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2014 (1) TMI 1858 - HC - Companies LawJurisdiction of Civil Court - proceedings before the BIFR - violation of the injunction of the civil court - participation of a Member of the BIFR in the proceedings - Held that - The Privy Council way back in 1940 in the case of Secretary of State v. Mask and Co. 1940 (3) TMI 7 - BOMBAY HIGH COURT was examining the question of jurisdiction of the civil court to entertain the related suit in view of the provisions of the Sea Customs Act 1878. It was held that exclusion of jurisdiction of the civil court is not to be readily inferred but that such exclusion must either be explicitly expressed or clearly implied. It was further held that even if jurisdiction is so excluded the civil courts would have jurisdiction to examine into cases where the provisions of the Act have not been complied with or where the statutory tribunal has not acted upon in conformity with the fundamental principles of judicial procedure. Appeal filed under the provision of Order XLIII rule 1(r) of the Code of Civil Procedure 1908 i.e. against the order of injunction - Held that - This provision is relatable to section 104 of the C.P.C. Admittedly the appellant is not a party to the suit. In the appeal filed the appellant has basically assailed the injunction order on the ground of lack of jurisdiction though other grounds are also taken - It is a settled proposition of law that the right of appeal is a creature of the statute and would be governed by the conditions of the statute. Being a vested right it enables a party to the suit to prefer an appeal subject to fulfillment of the required conditions. However there may be cases where a person who may not be a party to the suit but may feel the necessity to prefer an appeal against an order passed in the suit. Such a person can also file an appeal provided he seeks leave of the court and the court grants the leave for the purpose. In the present case it is seen that the appellant has not sought leave of the Appellate Court and consequently no leave to file appeal has been granted. Since the appellant is not yet a party to the civil suit question of him raising the objection as to jurisdiction before the civil court also does not arise at this stage - this court is of the considered opinion that the appeal filed by the appellant is not maintainable in the present form. As the appeal is being held to be not maintainable deliberation on the merit of the injunction order dated May 13 2013 is considered not necessary. Quashing of the proceedings before the BIFR dated May 16 2013 and the order of the BIER dated July 1 2013 passed in BIFR Case No. 149 of 1994 - Held that - The BIFR not being a judicial forum superior to the Civil Court at Guwahati could not have ignored the order of the civil court by terming the same to be one by corum-non-judice. Until and unless the injunction order of the civil court is vacated or recalled by an appropriate judicial forum the same must be respected and given effect to. Moreover the Allahabad High Court did not give any direction to the BIER to examine net worth of the company. While dismissing the writ it was observed by the Allahabad High Court that the issue can be raised before the BIFR. This cannot be construed to mean a positive direction to the BIER to proceed and decide the issue. There is thus no inconsistency or conflict between the order of the Allahabad High Court and the order of the civil court as observed by the BIFR. Petitioner recused himself from hearing the case - Held that - It goes without saying that justice must not only be done but must be seen to have been done. Likewise to dispel any apprehension of bias which a party may harbor against the presiding officer hearing the case the test applied should be from the stand point of the litigant. It is his apprehension which must be addressed and dispelled even though the presiding officer may not at all be biased in the case - Coming to the present case having once recused himself from hearing the case it is neither desirable nor expected that the hon ble Member should again start hearing the case moreso when proceedings have assumed almost adversarial character. Application disposed off.
Issues Involved:
1. Legality and validity of the injunction order restraining the BIFR from proceeding further. 2. Jurisdiction of the civil court to entertain the suit and grant the injunction. 3. Legality and validity of the proceedings before the BIFR and its orders. 4. Participation of a BIFR member who had earlier recused himself. Detailed Analysis: 1. Legality and Validity of the Injunction Order: The plaintiff, an unsecured creditor of the company declared as a sick industrial company, filed T.S. No. 166 of 2013 seeking a declaration that the company is not a sick company and an injunction to restrain the BIFR from proceeding further. The learned Civil Judge No. 3, Kamrup, Guwahati passed an injunction order on May 13, 2013, restraining the BIFR from proceeding with BIFR Case No. 149 of 1994. The injunction was granted based on the plaintiff's contention that the company's net worth had turned positive, thus removing it from the purview of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The civil court held that it had jurisdiction to grant the injunction as the company was no longer a sick industrial company. 2. Jurisdiction of the Civil Court: The appellant challenged the injunction order on the grounds that the civil court lacked jurisdiction under sections 22(1) and 26 of the SICA, which bar the jurisdiction of civil courts in matters over which the BIFR or AAIFR have authority. The appellant also argued that the Civil Court at Guwahati lacked territorial jurisdiction as the registered office of the company is in Kanpur, Uttar Pradesh, and the BIFR is located in New Delhi. However, the court held that the civil court has inherent power to determine its own jurisdiction and that the bar of jurisdiction is not to be readily inferred. The court also noted that the appellant had not sought leave to file the appeal and had not raised the jurisdictional issue before the civil court. 3. Legality and Validity of BIFR Proceedings and Orders: Despite the injunction order, the BIFR proceeded with the case, holding that the civil court's order was void and that it was corum-non-judice. The BIFR directed the State Bank of India to appoint an independent auditor to examine the company's net worth as of December 31, 2012. The court held that the BIFR, being a quasi-judicial body, could not ignore the civil court's order and must respect it until it is vacated or recalled by an appropriate judicial forum. The court emphasized that the BIFR's proceedings from May 13, 2013, onwards would stand stayed and be of no legal consequence. 4. Participation of a Recused BIFR Member: The company challenged the participation of a BIFR member, Sri J.P. Dua, who had earlier recused himself from the proceedings due to his association with the Sarda brothers. Despite this, Sri J.P. Dua participated in the proceedings on September 5, 2013. The court held that justice must be seen to be done, and a member who has recused himself should not participate again in the proceedings to avoid any apprehension of bias. Conclusion: The court dismissed the appeal filed by the appellant, holding it not maintainable due to the lack of leave to file the appeal and the failure to raise the jurisdictional issue before the civil court. The court upheld the injunction order of the civil court, restraining the BIFR from proceeding with BIFR Case No. 149 of 1994. The court also directed that the proceedings before the BIFR from May 13, 2013, onwards would stand stayed and be of no legal consequence. Additionally, the court directed that the BIFR member who had recused himself should refrain from participating in the proceedings.
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