2006 (11) TMI 345 - HC - Companies Law

Summary

Issues Involved:
1. Interim Injunction
2. Competing Business
3. Fiduciary Duty
4. Disclosure of Pending Proceedings
5. Jurisdiction of Company Law Board

Summary:

1. Interim Injunction:
The plaintiff filed I.A. No. 8363 of 2006 u/s Order 39, rules 1 and 2, Code of Civil Procedure, seeking to restrain defendant Nos. 1 to 3 from carrying on competing business, dealing with the plaintiff's customers, and transferring or creating third-party rights in the assets of defendant Nos. 4 and 5. The court noted that the law of interim injunction requires the plaintiff to establish a prima facie case, balance of convenience, and irreparable loss and injury.

2. Competing Business:
The plaintiff alleged that defendant Nos. 1 to 3, who were directors of the plaintiff, siphoned off funds and diverted business to set up competing businesses, M/s. USK Exports Pvt. Ltd. (defendant No. 4) and M/s. USK Trading Pvt. Ltd. (defendant No. 5). The plaintiff claimed that these actions caused monetary loss and damage to the plaintiff.

3. Fiduciary Duty:
The plaintiff argued that defendant Nos. 1 to 3 owed a fiduciary duty to the plaintiff and were obliged to carry on business activities for the plaintiff's benefit. The plaintiff contended that these defendants breached their fiduciary duties by diverting orders and siphoning off funds to the competing businesses.

4. Disclosure of Pending Proceedings:
The court noted that the plaintiff failed to disclose the pending proceedings before the Company Law Board, specifically C.P. No. 110 of 2005 and C.A. No. 39 of 2006, which sought similar reliefs. The court emphasized that it was the plaintiff's duty to disclose these material particulars.

5. Jurisdiction of Company Law Board:
The court highlighted that the jurisdiction of the Company Law Board u/s 397 of the Companies Act is concurrent with that of civil courts. The court observed that the issues raised in the present suit were already under consideration before the Company Law Board, which had reserved its judgment after hearing arguments.

Conclusion:
The court dismissed I.A. No. 8363 of 2006, vacating the ex parte injunction granted on July 31, 2006, and noted that the plaintiff's failure to disclose the pending proceedings before the Company Law Board and the similarity of reliefs sought in both forums were sufficient grounds to deny interim relief.