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2022 (12) TMI 1337 - HC - Companies LawJurisdiction of civil court - Rejection of plaint of appellant under Order VII Rule 11(d) of Code of Civil Procedure, 1908 - rejection on the ground that the civil suit was barred by virtue of Section 430 of the Companies Act, 2013 as the appropriate forum for the adjudication of the disputes involved is the National Company Law Tribunal - applicability of Companies Act, 1956 or the Companies Act, 2013? - reliability on decisions of on Jai Mahal Hotels Pvt. Ltd. 2015 (10) TMI 265 - SUPREME COURT and Standard Chartered Bank 2006 (5) TMI 185 - SUPREME COURT - bar on the jurisdiction of civil courts - applicability of bar under Section 430 - liquidation of TCL have an impact on the outcome of the instant appeal? Whether the instant suit is governed by the Companies Act, 1956 or the Companies Act, 2013? - Can the Appellants in the facts and circumstance of the present case rely on Jai Mahal Hotels Pvt. Ltd. and Standard Chartered Bank? - HELD THAT - I am in agreement that with the findings recorded by the learned trial Court inasmuch as the bulk of the provisions of the Companies Act, 2013 relevant to the present controversy was notified on 30th August 2018 and with Section 46 dealing with Certificate of Shares was notified on 1st April 2014. The ratio of Jai Mahal Hotels Pvt. Ltd. and Standard Chartered Bank is of no help to the plaintiff companies as the same were decided in the context of the Companies Act, 1956 and hence, are not applicable to the facts and circumstances of the present case. Even otherwise, this Court is afraid that such a plea taken by the learned senior counsel cannot be sustained particularly in view of Section 465 of the Act, 2013 which deals with Repeal of certain enactments and savings as well as the judgment of the Hon ble Supreme Court in Shashi Prakash Khemkha (D) Through LRs vs. NEPC Micon, 2019 (2) TMI 971 - SUPREME COURT wherein the Hon ble Supreme Court being confronted with an identical plea, held that We are conscious of the fact that in the present case, the cause of action has arisen at a stage prior to this enactment. However, we are of the view that relegating the parties to civil suit now would not be the appropriate remedy, especially considering the manner in which Section 430 of the Act is widely worded. There are no merit in the contentions of the learned senior counsel and hence, the present case will be governed by the provisions of the Companies Act, 2013 and not Companies Act, 1956. The instant issue is answered accordingly. How is a bar on the jurisdiction of civil courts to be inferred? - Whether in the facts and circumstances of the present case bar under Section 430 is attracted? - Does liquidation of TCL have an impact on the outcome of the instant appeal? - HELD THAT - On bare perusal of section 9 of the code, it is found that there are two types of exceptions which are canvassed in Section 9, first, exceptions under the Code of Civil Procedure itself which is apparent from the use of subject to the provisions herein contained and secondly, exceptions which are not covered under the Code of Civil Procedure which is apparent from the use of excepting suits of which their cognizance is either expressly or impliedly barred . In the present case we are concerned with the latter exception which can further be divided into two types, first, jurisdiction expressly barred and secondly, jurisdiction impliedly barred. Considering the language of Section 430 of the Act, 2013, the analysis in the present judgment pertains to jurisdiction expressly barred. A suit is said to be expressly barred when it is barred by any enactment for the time being in force. Indisputably, it is open for a competent legislature to bar the jurisdiction of civil Courts in respect of a particular class of suits of a civil nature, provided that in doing so it acts within the four corners of the legislative powers conferred upon it and does not violate the letter and spirit of the Constitutional provisions. It is a settled proposition that every presumption should be made in favour of the jurisdiction of a civil Court and the provisions of exclusion of jurisdiction of a Court must be strictly construed - The NCLT is a specialised agency created for the purpose of a speedier and efficient regulation of the management of a company. Its powers are much broader than what are vested in the civil courts by virtue of Section 9 of the Code. The bulk of the dispute between the parties pertain to the ownership of the 50.21% shareholding in TCL and the validity of the meeting of the board of directors which is alleged to have taken place on 27th August 2013. Having perused the scheme of the Act, 2013, on the first sight though it appears that the disputes at hand between the parties can be adjudicated by the NCLT but in my opinion, such a decision would render the Appellants herein remediless as TCL has been dissolved and is no more in existence. The fundamental principle behind the bar on the jurisdiction of the civil court is that the there must adequacy of remedy being available to the parties who are relegated out of the civil Courts and they must not be rendered remediless. This Court does not find any merit in the objection of the Respondents that the subsequent liquidation of TCL will have no bearing on the present case. No corporate entity now exists in the form of TCL which may be governed by the provisions of the Companies Act, 2013. Hence, it cannot be said that the suit filed by the plaintiff companies was barred under Section 430 of the Companies Act, 2013. There is an inherent right in every person as per Section 9 of the Code to bring a civil suit setting forth as to how the plaintiff s legal rights have been violated for which he/she is seeking the indulgence of the Court and every interpretation must be made by which the jurisdiction of the civil Court is not readily ousted. Further, in case of suspicion, an interpretation should be made which leans in favour of the jurisdiction of the civil Court - this Court is of the considered opinion that the trial court has erred in rejecting the plaint as being barred by Order VII Rule 11(d) of the Code inasmuch as the suit was not barred under Section 430 of the Act, 2013. Appeal allowed.
Issues Involved:
1. Applicability of the Companies Act, 1956 or the Companies Act, 2013. 2. Bar on the jurisdiction of civil courts under Section 430 of the Companies Act, 2013. 3. Impact of the liquidation of Tirupati Ceramics Limited (TCL) on the jurisdiction of civil courts. Issue-Wise Detailed Analysis: Issue I: Applicability of the Companies Act, 1956 or the Companies Act, 2013 24. Learned senior counsel for the plaintiff companies argued that the trial court erred in applying the Companies Act, 2013, as the facts of the case pertain to a period before the Act was notified. The trial court rejected this argument, noting that the Companies Act, 2013 came into force in August 2013, and the suit was filed in 2015. The court emphasized that the previous Act (Companies Act, 1956) was repealed by Section 465 of the Companies Act, 2013. 25. The court agreed with the trial court's findings, highlighting that the bulk of the relevant provisions of the Companies Act, 2013 were notified on 30th August 2018, and Section 46 dealing with 'Certificate of Shares' was notified on 1st April 2014. The court also referred to the Supreme Court judgment in Shashi Prakash Khemkha (D) Through LRs vs. NEPC Micon, which supported the applicability of the Companies Act, 2013. Therefore, the court concluded that the present case would be governed by the Companies Act, 2013, not the Companies Act, 1956. Issue II: Bar on the jurisdiction of civil courts under Section 430 of the Companies Act, 201329. Section 9 of the Code of Civil Procedure (CPC) allows civil courts to try all suits of a civil nature unless expressly or impliedly barred. The court noted that the exclusion of civil court jurisdiction is not readily inferred, and any presumption must favor the existence of jurisdiction. The court referred to several Supreme Court judgments, including State of Andhra Pradesh vs. Manjeti Laxmi Kantha Rao and Ganga Bai vs. Vijay Kumar, which emphasized the inherent right to bring a civil suit unless explicitly barred by statute. 36. The court examined the scheme of the Companies Act, 2013, including Sections 39, 46, 59, 179, 241, 242, 243, and 244, which outline the powers and jurisdiction of the National Company Law Tribunal (NCLT). The court noted that Section 430 of the Act explicitly bars civil court jurisdiction in matters that the NCLT is empowered to determine. The court also referred to the Supreme Court judgment in Shashi Prakash Khemkha (D) Through LRs vs. NEPC Micon, which held that the jurisdiction of civil courts is completely barred in matters within the NCLT's purview. Issue III: Impact of the liquidation of Tirupati Ceramics Limited (TCL) on the jurisdiction of civil courts42. The court acknowledged that the bulk of the dispute pertained to the ownership of 50.21% shareholding in TCL and the validity of a board meeting held on 27th August 2013. The court noted that TCL had been dissolved by the NCLT, rendering it non-existent. The court emphasized that the fundamental principle behind barring civil court jurisdiction is to ensure that parties are not rendered remediless. The court referred to Section 250 of the Companies Act, 2013, which states that a dissolved company ceases to operate except for specific purposes such as realizing dues and discharging liabilities. 44. The court referred to the NCLT's order dated 24th November 2020, which dissolved TCL. The court concluded that the liquidation of TCL meant there was no corporate entity to be governed by the Companies Act, 2013, and thus, the civil suit was not barred under Section 430 of the Act. Conclusion:46. The court held that there is an inherent right under Section 9 of the CPC to bring a civil suit unless expressly barred. The court found that the trial court erred in rejecting the plaint under Order VII Rule 11(d) of the CPC, as the suit was not barred under Section 430 of the Companies Act, 2013. 47. The court allowed the appeal, set aside the trial court's order dated 21st March 2022, and restored the suit to the file. There was no order as to costs. 48. Pending applications, if any, were also disposed of. 49. The judgment was ordered to be uploaded on the website forthwith.
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