest in or charge of the property. It is submitted that therefore when the said MOU is an agreement to sell and it does not create any interest or charge in the property, Section 293 of the Companies Act, 1956 would not be attracted. In support of his above submissions, Shri Thakore, Page 10 of 38 C/FA/218/2018 CAV JUDGMENT learned Counsel appearing on behalf of the appellant has heavily relied upon the decision of the Madras High Court in the case reported in 2009 (152) CC 282 (22).
[5.9] It is further submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that even otherwise the impugned order passed by the learned Commercial Judge is beyond the scope and ambit of Order VII Rule 11 of the CPC. It is submitted that as such in the facts and circumstances of the case and more particularly there are contentious issues and even while considering the defence raised on behalf of the original defendant No.4 the evidence is required to be led, the learned Commercial Judge has materially erred in rejecting the plaint at the threshold.
[5.10] It is submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that while deciding the application under Order VII Rule 11 of the CPC which is a drastic power conferred on the Court to terminate a civil action at threshold, the conditions precedent to exercise of power under Order VII Rule 11 of the CPC, therefore shall be stringent. It is submitted that therefore, for deciding the application under Order VII Rule 11 of the CPC, only the averments contained in the plaint are required to be considered and the defence raised by the defendants cannot be considered. In support of his above submissions, Shri Thakore, learned Counsel appearing on behalf of the appellant has relied on the following decisions.
1. P.V.Guru Raj Reddy v P. Neeradha Reddy (2015) 8 SCC 331 Page 11 of 38 C/FA/218/2018 CAV JUDGMENT
2. Hardesh Ores Pvt. Ltd. vs. Hede & Company (2007) 5 SCC 614
3. Pramodkumar Mittal vs. Andhra Steel Corporation Ltd. (1985) 58 Company Cases 772
4. Sree Yellamma Cotton, Woollen and Silk Mills Co. Ltd. vs. Bank of Maharashtra Ltd., Poona (1970) 40 Company Cases 466
5. Trust of Laxminarayan Dev Temple and its subordinate temple and Others vs. Ajendraprasadji Narendraprasadji Pandey 2013 (2) GLH 559 Relying upon the aforesaid decision of the Hon'ble Supreme Court in the case of Hardesh Ores Pvt. Ltd. (Supra), it is vehemently submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that for the purpose of deciding the application under Order VII Rule 11 of the CPC, the averments made in the plaint alone are required to be looked into and that too in its entirety and must be held to be correct and the same are required to be looked into without addition or subtraction of words or change of its apparent grammatical sense.
[5.11] Shri Thakore, learned Counsel appearing on behalf of the appellant has submitted that even assuming that section 293 of the Companies Act shall be applicable and before disposing of / transferring the suit properties, the General Board's Approval was required, in that case also, the conditional decree can be passed subject to obtaining the permission as required under Section 293 of the Companies Act. It is submitted that when the said MOU is Page 12 of 38 C/FA/218/2018 CAV JUDGMENT nothing more than an agreement to sell, the plaintiff is entitled for conditional decree in his favour. In support of his above submissions, he has relied upon the decision of the Full Bench of this Court in the case of Shah Jitendra Nanalal vs. Patel Lallubhai Ishwarbhai reported in 1985 GLH 53. It is submitted that therefore when a conditional decree can be passed, the application under Order VII Rule 11 of the CPC filed by the original defendant No.4 ought to have been dismissed.
[5.12] It is further submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that even otherwise the original defendant No.1 is not entitled to any relief. It is submitted that the original defendant No.4 has purchased the land of the Company by a registered sale deed dated 01.09.2008 in breach of the injunction order passed by the learned Civil Court on application below Exh.5 in Special Civil Suit No.275/1994. It is submitted that in the said suit there was injunction against the original defendant No.1 from disposing of by selling the immovable property till the final disposal of the suit and the said order was passed by the learned Civil Court on 31.07.2000. It is submitted that thus the original defendant No.4 has purchased the property in breach of the injunction order passed by the learned Civil Court. It is submitted that the original defendant No.1 who has sold the property was completely aware of the prohibitory injunction order passed by the learned Civil Court. It is submitted that therefore the original defendant No.4 does not have honour for the process of law. It is submitted that the learned Commercial Judge without considering above submissions made by the appellant herein -
Page 13 of 38 C/FA/218/2018 CAV JUDGMENToriginal plaintiff has allowed the application filed by the original defendant No.4.
[5.13] It is further submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that as such the said MOU was signed by the original defendant No.2 as authorized signatory of the original defendant No.1 Company and being the Chairman of the original defendant No.1 Company. It is submitted that the said MOU was executed by the Director and Chairman of the Company and original defendant No.2 being the Chairman of the Company is the owner of such number of equity shares comprising not less than 72% of total paid up capital. It is submitted that the original defendant No.2 has not only entered into the said MOU with the plaintiff, but has also accepted an amount of Rs.25 lakh by cheque before executing the said MOU with the Company. It is submitted that in the plaint the plaintiff has clearly demonstrated that more than Rs.1.40 Crore is also paid by the plaintiff to the defendants. It is further submitted that even the agreement to sell entered into by defendant No.2 in favour of the defendant No.4, the permission under Section 293 of the Companies Act was also not complied with. It is submitted that as per Articles of agreement to sell executed on July 2008, it is clear that all the necessary corporate actions to authorize the execution of the said agreement and shall obtain the consent and approval of the Company in General Meeting under the provisions of section 293 of the Companies Act, prior to completing the sale transaction. It is submitted that thus on the date of execution of agreement to sell in favour of the original defendant No.4, the compliance of section 293 of the Companies Page 14 of 38 C/FA/218/2018 CAV JUDGMENT Act was made.
[5.14] It is further submitted by Shri Thakore, learned Counsel appearing on behalf of the appellant that even the original defendant No.4 has purchased the suit properties during the period of lis pendens.
[5.15] Shri Thakore, learned Counsel appearing on behalf of the appellant relying upon the decision of the Hon'ble Supreme Court in the case of Mukesh Keshavlal Patel vs. Natvarlal Savabhai Prajapati reported in 2013(2) GLH 559 has submitted that the learned Commercial Judge has materially erred in rejecting the plaint under Order VII Rule 11 of the CPC.
Making above submissions it is requested to allow the present First Appeal and quash and set aside the impugned order passed by the learned Commercial Judge below Exh.49, rejecting the plaint in exercise of powers under Order VII Rule 11 of the CPC.
[6.0] Present First Appeal is vehemently opposed by the Shri Kamal Trivedi, learned Counsel appearing on behalf of the original defendant No.4.
[6.1] Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 has vehemently submitted that in the facts and circumstances of the case no error has been committed by the learned Commercial Judge allowing the application Exh.49 and rejecting the plaint under Order VII Rule 11 of the CPC.
Page 15 of 38 C/FA/218/2018 CAV JUDGMENT[6.2] It is further submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that the application Exh.49 under Order VII Rule 11 of the CPC was preferred by the original defendant No.4 mainly on the grounds that (1) plaint does not disclose cause of action; (2) ex facie barred by law viz. provisions of the Companies Act, 1956 - sections 291, 293 and provisions of sections 14(1)(a), 14(1)(d), 16(b) and 16(c) of the Specific Relief Act and sections 23 and 24 of the Contract Act, 1872. It is submitted that in the facts and circumstances of the case, the learned Commercial Judge has rightly allowed the application Exh.49 and rightly rejected the plaint. It is further submitted by Shri Trivedi, learned Counsel that as such the plaintiff had instituted the suit solely on the basis of the said MOU. It is submitted that on the date of execution of the said MOU the original defendant No.2 who according to the plaintiff executed the said MOU was not authorized to execute the said MOU on behalf of the original defendant No.1 Company. It is submitted that para 2 of the plaint / suit refers to the Board Resolution dated 15.09.2004, which is subsequent to the said MOU. It is further submitted that even no such resolution is produced on record till date. It is submitted that thus, it clearly reveals that on the date of execution of the said MOU, there was no authorization even by the Board of Directors authorizing the original defendant No.2 to execute the said MOU and/or authorizing the original defendant No.2 to transfer / alienate the Company's property / undertaking. It is submitted that therefore the said MOU of which specific performance is sought, is absolutely unauthorized and void ab initio Page 16 of 38 C/FA/218/2018 CAV JUDGMENT and therefore, the learned Commercial Judge has rightly rejected the plaint under Order VII Rule 11 of the CPC by observing that the suit is barred by law. In support of his above submissions, Shri Trivedi, learned Counsel has relied upon section 291 of the Companies Act as well as the decision of the Hon'ble Supreme Court in the case of Shubh Shanti Services Ltd. vs. Manjula S. Agarwal & Ors. reported in (2005) 5 SCC 30 (Paras 19 and 20).
[6.3] It is further submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that even considering section 293(1)(a) read with proviso to Section 291 of the Companies Act, the defendant No.1 Company being a public limited company, even the Board Resolution, would not be suffice. It is submitted that the entire plaint is silent as regards the mandatory requirement of the authorization of the shareholders in General Meeting and as such no resolution of the General Meeting is produced on record. It is further submitted by Shri Trivedi, learned Counsel that even neither in the reply filed before the Commercial Court vide Exh.51 opposing the application under Order VII Rule 11 of the CPC nor in the present First Appeal, the appellant has stated that there is any such resolution of the shareholders in the General Meeting. It is submitted that therefore as such there are no such resolutions. It is submitted that thus there is a clear violation of provisions of section 293(1)(a) of the Companies Act and therefore, the said MOU is void ab initio. It is submitted that considering the aforesaid facts and circumstances and even considering the facts as emerging from the bare reading Page 17 of 38 C/FA/218/2018 CAV JUDGMENT of the plaint and the said MOU, the suit is clearly barred by law. It is further submitted by Shri Trivedi, learned Counsel that it is averred in the plaint that by virtue of the said MOU, "the entire unit / undertaking of the first defendant Company comprising of its machineries, land and the structures thereon is sought to be disposed of. It is submitted that therefore the aforesaid would be covered under term 'undertaking' used in section 293(1)(a) of the Companies Act. It is further submitted that in the plaint also it is further averred that "by virtue of the said MOU the entire purpose of which the Company was formed would get defeated, inasmuch as the plant, machinery and buildings were disposed off / stood extinguished". It is submitted that therefore section 293 of the Companies Act is required to be purposefully construed to prevent the mischief as held by the Hon'ble Supreme Court in the case of Indian Performing Right Society vs. Sanjay Dalia reported in (2015) 10 SCC 161 (Para 24).
[6.4] It is further submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that on conjoint reading of the plaint and the said MOU more particularly paras 3 and 4 of the said MOU, it clearly reveals that entire chunk of the assets of the Company are to be sold / disposed off and thereafter, nothing would be left remaining. It is submitted that therefore, the same would thus follow within the meaning of term "undertaking".
[6.5] It is further submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that clause 5 of the said MOU stipulates removal of plant, machinery, structures for Page 18 of 38 C/FA/218/2018 CAV JUDGMENT shifting all machineries, for demolition of construction. It is submitted that clause 3 of the said MOU provides for sale, transfer and takeover of the said properties. It is submitted that therefore the above clearly falls within the ambit of section 293(1)(a) and even otherwise, would be covered in "....otherwise dispose of..." under section 293(1)(a) of the Companies Act.
[6.6] It is further submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that even the prayer prayed for in the suit for specific performance i.e. for getting the sale deed executed in favour of the plaintiff on the basis of the said MOU, if granted, the same would amount to transfer, render it contrary to and in breach of provisions of sections 293 and 291 of the Companies Act.
In support of his above submissions, Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 has relied upon section 293 read with proviso to section 291 and sections 171 to 186 of the Companies Act; decision of this Court in the case of Y.S. Spinner Ltd. (Supra) and the decision of the Bombay High Court in the case of P.S. Offshore (Supra).
[6.7] It is submitted that therefore the relief sought for by the plaintiff is barred under the law and the relief if granted would contravene the provisions of the Companies Act, Specific Relief Act and Contract Act, none of the reliefs as prayed for in the plaint can be granted and therefore, the suit is liable to be dismissed at the threshold and therefore, the learned Commercial Judge has rightly rejected the plaint in exercise of powers under Order VII Rule 11 of Page 19 of 38 C/FA/218/2018 CAV JUDGMENT the CPC. In support of his above submissions, Shri Trivedi, learned Counsel has heavily relied upon the decision of the Hon'ble Supreme Court in the case of M/s. Pearlite Liners Pvt. Ltd. vs. Manorama Sirsi reported in AIR 2004 SC 1373 (Para 10). It is further submitted that even otherwise the suit for specific performance is not maintainable and is barred under the provisions of section 14(1)(a) of the Specific Relief Act. It is submitted that conjoint reading of plaint with Clauses 6, 11 and 12 of the said MOU clearly reveals that in the event of nontransfer of the subject land to the plaintiff, the plaintiff was only entitled to recover the money advanced under the said MOU with interest as stipulated in the said MOU. It is submitted that since the monetary compensation has been agreed to by the parties, in the event of nonperformance of the said MOU, the relief sought for by the plaintiff is on the face of it barred in view of section 14(1)(a) of the Specific Relief Act. In support of his above submission, Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 has relied upon the decision of the Hon'ble Supreme Court in the case of Dadarao & Anr. vs. Ramrao & Ors. reported in (1998) 8 SCC 416 (Para 7).
[6.8] It is further submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that even the suit for specific performance of the said MOU is also barred by the provisions of Section 16(b) of the Specific Relief Act. It is submitted that even as per the averments in the plaint made in para 12, the amount of Rs.1,40,11,000/ is only paid and that too, to the original defendant No.2 and not the original defendant No.1 Page 20 of 38 C/FA/218/2018 CAV JUDGMENT Company. It is submitted that the schedule of payment reflects that of Rs.1,40,11,000/, only Rs.28,11,000/ is paid by the cheque and rest of the amount is stated to have been purportedly paid by cash. It is submitted that on conjoint reading of the plaint and the said MOU clearly reveals that plaintiff has failed to pay an amount of Rs.3 Crore on or before 21.10.2004. It is submitted that para 3 of the plaint reveals that cheques were returned unpaid. It is submitted that thus the plaint reveals clear violation of essential terms of contract and therefore, there is a clear bar to the suit under Section 16(b) of the Specific Relief Act. In support of his above submissions, Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 has relied upon the decision of the Hon'ble Supreme Court in the case of Pemmada Prabhakar vs. Youngmen's Vysya Association reported in (2015) 5 SCC
355. [6.9] It is further submitted that section 23 of the Contract Act suggests that if an agreement is of the nature that if permitted, would defeat the provisions of law, the same is unlawful. It is submitted that it further stipulates that every agreement of which, object or consideration is unlawful, is void. It is submitted that in the present case if the said MOU is permitted to be specifically performed and acted upon, the same would defeat the provisions of sections 291 and 293(1)(a) of the Companies Act as well as section 14(1)(a) and 16(B) of the Specific Relief Act and thus, the said MOU is void. It is submitted that thus no legal right is accrued in favour of the plaintiff, as the said MOU of which performance is sought is void. It is submitted that therefore the suit is without any Page 21 of 38 C/FA/218/2018 CAV JUDGMENT cause of action and/or is on illusory cause of action.
Making above submissions and relying upon the following decisions, it is submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that the learned Commercial Judge has rightly rejected the plaint in exercise of powers under Order VII Rule 11 of the CPC.
1. T. Arivandam vs. T.V. Satyapal & Anr.
(1997) 4 SCC 467 (Para 5)
2. Sopan Sukhdeo Sable & Ors. vs. Asstt. Charity Commissioner and Ors.
(2004) 3 SCC 137 (Paras 17 to 20)
3. Church of Christ Charitable Trust & Education vs. Ponniamman Trust (2012) 8 SCC 806 (Paras 12 to 18) [6.10] Now, so far as the submission on behalf of the plaintiff that the issue raised in the application Exh.49 under Order VII Rule 11 of the CPC cannot be looked into at this stage and that the same amounts to defences raised by the defendant, Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 has vehemently submitted that the application Exh.49 is very much within the scope of Order VII Rule 11 of the CPC. It is submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that as held by the Division Bench of this Court in the case of Maharaja Manvendrasinhji R. Jadeja vs. Rajmata Vijaykunverba Wd/o. Maharaja Mahendrasinhji reported in 1999 (1) GLR 261 (Para 14), in order to find out whether the plaint discloses a cause of action or not, the averments made in the plaint and documents annexed thereto should be scrutinized Page 22 of 38 C/FA/218/2018 CAV JUDGMENT meaningfully and if on such scrutiny it is found that the plaint does not disclose cause of action, it has got to be rejected in view of the provisions of Order VII Rule 11(a) of the CPC.
Relying upon the decision of the Hon'ble Supreme Court in the case of Sopan Sukhdeo Sable (Supra), it is submitted that as observed and held by the Hon'ble Supreme Court in the said decision, Rule 11 of Order VII lays down an independent remedy made available to the defendant to challenge the maintainability of the suit itself, irrespective of his right to contest the same on merits. It is submitted that it is further observed in the said decision that it cast a duty on the Court to perform its obligation in rejecting the plaint when the same is hit by any of the infirmities provided in the four clauses of Rule 11 of Order VII of the CPC, even without intervention of the defendant.
[6.11] Now, so far as the submission on behalf of the plaintiff that the issues raised by the defendant while submitting the application Exh.49 can be decided as preliminary issue and not under Order VII Rule 11 of the CPC is concerned, it is vehemently submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that when the plaint prima facie does not disclose cause of action, the Court need not wait till the stage of raising the preliminary issue. It is submitted that in the present case the said MOU of which the specific performance is sought is void ab initio, and thus no legal right has accrued to prefer the suit. It is submitted that therefore the case would fall within the scope of order VII Rule 11 of the CPC and not under Order XIV Rule 2 of the Page 23 of 38 C/FA/218/2018 CAV JUDGMENT CPC. It is submitted that in any case when the suit is ex facie barred by law and suffers from the vices of institutional defect, the same is liable to be dismissed under Order VII Rule 11 of the CPC and therefore, the learned Commercial Judge has rightly rejected the plaint. In support of his above submissions, Shri Trivedi, learned Counsel has relied upon the decision of the Hon'ble Supreme Court in the case of Kuldeep Singh Pathania vs. Bikram Singh Jaryal reported in (2017) 5 SCC 345 (Paras 8 to 12).
[6.12] Now, so far as the reliance placed upon the decision of the Division Bench of this Court in the case of Mukesh Keshavlal Patel (Supra) by the learned Counsel appearing on behalf of the plaintiff is concerned, it is submitted that the reliance is misplaced and the said decision shall not be applicable to the facts of the case hand.
[6.13] Now, so far as the submission on behalf of the plaintiff that the transfer in favour of the original defendant No.4 is in breach of the injunction order dated 31.07.2000 in Special Civil Suit No.275/1994 and therefore, the original defendant No.4 is not entitled to any relief is concerned, it is vehemently submitted by Shri Trivedi, learned Counsel appearing on behalf of the original defendant No.4 that as such in the said suit neither the plaintiff nor the original defendant No.4 were party to the said suit. It is submitted that the said suit was filed by the ONGC and therefore, only ONGC has to object / raise the grievance in this regard. It is submitted that no grievance of sale is raised by ONGC. It is submitted that even otherwise said suit No.275/1994 is disposed of Page 24 of 38 C/FA/218/2018 CAV JUDGMENT on the ground of cause of action for instituting the suit has ceased to exist vide order dated 14.03.2017 and the dispute does not survive. It is submitted that even otherwise the issue here is not whether the original defendant No.4 has the locus to contest the suit, but is whether the plaint as filed can be maintained or deserves to be rejected.
Making above submissions and relying upon the above decisions as well as relying upon the decisions of the Division Bench of this Court in the case of Maheshbhai Dayaljibhai Patel vs. Andhra Bank & Ors. rendered in First Appeal No.1066/2016; Mohanbhai Maganbhai Patel vs. Miral Vallabhbhai Surani rendered in First Appeal No.1095/2016 and in the case of Masrur Fatema Jafarali Saiyed vs. Vishnubhai Ambalal Patel and Ors. rendered in First Appeal No.1897/2014, it is requested to dismiss the present First Appeal.
[7.0] Heard learned Counsel appearing for respective parties at length. Perused the impugned order passed by the learned Judge, Commercial Court, Vadodara rejecting the plaint under Order VII Rule 11 of the CPC. We have also considered the averments in the plaint as well as the documents produced alongwith the plaint.
[7.1] At the outset it is required to be noted that the plaintiff had instituted the suit against the defendant Nos.1 and 2 seeking specific performance of the MOU dated 09.09.2004 for the sale pertaining to the suit lands belonging to the original defendant No.1 Company, the MOU which was executed by the original defendant No.2 alleged to have been signed as Director / Page 25 of 38 C/FA/218/2018 CAV JUDGMENT Authorized Signatory of the original defendant No.1 Company. The plaint has been rejected by the learned Judge under Order VII Rule 11 of the CPC mainly on the ground that in view of the provisions of the Companies Act more particularly section 293 of the Companies Act, the MOU dated 09.09.2004 is void ab initio and therefore, the plaintiff shall not be entitled to the specific performance of the said MOU with respect to the suit lands as the same is hit by section 293 of the Companies Act and therefore, the suit amounts to gross abuse of judicial process. Therefore, what is required to be considered is whether in the facts and circumstances of the case the learned Judge is right in rejecting the plaint in exercise of powers under Order VII Rule 11 of the CPC?
[7.2] While considering the aforesaid question / issue, few decisions of the Hon'ble Supreme Court as well as this Court on exercise of powers under Order VII Rule 11 of the CPC are required to be referred to and considered.
[7.3] In the case of Masrur Fatema Jafarali Saiyed (Supra), the Division Bench of this Court has considered the decisions of the Hon'ble Supreme Court in the case of T. Arvindanam (Supra) as well as the decision of the Hon'ble Supreme Court in the case of The Church of Christ Charitable Trust and Educational Charitable Society vs. M/s. Ponniamman Educational Trust reported in AIR 2012 SC 3912 and in paras 55, 56, 57 and 60, the Division Bench of this Court in the aforesaid decision has observed and held as follows:
Page 26 of 38 C/FA/218/2018 CAV JUDGMENT"55. Before considering the present appeal on merits, few decision of the Hon'ble Supreme Court as well as this Court on Order 7 Rule 11 of the Code of Civil Procedure are required to be referred to and considered. 56. In the case of T. Trivandam v. T.V. Satyapal reported in (1977) 4 SCC 467 while considering the very same provision i.e. Order 7 Rule 11 of the Code of Civil Procedure and the decree of trial Court in considering the such application, the Hon'ble Supreme Court in para 5 has observed and held as under:
"We have not the slightest hesitation in condemning the petitioner for gross abuse of the process of the Court repeatedly and unrepentently resorted to. From the statement of the facts found in the judgment of the High Court, it is perfectly plain that the suit now pending before the First Munsif's Court, Bangalore, is a flagrant misuse of the mercies of the law in receiving plaints. The learned Munsif must remember that if on a meaningful not formal reading of the plaint it is manifestly vexatious, and meritless, in the sense of not disclosing a clear right to sue, he should exercise his power under Order VII, Rule 11, C.P.C., taking care to see that the ground mentioned therein is fulfilled. And, if clever drafting has created the illusion of a cause of action, nip it in the bud at the first hearing by examining the party searchingly under Order X, C.P.C. An activist Judge is the answer to irresponsible law suits.
57. In the case of The Church of Christ Charitable Trust and Educational Charitable Society vs. M/s. Ponniamman Educational Trust reported in AIR 2012 SC 3912, in para 8 to 10 has observed and held as under:
8. While scrutinizing the plaint averments, it is the bounden duty of the trial Court to ascertain the materials for cause of action. The cause of action is a bundle of facts which taken with the law applicable to them gives the plaintiff the right to relief against the defendant. Every fact which is necessary for the plaintiff to prove to enable him to get a decree should be set out in clear terms. It is worthwhile to find out the meaning of the words "cause of action". A cause 9 Page 10 of action must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue.
9. In A.B.C. Laminart Pvt. Ltd. and Anr. v. A.P. Agencies, Salem (1989) 2 SCC 163 : (AIR 1989 SC 1239), this Court explained the meaning of "cause of action" as follows:
"12. A cause of action means every fact, which if Page 27 of 38 C/FA/218/2018 CAV JUDGMENT traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded. It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree.
Everything which if not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relation whatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff."
10. It is useful to refer the judgment in Bloom Dekor Ltd. v. Subhash Himatlal Desai and Ors. (1994) 6 SCC 322, wherein a three Judge Bench of this Court held as under:
"28. By "cause of action" it is meant every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court, (Cooke v. Gill, 1873 LR 8 CP
107). In other words, a bundle of facts which it is necessary for the plaintiff to prove in order to succeed in the suit."
It is mandatory that in order to get relief, the plaintiff has to aver all material facts. In other words, it is necessary for the plaintiff to aver and prove in order to succeed in the suit.
60. Considering the law laid down by the Hon'ble Supreme Court in the aforesaid decisions and applying the same to the facts of the case on hand, for the reasons below stated, we are of the opinion that the learned trial Court has rightly rejected the plaint under Order VII Rule 11(d) of the Code of Civil Procedure."
[7.4] In the case of Sopan Sukhdeo Sable (Supra) in paras 11, 12, 17, 19 and 20 has observed and held as under:
"11. In I.T.C. Ltd. v. Debts Recovery Appellate Tribunal2 it was held Page 28 of 38 C/FA/218/2018 CAV JUDGMENT that the basic question to be decided while dealing with an application filed under Order 7 Rule 11 of the Code is whether a real cause of action has been set out in the plaint or something purely illusory has been stated with a view to get out of Order 7 Rule 11 of the Code.
12. The trial Court must remember that if on a meaningful and not formal reading of the plaint it is manifestly vexatious and meritless in the sense of not disclosing a clear right to sue, it should exercise the power under Order 7 Rule 11 of the Code taking care to see that the ground mentioned therein is fulfilled. If clever drafting has created the illusion of a cause of action, it has to be nipped in the bud at the first hearing by examining the party searchingly under Order 10 of the Code. (See T. Arivandandam v. T. V. Satyapal3)
17. Keeping in view the aforesaid principles the reliefs sought for in the suit as quoted supra have to be considered. The real object of Order 7 Rule 11 of the Code is to keep out of courts irresponsible law suits. Therefore, the Order 10 of the Code is a tool in the hands of the Courts by resorting to which and by searching examination of the party in case the Court is prima facie of the view that the suit is an abuse of the process of the court in the sense that it is a bogus and irresponsible litigation, the jurisdiction under Order 7 Rule 11 of the Code can be exercised.
19. Order 6 Rule 2(1) of the Code states the basic and cardinal rule of pleadings and declares that the pleading has to state material facts and not the evidence. It mandates that every pleading shall contain, and contain only, a statement in a concise form of the material facts on which the party pleading relies for his claim or defence, as the case may be, but not the evidence by which they are to be proved.
20. There is distinction between "material facts" and "particulars". The words "material facts" show that the facts necessary to formulate a complete cause of action must be stated. Omission of a single material fact leads to an incomplete cause of action and the statement or plaint becomes bad. The distinction which has been made between "material facts" and "particulars" was brought by Scott, L.J. in Bruce v. Odhams Press Ltd.6 in the following passage : (All ER p.294) "The cardinal provision in Rule 4 is that the statement of claim must state the material facts. The word 'material' means necessary for the purpose of formulating a complete cause of action; and if any one 'material' statement is omitted, the statement of claim is bad; it is 'demurrable' in Page 29 of 38 C/FA/218/2018 CAV JUDGMENT the old phraseology, and in the new is liable to be 'struck out' under R.S.C. Order 25, Rule 4 (see Philipps v. Philipps7; or 'a further and better statement of claim' may be ordered under Rule 7.
The function of 'particulars' under Rule 6 is quite different. They are not to be used in order to fill material gaps in a demurrable statement of claim gaps which ought to have been filled by appropriate statements of the various material facts which together constitute the plaintiff's cause of action. The use of particulars is intended to meet a further and quite separate requirement of pleading, imposed in fairness and justice to the defendant. Their function is to fill in the picture of the plaintiff's cause of action with information sufficiently detailed to put the defendant on his guard as to the case he had to meet and to enable him to prepare for trial."
The dictum of Scott, L.J. in Bruce case6 has been quoted with approval by this Court in Samant N. Balkrishna v. George Fernandez8, and the distinction between "material facts" and "particulars" was brought out in the following terms: (SCC p.250, para 29) "The word 'material' shows that the facts necessary to formulate a complete cause of action must be stated. Omission of a single material fact leads to an incomplete cause of action and the statement of claim becomes bad. The function of particulars is to present as full a picture of the cause of action with such further information in detail as to make the opposite party understand the case he will have to meet."
Rule 11 of Order 7 lays down an independent remedy made available to the defendant to challenge the maintainability of the suit itself, irrespective of his right to contest the same on merits. The law ostensibly does not contemplate at any stage when the objections can be raised, and also does not say in express terms about the filing of a written statement. Instead, the word "shall" is used, clearly implying thereby that it casts a duty on the Court to perform its obligations in rejecting the plaint when the same is hit by any of the infirmities provided in the four clauses of Rule 11, even without intervention of the defendant. In any event, rejection of the plaint under Rule 11 does not preclude the plaintiffs from presenting a fresh plaint in terms of Rule 13."
Page 30 of 38 C/FA/218/2018 CAV JUDGMENT[7.5] In the case of Maharaja Manvendrasinhji R. Jadeja (Supra), the Division Bench of this Court has specifically observed and held that in order to find out whether the plaint discloses a cause of action or not, the averments made in the plaint and documents annexed thereto should be scrutinized meaningfully and if on such scrutiny it is found that the plaint does not disclose cause of action, it has got to be rejected in view of the provisions of Order VII Rule 11(a) of the CPC.
[8.0] Applying the law laid down by the Hon'ble Supreme Court inthe aforesaid decisions on exercise of powers under Order VII Rule 11 of the CPC, the issue involved in the present appeal is required to be considered.
[8.1] At the outset it is required to be noted that as such the plaintiff had instituted the suit for specific performance of the MOU dated 09.09.2004 executed by the original defendant No.2 as Authorized Signatory of the original defendant No.1 and with respect to the suit lands in question. It is required to be noted and it is not in dispute that the suit lands / properties belong to original defendant No.1 - New India Industries Ltd of which the original defendant No.2, the signatory of the MOU dated 09.09.2004 was the Chairman. Considering the provisions of the Companies Act more particularly section 293 of the Companies Act, the properties of the Company cannot be transferred and/or alienated and/or disposed of without any authorization and/or resolution of the Company. It is required to be noted that in the present case at the time when the MOU dated 09.09.2004 was executed by the original Page 31 of 38 C/FA/218/2018 CAV JUDGMENT defendant No.2, there was no resolution of the Board of Directors of the original defendant No.1 Company. Even the plaintiff also relied upon the resolution of the Board of Directors of the original defendant No.1 Company dated 15.09.2004. It is required to be noted that even the so called resolution of the Board of Directors of original defendant No.1 dated 15.09.2004 authorizing the original defendant No.2 to sell and/or dispose of the lands in question belonging to the original defendant No.1 is not forthcoming even after the application Exh.49 was given specifically to reject the plaint on the ground that the MOU dated 09.09.2004 was void ab initio as the same was hit by section 293 of the Companies Act and the original defendant No.2 was not having any authority by the Board of Directors of the original defendant No.1 Company to dispose of the properties / lands of the original defendant No.1 Company. Even otherwise it is required to be noted that the MOU dated 09.09.2004 of which the specific performance is sought is prior to the so called authorization by the Board of Directors of the original defendant No.1 Company i.e. dated 15.09.2004. Therefore, at the time when the MOU dated 09.09.2004 was executed by the original defendant No.2, there was no authorization in favour of the original defendant No.2 as required under the provisions of the Companies Act. Under the circumstances as the MOU dated 09.09.2004 of which the specific performance is sought, is hit by section 293 of the Companies Act and as the same is void ab initio, the plaintiff as such shall not be entitled to any relief of specific performance of the said MOU and therefore, to continue with the suit would be abuse of the Court's process / proceedings and Page 32 of 38 C/FA/218/2018 CAV JUDGMENT wasting the Court's precious time.
[8.2] Now, so far as the submission on behalf of the plaintiff thatsection 293 of the Companies Act shall be applicable only with respect to the "undertaking" of the Company and therefore, as the suit properties / lands of the original defendant No.1 Company cannot be said to be an "undertaking" of the Company and therefore, bar under Section 293 of the Companies Act shall not be applicable is concerned, the aforesaid has no substance. The word "undertaking" shall be required to be given a wide meaning. Any land and/or property of the Company can be said to be an undertaking and therefore, section 293 of the Companies Act shall be applicable. On fair reading of section 293 of the Companies Act, when the Company sells, leases or otherwise disposes of the whole, or substantially the whole, of the undertaking including the properties, a resolution is required to be passed in general Board meeting of the Company. Merely because the Company is closed and there are no workers working in the Company, the submission on behalf of the plaintiff that the bar under Section 293 shall not be applicable cannot be accepted. Even section 290 of the Companies Act authorizes Board of Directors of the Company to exercise such powers or such acts or things as the Company authorized to exercise and do such acts or things, except in the manner where the power is to be exercised by the Company in general meeting. In the case of Manjula S. Agarwal & Ors. (Supra), the Hon'ble Supreme Court was considering the flat owned by the Company.
[8.3] Now, so far as the reliance placed upon the decision of the Page 33 of 38 C/FA/218/2018 CAV JUDGMENT Mysore High Court in the case of Sree Yellamma Cotton, Woollen and Silk Mills Co. Ltd. (Supra) and the decision of the Calcutta High Court in the case of Pramodkumar Mittal (Supra) relied upon by the learned Counsel appearing on behalf of the plaintiff shall not be applicable to the facts of the case on hand.
[8.4] Now, so far as the submission on behalf of the plaintiff that the learned Judge has materially erred in observing that there are no pleadings in the plaint that the MOU dated 09.09.2004 was in accordance with law and/or backed by resolution of the Board of Directors and/or general board of the original defendant No.1 Company and the submission that no such averments are required in the plaint is concerned, even assuming that such submission is accepted, in that case also, when the application Exh.49 was submitted by the defendant No.4 to reject the plaint on the ground that the MOU dated 09.09.2004 is void ab initio as no resolution in favour of the original defendant No.2 authorizing the original defendant No.2 to dispose of the properties of the Company has been passed and therefore, the same is hit by section 291 and 293 of the Companies Act, at that stage the plaintiff was required to even state and/or produce on record some material to suggest that the original defendant No.2 who executed the MOU dated 09.09.2004 of which the specific performance is sought, is legal and the original defendant No.2 was authorized by resolution to dispose of the property of the Company.
[8.5] Now, so far as the submission on behalf of the plaintiff that even the issue whether the plaintiff is entitled to the relief of Page 34 of 38 C/FA/218/2018 CAV JUDGMENT specific performance of the MOU dated 09.09.2004 and whether the said MOU is legal and valid or not can be tried as a preliminary issue and the plaint cannot be rejected at the stage of deciding application under Order VII Rule 11 of the CPC is concerned, as observed by the Hon'ble Supreme Court in the case of Kuldeep Singh Pathania (Supra), the stage on which an inquiry is undertaken by the Court makes no difference since an inquiry under Order VII Rule 11(a) of the CPC can be taken up at any stage. Therefore, merely because something can be decided as preliminary issue, the Court is not precluded from exercising powers under Order VII Rule 11 of the CPC, if the case is made out to reject the plaint in exercise of powers under Order VII Rule 11 of the CPC and the Court is satisfied that no cause of action is pleaded and/or there is an illusory cause of action and/or the reliefs claimed in the suit are barred by law.
[8.6] Now, so far as the decisions relied upon by the learned Counsel appearing on behalf of the plaintiff on exercise of powers under Order VII Rule 11, referred to herein above, are concerned, there cannot be any dispute with respect to the proposition of law laid down in the aforesaid decisions. However, in the facts and circumstances of the case and for the reasons stated herein above and the decisions of the Hon'ble Supreme Court referred to herein above, we are of the opinion that the said decision shall not be applicable to the facts of the case on hand and/or the same shall not be of any assistance to the plaintiff.
[8.7] It is also required to be noted that even according to the Page 35 of 38 C/FA/218/2018 CAV JUDGMENT plaintiff and even as per the MOU, the plaintiff was required to pay a sum of Rs.3 Crores on or before 21.10.2004. The cheques which were given by the plaintiff towards the payment of the said Rs.3 Crores have been dishonored. It is also required to be noted that even as per the averments in the plaint made in para 12, the amount of Rs.1,40,11,000/ was paid and that too, to the original defendant No.2, out of which only Rs.28,11,000/ is stated to be paid by cheque and rest of the amount is stated to have been purportedly paid by cash for which no receipts are produced alongwith the plaint / suit nor any prima facie proof of having been paid such a huge amount by cash has been produced. In any case as per the MOU, Rs.3 Crores was required to be paid on or before 21.10.2004 which has not been paid by the plaintiff and therefore, the plaintiff himself has committed breach of terms and conditions of the MOU of which the specific performance is sought.
[8.8] It is also required to be noted that the suit lands in question are already sold in favour of original defendant No.4 by registered sale deed which was registered on 01.09.2008 vide Registration No.6077. The suit has been amended praying the relief against the original defendant No.4 in the year 2016. Though in para 21(B) it is stated that as pursuant to the order passed by the High Court the proceedings of the suit were stayed at the relevant time, original defendant No.4 was not joined as a party to the suit and therefore, there is no delay in joining the original defendant No.4 as party to the suit. However, it is required to be noted that nothing has been stated in the plaint (amended plaint) that the stay has been vacated or not and if vacated, when it was vacated. Be that as it may, the Page 36 of 38 C/FA/218/2018 CAV JUDGMENT plaint is not amended so far as the cause of action pleaded against the original defendant No.4 - subsequent purchaser is concerned. It is also required to be noted that except the permanent injunction sought against the original defendant No.4 in terms of para 26(B), no relief is sought against the original defendant No.4 and more particularly with respect to the sale deed in favour of the original defendant No.4. No declaration is sought. There is no further prayer sought in the plaint against the original defendant No.4 more particularly with respect to the sale deed executed in favour of the original defendant No.4 with respect to the suit lands and more particularly to quash and set aside the said sale deed and/or even for a declaration that the said sale deed in favour of the original defendant No.4 is void and/or the same deserves to be quashed and set aside. Therefore, as such no cause of action is pleaded against the original defendant No.4 and even except the permanent injunction sought against the original defendant No.4 in terms of para 26B, no further relief is sought. The order passed by the learned Commercial Judge rejecting the plaint is required to be considered from that angle also. Considering the overall facts and circumstances of the case, it cannot be said that the learned Commercial Judge has committed any error in rejecting the plaint under Order VII Rule 11 of the CPC which calls for interference of this Court.
[9.0] In view of the above and for the reasons stated above, present First Appeal fails and the same deserves to be dismissed and is, accordingly, dismissed. Impugned judgment and order dated 29.11.2017 passed by the learned Commercial Court, Vadodara Page 37 of 38 C/FA/218/2018 CAV JUDGMENT below Exh.49 in Commercial Civil Suit No.44/2017 is hereby confirmed. No costs.
CIVIL APPLICATION NO.1/2018 In view of dismissal of main First Appeal, Civil Application No.1/2018 also stands dismissed.
Sd/ (M.R. Shah, J.) Sd/ (A.Y. Kogje, J.) Ajay** Page 38 of 38