Delhi District Court
Shree Kumar Mundhra vs Spell Organics Limited And Anr on 4 September, 2024
IN THE COURT OF MR. ANIL KUMAR SISODIA: DISTRICT JUDGE
(COMMERCIAL COURT)-04,CENTRAL, TIS HAZARI COURTS,
DELHI
CS (Comm.) No. 362/ 2019
SHREE KUMAR MUNDHRA
residing at 3 Wood Street,
Flat no.9/6
Kolkata - 700017 ...PLAINTIFF
Versus
1. SPELL ORGANICS LTD.
Having its registered office at
16/3-B, Ansari Road, Daryaganj,
New Delhi-110002
2. SURESH KUMAR MUNDHRA
Director
Registered office of defendant no.1
situated at 16/3-B, Ansari Road,
Daryaganj New Delhi-110002. ..DEFENDANTS
Date of filing of the suit : 26.03.2019
Date of reserving judgment : 31.08.2024
Date of judgment : 04.09.2024
JUDGMENT
1. The present suit has been filed by the plaintiff against the defendants for declaration, perpetual and mandatory injunction.
PLAINTIFF'S CASE
2. The plaintiff is son of Sh. Madan Lal Mundhra and brother of Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:43:07 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 1 of 44 defendant no.2. Defendant no. 2 is Director and Incharge of day to day affairs of defendant no.1 company which was incorporated as Private Limited Company on 07.06.1988. The defendant no.1 was converted into Limited Company and fresh incorporation certificate was issued by the ROC on 31.05.1993.
3. It is averred that in October 2003, disputes arose between the lineal descendants of Late Suraj Mal Mundhra and a Memorandum of Understanding (MoU) dated October, 2003 was executed recording a family arrangement between the lineal descendants of Late Suraj Mal Mundhra. In terms of the said MoU, Sh. Madan Lal Mundhra and his family members including the plaintiff and the defendant no.2 were allotted various businesses, assets and liabilities including the management of the defendant no.1 company to the exclusion of the other lineal descendants. It was also agreed in MoU that the shares held in the group companies would be transferred by non-allotee group to the allottee group without receiving any consideration. It is further stated that pursuant to the MoU, 87010 fully paid up equity shares of Rs.10/- were transferred in favour of the plaintiff under Folio no. S-026 and original share certificate for the said shares was handed over to plaintiff which was in possession of the plaintiff.
4. It is further averred in the plaint that in or about April 2015, the plaintiff learnt about the loss of the original share certificate and he lodged a General Diary entry with the Shakespeare Sarani, Police Station, Kolkata on 20.04.2015 and simultaneously vide his letter of even date informed company secretary of defendant no.1 company about the loss of the share Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:43:19 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 2 of 44 certificate and made a request to issue duplicate share certificate in his favour. However, the defendants failed and neglected to take steps in this regard.
5. It is further stated that plaintiff filed a complaint before the Registrar of Companies vide his letter dated August 4, 2015. The defendants for the first time vide undated letter addressed to the Registrar of Companies contended that the plaintiff had handed over the original share certificate to the defendants in 2012 as a security for the loan advanced to one Apsom Turner Pvt. Ltd. (hereinafter referrred to as "ATPL") without disclosing any resolution passed by the Board of Directors of the defendant no.1 company.
On August 12, 2015 the defendants claimed a sum of Rs.1.20 crores from one ATPL and the plaintiff by issuing a notice. Plaintiff received copy of undated letter in October, 2015 under cover of a letter issued by Registrar of Company. The plaintiff specifically denied that the original share certificate was pledged or deposited with the defendant no.1 vide letter dated 15.10.2015 to ROC. Thereafter, defendant filed a suit in the High Court of Delhi bearing CS(OS) No.3169 of 2015 seeking a decree of Rs.1,20,00,000/- against ATPL and the plaintiff jointly and severally. The plaintiff was arrayed as defendant no.2. After enactment of the Commercial Courts Act, 2015, the suit was transferred to Tis Hazari Courts, Delhi and is pending adjudication. The plaintiff filed WS in the said suit reiterating his stand.
6. It is further averred that on 31.03.2016 for the first time the defendants surreptitiously added a condition to the shareholding of the Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:43:34 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 3 of 44 plaintiff as is evident from the copy of Annual Return of defendant no.1 company for the financial year ending on 31.03.2016. On 01.12.2015 the plaintiff lodged a General diary entry against defendant no.2 alleging that the defendant no.2 had committed theft of his original share certificate with police station Shakespeare Sarani, Calcutta.
7. It is further averred that under a bonafide belief that NCLT has jurisdiction to adjudicate the disputes between the parties, plaintiff filed an application before NCLT on 24.11.2016 under section 46 and 56 of the Companies Act, 2013 being CP no.15/04/2016. The said petition was dismissed by NCLT on 10.05.2018 holding that application was beyond the scope of Section 46 or 56 of Companies Act. Aggrieved by the order dated 10.05.2018 of NCLT, the plaintiff filed an appeal before NCLAT bearing Company Appeal no. 219/2018. NCLAT vide order dated 29.10.2018 dismissed the appeal filed by the plaintiff and the plaintiff filed civil appeal in the Supreme Court of India bearing Civil Appeal no. 1457/2019. However, the said appeal was dismissed by the Hon'ble Supreme Court on 11.02.2019. It is also stated that in CS no. 4030/2017, the name of the plaintiff was deleted from the array of parties vide order dated 18.07.2018 in the suit filed by defendant no. 1.
8. It has been stated that plaintiff is entitled to legal right in the original share certificate for the shares issued to the plaintiff under folio no. 026 and defendants are withholding the original share certificate contrary to the law. It was also stated that the alleged pledge is illegal, null and void ab initio. It is also stated that plaintiff is entitled to exclusion of time spent by Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:43:46 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 4 of 44 him from 24.11.2016 to 11.02.2019 u/s 14 of the Limitation Act, 1963 prosecuting his rights in good faith and with due diligence before NCLT, NCLAT and Hon'ble Supreme Court of India.
Written Statement of the defendants
9. Defendants have contested the suit by filing the WS.
It has been stated in preliminary submissions that Mundhra Family was residing and running their business at Calcutta and floated various firms. In the year 1992, plaintiff's father and defendant no. 2 shifted to Delhi and started a business in a rented accommodation from Chawri Bazar, Delhi and lived in rented accommodation at Greater Kailash. The business at Calcutta was looked after by plaintiff, brothers of their father and their family. In January 1995, equity of defendant no. 1 was purchased with the intervention of Hon'ble High Court of Delhi as it was a sick industry. Defendant no. 2 was appointed as Director and he got the responsibility to rehabilitate the said company. Defendant no. 2 worked with full devotion and defendant no. 1 started progressing. The wife of the plaintiff remained on the Board of defendant no.1 company for a long time and voluntarily resigned in the year 2011 as she was permanently residing in Calcutta. It is further stated that property no. N-47, Greater Kailash was purchased by brother of Sh. Madan Lal Mundhra although it remained in possession of Sh. Madan Lal Mundhra as a tenant. It is further stated that in October, 2003 MoU was entered between the parties and thereby B & M Corporation, Spell Organics Ltd., M/s Waridhi International & M/s Sun Chemicals India Ltd. fell in share of Shri Madan Lal Mundhra. During this time period, one more firm namely S.V. Corporation, a partnership firm was also formed by Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:44:01 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 5 of 44 Shri Madan Lal Mundhra. It was further stated that M/s B & M Corporation, S.V. Corporation and Spell Organic Ltd were managed by defendant no. 2 and his father and the firm M/s Waridhi International and M/s Sun Chemical India Ltd which were situated at Calcutta were handed over to plaintiff. It was stated that the business of the firms at Calcutta which was managed by the plaintiff, went into losses and consequently both the firms are not in existence. Plaintiff acquired 88.19% equity in M/s Apsom Turner Pvt. Ltd in the year 2008 in the name of his wife from his father-in-law and became its director. Defendant no. 2 was forcefully appointed as director in order to avail loan and to demonstrate financial networth but defendant no. 2 never participated in the business of said company.
10. It is further stated that wife of plaintiff was also a partner in B & M Corporation and S.V. Corporation since 2004 but since inception she had given her attorney to defendant no. 2 for conducting the business in the firm.
The property no. N-43 was purchased in the name of plaintiff's wife and wife of defendant no.2 without termination of tenancy of Sh. Madan Lal Mundhra who was still residing there. The plaintiff's wife did not have the sale consideration money and hence, the same was paid to her by defendant no. 2, his wife or Sh. Madan Lal Mundhra.
11. It is further stated that a business loan was availed by M/s ATPL from M/s Celica Developers Pvt. Ltd and corporate guarantee to repay the loan was provided by defendant no.1 company and in lieu thereof, plaintiff handed over the original share certificate of defendant no.1 company.
Digitally signed ANIL by ANIL KUMAR
SISODIA
KUMAR Date:
SISODIA 2024.09.04
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Subsequently, the plaintiff's company M/s ATPL failed to repay the loan and came into losses and since then plaintiff had been facing financial hardship. The plaintiff along with his wife and children filed suit for partition in High Court of Calcutta for partition of HUF property and claimed his 1/3rd share. The said suit was later on withdrawn by plaintiff and his family members.
12. It is further stated that plaintiff and his wife also filed winding up petition of defendant no. 1 which is pending adjudication before NCLT, New Delhi. M/s Celica Developers Pvt. Ltd also filed proceedings under Arbitration and Conciliation Act, 1996 and served notice and filed petition u/s 9 before Kolkata High Court and vide order dated 04.06.2014 plaintiff, defendants and other were restrained from creating third party interest in respect of properties including shares in question and the said order was confirmed vide order dated 30.07.2014. During arbitration proceedings filed before the Sole Arbitrator, defendant no. 1 paid a sum of Rs. 1.2 crores in November, 2014 on behalf of M/s ATPL to M/s Celica Developers Pvt. Ltd and thereupon interim order against the defendants were vacated by the Hon'ble High Court of Kolkata. It is stated that defendant no.1 was forced to pay the said amount as the interim order was coming in smooth running of the business. The plaintiff and M/s ATPL admitted the claim of M/s Celica Developers Pvt. Ltd in their reply before Sole Arbitrator. It is further stated that plaintiff has also filed application for modification of order dated 30.07.2014 but the same was dismissed by Kolkata High Court vide order dated 20.07.2015 since sole arbitrator has passed the award against the plaintiff additionally for a sum of Rs. 34,77,893/- along with interest. It is stated that wife of defendant no. 2 is entitled to recover a sum Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:44:31 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 7 of 44 of Rs. 23,30,955.41 from the wife of plaintiff and Rs. 3,12,329/- from M/s ATPL. Similarly, father of defendant no. 2 is entitled to recover Rs. 7,13,261/- from wife of plaintiff and Rs. 6,15,000/- from M/s ATPL. Defendant no. 2 is also entitled to recover Rs. 3,29,708/- from the plaintiff and Rs. 2,55,000/- from plaintiff's wife which has been withheld by the plaintiff and his wife in all litigations.
13. It has further been stated that wife of plaintiff filed a civil suit bearing suit no. 18552/16 which is pending adjudication in Tis Hazari Courts. The interim injunction application in the suit was dismissed and the same is subject matter of appeal before Hon'ble High Court of Delhi in FAO No. 302/17. Plaintiff's wife also filed another civil suit bearing CS (OS) No. 343/17 for partition of one floor of property no. N-43, Greater Kailash Part-I, which is pending adjudication before Hon'ble High Court of Delhi. It is further stated that defendant no. 1 has filed one suit against the plaintiff and M/s ATPL for recovery of Rs. 1.2 crores which is pending adjudication in Tis Hazari Courts.
14. It is further stated in the WS that plaintiff had previously instituted proceedings before NCLT for the same relief as prayed in the suit and NCLT has held that plaintiff is not entitled to delivery of certificate in respect of 87,010 shares since sum of Rs. 1.2 cores is withheld by plaintiff and his company. The plaintiff has not denied the fact that defendant no. 1 had paid Rs. 1.20 crores to M/s Celica Developers Pvt. Ltd. It is further stated that NCLT had appointed valuer in the said petition with consent of all the parties to evaluate the value of defendant no. 1 company vide order dated Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:44:44 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 8 of 44 09.01.2015. It is stated that plaintiff was not able to sell his shares in defendant no. 1 company because of interim injunction granted by Kolkata High Court though plaintiff had agreed to sell his share in defendant no. 1. It is also stated that M/s Ashoka Niketan Pvt. Ltd has also served legal notices to M/s ATPL demanding sum of Rs. 47,07,535.85 which suggests that plaintiff is heavily under debts.
15. Defendants also raised preliminary objections in the WS stating that the suit of the plaintiff is liable to be rejected as it does not comply with the mandatory requirements of the Commercial Courts Act. The suit is based on the falsehood and inadmissible evidence and same is without cause of action. The plaintiff has not approached the court with clean hands and withheld material facts to over reach the court. The suit has not been valued properly and plaintiff has not paid ad valorem court fees separately on each relief. The suit is barred by limitation as plaintiff is not entitled for benefit u/s 14 of the Limitation Act. The suit is barred by rejudicata and plaintiff is not entitled for equitable relief.
16. On merits, the contents of the plaint have been denied except the fact that plaintiff and defendants are real brothers and defendant no. 1 is a public limited company. It is stated that plaintiff has not contributed any amount in purchasing the shares or operating the business of defendant no.
1. In 2012 loan was availed by plaintiff in M/s ATPL on corporate guarantee furnished by defendant no. 1 and plaintiff had pledged the shares of defendant no. 1 with defendant no. 1. It was denied that in April, 2015 the plaintiff came to know that original shares have been lost and it was stated Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:44:58 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 9 of 44 that the share certificate were handed over to defendant no. 1 in 2012. Defendants also denied the police complaint made by plaintiff and stated that defendant no. 1 is entitled to recover the amount paid on behalf of plaintiff and M/sATPL. It was stated that complaint made before the ROC by the plaintiff was to create illusion of cause of action and calculated to file false and frivolous application before NCLT. Defendants also denied having knowledge of complaint dated 05.10.2015 to the Registrar of Company. The plaintiff has admitted the liability before NCLT and he is acting against the interest of defendant no. 1 company and there is no equity in his favour. Defendant also submitted that no intimation was received for inquiry from any authority into the general diary dated 01.12.2015. It was further stated that defendants have preferred CM (M) No. 860/18 before the Hon'ble High court against the order dated 18.07.2018 and the operation of the order dated 18.07.2018 was suspended by Hon'ble High Court vide its order dated 14.09.2018. Other contents of the plaint have been denied and prayer has been made for dismissal of the suit.
17. Plaintiff has filed replication to the WS of the defendants and has reiterated the facts stated in the plaint and has denied its contents contrary to it.
18. After completion of pleadings, the following issues were framed:-
(i)Whether suit filed by the plaintiff is not maintainable as plaintiff has not approached the court with clean hands and has suppressed material facts? OPD
(ii) Whether suit filed by the plaintiff is barred by the Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:45:20 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 10 of 44 principles of res-judicata? OPD
(iii) Whether the suit filed by plaintiff is not maintainable as the same is barred by limitation? OPD
(iv) Whether plaintiff is entitled for a decree of declaration that pledge of share certificate relating to the equity shares of defendant no. 1 as null and void and void ab-initio, as prayed for? OPP.
(v) Whether the plaintiff is entitled for a decree of mandatory injunction directing the defendant to hand over the original share certificate to the plaintiff, as prayed for? OPP
(vi) Any other Relief.
19. The matter was listed for plaintiff's evidence on 20.02.2021. On 07.10.2021 counsel for plaintiff made a statement that plaintiff does not wish to lead evidence in the case. In view of the statement of counsel for plaintiff, PE was closed and the matter was listed for defendant's evidence.
20. On 27.10.2021 counsel for defendants also made a statement that defendant does not wish to file defence evidence. In view of the statement of counsel for defendants, DE was closed.
21. I have heard counsel for plaintiff as well as counsel for defendants and have perused the record carefully. I have also gone through the written submissions and judgments filed by the parties in support of their oral arguments. The issues wise findings are as under:-
Digitally signed ANIL by ANIL
KUMAR
KUMAR SISODIA
Date:
SISODIA 2024.09.04
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Issue no.2:
Whether suit filed by the plaintiff is barred by the principles of res- judicata? OPD
22. The onus of proving this issue was on the defendants. In their WS, defendants have taken a preliminary objection that the suit filed by the plaintiff is barred under the provisions of constructive res- judicata, since the plaintiff previously availed the remedy before Hon'ble NCLT, New Delhi and preferred an appeal before the Hon'ble NCLAT, New Delhi and finally before the Hon'ble Supreme Court of India in respect of the same prayer as made in the plaint and therefore, the suit of the plaintiff is liable to be dismissed.
23. Ld. Counsel for the defendants has argued that the plaintiff in the present suit has sought a decree of declaration declaring the alleged pledge asserted by the defendants on the original share certificate issued under Folio no.026 for 87010 equity shares of defendant no.1 company as illegal, null and void-ab-initio and has further prayed for a decree of mandatory injunction compelling the defendants to hand over the original share certificate issued under the aforesaid folio to the plaintiff. It has been argued that in the prayer before Hon'ble NCLT, New Delhi also the plaintiff prayed for an order directing respondent no.1 (defendant no.1 herein) to deliver the original share certificates in respect of 87010 equity shares to the petitioner within a period of two weeks from the date of order. It has been argued that Hon'ble NCLT, New Delhi vide its order dated 10.05.2018 had disposed off the Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:45:50 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 12 of 44 petition on merits. It is further argued that in the appeal preferred before Hon'ble NCLAT, the plaintiff raised the same issues and contended that Section 430 of the Companies Act 2013 categorically bars a civil court from entertaining a civil suit or proceeding involving subject matter which the Tribunal under the Act is empowered to entertain. He further argued that the plaintiff in the appeal averred that Ld. Tribunal failed to appreciate that application filed by the appellant was not in the nature of redemption of alleged pledge shares and the application was under Section 46 and 56 of the Companies Act, 2013. The plaintiff further averred that Ld. Tribunal erred in holding that prayer of the appellant (plaintiff herein) is beyond the scope of Section 46 and 56 of the Companies Act, 2013. Counsel for the defendant has further argued that Hon'ble NCLAT vide its order dated 29.10.2018 rejected the appeal filed by the plaintiff herein and upheld the decision of the Hon'ble NCLT and the appeal filed by the plaintiff before Hon'ble Supreme Court was also dismissed vide order dated 11.02.2019. It has been argued that once the matter has been heard and decided on merits and had attained finality, the present suit filed by the plaintiff is barred by the principles of res-judicata.
24. Per contra counsel for the plaintiff has argued that the principles of res-judicata are not attracted in the present suit as the petition before the Hon'ble NCLT was not decided on merits but it was rejected since it was beyond the scope of the Hon'ble NCLT. It was argued that the Hon'ble NCLT did not decide the issue of validity of the pledge. Hon'ble NCLAT and Hon'ble Supreme Court had upheld the decision ANIL Digitally signed by ANIL KUMAR KUMAR SISODIA Date: 2024.09.04 SISODIA 15:46:19 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 13 of 44 of Hon'ble NCLT but the issue of validity of the pledge was not adjudicated. It was argued that Hon'ble NCLT had observed that the entitlement of respondents to recover their claims is already a subject matter of adjudication. It further observed that the prayer of the petition is beyond the scope of Section 46 and 56 of the Companies Act, 2013. No directions could be given by the Tribunal as it involves adjudication and not mere directions of the kind envisaged under the above mentioned provisions.
Ld. Counsel for the plaintiff has also placed reliance on the following judgments in support of his arguments:-
i) Sheodan Singh Vs. Daryao Kanwar AIR 1966 SC 1332.
ii) Maroti Ashtankar Vs. Gangadhar Rao Kher ILR 1968 MP 137
iii) Dada Dayalu Mahasabha, Jaipur Trust Vs. Mehant Ram Nivas and Anr. (2008) 11 SCC 753.
25. A plain reading of Section 11 shows that to constitute a matter res judicata , the following conditions must be satisfied, namely-
(i) The matter directly and substantially in issue in the subsequent suit or issue must be the same matter which was directly and substantially in issue in the former suit;
(ii) The former suit must have been a suit between the same parties or between parties under whom they or any of them claim;
(iii) The parties must have litigated under the same title in the former suit;
(iv) The court which decided the former suit must be a court competent to try the subsequent suit or the suit in which such issue subsequently raised; and Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
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(v) The matter directly and substantially in issue in the subsequent suit must have been heard and finally decided by the court in the first suit. Further Explanation 1 shows that it is not the date on which the suit is filed that matters but the date on which the suit is decided, so that even if a suit was filed later, it will be a former suit if it has been decided earlier. In order therefore that the decision in the earlier two appeals dismissed by the High Court operates as res judicata it will have to be seen whether all the five conditions mentioned above have been satisfied.
26. Perusal of the order passed by the Hon'ble NCLT, New Delhi dated 10.05.2018 in CP No.15/04/2016 would shows that Hon'ble NCLT in para 12 of the order held that the prayer of the petitioner was beyond the scope of Section 46 and 56 of the Companies Act 2013 and no directions could be given by the Tribunal as it involved adjudication and not mere directions of the kind envisaged under the above mentioned provisions. Thus, from the perusal of the order, it is apparent that Hon'ble NCLT was of the opinion that the right to claim the shares or to redeem the pledge cannot be adjudicated by this forum. It was further of the opinion that the issue of entitlement of the respondent to recover their claim was already a subject matter of adjudication and if the suit for recovery is adjudicated in their favour, they would well be within their rights to appropriate the proceeds under the shares in execution proceedings if the pledge is not redeemed. This clearly shows that Hon'ble NCLT did not dispose off the petition on merits as the issue of adjudication of validity of the Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:47:35 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 15 of 44 pledge was not decided by it. The order of Hon'ble NCLT was further upheld that by Hon'ble NCLAT vide its order dated 29.10.2018 wherein, it was observed that Section 46 and 56 or the Companies Act 2013 were not attracted and the prayer of the petitioner was beyond the scope of Section 46 and 56 of the Companies Act 2013. Hon'ble NCLAT also did not enter into the question of deciding whether or not there had been a valid pledge. It was of the opinion that when the civil proceeding were already pending in the High Court, Hon'ble NCLAT need not enter into these disputes whether or not the pledge is there. The order of NCLT and NCLAT was further upheld by Hon'ble Supreme Court in Civil Appeal no.1457/2019 vide order dated 11.02.2019 when it declined to interfere in the order of Hon'ble NCLAT.
27. Hence, in view of the observations made by Hon'ble NCLT in its order dated 10.05.2018 and Hon'ble NCLAT in its order dated 29.10.2018, I am of the considered opinion that the necessary condition for applicability of the principles of res judicata i.e. that the matter must have been heard and finally decided by the court in the first suit is not made out. Accordingly, the issue is decided in favour of the plaintiff and against the defendants.
Issue no.3:
Whether the suit filed by plaintiff is not maintainable as the same is barred by limitation? OPD
28. The onus to prove this issue has been cast on the defendants.Digitally signed
ANIL by ANIL KUMAR
SISODIA
KUMAR Date:
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Defendants have taken a plea in the WS that plaintiff is not entitled for exclusion of period under Section 14 of the Limitation Act 1963 and no separate application for condonation of delay has been filed in this regard. It is further stated that plaintiff pursued his petition with full force before Hon'ble NCLT, New Delhi and further proceeded with upto the highest court of the land and is not entitled for benefit of Section 14 as all the ingredients of provisions are not fulfilled and are not available to the plaintiff and the suit is hopelessly barred by limitation.
29. Counsel for the defendants has submitted that the onus of this issue should have been placed on the plaintiff since he is seeking exclusion of period consumed in another litigation. It was submitted that as per averments in the plaint, plaintiff came to know on 05.10.2015 that the original share certificate was in possession of defendant no.1. The present plaint has been filed on 14.03.2019 after the expiry of period of limitation and therefore, the suit is barred by the law of limitation. It is further argued that adjudicating the issue of transfer of shares is within the domain of NCLT. It is further argued that the prayer made before the court is different from the prayer made in the petition under section 46 and 56 of Companies Act, 2013 before the Hon'ble NCLT. He has also argued that Hon'ble NCLT decided the matter on merits and not on the point of jurisdiction. It has been wrongly stated that the prior proceedings were decided due to defect of jurisdiction or other cause of like nature. It has been argued that Hon'ble NCLT and thereafter Hon'ble NCLAT had examined the ANIL Digitally signed by ANIL KUMAR KUMAR SISODIA Date: 2024.09.04 SISODIA 15:47:59 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 17 of 44 matter meticulously and found that plaintiff was not entitled to equitable relief and had not approached the court with clean hands. He further argued that the plaintiff has failed to show that he prosecuted the proceedings with due diligence and in good faith and therefore, provisions of Section 14 are not applicable. Counsel for the defendant has placed reliance on the judgments of Shashi Prakash Khemka (dead) through LRs Vs. NEPC Micon (now called NEPC India Ltd) & Others, Civil Appeal no.1965-1966 of 2014 dated 08.01.2019 and Raj Shri Agarwal @ Ram Shri Agarwal & Anr. Vs. Sudhir Mohan & Others 2022 SCC Online SC 1775 in support of his arguments.
30. Counsel for the plaintiff, on the other hand has submitted that the suit is not barred by principles of Limitation and the plaintiff is entitled for exemption under Section 14(1) of the Limitation Act and therefore, the suit of the plaintiff is within the period of limitation. It was argued that the plaintiff is entitled for exclusion of the period from 24.11.2016 to 11.02.2019 as the plaintiff was prosecuting his rights in good faith and with due diligence in NCLT. He argued that plaintiff has specifically pleaded these grounds in para 36 and 37 of the plaint. It was argued by counsel for the plaintiff that there is no requirement of separate application to seek exclusion of the period under section 14 of the Limitation Act as Order 7 rule 6 CPC makes it mandatory for the plaintiff to disclose the grounds for seeking exemption under the Limitation Act. He further argued that the submission made by the counsel for the defendant, that the prayers in the present plaint and petition before NCLT were different, is misconceived as Section 14(1) Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:48:13 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 18 of 44 states that the suit proceedings must pertain to the 'same matter in issue'. It was argued that the matter in issue before NCLT and in the present suit are the same i.e. whether the pledge was valid in the eyes of law or not. Hence, the issue in both the proceedings is the same. He further argued that the NCLT/NCLAT have been established under the Companies Act, 2013 and have the same powers as vested in the civil court under CPC, 1908. Therefore, NCLT and NCLAT are Tribunals having the trappings of the civil court and therefore, is a 'court' under section 14(1) of the Limitation Act, 1963. Counsel for the plaintiff argued that all the ingredients for extending the benefit under section 14(1) of the Limitation Act 1963 has been satisfied by the plaintiff and the present suit is not barred by limitation.
Counsel for the plaintiff has also placed reliance on the following judgments in support of his arguments:-
i) Zafar Khan Vs. Board of Revenue, UP AIR 1985 SC 39.
ii) Consolidated Engg. Enterprises Vs. Principal Secretary, Irrigation Department and Ors. (2008) 7 SCC 169.
iii) P Sarthi Vs. State Bank of India (2000) 5SCC 355
iv) MP Steel Corporation Vs. Commissioner of Central Excise (2015) 7SCC 58.
v) Vijay Kumar Rampal Vs. Diwan Devi AIR 1985 SC 1669.
31. Section 14 of the Limitation Act deals with exclusion of time of proceeding bonafide in a court without jurisdiction. On analysis of the said Section, it becomes evident that the following conditions must be satisfied before Section 14 can be pressed into service:
(I) Both the prior and subsequent proceedings are civil proceedings prosecuted by the same party;Digitally signed
ANIL by ANIL KUMAR
SISODIA
KUMAR Date:
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(2) The prior proceedings had been prosecuted with due diligence
and in good faith;
(3) The failure of the prior proceeding was due to defect of
jurisdiction or other cause of like nature;
(4) The earlier proceeding and the latter proceeding must relate to
the same matter in issue and;
(5) Both the proceedings are in a court.
32. The policy of the Section is to afford protection to a litigant against the bar of limitation when he institutes a proceeding which by reason of some technical defect cannot be decided on merits and is dismissed. While considering the provisions of Section 14 of the Limitation Act, a proper approach will have to be adopted and the provisions will have to be interpreted so as to advance the cause of justice rather than abort the proceedings. It will be well to bear in mind that an element of mistake is inherent in the invocation of Section 14.
In fact, the section is intended to provide relief against the bar of limitation in cases of mistaken remedy or selection of a wrong forum. On reading Section 14 of the Act it becomes clear that the legislature has enacted the said section to exempt a certain period covered by a bonafide litigious activity. Upon the words used in the section, it is not possible to sustain the interpretation that the principle underlying the said section, namely, that the bar of limitation should not affect a person honestly doing his best to get his case tried on merits but failing because the court is unable to give him such a trial.
Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date: SISODIA 2024.09.04 15:48:47 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 20 of 44
33. As regards, the submissions of the counsel for the defendants that plaintiff is not entitled for the benefit of Section 14 of the Limitation Act as no application has been filed by the plaintiff seeking exclusion of the period of limitation, I am of the considered opinion that neither Section 14 of Limitation Act 1963 nor the CPC provides for filing of a separate application seeking the benefit of Section 14 of the Limitation Act. In order to establish availability or non availability of the benefit of the section, both the parties have to plead, and file necessary evidence to establish their pleadings to enable the court to come to the finding of bona fide of the plaintiff. Order 7 rule 6 provides that where the suit is instituted after the expiry of the period of limitation, the plaint shall show the ground upon which exemption from such law is claimed. In the present case the plaintiff has stated the grounds for exclusion of period of limitation in para 36 and 37 of the plaint. Hence, it cannot be said that plaintiff is not entitled for claiming the benefit of Section 14 of Limitation Act merely because no separate application has been filed by the plaintiff in this regard.
34. Section 14 provides that both the prior and subsequent proceedings should be civil proceedings prosecuted by the same party. In the present case the plaintiff had filed the petition before NCLT prior to the filing of the present suit. The said petition was undoubtedly a civil proceeding and even defendants have not disputed this fact. Another requirement of Section 14 is that both the proceedings are in a court. Perusal of The Companies Act, 2013 show that chapter XXVII deals with the constitution of NCLT and NCLAT, their powers, Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:49:01 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 21 of 44 procedures etc. Section 408 and 410 deals with the constitution of NCLT and NCLAT. Section 424 of the Act provides the procedure before Tribunal and Appellate Tribunal. Perusal of section 424 shows that the Tribunal and Appellate Tribunal are bound by the procedure laid down by CPC 1908 and they have been vested with the same powers as are vested in the civil court under CPC 1908. They have the powers to summon and enforce attendance of any person and examine him on oath; requiring discovery and production of documents; receiving evidence on affidavits; requisitioning any public record or documents; issuing commissions for examination of witnesses or documents; dismissing a representation for default or deciding it exparte; setting aside any order of dismissal of any representation for default or any order passed by it ex-parte. Section 424 (3) further provides that order of the Tribunal and Appellate Tribunal may be enforced as if it were a decree made by a court in a suit pending therein. Thus, on the perusal of the aforesaid provisions, it is apparent that NCLT and NCLAT have all the trappings of a court. Section 14 of Limitation Act does not speak of a 'civil court' but speaks only of a 'court'. Hence it is not necessary that the court spoken of in Section 14 should be a civil court. Any authority or Tribunal having the trappings of a court would be a 'court' within the meaning of this section. I am supporting in my views by the judgment of Hon'ble Supreme Court in P. Sarathy Vs. SBI (Supra).
35. The counsel for the defendants has argued that the prayers in the petition before NCLT and NCLAT were different. In the present suit Digitally signed ANIL by ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:49:16 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 22 of 44 the plaintiff has prayed for the relief of declaration which could not have been prayed before NCLT as NCLT did not have the power to grant a decree of declaration. Hence, plaintiff is not entitled to the benefit of Section 14 of the Limitation Act. A bare perusal of Section 14(1) of Limitation Act would show that the condition necessary for applicability of this section is that the proceedings in the previous case and the present case must relate to the 'same matter in issue'. Therefore, what has to be seen is whether the issue involved in both the matters is the same or different. Perusal of the orders of NCLT as well as NCLAT would show that the issue involved in the said petition was 'whether there was a valid pledge' and the same issue is involved in the present suit also. Hence, it cannot be said that the issue involved in both the proceedings is different.
36. Ld. Counsel for the defendants further argued that the benefit of Section 14 is not available to the plaintiff as he had not prosecuted the proceedings before Hon'ble NCLT and NCLAT in good faith and with due diligence. It is argued that had the plaintiff been diligent, he would have filed the civil suit after the petition was rejected by the Hon'ble NCLT instead of preferring appeals to the Hon'ble NCLT and Hon'ble Supreme Court.
Counsel for the plaintiff has vehemently opposed the submission and has argued that the plaintiff prosecuted his petition before Hon'ble NCLT under a bonafide belief that Hon'ble NCLT had the jurisdiction to entertain and adjudicate the claim of the plaintiff and after his claim was rejected by Hon'ble NCLT he prosecuted his right of appeal in ANIL Digitally signed by ANIL KUMAR KUMAR SISODIA Date: 2024.09.04 SISODIA 15:49:31 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 23 of 44 good faith before Hon'ble NCLAT and Hon'ble Supreme court.
37. Perusal of the plaint filed by the plaintiff shows that in para 37 plaintiff has claimed that he was prosecuting his rights in good faith and with due diligence before the Hon'ble NCLT, NCLAT and Hon'ble Supreme Court of India. From the perusal of the copies of the petition filed before the Hon'ble NCLT and memorandum of appeal filed in Hon'ble NCLAT and Hon'ble Supreme Court, it is apparent that the plaintiff had been vigorously prosecuting his remedies before these forums under legal advise. Even the copies of reply filed by the defendants before Hon'ble NCLT would show that no objection had been taken by the defendants that Hon'ble NCLT had no jurisdiction to adjudicate the claim filed by the plaintiff. Hence, it cannot be said that the filing of the petition before Hon'ble NCLT and appeals before Hon'ble NCLAT and Hon'ble Supreme Court by the plaintiff were not in good faith or due to some malafides. Merely because the claim of the plaintiff was rejected by Hon'ble NCLT and the appeals filed by him were dismissed, no presumption can be raised that plaintiff had not acted in good faith and with due diligence.
38. Counsel for the defendants has further argued that the claim of the plaintiff was rejected on merits and not due to defect of jurisdiction and other causes of the like nature as acquired under Section 14 of the Limitation Act. He has argued that in Shashi Prakash Khemka Vs. NEPC Micon (supra), it was held that the issue of transfer of shares has to be adjudicated by the Hon'ble NCLT and Section 430 of the Digitally signed ANIL by ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:49:44 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 24 of 44 Companies Act 2013 bars the jurisdiction of civil court. He further argued that the claim of the plaintiff was rejected as Hon'ble NCLT came to the conclusion that plaintiff had not approached the Tribunal with clean hands and had concealed facts. The Tribunal was also of the opinion that the shares could not be returned to the plaintiff as there was no equity in his favour.
Counsel for the plaintiff, on the other hand has argued that Hon'ble NCLT rejected the claim of the plaintiff on the ground that it did not have the jurisdiction to adjudicate on the issue of validity of the pledge and the matter involved adjudication and not mere directions. He further argued that Hon'ble NCLT vide its order dated 29.10.2018 has affirmed the reasons given by the Hon'ble NCLT and refused to enter into the question of deciding whether or not there had been a valid pledge. He further argued that the Hon'ble Supreme Court also refused to interfere in the decision of Hon'ble NCLT. Hence, the adjudication of the claim of the plaintiff cannot be said to be on merits and the claim was rejected on the ground of defect of jurisdiction.
39. A perusal of order dated 10.05.2018 passed by Hon'ble NCLT and order dated 29.10.2018 passed by Hon'ble NCLAT would show that the claim was rejected on the ground that the claim was beyond the scope of Section 46 or 56 of the Companies Act, 2013 and further no directions could be given by the Tribunal as it involved adjudication and not mere directions. Hon'ble NCLAT also dismissed the appeal vide its order dated 29.10.2018 upholding the orders of Hon'ble NCLT and it also refused to enter into the question of deciding whether or not Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 15:49:59 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 25 of 44 there has been a valid pledge. Hence, I am of the considered opinion that the dismissal of the petition filed by the plaintiff squarely fall within the ambit of the term 'defect of jurisdiction and other causes of like nature'.
40. In view of the aforesaid discussion, I am of the considered opinion that the plaintiff is entitled for exclusion of period of limitation for the period 24.11.2016 to 11.02.2019 as the plaintiff was prosecuting his rights in good faith and with due diligence in NCLT. The issue is accordingly decided in favour of the plaintiff and against the defendants.
ISSUE NO. 1, 4 and 5 :
(i) "Whether suit filed by the plaintiff is not maintainable as plaintiff has not approached the court with clean hands and has suppressed material facts? OPD
(iv) Whether plaintiff is entitled for a decree of declaration that pledge of share certificate relating to the equity shares of defendant no. 1 as null and void and void ab-initio, as prayed for? OPP.
(v) Whether the plaintiff is entitled for a decree of mandatory injunction directing the defendant to hand over the original share certificate to the plaintiff, as prayed for? OPP"
41. These issues are taken up together as they can be disposed off by common discussion. The onus of proving issue no.1 was cast on the defendants, whereas onus of proving issue no.4 and 5 has been cast on the plaintiff.
42. The plaintiff has filed the present suit for a decree of declaration Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:50:44 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 26 of 44 that the pledge asserted by the defendants on the original share certificate issued under folio no.026 for 87010 equity shares of defendant no.1 company be declared as null and void ab initio. The plaintiff has further prayed for decree of mandatory injunction compelling the defendants to forthwith hand over the aforesaid original share certificate to the plaintiff.
43. It is pertinent to mention here that after framing of the issues on 09.08.2018 neither the plaintiff nor defendants have led any evidence in support of their case despite opportunities being given. Counsel for the plaintiff closed the plaintiff evidence by making the statement dated 07.10.2021. The counsel for the defendants also closed the evidence by making the statement dated 27.10.2021.
44. Counsel for the plaintiff has argued that plaintiff is the owner of 87010 shares of the face value of Rs.10/- vide folio no.S026. He has argued that there is no dispute with regard to the ownership of the plaintiff qua the aforesaid shares as defendant no.1 in its annual returns dated 31.03.2005 and 31.03.2015 has shown the plaintiff as share holder of defendant no.1 company in respect of aforesaid shares. Counsel for the plaintiff further argued that the plaintiff came to know about the loss of the shares and he filed a complaint with the police at PS Kolkata on 20.04.2015. He also wrote a letter to the Company Secretary of defendant no.1 on the same day informing him about the loss of the shares and requested for issuance of duplicate shares. When the defendant no.1 company did not issue the duplicate shares, plaintiff ANIL Digitally signed by ANIL KUMAR KUMAR SISODIA Date: 2024.09.04 SISODIA 15:50:56 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 27 of 44 wrote a letter to Registrar of Companies dated 04.08.2015. It was argued that on 05.10.2015 the plaintiff received a reply from the ROC along with copy of reply given by defendant no.1. It was further submitted that plaintiff replied to the said letter vide his letter dated 15.10.2015. In the meanwhile plaintiff also received a notice dated 12.08.2015 from the counsel of defendant no.1 company for recovery of Rs.1.20 crores and the plaintiff filed a petition before Hon'ble NCLT for directing the defendants to hand over the shares which was dismissed vide order dated 10.05.2018. Appeal filed against the order dated 10.05.2018 was also dismissed by Hon'ble NCLAT vide its order dated 29.10.2018. The plaintiff preferred appeal to Hon'ble Supreme Court but the same was also dismissed vide order dated 11.02.2019. Counsel for the plaintiff has argued that the defendants in their notice dated 12.08.2015 asserted that they had paid Rs.1.2 crores on account of corporate guarantee furnished by defendants for the loan obtained by M/s. ATPL in which the plaintiff was the director and his wife was a majority share holder. It was argued that for the first time defendant no.1 inserted a note in the balance sheet of the year 2015-16 in which the aforesaid shares were shown to have been pledged by the plaintiff with defendant no.1 as a collateral security against the payment made to Celica Developers (P) Ltd. on behalf of M/s ATPL. Counsel for the plaintiff has argued that no deed of pledge was executed for creation of the pledge and this fact has not been disputed by the defendants in their WS. Counsel for the plaintiff has argued that the alleged pledge is bad in the eyes of law as the same is in violation of Section 172 and 148 of Indian Contract Act. The pledge is further in Digitally signed ANIL by ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:51:10 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 28 of 44 violation of Indian Stamp Act and no stamp duty as required has been paid on the said pledge. The said pledge is further in violation of Regulation 58 of SEBI (Depositories and Participants) Regulations 1996. It was also argued that defendants have not placed any Board Resolution in terms of Section 189 of the Companies Act 2013 and the legal notice dated 12.08.2015 also does not mention about any pledge of shares by the plaintiff in favour of defendant no.1 company. It has been argued that the defendants have no right to withhold the shares of the plaintiff and they should be directed to return/deliver the shares to the plaintiff. Counsel for the plaintiff has also relied upon the following judgments in support of his arguments:-
i) PN Krishna Pattar Vs. Kannambra Nayar AIR 1941 Madras
394.
ii) Sanjeev Bhavnani & Ors. Vs. M/s. Infotech India Pvt.Ltd. & Ors.2017 SCC Online NCLT 700.
iii) Pushpanjali Tieup Pvt. Ltd. Vs. Renu Devi Chaudhary AIR 2015 Bom. 1.
45. Per contra, counsel for the defendants has argued that the suit filed by the plaintiff is not in compliance with the provisions of Commercial Courts Act as the plaintiff has not filed affidavit in support of amended plaint in terms of first schedule of amended provisions of Order 6 rule 15A CPC. The plaint, verification and affidavit lacks material statement as required under the provisions of Commercial Courts Act. The plaintiff did not cure the defects even after the amendment of the plaint and the plaint cannot be looked into. It was further argued that the plaintiff in para 10 of its plaint has averred that he learned about the loss of the share certificate in or Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:51:21 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 29 of 44 about April 2015 but no evidence has been led by the plaintiff to prove this fact. It was argued that plaintiff and defendant no.2 are real brothers and defendant no.2 had given corporate guarantee against the loan taken by M/s. ATPL and defendant no.1 paid the amount of Rs.1.2 crores to discharge its liabilities. The plaintiff has failed to repay the said amount and the defendants are willing to return the shares to the plaintiff once the plaintiff repays the amount along with the interest.
It was argued that the suit of the plaintiff has not been properly valued. The plaintiff has valued the suit for the purpose of court fee and jurisdiction on the book value of the shares, whereas the value of the shares was Rs.153/- per share as on 31.01.2015 and this fact is corroborated by the order dated 09.01.2015 passed by Company Law Board in CP No.33(ND)13, whereby valuer was appointed for valuation of the company. It was argued that the valuation report dated 20.03.2015 showed the value of the company i.e. defendant no.1 to be Rs.6,98,19,571/-. The said valuation report was not challenged by the plaintiff before any forum. It was argued that the suit has been under valued by the plaintiff. Counsel for the defendants has argued that the valuation of the suit must be on the basis of market value of the shares on the date of filing of the suit and not on the basis of book value. It was also argued that in the report made to the police by the plaintiff on 01.12.2015, he has stated the value of shares to be Rs.1.50 crores but the plaintiff has withheld the said document. However, the plaintiff on 16.08.2024 during the course of the proceedings deposited the deficient court fees of Rs. 1600/- on the basis of the valuation of the shares as per the balance sheet of defendant no. 1 company pending on Digitally signed ANIL by ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:51:34 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 30 of 44 31.03.2019. Hence, the plaintiff has paid proper court fees according to the valuation of the shares on the date of filing of the suit.
46. It was further argued by the counsel for the defendants that the plaintiff has not chosen to enter the witness box to prove the story of misplacing/loss of the shares and has thus failed to discharge the onus cast on him. It was argued that the plaintiff has submitted in the plaint that on 01.12.2015 plaintiff got registered a general diary against defendant no.2 alleging that defendant no.2 had committed theft of the original share certificate. However, the plaintiff has neither examined himself nor he has examined any other witness to prove this letter dated 01.12.2015. It was further argued that the prayers of declaration and injunction are purely discretionary based on the principles of equity. The plaintiff has not approached the court with clean hands and has concealed the liability of Rs.1.20 crores as paid by defendant no.1 due to the default of plaintiff and his company (M/s ATPL) to the lender M/s. Celica Developers Pvt. Ltd. recorded in the award dated 13.02.2015. Plaintiff filed a company petition bearing CP No.33/ND / 2013 and during the course of arguments before Hon'ble NCLT defendants expressed their readiness and willingness to return the original share certificates subject to clearing the liability but the plaintiff refused to do so and has approached the present court for return of the shares. It was argued that the plaintiff is not entitled to the equitable relief as he has not approached the court with clean hands. Counsel for the defendants further argued that no written contract is necessary for creating a pledge/bailment and handing over Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 15:51:50 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 31 of 44 the share certificates by the plaintiff was sufficient to create a pledge. Ld. Counsel for the defendants has placed reliance on the following judgments in support of his case (i)Rachpal Maharaj Vs Bhagwan Dass Daruka and Ors., 1950 SCC 195 and (ii) Kannambra Nayar & Anr. Vs PN Krishna Pattar & Ors., AIR 1943 Madras 74. Counsel for the defendants further argued that SEBI (Depositories and Participants) Regulations 1996 are not applicable in the present case as the same applies only to the companies registered under SEBI and not to the private companies.
47. In rebuttal, counsel for the plaintiff has argued that the plaint was amended by the plaintiff under the Commercial Courts Act. He further argued that there was no challenge to the factual aspects of the case and hence, there was no requirement of leading evidence. It was argued that Order 6 Rule 2(1) CPC only material facts have to be stated in the pleadings. Defendants have admitted that plaintiff is the owner of the shares and the shares are in possession of defendant no.1.
Hence, all the material facts have been disclosed by the plaintiff in the plaint. It was reiterated that pledge cannot be created merely by deposit of the share certificate. It was argued that there is no concealment of material facts by the plaintiff and the plaintiff is entitled for the discretionary relief of declaration and injunction.
48. At the outset, it may be mentioned here that admittedly there is no dispute between the parties that plaintiff is the owner of 87010 equity shares in the defendant no. 1 company under Folio No. 26 and Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date:
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the said shares were duly issued to the plaintiff and were in his possession. The case of the plaintiff is that in April, 2015 he learnt that the original share certificate in respect of the aforesaid shares was lost and he lodged a GD with PS Shakespeare Sarani, Kolkata on 20.04.2015 and also wrote letter to the defendants on the same day. It is further the case of the plaintiff that vide copy of reply issued by ROC dated 05.10.2015 accompanied with the reply submitted by the defendants, he came to know that the shares were in possession of the defendants as a collateral security.
However, as per the case of the defendants, the aforesaid 87010 equity shares were pledged by the plaintiff to the defendants in 2012 as collateral security as defendant no.1 company had paid a sum of Rs. 1.2 crores on behalf of M/s ATPL to M/s Celica Developers Pvt. Ltd on invocation of guarantee. The plaintiff however, denied having pledged the shares to the defendants as a collateral security.
49. The cause of action for filing the present suit is based on the loss of 87010 shares issued to the plaintiff vide Folio no. S026. The defendants in their WS have denied the knowledge of the loss of the shares as stated by the plaintiff and lodging of general diary on 20.04.2015 and have reiterated that the shares were handed over to defendant no. 1 by the plaintiff in the year 2012. It was stated that the complaint if any made by the plaintiff was malafide. It was further stated that the plaintiff or M/s ATPL did not reply to the letter dated 12.08.2015 issued on behalf of defendant no. 1 and therefore, the contents thereof are deemed to be admitted.
ANIL Digitally signed
by ANIL KUMAR
KUMAR SISODIA
Date: 2024.09.04
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50. The first and foremost question which arises for consideration before this court is whether plaintiff had created a valid pledge of his 87010 shares issued to the plaintiff vide Folio no. S026 in favour of defendant no. 1 and had handed over the original share certificate to the defendant no. 1.
51. Counsel for plaintiff has vehemently argued that there was no valid pledge in existence as the plaintiff never handed over the share certificate to the defendants. He also argued that admittedly no contract /agreement has been executed between the parties evidencing the pledge and therefore, the alleged pledge is illegal, null and void ab- initio because under Section 172 and 148 of Contract Act there cannot be bailment without a contract and therefore, there cannot be a valid pledge without a contract/agreement. Reliance was placed on the judgment of PN Krishna Pattar Vs. Kannambra Nayar (supra). Counsel for the plaintiff has argued that stamp duty is required to be paid on the instruments and therefore, pledge cannot be created without a duly stamped instrument of pledge. He further argued that the pledge asserted by defendants is contrary to and in violation of Regulation 58 of SEBI (Depositories and Participants) Regulations 1996. It was argued that pledge of shares created in violation of Depositories Act, 1996 and regulations thereof is invalid and no pledge in the eyes of law as held by Hon'ble High Court Bombay in Pushpanjali Tie Up Pvt. Ltd Vs Renu Devi Chaudhary (supra).
Digitally signed ANIL by ANIL KUMAR
SISODIA
KUMAR Date:
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52. Per Contra, Counsel for defendants has placed reliance on the judgment of Kannambra Nayar & Anr. Vs PN Krishna Pattar & Ors. (supra) to argue that a valid pledge can be created by mere deposit of the share certificate. It was also argued that Hon'ble Supreme Court in Rachpal Maharaj Vs Bhagwan Dass Daruka (supra) also held that mortgage by deposit of title deeds is recognized by Section 58 (f) of Transfer of Properties Act, 1882 and the law implies a contract between the parties to create a mortgage, and no registered instrument is required u/s 59 as in other forms of mortgage. However, where the parties choose to reduce the contract into writing, the implication is excluded by their express bargain and documents would require registration if the value of the immovable properties 100 rupees or above. Hence, where no document is executed and pledge is created by mere deposit of share certificate, there is no requirement of payment of stamp duty and it is a valid pledge. Counsel for the defendants has further argued that provisions of Depositories Act and Regulations framed thereunder are not applicable in the present case.
53. Section 172 of Indian Contract Act defines a "pledge" as the bailment of goods as security for the payment of debt or performance of an obligation. "Bailment" has been defined u/s 148 of the Contract Act as delivery of goods by one person to another for some purpose, upon and contract that they shall, when the purpose is accomplished, be returned or otherwise dispose of according to the direction of the person delivering them. Thus, a valid pledge connotes two essentials elements:- (i)delivery of goods and (ii)security for a debt or ANIL Digitally signed by ANIL KUMAR KUMAR SISODIA Date: 2024.09.04 SISODIA 16:09:09 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 35 of 44 performance of an obligation.
54. Ld. Counsel for the plaintiff in support of his arguments as relied upon the judgment of PN Krishna Pattar Vs. Kannambra Nayar AIR 1941 Madras 394 that mere deposit of share certificate would not be enough to create a valid pledge. However, Ld. Counsel for the defendants has placed reliance on the judgment of Kannambra Nayar & Anr. Vs PN Krishna Pattar & Ors., AIR 1943 Madras 74 which is a decision in appeal by the Hon'ble Division Bench of Madras High Court relied upon by the counsel for plaintiff. In the appeal Hon'ble Division Bench allowed the appeal against the decision of Hon'ble Single Judge and held that as shares are goods and therefore pledgeable, they can be pledged by the deposit of share certificate. It was further held that when a person delivers a share certificate to another to be held by him as security, there is under the law of India a pledge which he can enforce, but unless the pledgee at a time of deposit secures a deed of transfer which he can use in case of a necessity or obtains from his debtors at a later stage, he must have recourse to the court when he wishes to enforce his security. There is nothing to prevent a pledgee suing on the debt and asking the court to sell the goods for him and the court can confer full title on the buyer on following the procedure laid down in Order XXI Rule 80 of CPC.
Therefore, in view of the aforesaid legal position, it can be safely held that a valid pledge can be created by mere deposit of the share certificate and in such cases no stamp duty would be required to be paid as no document evidencing the contract has been executed Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 16:09:26 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 36 of 44 between the parties.
55. As regards the objection of the counsel for the plaintiff that the pledge was not valid as it was in violation of Regulation 58 of the Depositories Act, 1996 and Regulation 58 framed thereunder, a bare perusal of the judgments relied upon by the counsel for plaintiff i.e. (i)Sanjeev Bhavnani & Ors. Vs. M/s. Infotech India Pvt.Ltd. & Ors.2017 SCC Online NCLT 700 and (ii) Pushpanjali Tieup Pvt. Ltd. Vs. Renu Devi Chaudhary AIR 2015 Bom. 1 would show that the Depositories Act and Regulations would be applicable only when the shares are not in physical form but the same are in dematerialized form which are stored with or deposited as shares of the company in the dematerialized form without individual identity i.e. they are in fungible form. It is clear that such shares cannot be pledged with in accordance with the provisions of Indian Contract Act, 1872 which requires delivery of the goods pledged. Since such shares (goods) are invisible and intangible, it would be impossible and in any case difficult to fix the fact of time and place of delivery as dematerialized shares cannot be delivered physically nor can the physical possession of such dematerialized shares can be handed over. The provisions of Depositories Act, 1996 have been enacted for the purpose of recording accurately the transfer and pledges of the shares in dematerialized form. Perusal of Regulation 58 shows that it contains a whole and self contained procedure for creation of pledges and since it is not possible to physically deliver demated shares, pledge of such shares can only be validly created in accordance with the provisions of Depositories Act, Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 16:09:42 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 37 of 44 1996. In the present case, admittedly the shares owned by the plaintiff were in physical form i.e. in the nature of share certificate and there is nothing on record to show that the shares were held by any depository. Hence, in my considered opinion the provisions of Depositories Act, 1996 and SEBI (Depositories and Participants) Regulations 1996 are not applicable in the present case.
56. Another argument was advanced by the counsel for plaintiff that the plaintiff never handed over the share certificate to the defendant no. 1 company and the same were lost/misplaced. However, the plaintiff has not led any evidence to prove the loss of the share certificate. As already noted above, defendants have denied this fact and have claimed that shares were handed over by the plaintiff as a collateral security. Therefore, the onus of proving the factum of loss of share certificate was upon the plaintiff. He was required to prove the same by leading cogent evidence in this regard. However, neither the plaintiff has entered in the witness box to prove this fact nor the plaintiff has examined any witness for proving the general diary dated 20.04.2015 lodged by him with the PS Shakespeare Sarani Kolkata. The plaintiff cannot be said to have discharged the burden cast on him by merely filing the photocopy of the general diary along with the plaint.
57. Not only this, defendants in para 8 of preliminary submissions of their WS have categorically stated that M/s ATPL had availed business loan from M/s Celica Developers Pvt. Ltd against corporate Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 16:09:58 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 38 of 44 guarantee given by defendant no. 1 company and in lieu thereof plaintiff had handed over his original share certificate of defendant no. 1 as security. In the replication, the plaintiff has given an evasive reply to this paragraph and has not specifically denied that he never handed over the share certificate to defendant no. 1 company as security for the corporate guarantee. He has simply stated that the alleged handing over of the original share certificate is contrary to the law and unenforceable and the same was illegal, null and void ab initio. This evasive reply by the plaintiff raises an adverse inference against him. If he had really lost or misplaced the original share certificate, what prevented him to categorically deny the fact that he had never handed over his original share certificate to defendant no. 1 company at any point of time whatsoever.
58. The stand of the plaintiff that he had misplaced or lost the original share certificate also gets contradicted by another letter /GD dated 01.12.2015 written by him, alleging that defendant no. 2 had committed the theft of the original share certificate. It is also pertinent to note here that plaintiff did not pursue the said GD to its logical conclusion and no complaint case has been filed by him against defendant no. 2 till date. Defendants in reply to para 21 of the plaint has stated that no intimation from any authority for inquiry into general diary dated 01.12.2015 was ever received by them. It is surprising that if the plaintiff had become aware that defendant no. 2 had stolen the original share certificate from his possession, why he did not pursue the criminal remedy against defendant no. 2 and kept silent after ANIL Digitally signed by ANIL KUMAR KUMAR SISODIA Date: 2024.09.04 SISODIA 16:10:15 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 39 of 44 lodging the general diary dated 01.12.2015. Even this general diary dated 01.12.2015 has not been proved by the plaintiff by examining the witnesses or summoning the original record from the concerned police station.
59. Hence, in view of the aforesaid discussions and facts and circumstances, I am of the considered opinion that there existed a valid pledge of 87010 shares vide Folio no. S026 between the parties and the plaintiff has failed to discharge the onus cast on him that the pledge of share certificate relating to the equity shares of defendant no. 1 company be declared as null and void ab initio.
60. The plaintiff has further claimed the relief of mandatory injunction for directing the defendants to handover the original share certificate to the plaintiff. The entire basis of this prayer is that there was no valid pledge of the shares executed between the parties.
61. As already held hereinabove, the pledge of shares by the plaintiff to defendants was a valid pledge. Hence, the claim of the plaintiff that defendants be directed to return the original share certificate to the plaintiff, is unwarranted.
62. Defendants in para 13 to 15 of preliminary submissions of their WS have stated that since M/s ATPL failed to repay the loan, M/s Celica Developers Pvt. Ltd initiated proceedings under Arbitration and Conciliation Act, 1996 and also filed a petition u/s 9 of Arbitration and Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 16:10:31 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 40 of 44 Conciliation Act before Hon'ble Kolkata High Court and vide order dated 04.06.2014 Hon'ble High Court restrained the plaintiff and defendants from creating third party interest in the property including the shares in question. This order was confirmed by order dated 30.07.2014. During the arbitration proceedings, defendant no. 1 paid a sum of Rs. 1.20 crores in November, 2014 to M/s Celica Developers Pvt. Ltd on behalf of the plaintiff and M/s ATPL. It is further stated that the plaintiff and M/s ATPL admitted the claim of M/s Celica Developers Pvt. Ltd before the Ld. Arbitrator and vide order dated 30.07.2014 the order was modified against the defendants and they were discharged from the further liabilities. It was further stated that the plaintiff had filed an application for modification of order dated 30.07.2014 but the same was dismissed vide order dated 20.07.2015 by the Hon'ble High court of Kolkata. In the replication filed by the plaintiff, plaintiff has not denied the record of the judicial proceedings.
Defendant had placed on record the copies of order dated 04.06.2014 and 30.07.2014 passed by Hob'ble High Court of Kolkata as well as copy of the award dated 13.02.2015 passed by Ld. Sole Arbitrator in the arbitration between M/s Celica Developers Pvt. Ltd Vs M/s Apsom Turner Pvt. Ltd.
63. A bare perusal of the copies of the orders dated 04.06.2014 and 30.07.2014 passed by Hon'ble Kolkata High Court and order dated 13.02.2015 passed by Ld. Sole Arbitrator confirm the fact that the defendants had paid Rs. 1.20 crores to M/s Celica Developers Pvt. Ltd 20.11.2014 and 05.12.2014 respectively on behalf of the plaintiff and Digitally signed ANIL by ANIL KUMAR SISODIA KUMAR Date:
SISODIA 2024.09.04 16:10:46 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 41 of 44 M/s ATPL. The plaintiff has also not disputed this fact. It is also a matter of record that plaintiff has not repaid the aforesaid amount to the defendants and defendants have already filed a suit for recovery of the said amount which is pending adjudication before court in Delhi.
64. Hon'ble NCLT in CP NO. 15/04/2016 titled as Shree Kumar Mundhra Vs M/s Spell Organic Ltd & Ors vide its order dated 10.05.2018 also observed in para 9 that petitioner (plaintiff herein) has not denied that respondent no. 1(defendant no. 1 herein) had offered a corporate guarantee for the loan availed by M/s Apsom Turner Pvt. Ltd at his instance. It was also not repudiated that respondent no. 1 company had paid a sum of Rs. 1.2 crores on invocation of the guarantee by M/s Celica Developers Pvt. Ltd which they seek to recover from M/s Apsom Turner Pvt. Ltd in a suit filed by them.
Hon'ble NCLT further held that it did not find it equitable to direct the respondents to handover the share certificate over which they assert their lien having bailed out M/s Apsom Turner Pvt. Ltd by liquidating the outstanding liability under the corporate guarantee offered at the instance of the plaintiff and it would be grossly inequitable to direct the respondents to handover the security to the petitioner without the claim of the respondents being satisfied. It is also pertinent to mention here that order of Hon'ble NCLT dated 10.05.2018 has been upheld by Honb'ble NCLAT vide its order dated 29.10.2018. The appeal filed by the plaintiff before Hon'ble Supreme Court against the order of Hon'ble NCLAT was also dismissed vide order dated 11.02.2019.
Digitally signed ANIL by ANIL KUMAR
SISODIA
KUMAR Date:
SISODIA 2024.09.04
16:11:00 +0530
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65. It is settled principle of law that the relief of injunction is a discretionary and equitable relief. A person who seeks equity must do equity. The plaintiff is seeking the equitable relief of mandatory injunction from this court. Hence, he was required to approach the court with clean hands and disclose all material facts before the court in order to become entitled for the equitable relief claimed by him. However, the plaintiff has not approached the court with clean hands and has concealed material facts from the court that he had pledged his equity shares with defendant no.1 company as a security in lieu of corporate guarantee offered by defendant no.1 at his instance. The plaintiff has failed to lead any evidence to prove the factum of the loss of the shares as claimed by him in the plaint. Perusal of the award passed by the sole arbitrator dated 13.02.2015 would show that M/s Apsom Turner Pvt. Ltd had obtained the loan from M/s Celica Developers Pvt. Ltd in February, 2013 in which defendants had offered corporate guarantee in lieu of the pledge of the shares as security. Hence, the averments made in the plaint that plaintiff learnt about the loss/misplacing of the original share certificate in April, 2015 and consequently its reporting with the police and registrar of company appear to be patently false.
66. Further, in view of the admitted facts that the plaintiff has not repaid the sum of Rs. 1.2 crores to the defendants which was paid by the defendants on behalf of plaintiff and M/s Apsom Turner Pvt. Ltd to M/s Celica Developers Pvt. Ltd and a suit for recovery of the same is pending adjudication, no equity lies in favour of plaintiff to direct the Digitally signed by ANIL ANIL KUMAR KUMAR SISODIA Date:
SISODIA 2024.09.04 16:11:13 +0530 Cs (comm) 362/2019 Shree Kumar Mundhra Vs Spell Organics Ltd. & Anr. Page No. 43 of 44 defendants to return the shares to the plaintiff.
67. Since the plaintiff has not approached the court with clean hands and has concealed material facts, the equitable relief of mandatory injunction cannot be granted to the plaintiff.
68. In view of the aforesaid discussion, the issue nos. 1, 4 and 5 are decided against the plaintiff and in favour of the defendants.
Relief
69. In view of my findings on issue nos. 1, 4 and 5 herein above, the suit filed by the plaintiff is dismissed. No order as to cost.
Decree Sheet be prepared accordingly.
File be consigned to record room after due compliance.
ANIL Digitally signed
by ANIL KUMAR
KUMAR SISODIA
Date: 2024.09.04
SISODIA 16:11:28 +0530
(ANIL KUMAR SISODIA)
District Judge (Commercial Court-04)
Central District, Tis Hazari Courts
Announced in open court
on 04th September, 2024
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