Karnataka High Court
C Krishniah Chetty And Sons Private ... vs Deepali Company Private Limited on 27 May, 2021
Bench: Satish Chandra Sharma, S Vishwajith Shetty
COM.APPEAL.61/2021
R
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF MAY 2021
PRESENT
THE HON'BLE MR.JUSTICE SATISH CHANDRA SHARMA
AND
THE HON'BLE MR. JUSTICE S.VISHWAJITH SHETTY
COMMERCIAL APPEAL No.61/2021
BETWEEN:
C.KRISHNIAH CHETTY & SONS PRIVATE LIMITED
AN INDIAN COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956
CIN: U27205KA1979PTC003692
HAVING ITS REGISTERED OFFICE AT
35, COMMERCIAL STREET
BENGALURU-560 001.
AND CORPORATE OFFICE AT
THE TOUCHSTONE, A BLOCK
3-3/1 MAIN GUARD CROSS ROAD
BENGALURU-560 001.
REPRESENTED HEREIN BY ITS
CHIEF FINANCIAL OFFICER
SRI S.A.SURESH
S/O SRI A.S.ARUNACHALAM. ... APPELLANT
(BY SRI.AMIT SIBAL, SENIOR COUNSEL FOR
SRI SIVARAMAN VAIDYANATHAN, ADV.)
AND:
1. DEEPALI COMPANY PRIVATE LIMITED
AN INDIAN COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 1956
CIN: U03691K1982PTCOO4687
35, COMMERCIAL STREET
COM.APPEAL.61/2021
2
BENGALURU-560 001
REPRESENTED HEREIN BY ITS DIRECTOR
SRI C.GANESH NARAYAN
S/O LATE SRI C.V.NARAYAN.
2. SRI C.GANESH NARAYAN
S/O LATE SRI C.V.NARAYAN
INDIAN, HINDU, AGED ABOUT 42 YEARS
RESIDING AT 2A, NITESH MAYFAIR
KASTURBA CROSS ROAD
BENGALURU-560 001.
3. SMT.C.VALLI NARAYAN
W/O LATE SRI C.V.NARAYAN
INDIAN, HINDU, AGED ABOUT 77 YEARS
RESIDING AT 44 OSBORNE ROAD
ULSOOR, BENGALURU-560 042.
4. SMT.VIDYA NATARAJ
W/O SRI C.GANESH NARAYAN
INDIAN, HINDU, AGED ABOUT 42 YEARS
RESIDING AT 2A, NITESH MAYFAIR
KASTURBA CROSS ROAD
BENGALURU-560 001.
5. BLUESTONE JEWELLERY &
LIFESTYLE PRIVATE LIMITED
AN INDIAN COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 1956
CIN: U72900KA2011PTC059678
SITE NO.89/2, LAVA KUSHA ARCADE
MUNNEKOLAL VILLAGE
OUTER RING ROAD,
MARATHALLI
BENGALURU-560 037.
REPRESENTED HEREIN BY ITS
CHIEF EXECUTIVE OFFICER
SRI GAURAV SINGH KUSHWAHA.
. . . . . .RESPONDENTS
(BY SRI UDAY HOLLA, SR.COUNSEL FOR
Ms.KRUTIKA RAGHAVAN, ADV. FOR C/R1 TO R3)
COM.APPEAL.61/2021
3
THIS COMMMERCIAL APPEAL IS FILED UNDER
SECTION 13(1A) OF THE COMMERCIAL COURTS,
COMMERCIAL DIVISION AND COMMERCIAL APPELLATE
DIVISION OF HIGH COURTS ACT, 2015 R/W ORDER 43 RULE
1(r) OF THE CPC, PRAYING TO SET ASIDE THE IMPUGNED
ORDER AT ANNEXURE-A DATED 20.02.2021 PASSED BY THE
HON'BLE LXXXII ADDL. CITY CIVIL AND SESSIONS JUDGE,
COMMERCIAL COURT-CCH 83 AT BENGALURU IN
I.A.NOs.1,2 AND 3 IN COM.O.S.No.306/2020, ETC.,
THIS APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT ON 23.04.2021 AND COMING
ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY,
VISHWAJITH SHETTY J., DELIVERED THE FOLLOWING:
JUDGMENT
The instant commercial appeal is filed by the appellant, who is the plaintiff before the trial court seeking to set aside the order dated 20th February 2021 passed by the LXXXII Addl.City Civil and Sessions Judge and Commercial Court, Bengaluru, on I.A.Nos.1 to 3 in Commercial O.S.No.306/2020 and the appellant has also filed the following I.As. in this appeal:
a) I.A.No.1/2021 seeking stay of the impugned order;
b) I.A.No.2/2021 for production of additional documents;
c) I.A.No.3/2021 for an order of temporary injunction restraining the respondent No.1 to 3 from using the disputed registered trademarks until final disposal of the appeal;COM.APPEAL.61/2021 4
d) I.A.No.4/2021 for an order of temporary injunction restraining the respondent Nos.1 to 3 from using any products or services connected with the jewellery business, the disputed trademarks until final disposal of the appeal;
e) I.A.No.5/2021 for staying the operation of the common order in I.A.Nos.1 to 3 dated 20.2.2021 and all further proceedings in Com.O.S.No.306/2020 and all further proceedings therein.
2. The appellant, a Private Limited Company had filed Commercial O.S.No.306/2020 before the trial court praying for a judgment and decree of perpetual injunction restraining the respondents and persons claiming through or under them from using the trademarks "C.Krishniah Chetty Corp., C.Krishniah Chetty & Co., Chetty & Co. Chetty, C.Krishniah Chetty & Co.1869, Chetty & Co. 1869, Chetty 1869."
3. The appellant Company is engaged in the business of Gems and Jewellery. In the year 1869 Sri.C.Krishnaiah Chetty had commenced the jewellery business in the property bearing No.35, Commercial Street, Bangalore. After his death, the business was carried on by his son Sri.Adinarayana Chetty and COM.APPEAL.61/2021 5 grandson Sri.Venkatachalapathy Chetty until their demise in the year 1955 and 1956 respectively. Subsequently C.V.Narayana, who is the father of respondent No.2 and late husband of respondent No.3 herein and C.V.Hayagriv carried on the said family business as a partnership firm with equal share in the profits.
4. On 01.04.1958, a partnership firm was constituted by Sri.C.V.Hayagriv and late Smt.C.V.Ashwathamma acting for herself and as a guardian of her minor son C.V.Narayana and the aforesaid first partners had admitted the minor C.V.Narayana to the benefits of the partnership and it was also recognized and agreed by the parties that the jewellery business was taken over as a family assets and divided into equal shares between C.V.Hayagriv and minor C.V.Narayana represented by his mother and guardian Smt.Ashwathamma. The Deed of Partnership dated 01.04.1958 was amended and re-constituted on 02.10.1978. The appellant Company was incorporated COM.APPEAL.61/2021 6 on 24.12.1979 by Sri.C.V.Narayana and C.V.Hayagriv and subsequently the appellant Company was included as a partner of the partnership firm under a Deed dated 03.01.1980. In a Board Meeting dated 19.03.1980, a decision was taken to dissolve the partnership firm and the business and assets of the said firm was taken over by the appellant Company and by Deed of Dissolution dated 28.04.1980, the partnership firm was dissolved and the business of the said firm was taken over by the appellant Company along with all its assets and liabilities which included the trademark of the partnership firm.
5. The family of C.V.Narayana and C.V.Hayagriv held 50% equity shares each in the company. After the death of C.V.Hayagriv, his son C.Vinod Hayagriv, wife Vishala Hayagriv and daughter-in-law Triveni Vinod are holding 50% equity shares in the company while the remaining 50% shareholding of the company is held by respondent Nos.2 and 3, who are the son and widow of C.V.Narayana.
COM.APPEAL.61/20217
6. Respondent No.1 is a Company engaged in the business of Gems and Jewellery and was incorporated in the year 1982 by Vinod Hayagriv, C.Vishala Hayagriv and C.V.Narayana. Initially both branches of family held shares in respondent No.1 Company. Subsequently the entire shareholding of respondent No.1 Company was transferred to the name of respondent No.2 herein at a fair market value.
7. Presently respondent Nos.2 and 3 are the Directors and shareholders of respondent No.1 Company. The appellant and respondent No.1 carried on their business in the same premises and the registered office of both the companies is also located in a common premises. Respondent no.4 is the wife of second respondent and respondent no.5 is a Company, which has been marketing the business of the first respondent Company online.
8. Sri.C.V.Hayagriv's family later on had incorporated Company known as "C.Krishnaiah Chetty Jewellery Pvt.Ltd." and allegedly diverted the business COM.APPEAL.61/2021 8 of the appellant Company to the newly incorporated Company. In view of various acts of oppression and mismanagement including diversion of business from the appellant Company, there was discord in the family and therefore, a family settlement agreement was entered into between the two branches of the family on 09.01.2014 for amicable division of the business of the appellant Company and the appellant, all C.K.C. entities, all shareholders of both the branches of the family, respondent No.1 and C.Krishnaiah Chetty Jewelleries Private Limited, which was a Company incorporated by the family of C.V.Hayagriv, were the signatories to the family settlement agreement.
9. After the execution of the family settlement agreement, alleging that C.V.Hayagriv and his family members had further indulged in oppression and mismanagement, respondent no.3 herein filed a Company Petition on 16.09.2014 before the Company Law Board, Chennai interalia seeking proportional representation on the Board, maintenance of status quo COM.APPEAL.61/2021 9 until the family settlement agreement is final and to restrain C.V.Hayagriv and his family members from diverting the business of appellant Company.
10. The said case was subsequently transferred to N.C.L.T., Bangalore and numbered as T.P.No.65/2016. During the pendency of the said petition, on 05.03.2018 C.V.Hayagriv and his family had filed I.A.No.54/2018 in the said case interalia seeking to restrain respondent Nos.2 and 3 herein from carrying on competing business in the very same premises. The said application and the main petition were subsequently dismissed by N.C.L.T., Bangalore on 24.01.2019. Being aggrieved by the order dated 24.01.2019, C.V.Hayagriv and his family members had filed Company Appeal No.33/2019 while Company Appeal No.65/2019 was filed by the third respondent herein challenging the very same order before the N.C.L.A.T., New Delhi. Subsequently Company Appeal no.33/2019 was withdrawn before the N.C.L.A.T. while Company Appeal no.65/2019 is pending consideration. COM.APPEAL.61/2021 10 On 19.12.2019, the appellant Company had undertaken before the N.C.L.A.T., New Delhi in Company Appeal No.65/2019 that no Board meeting will be held until further orders from the said Tribunal. The said order is still in force.
11. In the meanwhile, it appears that the first respondent Company had filed certain applications for registration of identical trademarks and objections were filed by the appellant Company for the same. The competent authority while allowing some of the applications had also rejected a few applications. Being aggrieved by the registration of certain trademarks in favour of the first respondent Company, the appellant had filed rectification proceedings before the Intellectual Property Appellate Board on 14.09.2020. During the pendency of the said proceedings, the present suit was filed on 02.11.2020. During the pendency of this suit, the Intellectual Property Appellate Board had granted an interim order staying COM.APPEAL.61/2021 11 the operation of the first respondent's trademarks vide its order dated 19.01.2021.
12. The respondents after service of notice in the present suit had filed a detailed written statement. According to the respondents, C.Vinod Hayagriv and his family members, who have got 50% shareholdings in the appellant Company, had got this suit filed against the respondents for the alleged infringement of trademarks of the appellant by the respondent Nos.2 and 3 who are the holders of remaining 50% shares of the appellant Company. The respondents in their written statement in addition to traversing the plaint averments have also raised an objection with regard to the maintainability of the suit on the ground that the suit has not been instituted by a competent person and the person who has signed the pleadings and instituted the suit has not been authorised by the company by passing a Board resolution to the said effect.
13. In the suit, the appellant had also filed three applications. I.A.Nos.1 and 2 are filed by the appellant COM.APPEAL.61/2021 12 under Order XXXIX Rule 1 and 2 read with Section 151 of CPC and I.A.No.3 is filed under Order XXXIX Rule 7 read with Section 151 of CPC. I.A.No.1 is filed seeking for grant of ad-interim order of temporary injunction restraining the opponents/defendants from using in relation to any products or services connected with the jewellery business in classes 14, 16, 21, 35, 36, 37 and 42 and the disputed trademarks. I.A.No.2 is filed seeking to grant an ad-interim order of temporary injunction restraining the opponents/defendants from using any other trademark in relation to any business amounting to passing off of the goodwill and reputation in and to the plaintiff's earlier well known house marks till disposal of the suit. I.A.No.3 is filed seeking for an order to direct the defendants to preserve any/all materials bearing the identical and deceptively similar trademarks mentioned in the application. The respondents had filed objections to the said applications.
COM.APPEAL.61/202113
14. The trial court after hearing the arguments of the learned counsel appearing on both sides had formulated the following points for consideration :
"1. Whether the applicant/plaintiff proves the prima facie case about alleged using of Trademarks by the defendants as contended in I.A.Nos.I and II?
2. Whether the balance of convenience lies in favour of the applicant/plaintiff:
3. Whether the applicant/plaintiff suffers any irreparable injury which cannot be compensated in terms of money if the temporary injunction is not granted?
4. Whether the defendants are directed to be ordered to preserve any/all materials bearing the identical and similar trademarks to that of the plaintiff as prayed in I.A.No.III?
5. What order?"
15. The trial court vide the order impugned having answered all the points for consideration in the COM.APPEAL.61/2021 14 negative has also observed that the suit itself is not maintainable without resolution of Board of Directors of the Company delegating authority to file the suit and it has been made clear that such an observation about maintainability of the suit is made only for the purpose of deciding the applications.
16. In the present appeal, after service of notice, the defendants have filed a detailed statement of objections and have raised preliminary objection with regard to the maintainability of the appeal on the ground that no Board resolution or authorisation has been submitted by the signatory to the appeal who is the alleged Chief Financial Officer of the appellant Company to file the present appeal on behalf of the appellant. Having regard to this preliminary objection, this court on 20.04.2021 at the request of learned counsel for the appellant had granted time to argue the matter on the issue of maintainability and directed relisting of the matter on 23.04.2021. On 23.04.2021, learned Senior Counsel Sri. Amit Sibal appearing on COM.APPEAL.61/2021 15 behalf of the appellant and learned Senior Counsel Sri.Uday Holla appearing on behalf of the respondents have made their submissions regarding maintainability of the present appeal.
17. Learned Senior Counsel for the appellant submitted that the present appeal is maintainable and is validly filed. He has relied upon the judgment of the High Court of Delhi in the case of Glaxo Group Ltd. and Another -vs- Sunlife Sciences Pvt.Ltd.1 wherein in paragraphs-19 and 20, it is observed as under:
"19. In case titled Haryana Financial Corp. & Anr. v. Jagdamba Oil Mills & Anr., AIR 2002 SC 834, the Supreme Court has very categorically laid down that while applying the law enunciated in the particular case, the Court should not act mathematically and the law which is laid down in the reported case should not be applied like theorems. The facts of the reported judgment in Electric Construction Company case (supra) must be seen in the light of these facts. The reasons for distinguishing the facts of that case have been given herein before, which was primarily the nature of the suit as well as the fact that the said suit was being 1 2011(45) PTC 561 ((Del) COM.APPEAL.61/2021 16 decided finally on merits while as in the instant case Court has to decide the application under Order XXXIX Rules 1 and 2 CPC only at this stage.
20. In addition to this, the Apex Court in Sangram Singh v. Election Tribunal (AIR 195 SC 425) observed that:
'A code of procedure is procedure, something designed to facilitate justice and further its ends : not a Penal enactment for punishment and penalties; not a thing designed to trip people up. Too technical construction of sections that leaves no room for reasonable elasticity of interpretation should therefore be guarded against (provided always that justice is done to both sides) lest the very means designed for the furtherance of justice be used to frustrate it."
18. He has also relied upon Order XXIX Rule 1 of CPC and contended that the present appeal filed by the Company represented by its Chief Financial Officer is valid and in support of his contention, he has relied upon a judgment of the Bombay High Court in the case of The Calico Printers' Association Ltd. -vs- COM.APPEAL.61/2021 17 A.A.Karim and Bros.,2 wherein it has been held as follows:
". . . . . .the proper construction to put upon the two rules taken together is this, that under Order VI, Rule 14, the pleading must be signed by the party, but where the party is a company and therefore unable to sign, it necessarily follows, having regard to the words " or for other good cause," that the last part of the section always applies in the case of a company, and that the company therefore can always authorise some person to sign on behalf of the company. If the company does not choose to do that, it can act under Order XXIX, Rule 1, i.e., it can rely on that order as in fact constituting an agent to sign without the necessity of giving any express authority. In that way Order XXIX is read as merely permissive and not mandatory, In point of form it is clearly permissive and not mandatory."
19. He has also relied upon the judgment of the High Court of Allahabad in Bhanu Pratap Mehta -vs- 2 AIR 1930 BOM 566 COM.APPEAL.61/2021 18 Brij Leasing (P) Ltd. and Others3 wherein in paragraphs -13 and 14 it is held as follows:
13) In the case of Bharat Petroleum Corporation Limited v. M/s. Amar Autos, 2008(5) ADJ 584 (DB), a similar argument has been raised by the learned counsel for the respondent relying upon the decision of the Delhi High Court in the case of M/s. Nibro Limited v. National Insurance Company Ltd. (supra). This Court negated the submissions and held as follows :
"Upon considering the pros and cons of the matter we are of the view that the learned Judge of the Court below has proceeded in a wrong premises and with hot-haste. According to us, a power of attorney or an affidavit of such nature is only required to prima facie satisfy the Court that a company or corporation or a body corporate has presumably proceeded with the suit under its seal and signature, it has nothing to do with the registration of the document unless it is compulsorily remittable. Persuasive value of M/s Nibro Ltd. (supra) cannot pursue us. There is a thinner line in between authorization to sign and verify the pleadings, and to institute a suit on behalf of the corporation, company or a body corporate. Whenever a person is authorised to sign and verify the pleadings other than verification of plaint, written statement, memorandum of appeal, etc., it is doing so by filing affidavit in support of 3 2011(4) ADJ 125 COM.APPEAL.61/2021 19 such contentions. Therefore, it stands on a better position than ordinary verification. But a person when verifies the plaint, written statement or memorandum of appeal, it is a verification simplicitor, meaning thereby that the verification part is also to be evidently proved unlike an affidavit, which itself is an evidence. Hence, authorization to institute a suit stands in the lower side than putting signature and verifying a pleading by way of an affidavit. On the other hand, signature and verification of the pleading of a plaint cannot be made for the sake of signature and verification alone but for the purpose of filing of the same before the Court either by him or by his learned Advocate. As soon as it is filed, the same will be treated to be institution of such proceeding by the person who has signed and verified. It is automatic. Institution of suit and right to institute the suit are distinct and different. The argument of Mr. Shashi Nandan restricted only to the first part of Order XXIX, Rule 1 of C.P.C. but not to the last part. If the suit is proceeded and the evidence is led and if any of the defendants want to challenge the verification of the plaint, he can call the deponent as witness for the purpose of examination. But Court cannot prevent any one from instituting a suit when his authority is apparently satisfactory. No body will be prevented from enforcing his legal right. It is a gross mistake on the part of the Court below to construe that the power of attorney should be registered and then only the suit can be instituted by a representative of the company or corporation. Moreover justification of filing the plaint by the authorised representative of the corporation or company will be COM.APPEAL.61/2021 20 considered from the practical point of view. If the Court below is not happy, it could have called upon the company to file an affidavit of competency, which is desirable under such circumstances, but not outright rejection of the plaint. Therefore, from any angle the order/s impugned appear to be perverse in nature. Thus, in totality the orders impugned in both the appeal cannot be sustained. Hence, the orders dated 24th January, 2008 passed by the Court below in the above referred suits, impugned in the instant appeals, are set aside. Thus, both the appeals are allowed without imposing any cost.
(14) In my view the Division Bench decision of this Court referred hereinabove squarely covers the issue."
20. He has further relied upon the judgment of the High court of Delhi in the case of Seritec Electronics Pvt.Ltd. -vs- M/s.Computer Peripheral Solutions4wherein it is observed as follows:
"A similar issue has been dealt with by me in the judgment reported as Mahanagar Telephone Nigam Ltd. Vs. Smt. Suman Sharma 2011 (I) AD Delhi 331 wherein I have relied upon the judgment of the Supreme Court in the case of United Bank of India Vs. Naresh Kumar & others 4 MANU/DE/0763/2014 COM.APPEAL.61/2021 21 (1996) 6 SCC 660 to hold that on technical grounds suits should not be dismissed if they are contested to the hilt i.e till last stage. I have also held in the judgment in the case of Smt. Suman Sharma (supra) that issue of authorization for filing of the suit is only relevant when there are disputes inter se shareholders i.e there are two groups of shareholders with respect to control of the company, and otherwise Order 29 Rule 1 CPC empowers any principal officer of a company to institute and continue the suit. The relevant paras of the judgment in the case of Smt. Suman Sharma (supra) read as under:-
"4. This aspect, with respect to the authority to sign and verify the suit by a principal officer has been dealt with by a Division Bench of this Court in the case of Kingston Computers (I) P. Ltd. Vs. State Bank of Travancore 153 (2008) DLT 239 (DB) and in which, it has been held that a principal officer is authorized by virtue of Order 29 Rule 1 CPC not only to sign and verify the pleadings, but also therefore to institute the suit."
21. Learned Senior Counsel has also argued that the defect in the present appeal is a curable defect and the same is not fatal. He has submitted that such defect can be cured subsequently by ratification. In COM.APPEAL.61/2021 22 support of his argument, he has relied upon the judgment of the High Court of Bombay in Alcon Electronics Pvt.Ltd. -vs- Celem S.A.5. wherein it is held as follows:
"In my view the suit did not suffer from any jurisdictional infirmity and even if there was any such defect in not passing a specific resolution for filing a suit against the defendant, the same was curable and thus plaint could not have been rejected on the ground of non-compliance of passing of a specific resolution."
"The Supreme Court has held that disputed questions cannot be decided at the time of considering an application filed under Order VII Rule 11(d) of the Code of Civil Procedure. Such provision applies in cases only where the statement made by the plaintiff in the plaint, without any doubt or dispute shows that the suit is barred by any law in force. The averments in the plaint are the germane, the pleas taken by the defendant in the written statement would be wholly irrelevant at that stage. Supreme Court has held that it should 5 2015 (4) BomCR 107 COM.APPEAL.61/2021 23 appear from the averments in the plaint itself that the same is barred by any law. It is not the case of the respondent that the suit, from the averments in the plaint itself, can be said to be barred by law. Learned counsel appearing for the respondent does not dispute the statement of the appellant that the defect if any in not passing any specific resolution authorising a Director to file a suit on behalf of the company against the defendant is a curable defect."
22. Per contra, learned senior counsel Sri.Uday Holla appearing for the respondents has contended that in the written statement filed in the suit and also in the statement of objections filed in the present appeal, the respondents have categorically raised a preliminary objection with regard to the locus of the Chief Financial Officer to represent the Company in the suit and in the appeal, in the absence of a valid resolution to the said effect by the Board of Directors of the Company as required under Section 291 of the Companies Act, 1956. In support of his argument, he has relied upon COM.APPEAL.61/2021 24 the judgment of the Delhi High Court in the case of M/s.Nibro Limited -vs- National Insurance Co.Ltd.6 wherein at paragraphs-12, 13, 14 and 22 it is observed as follows:
"12. Order 3 Rule 1 of the Code of Civil Procedure reads thus :
"Any appearance, application or act in or to any court, required or authorised by law to be made or done by a party in such court, may except where otherwise expressly provided by any law for the time being in force, be made or done by the party in person, or by his recognized agent or by a pleader appearing, applying or action, as the case may be, on his behalf:
Provided that any such appearance shall, if the court so directs, be made by the party in person."
Order 29 Rule 1 of the Code of Civil Procedure reads thus :
"In suits by or against a corporation, any pleading may be signed and verified on behalf of the corporation by the secretary or be any director or other principal officer of the corporation who is able to depose to the facts of the case."
13. Order 3, rule 1 provides that any appearance, application or act in or to any 6 AIR 1991 DELHI 25 COM.APPEAL.61/2021 25 court required or authorise by law can be made or done by the party in person or by his recognized agent or by a pleader appearing, applying or acting, as the case may be, on his behalf. Provided of course, such an appearance, application or act in or to any court is required or authorised by law to be done or done by a party in such court.
Where, however, there is an express provision of law, then that provision will prevail. Thus, if an authority is given to a pleader or a recognised agent as provided by law, the recognised agent or pleader can file an appearance or file a suit in court if the party himself is not in a position to file it. In my view, if a party is a company or a corporation, the recognised agent or a pleader has to be authorise by law to file such a plaint. Such an authority can be given to a pleader or an agent in the case of a company by a person specifically authorised in this behalf. In other words, a pleader or an agent can be authorised to file a suit on behalf of a company only by an authorised representative of the company. If a director or a secretary is authorised by law, then he can certainly give the authority to another person as provided under Order 3, rule 1.
14. Order 29, rule 1 of the Code of Civil Procedure provides for subscription and verification of pleadings and states that in suits by or against the corporation, any pleadings may be signed and verified on behalf of the corporation by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case.
........
COM.APPEAL.61/202126
22. On the analysis of the judgments, it is clear that Order 29, rule 1 of the Code of Civil Procedure does not authorise persons mentioned therein to institute suits on behalf of the corporation. It only authorises them to sign and verify the pleadings on behalf of the Corporation.. .
23. He submits that the said judgment in the case of M/s.Nibro(supra)has been confirmed by the Hon'ble Supreme Court in the case of State Bank of Travancore -vs- Kingston Computers India Private Limited7 Bank and he refers to paragraph-12 and 14 of the said judgment which reads as follows:
"12. The trial Court then referred to the judgments of the Delhi High Court in M/s. Nibro Limited v. National Insurance Company Limited AIR 1991 Delhi 25, Shubh Shanti Services Limited v. Manjula S.Agarwalla and others (2005) 5 SCC 30, Delhi High Court (original side) Rules, 1967 and proceeded to observe:
"..............As already stated, it has not been averred in the plaint nor sought to be proved that any resolution had been passed by the Board of Directors of the plaintiff company authorising Shri A.K. 7 (2011) 11 SCC 524 COM.APPEAL.61/2021 27 Shukla to sign, verify and institute the suit. It has also not been averred that the memorandum/articles of the plaintiff company give any right to Shri A.K. Shukla to sign, verify and institute a suit on behalf of the plaintiff company. It, therefore, follows that the plaint has been instituted by Shri A.K. Shukla only on the authority of Sh. Raj K.Shukla, CEO of the plaintiff company. Such an authority is not recognized under law and, therefore, I held that the plaint has not been instituted by an authorised person.
Issue No.1 is accordingly, decided against the plaintiff and in favour of the defendants."
13. . . . . . . . . .
14. In our view, the judgment under challenge is liable to be set aside because the respondent had not produced any evidence to prove that Shri Ashok K.Shukla was appointed as a Director of the company and a resolution was passed by the Board of Directors of the company to file suit against the appellant and authorised Shri Ashok K.Shukla to do so. The letter of authority issued by Shri Raj K.Shukla, who described himself as the Chief Executive Officer of the company, was nothing but a scrap of paper because COM.APPEAL.61/2021 28 no resolution was passed by the Board of Directors delegating its powers to Shri Raj K.Shukla to authorise another person to file suit on behalf of the Company."
24. He submits that when the suit is not properly instituted and when final relief cannot be granted in such a suit, there cannot be any interim orders or orders of injunction granted in such a suit. In support of his contention, he has relied upon the judgment of the Apex Court in the case of Cotton Corporation of India Limited -vs- United Industrial Bank Limited and Others8, by referring to para-10 of the said judgment, which reads as under:
"10. Mr Sen, learned counsel for the respondent Bank, contended that Section 41(b) is not at all attracted because it deals with perpetual injunction and the temporary or interim injunction is regulated by the Code of Civil Procedure specially so provided in Section 37 of the Act. Expression 'injunction' in Section 41(b) is not qualified by an adjective and therefore, it would comprehend both interim and perpetual injunction. It is, however, 8 (1983) 4 SCC 625 COM.APPEAL.61/2021 29 true that Section 37 specifically provides that temporary injunctions which have to continue until a specified time or until further order of the court are regulated by the Code of Civil Procedure. But if a dichotomy is introduced by confining Section 41 to perpetual injunction only and Section 37 read with Order 39 of the Code of Civil Procedure being confined to temporary injunction, an unnecessary grey area will develop. It is indisputable that temporary injunction is granted during the pendency of the proceeding so that while granting final relief the court is not faced with a situation that the relief becomes infructuous or that during the pendency of the proceeding an unfair advantage is not taken by the party in default or against whom temporary injunction is sought. But power to grant temporary injunction was conferred in aid or as auxiliary to the final relief that may be granted. If the final relief cannot be granted in terms as prayed for, temporary relief in the same terms can hardly if ever be granted. In State of Orissa v. Madan Gopal Rungta [AIR 1952 SC 12 : 1952 SCR 28 : 1951 SCJ 764] a Constitution Bench of this Court clearly spelt out the contours within which interim relief can be granted. The Court said that 'an interim relief can be granted only in aid of, and as ancillary to, the main relief which may be available to the party on final determination of his rights in a suit or proceeding'. If this be the purpose to achieve which COM.APPEAL.61/2021 30 power to grant temporary relief is conferred, it is inconceivable that where the final relief cannot be granted in the terms sought for because the statute bars granting such a relief ipso facto the temporary relief of the same nature cannot be granted. To illustrate this point, let us take the relief which the Bank seeks in its suit. The prayer is that the Corporation be restrained by an injunction of the court from presenting a winding-up petition under the Companies Act, 1956 or under the Banking Regulation Act, 1949. In other words, the Bank seeks to restrain the Corporation by an injunction of the court from instituting a proceeding for winding up of the Bank. There is a clear bar in Section 41(b) against granting this relief. The court has no jurisdiction to grant a perpetual injunction restraining a person from instituting a proceeding in a court not subordinate to it, as a relief, ipso facto temporary relief cannot be granted in the same terms The interim relief can obviously be not granted also because the object behind granting interim relief is to maintain status quo ante so that the final relief can be appropriately moulded without the party's position being altered during the pendency of the proceedings."
25. We have carefully considered the arguments addressed by the learned Senior Counsels appearing for COM.APPEAL.61/2021 31 the rival parties and also perused the entire material available on record.
26. The question that arises for consideration in this appeal is:
"Whether, in the absence of the Board Resolution, can a Chief Financial Officer or any other Principal Officer of a Private Limited Company institute a suit/appeal or any other legal proceedings on behalf of the Company against its shareholders on the strength of Order XXIX Rule 1 of the Code of Civil Procedure, 1908?"
27. Learned Senior Counsel Sri. Amit Sibal appearing on behalf of the appellant has strongly relied upon Order XXIX Rule 1 of CPC in support of his argument that the present appeal filed by the Chief Financial Officer of the appellant Company is maintainable and he has also contended that the defect, if any, in instituting the suit or filing the appeal COM.APPEAL.61/2021 32 is a curable defect. Order XXIX Rule 1 CPC reads as follows:
"1. Subscription and verification of pleading.- In suits by or against a corporation, any pleading may be signed and verified on behalf of the corporation by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case."
28. On the reading of said provision of law, it is very clear that Order XXIX Rule 1 CPC only defines the person who is authorised to sign or verify the pleadings on behalf of the Company and it does not authorise any person mentioned therein to institute suits or appeals on behalf of the Company. The said provision of law comes into operation only after proceedings have been validly commenced and itself does not authorise a person to institute suits or any other legal proceedings. Defect in filing of a suit or appeal would go to the very root of the matter.
COM.APPEAL.61/202133
29. It is true that a suit cannot be thrown out at the inception or a party cannot be non-sued on the ground of technicalities but while considering an application for interim orders or interim injunctions, the court must prima facie satisfy itself that "a triable case"
is prima facie made out by the party approaching the court. Each case has to be considered on the facts of the said case and merely for the reason that a suit cannot be thrown away at the inception level on the ground of technicalities, it does not give a right to a party to seek any interim orders or interim injunctions in such suits unless the party prima facie satisfies with regard to the maintainability of the suit. When the question of maintainability of a suit or any other legal proceedings is raised, which would go to the root of the matter, the same requires to be considered by the court for its prima facie satisfaction before proceeding further in the matter.
30. Section 291 of the Companies Act, 1956 reads as follows:
"291. GENERAL POWERS OF BOARD.-COM.APPEAL.61/2021 34
(1) Subject to the provisions of this Act, the Board of directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do :
Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by this or any other Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting :
Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to the provisions contained in that behalf in this or any other Act, or in the memorandum or articles of the company, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting.
(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made."
31. A Company duly incorporated and registered is a distinct and independent legal person and its assets are separate from its members, it can sue and be sued in its own name. The Company being a juristic person needs somebody to act on its behalf and manage the affairs of the Company. A reading of Section 291 of the COM.APPEAL.61/2021 35 Companies Act makes it clear that the Board of Directors have been given all the powers of the Company except those which are required to be exercised in the General Meeting of the Company.
32. The learned counsel for the appellant has relied upon the judgment of High Court of Delhi in Seritec Electronics Pvt.Ltd.'s case (supra) and in the said case, a reference has been made to the case of Mahanagar Telephone Nigam Limited -vs- Smt.Suman Sharma (2011(I) AD Delhi 331) which interalia refers to the decision of the Hon'ble Apex Court in the case of United Bank of India -vs- Naresh Kumar and others ((1996) 6 SCC 660), wherein it is held that on technical grounds, suit shall not be dismissed. In para-5 of Mahanagar Telephone Nigam Limited's case (supra), it is observed as follows:
"5. Reference may also be made usefully to the judgment of the Supreme Court in the United Bank of India -vs- Naresh Kumar and others (1996) 6 SCC 660, in which, in para 13, it is said that there is a presumption of valid institution of a suit once the same is prosecuted for a number of years. This test as laid down by the Supreme Court is also satisfied in the present case COM.APPEAL.61/2021 36 inasmuch as the suit in fact has been prosecuted for about two years by the appellant corporation for seeking an appropriate decree against the respondent by adducing evidence.
I may note that the appellant is a public sector undertaking and not a private company where there would be disputes between two sets of shareholders claiming right to management and one set of shareholders are opposing another set of shareholders with respect to control and management of the company. This thus is an additional fact that there can be no dispute as to the authority of the person signing/verifying the pleadings and instituting the suit."
33. Therefore, it is very clear that in the case of Mahanagar Telephone Nigam (supra), a distinction has been made with regard to a public undertaking company and a private limited company. The court has observed that in a private company, there could be dispute between two sets of shareholders claiming right to management and one set of shareholders opposing another set of shareholders with respect to control and management of the Company and in such an event, there can be a dispute as to the authority of a person signing/verifying in instituting the same. In the present case, the dispute is admittedly interse between the two COM.APPEAL.61/2021 37 branches of a family, who are equal shareholders of the Company and the respondent Nos.2 and 3 being 50% shareholders of appellant Company have questioned the authority of the Chief Financial Officer of the Company to file the appeal in the absence of a Board Resolution duly authorising him.
34. In the case of Al-Amin Seatrans Ltd. -vs- Owners and Party interested in Vessel M.V.9it has been observed in paragraphs-23, 33, 50 and 53 as follows:
"23. It is well-settled, that under Section 291 of the Companies Act except where express provision is made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting in all other cases the Board of Directors are entitled to exercise all its powers. Individual directors have such powers only as are vested in them by the Memorandum and Articles. It is true that ordinarily the Court will not unsuit a person on account of technicalities. However, the question of 9 AIR 1995 CALCUTTA 169 COM.APPEAL.61/2021 38 authority to institute a suit on behalf of a company is not a technical matter. It has far- reaching effects. It often affects policy and finances of the company. Thus, unless a power to institute a suit is specifically conferred on a particular director, he has no authority to institute a suit on behalf of the company. Needless to say that such a power can be conferred by the Board of Directors only by passing a resolution in that regard.
......
33. In the instant case it is quite clear that there were talks and consultations between the Managing Director and the Chairman which are reflected, inter alia, by the agreement between the Managing Director and the Chairman dated 12-9-91. The said agreement provided that money given as loan by the Managing Director of the plaintiff to any companies except Loyal Shipping Pvt. Ltd. would be recovered by Managing Director within 3 months time. So there was not only consultation between them, but there was an agreement that money due from Loyal Shipping Pvt. Ltd. would not be recovered. It has not also not been alleged anywhere that COM.APPEAL.61/2021 39 there was any further or other consultation. The Managing Director knew sufficiently well that he could not get any resolution passed by the Board of Directors giving him power to institute a suit against the Loyal Shipping Pvt. Ltd. After all the Managing Director as also the Chairman of the two companies are common. It is also quite clear that no attempt was made by the Managing Director to get any specific authority to institute the suit by or in the name of the plaintiff company against Loyal Shipping Pvt. Ltd. or its vessel. The Managing Director also knew very well that he could not even get a resolution or authority in his favour even in a general meeting because he could not get any resolution passed due to the equal division in two groups and the casting vote which the Chairman could exercise. In my opinion, the right of management of the company's affairs was vested in the Board of Directors and the Managing Director could only act subject to the control and supervision of the Board of Directors. There was no specific authority granted to the Managing Director either to institute any suit or to appoint any Constituted Attorney of the plaintiff company. In my opinion, the Managing Director did not have COM.APPEAL.61/2021 40 any power or authority in the facts and circumstances of this case to institute any suit on behalf of the plaintiff or to appoint any Constituted Attorney of the Company without prior approval of the Board of Directors. ......
50. In my opinion, there are serious disputes and difference as between the Board of Directors of the plaintiff. All the four directors of plaintiff are directors or Loyal Shipping Pvt. Ltd. which has only one more director. The Chairman and the Managing Director of plaintiff and the Loyal Shipping Pvt. Ltd. which has only one more director. The Chairman and the Managing Director of plaintiff and the Loyal Shipping Pvt. Ltd. are same. There was an agreement between the Chairman and the Managing Director plaintiff in 1991 that the dues from Local Shipping Pvt. Ltd. were not to be realised. In any event, the disputes have been going on since 1991 and no subsequent accounts have been disclosed since after the accounting year 1991.
......COM.APPEAL.61/2021 41
53. I, therefore, hold that the suit has been instituted at the instance of the Managing Director alone without any specific power or authority in him to institute the suit and the Managing Director had no power either to institute the suit by himself or through his agent or to appoint any Constituted Attorney for the said purpose. The suit has been instituted without due and proper authority and the suit is, therefore, liable to be dismissed on that ground alone and all interim orders are liable to be vacated. I also hold that in any event the order dated 7th July, 1994 for arrest of the said vessel, namely Loyal Bird was obtained by suppression of material facts and/or by making false and incorrect allegations as to the material facts and the said order dated 7th July, 1994 is in any event liable to be vacated. The petitioner, in my opinion, is entitled to an order for release of the said vessel without security."
35. In the case of M/s.Schmenger GMBH and Company Leder -vs- M/s.Saddler Shoes Pvt.Ltd. in Civil Suit No.689/1999 decided on 29.10.2010, the COM.APPEAL.61/2021 42 High Court of Judicature at Madras at paras-20 and 21, it has been observed as follows:
"20. The abovesaid decision reported in 1996(60 SCC 660 = 1997(90) Comp. Cases 329 = AIR 1997 SC 3 (United Bank of India
-vs- Naresh Kumar) (cited supra), has been referred to by the High Court of Himachal Pradesh in the decision reported in 2004 (118) Comp. Cases 328 (Apple Valley Resort Vs. H.P.State Elec.Board), in which it was observed by the High Court of Himachal Pradesh that Order 29, Rule 1 of CPC only authorises the persons mentioned therein to sign and verify the pleadings on behalf of a Corporation/Company and it does not authorise such persons to institute an action on behalf of a Corporation/Company; the question of authority to institute an action on behalf of a Company is not a technical matter; it has far-reaching effects and it often affects policy and finances of the Company; therefore, unless a power to institute an action is specifically conferred on a particular Director, he would have no authority to bring an action on behalf of the Company; the power to institute an action on behalf of the Company can be conferred on a Director or any other Officer of the Company only by the Board of Directors by way of a Resolution in that regard; in the absence of a specific provision of the Board of Directors authorising the Liaison Officer to institute the petition (suit) for and on behalf of the Company or power conferred on the Director by the Memorandum and Articles of Association, the petition (suit) cannot be said to have been laid by a duly authorised and competent person for and on behalf of the Company; the High Court of COM.APPEAL.61/2021 43 Himachal Pradesh further held that the suit was bad and liable to be dismissed on that ground alone.
21. Since the plaintiff neither filed the Memorandum/Articles of Association, nor the Resolution of the Board of Directors of the Company, authorising the Liaison Officer namely the person to verify the plaint and institute the suit. Hence, as per the decisions cited above, I am of the view that the suit itself is not maintainable."
36. In the case of Naresh Kumar (supra) the Hon'ble Supreme Court in para-10 has observed as follows:
"10. It cannot be disputed that a company like the appellant can sue and be sued in its own name. Under Order 6 Rule 14 of the Code of Civil Procedure a pleading is required to be signed by the party and its pleader, if any. As a company is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the company. Order 29 Rule 1 of the Code of Civil Procedure, therefore, provides that in a suit by or against a corporation the Secretary or any Director or other Principal Officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 COM.APPEAL.61/2021 44 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto and dehors Order 29 Rule 1 of the Code of Civil Procedure, as a complaint is a juristic entity, it can duly authorise any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the Code of Civil Procedure. A person may be expressly authorised to sign the pleadings on behalf of the company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers a corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The court can, on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial, come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer."
37. The Hon'ble Supreme Court in Naresh Kumar's case (supra) has therefore stated that a suit filed on the strength of Order XXIX Rule 1 of CPC needs ratification which could be either express or implied.
38. Even in the case of Alcon Electronics Pvt.Ltd. (supra), it has been held that the defect, if COM.APPEAL.61/2021 45 any, in not passing any specific resolution authorizing the Director to file a suit on behalf of the Company against the defendant is a curable defect, which means such action needs to be ratified.
39. In the present case, the dispute is interse between the two branches of a family holding equal shareholdings in the Company. Though the defect in filing the suit or an appeal in the absence of a Board Resolution by a Company is a curable defect, which can be cured by a express or implied ratification by a Board Resolution, such an eventuality is completely ruled out in the present case having regard to the fact that the present case has been initiated by the Company by its Chief Financial Officer against 50% shareholders of the Company. Therefore, since the possibilities of a ratification being not there, the defect in instituting the suit or appeal for want of Board Resolution of the Company cannot be said to be a curable defect in the present case.
COM.APPEAL.61/202146
40. The judgments relied upon by the learned counsel for the appellants are either in the cases of a Public Sector Undertaking Company or in respect of a Private Company instituting a suit against a third party where the defect in instituting the suit/appeal for want of Board Resolution could be cured by ratification. But the said principle cannot be made applicable to the facts of the present case, as admittedly the dispute in the present case is interse between the two branches of a family, who hold equal shareholdings in the Company.
41. In none of the judgments relied upon by the appellant, it has been held that without there being a ratification by the Company, solely on the basis of Order XXIX Rule 1 of CPC, a suit can be instituted by a Director or any other principal officer of the Company. Legal proceedings initiated to protect the interest of the Company against third party and a proceedings initiated on behalf of the Company against its own shareholders stand on altogether different footings. COM.APPEAL.61/2021 47
42. In the case of Nibro Limited (supra), the suit was instituted by a Director of the Company without the Board Resolution of the Company authorizing him to institute the suit. Even after the suit was instituted, no resolution was passed by the Company ratifying the action. Though a plea was taken that on the strength of Order XXIX Rule 1 of CPC, a suit could be maintained by the Director of the Company even in the absence of a Board Resolution, it was held that Order XXIX Rule 1 of CPC does not authorize persons mentioned therein to institute suit on behalf of the Corporation but only authorizes them to sign and verify the pleadings on behalf of the Corporation and unless a power to institute the suit is specifically conferred on a particular Director, by a resolution to the said effect, he has no authority to institute a suit on behalf of the Company. The judgment in Nibro Limited's case has been confirmed by the Hon'ble Apex Court in the case of State Bank of Travancore (supra) and therefore, it can be safely held that a suit or any other legal proceedings can be instituted by a COM.APPEAL.61/2021 48 Director or Officer of the Company only on the strength of Board Resolution by the Company to the said effect and in the absence of such a Board Resolution, if a suit or legal proceedings is instituted, then necessarily there has to be a resolution by the Company ratifying the defect, failing which the suit or legal proceedings cannot be maintained. Therefore, the question framed for consideration in this appeal is answered negatively.
43. In the case of Kashi Math Samsthan -vs- Srimad Sudhindra Thirtha Samsthan10, the Hon'ble Supreme Court in para-13 has observed as follows:
"13. It is well settled that in order to obtain an order of injunction, the party who seeks for grant of such injunction has to prove that he has made out a prima facie case to go for trial, the balance of convenience is also in his favour and he will suffer irreparable loss and injury if injunction is not granted. But it is equally well settled that when a party fails to prove prima facie case to go for trial, question of considering the balance of convenience or irreparable loss and injury to the party concerned 10 AIR 2010 SC 296 COM.APPEAL.61/2021 49 would not be material at all, that is to say, if that party fails to prove prima facie case to go for trial, it is not open to the Court to grant injunction in his favour even if, he has made out a case of balance of convenience being in his favour and would suffer irreparable loss and injury if no injunction order is granted. . . . . ."
44. In the present case, it is not in dispute that the Company has not authorized the Chief Financial Officer by passing a Board Resolution to institute the suit or appeal on behalf of the Company. In a suit or appeal, "a prima facie case" would depend upon the facts of the said case and in the present appeal having regard to the undisputed facts of the case, wherein equal shareholders of the Company have been fighting against each other, in the absence of a Board Resolution, the suit or appeal instituted by the Chief Financial Officer of the Company is definitely defective and therefore, there is no prima facie case made out for a trial in the suit and in the absence of the party making out a case for trial, the prayer made by the said COM.APPEAL.61/2021 50 party for grant of interim orders/interim injunctions in such a suit cannot be favoured.
45. The trial court has considered all these aspects of the matter and has rightly rejected the applications I.A.Nos.1 to 3 filed in the suit and while disposing of the applications, the Trial Court has observed that the suit itself was defective and not maintainable. The said order does not suffer from any illegality or perversity, which calls for interference by this court.
46. The Hon'ble Supreme Court in the case of Skyline Education Institute (India) Pvt.Ltd. -vs- S.L.Vaswani and Another11 has held that, in the absence of an error apparent or perversity, the order passed by the court of first instance exercising its discretion to grant or refuse to grant relief of temporary injunction should not be interfered with. 11
2010 AIR SCW 628 COM.APPEAL.61/2021 51
47. Under the circumstances, we do not find any grounds to interfere with the order passed by the Trial Court.
Accordingly, the Commercial Appeal stands dismissed.
In view of the disposal of the appeal, the pending applications i.e., I.A.Nos.1/2021 to 5/2021 do not require consideration and accordingly, they stand disposed of.
Sd/-
JUDGE Sd/-
JUDGE KNM/-