Allahabad High Court
Nirbhay Kapoor vs M/S Kamero Technosys Ltd And Another on 1 July, 2019
Author: Surya Prakash Kesarwani
Bench: Surya Prakash Kesarwani
HIGH COURT OF JUDICATURE AT ALLAHABAD A.F.R. Judgment Reserved on 24.05.2019 Judgment Delivered on 1.07.2019 Court No. - 59 Case :- FIRST APPEAL No. - 427 of 2019 Appellant :- Nirbhay Kapoor Respondent :- M/S Kamero Technosys Ltd And Another Counsel for Appellant :- Ashish Kumar Srivastava Counsel for Respondent :- Manoj Kumar Srivastava,Nimai Dass,Udai Chandani Hon'ble Surya Prakash Kesarwani,J.
Controversy Maintainability of a suit by the plaintiff - appellant (Ex-director) as individual under Section 9 of the Civil Procedure Code for declaratory relief of lien and injunction on the basis of Minutes of Meeting of the then Directors (plaintiff and the defendant - respondent No.2 and their two guests), dated 10.2.2016, with respect to the properties of defendant-respondent no.1 Company and five other companies, is involved in the present appeal.
1. Heard Sri Ashish Kumar Srivastava, learned counsel for the plaintiff-appellant and Sri Udai Chandani and Sri Nimai Dass, learned counsel for the defendants-respondents.
Facts
2. Briefly stated facts of the present case are that the plaintiff-appellant was one of the Directors in the respondent no.1 Company. The defendant-respondent No.1 is a Limited Company. It purchased an immovable property being House No.19/1, B.L.K.-B, Okhla Industrial Area, Phase -2, New Delhi (hereinafter referred to as the "disputed property"). The plaintiff-appellant and the defendant-respondent No.2 and their family members were Directors in six companies, namely, M/s. Himalayan Bioxteracts Pvt. Ltd., Kamero Technosys Ltd., Virat Residency Ltd., Dynacon Cares Ltd., Dynacon Systems Ltd. and Duet Marketing Pvt. Ltd. The plaintiff-appellant and the defendant-respondent no.2 and their two guests drawn Minutes of the Meeting dated 10.2.2016, which is reproduced below :-
"MINUTES OF THE MEETING OF THE DIRECTORS OF KAMERO TECHNOSYS LIMITED HELD ALONGWITH TWO OTHER GUESTS ON 10/02/2016 AT ROOM NO. 600 OF VIJAY INTERCONTINENTAL HOTEL AT 12.30 P.M. The Following person were present -
1. Nirbhay Kapoor -Director Kamero Tecnosys Ltd.
2. Pankaj Kumar Gupta -Director of Kamero Technosys Ltd.
3. Brijesh Saxena -Guest
4. Muqaddar Ali -Guest This meeting was convened with a basic object of finishing the problems faced by both the directors of Kamero Technosys Limited in day to day working of Company and also to find out an amicable solution for separation of the both directors from the business done by both of them jointly. Various decisions were taken during the course of discussions held and an amicable solution was found out for separation of the both the above named directors of Kamero Technosys Limited which was acceptable to both of them. As a token of remembrance and also acceptance of the decisions taken in the meeting these are enumerated below. Both the directors are signing this document in the presence of other two guests willingly. Without any force or coercion and in token of their acceptance of the decisions taken in the meeting which they will follow in the best interest of the Organization as a whole and for the other director also. The amicable decisions reached between both the directors are enumerated below -
1. That the Company Kamero Technosys Ltd which will be taken over by Shri Pankaj Kumar Gupta will be made liability free to the extent of liabilities of shoe division which was looked after by Shri Nirbhay Kapoor. In that respect the liability of Export obligation under EPCG Scheme, the liability of pending Excise matters, recovery by DGSND on any disputed matter of excise if any, clearance of Creditors of Shoe division and the Cash Credit limit of Rs 100.00 lacs alongwith interest till date of its clearance will be paid by Shri Nirbhay Kapoor. Further, it was also agreed between both the directors that expenses of the factory at C-6 Site-1, Panki Industrial Area, Kanpur up to 31st March 2016 will be borne by both the directors equally and thereafter if the setup of shoe division remains there then the expense part will be borne by both the directors equally till the setup of shoe division is removed from C-6 Site-1, Panki Industrial Area, Kanpur. For the part of above stated expenses of Excise, DGFT dept. etc a buffer amount of money will be retained in Kamero Technosys Ltd from the part of Shri Nirbhay Kapoor.
2. That Rs 100.00 Lacs of the cash of the Company held by Shri Nirbhay Kapoor at the time of dispute in July, 2012 will be added to his account (pt. no. 7).
3. That the six common Companies will be divided in the following manner -
Pankaj Kumar Gupta Nirbhay Kapoor Himalayan Bioxteracts Pvt. Ltd.
Dynacon Cares Ltd.
Kamero Technosys Ltd.
Dynacon Systems Ltd.
Virat Residency Ltd.
Duet Marketing Pvt. Ltd.
4. The matter of immovable assets in the above six companies was discussed and it was amicably decided to find out the valuation of immovable assets and divide them amongst both the directors. Both the directors were agreeable to this proposition readily. After discussions with various property dealers by both the directors the following valuation of the properties was made which was readily acceptable to both the directors -
Name of the Property Valuation reached amicably (Rs in Crores)
1. C-6, Panki Industrial Area, Site - 1, Kanpur 17.00
2. Okhla factory at Delhi 6.00
3. Land at Rania, Kanpur Dehat 7.50
4. Property at Sarojini Nagar, Kanpur 1.25
5. Flat at Lajpat Nagar, Kanpur 0.30
6. Flat at Jangpura Extension, Delhi 1.25
7. Factory at G-116, Site-3, Panki, Kanpur 1.00 Total 34.30
5. That the above properties will be divided amongst both the directors as mentioned below -
Pankaj Gupta Valuation Nirbhay Kapoor Valuation C-6 Site-1, Panki 17.00 Okhla, Delhi 6.00 Flat at Jangpura ext.
1.25 Land at Rania 7.50 Sarojini Nagar, Kanpur 1.25 Flat at Lajpat Nagar, Knp.
0.30 G-116 Site-3, Panki Knp 1.00 Total Valuation 18.25 Total Valuation 16.05 It was amicably decided that both the directors are at their free will to keep the property or to sale it. In case of sale of property the other director will sign the Sale deed without any questions or hindrance. The proceeds of sale of the property will go to the credit of the director who sells his part of property and will be paid to him. The Long Term Capital gains, if any, arising on sale will be borne by the director who is selling his part of Immovable property and the other director will in no way be responsible for that part of expense.
6. The matter of Plant and machinery owned in the group was discussed. The Plant & Machinery of Shoe division was valued at Rs 2.50 Crores by Shri Nirbhay Kapoor which was readily acceptable to the other director. The machines of Mould division was valued at Rs 0.75 Lacs and that of Adhesive plant and other misc. machines was valued at Rs. 0.40 Lacs by both the directors. The machines at G-116 Site-1 factory were valued at Rs 0.07 lacs. It was amicably decided by both the directors that the machines of Shoe division will be taken over by Shri Nirbhay Kapoor at the above valuation and the rest machines will be taken over by Shri Pankaj Kumar Gupta also at the above valuation. It was also decided that out of the machines of Shoe division one desma machine of 18 Stations will be taken over by Shri Pankaj Kumar Gupta at a valuation of Rs 0.40 Lacs to which the other director readily agreed.
7. The final position of payment between both the directors is placed below-
Particulars Pankaj Kr. Gupta Nirbhay Kapoor Fixed Assets 18.25 16.05 Cash 0.00 1.00 Plant 1.22 2.10 18 Station 0.40 0.00 TOTAL 19.87 19.15 The sum total of the valuation of the Immovable & movable properties stated above come to Rs 39.02 Crores (19.87+19.15). Half share of the sum total of valuation comes to Rs. 19.51 Crores (39.02/2) i.e. each director's share of the property comes to Rs 19.51 Crores. To balance both the director's valuation an amount of Rs 0.36 Lacs will be paid by Shri Pankaj Kumar Gupta to Shri Nirbhay Kapoor (19.87-19.51)(19.51-19.15).
8. Besides the above it was also decided that the proceeds of sale of Land at Bhadurgrah, Haryana of Rs 1.46 Crores will be divided amongst both the directors in equal proportion, after deducting expenses of Rs 4.00 lacs incurred on its sale and Tax on Long term capital gains to be calculated as per I. Tax Act, 1961.
9. It was also decided that the advance payment of flats made in one of the Company of Rs 23.00 Lacs approx. which was received back will be divided equally amongst both the directors.
10. Both the directors also readily agreed that the payments received from Defence Organizations for sale of Shoes in Kamero Technosys Ltd will go to the credit of Shri Nirbhay Kapoor and will be paid to him even after separation. In the event of payment received being less than the liabilities then that shortfall will be borne by Shri Nirbhay Kapoor.
11. It was also readily agreed by both the directors that any liability of the common six companies arising of the period prior to 31st July, 2012 will be borne equally by both the directors even after separation.
12. It was also readily agreed between both the directors that the Brand "KAMERO" will be the sole property of Shri Pankaj Kumar Gupta and the brand "DYNACON" will be the sole property of Shri Nirbhay Kapoor.
13. It was also decided amicably that the shares of both the directors standing in the name of each other will be transferred in the name of the director to whom the Company is going. It was also decided that the directors will give resignations unconditionally from the directorship of the Company which is going to the other director.
14. It was also decided that the director who is resigning will also give a letter to the Banker of the Company informing about his unconditional resignation and also to remove his name from the Authorized signatory of that Company.
Finally the meeting concluded and it was amicably decided that the process of separation should be completed at the earliest."
3. Subsequently, agreement to sell dated 21.5.2016, was entered by the defendant-respondent No.1 with someone for sale of the disputed property for Rs.5,40,00,000/-. The plaintiff-appellant asked the defendant-respondents to pay to him Rs. 8,55,00,000/- in terms of the Minutes of the Meeting dated 10.2.2016. Since this amount was not paid, therefore, the plaintiff-appellant filed O.S. no.79 of 2019 (Nirbhay Kapoor Vs. M/S Kamero Technosys Ltd And Another) praying for declaration of lien over assets of three companies, namely, M/s. Himalayan Bio Extracts Pvt. Ltd., Kamero Technosys Ltd. and Virat Residency Ltd. The relief for permanent injunction was also sought to restrain the defendant-respondents from transferring the disputed property. The aforesaid suit was dismissed by the impugned order dated 25.3.2019, passed by the Additional Civil Judge (S.D.)/ACMM, 9th, Kanpur Nagar, on the ground that it is not maintainable in view of the provisions of Section 430 of the Companies Act 2013 (hereinafter referred to as "the Act 2013") read with Order 7 Rule 11 (d) of the C.P.C.
4. Aggrieved with this order the plaintiff-appellant has filed the present appeal under Section 96 of the Civil Procedure Code.
5. Both the learned counsel for the parties jointly submit that pure question of law as to the maintainability of the suit is involved in the present appeal and, therefore, without calling for the records and paper book, the appeal may be finally heard on the following question. Accordingly, this appeal has been heard on the following question :-
"Whether under the facts and circumstances, the suit filed by the plaintiff-appellant was not maintainable under Section 9 of the Civil Procedure Code being barred by the provisions of Section 430 of the Companies Act, 2013"?
Submissions on behalf of the plaintiff-appellant
6. Sri Ashish Kumar Srivastava, learned counsel for the plaintiff-appellant submits, as under:
i) That the plaintiff-appellant was Director and share holder in the companies in respect of which declaratory relief was sought in the suit. An agreement dated 10.2.2016 was entered between the Directors of the companies under which with respect to the disputed property, it was agreed that when the defendant-respondent no.1, shall sell the aforesaid property, the proceeds thereof shall be transferred to the plaintiff-appellant. The defendant-respondent no.1 has sold the said property for Rs.5,40,00,000/- but has not transferred/paid that amount to the plaintiff-appellant. This caused the plaintiff-appellant to file the suit in question i.e. O.S. No.79 of 2019, seeking a relief for declaration and permanent injunction against the defendant no.1 - Company.
ii) The Civil Court was having jurisdiction to decide the aforesaid suit and not the NCLT. The bar provided under Section 430 of the Companies Act, 2013, was not applicable. Section 230 of the Act, 2013, relates to the proposed agreement and not covers the agreement already entered and acted upon. Therefore, neither Section 230 nor Section 231 were applicable and consequently, Section 430 of the Act, 2013, is not attracted on the facts of the present case. Therefore, the court below has committed a manifest error of law to reject the plaint as barred by jurisdiction.
7. In rejoinder, Sri Ashish Kumar Srivastava, learned counsel for the plaintiff-appellant submits, as under:-
i) Clause 8 of Section 118 of the Act 2013, attracts only in the circumstances when there is a dispute with regard to the minutes or the resolution. In present set of facts, there is no such dispute. Therefore, this provision is not attracted on the facts of the present case.
ii) Section 241 of the Act 2013 is attracted when any member of the Company makes a complaint. In the present case, there is no such complaint. Therefore, neither Section 241 nor Section 244 are applicable.
iii) The plaint has been rejected not on the ground of cause of action under Clause (a) of Order VII Rule 11 CPC but it has been rejected only invoking Clause (d) on a finding that the suit is barred by Section 430 of the Companies Act.
iv) The dispute with regard to properties of the Company can be adjudicated only in a civil suit. In the present case the dispute is with regard to the properties of company. Therefore, the suit was maintainable and not barred by Section 430 of the Act 2013. Reliance is placed on the judgment of the Supreme Court in Jail Mahal Hotels Private Limited Vs. Devraj Singh and others (2016) 1 SCC 423 (para 18).
Submissions on behalf of the defendants-respondents
8. Sri Nimai Das, learned counsel for the defendants-respondents submits, as under:
i) As per own averments of the plaintiff-appellant, in paragraph 5 of the plaint that he and his family members resigned from the Companies, namely, M/s. Himalayan Bioxteracts Pvt. Ltd., Kamero Technosys Ltd. and Virat Residency Ltd. Therefore, after resignation the plaintiff-appellant has no concern or lien of any nature whatsoever over the properties of the aforesaid companies.
ii) As per plaint, declaratory relief has been sought against the aforesaid three companies but only Kamero Technosys Ltd. has been made as defendant in the suit as well as before this Court as defendant-respondent. The rest of the two companies against which declaratory relief and relief of permanent injunction have been sought were not parties either in the aforesaid suit No.79 of 2019 or are parties in this appeal.
iii) The reference of paragraph 10 of the plaint made by learned counsel for the plaintiff-appellant is wholly irrelevant in as much as the averment made in paragraph 10 does no give any cause of action to the plaintiff-appellant since the plaintiff-appellant has no concern with the defendant-respondent no.1 - Company.
iv) Cause of action disclosed in paragraphs 17 & 18 of the plaint is that some person came to the plaintiff-appellant on 15.1.2019 and requested him to sign the sale deed being Ex-Director of the Company so that there may not arise any dispute in future. On 17.1.2019, the plaintiff-appellant came to know about the sale of the properties and on 21.1.2019, the defendant-respondent no.1 has refused to make payment of the sale proceeds of the properties in question.
v) Clause (a) of the Order VII Rule 11 C.PC. provides for rejection of plaint in the event the plaint does not disclose any cause of action. Since the plaintiff-appellant has not disclosed any cause of action with respect to the disputed property, therefore, the plaint was rightly rejected under Clause (a) of Order VII Rule 11 C.P.C.
(vi) The suit was barred by the provisions of Section 430 of the Companies Act read with Section 9 C.P.C. and, therefore, it was rightly rejected in view of clause (d) of Order VII Rule 11 C.P.C.
vii) The alleged cause of action for filing the suit is the alleged minutes of the meeting of the Directors of the defendant-respondent no.1-Company, dated 10.2.2016. Firstly, the said minutes of the meeting is not in accordance with the provisions of sub Section 8 of Section 118 of the Act, 2013 and, secondly, in any case the remedy lies under Section 241(1) of the Act to apply to the Tribunal under Section 244. Therefore, the suit was clearly barred by provisions of Section 430 of the Act inasmuch as the NCLT was having jurisdiction to decide such type of dispute.
viii) Powers of the Tribunal has been provided in Section 242 of the Act 2013. The procedure before the Tribunal and Appellate Tribunal has been provided in Section 424 of the Act, 2013.
9. In support of his submissions, learned counsel for the defendant-respondent no.1 has relied upon the judgments of Hon'ble Supreme Court in Shashi Prakash Khemka Vs. NEPC Micon (Now called NEPC India Ltd.) & Others (Civil Appeal Nos. 1965-1966 of 2014, decided on 8.1.2019), Madras Bar Association Vs. Union of India and another (2015) 8 SCC 583, Robust Hotels Private Limited & others Vs. EIH Limited & another(2017)1 SCC 622, Church of North India Vs. Lavajibhai Ratanjibhai & Ors (2005) 10 SCC 760, Jitendra Nath Biswas Vs. M/s. Empire of India and Ceylone Tea Co. and another (1989) 3 SCC 582 and the judgment of Delhi High Court in SAS Hospitality Pvt. Ltd. Vs. Surya Constructions Pvt. Ltd. & others 2019 (212) Company Cases 102 and the judgmnts of Calcutta High Court in Prasanta Kumar Mitra & Ors Vs. India Steam Laundry (P) Ltd. & Ors. APO 112 of 2017 decided on 5.9.2018.
Discussion and Findings
10. Before I proceed to examine rival submissions, it would be appropriate to reproduce the provisions of Section 9, Order VII Rule 11 C.P.C. and Section 430 of the Act 2013, as under:-
Civil Procedure Code "Section 9. Courts to try all civil suits unless barred-- The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred.
[Explanation I].--A suit in which the right to property or to an office is contested is a suit of a civil nature, notwithstanding that such right may depend entirely on the decision of questions as to religious rites or ceremonies.
[Explanation II]. For the purposes of this section, it is immaterial whether or not any fees are attached to the office referred to in Explanation I or whether or not such office is attached to a particular place.].
Order VII Rule 11 Rejection of plaint-- The plaint shall be rejected in the following cases:--
(a)where it does not disclose a cause of action;
(b)where the relief claimed is undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so;
(c)where the relief claimed is properly valued, but the plaint is returned upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so;
(d)where the suit appears from the statement in the plaint to be barred by any law :
Provided that the time fixed by the Court for the correction of the valuation or supplying of the requisite stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the plaintiff was prevented by any cause of an exceptional nature form correcting the valuation or supplying the requisite stamp-paper , as the case may be, within the time fixed by the Court and that refusal to extend such time would cause grave injustice to the plaintiff.
Section 430 of the Companies Act 2013 430 Civil Court Not to Have Jurisdiction - No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal."
11. The Minutes of the Meeting of the Directors of the defendant-respondent no.1 - Company alongwith two guests was drawn on 10.2.2016 to show that by the aforesaid Minutes of the Meeting the plaintiff-appellant and the defendant-respondent no.2 admitted to divide six Companies out of which two were private and four were limited Companies, amongst themselves. This was not the meeting of the Board of Directors of the six Companies or the defendant-respondent no.1 - Company. Such a meeting is not referable any of the provisions of the Act 2013, but it relates to the properties/assets of the Companies.
12. Section 151 and 152 of the Act 2013 provides for appointment of Directors of the Company. Undisputedly, directors are not the owners of the Company. They are merely Officers of the Company. Duties of Directors is provided in Section 166 of the Act, 2013, which is reproduced below:-
"166 Duties of Directors. (1) Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company.
(2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
(3) A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
(4) A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
(5) A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
(6) A director of a company shall not assign his office and any assignment so made shall be void.
(7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees."
13. Sub-Section (4) of Section 166 mandates in clear terms that a Director of the Company shall not involve in a situation in which he may have a direct or indirect interest that conflicts or possibly may conflict, with the interest of the Company. Sub-Section (1) and (2) mandates that a director of a Company shall act in accordance with the articles of the Company and he shall act in good faith in order to promote objects of the Company for the benefits of its members as a whole, and in the best interest of the Company, its employees, the community and for the protection of environment. Powers of the Board of Directors is provided in Section 179 and restriction thereon is provided in Section 180 of the Act. Perusal of Section 179 would reveal that the minutes of the meeting, although was not of Board of Directors; yet in any event its subject matter can not be included within the powers conferred under Section 179 for dividing the properties/assets of the Company by its two directors amongst themselves. Section 187 (1) of the Act 2018, clearly provides that all investments made or held by a Company in any property, security or other asset shall be made or held by its own name, provided that the company may hold any shares in its subsidiary company in the name of any nominee or nominees of the company, if it is necessary to do so, to ensure that the number of members of the subsidiary company is not reduced below the statutory limit. Contravention of sub-section 1 of Section 187 has been made punishable under sub-section 4. Section 189 provides for maintaining register of all contracts or arrangements in which Directors are interested. It is not the case of the plaintiff-appellant that the disputed minutes of the meeting dated 10.2.2016 is an arrangement under Section 184 or 188 of the Act which has been entered in the register. Section 230(1) of the Act provides that in case a compromise or arrangement is proposed--
(a) between a company and its creditors or any class of them; or
(b) between a company and its members or any class of them, then the Tribunal may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs. Under Section 231 of the Act Tribunal has power to enforce the compromise or arrangement under Section 230 of the Act. The alleged minutes of the meeting dated 10.2.2016 does not fall under Section 230 of the Act.
14. Section 241 of the Act empowers any member of a Company to apply to the Tribunal in certain circumstances provided such member has a right to apply under Section 244, for an order under Chapter XVI and in that event power has been conferred upon the Tribunal for appropriate action under Section 242 of the Act.
15. Sections 241, 242 and 245 of the Act are relevant, which are reproduced below:-
"241. Application to Tribunal for Relief in Cases of Oppression, etc (1) Any member of a company who complains that--
(a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or
(b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter.
(2)The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter.
242. Powers of Tribunal (1) If, on any application made under section 241, the Tribunal is of the opinion--
(a) that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and
(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.
(2) Without prejudice to the generality of the powers under sub-section (1), an order under that sub-section may provide for--
(a) the regulation of conduct of affairs of the company in future;
(b) the purchase of shares or interests of any members of the company by other members thereof or by the company;
(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital;
(d) restrictions on the transfer or allotment of the shares of the company;
(e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case;
(f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e):
Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned;
(g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;
(h) removal of the managing director, manager or any of the directors of the company;
(i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims;
(j)the manner in which the managing director or manager of the company may be appointed subsequent to an order removing the existing managing director or manager of the company made under clause (h);
(k) appointment of such number of persons as directors, who may be required by the Tribunal to report to the Tribunal on such matters as the Tribunal may direct;
(l)imposition of costs as may be deemed fit by the Tribunal;
(m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made.
(3) A certified copy of the order of the Tribunal under sub-section (1)shall be filed by the company with the Registrar within thirty days of the order of the Tribunal.
(4) The Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company's affairs upon such terms and conditions as appear to it to be just and equitable.
(5) Where an order of the Tribunal under sub-section (1)makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make, without the leave of the Tribunal, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles.
(6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum or articles of a company shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act and the said provisions shall apply accordingly to the memorandum or articles so altered.
(7) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same.
(8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.
245. Class Action (1) Such number of member or members, depositor or depositors or any class of them, as the case may be, as are indicated in sub-section (2) may, if they are of the opinion that the management or conduct of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members or depositors, file an application before the Tribunal on behalf of the members or depositors for seeking all or any of the following orders, namely:--
(a) to restrain the company from committing an act which is ultra vires the articles or memorandum of the company;
(b) to restrain the company from committing breach of any provision of the company's memorandum or articles;
(c) to declare a resolution altering the memorandum or articles of the company as void if the resolution was passed by suppression of material facts or obtained by mis-statement to the members or depositors;
(d) to restrain the company and its directors from acting on such resolution;
(e) to restrain the company from doing an act which is contrary to the provisions of this Act or any other law for the time being in force;
(f) to restrain the company from taking action contrary to any resolution passed by the members;
(g) to claim damages or compensation or demand any other suitable action from or against--
(i) the company or its directors for any fraudulent, unlawful or wrongful act or omission or conduct or any likely act or omission or conduct on its or their part;
(ii) the auditor including audit firm of the company for any improper or misleading statement of particulars made in his audit report or for any fraudulent, unlawful or wrongful act or conduct; or
(iii) any expert or advisor or consultant or any other person for any incorrect or misleading statement made to the company or for any fraudulent, unlawful or wrongful act or conduct or any likely act or conduct on his part;
(h) to seek any other remedy as the Tribunal may deem fit.
(2) Where the members or depositors seek any damages or compensation or demand any other suitable action from or against an audit firm, the liability shall be of the firm as well as of each partner who was involved in making any improper or misleading statement of particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner.
(3)(i)The requisite number of members provided in sub-section (1)shall be as under:--
(a) in the case of a company having a share capital, not less than one hundred members of the company or not less than such percentage of the total number of its members as may be prescribed, whichever is less, or any member or members holding not less than such percentage of the issued share capital of the company as may be prescribed, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares;
(b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.
(ii) The requisite number of depositors provided in sub-section (1) shall not be less than one hundred depositors or not less than such percentage of the total number of depositors as may be prescribed, whichever is less, or any depositor or depositors to whom the company owes such percentage of total deposits of the company as may be prescribed.
(4) In considering an application under sub-section (1),the Tribunal shall take into account, in particular-
(a) whether the member or depositor is acting in good faith in making the application for seeking an order;
(b) any evidence before it as to the involvement of any person other than directors or officers of the company on any of the matters provided in clauses (a)to (f) of subsection (1);
(c) whether the cause of action is one which the member or depositor could pursue in his own right rather than through an order under this section;
(d) any evidence before it as to the views of the members or depositors of the company who have no personal interest, direct or indirect, in the matter being proceeded under this section;
(e) where the cause of action is an act or omission that is yet to occur, whether the act or omission could be, and in the circumstances would be likely to be--
(i) authorised by the company before it occurs; or
(ii) ratified by the company after it occurs;
(f) where the cause of action is an act or omission that has already occurred, whether the act or omission could be, and in the circumstances would be likely to be, ratified by the company.
(5) If an application filed under sub-section (1) is admitted, then the Tribunal shall have regard to the following, namely:--
(a) public notice shall be served on admission of the application to all the members or depositors of the class in such manner as may be prescribed;
(b) all similar applications prevalent in any jurisdiction should be consolidated into a single application and the class members or depositors should be allowed to choose the lead applicant and in the event the members or depositors of the class are unable to come to a consensus, the Tribunal shall have the power to appoint a lead applicant, who shall be in charge of the proceedings from the applicant's side;
(c) two class action applications for the same cause of action shall not be allowed;
(d) the cost or expenses connected with the application for class action shall be defrayed by the company or any other person responsible for any oppressive act.
(6) Any order passed by the Tribunal shall be binding on the company and all its members, depositors and auditor including audit firm or expert or consultant or advisor or any other person associated with the company.
(7) Any company which fails to comply with an order passed by the Tribunal under this section shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.
(8) Where any application filed before the Tribunal is found to be frivolous or vexatious, it shall, for reasons to be recorded in writing, reject the application and make an order that the applicant shall pay to the opposite party such cost, not exceeding one lakh rupees, as may be specified in the order.
(9) Nothing contained in this section shall apply to a banking company.
(10) Subject to the compliance of this section, an application may be filed or any other action may be taken under this section by any person, group of persons or any association of persons representing the persons affected by any act or omission, specified in sub-section (1)."
16. Admittedly, the disputed property was purchased by the defendant-respondent no.1 - Company in its own name which is in accordance with the provisions of Section 187 of the Act. Whatsoever may be the nature of the alleged Minutes of the Meeting dated 10.2.2016, but it relates to the affairs of the defendant-respondent-Company which may be complained under Section 241(1)(a) of the Act 2013 by making application before the Tribunal. Under Clause (e) and Clause (f) of sub-Section 2 of Section 242, the Tribunal has the power to terminate, set aside or modify any agreement, howsoever, arrived at between the Company and the Managing Director or any other Director or Manager, upon such terms and conditions as may in the opinion of the Tribunal be just and equitable in the circumstances of the case. The Tribunal has power to terminate, set aside or modify any agreement between the Company or any person other than those referred to in Clause (e). A class of member or members, depositor or depositors may also apply to the Tribunal in the circumstances mentioned in sub-section 1 of Section 245 of the Act.
17. Thus, the alleged Minutes of the Meeting drawn by the Directors plaintiff-appellant and the defendant-respondent no.2, dated 10.2.2016 relating to property held by the Company in its own name under Section 187 of the Act fall within the powers of the Tribunal conferred under Section 242 of the Act. Section 430 of the Act specifically provides that no Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under the Act or any other law for the time being in force.
18. Under Section 9 of the C.P.C. civil court shall have jurisdiction to try all suits of a Civil nature excepting suits of which their cognizance is either expressly or impliedly barred. Thus, the Civil Court shall have jurisdiction to try all types of suits unless the same is ousted, expressly or by necessary implication vide Robust Hotels (P) Ltd. and others Vs. EIH Limited and others (2017)1 SCC 622 (para 31), Nahar Industrial Enterprises Ltd. Vs. Hong Kong & Shanghai Banking Corpn, (2009) 8 SCC 646 and Jyoti Limited & Others Versus Bharat J. Patel (2015) 14 SCC 566 (para 7) etc.
19. The question of ouster of a jurisdiction of a Civil Court needs to be construed having regard to the Scheme of the Act as also the object and purport it seeks to achieve. A plea of bar to jurisdiction of a civil court has to be considered having regard to the contentions raised in the plaint. For this purpose, averments disclosing cause of action and the relief sought for therein must be considered in entirety. When the plaint read as a whole does not disclose material facts giving rise to a cause of action which may be entertained by a civil court, it may be rejected in terms of Order 7, Rule 11 of the C.P.C.
20. The principles relating to exclusion of jurisdiction of Civil Court has been summarised by Hon'ble Supreme Court in Dhulabhai and Others Vs. The State of Madhya Pradesh, AIR 1969 SC 78; as under:
"(1) Where the statute gives a finality to the orders of the special tribunals, the civil courts' jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.
(2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.
Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not.
(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals.
(4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.
(5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies.
(6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry.
(7) An exclusion of the jurisdiction of the civil court is not readily to be inferred unless the conditions above set down apply. "
(Emphasis supplied by me)
21. The aforesaid principles also finds support from the law laid down by Hon'ble Supreme Court in various judgments including the judgments in Rajasthan State Road Transport Corporation and another vs. Krishna Kant and Others (1995) 5 SCC 75, Dwarka Prasad Agarwal Vs. Ramesh Chand Agarwal - (2003) 6 SCC 220, Sahebgouda vs. Ogeppa (2003) 6 SCC 151, Dhruv Green Field Ltd. Vs. Hukam Singh (2002) 6 SCC 416 and Swamy Atmananda & Ors. Vs. Sri Ramakrishna Tapovanam & Ors, (2005) 10 SCC 51 and Church of North of India Vs. Lavajibhai Ratanjibhai & Ors. (2005) 10 SCC 760 (PARA 40 & 41). However, the principle aforementioned would not mean that in a given case if the Court has jurisdiction to determine a part of the relief claimed it will not confine itself thereto and reject the plaint in its entirety.
22. The crux of my conclusion is that the jurisdiction of Civil Court is excluded in cases where the matter in dispute is required under the Act 2013 to be determined by the Tribunal. If a matter fall outside the jurisdiction of the Tribunal under the Act 2013, the civil court shall have jurisdiction under Section 9 of the Civil Procedure Code.
23. Similar is the ratio of decision in a recent judgment and Hon'ble Supreme Court in Punjab Wakf Board Vs. Sham Singh Harike, 2019 4 SCC 698, where the controversy was with respect to the jurisdiction of Tribunal under the Wakf Act, 1995.
24. Perusal of the plaint of O.S. no.79 of 2019, reveals that the plaintiff-appellant has set up a case that he and the defendant-respondent no.2 and their family members were directors in six companies and there arose some dispute between him and other Directors relating to the conduct of the affairs of the Company and in that event two guests, namely, Brijesh Saxena and Muqadar Ali intervened and an agreement dated 10.2.2016 (alleged minutes of the meeting) was entered on calling of a meeting of Directors but the defendant-respondent no.2 has not complied with the conditions of the aforesaid minutes of the meeting. It has been mentioned in paragraphs 5 to 16 of the plaint that in terms of the Minutes of the Meeting the plaintiff-appellant and his family members resigned from Directorship on 11.3.2016 but the defendant-respondents sold the disputed property and have not complied with the terms of the Minutes of the Meeting. The cause of action arose when on 15.1.2019 some persons came to the plaintiff-appellant with regard to purchase by them the Plot No.C-6, Panki Industrial Area, Site 1, Panki, Kanpur and requested him to sign the sale deed and thereupon the plaintiff-appellant contacted the defendant-respondent no.2 and demanded money in terms of the Minutes of the Meeting dated 10.02.2016 which the defendant-respondent no.2 refused. Thus, the cause of action disclosed in the plaint clearly indicates the complaint of the plaintiff-appellant with respect to the property of the defendant-respondent-Company and conduct of its affairs. Therefore, the suit was clearly barred by the Provisions of Section 430 of the Act.
25. The Scheme of the Act 2013, exhaustively provides for all matters relating to a Company and its conduct and affairs. Jurisdiction has been exhaustively provided in such matters to Tribunal which is a specialised body constituted under the Act. The matters for which jurisdiction has not been conferred upon the Tribunal, has been provided specifically. In this regard reference may be had to Section 37 of the Act which provides for filing of a suit in certain circumstances. The case of the plaintiff-appellant is not covered by Section 37 of the Act.
26. All the reasons aforestated leads to an irresistible conclusion that the O.S. No.79 of 2019, filed by the plaintiff-appellant under Section 9 of the Civil Procedure Code was barred by the Provisions of Section 430 of the Act 2013 and, therefore, the plaint was lawfully rejected in terms of the provisions of Order VII Rule 11 C.P.C. The impugned order has been passed by the court below in accordance with law which does not require any interference.
27. For all the reasons aforestated, I do not find any merit in this appeal. Consequently, the appeal is dismissed. The question framed above is answered in affirmative by holding that under the facts and circumstances of the case the suit filed by the plaintiff-appellant was not maintainable under Section 9 of the Civil Procedure Code as it was barred by the provisions of Section 430 of the Companies Act 2013.
Order Date :- 1.7.2019/vkg