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2019 (12) TMI 395 - HC - Companies LawOppression and mismanagement - Whether an election dispute of a company involving voting through electronic means done under Section 20 of the Companies (Management and Administration) Rules 2014 to the Board of Directors would be amenable to the jurisdiction of the National Company Law Tribunal? HELD THAT - Section 424 of the Act deals with the procedure to be adopted by the Tribunal and the Appellate Tribunal. The forums are given liberty to go beyond the Code of Civil Procedure by applying principles of natural justice and subject to other provisions governing. Thus, they are not bound by the Code, which is obviously a procedural one. They can also formulate their own procedure - Under Sub Clause (2) of 424 of the Act, the Tribunals are vested with the powers of the Civil Court as granted under the Code of Civil Procedure. Sub Section (3) gives sanctity to an order passed by the Tribunal or the Appellate Tribunal by elevating to it that of a decree. Sub Section 4 makes the position clear by deeming the Tribunal as a Civil Court though for the purpose of Section 195 and Chapter XXVI of the Code of Criminal Procedure. The functioning of the Tribunal also has the protection for its action taken in good faith under Section 428 of the Act. The Tribunal can also seek assistance of Chief Metropolitan Magistrate etc., while taking custody of the properties, books of account or other documents of the said company - Section 430 of the Act provides for an absolute bar to a Civil Court to entertain any suit or proceedings, which the Tribunal is empowered to do so under the Act. This provision starts with a negative covenant and thus, makes the intention of the legislature very clear. The object is to decide the disputes of the company. This section gives power to the Tribunal to determine, enforce law qua the company for any violation. Law includes any other law also. Therefore, it is certainly a peremptory provision. This provision has to be read along with other provisions in Sections 241, 242 and 424 to 429. Once this position is made clear, then it is very easy to understand the scope and ambit of Section 241. The intendment of the legislature is to redress the disputes, more particularly, internal ones of a company within the four walls of the Tribunal. Therefore, the contention that complex or disputed issues to be adjudicated upon only through the Civil Court would never arise at all. Though, summary proceeding may be required by the Tribunal in a given case, the Tribunal is not meant to follow it in all cases. Such a leverage and flexibility is conferred on the Tribunal either act as a regular or a special Court depending upon the nature of the complaint behind it. Sections 241 and 242 on the one hand and along with Sections 424 to 430 of the Act on the other hand, an election dispute would not lie before the Civil Court, but only before the Tribunal. There are no hesitation in holding that the learned single Judge has not taken note of the relevant provisions involved - it was accordingly held that the proper remedy is by an adjudication before the Civil Court as complex issues issues are involved - the order passed by the learned single Judge set aside - appeal allowed.
Issues Involved:
1. Jurisdiction of the National Company Law Tribunal (NCLT) over election disputes involving electronic voting under Section 20 of the Companies (Management and Administration) Rules 2014. 2. Applicability of Section 430 of the Companies Act, 2013, which bars Civil Courts from entertaining suits that the Tribunal is empowered to determine. 3. Interpretation of Sections 241 and 242 of the Companies Act, 2013 concerning oppression and mismanagement. 4. Application of the principle of "ejusdem generis." 5. Relevance of precedents and judicial interpretations in the context of the Companies Act, 2013. Detailed Analysis: 1. Jurisdiction of NCLT over Election Disputes: The primary issue was whether an election dispute involving electronic voting for the Board of Directors falls under the jurisdiction of the NCLT. The respondents, who lost the election, alleged fraud and manipulation in the e-voting process. They sought a declaration that the election results were void and requested a mandatory injunction for a re-election under judicial supervision. The Court examined whether such disputes could be adjudicated by the NCLT under Sections 241 and 242 of the Companies Act, 2013, which deal with oppression and mismanagement. 2. Applicability of Section 430 of the Companies Act, 2013: Section 430 bars Civil Courts from entertaining any suit that the Tribunal is empowered to determine under the Act. The appellants argued that the suit was not maintainable in Civil Court due to this express bar. The Court agreed, stating that Section 430's negative covenant clearly indicates the legislature's intent to confine such disputes within the Tribunal's jurisdiction. The Court emphasized that the NCLT has comprehensive powers to address complex issues, including election disputes, under Sections 241 and 242. 3. Interpretation of Sections 241 and 242: Sections 241 and 242 provide remedies for oppression and mismanagement. The Court noted that the term "oppression" is broad and includes any conduct that is burdensome, harsh, and wrongful. An election dispute, particularly one alleging fraud and collusion, falls within the scope of mismanagement and oppression, as it affects the company's management and decision-making processes. The Court cited the Apex Court's judgment in Shanti Prasad Jain, which held that continuous acts of oppression and mismanagement could justify invoking these sections. 4. Application of "Ejusdem Generis": The principle of "ejusdem generis" suggests that general words following specific ones should be interpreted in the context of the specific words. The Court cautioned against applying this principle rigidly, noting that it should not be used to defeat legislative intent. The Court referenced the Division Bench's decision in D. Sivakumar v. Government of Tamil Nadu, emphasizing that the principle applies only when there is ambiguity and a clear legislative intent is absent. In this case, the Court found no ambiguity in Sections 241 and 242 and thus rejected the application of "ejusdem generis." 5. Relevance of Precedents and Judicial Interpretations: The Court reviewed various precedents cited by both parties. It distinguished the facts and legal issues in those cases from the present case. For instance, the Court found that the decision in Jai Mahal Hotels (P.) Ltd. was not applicable as it dealt with rectification and jurisdiction of the Company Law Board under different sections of the Companies Act, 1956. The Court also referred to the Apex Court's decision in Shashi Prakash Khemka v. NEPC Micon Ltd., which clarified the wide scope of Section 430, reinforcing that disputes within the Tribunal's purview must be adjudicated by the NCLT. Conclusion: The Court concluded that election disputes involving allegations of fraud and manipulation fall within the jurisdiction of the NCLT under Sections 241 and 242 of the Companies Act, 2013. It held that Section 430 bars Civil Courts from entertaining such suits. The Court set aside the learned single Judge's order, which had erroneously directed adjudication by the Civil Court, and allowed the appeals, granting liberty to the respondents to approach the NCLT within four weeks. The NCLT was directed to decide the application on its merits in accordance with the law.
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