1986 (12) TMI 298 - HC - Companies Law

Summary

Issues Involved:
1. Application under Section 11 of the Code of Civil Procedure (Res Judicata)
2. Validity of Plaintiff No. 1's Renomination as Director
3. Jurisdiction and Decisions of the Company Law Board under Sections 408 and 409 of the Companies Act

Issue-wise Detailed Analysis:

1. Application under Section 11 of the Code of Civil Procedure (Res Judicata)
The defendants filed an application under Section 11 of the Code of Civil Procedure, arguing that the suit should be dismissed as barred by res judicata. They contended that the plaintiffs had already sought relief under Sections 408 and 409 of the Companies Act before the Company Law Board, which had dismissed their application. The doctrine of res judicata, as codified in Section 11 and explained in the case of Workmen of Cochin Port Trust v. Board of Trustees of the Cochin Port Trust, AIR 1978 SC 1283, was cited to support this argument. The court acknowledged the principle but emphasized that for res judicata to apply, the subject matter must be identical, the matter must have been finally decided, and the decision must have been made by a competent authority.

2. Validity of Plaintiff No. 1's Renomination as Director
The plaintiffs sought a declaration that Plaintiff No. 1 was validly renominated as a director of Defendant No. 7-company during the annual general meeting held on March 31, 1986. They alleged that Defendant No. 1, in conspiracy with other defendants, objected to the renomination and forged the meeting's proceedings. The court noted that the Company Law Board's dismissal of the application under Section 409 was based on the technical ground that the applicant was not a director at the relevant time, and the application under Section 408 was dismissed for lack of substantiation, but an inspector was appointed to investigate the company's affairs. This indicated that the matter had not been finally decided.

3. Jurisdiction and Decisions of the Company Law Board under Sections 408 and 409 of the Companies Act
The defendants argued that the Company Law Board's order dated July 31, 1986, which dismissed the plaintiffs' application under Sections 408 and 409, barred the current suit. However, the court pointed out that the subject matter of the suit (the validity of Plaintiff No. 1's renomination) was not identical to the issues before the Company Law Board, which dealt with broader allegations of mismanagement and oppression. Furthermore, the Company Law Board did not have the jurisdiction to grant the specific declaration sought by the plaintiffs in this suit. The court also noted that the Company Law Board had not finally decided the allegations, as it had appointed an inspector to investigate further.

Conclusion
The court concluded that the necessary conditions for res judicata under Section 11 of the Code of Civil Procedure were not met because the subject matter of the suit was not identical to the matter before the Company Law Board, and the latter had not finally decided the issues. Consequently, the application under Section 11 was dismissed with costs assessed at Rs. 1,000.