2025 (4) TMI 1293 - HC - Companies Law

Rejection of the plaint filed by the appellant - decree of permanent injunction from transferring any tenancy right in favour of any new tenant in respect of the property described in Schedule- A of the plaint - Company and its Directors have been mismanaging the assets of the Company - locus standi and a cause of action to seek a declaration of shareholding and related rights without having the transfer of shares recorded under Section 56 of the Companies Act 2013 - misjoinder of causes of action - HELD THAT - As rightly enumerated in the impugned judgment and deemed decree the plaintiff does not disclose clearly in the plaint as to how he became such partial owner of the property - Thus there is a palpable non-disclosure of the right of the plaintiff to the suit property which forms an essential component of the bundle of facts which comprise of the cause of action for the suit. For a plaintiff to claim a remedy in a suit the plaintiff has to essentially disclose a legal right to the subject property as well as an infringement of such right both of which ingredients are absent from the plaint inasmuch as the immovable property is concerned which is the only subject-matter of the suit as mentioned in the plaint schedule - the learned trial Judge also proceeded on the premise that if the plaintiff has an axe to grind regarding the alleged mismanagement of the affairs of the Company by inducting third party-tenants the appropriate remedy would be under Section 241 of the 2013 Act. The reliance of the plaintiff/appellant on the Division Bench judgment of this Court in the matter of Eastern Indian Motion Picture Association 2024 (2) TMI 775 - CALCUTTA HIGH COURT by the appellant is also misplaced since in paragraph no.21 thereof the coordinate Bench categorically observed that it did not find it necessary to go into the issue whether the dispute therein was covered by Section 241 of the 2013 Act. Thus the said judgment cannot be said to be a binding precedent on the applicability of Section 241 in the facts of the present case - That apart the said judgment was rendered in the particular factual matrix of the said case which are not applicable to the present case. There are no reason to interfere with the impugned judgment and deemed decree both on the basis of the observations arrived at by the learned trial Judge and the additional reasons supplied - it is not inclined to interfere in the present appeal. Conclusion - The suit is not maintainable due to lack of cause of action misjoinder of causes of action and bar under the Companies Act and procedural law. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the plaint filed by the plaintiff-appellant is maintainable in view of the provisions of the Companies Act, 2013, particularly Sections 241 and 430, given that the reliefs sought pertain to alleged mismanagement of the company and rights as a shareholder.

(b) Whether the plaintiff has locus standi and a cause of action to seek a declaration of shareholding and related rights without having the transfer of shares recorded under Section 56 of the Companies Act, 2013.

(c) Whether the suit is barred by the doctrine of misjoinder of causes of action, specifically joining claims relating to shareholding and alleged rights in immovable property without clear nexus.

(d) Whether the appropriate remedy for the plaintiff's claims lies before the National Company Law Tribunal (NCLT) under the Companies Act, 2013, rather than in a civil suit.

(e) The applicability of the provisions of the City Civil Court's Act, 1953, and the Code of Civil Procedure, particularly Order II Rule 2 and Order VII Rule 11, in the rejection of the plaint.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Maintainability of the plaint under Companies Act, 2013 provisions

The relevant legal framework includes Section 241 of the Companies Act, 2013, which provides a remedy for shareholders in cases of oppression or mismanagement, and Section 430, which bars civil suits in respect of matters covered under the Companies Act. The City Civil Court's Act, 1953, also contains provisions excluding jurisdiction over certain company-related disputes.

The Court observed that the plaint's primary reliefs revolve around alleged mismanagement by the company and its directors, including unauthorized transfer of tenancy rights and rent collection. The respondents argued that such disputes fall squarely within the ambit of Section 241 and are barred from civil suit by Section 430.

The Court noted that the plaint does not disclose a cause of action outside the scope of company law remedies and that the trial court rightly rejected the plaint on the ground of non-maintainability under the Companies Act. The Court also upheld the applicability of the City Civil Court's Act provisions in excluding jurisdiction.

Issue (b): Plaintiff's locus standi and cause of action to claim shareholding rights

The plaintiff sought a declaration of being a shareholder by virtue of inheritance from his deceased mother. The Court emphasized that under Section 56 of the Companies Act, 2013, the transfer or transmission of shares must be recorded by the company for a person to acquire shareholder status.

The plaint did not disclose any application or action under Section 56 to record the plaintiff's shareholding, nor did it disclose any cause of action for such declaration. The Court held that without such recording, the plaintiff has no legal right as a shareholder and therefore no locus standi to claim reliefs related to shareholding or company assets.

The respondents' argument that the remedy lies before the NCLT for such claims was accepted, and the Court found the plaintiff's reliance on a Division Bench judgment in a different factual matrix misplaced.

Issue (c): Misjoinder of causes of action

The plaint joined claims relating to the plaintiff's alleged shareholding and his rights in an immovable property described in the plaint schedule. The Court found that these causes of action are distinct and independent, lacking any common genesis or nexus.

Further, the plaint failed to disclose how the plaintiff became a partial owner of the immovable property or any legal right to it. This non-disclosure was fatal to the cause of action concerning the property.

The Court held that such misjoinder violated Order II Rule 2 of the Code of Civil Procedure, rendering the plaint bad in law.

Issue (d): Appropriate forum for reliefs sought

The Court reiterated that claims regarding shareholding rights, transfer of shares, and alleged mismanagement of company affairs fall within the exclusive jurisdiction of the NCLT under the Companies Act, 2013.

The plaint did not disclose any attempt to seek relief before the NCLT under the relevant provisions, such as Sections 56, 58, 59, or 241. The Court held that the trial court correctly declined jurisdiction and rejected the plaint accordingly.

Issue (e): Application of procedural provisions

The plaint was rejected under Order VII Rule 11 of the Code of Civil Procedure, which permits rejection of a plaint if it does not disclose a cause of action or is barred by law.

The Court found that the plaint was barred by law due to the Companies Act provisions and the City Civil Court's Act, and also suffered from non-disclosure of cause of action and misjoinder of causes of action, justifying rejection at the threshold.

3. SIGNIFICANT HOLDINGS

The Court held:

"The plaint does not disclose any locus standi of the plaintiff vis-`a-vis the reliefs sought and, consequentially, any cause of action for the plaintiff to seek any remedy regarding alleged mismanagement of the affairs of the Company and/or in respect of its assets."

"In the event the plaintiff claims to be a right in praesenti as a shareholder, it was the incumbent duty of the plaintiff to apply in proper format under Section 56 of the 2013 Act and only upon the transfer/devolution of the rights in the concerned shares in favour of the plaintiff being recorded under Section 56 would a right accrue to the plaintiff to claim as a shareholder."

"The plaint is barred by law ex facie for misjoinder of causes of action, mixing up the causes pertaining to the immovable property and the shares in the defendant no. 1-Company."

"The Companies Act itself bars a civil suit under Section 430 and the learned trial Judge was justified in rejecting the plaint on such count as well."

"The reliefs sought with regard to the plaintiff being declared to be a shareholder/member of the defendant no. 1- Company are available to be urged before the NCLT in the event an application to that effect made under the 2013 Act by the plaintiff was rejected by the Company."

Accordingly, the Court affirmed the dismissal of the plaint, holding that the suit is not maintainable due to lack of cause of action, misjoinder of causes of action, and bar under the Companies Act and procedural law. The Court declined to interfere with the trial court's order, emphasizing that the issues were not decided on merits but on preliminary legal grounds under Order VII Rule 11 CPC.