2015 (2) TMI 1253 - HC - Companies Law

Temporary injunction - Whether the plaintiffs have made out a prima facie case for continuation of the exparte ad-interim temporary injunction passed on 5.8.2014? - Held that - Admittedly a majority of the shareholders attended the meeting and endorsed the removal of the defendants as directors. Once defendants 1 and 2 have been removed from directorship they cannot interfere with the day-to-day affairs of the company and its working units. The learned judge has considered all the materials placed on record to come to the conclusion about the existence of prima facie case and the balance of convenience being in favour of the plaintiffs and comparative hardship that would be caused to the plaintiffs in the event of non-granting of injunction order. The learned judge has adopted right approach to the real state of affairs. Even if this court were to come to a different conclusion from the one arrived at by the trial court the same cannot be substituted unless it suffers from absurdity or perversity. It is not as though the learned judge has ignored certain documents having a bearing on the applications filed. He has not misapplied the law into the facts of the case. The learned judge has adopted right approach to the real state of affairs by considering all the materials placed on record in the light of the respective pleadings. No infirmity or absurdity is found in the impugned order. Accordingly the appeals will have to be dismissed a s unfit for admission.

Summary

Issues:
1. Jurisdiction of the civil court in matters involving company disputes and injunctions.

Analysis:
The judgment involves a dispute between the plaintiffs, a company and its directors, and the defendants who were removed from directorship. The plaintiffs sought permanent injunction against the defendants for alleged mismanagement and interference in the company's affairs. The defendants contested the suit, claiming lack of clean hands on the plaintiffs' part and challenging the jurisdiction of the civil court to entertain the matter. The court granted temporary injunction against the defendants, restraining them from interfering with the company's operations and representing themselves as directors. The defendants argued that the Company Law Board had exclusive jurisdiction under Section 430 of the Companies Act, 2013. However, the court held that the civil court's jurisdiction was not ousted for granting injunctions related to company management issues, especially when the defendants had already been removed as directors through a lawful process.

The court analyzed the removal of defendants from directorship, noting that a majority of shareholders had elected new directors in their place. The court considered the documents and communications supporting the removal of defendants and found that they could not interfere with the company's affairs post-removal. The court assessed the existence of a prima facie case, balance of convenience, and potential irreparable loss to the plaintiffs if the injunction was not granted. The judge framed relevant points for consideration and concluded that the trial court had correctly evaluated the situation, considering all materials and pleadings. The judgment emphasized that the trial court's decision should not be substituted unless it was absurd or perverse, and found no infirmity in the order. Consequently, the appeals were dismissed, with parties directed to bear their own costs.

In summary, the judgment clarifies the jurisdiction of civil courts in granting injunctions related to company management disputes, highlighting the importance of due process in director removal and the court's role in protecting the company's interests.