2004 (9) TMI 387 - HC - Companies Law

Summary

Issues Involved:
1. Whether the Company Law Board should be equated and treated as a Court for the purposes of section 10 of the Code of Civil Procedure.
2. Whether the Company Petition filed before the Company Law Board should be treated as a suit before the Civil Court.
3. Whether the matter in issue in the Company Petition is directly and substantially in issue in the previously instituted suit before the Civil Court, thereby warranting a stay of the proceedings in the Company Petition.

Detailed Analysis:

1. Whether the Company Law Board should be equated and treated as a Court for the purposes of section 10 of the Code of Civil Procedure:

The Company Law Board, constituted under section 10E of the Companies Act, has some trappings of a judicial Tribunal, such as the power to give a definitive judgment. However, it is not a "Court" in the accepted sense. The Board's powers and functions are quasi-judicial in nature, and it operates under the control of the Central Government. Although it follows procedures of a legal character and has some powers similar to those of a Civil Court, it is not independent and lacks the finality and authoritativeness of a Court. The Allahabad High Court in Prakash Timbers v. Sushma Shingla and the Apex Court in P. Sarathy v. State Bank of India have held that the Company Law Board is a Tribunal and not a Court. Therefore, for the purposes of section 10 of the Code, the Company Law Board cannot be equated and treated as a Court.

2. Whether the Company Petition filed before the Company Law Board should be treated as a suit before the Civil Court:

The proceedings before the Company Law Board, though judicial in nature, are summary and limited in scope. The reliefs sought in the Company Petition under sections 111A, 397, 398, 402, and 408 of the Companies Act are distinct from those in a civil suit. The term "suit" is generic and encompasses proceedings before any authority or forum, but the Company Law Board's proceedings cannot be treated as a suit within this generic meaning. The judgments cited by the appellants, including Pandurang Ramachandra Mandlik v. Shantibai Ramchandra Ghatge and Patel Roadways Ltd. v. Birla Yamaha Ltd., do not support the argument that the Company Petition should be treated as a suit. Therefore, the Company Petition cannot be equated with a suit before the Civil Court.

3. Whether the matter in issue in the Company Petition is directly and substantially in issue in the previously instituted suit before the Civil Court, thereby warranting a stay of the proceedings in the Company Petition:

The reliefs sought in the Company Petition and the civil suit are different. The civil suit seeks to restrain interference with the management of the company by the respondents, while the Company Petition alleges acts of oppression and mismanagement, including manipulation of shareholding and misappropriation of funds. The scope of enquiry in the Company Petition is different and distinct from that in the civil suit. The proceedings before both forums are independent and not identical. The Gujarat High Court in S.E. Works v. R.J.V. Mills and the Calcutta High Court in Piyush Kanti Guha v. West Bengal Pharmaceutical and Phytochemical Development Corporation Ltd. have held that section 10 of the Code applies only if the matter in issue is identical in both proceedings. Since the matters in issue are not directly and substantially the same, the provisions of section 10 of the Code do not warrant a stay of the proceedings before the Company Law Board.

Conclusion:

The Company Law Board is not a Court for the purposes of section 10 of the Code, and its proceedings cannot be treated as a suit. The matter in issue in the Company Petition is not directly and substantially in issue in the previously instituted civil suit. Therefore, the Company Law Board was correct in refusing to stay the proceedings in the Company Petition. The appeal is dismissed.