Madras High Court
Chennimalai Yarns Pvt. Limited And Anr. vs S. Chandrasekar And Ors. on 8 August, 2005
Equivalent citations: [2007]138COMPCAS99(MAD), (2005)4MLJ22, [2006]66SCL320(MAD)
Author: R. Banumathi
Bench: R. Banumathi
ORDER R. Banumathi, J.
1. These revisions are directed against the orders of Principal Subordinate Judge, Coimbatore made in I.A. Nos. 452, 453/1998 in O.S. No. 541/1998, allowing the petition filed by the Plaintiff to implead D-6 individually and in his Representative Capacity for all other shareholders and regarding the territorial jurisdiction of the Court at Coimbatore. The Defendants 1 and 2 are the Revision Petitioners.
2. Necessary facts for the disposal of this revision could briefly be stated thus:
O.S. No. 541/1998.-- The first Defendant-M/s. Chennimalai Yarns Private Limited has been carrying on business at Chennimalai and having its registered office at Coimbatore. Defendants 2, 3 and 4 are the Directors of the D-1 company; D-5 is the former Director of the company and a share holder. D-6 is also a share holder in D-1 company. Case of the Plaintiff is that he is the Managing Director of D-1 company and has been so appointed for a period of five years. The company has made borrowings from Tamil Nadu Industrial Investment Corporation Limited, State Bank of India, M/s. Fidelity Finance Limited and other financiers. D-1 company is heavily indebted. The Plaintiff has furnished his properties as security for the loan obtained by D-1 company. The Plaintiff's wife has also furnished her property as security for the loan borrowed by the D-1 company. While so, with a view to defeat the lawful claim of the Plaintiff. On 15.5.1998 the Defendants 2 to 5 have adopted a Resolution to the effect of removing the Plaintiff from the office of the Managing Directorship of D-1 company. The Plaintiff has alleged that the Resolution is not true and invalid under law. The Defendants are also making arrangements in bringing about another General Body Meeting on 24.6.1998 to remove the Plaintiff from Directorship. Plaintiff has filed the suit to declare the impugned Resolution dated 15.5.1998, that sought to remove the Plaintiff as Managing Director of the first Defendant, as null and void and also for a Decree for Permanent Injunction restraining the Defendants 2 to 6 from holding the Extraordinary General Body meeting on 24.6.1998 and also restraining the Defendants 2 to 6 from incurring any further liability, by borrowing loans or availing further credit facilities from other Defendants.
3. I.A.No. 452/1998.-- In the said suit, I.A. No. 452/1998 was filed to implead D-6 in his Representative Capacity for all other shareholders. According to the Plaintiff, D-1 company has several shareholders and all the shareholders cannot be individually impleaded in the suit. Hence, for representing the entire General Body of shareholders, the suit has been filed against D-6, who is the shareholder of the company, individually and also representing the entire general body of shareholders. This application has been filed seeking the permission of the Court to sue D-6 in the Representative Capacity (under Order 1, Rule 8, C.P.C.).
4. This application was resisted by the Defendants 1 and 2 contending that D-6 is a supporter of the Plaintiff and he is biased and he does not have the support of other shareholders. D-6 stands by the Plaintiff and he cannot be the representative of all the shareholders and hence, he cannot be sued in his Representative Capacity.
5. I.A. No. 452/1998 was allowed by the trial Court finding that the objection regarding the Representative Capacity of D-6 cannot be raised by the Defendants at the initial stage. It was held that whether D-6 represents other shareholders or not could be determined only at the time of trial. Finding that the Plaintiff can sue D-6 for himself and in his Representative Capacity representing the other shareholders, the trial Court has allowed the application. Raising serious objection to the maintainability of the suit at Coimbatore, the learned Counsel for the Revision Petitioner has submitted that when most of the Directors are residing in Chennimalai and when the disputed Resolution dated 15.05.1998 emanates from Chennimalai, certainly, jurisdiction of the Courts at Coimbatore is not attracted.
6. I.A. No. 453/1998.-- The first Defendant, incorporated as a Private Limited Company is operating from Chennimalai, Erode District. Some of the Defendants D-4, D-5 and D-6 are residing in Coimbatore. Hence this application was filed under Section 20(b), C.P.C. seeking the permission of the Court to file the suit in Sub Court, Coimbatore, since some of the Defendants are residing outside the jurisdiction.
7. This application was resisted by the Defendants 1 and 2 contending that the impugned Resolution dated 15.5.1998 was passed in the premises of D-1 company at Chennimalai, Erode District. It was alleged that for any suit filed challenging that resolution, only Erode District would have the jurisdiction, since the cause of action has arisen only within the District of Erode. Objection was also raised on the ground that almost all the Directors of D-1 company reside and carry on business outside the jurisdiction of Coimbatore Court. It was urged that residence of some of the Defendants would not confer jurisdiction upon the Courts at Coimbatore.
8. The trial Court allowed the application granting permission to the Plaintiff to file the suit at Coimbatore. Pointing out that some of the Directors-D-4, D-5 and D-6 are residing in Coimbatore, the trial Court found that when the Defendants are residing in more than one place, the suit could be filed in Coimbatore. It was further held that if at all in the later stage if the Court finds that the Court has got no jurisdiction, the Court could still have the power to return the plaint at any stage.
9. Assailing the impugned order, it is submitted that the trial Court erred in taking cognizance of the suit. It is also submitted that when the Court cannot proceed with the suit, the trial Court erred in saying that at later stage, if it is found that Court has got no jurisdiction, plaint could be returned and that the impugned order suffers from serious infirmity.
10. Regarding allowing of the application in I.A. No. 452 /1999, it is submitted that D-6 was not a party to the impugned Resolution dated 15.5.1998 and D-6 cannot be sued in his Representative Capacity. It is submitted that absolutely no material has been produced in support of the case, showing D-6 in his Representative Capacity. It is submitted that when the mandatory requirements - issuance of Public Notification under Order 1, Rule 8, C.P.C. has not been complied with, the impugned order permitting the Plaintiff to sue D-6 in his Representative Capacity cannot be sustained.
11. Supporting the findings of the Court below, the learned Counsel for the first Respondent/Plaintiff has submitted that apart from D-6, D-4 and D-5 are also residing at Coimbatore and when some of the Defendants/ Directors are residing in Coimbatore, the Court at Coimbatore certainly has the jurisdiction to entertain the suit and that no valid objection could be raised. It is also submitted that the Court below has rightly granted permission to the Plaintiff to sue D-6 in the Representative Capacity. It is submitted that the correctness of the said order could be determined only at the time of trial when the parties adduce evidence.
12. Upon consideration of the contentions of both parties, impugned order and other materials on record, the following common points arise for consideration in these revisions:
(i) Since the first Defendant- Private Limited Company is having its factory premises at Chennimalai and some of the Directors are residing at Chennimalai Erode District, is the jurisdiction of the Courts at Coimbatore ousted ?
(ii) Could D-6 represent the other shareholders at Chennimalai Yarns Private Ltd ?
(iii) Whether the impugned Order suffers from material irregularity warranting interference ?
13. The first Defendant Company is a Private Limited Company having its Factory premises at Mukasipidariur Village, Perundurai Taluk, Chennimalai. The Directors of D-1 company viz., D-2 and D-3 are residing in Chennimalai, Erode District. Though the first Defendant company is having its Factory premises at Mukasipidayur Village, Perundurai Taluk, Chennimalai, D-1 is said to be having its Head Office at 326, Variety Hall Road, Coimbatore. The other Directors, D-4, D-5 and D-6 are residing in Coimbatore. The main contention is that the first Defendant Company is having business only in Chennimalai and that the Chennimalai is the principal place of business and the suit ought to have been filed in Erode. The merits of this contention is to be considered in the light of Section 20(b), C.P.C. which reads:
"Any of the Defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the Defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution".
14. The words "actually and voluntarily resides", "carries on business" are important. No doubt, D-1 company carries out manufacturing work at Chennimalai. But "carrying on business" is not restricted to Chennimalai alone. The activity of profit or gain is not restricted merely to Chennimalai. In other words, the place of functioning of the Private Limited Company is not limited to Chennimalai alone. From the averments in the plaint, it is seen that the D-1 company is having its registered Head Office at 326, Variety Hall Road, Coimbatore. Having its Head Office at Coimbatore, indicates that part of D-1's business or the activities of profit or gain is being carried on in Coimbatore, attracting the jurisdiction of Courts at Coimbatore.
15. The expression "business" has a very wide import and would compass almost all the activities associated to the company. Business need not be carried on personally in that area. It may be through an agency or manager. The Plaintiff who was the Managing Director of D-1 company had some control over the business and the power of D-1 company. Since the D-1 company is having its Head Office at Coimbatore and the Plaintiff being the Managing Director, inference could be drawn that D-1 company must have carried on part of its activities in Coimbatore also. In such circumstances, in the absence of a definite clause conferring exclusive jurisdiction on the Courts at Erode, the jurisdiction of Courts at Coimbatore cannot be said to be excluded.
16. Under Section 20(b), C.P.C., the leave must be specifically sought and granted for filing the suit. Leave of the Court may be obtained after institution of the suit. When some of the Defendants reside within the jurisdiction and some of the other Defendants reside outside the jurisdiction, the Court may be granted leave for filing the suit. By exercise of discretion where leave is granted, the Defendants who are residing outside the jurisdiction cannot raise objection. In the absence of any express Clause, conferring jurisdiction upon the Courts at Erode, no valid objection could be raised by the Defendants.
17. The suit has been filed for declaring the Resolution dated 15.5.1998, removing the Plaintiff from the post of Managing Director of D-1 company, as null and void. It is contended that the impugned Resolution has been passed at Mukasipidariur Village, Perundurai Taluk, Chennimalai. Much arguments have been advanced that cause of action has wholly arisen only at Chennimalai and that the Courts at Coimbatore have no jurisdiction to entertain the suit. This contention does not merit acceptance. Since cause of action means bundle of facts. When part of the cause of action has arisen in Coimbatore, the Defendants cannot raise any objection that no part of cause of action has arisen in Coimbatore.
18. In Bloom Dekor Limited v. Subhash Himmatlal Desai, , it has been held:
" 'Cause of action' consists of bundle of facts which give cause to enforce the legal injury for redress in a Court of law. The cause of action means every fact, which if traversed, it would be necessary for the Plaintiff to probe in order to support his right to a Judgment of the Court."
19. Whether any part of cause of action has arisen within the jurisdiction of the Court would depend upon the facts and circumstances of the given case. The impugned Resolution though emanates from Chennimalai, it is the result of the associated activities of the D-1 Company, which is having its Head Office at Coimbatore. That apart, when certain Directors are also having the residence at Coimbatore, the Court at Coimbatore has jurisdiction to admit the suit, in view of the principal place of business of D-1 Company and the residence of other Defendants. The learned Subordinate Judge has gone into detail as to the maintainability of the suit at Coimbatore; but has found that in the later stage, if it is found that the suit is not maintainable in Court at Coimbatore, the Court could return the plaint. The learned Subordinate Judge has not appreciated that suit is well maintainable in Coimbatore.
20. The suit has been filed against D-6 for himself and in the Representative Capacity, representing the other shareholders. Objection is raised on the allegation that D-6 is sailing along with the Plaintiff and that he cannot represent the other shareholders. No material had been produced showing that D-6 is the supporter of the Plaintiff. If any of the shareholders are aggrieved against D-6 representing them, they could pursue the matter through the other Defendants. In other words, the dissident group could be well represented by any of the other contesting Defendants. Other Defendants cannot raise any objection for suing D-6 in Representative Capacity for himself and representing the other shareholders.
21. Order 1, Rule 8, C.P.C. is the enabling Rule, prescribing the condition to file the suit or to be sued in the Representative Capacity. When the permission has been granted, it becomes the duty of the Court to direct notice to be given to the opposite parties. It is contended that the requirements of Order 1, Rule 8, C.P.C. has not been complied with and that notice to other shareholders has not been issued. In support of this contention that no public notice was issued to the other shareholders, no material had been produced. In the absence of any material, it is not possible to accept the contention that necessary conditions of Order 1, Rule 8, C.P.C. was not complied with. The contention of the Revision Petitioners raising objection regarding the Representative Capacity of D-6 cannot be accepted. However, it is open to the parties to put-forth their objection at the time of adducing evidence.
22. By permitting the Plaintiff to file the suit in Sub-Court Coimbatore, there is no improper exercise of discretion. Also, there is no impropriety in permitting the Plaintiff to file the suit to sue D-6 for himself and on behalf of other shareholders. The impugned orders do not suffer from any material irregularity warranting interference. These revisions have no merits and are bound to fail.
23. For the foregoing reasons, the orders, dated 16.8.1999, made in I.A. Nos. 452, 453/1998 in O.S. No. 541/1998 on the file of the Principal Subordinate Court, Coimbatore are confirmed and these revision petitions are dismissed. Consequently, C.M.P. is also dismissed. In the circumstances of the case, there is no order as to costs.
24. The suit is of the year 1998, pending for more than seven years. All the contesting Defendants are directed to file their Written Statement within two months from the date of receipt of a copy of this order. Thereupon, the learned Subordinate Judge, Coimbatore is directed to expedite the trial and dispose of the suit expeditiously.