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2019 (9) TMI 1008 - HC - Companies LawMaintainability of suit - alternative remedy - Prevention of Oppression and Mismanagement - Jurisdiction of NCLT - right of dependent, individually or collectively to sell, transfer, dispose of or create third party interest in the undertaking - HELD THAT - Section 242(2)(m), being the residuary power and which is equivalent to Section 402(g) of the Companies Act, 1956, is very widely worded and would confer such a power on the NCLT - The NCLT, per Section 242(4), is also empowered to grant interim relief as sought by the plaintiff along with the plaint in this suit also, of restraining the defendants from dealing with the immovable property of the defendant no.1. NCLT and its predecessor Company Law Board (CLB), in such situation as pleaded by the plaintiff, if finds merit in the claim of the plaintiff, have much wider powers than the powers of this Court as the Civil Court. NCLT, in exercise of its powers under Section 442 of the Act, is empowered to bring about a settlement between the plaintiff and the defendants no.2 to 6 and other shareholders of the defendant no.1 company, relating to the affairs of the defendant no.1 and which power cannot be exercised by the Civil Court. NCLT / CLB are known to often make orders providing for sale / transfer of shareholdings inter se shareholders and / or of transfer of immovable properties of the company in favor of a shareholder in lieu of his shareholding in the company and which, this Court as the Civil Court, will be able to do. Once it is found that NCLT has jurisdiction, the jurisdiction of the Civil Court to determine the matter which the NCLT is empowered to determine would stand excluded under Section 430 of the Act. The question of bar of jurisdiction of the Civil Court would depend upon the nature of the averments in the plaint. If the averments in the plaint, though not using the words mismanagement, prejudicial to interest and oppression, are found to be amounting thereto and the relief sought are also which fall in the domain of Section 442(2) of the Act, the jurisdiction of the Civil Court would be barred. This Court lacks jurisdiction to entertain this suit - suit dismissed.
Issues Involved:
1. Maintainability of the suit. 2. Locus of the plaintiff to file the suit. 3. Jurisdiction of the Civil Court vs. National Company Law Tribunal (NCLT). 4. Non-impleadment of necessary parties. 5. Allegations of oppression and mismanagement. 6. Validity of the sale deed executed by the defendants. 7. Remedies available under the Companies Act, 2013. Detailed Analysis: 1. Maintainability of the Suit: The plaintiff instituted the suit seeking declarations and injunctions related to the properties of defendant no.1 company, of which he holds 20% shareholding. The plaintiff alleged that the defendants no.2 to 6, who are also directors and shareholders, have misappropriated funds and are attempting to dispose of the company’s assets without proper authorization, violating Sections 179 and 180 of the Companies Act, 2013. The plaintiff sought declarations that the defendants have no right to sell the company’s assets and that a sale deed executed by defendant no.2 is null and void. The plaintiff also sought injunctions to prevent further sales and to mandate the deposit of sale proceeds. 2. Locus of the Plaintiff to File the Suit: The court questioned the plaintiff’s locus to file the suit, given that the issues pertain to the internal management and affairs of the company. The plaintiff, holding 20% shareholding, qualifies to approach the NCLT under Section 241 of the Companies Act, 2013, which deals with complaints of oppression and mismanagement. 3. Jurisdiction of the Civil Court vs. NCLT: The court examined whether it has jurisdiction to entertain the suit or if the matter falls within the exclusive jurisdiction of the NCLT. Section 430 of the Companies Act, 2013, bars the jurisdiction of civil courts in matters that the NCLT is empowered to determine. The court noted that the plaintiff’s allegations and reliefs sought, including setting aside the sale deed and restraining further sales, fall within the domain of the NCLT’s powers under Sections 241 and 242 of the Companies Act, 2013. The NCLT has the authority to regulate the conduct of the company’s affairs, terminate or set aside agreements, and grant interim reliefs. 4. Non-impleadment of Necessary Parties: The court identified a defect in the suit due to the non-impleadment of Dandona Infrastructure Pvt. Ltd., the entity in whose favor the disputed sale deed was executed. However, this defect was deemed rectifiable and not central to the dismissal of the suit. 5. Allegations of Oppression and Mismanagement: The court found that the plaintiff’s allegations of misappropriation of funds, unauthorized sales, and jeopardizing the company’s assets constitute complaints of oppression and mismanagement. Such complaints are specifically addressed by the NCLT under Chapter XVI of the Companies Act, 2013. 6. Validity of the Sale Deed Executed by the Defendants: The plaintiff challenged the validity of a sale deed executed by defendant no.2 on behalf of defendant no.1, claiming it was done without proper authorization and in violation of Section 180 of the Companies Act, 2013. The court noted that the NCLT has the power to set aside such agreements under Section 242(2)(f) of the Companies Act, 2013. 7. Remedies Available Under the Companies Act, 2013: The court emphasized that the Companies Act, 2013, provides comprehensive remedies for shareholders’ grievances through the NCLT. The NCLT has broader powers to address issues of oppression and mismanagement, regulate the company’s affairs, and bring about settlements, which civil courts cannot do. The court cited precedents affirming the exclusive jurisdiction of the NCLT in such matters and the absolute bar under Section 430 of the Companies Act, 2013. Conclusion: The court concluded that it lacks jurisdiction to entertain the suit, as the matters fall within the exclusive jurisdiction of the NCLT. The suit was dismissed, with no costs awarded. The court highlighted the importance of utilizing the appropriate forum provided by the Companies Act, 2013, to resolve disputes related to company affairs.
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