Telangana High Court
M/S. Crystal Dwellings Private Limited vs Surat Singh Malhotra And 20 Others on 4 August, 2022
Bench: P Naveen Rao, G.Radha Rani
IN THE HIGH COURT FOR THE STATE OF TELANGANA
********
CIVIL MISCELLANEOUS APPEAL NOs.274, 281 OF 2022
and Cross Objections No. 24 of 2022
Between:
M/s. Crystal Dwellings Private Limited,
rep.by its Managing Director, Mahesh Kedia,
s/o.Damodarlal, Aged 51 years, occu:Business,
Regd.Office at 14-2-420, Sukhji Lane,
Goshamahal, Near DVS Floor Concepts,
Chaknawadi, Hyderabad.
....Appellant
And
Surat Singh Malhotra s/o.late Jagdish Singh Malhotra,
Aged 65 years, occu: Business, H.No.8-2-608/1/3,
Namdhari Towers, 3rd Floor, Road No.10, Banjara Hills,
Hyderabad others.
...Respondents
JUDGMENT PRONOUNCED ON : 04-08-2022
HON'BLE SRI JUSTICE P.NAVEEN RAO
&
HON'BLE DR. JUSTICE G.RADHA RANI
1. Whether Reporters of Local Newspapers may : YES
be allowed to see the Judgments ? :
2. Whether the copies of judgment may be marked : YES
to Law Reporters/Journals :
3. Whether Their Ladyship/Lordship wish to : No
see fair Copy of the Judgment ? :
PNR,J & Dr.GRR,J
CMA Nos.274 & 281 of 2022
2
* HON'BLE SRI JUSTICE P.NAVEEN RAO
&
HON'BLE DR. JUSTICE G.RADHA RANI
+ CIVIL MISCELLANEOUS APPEAL NOs.274, 281 OF 2022
and Cross Objections No. 24 of 2022
%04-07-2022
# M/s. Crystal Dwellings Private Limited,
rep.by its Managing Director, Mahesh Kedia,
s/o.Damodarlal, Aged 51 years, occu:Business,
Regd.Office at 14-2-420, Sukhji Lane,
Goshamahal, Near DVS Floor Concepts,
Chaknawadi, Hyderabad.
....Appellant
Vs.
$ Surat Singh Malhotra s/o.late Jagdish Singh Malhotra,
Aged 65 years, occu: Business, H.No.8-2-608/1/3,
Namdhari Towers, 3rd Floor, Road No.10, Banjara Hills,
Hyderabad others.
...Respondents
!Counsel for the petitioner : Sri A Venkatesh
Counsel for the Respondents: Sri S Ravi,
Senior counsel for M/s. R.S.Associates
<Gist :
>Head Note:
? Cases referred:
(2006) 5 SCC 353
MANU/SCOR/46567/2020
1985 SCC Online AP 55
(2002) 108 Company Cases 516 AP
2018 SCC Online J&K 249
(2019) 18 SCC 569
PNR,J & Dr.GRR,J
CMA Nos.274 & 281 of 2022
3
HONOURABLE SRI JUSTICE P.NAVEEN RAO
&
HONOURABLE DR. JUSTICE G.RADHA RANI
CIVIL MISCELLANEOUS APPEAL NOs.274, 281 OF 2022
and Cross Objections No. 24 of 2022
Date : 04.08.2022
CMA No.274 of 2022:
Between:
M/s. Crystal Dwellings Private Limited,
rep.by its Managing Director, Mahesh Kedia,
s/o.Damodarlal, Aged 51 years, occu:Business,
Regd.Office at 14-2-420, Sukhji Lane,
Goshamahal, Near DVS Floor Concepts,
Chaknawadi, Hyderabad.
.... Appellant/petitioner/
Plaintiff
Vs.
Surat Singh Malhotra s/o.late Jagdish Singh Malhotra,
Aged 65 years, occu: Business, H.No.8-2-608/1/3,
Namdhari Towers, 3rd Floor, Road No.10, Banjara Hills,
Hyderabad others.
....Respondents/respondents/
Defendants
This Court made the following :
PNR,J & Dr.GRR,J
CMA Nos.274 & 281 of 2022
4
HONOURABLE SRI JUSTICE P.NAVEEN RAO
&
HONOURABLE DR. JUSTICE G.RADHA RANI
CIVIL MISCELLANEOUS APPEAL NOs.274, 281 OF 2022
and Cross Objections No. 24 of 2022
COMMON JUDGMENT:(Per Hon'ble Sri Justice P.Naveen Rao) Heard Mr. A.Venkatesh learned counsel for the appellant and Sri S.Ravi learned senior counsel for the respondents.
2. The appellant is the company, registered under the provisions of The Indian Companies Act, 2013, represented by Sri Mahesh Kedia, Managing Director of the company. The first respondent was initially appointed as Managing Director of the petitioner company on 02.05.2015 and subsequently, his term was extended for a period of five years with effect from 02.05.2019 to 01.05.2024.
3. Appellant alleges that during his tenure, the first respondent has committed several illegalities, played fraud and acted against the interest of the appellant company, misappropriated crores of rupees belonging to the appellant by withdrawing them or depositing them into his own account or to his family members' accounts, increased his shareholding from 1,25,000 shares to 19,65,000 shares illegally. The first respondent misused his capacity as Managing Director of the company and had transferred lands belonging to the appellant company illegally in his PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 5 favour and in favour of his family members, who are the respondents 2 to 6 herein.
4. It is further case of the appellant that the first respondent had executed 49 sale deeds in his favour in his personal capacity and executed one sale deed in favour of the second respondent, who is his wife, four sale deeds in favour of respondent no.3, one sale deed in favour of respondent no.4, four sale deeds in favour of respondent no.5 and five sale deeds in favour of respondent no.6. The respondents 2 to 6 are his wife, sons and daughter-in-law. The respondent no.1 was also instrumental in executing the sale deeds in favour of respondent nos.15 to 21, who are other employees of the petitioner company, wife of the Chartered Accountant and Company Secretary of the company. It amounts to personal gain and unjust enrichment and thereby depriving the company of its legitimate assets and money. It is further contended that all the transfers affected by the respondent no.1 are illegal, without any authorization of the Board and as such they are liable to be cancelled.
5. It is further alleged that the first respondent had created Board Resolutions dated 22.04.2021 and 16.06.2021, where under authorized one J.Ramaswamy Sastry, employee of the company to execute sale deeds in favour of the respondent nos.15, 17 to 21. It is further alleged that the respondent no.1 failed to handover the records and documents belonging to the company.
PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 6
6. Having come to know of the misdeeds by first respondent, in the Board Meeting conducted on 14.07.2021, the first respondent was removed from the Office of the Managing Director of the appellant company and in his place, Sri Mahesh Kedia was appointed as Managing Director. The appellant company issued legal notice dated 16.07.2021 calling upon the first respondent to return all the records and documents of the company, but there is no response from the first respondent. The appellant company has initiated proceedings under Section 452 of the Indian Companies Act for not returning the records and documents of the company.
7. The appellant instituted O.S.No.119 of 2021 in the Court of Principal District and Sessions Judge at Sanga Reddy praying to grant decree to cancel all the sale deeds where under properties of the appellant company were sold and to grant mandatory injunction in favour of the plaintiff and against the defendants directing defendants 1 to 6 and 15 to 21 to return the original link documents pertaining to the properties mentioned in the schedule to the plaint.
8. I.A.No.771 of 2021 is filed by the appellant/plaintiff under Order XXXIX Rules 1 and 2 read with Section 151 of Code of Civil Procedure, 1908, (for short, 'CPC') to grant ex parte ad-interim injunction restraining the respondents 1 to 6 and 15 to 21, their agents, workmen from changing the nature of the suit schedule properties.
PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 7
9. I.A.No.772 of 2021 is filed by the appellant/plaintiff under Order XXXIX Rules 1 and 2 read with Section 151 of CPC to grant temporary injunction restraining the respondents 1 to 6 and 15 to 21, from alienating the suit schedule properties in favour of the third parties, till further orders.
10. By common order dated 25.02.2022 the trial Court dismissed both I.As. Challenging the decision of the trial Court these two Civil Miscellaneous Appeals are preferred.
11. During the course of hearing these two I.As., the first respondent raised the plea of maintainability of a suit in the civil Court and consequently the two I.As. It was contended that Section 430 of the Companies Act bars the jurisdiction of civil Court in disputes relating to companies and the aggrieved party has to invoke the jurisdiction of the National Company Law Tribunal.
12. This plea of respondents on maintainability of the suit in a civil Court is negatived and the trial Court held suit is maintainable.
13. The respondents 1 to 6 filed cross-objections raising the plea of maintainability of the suit and the CMAs arising out of interlocutory orders of the trial Court.
PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 8 14.1. Learned counsel for appellant contended that large extent of land belonging to the company was illegally knocked away by the first respondent and his family members. With trust and confidence, the first respondent was appointed as Managing Director. But, he misused his position and transferred the land of the company to his name and in the name of his family members. He has misused his position in the company to commit several other illegalities. In order to recover the land of the company, the company was compelled to file civil suit. 14.2. He would submit that 71 sale deeds were executed in his name or in the name of his family members and sale proceeds are not accounted in the company accounts. That shows there are fraudulent transactions to knock away the properties of the company.
14.3. He would contend that the Managing Director has fiduciary relationship with the company, but he misused his official position, played fraud and caused huge loss to the company.
14.4. He would submit that the trial Court grossly erred in not granting injunction. There is every possibility of the respondents creating third party interest and changing the physical features of the land and in such an event grave prejudice would be caused to the appellant.
PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 9 15.1. Per contra, learned senior counsel for respondents raised preliminary objection on maintainability of the suit in the civil Court and these appeals arising there from. According to learned senior counsel what is urged in the suits are company disputes and such disputes have to be urged only before the National Company Law Tribunal (NCLT) and civil suit is not maintainable. He placed reliance on Sections 430, 241 and 242 of the Companies Act.
15.2. He would further submit that first respondent as Managing Director was authorized to represent the company in all aspects. He was competent to execute sale deeds on behalf of the company. The company sold the land. All sale transactions reflect receiving full sale consideration and there was no illegality in executing the sale deeds. The sale deeds are in compliance of law.
15.3. He would submit that as sale transactions were in compliance of law, balance of convenience is not in favour of the appellant. The trial Court has assigned reasons in rejecting the applications to grant injunctions. There is no illegality committed by the trial Court in rejecting the injunction applications.
PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 10 15.4. Learned senior counsel placed reliance on the decision of the Hon'ble Supreme Court in Prem Singh and others vs. Birbal and others1 (paragraph-27).
16. In reply, learned counsel for appellant contended that what is prayed in the suit is not barred by Section 430 of the Companies Act and the suit is maintainable. He placed reliance on the decision of Hon'ble Supreme Court in Darshan Anilkumar Patel vs. Pravinkumar Jinabhai Patel and others2. He would submit that Section 241 only deals with a member/shareholder of the company and does not envisage remedy before the Tribunal by the company. Therefore, to declare the sale transactions as void only civil Court has jurisdiction.
17. Issues for consideration:
(i) Whether the suit of the appellant is maintainable in the civil Court ?
(ii) Whether the appellant is entitled to injunctions prayed for ?
Issue (i):
18. Section 430 of the Companies Act takes away jurisdiction of the civil Court to entertain any suit or proceeding in respect of any matter which the NCLT or the National Company Appellate Tribunal is empowered to determine by or under the Act or any other law for the time 1 (2006) 5 SCC 353 2 MANU/SCOR/46567/2020 PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 11 being in force. It also restrains civil Courts to issue injunction orders on such matters. Insofar as these cases are concerned, Sections 241 and 242 of the Act are relevant. Section 241(1)3 of the Act enables a member of a company to apply to the Tribunal complaining on various aspects enlisted in clauses (a) and (b). According to Section 242, in any application filed under Section 241, if the Tribunal opines the affairs of the company have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interest of the company; and opines to wind up the company would unfairly prejudice such member or members, but otherwise the facts would justify the making of a winding-up order, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.
19. Section 241 makes it clear that a member of a company or Central Government can only file a complaint setting in motion appropriate action by the Tribunal under Section 242, which can even result in initiation of 3 S.241.Application to Tribunal for relief in cases of oppression, etc. --
(1) Any member of a company who complains that -
(a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or
(b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under Section 244, for an order under this Chapter.
PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 12 winding-up proceedings. An order passed under section 242(1)4 can also provide for setting aside any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of application or recovery of undue gains made by the Managing Director or Manager or Director during the period of their appointment.
20. A combined reading of Sections 241 and 242 make it clear that on complaint given by the member of the company, the Tribunal can go into the functioning of the company and take appropriate action as warranted including winding-up and taking action under Section 242 (2) (g)& (i)5 of the Act. From the reading of clause (g) of sub-section (2), it is manifest that to take action to set aside any transfer, delivery of goods, payment, execution or other act relating to property that action ought to have been made or done by or against the company within three months before the date of filing application under Section 241.
4 S.242. Powers of Tribunal. --- (1) If, on any application made under Section 241, the Tribunal is of the opinion--
(a) that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and
(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.
5 S.242. Powers of Tribunal.
(2)Without prejudice to the generality of the powers under sub-section (1), an order under that sub-section may provide for-- (g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilization of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims;
PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 13
21. In the case on hand, the complaint is not by the individual member of the company, but by the company itself seeking to cancel the sale deeds executed by the then Managing Director/first respondent representing the company in his own name or in the name of his family members, a total of 79 transactions and sale transactions were made much prior to three months from the date of filing of the civil suit. Therefore, even if course suggested by Section 242 is to be followed, no such action can be taken under Section 242 (2)(g). Therefore, perforce, provisions in Sections 241 and 242 are not attracted to the cases on hand.
22. Section 96 of the CPC vests jurisdiction in a civil Court to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred. Disputes concerning execution of sale deeds affecting immovable property are a civil dispute. Section 430 of the Companies Act bars jurisdiction of the civil Court only when a matter which the Tribunal or the appellate Tribunal is empowered to determine .
6 S.9 of CPC. Courts to try all civil suits unless barred The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred.
[Explanation I].--A suit in which the right to property or to an office is contested is a suit of a civil nature, notwithstanding that such right may depend entirely on the decision of questions as to religious rites or ceremonies [Explanation II].--For the purposes of this section, it is immaterial whether or not any fees are attached to the office referred to in Explanation I or whether or not such office is attached to a particular place.] PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 14 by or under the Act. What is required to be seen is whether there is express or implied bar of jurisdiction of civil Court.
23. In the facts of these cases, only Section 241 is applicable and whereas Section 241 is not attracted as the dispute is raised by the company against its former Managing Director. Therefore, the issue raised in the civil Court is not barred expressly ousting the jurisdiction of the civil Court. From the reading of Section 430 read with Sections 241 and 242, it cannot be said that impliedly also the jurisdiction of civil Court is ousted. The scheme of Section 241 can be understood by looking into provision in Section 59. According to this section, if the name of any person is entered in the register of members or omitted from the register or if a default is made or unnecessary delay takes place in entering in the register, the person aggrieved or any member of the company or the company itself may apply in such form as may be prescribed to the Tribunal. In such a case, it is deemed that the jurisdiction of the civil Court is ousted.
24. Juxtaposing Section 59 with Section 241, it is apparent that while under Section 59 a company can also file complaint or application before the Tribunal, under Section 241 only a member can file such a complaint. A company has no remedy before the Tribunal. Further, the course suggested by Section 242 (2)(g) can be adopted when the Tribunal is PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 15 satisfied that winding-up process be set in motion. Therefore, it cannot be assumed that jurisdiction of the civil Court is ousted. 25.1. In Avanti Explosives Private Limited vs. The Principal Subordinate Judge, Tirupathi, Chittoor district and another7, the jurisdiction of civil Court vis-à-vis the Companies Act was considered by the learned single Judge of this Court, as he then was. Briefly the facts to the extent relevant are, a proposal to shift the Registered Office of the petitioner company from Secunderabad to Tirupathi was accepted by the Board of Directors. At Tirupathi, the company was to be located in a premises as a lessee of another firm by name Avanthi Enterprises, which in turn was the principal lessee from the owners of the building. The 2nd respondent- plaintiff was a partner of Avanthi Enterprises with whom the petitioner- company entered into the sub-lease. It was alleged that 2nd respondent did not specifically disclose the fact of his being a partner of Avanthi Enterprises to the company as required by Section 293 read with Section 299 of the Indian Companies Act, 1956. On that ground, the other Directors are said to have passed a resolution holding that the plaintiff has become disqualified from being a Director with retrospective effect from 13.06.1980. Second respondent filed the civil suit contending that he was present at the meeting which took place on 13.02.1984 and no such resolution disqualifying him was passed. He claimed that 2nd 7 1985 SCC Online AP 55 PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 16 respondent-plaintiff continues to be the Managing Director of the 1st defendant (petitioner-company) and for further declaration that any Board meeting held by the petitioner subsequent to 13.02.1984 is null and void and also for further declaration that any change effected in the composition of the Board of the petitioner subsequent to 13.02.1984 is illegal. He also sought for permanent injunction restraining the defendants therein from interfering with the office of the 2nd respondent- plaintiff as Managing Director in the day-to-day affairs of the petitioner- company.
25.2. At that stage, instant Writ Petition was filed contending the disqualification specified in Section 283 (1)(i) and 299 of the Act relates to certain rights unknown to the common law and those rights as well as the remedies in that regard are those specially created by the Companies Act and the 2nd respondent ought to have approached the Company Court and not the civil Court for adjudication of disputes relating to his disqualification.
25.3. Having regard to the objection raised on maintainability of the civil suit, the question considered by the Court was "whether the civil Court has jurisdiction to decide the question relating to the alleged disqualification of the 2nd respondent". The learned single Judge held as under:
PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 17 "11. It will be noted that there is no express provision ousting the jurisdiction of the Civil Court in any particular respect. All that Section 10 does is to state that "the Court" having jurisdiction under the Act shall be the High Court in whose jurisdiction, the registered office of the Company is situate, except to the extent to which the jurisdiction has been conferred on any District Court under sub-
section (2) by notification issued by the Central Government. The Central Government can empower a District to exercise all or any jurisdiction conferred by this Act "upon the Court" except the jurisdiction conferred by Section 237, 391, 394, 395 and 397 to 407 (both inclusive) and not being the jurisdiction conferred in respect of Companies with paid-up share capital of not less than Rs. one lakh by Part-VII and the provisions of the Act relating to winding up of companies.
xx
13. In my view section 10 of the Act only proceeds to enumerate or specify "the court having jurisdiction under this Act", wherever such jurisdiction is conferred on "the Court, by the other provisions of the Act. Powers are conferred by the Act not only on Courts but also on other authorities like the Central Government, the Company Law Board and the Registrar and where a power is vested in a Court that Court has to be specified Beyond so specifying the Court competent to deal with a matter arising under the Act, Section 10 does not purport to invest the Company Court with jurisdiction over every matter arising under the Act. It may be that, in view of the elaborate provisions contained in the 1956 Act in regard to the Managing and the conduct of a Company's affairs including important internal matters of administration, the Court's interference by Civil Court has become more limited, but the power has not at all been taken away. Every suit for redress of individual wrongs cannot be considered as merely concerned with matters of internal management. (M.P. Menon, J. in P. Prakasam v. Sri Narayana Dharma Paripalan Yogam (1) 1980 (50) Company Cases page 611. xx
23. In our High Court in Bhagwandas v. Canara Bank Ltd. (16) (1978) 1 An. W.R. 504 Chennakesav Reddi, J. (as he then was) held that a suit for recovery of money against the Canara Bank in respect of the deposit amount payable by the plaintiff in respect of twelve shares was maintainable, observing:--
"Section 10 of the Companies Act also confers exclusive jurisdiction on the High Court only in respect of matters covered by Sections 237, 391, 394, 395 and 397 to 407 (both inclusive) and in respect of matters covered by part VII of the Companies Act with a paid up capital of one lakh of rupees and over in respect of other provisions relating to winding up of the companies. Except in respect of these matters, the ordinary jurisdiction of the civil courts to decide the rights of parties is not excluded.".
xx
25. Following the aforesaid rulings, with which I respectfully agree, I hold that the present case deals with an individual, right of the 2nd respondent and that the suit filed by him is maintainable.
xx
32. I, therefore, hold that the general law of contracts is the basis of the rights of parties and that the companies Act, 1956 merely regulates these rights and does not create any new rights or remedies. Unless as stated in Wolverhampton's case (22) there is an exclusion of the jurisdiction of the civil court, by words PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 18 express or implied, the suit is maintainable, and no such exclusion has been held existing by the courts in respect of individual rights."
26. The Division Bench of High Court in Tej Prakash S.Dangi and others vs. Coramandal Pharmaceuticals Limited8, affirmed the decision of learned single Judge and held the contrary view taken in Nizamabad Corn Products (P) Limited vs. Vasudev Walia is overruled. Paragraph-8 reads as under:
"8. Pressing for the opposite view, Mr.Sastry has placed reliance on a decision of a Single Judge of this court in Nizamabad Corn Products (P) Ltd. V. Vasudev Walia. The court in that case was considering the maintainability of a suit in the civil court to declare a resolution passed in the annual general meeting and the meeting of the Board of Directors removing a Director of a Company as illegal and void and for permanent injunction. The learned Judge held that the view that the civil court's jurisdiction has not been taken away merely because Section 10 confers jurisdiction on the High Court, cannot be correct in view of the specific direction contained in Section 10(1)(a), viz., 'except to the extent to which jurisdiction has been conferred on any District Court, in pursuance of Sub-section (3)'. The learned Judge proceeded on the footing that the civil court has jurisdiction only in matters in respect of which specific jurisdiction has been conferred upon it and that otherwise, the High Court has the exclusive jurisdiction in all matters. Since the learned Judge was deciding contrary to the view taken in the earlier decision of the court in Avanthi Explosives P.Ltd. v. Principal Subordinate Judge (1997) 5 Com LJ 345 (AP) - it was necessary to have referred the case to a larger Bench. A judgment of a co-ordinate Bench is binding unless it is overruled by a larger Bench. Besides, the view was also not legally correct. The civil court would have jurisdiction in all matters unless its jurisdiction is either expressly or by implication ousted. We hence overrule the decision."
27. In Bakshi Faiz Ahmad v. Bakshi Farooq Ahmad and another9, it was contended that the suit instituted by the respondent no.1 for declaration, partition, possession with mandatory and permanent injunction against appellant and second respondent was not maintainable. Elaborately considering the various provisions of the Companies Act, learned single Judge of J&K High Court held as under:
8 (2002) 108 Company Cases 516 AP 9 2018 SCC Online J&K 249 PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 19 "35. Qua applicability of provisions of Companies Act, 2013, it is well settled law that a serious question of fraud and collusion cannot be decided by the Tribunal in a summary proceeding. Given the relief solicited for by respondent no. 1 in the Suit for Declaration, Partition and Injunction, the Tribunal has no power to decide the title of the shares in summary proceedings. Section 58 of the Companies Act, provides that rectification of register of members has to be decided by Tribunal and as per Section 430, the Civil Court has no jurisdiction.
At the same time, it is also a trite law that Tribunal has a power only to decide the issue of rectification of register of members and has no power to decide the issue of title. It is apt to mention here that as per Section 111A of the Companies Act, 1956, the Company Law Board was empowered to decide the issue of title also. The word 'title' has not been included in Section 58 of the Companies Act, 2013. Even while considering Section 111A, it was held by the Supreme Court that a seriously disputed question of title cannot be decided by the Company Court or Company Law Board. This conclusion was arrived at by the Supreme Court by taking into consideration jurisdiction of the Company Law Board being summary in nature. The procedure in National Company Law Tribunal constituted under the Companies Act, 2013, is also summary in nature.
36. From the provisions of Companies Act, 2013 and 1956, it is clear that Tribunal, or Board as the case may be, can decide only rectification of register concerning shares and connected incidental issues and matters therewith and not disputed questions of title. In the present case, a bare perusal of averments in the plaint as well as the relief sought for by respondent no. 1 shows that to decide the issue raised by him vis-à-vis share(s)/title of the property in question is a disputed question of title, which can be decided by the Civil Court and the Tribunal/Company Law Board has no power to adjudicate the said issue. The Supreme Court in Ammonia Supplies Corporation (PT) Limited v. Modern Plastic Containers (P) Ltd., (1998) 7 SCC 105, the scope of jurisdiction of the Company Court to deal with an issue of rectification in the Register of Members maintained by the Company was considered. Following Public Passenger Service Limited v. M.A. Khadar, AIR 1966 SC 489, it was held that jurisdiction under Companies Act, was summary in nature. If for reasons of complexity or otherwise, the matter could be more conveniently decided in a suit. In Standard Chartered Bank v. Andhra Bank Financial Services Limited, (2006) 6 SCC 94, it was observed that jurisdiction of Tribunal being summary in nature, a seriously disputed question of title could be left to be decided by the civil court as same being more appropriate remedy for investigation and adjudication of such seriously disputed question of title. In Luxmi Tea Company Limited v. Pradip Kumar Sarkar, 1989 Supp (2) SCC 656, it was observed that a company did not have any discretion in rectifying its register except to require the procedure being followed."
28.1. In Shashi Prakash Khemka (dead) through Legal Representatives and another vs. NEPC MICON (now NERPC India Limited) and others10, matter concerns transfer of shares. On appeal filed against the order of Company 10 (2019) 18 SCC 569 PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 20 Law Board, Madras High Court reversed the decision of the Company Law Board and appellants were left to avail a remedy of civil suit. 28.2. The issue raised therein is covered by the provision in Section 59 of the Act. Section 59 vests jurisdiction in the NCLT. In view thereof the civil suit remedy completely barred and only National Company Law Tribunal alone is entitled to adjudicate the dispute raised under Section 59. Paragraph-6 reads as under:
"6. It is not in dispute that were a dispute to arise today, the civil suit remedy would be completely barred and the power would be vested with the National Company Law Tribunal (NCLT) under Section 59 of the said Act. We are conscious of the fact that in the present case, the cause of action has arisen at a stage prior to this enactment. However, we are of the view that relegating the parties to civil suit now would not be the appropriate remedy, especially considering the manner in which Section 430 of the Act is widely worded."
29.1. In Darshan Anilkumar Patel (supra), in a civil suit filed before the civil Court, it was contended that defendant no.1-Pravinkumar Jinabhai Patel was not competent to execute sale deeds on various properties in favour of defendants 2 to 19 and agreement to sell in favour of defendant no.20. By judgment and decree dated 15.04.2013, trial Court dismissed the suit. The trial court held that Sri Anilkumar was not a Director of Kalpita Buildings Pvt. Ltd., and further held that defendant no.1 was the Managing Director of Kalpita Builders Pvt. Ltd. and that the alienation done did not suffer from any infirmity and that there was a mis-joinder of causes of action. On this, two appeals were preferred, one by the Company and another by Sri Anilkumar. It was contended that jurisdiction of civil PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 21 Court is barred in view of Section 430 of the Act. Learned single Judge of Bombay High Court in W.P.No.1139 of 2020 held as under:
"9. Section 430 is brought into force with efect from 01st June, 2016, vide Notifcation No. SO 1934(E), dated 01.06.2016. The submission of the plaintif, that the jurisdiction of the Civil Court is barred, is on the premise that in view of the coming into force of Section 430, the jurisdiction of the Civil Court is barred, since the NCLT is empowered to deal with and decide the issues framed by the trial Court. The submission is, that in view of the provisions of Section 424 of the Act, which deals with the procedure regulating the proceedings before the NCLT, the powers vested in the Civil Court under the CPC are conferred on NCLT. The submission is, that the power of NCLT is indeed broader and wider than the power which can be exercised by the Civil Court, since the NCLT is a specialised Tribunal constituted to ensure speedy and efective regulation of the afairs of the Companies. It is submitted that the NCLT, having been created by amending the law, and having been vested with all the trappings of the Civil Court, in view of the amendments, the bar under Section 430 of the Act is triggered."
29.2. On appeal, Hon'ble Supreme Court upheld the view taken by the learned single Judge of Bombay High Court. Hon'ble Supreme Court in Darshan Anilkumar Patel - [SLP Civil Diary No.9209/2020], held as under:
"2. There is no error in the finding that the suit which was filed for a declaration in regard to the invalidity of the sale deeds was properly instituted before the civil court and there was no occasion to transfer the appeal to the National Company Law Tribunal. Section 430 of the Companies Act, 2013 bars the jurisdiction of a civil court to entertain a suit or proceeding in respect of any matter which the tribunal or the appellate tribunal is empowered to determine under the Act or any other law for the time being in force. The jurisdiction to decide the validity of a sale deed would fall within the ambit of the civil court. Hence, we are in agreement with the impugned order of the High Court dated 5 February, 2020."
29.3. Learned senior counsel Sri S.Ravi contended that in that case cause of action arose prior to 01.06.2016 on which date Section 430 came into effect and, therefore, the decision rendered by the Bombay High Court, affirmed by the Hon'ble Supreme Court has no application to the facts of these cases.
29.4. What is contended by the learned senior counsel may be true, but Hon'ble Supreme Court held that jurisdiction to decide validity of the sale PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 22 deed would fall within the ambit of the civil Court. In view of the said opinion, the Hon'ble Supreme Court upheld the decision of the Bombay High Court.
30. This view of the Hon'ble Supreme Court is in tune with the earlier decision of the Hon'ble Supreme Court and the decisions of the learned single Judge and the Division Bench of this Court.
31. Cumulatively, unless, there is specific bar excluding the jurisdiction of the civil Court on any matter, which is also traceable to Companies Act, the jurisdiction of the civil Court to decide the civil dispute is not ousted. At the cost of repetition, it is appropriate to note that the issue raised before the civil Court is regarding the illegality in the transactions undertaken by the first respondent in executing sale deeds on behalf of the plaintiff company to himself and to his family members as illegal and to cancel all the sale deeds and to grant mandatory injunction in favour of the plaintiff. Thus, what is urged before the civil Court is a dispute civil in nature and the civil Court has jurisdiction under Section 9 of the CPC and the jurisdiction of civil Court is not ousted by Section 241 of the Companies Act. Except Section 241 no other provision is brought to our notice, which ousted the jurisdiction of the civil Court to adjudicate the dispute raised by the plaintiff company. The Cross Objection No. 24 of 2022 on maintainability of suit is rejected.
PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 23 Issue (ii):
32. Having cleared the issue (i), we set out to consider issue (ii).
33. The elementary principles to consider application to grant injunction pending trial of a suit are prima facie case, balance of convenience and irreparable loss and hardship to the plaintiff.
34. It is not in dispute that all the suit schedule properties belonged to the appellant company. The first respondent was the Managing Director of the appellant company. In the capacity as Managing Director he was the custodian of the assets of the company and is required to protect the interests of the company at any cost. That being so, the appellant company now alleges that the first respondent siphoned of money and illegally transferred the assets of the company. It is not in dispute that large extent of land parcels were transferred to himself and his close family members and his known persons. The proceeds of sale transactions are not reflected in the company accounts. The appellant marked Exs.P96 - bank statement, to show that it does not reflect depositing of sale proceeds. Sale deeds may reflect payment of full sale consideration, but in 49 sale deeds he represented the company as vendor and he is the vendee and in 15 other sale deeds his family members are the vendees. Therefore, it was only nominal transaction. At any rate, sale proceeds are not credited to the company account. As no money is credited to the bank accounts of the company, prima facie, it cannot be PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 24 said that the sale of land was in the interest of the company. The allegations leveled by the appellant, if proved, are serious. It may be possible that what all was done by the first respondent was justified and in the interests of the company. Parties are entitled to lead evidence in support of respective claims. While so, if injunction is not granted, respondents/defendants are free to change the physical features of the land and create third party interests. If that happens, in the event of plaintiff succeeding in the suit it would be difficult to enforce the decree and secure possession of the land and might lead to more litigation.
35. Appellant has made out a prima facie case. In the peculiar facts of these cases, balance of convenience is in favour of the appellant and unless injunction is granted, grave prejudice would be caused to the appellant which cannot be remedied later.
36. The Civil Miscellaneous Appeals are accordingly allowed and Cross Objection No. 24 of 2022 is dismissed. It is made clear that there is no expression of opinion on merits. Since we have upheld the decision of Court below on maintainability of the suit, we leave open all issues to be urged in the pending suit. Pending Miscellaneous applications, if any, shall stand closed.
______________________ P.NAVEEN RAO,J PNR,J & Dr.GRR,J CMA Nos.274 & 281 of 2022 25 ______________________ DR.G.RADHA RANI,J Date: 04.08.2022 KKM/tvk HONOURABLE SRI JUSTICE P.NAVEEN RAO & HONOURABLE DR. JUSTICE G.RADHA RANI CIVIL MISCELLANEOUS APPEAL NOs.274, 281 OF 2022 and Cross Objections No. 24 of 2022 Date : 04.08.2022 Kkm/tvk