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2020 (9) TMI 851 - HC - Companies LawJurisdiction - elections to the Board of Directors (APEX Council) of a company - allegations of oppression and mismanagement - wrongful appointment of an Ombudsman in violation of Articles of Association - Whether adjudication can be done by a civil court or whether jurisdiction vests exclusively with the National Company Law Tribunal (NCLT)? - Section 430 of the Companies Act, 2013. HELD THAT - What emanates from the preceding arguments and on consideration of the comparative chart presented, is that sections 241, 242 and 244 of the Companies Act deal with all the issues which have been raised in the suit. The NCLT has been specifically conferred powers to address grievances relating to the affairs of the company, which may be prejudicial or oppressive to any member of the company, or for issues of appointment of directors. The appointment of an Ombudsman, would also form a part of the conduct and management of the affairs of the company. The Supreme Court has held in SHASHI PRAKASH KHEMKA (DEAD) THROUGH LRS. AND ANOTHER VERSUS NEPC MICON (NOW CALLED NEPC INDIA LTD.) AND OTHERS 2019 (2) TMI 971 - SUPREME COURT that the scope of Section 430 is vast, and jurisdiction of the civil court is completely barred when the power to adjudicate vests in the Tribunal. As has been held in VIJI JOSEPH VERSUS P. CHANDER, ESWARAN ANNAMALAI, THE PRESIDENCY CLUB, M/S P. SRIRAM ASSOCIATES, M/S NSDL LIMITED, INTEGRATE REGISTRY MANAGEMENT SERVICES PVT. LTD., TARUN KUMAR BAGGA, K. GOPAL, T.K. SRINIVASAN, SANKARAIAH, CHIRAG BATAVIA, CHARI RAMESH, SANJAI SHANKAR, DR. S. RAMACHANDRAN, RAMESH JAGTIANI AND THE PRESIDENCY CLUB, REP., BY ITS HONY. SECRETARY VERSUS P. CHANDER, ESWARAN ANNAMALAI 2019 (12) TMI 395 - MADRAS HIGH COURT , the issue of election to the Board of Directors would be amenable to jurisdiction of the NCLT. The issue is the same in the present suit. Likewise, the lis and grievances raised in the suit can be agitated only before the NCLT. A civil court would have no jurisdiction. As far as the specific allegation apropos the manner in which the Ombudsman was appointed are concerned, it too, is an issue which will come within the ambit of Tribunal i.e. appointment of people who would conduct the affairs of the company/the management. The video recording of the manner of appointments at the AGM in question, could well be examined by the NCLT. That being the position, the issue of maintainability ought to have been determined first by the trial court. It did not have jurisdiction to entertain the suit. Appeal allowed.
Issues Involved:
- Jurisdiction of civil court vs. National Company Law Tribunal (NCLT) in matters of company management. - Allegations of oppression and mismanagement. - Validity of the appointment of an Ombudsman. - Legality of the Annual General Meeting (AGM) and amendments to the Articles of Association. Detailed Analysis: 1. Jurisdiction of Civil Court vs. NCLT: The primary issue was whether the civil court had jurisdiction to adjudicate matters related to the company’s management, including elections to the Board of Directors, allegations of oppression and mismanagement, and the appointment of an Ombudsman. The appellant argued that Section 430 of the Companies Act, 2013, bars civil courts from entertaining such suits, as the NCLT has exclusive jurisdiction. The court referenced several judgments, including *Shashi Prakash Khemka vs. NEPC Micon* and *SAS Hospitality Pvt. Ltd. vs. Surya Constructions Pvt. Ltd.*, which reinforced that the NCLT has comprehensive powers to handle such disputes, thereby excluding the jurisdiction of civil courts. 2. Allegations of Oppression and Mismanagement: The appellant contended that the grievances raised in the suit, such as the validity of the AGM notice and the election process, fall under Sections 241 and 242 of the Companies Act, which deal with oppression and mismanagement. The court acknowledged that the NCLT is empowered to address these issues, as it has the authority to regulate the conduct of the company’s affairs and provide relief in cases of oppression and mismanagement. 3. Validity of the Appointment of an Ombudsman: The dispute included the wrongful appointment of an Ombudsman in violation of the Articles of Association. The appellant argued that this issue should also be adjudicated by the NCLT, as it pertains to the management and conduct of the company’s affairs. The court agreed, citing that the NCLT has the jurisdiction to address such appointments under the Companies Act. 4. Legality of the AGM and Amendments to the Articles of Association: The suit sought to declare the AGM held on 29.12.2019 and the amendments made to the Articles of Association as illegal. The appellant argued that these matters are within the purview of the NCLT, as they involve the management and regulatory conduct of the company’s affairs. The court found that the NCLT has the necessary powers to adjudicate these issues, including the validity of resolutions passed at the AGM. Conclusion: The court concluded that the civil court did not have jurisdiction to entertain the suit, as the matters fall within the exclusive jurisdiction of the NCLT under Sections 241, 242, and 430 of the Companies Act. The impugned order of the trial court was set aside, and the appeal was allowed, directing that the grievances be adjudicated by the NCLT.
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