2020 (9) TMI 173 - HC - Companies Law

Validity of proceeding with the civil suit - dispute between the parties is covered under the provisions of the Companies Act or not - whether after incorporation of Section 430 of The Companies Act, 2013 w.e.f. 1.6.2016, the civil Court is barred to proceed with the civil suit already pending before it? HELD THAT - In the present case, the parties are at variance with regard to the issue of duplicate share certificate. In the backdrop of the law laid down by Hon'ble the Apex Court in SHRIPAL JAIN VERSUS TORRENT PHARMACEUTICALS LTD. AND ORS. 1995 (3) TMI 494 - SC ORDER and followed by the Bombay High Court in NINE MEDIA INFORMATION SERVICES LTD. VERSUS HERO HONDA MOTORS LTD. OTHERS 2016 (10) TMI 370 - BOMBAY HIGH COURT and the aforestated provisions of the Companies Act, in the facts and circumstances of the present case, it is manifest that the dispute between the parties is a company matter and not a civil dispute as held by the learned trial Court. After incorporation of new Companies Act, 2013 such matters has to be heard and decided by the Company Law Tribunal constituted under the new company law and is the only competent authority and has jurisdiction under the law to decide the conflict between the parties in respect of any company matter. It can hold enquiry into the matter under Section 84 of the Act, 1956 or 46 of the Companies Act, 2013 read with the Companies (Issue of Share Certificates) Rules, 1960 or The Companies (Share Capital and Debentures) Rules, 2014 and take a decision in the matter. In all the judgments cited by the petitioner, the disputes between the parties were found to be related to the company matters as enshrined in the Companies Act; like increase of authorized capital, allotment of shares or bonus shares, appointment of directors etc., therefore, they were relegated to the competent authorities constituted under the Companies Act. In this case also the conflict between the parties is found to be the dispute covered under the Companies Act, therefore, applying the above dictum of law, the petition is allowed. The order of the learned Trial Court dated 22.11.2019 delivered by XVth Civil Judge Class-I, Indore is set aside. The matter is pending since last 10 years, therefore, the Tribunal is directed to decide the matter within 6 (six) months from the date of receipt of the matter following the due process of law. No adjournment shall be given to the parties except in unavoidable circumstances. Petition allowed.

Summary

Issues Involved:
1. Jurisdiction of Civil Court post incorporation of Section 430 of the Companies Act, 2013.
2. Issuance of duplicate share certificates and related disputes.
3. Applicability of Sections 56, 57, 58, and 59 of the Companies Act, 2013.
4. Transfer of pending proceedings to the Company Law Tribunal.

Detailed Analysis:

1. Jurisdiction of Civil Court Post Incorporation of Section 430 of the Companies Act, 2013:
The core issue is whether the civil court retains jurisdiction over a pending civil suit after the incorporation of Section 430 of the Companies Act, 2013. Section 430 explicitly bars civil courts from entertaining any suit or proceeding related to matters that fall under the jurisdiction of the Company Law Tribunal or the Appellate Tribunal. The judgment emphasizes that the civil court is not competent to try disputes that fall within the ambit of the Companies Act, 2013, post the constitution of the Company Law Tribunal as per the notification dated 1st June 2016.

2. Issuance of Duplicate Share Certificates and Related Disputes:
The respondent had misplaced his share certificates and sought duplicate certificates from the company, which was denied. The matter escalated to SEBI and eventually led to a civil suit. The judgment refers to Section 84 of the Companies Act, 1956, and its corresponding Section 46 in the Companies Act, 2013, which govern the issuance of duplicate share certificates. The Supreme Court in Shripal Jain Vs. Torrent Pharmaceuticals Ltd. held that the proper forum for such disputes is not the civil court but the Registrar, who should conduct an inquiry under the relevant provisions.

3. Applicability of Sections 56, 57, 58, and 59 of the Companies Act, 2013:
The petitioner argued that the dispute falls under Sections 56, 57, 58, and 59 of the Companies Act, 2013, which deal with the transfer and transmission of securities and the rectification of the register of members. The judgment highlights that these sections provide a mechanism for resolving disputes related to the refusal of registration and rectification of the register, which should be addressed by the Company Law Tribunal.

4. Transfer of Pending Proceedings to the Company Law Tribunal:
Section 434 of the Companies Act, 2013, mandates the transfer of pending company matters from civil courts to the Company Law Tribunal. The judgment underscores that disputes pertaining to company matters, such as the issuance of duplicate share certificates, fall under the exclusive jurisdiction of the Company Law Tribunal. Consequently, the civil court's order was set aside, and the plaint was directed to be presented before the Company Law Tribunal.

Conclusion:
The judgment concludes that the dispute between the parties is a company matter and not a civil dispute. It directs the civil court to return the plaint to the concerned Company Law Tribunal within two months and mandates the Tribunal to decide the matter within six months. The status quo regarding the disputed shares is to be maintained until the Tribunal's decision. The petition is allowed, and the civil court's order dated 22.11.2019 is set aside.