Madras High Court
2 The vs Kingston Computers (I) P. Ltd. (2011)2 ... on 13 December, 2012
Author: Vinod K.Sharma
Bench: Vinod K.Sharma
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 13/12/2012 CORAM THE HON'BLE MR.JUSTICE VINOD K.SHARMA A.Nos.2215, 2887, 2888 and 3842 of 2012 in C.S.No.51 of 2005 A. No.2215 of 2012 ------------------ K. BALASUBRAMANIAN 27 IV MAIN ROAD KASTURBA NAGAR CHENNAI 20 M RATHINAKUMAR . S.CHANDRASEKAR 10/4 SPIC NAGAR VELACHERY CHENNAI 42 Vs R PADMA AJ-81 ANNA NAGAR CHENNAI 40 AND 6 OTHERS A. No.2887 of 2012 ------------------ MRS.MANGALAM AND 5 OTHERS. VIJAYASHANTHI APARTMENTS NO.42, LAKE VIEW ST., KOTTUR, CHENNAI -85 DR.R.GANESH 87-A III FLOOR, 36, HOSPITALS ROAD, PARAN NAGAR, SAIDAPET, CHENNAI 600 015. P.RAMMOHAN 19 OFFICERS COLONY 5TH ST ALANDUR (M) TAMBARAM (T) ADAMBAKKAM, CHENNAI -88 V.GOPAL 83, MAHALAKSHMI NAGAR, II MAIN ROAD, G-1 MUDALAVAN ESTATE, ADAMBAKKAM, CH- 88. SUMATHI RATHINAKUMAR W/O. M.RATHINAKUMAR G-2, I BLOCK, LAND MARVEL GARDEN, PILLAIYAR KOIL ST RAJAJI NAGAR, CH-41. REVATHI GOPAL W/O.GOPAL 83, MAHALAKSHMI NAGAR, II MAIN ROAD, G-1 MUDALAVAN ESTATE, ADAMBAKKAM, CH- 88. Vs M/S CITREX PRODUCTS LTD REP.BY ITS DIRECTOR V.RAJENDRAN, AND 22 OTHERS AJ 81, ANNA NAGAR, CH-40 R.PADMA W/O V.RAJENDRAN AJ 81, ANNA NAGAR CH-40 A. No.2888 of 2012 ------------------ MRS.MANGALAM VIJAYASHANTHI APARTMENTS NO.42, LAKE VIEW ST., KOTTUR, CHENNAI -85 DR.R.GANESH 87-A III FLOOR, 36, HOSPITALS ROAD, PARAN NAGAR, SAIDAPET, CHENNAI 600 015. P.RAMMOHAN 19 OFFICERS COLONY 5TH ST ALANDUR (M) TAMBARAM (T) ADAMBAKKAM, CHENNAI -88 V.GOPAL 83, MAHALAKSHMI NAGAR, II MAIN ROAD, G-1 MUDALAVAN ESTATE, ADAMBAKKAM, CH- 88. SUMATHI RATHINAKUMAR W/O. M.RATHINAKUMAR G-2, I BLOCK, LAND MARVEL GARDEN, PILLAIYAR KOIL ST RAJAJI NAGAR, CH-41. REVATHI GOPAL W/O.GOPAL 83, MAHALAKSHMI NAGAR, II MAIN ROAD, G-1 MUDALAVAN ESTATE, ADAMBAKKAM, CH- 88. Vs M/S CITREX PRODUCTS LTD REP.BY ITS DIRECTOR V.RAJENDRAN, AND 22 OTHERS AJ 81, ANNA NAGAR, CH-40 R.PADMA W/O V.RAJENDRAN AJ 81, ANNA NAGAR CH-40 A. No.3842 of 2012 ------------------ THAMIRAPARANI INVESTMENTS LTD D-1 SRISHTI CRESCENDO 24 DESIKA ROAD MYLAPORE CEHNNAI 4 Vs M/S CITREX PRODUCTS LTD REP.BY ITS DIRECTOR V.RAJENDRAN, AJ 81, ANNA NAGAR, CH-40 R/.PADMA W/O V.RAJENDRAN AJ 81, ANNA NAGAR CH-40 R.GANESH RAJ REP.BY POWER OF ATT.HOLDER V.RAJENDRAN, S/O.P.N. VALLINAYAGAM AJ 81, ANNA NAGAR CH-40 RAJESWARI SATHISH W/O.R. SATHISH RAJ, AJ 81, ANNA NAGAR CH-40 R.SATHISH RAJ S/O V.RAJENDRAN, AJ 81, ANNA NAGAR CH-40 V.RAJENDRAN S/O P.N.VALLINAYAGAM, AJ 81, ANNA NAGAR CH-40 USHA SELVARATHINAM W/O P.SELVARATHINAM, AJ 81, ANNA NAGAR, CH-40 P.SELVARATHINAM S/O S.PADMANABHAN AJ 51, ANNA NAGAR, CH 40 M.JEYA W/O K.MAHALINGASWAMY, 321/2, KATHIRAVAN COLONY, ANNA NAGAR, CH-40 K.MAHALINGASWAMY S/O KRISHNASWAMY, 321/2, KATHIRAVAN COLONY, ANNA NAGAR, CH-40 N.AYYAMPERUMAL S/O NALLASIVAM, AJ 81, ANNA SALAI, CH-40 ORDER
This order shall dispose of A.Nos.2215, 2887, 2888 and 3842 of 2012, as the common question of fact and law are involved in all these applications.
2 The plaintiffs/non applicants have filed a suit for declaration declaring that the pledge of the 900 shares belonging to the plaintiffs 2, 3, 5 to 11 in favour of M/s.Custodial Services India (P) Ltd., defendant No.2, stands discharged and consequently, direct the defendant No.2 to return the 900 shares pledged by the plaintiffs 2, 3, 5 to 11. The alternative relief is to declare that the transfer of 900 shares belonging to the plaintiffs 2, 3, 5 to 11 by the defendant No.2 is null and void and not binding on the plaintiffs.
3 The prayer is also for declaration that the plaintiffs 2 to 6 continued to be the directors of the first plaintiff company and the plaintiffs 2, 3, 5 to 11 continued to be the shareholders of the first plaintiff company with consequential relief of permanent injunction from interfering with the management of the first plaintiff company.
4 M/s.Citrex Products Ltd., the plaintiff No.1 in response to the advertisement issued by M/s.Tamil Nadu Industrial Investment Corporation Ltd.(hereinafter referred to as "TIIC") participated in an auction on 25.9.1992 to purchase properties as detailed in A schedule to the plaint together with Plant and machineries and buildings. The plaintiff offered Rs.80 lakhs, since TIIC was not satisfied with the offers received, the properties were re-auctioned on 5.2.1993. The plaintiff No.1 again offered highest bid of Rs.108 lakhs on deferred payment. The bid was accepted and plaintiff company paid a sum of Rs.27 lakhs representing 25% of the bid amount. A deed of sale was registered on 28.7.1993.
5 It is submitted that the 6th plaintiff who promoted a Company called Meta films (India) Ltd. look out for a property to set up manufacturing unit for manufacture of flexible packaging material. The 6th plaintiff on the advertisement issued by the first plaintiff started negotiation with the management of the Company for purchase of five acres of the suit schedule property. But this was not accepted, as Tamil Nadu Industrial Investment Corporation Ltd. was not willing to give its consent for the sale of "A" schedule property in the plaint. The 6th plaintiff therefore, decided to purchase the entire property measuring 30.8 acres. A Memorandum of Understanding, (hereinafter referred to as MOU) dated 23.11.1994 was entered into between the then shareholders of the plaintiff Company and the plaintiff No.3, 5 and 6 to take over the assets and liabilities of the first plaintiff company by acquiring its entire shareholdings. Though authorised share capital of the first plaintiff Company was Rs.10 lakhs, but paid up capital was Rs.9000/- (Rupees nine thousand only) consisting of 900 equity shares of Rs.10/- (Rupees ten only) each.
6 The terms and conditions of Memorandum of Understanding are as under:
(a) The 3rd, 5th and 6th plaintiffs and the original promoters estimated the total liabilities of the first plaintiff at Rs.150.51 lakhs and the assets at Rs.151 lakhs. The only asset of the first plaintiff company was the A schedule property as the plaint and machineries had already been sold by the original promoters and the liabilities of the first plaintiff Company were amounts due to TIIC, Canara Bank, Indian Overseas bank, unsecured creditors and other statutory liabilities as on 23.11.1994.
(b) Considering the above, the promoters of the first plaintiff Company agreed to sell and transfer the 900 equity shares for a sale consideration of Rs.9000/- (Rupees nine thousand only) to the plaintiffs 2, 3, 5 to 11.
(c) The dues to the financial institutions and the unsecured creditors were to be discharged by plaintiffs 3, 5 and 6 as detailed in Annexure 2 and Clause 18 of the MOU.
(d) Two directors from out of plaintiffs 3, 5 and 6 were to be inducted into the Board of the first plaintiff Company.
(e) The plaintiffs 3, 5 and 6 had undertaken to settle the dues of TIIC, I.O.B., Canara bank as detailed in Annexure 2 to the MOU. They had also undertaken that in case of a default on their part in paying any of the institution the earlier shareholders could settle the dues to such institutions and plaintiffs 3,5 and 6 undertook to indemnify the earlier shareholders for all the costs and incidental expenses incurred by them together with the original liability.
(f) The possession of the assets detailed in Annexure 1 to the MOU was to be handed over to plaintiffs 3, 5 and 6 on the day of the signing of the MOU. The conditions further provided that the factory land and building were being handed over without any encroachment and machinery thereon.
7 It is pleaded that on the date of signing of MOU, a sum of Rs.5,00,000/- (Rupees five lakhs only) was paid towards price of shareholdings and for payment to the secured creditors. Thereafter, within a period of two years, a sum of Rs.25,00,000/- (Rupees twenty five lakhs only) was paid to TIIC and Canara Bank.
8 It is pleaded case of the plaintiff that plaintiff 3, 5 and 6 discovered that several liabilities have not been disclosed by the earlier management which was to the tune of Rs.13,00,000/- (Rupees thirteen lakhs only) and accordingly, the plaintiff did not pay any money. This resulted in deposit of post dated cheques issued by the plaintiff No.6 which also resulted in filing of cases under section 138 of Negotiable Instrument act. The defendant No.1 was also proceeded under the Revenue Recovery Act for non payment of dues of TIIC.
9 Plaintiff No.1 approached the TIIC to know about the outstanding amount after adjusting Rs.25,00,000/- (Rupees twenty five lakhs only) already paid. The plaintiff was informed that a sum of Rs.120 lakhs was outstanding.
10 It is submitted that to avoid resale of property by TIIC, a sum of Rs.75,00,000/- (Rupees seventy five lakhs only) was paid to discharge the loan.
11 It is the case of the plaintiff that in response to advertisement of the defendant No.1, plaintiffs have approached them for financial assistance. It was agreed to extend loan to the Group of Companies of the defendant No.1.
12 It is not in dispute that property was mortgaged as security for the loan. It is admitted case of the plaintiff No.6 that the agreement has been signed by defendant No.2 in respect of the first defendant with whom negotiation was held.
13 It is also not in dispute that the agreement was executed by plaintiff No.6. On 3.6.1997, a bank account was opened in the name of the first plaintiff and the cheque books were handed over to the 6th plaintiff.
14 It is submitted that on the asking of the defendant No.6 cheque was signed on behalf of the plaintiff No.1 and handed over to the 6th plaintiff. The plaintiff also signed number of other documents on being informed that these documents were meant for security for the loan amount which would be returned on repayment of loan. Thereafter, on 4.6.1997 6th plaintiff asked to come to the Bank when an account was opened in his name. He was informed that he could withdraw Rs.3,25,000/- (Rupees three lakhs and twenty five thousand only) on the next day. Thereafter, certain transactions were held in the bank.
15 It is submitted that the plaintiffs have approached TIIC for one time settlement and after negotiation, Rs.97,92,677.15 was arrived at. This amount was paid by the plaintiffs as per the details given below:
-----------------------------------------------------------------------------------------------
SL. Instrument of payment Amount No. and date Favouring (in Rupees)
-----------------------------------------------------------------------------------------------1 Demand Draft No.293738
Global Trust Bank I.O.B. A/c Citrex Products Ltd. Rs.26,49,395/-
-----------------------------------------------------------------------------------------------2 Demand Draft No.293739
Global Trust Bank Canara bank A/c Citrex Products Ltd. Rs.22,98,710/-
-----------------------------------------------------------------------------------------------3 Demand Draft No.293737
Global Trust Bank TIIC A/c Citrex Products Ltd Rs.48,49,572.15
-----------------------------------------------------------------------------------------------
16 It is the case of the plaintiffs/respondents that the plaintiff and other sister concern had so far paid the following amount:
--------------------------------------------------
Date Payment (Rs.)
--------------------------------------------------
4 Dec. 97 500000
--------------------------------------------------
15 April 98 3,618.645-00
--------------------------------------------------
15 April 98 3,017,630-00
--------------------------------------------------
15 April 98 2,863,725-00
--------------------------------------------------
25 Sep. 98 105,426-00
--------------------------------------------------
18 Nov. 98 100,000-00
--------------------------------------------------
03 Dec. 98 100,000-00
--------------------------------------------------
05 Dec.98 88,000-00
--------------------------------------------------
09 Dec.98 110,261-00
--------------------------------------------------
10 Dec.98 100,739-00
--------------------------------------------------
18 Jan. 99 50,000-00
--------------------------------------------------
06 Feb. 99 150,000-00
--------------------------------------------------
28 Feb. 99 198,765-55
--------------------------------------------------
16 Mar.99 100,000-00
--------------------------------------------------
29 Mar. 99 150,000-00
--------------------------------------------------
06 Apr. 99 162,803-20
--------------------------------------------------
06 Apr. 99 100,000-00
--------------------------------------------------
07 Apr. 99 242,000-00
--------------------------------------------------
Thereafter, entire principal and interest had been repaid.
17 That in view of payment of total loan amount, TIIC had no right to auction the property under section 28 of the State Financial Corporation Act and accordingly, the first plaintiff sold 5 acres of land to Metta Films, vide sale deed dated 26.9.1997.
18 It is pleaded case of the plaintiff that since portion of the principal amount was repaid and the entire amount of Rs.2,50,000/- (Rupees two lakhs and fifty thousand only) due under the mortgage loan agreement, dated 2.6.1997 and the loan agreement, dated 6.8.1997 were fully cleared, the charge created by the above agreements were fully removed and the first plaintiff was free to deal with the B schedule property in the manner it thought fit. The first plaintiff with a view to augment its income and to repay balance loan amount to the first defendant which was only a sum approximately Rs.10,00,000/- (Rupees ten lakhs only) alienated certain portions of the B schedule property to the 5th and 6th plaintiff under sale deeds dated 13.7.1998 and registered as Document Nos.1761/1998 and 1765/1998 respectively on the file of the Sub Registrar office, Ponneri. The total extent of land alienated was 10 acres. Thereafter, in the year 2001, the first plaintiff had leased out an extent of 12 acres to M/s.Larsen and Toubro Ltd. for their NH5 project to house their project office. Originally an extent of 10 acres was leased and subsequently, an additional extent of 2 acres was included in the lease. The 5th plaintiff leased out an extent of 9 acres from out of the 10 acres purchased to M/s.Best Boards and they required huge open spaces for drying the wet boards after their manufacturing process. They are using the vacant area of 9 acres along with a factory shed of 3000 sq.ft. The remaining extent of 1 acre together with two godowns measuring 10,000 sq.ft. leased out by the 6th plaintiff to M/s.Paharpur Industries ltd. for their godown purposes. A further extent of 1.5 acres of land and a building measuring an extent of 6000 sq.ft. had been leased out to one mr.Jayaram shetty and Manivannan for putting up ganvanising unit . In the meanwhile, the Government of Tamil Nadu decided to acquire lands for widening the NH5 into a four lane highway under the Prime Minister's Golden Quadrilateral Project and accordingly, an extent of 22 cents of the plaintiff's land immediately abutting the highway was acquired by the Government for which compensation was paid by the Special Tahsildar, Land Acquisition to the first plaintiff company.
19 That after the repayment of the entire principal amount made as per the instructions of the first defendant, the first defendant through 6th defendant called upon the first plaintiff to execute a Power of Attorney in respect of B schedule property. When the entire principal amount had been paid, the 6th defendant had informed that the same is only as a security. The first plaintiff had consented to execute Power of Attorney. The 6th plaintiff was asked to come to the Registrar Office and accordingly, on 7.4.1999 the 6th plaintiff had arrived at the registration office at Adyar at about 4.00 p.m. and on the very same day, the first plaintiff paid a sum of Rs.1,00,000/- (Rupees one lakh only). Only when the Power of Attorney was executed, 6th plaintiff came to know that 5th defendant was a group of company of the first defendant.
20 That after repayment of entire loan amount with interest by end of the year 1999, they approached the first defendant to close the loan account by cancelling the mortgage loan agreement, by returning the original documents, original shares, blank papers executed by the plaintiffs 2, 3, 5 and 6. Even after several reminders, the first defendant gave evasive replies for return of original documents. Finally, the first defendant orally informed the 6th plaintiff that there was a sum of Rs.2 crores still due from the first plaintiff.
21 That the entire loan has been repaid to defendant No.1 and on account of this, plaintiffs demanded return of original documents of title, original share certificates, blank papers executed by the plaintiffs 2, 3, 5 and 6 in their individual capacities and this plaintiff as director of the plaintiff company. It is submitted that plaintiff was informed orally that Rs.2 Crores was still due from the first plaintiff to the first defendant.
22 That on the basis of claim, the defendant No.1 took over the management of the plaintiff No.6, inspite of negotiation for amicable settlement.
23 It is also pleaded by the plaintiff that the plaintiff shocked to know through internet, that the returns in respect of the first plaintiff company had been filed from 29.7.2003, 2002-03 and April 2003 to December 2003 since the first plaintiff company had not filed these returns. It was brought to the notice of the Registrar of Companies and on search being done, they became aware about the sinister game plan of the first defendant. The returns filed by the defendants reflected that the share belonging to plaintiffs 2, 3, 5 to 11 were transferred in favour of the defendants 6, 8 to 15 and plaintiffs 2,3,5 and 6 had been removed from the board. These documents have been filed fraudulently and do not reflect the actual state of affairs. The plaintiffs 2, 3, 5 to 11 continue to be shareholders of the first plaintiff company and the plaintiffs 2 to 6 are the directors of the company. A perusal of records of the first plaintiff company would show that they are in absolute control and management of the first plaintiff company and also immovable property and day to day affairs were run by the the plaintiffs 2 to 6. None of the defendants have never dealt with the management or any other affairs of the first plaintiff company.
24 It is pleaded that plaintiff lodged a complaint on 15.7.2004 to the Commissioner of Police, Chennai against defendants 1, 2 and 16 and defendants 6 to 9 requesting the Commissioner to conduct an enquiry into the fraud committed by the defendants. F.I.R. was registered on 30.7.2004. On the basis of this complaint, the 6th defendant was arrested on 1.8.2004 and remanded to custody.
25 The 6th defendant before the criminal Court, stated that each shareholder had entrusted the share certificates, transfer deeds, irrevocable Powers of Attorney along with letters of authority in the year 1997 itself and that every signature was attested by the first plaintiff company. He further stated that every shareholder had authorised the transfer of the shares pledged and it was they had lodged the share certificates, transfer deeds and powers of attorney and all the transfer deeds were attested by the first plaintiff company.
26 The 6th defendant also contended that the possession of the property and the original documents of title had been handed over to the 4th defendant. The 6th defendant in the criminal case, admitted that a major portion of the loan had been discharged and that the 7th defendant who had an eye on the plaintiff's property for which he along with 8th defendant and others had forged papers, created bogus resignation letters, etc. 27 That taking into consideration of the confession statement of the 6th defendant and the fact that a major portion of the loan had been repaid, the Principal Sessions Judge dismissed all the petitions by a common order dated 25.8.2004. The 7th defendant obtained anticipatory bail in this Court on 11.9.2004. It was only after these statements were made by the defendants before the criminal Court, the plaintiffs have become aware about the serious fraud played against them.
28 The plaintiff has also challenged the sale agreement, dated 2.6.1997 purported to have been entered into between the plaintiff company and the 4th defendant. As per the sale agreement, the first plaintiff is owing a sum of Rs.150 lakhs to its secured and unsecured creditors. It was further alleged in the sale agreement that the first defendant had agreed to extend the loan upto Rs.125 lakhs and it was needless for the plaintiff that for a paltry sum of Rs.30 lakhs as against a total liability of Rs.150 lakhs. A perusal of the fabricated agreement indicated that a sum of Rs.28,99,000/- (Rupees twenty eight lakhs ninety nine thousand only) had been paid to the first plaintiff company.
29 That on perusal of bank statement, it is evident that on 2.6.97 the second defendant had transferred a sum of Rs.125 lakhs to the 6th plaintiff's account and on the very same day, this amount had been transferred to the third defendant's account. Thereafter, 4th defendant transferred a sum of Rs.28,99,000/- (Rupees twenty eight lakhs ninety nine thousand only) to the first plaintiff's account and on the very same day the second defendant had transferred a sum of Rs.2,50,000/- (Rupees two lakhs and fifty thousand only) to the first plaintiff's account. This amount apparently constituted the amount mentioned in the mortgage loan agreement, dated 2.6.1997. On the very same day, a sum of Rs.27,50,000/- (Rupees twenty seven lakhs and fifty thousand only) had been transferred to the account of the 6th plaintiff from the first plaintiff's account and from the 6th plaintiff's account, the sum of Rs.27,50,000/- (Rupees twenty seven lakhs and fifty thousand only) had been rerouted to the 4th defendant's account. On the very same day, Rs.4 lakhs had been transferred from the first plaintiff's account to the third defendant's account. Therefore, the allegation in the agreement of sale that a sum of Rs.28,99,000/- (Rupees twenty eight lakhs ninety nine thousand only) which constituted bulk of the sale consideration had been paid to the first plaintiff company is absolutely false and the bank transactions would clearly prove the fraud committed by the defendants. In any event assuming without admitting that the said sum of Rs.2,50,000/- (Rupees two lakhs and fifty thousand only) was actually lent by the second defendant to the first plaintiff, the said sum together with interest @ 18% p.a. was fully repaid by the 6th plaintiff to the second defendant as detailed below:
------------------------------------------------------------
SL.No. Date Amount (Rs.)
------------------------------------------------------------
1 18.11.1998 1,00,000-00
------------------------------------------------------------
2 31298 1,00,000-00
------------------------------------------------------------
3 18.01.1999 50,000-00
------------------------------------------------------------
4 29.03.1999 1,50,000-00
------------------------------------------------------------
The plaintiffs therefore state that the alleged consideration under the mortgage deed, dated 2.6.97 stands fully discharged.
30 The first plaintiff cancelled the Power of Attorney executed in favour of the defendant No.5, 6 and 18 on 21.9.2004 by way of registered deed. The defendants 4, 5 and 18 have filed a suit to challenge the sale deed executed in favour of the plaintiff No.5 and 6 and also to challenge the cancellation of Power of Attorney.
31 The sum and substance of the suit, different transactions are challenged on the basis of fraud and misrepresentation between the parties and the litigation is pending, between the parties to suit, the defendants have filed the following applications.
32 A.No.2887 of 2012:This application has been filed under Order 14 Rule 8 read with Order 6 Rule 17 and section 151 of C.P.C. to dismiss the suit against the defendants 10 to 15/applicants.
33 A.No.2888 of 2012This application has been filed by the defendants 10 to 15 to strike out the pleadings as set out in the schedule of the application and also prayer 'a', 'b' and portion of 'c'.
34 A.No.2215 of 2012This application has been filed by the defendants 6, 8 & 9 to strike out the plaint prayer 'c'.
35 It is submitted that the defendants 10 to 15/applicants are shareholders of the company, Citrex Products Ltd. (hereinafter called "Company"). That suit has been filed by the applicants on the basis of no cause of action for the reliefs set out in the plaint.
36 It is submitted that the applicants had filed an application under order 6 Rule 16 of C.P.C. to strike off the prayer 'A', 'B' and and the latter portion of prayer 'C', as it essentially relates to the rectification of the register of members of the Company which could be considered only by the Company Law Board. That in the said application, reference was made only to the prayer clause, but the applicants had not in the said application specifically referred to the relevant portions of the plaint which was to be struck off. The applicants therefore, requested leave to withdraw the application No.5636 of 2011 with liberty to file fresh application which was granted by this Court on 18.12.2011.
37 It is pleaded that applicants have became shareholders in the company in April, 2000 on the transfer of 600 equity shares of Rs.10/- (Rupees ten only) each.
38 The applicants have also pleaded the events which led to the applicant to become the shareholders of the Company as under:
(a) The applicants understand that the 11th respondent had lent various sums of money to the 5th respondents.
(b) The respondents 2 to 10 were the then shareholders of the Company and had guaranteed the repayment of such loans.
(c ) In respect of the said loans, it is seen from documents that the respondents 2 to 10, then shareholders of the Company had all handed over the share certificates in respect of their shareholding in the company to the respondent No.11 together with duly executed Share Transfer deeds.
(d) The transfer deeds were certified by the company confirming that the signatures were that of the respondents 2 to 10.
(e) it is also evident that the respondents had undertaken that the shares of the Company owned by each of them could be dealt with by the respondent No.11 either under the terms of the Power of Attorney executed by the shareholders or by effecting transfer of the same.
(f) The documents executed by the respondents 2 to 10 also states that the proceeds realised if any by the sale of shares of the Company by the respondent No.11 could be adjusted against any obligations of the respondent No.1 and 5 to 11.
(g) The records also shows the fact of execution of power of attorney by the respondents 2 to 10 in respect of the shares in favour of the respondent No.11 was duly intimated to the Company which acknowledged registering the power of attorney and undertook to act solely on the terms of the same as it was confirmed that the powr of attorney was coupled with interest and supported by consideration and therefore irrevocable.
(h) The said shares were sold to the applicants 1 to 6 and 3 others by the respondent No.11 as the Power of agent of the respondents 2 to 10 in April 2000 for valuable consideration on behalf of the respective respondents 2 to 10 under the terms of the power of attorney.
(i) The applicants were informed in April 2000 that the shares were transferred into the names of the applicants 1 to 6 and entered into the register of members. The transferred share certificates were also received by each of the applicant.
(j) The fact that the applicants are shareholders of the Company is also reflected in the annual returns of the Company and in the attendance slips/proxy forms being dispatched by the Company at the time of each General meeting of the company.
(k) After change in shareholding by sale from the respondents 2 to 10 to the applicants and 3 others by the respondent No.11 as POA holder, the 5 directors representing the said shareholders also ceased to be on the Board of the company as they retired and did not contest for re-election.
39 It is also submitted that the applicants came to know that some of the respondents had entered into various transactions as though on behalf of the company without valid authorisation and authority and subsequently, they have ceased to be the directors of the company.
40 That part of the plaint challenges the transfer of 600 shares of the Company to the applicants and the 300 shares to other purchasers to be defective, which is false, vague and contradictory. Thereafter, the averments have been made to justify the transfer of shares in favour of the applicants.
41 Reliance placed on section 111(4) of the Companies Act read with other sections to contend, that relief qua applicants does not fall within the jurisdiction of the civil Court, and lies with the Company Law Board.
42 The other ground raised in the application is that pecuniary jurisdiction of this Court is sought to be created by adding the prayer in respect of the shares of the applicants by valuing at Rs.1 lakh.
43 It is submitted that the applicants are not concerned with the relief in respect of the transfer of shares, as agreement of sale is of 1997 whereas share transfer was in April 2000, much after the agreement which is under challenge.
44 It is prayed that the pleading in the suit, in respect of transfer of 900 shares has to be deleted from the plaint on the ground of non maintainability, in view of exclusive jurisdiction of Company Law Board in respect of these matters, as the applicants claimed to be bonafide purchasers of the shares for consideration and have exercised due care. Therefore, the applicants prays for dismissal of the suit as against the defendants 10 to 15.
45 The applications are opposed by the plaintiffs/non applicants on the plea that these applications are not maintainable, as A.No.5636 of 2011 was dismissed on merits, and not as not pressed.
46 Paragraph 4 of the A.No.2888 of 2011 reads as under:
"The applicants who are the defendants 10 to 15 in the suit, had filed an application in A.No.5636 of 2011 in the above suit under Order 6 Rule 16 of the CPC , seeking the striking off of the prayers (a), (b) and the latter portion of Prayer (c) since the same essentially relate to the rectification of the register of members of the Company which are matters that ought to be considered by the Company Law Board, since the Company Law Board is vested with the exclusive jurisdiction over matters relating to such rectification. The inclusion of these reliefs in a suit before this Court is thus an abuse of process. The applicants had in the said application only referred to the prayers sought for in the suit that ought to be struck off. Since the applicants had not in the said application specifically referred to the relevant portions of the plaint which were to be struck off, the applicants requested leave to withdraw the application No.5636 of 2011 with liberty to file a fresh application, which liberty was granted to them as recorded in the order of this Court, dated 8.12.2011. The present application has therefore been filed seeking the striking out the pleadings relating to prayers (a), (b) and the latter portion of prayer (c ) and for consequential reliefs."
47 This averment is wrong and misleading amounts to an attempt to overreach this Court. The non applicants/plaintiffs are right in contending that A.No.5636 of 2011 was dismissed on merit. The order passed by this Court reads as under:
"The applicants/defendants 10 to 15 have filed this application for striking out the first respondent/first plaintiff from the array of plaintiffs.
2 The first plaintiff is Citrex Products Ltd. Which is a company registered under the Companies Act. The ground on which the applicants seek striking out the name of first plaintiff is that the plaintiff No.1 has been improperly joined without due authority to represent the plaintiff. This ground is based on the allegations that the first plaintiff has filed the plaint through V.Rajendran, claiming to be its Director, whereas he was not the director of the company.
3 It is also the case of the applicants that the applicants were in majority, therefore, no decision was taken by the plaintiff No.1 to file the present suit.
4 On consideration of the pleadings in support the application, I find this application to be totally misconceived. It is always open to the applicants/ defendants to raise objection about the maintain-ability of suit on behalf of the plaintiff No.1 for want of proper authorization, but it does not give any right to seek deletion of the name of plaintiff No.1.
5 It will be for the plaintiffs to prove that a valid resolution was passed in favour of the director, representing the company. The dispute raised in this application cannot be adjudicated in an application moved under Order 1 Rule 10(2) of C.P.C.
6 The reliance placed by the applicants, on the judgment of the Hon'ble Supreme Court in the case of State Bank of Travancore vs.Kingston Computers (I) P. Ltd. (2011)2 Comp.L.J. 473 (SC), is misplaced, as the Hon'ble Supreme Court, in the said case, has nowhere laid down that name of the party can be deleted on an application moved by the defendants.
Consequently, finding no merit in this application, it is ordered to be dismissed. No costs."
48 It would be seen that the defendants 10 to 15/applicants have approached this Court with unclean hands and had made wrong and deliberate mis-statement, therefore, are not entitled to invoke the inherent jurisdiction of this Court for discretionary relief, nor they have made out any case to delete part of pleading or prayer, as the challenge to the transfer of shares is an ground of fraud and misrepresentation, which cannot to be gone into by the Company Law Board, but can be determined by civil Court only.
49 Consequently, A.No.2887 of 2012 is dismissed with costs which are assessed at Rs.10,000/- (Rupees ten thousand only) payable to the plaintiffs, as the applicants are guilty of wrong statement about dismissal of earlier application.
A.No.2888 of 2012 is also dismissed with costs which are assessed at Rs.10,000/- (Rupees ten thousand only) payable to the plaintiffs.
A.No.2215 of 2012 is dismissed with no order as to costs.
50 A.No.3842 of 2012:This application has been filed by M/s.Thamiraparani Investments Ltd. under Order XIV Rule 8 of O.S. Rules read with Order VII Rule 11 read with section 151 of C.P.C. to reject the plaint for want of leave under Clause 14 of Letters of Patent.
51 The defendant No.4/applicant has filed this application on the ground that the plaint is hit by misjoinder of cause of action as plaintiffs are claiming multiple cause of action against separate defendants which are unrelated to each other.
52 That the plaintiffs have prayed declaration to declare the agreement of sale to be void, and have sought rectification of register of members of company and also to seek declaration of being directors of the company.
53 That all the documents pertaining to agreements of sale are with the first plaintiff company which is sought to be rescinded in this suit and were executed on behalf of the company by the plaintiffs and not by any of the defendant whose competence to act as director of the first plaintiff company is challenged by the plaintiffs.
54 That none of the issues relating to the determination of whether the other defendants are directors are not will affect the determination of the validity of the impugned agreement of sale and therefore, relief with respect to agreement of sale against the applicants has no nexus with the relief in respect of determining directors and shareholders of the company which proved misjoinder of cause of action.
55 That there can be no joinder of cause of action unless there is specific leave granted by this Court under Clause 14 of the Letters Patent. In the instant case, the records reveal that no such leave was sought and in any event such leave cannot be granted by this Court without notice to the defendants including the applicants herein.
56 That no suit with regard to immovable property can be instituted in this court unless the property is situated within the original territorial jurisdiction of this Court. The property in dispute in this case is not within the jurisdiction of this Court.
57 It may be noticed here that leave to sue was granted in 2005 and till date, it was not challenged by the defendants/applicants. An attempt was made after the judgment was reserved in this case to challenge the leave to sue. The said application was rejected being belated, therefore, this plea is not available to the applicants.
58 Reliance placed on the judgment of the Hon'ble Supreme Court holding that the suit with regard to possession of land can only be filed in Court in which jurisdiction of the land is situated. This judgment cannot advance the case of the applicant as leave to sue already stands granted. It may be noticed here, that in the suit filed by the plaintiffs/non applicants is with regard to pledge of shares, the transfer of shares as also challenge to the agreement of sale, dated 2.6.1997 and 25.8.1997.
59 The claim is not with regard to possession of land. Therefore, suit is maintainable in this Court.
60 The main contention is that in absence of leave under Clause 14 of Letters Patent, the suit as framed is not competent and therefore, plaint is liable to be rejected.
61 It may be noticed here that the only point raised at the time of argument by the learned counsel for the applicants is that suit is bad for want of leave under Clause 14 of Letters Patent which was also required, independent of the leave under Clause 12 of Letters Patent. The liberty was sought to file written arguments, but no written argument have been filed.
62 The application is opposed by the plaintiffs/respondents on the ground that the suit is not for land, as Plaintiffs have not sought possession of land as they continued to be in possession of the land, except the portions alienated by them which is not under challenge.
63 It is further submitted that the leave granted was also with respect to joinder of cause of action and relief.
64 It is also the ground of the respondents/plaintiffs that this application is filed after 8 years of institution of suit, therefore, is an abuse of process of Court, and has been filed with ulterior motive to harass the plaintiffs/ respondents to delay the trial of the suit.
65 It is also pertinent to mention here that the Hon'ble Division Bench of this Court in O.S.A.Nos.167 and 168 of 2010 passed the following order:
" Para 18: By a perusal of the averments in the said suit O.S.No.64 of 2004, it is clear that appellants themselves seek for declaration that they are the only directors of the first plaintiff M/s.Citrex Products ltd. And the claim of the applicant itself is subject matte of the dispute in the suit in O.S.No.64 of 2004. When both parties claim to be in control and management of the first plaintiff company, having regard to the nature of controversy, the issue as to who is in actual control could be gone into only at the time of trial when the parties adduce oral and documentary evidence. In this regard, it is pertinent to note that the plaintiffs have produced number of documents stating that those documents are to be produced as evidence at the time of trial. Having regard to the nature of the dispute, we are of the view that the learned single Judge has rightly held that the contentious issues raised by the appellants in the interlocutory application could be decided only after conducting an elaborate enquiry.
"21......... When both the parties have taken diametrically opposite stand and earlier in the interlocutory application when the parties have fought out the litigation up to the Hon'ble Supreme Court, it would not be appropriate to pass any interim injunction restraining the plaintiff from taking any decision or implementing any of them in respect of the first plaintiff company."
66 On consideration, I find that this application is totally misconceived, and has been filed with motive to delay the proceedings. The Hon'ble Division Bench has held that this contentious matter with regard to maintainability of suit can only be gone into at the time of trial and not by way of interim application.
67 The plaint can be rejected by taking into consideration, the pleadings in the plaint and the defence of the defendants cannot be gone into, to reject the plaint.
68 The reading of the plaint discloses cause of action to maintain the suit. The suit raises plea of fraud, misrepresentation and acts of the parties which can only be gone into by the Civil Court.
Consequently, this application is also without any merit and is ordered to be dismissed. However, with no order as to costs.
vaan