2015 (3) TMI 548 - HC - Companies Law

Relief abandoned in Company Law Board proceedings voluntarily can not be filed again in a fresh suit - Abuse of process of law - Held that - On a meaningful reading of the plaint filed in the instant suit of the plaint it would appear that the reliefs claimed in the plaint against the applicants are substantially similar to the reliefs that the plaintiffs had claimed against the applicant in the Company Law Board proceeding. For whatever reason, the plaintiffs herein who are the petitioners in the Company Law Board proceedings, applied to the Company Law Board for withdrawing such reliefs with leave to file fresh proceedings against the applicants herein. Such prayer was refused by the Company Law Board. The petitioners in the Company Law Board proceeding appealed to this court against such refusal. This court permitted the petitioners to withdraw such reliefs but recorded that the further prayer of the appellants (petitioners in the Company Law Board proceedings) cannot be acceded to since the Company Law Board did not have jurisdiction to grant leave to the appellants to institute a fresh suit. However, this court recorded that nothing in the said order would prevent the appellants from filing a suit, but the maintainability of such suit on account of the pendency and partial abandonment of the Company Law Board proceedings may be gone into by the forum which receives the action. I am inclined to accept the contention of the Ld. Counsel for the applicants. The plaintiffs having claimed and having subsequently abandoned certain reliefs against the applicants in the Company Law Board proceedings without being granted unconditional leave to file fresh proceedings for the self-same reliefs, in my opinion the plaintiffs suit is barred against the applicants under Order 23 of the CPC. Further, exposing the applicants in the present suit substantially to the same claims which were withdrawn/abandoned against them in the Company Law Board proceedings, would, in my opinion, amount to abuse of process of law. The withdrawal and/or abandonment of the concerned reliefs against the applicants by the plaintiffs in the Company Law Board proceedings was voluntary and it would not be fair to expose the applicants to the same claims again in the present suit which would amount to putting the applicants in doubled jeopardy. - Decided in favour of applicant.

Issues Involved
1. Rejection of the plaint or expunction of defendants' names.
2. Withdrawal and abandonment of reliefs in Company Law Board proceedings.
3. Applicability of Order 23 Rule 1 of the Code of Civil Procedure (CPC) to company proceedings.
4. Maintainability of the present suit in light of previous proceedings.

Detailed Analysis

1. Rejection of the Plaint or Expunction of Defendants' Names
The defendants (Nos. 12, 13, and 14) filed an application for the rejection of the plaint in CS No. 319 of 2013 or alternatively, for the expunction of their names from the plaint. The basis for this application was that the reliefs sought in the present suit were substantially the same as those previously claimed in the Company Law Board (CLB) proceedings but were later abandoned without obtaining leave to file a fresh proceeding.

2. Withdrawal and Abandonment of Reliefs in Company Law Board Proceedings
The plaintiffs had filed Company Petition No. 859 of 2010 before the CLB, seeking various reliefs, including the declaration of certain agreements as null and void and injunctions against acting upon those agreements. The plaintiffs later sought to withdraw these reliefs and filed for leave to institute a fresh suit, which the CLB rejected. The plaintiffs appealed this decision, and the High Court allowed the withdrawal of the reliefs but did not grant unconditional leave to file a fresh suit. The Court stated, "nothing in this order will prevent the appellants from filing a suit, but the maintainability of such suit on the ground of the pendency and partial abandonment of the Company Law Board proceedings may be gone into by the forum which receives the action."

3. Applicability of Order 23 Rule 1 of the Code of Civil Procedure (CPC) to Company Proceedings
The defendants argued that under Order 23 Rule 1 of the CPC, the plaintiffs were barred from instituting a fresh suit on the same subject matter without obtaining leave to do so. They cited Rule 6 of the Companies (Court) Rules, 1959, which states that the provisions of the CPC apply to company proceedings. They also referenced the Madras High Court decision in Jacob Cherain vs. K.N. Cherain and the Supreme Court decision in Sarguja Transport Service vs. State Transport Appellate Tribunal, Gwalior, to support their contention.

4. Maintainability of the Present Suit in Light of Previous Proceedings
The plaintiffs contended that the High Court had granted them leave to file a fresh suit and that the bar under Order 23 Rule 1 (4) of the CPC did not apply. They argued that the subject matter of the present suit was different from the abandoned reliefs in the CLB proceedings. However, the Court found that the reliefs claimed in the present suit were substantially similar to those abandoned in the CLB proceedings. The Court held that the plaintiffs' suit was barred under Order 23 of the CPC and that allowing the suit to proceed would amount to an abuse of process of law.

Court's Decision
The Court accepted the defendants' arguments and ruled that the plaintiffs' suit was barred under Order 23 of the CPC. The Court stated, "The plaintiffs having claimed and having subsequently abandoned certain reliefs against the applicants in the Company Law Board proceedings without being granted unconditional leave to file fresh proceedings for the self-same reliefs, in my opinion, the plaintiffs' suit is barred against the applicants under Order 23 of the CPC." Consequently, the plaint in CS No. 319 of 2013 was rejected as against defendant nos. 12, 13, and 14. The application was thus disposed of, and the plaintiffs' prayer for a stay was refused.

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