2019 (7) TMI 107 - HC - Indian Laws

Maintainability of the plaint - Valuation - Undervaluation of the relief claimed in the suit - HELD THAT - Order VII Rule 11(b) of the CPC permits rejection of the plaint where the relief claimed is undervalued and the plaintiff, on being required by the Court to correct the valuation within the time to be fixed by the Court, fails to do so - The suit as aforesaid is for the reliefs of declaration and permanent injunction. Section 8 of the Suits Valuation Act, 1887 provides that in suits other than those referred to in Section 7(v), (vi), (ix) and (x)(d), the value as determined for the computation of court fees and the value for the purposes of jurisdiction shall be the same - The present suit, where the plaintiffs as a consequence of declaration are seeking permanent injunction, qualifies under Section 7(iv)(c) as a suit for declaratory decree and consequential relief and in accordance therewith the plaintiffs are required to set out in the plaint the value at which they value the relief and court fees is to be computed thereon - The Suits Valuation Act provides for valuation for the purposes of jurisdiction to be the same as for the purposes of court fees. The plaintiffs have valued the relief of declaration with consequential relief claimed in the suit, for the purposes of court fees and jurisdiction, at ₹ 2 crores and paid appropriate court fees thereon - It is not in dispute that the Court of minimum pecuniary jurisdiction for entertaining a suit, valuation whereof is in excess of ₹ 2 crores, is this Court. The present suit is not for declaration qua liability of the plaintiffs for the debts of the defendant, for it to be said that the maximum liability of each of the plaintiffs as member of the defendant under the Memorandum and Articles of Association having been pegged at ₹ 100/-, the statement required to be made by a plaintiff under Section 7(iv)(c) supra cannot be of a valuation of more than ₹ 100/- - Thus no merit is found in the contention qua valuation, for seeking rejection of the plaint. Jurisdiction of this Court - Bar as created under Section 430 of the Companies Act, 2013 - HELD THAT - The grievance in the present suit, though may have its genesis in the complaints of the plaintiffs of mismanagement, the subject matter of the present suit is not mismanagement but the action of the defendant of issuing notice to the plaintiffs to show cause why the membership of the plaintiffs should not be terminated. The said grievance is not a grievance of mismanagement and oppression, even though the cause of action may have its genesis in complaints of plaintiffs, of mismanagement and oppression - Though this is clear as daylight but the defendant also, by filing an application under Order VII Rule 11 of the CPC running into as many as 93 pages and by raising all sorts of arguments, did not allow the same to be seen immediately, resulting in the order being reserved. The application under Order VII Rule 11 of the CPC is found to be misconceived and is dismissed.

Summary

Issues Involved:
1. Enforceability and legality of Show Cause Notices.
2. Application under Order VII Rule 11 CPC for rejection of plaint.
3. Valuation of relief claimed.
4. Jurisdiction of Civil Court vs. National Company Law Tribunal (NCLT).

Issue-wise Detailed Analysis:

1. Enforceability and Legality of Show Cause Notices:
The plaintiffs sought a declaration that the Show Cause Notices dated 6th October 2018 were unenforceable, illegal, void, and not binding. They also sought a permanent injunction to restrain the defendant from taking any steps in furtherance of these notices. The plaintiffs argued that the notices were issued for complaining to the Serious Fraud Investigation Office (SFIO) about alleged misconduct and financial irregularities by the previous General Committee members of the defendant, a company registered under Section 8 of the Companies Act, 2013.

2. Application under Order VII Rule 11 CPC for Rejection of Plaint:
The defendant filed an application under Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC), seeking rejection of the plaint on grounds of lack of cause of action, undervaluation of the relief claimed, and the suit being barred by law. The application was initially withdrawn due to the payment of requisite court fees by the plaintiffs. A subsequent application was filed, arguing that the plaint did not disclose any cause of action and that the Show Cause Notices were issued in accordance with the defendant's Bye-laws and Articles of Association.

3. Valuation of Relief Claimed:
The defendant contended that the relief claimed was undervalued, arguing that the maximum liability of each plaintiff towards the defendant’s debts was ?100, and thus the valuation should not exceed this amount. The plaintiffs, however, valued the relief at ?2 crores and paid appropriate court fees. The court held that the valuation under Section 7(iv)(c) of the Court Fees Act, 1870, for declaratory relief with consequential relief is at the discretion of the plaintiffs, and the court should not interfere with this discretion. Therefore, the contention regarding undervaluation was found to be without merit.

4. Jurisdiction of Civil Court vs. National Company Law Tribunal (NCLT):
The defendant argued that the jurisdiction of the Civil Court was barred by Section 430 of the Companies Act, 2013, and that the plaintiffs should seek redressal before the NCLT for grievances related to mismanagement and oppression. However, the court found that the subject matter of the suit was not mismanagement but the legality of the Show Cause Notices issued to the plaintiffs. The court clarified that the grievance in the present suit did not fall under the category of mismanagement and oppression, thus the jurisdiction of the Civil Court was not ousted.

Conclusion:
The application under Order VII Rule 11 of the CPC was dismissed as misconceived. The court held that the valuation of the relief claimed by the plaintiffs was appropriate and within their discretion. Additionally, the court affirmed its jurisdiction to hear the case, as the grievance did not pertain to mismanagement or oppression under the Companies Act, 2013, but rather to the legality of the Show Cause Notices issued by the defendant.