2015 (2) TMI 1413 - HC - Companies Law

Maintainability of the suit - entitlement to interim relief/injunction - abuse of process and suppression of material facts - plaintiffs have prima facie case where the balance of convenience lies or not - absence of any direction from any judicial forum. Maintainability of the suit - HELD THAT - On conjoint reading of Section 100 of Companies Act 2013 and the objection taken by the respondents including the one that the voting right is already suspended by the Company qua the said share holding asking the plaintiffs to move the Company Law Board would be meaningless because their (plaintiffs ) lack of voting right as contended by the respondents would make the proceedings before the Company Law Board as well not maintainable. This is over and above an additional aspect that the provision of Section 186 of the Companies Act prima facie can not be read to be meant for the circumstances like the present one however no final opinion needs to be expressed with regard to the scope and ambit of the said section since that is not the controversy before this Court - Suffice it to hold that in the facts of this case considering the material on record and the chequered history between the contesting parties and the chronology of the actions taken by the respondents as borne out from record the suit in question can not be termed to be not maintainable. The suit is therefore held to be maintainable. Whether the plaintiffs have prima facie case where the balance of convenience lies and who would suffer irreparable loss if the injunction as prayed for is not granted? - HELD THAT - This Court finds that what is prayed for by the plaintiffs is within four corners of law and even in absence of any direction from any judicial forum the respondents were under legal obligation to act in accordance with law. Therefore by giving direction to the respondents to act in accordance with law no prejudice would be caused to them but in the event it is not done the plaintiffs would certainly suffer irreparable loss. By the impugned action taken at the Board Meeting dated 10.11.2014 the voting right is also claimed to have been taken of the plaintiffs/ shareholders - This Court finds that refusal by this Court to grant interim relief as prayed for by the plaintiffs would not only make the civil suit infructuous but would have effect of giving premium to the respondents for the impugned actions/in actions if ultimately it turns out to be unsustainable. The argument of learned advocate for the respondents with regard to arbitration clause would not help the respondents for the reason that even they had unsuccessfully attempted so once before this Court. This Court also does not find any substance in the argument canvassed on behalf of the respondents about suppression of material fact by the plaintiffs or that the proceedings are taken out one by one by the plaintiffs or persons of their group. This Court has taken into consideration the cause of action and prayer clauses of those proceedings and after doing so this contention is rejected. Appeal admitted - List for further consideration on 16.03.2015.

Issues Involved:

1. Maintainability of the suit.
2. Entitlement to interim relief/injunction.
3. Compliance with the Companies Act, 2013 and the Companies (Administration and Management) Rules, 2014.
4. Allegations of abuse of process and suppression of material facts.
5. Applicability of arbitration clause.

Issue-wise Analysis:

1. Maintainability of the Suit:

The respondents contended that the suit was not maintainable, arguing that the plaintiffs should have approached the Company Law Board under Section 186 of the Companies Act, 1956. The court examined the nature of the suit and the relief sought in the Exh.5 application, concluding that the suit was indeed maintainable. The court reasoned that the plaintiffs' lack of voting rights, as contended by the respondents, would render proceedings before the Company Law Board non-maintainable. Furthermore, the court noted that the circumstances did not align with the intended scope of Section 186, thus rejecting the respondents' contention.

2. Entitlement to Interim Relief/Injunction:

The court assessed whether the plaintiffs had a prima facie case and where the balance of convenience lay. It found that the plaintiffs had a strong prima facie case, as the actions of the respondents were contrary to the legal obligations under the Companies Act and the Companies (Administration and Management) Rules, 2014. The court emphasized that refusing interim relief would cause irreparable loss to the plaintiffs, while granting it would not prejudice the respondents. The court directed the respondents to comply with the requisition notice and facilitate the holding of an Extraordinary General Meeting (EGM).

3. Compliance with the Companies Act, 2013 and the Companies (Administration and Management) Rules, 2014:

The plaintiffs sought compliance with Rule 17(7) of the Companies (Administration and Management) Rules, 2014, which mandates the company to provide a list of members to requisitionists. The court noted that the respondents had failed to provide this list, which was a legal obligation. The court ordered the respondents to comply within a week, enabling the plaintiffs to convene the EGM in accordance with the law.

4. Allegations of Abuse of Process and Suppression of Material Facts:

The respondents alleged that the plaintiffs, in collusion with others, were abusing the process of law and suppressing material facts. The court examined the cause of action and prayer clauses of the related proceedings and found no substance in these allegations. It rejected the respondents' contention that the proceedings were an abuse of process or that there was suppression of material facts.

5. Applicability of Arbitration Clause:

The respondents argued that the plaintiffs should have invoked the arbitration clause. The court dismissed this argument, noting that the respondents had previously unsuccessfully attempted to rely on the arbitration clause. The court found no merit in the argument that the arbitration clause rendered the suit non-maintainable.

Conclusion:

The court admitted the Appeal from Order and directed the respondents to comply with the requisition notice, facilitating the holding of the EGM. It ordered that any decisions or resolutions from the EGM would not be effective without the court's permission and would be subject to further court orders. The court continued the status quo regarding the composition of the Board of Directors and rejected the respondents' request to stay the order.

← Previous Next →