2014 (9) TMI 1202 - HC - Indian Laws

Dismissal of the suit for want of jurisdiction - whether suit could be filed by the plaintiff company against the defendant through one of the director without passing a specific resolution empowering a director to file a suit against a particular party and if no such resolution is passed, what is the consequence thereof? - Whether application under order 7 rule 11(d) was at all maintainable on the ground that suit was bad for want of specific resolution in favour of a director to file a such suit against the defendant company? - Whether defect if any was curable and plaint could not be rejected on that ground? HELD THAT - It is not in dispute that the defendant had already filed an application in the same suit in the year 2006 under order 7 rule 11(a) of the Code of Civil Procedure, 1908 relying upon the averments made in the plaint and inter alia praying that the plaint did not disclose any cause of action and was thus liable to be rejected. The defendant never raised any issue at that stage that the plaint itself was liable to be rejected on the ground that no specific resolution was passed by the company authorising the director to file specific suit against the defendant. The learned District Judge after considering the submission of both parties rejected application under order 7 rule 11(a) of the Code of Civil Procedure, 1908. It is not in dispute that the respondent did not challenge the said order passed by the District Court as far back as on 25th September 2006. It is thus clear that the defendant had accepted the fact that no such specific resolution was required to be passed authorising a director to file specific suit against the defendant. The respondent not having raised such issue in the earlier application filed under order 7 rule 11(a) of Code of Civil Procedure, 1908 and having relied upon the plaint could not have file another application under order 7 rule 11(d) though earlier application having been rejected holding that the plaint disclosed cause of action. Once the company had accepted and confirmed the authority granted to one of his Director to file such suit, the objection raised by the respondent was taken care of. The learned trial Judge therefore could not ignore such confirmation on the authority of the director or in the alternative ought to have render a finding about ratification by the board of the acts of its Director for filing such suit on behalf of the company. Be that as it may, the said affidavit itself was in the nature of a ratification by the board of the acts of the director who had filed and signed the plaint on behalf of the company. Application allowed.

Summary

Issues Involved:
1. Jurisdiction of the District Court at Nashik
2. Authority of Mr. Siddharth Sachdev to file the suit
3. Maintainability of the application under Order VII Rule 11(d)
4. Curability of the defect in the authorization

Issue-wise Detailed Analysis:

1. Jurisdiction of the District Court at Nashik
The defendant initially filed an application under Order VII Rule 11 of the Code of Civil Procedure, 1908, arguing that the District Court at Nashik lacked territorial jurisdiction to entertain the suit. The District Judge II, Nashik, rejected this application, deciding that the issue of territorial jurisdiction would be framed and decided along with other issues. The defendant did not challenge this order.

2. Authority of Mr. Siddharth Sachdev to File the Suit
The defendant later filed an application under Order VII Rule 11(d), claiming that Mr. Siddharth Sachdev, who signed and verified the plaint, lacked the authority to file the suit on behalf of the plaintiff company. The defendant argued that Order 29 Rule 1 of the Code of Civil Procedure does not authorize individuals to institute suits on behalf of companies but only to sign and verify pleadings. The plaintiff countered by stating that a resolution of the board of directors is not a legal requirement for filing a suit and provided a power of attorney authorizing Mr. Siddharth Sachdev to initiate legal proceedings.

3. Maintainability of the Application under Order VII Rule 11(d)
The plaintiff contended that the application under Order VII Rule 11(d) was not maintainable as the suit was not barred by any law. They argued that the lack of a specific resolution authorizing Mr. Siddharth Sachdev to file the suit was a curable defect and did not constitute a bar under any law. The plaintiff cited the Supreme Court's judgment in Prem Lala Nahata vs. Chandi Prasad Sakaria, which held that procedural defects, such as misjoinder of parties or causes of action, do not bar a suit under Order VII Rule 11(d).

4. Curability of the Defect in the Authorization
The plaintiff argued that even if the trial judge was correct in holding that there was no specific resolution authorizing Mr. Siddharth Sachdev to file the suit, this was a curable defect. They cited the Supreme Court's judgment in United Bank of India vs. Naresh Kumar, which held that a company can ratify the actions of its officers, and such ratification can be express or implied. The plaintiff asserted that the board of directors had approved a power of attorney authorizing Mr. Siddharth Sachdev to initiate legal proceedings, which was sufficient compliance with the law.

Conclusion:
The High Court concluded that the lack of a specific resolution authorizing Mr. Siddharth Sachdev to file the suit was a curable defect and did not bar the suit under any law. The court noted that the plaintiff had provided a power of attorney and an affidavit confirming Mr. Siddharth Sachdev's authority. The court held that the application under Order VII Rule 11(d) was not maintainable and that the suit did not suffer from any jurisdictional infirmity. The trial court's order rejecting the plaint was set aside, and the plaint was restored to file. The trial court was directed to dispose of the suit expeditiously.