2015 (5) TMI 282 - SC - Companies Law

Interim application seeking certain interim relief - Not to convey or hold or attend any meeting of Board of Directors, from voting threat , to pass any resolution by Circulation - The High Court recorded a conclusion that the respondents would not be able to maintain the proceedings before the Company Law Board - Held that - The maintainability of a suit is question of law. Though, by virtue of declaration under Section 9 of the Code of Civil Procedure, 1908, all suits of civil nature are maintainable unless barred either by an express provision or by implication of law. In the case on hand, when a specific stand is taken that in view of the provisions of Companies Act the suit is not maintainable, the checkered history between the contesting parties and the chronology of the actions taken by the respondents , in our opinion, do not decide the maintainability of the suit. We find the conclusion recorded by the High Court to be highly unsatisfactory. On the question whether the plaintiffs have a prima facie case, the High Court recorded a cryptic conclusion without recording any reasons (at para 7.2) that they have a strong prima facie case. On the question of the balance of convenience also, the order of the High Court is very equivocal. But the High Court went on to issue certain directions.The High Court at para 7.4 held that in view of the fact that from 31.12.2014 orders of status quo existed, the same is directed to be continued to be considered on the next date of hearing, i.e. 16.03.2015. We are of the opinion that the directions in paras 7.2 and 7.3 are inconsistent with the directions in para 7.4. Apart from that, the fact that the orders of status quo were granted by the Chamber Judge during vacation, which have been continued from time to time without further consideration regarding the tenability of such orders, is no ground for continuing such orders. In the circumstances, we deem it appropriate to set aside the impugned order. Having regard to the various contentions raised by the parties, it is better that the appeal before the High Court itself is disposed of on merits expeditiously. - Decided in favour of appellant.

Summary

Issues:
1. Maintainability of the suit under the Companies Act.
2. Prima facie case of the plaintiffs.
3. Balance of convenience.
4. Directions issued by the High Court.

Analysis:

Issue 1: Maintainability of the suit under the Companies Act
The High Court concluded that the suit is maintainable, rejecting the respondents' objection that the plaintiffs should approach the Company Law Board under Section 186 of the Companies Act, 1956. The High Court found that the lack of voting rights claimed by the respondents would render proceedings before the Company Law Board futile. The Court held that the suit's maintainability is a question of law and that the respondents' objections based on the Companies Act did not affect the suit's validity.

Issue 2: Prima facie case of the plaintiffs
The High Court cryptically concluded that the plaintiffs had a strong prima facie case without providing detailed reasons for this finding. The lack of a clear rationale for this conclusion raises questions about the thoroughness of the analysis conducted by the High Court in determining the existence of a prima facie case.

Issue 3: Balance of convenience
The High Court's order regarding the balance of convenience was deemed equivocal, indicating a lack of clarity in assessing this aspect of the case. The ambiguity in the High Court's decision on the balance of convenience suggests a need for a more detailed and reasoned evaluation of the competing interests at stake in the dispute.

Issue 4: Directions issued by the High Court
The High Court issued directions for the continuation of the status quo and instructed the respondents to consider the requisition notice provided by the plaintiffs. The Court also mandated compliance with specific provisions of the Companies (Management and Administration) Rules, 2014, within a specified timeframe. However, the Supreme Court found inconsistencies in the directions issued by the High Court and set aside the impugned order, emphasizing the need for expeditious disposal of the appeal on its merits.

In conclusion, the Supreme Court allowed the appeals by special leave, highlighting the need for a comprehensive and expeditious resolution of the issues raised in the case. The Court's decision to set aside the High Court's order underscores the importance of clarity, consistency, and thoroughness in legal judgments to ensure the fair and effective adjudication of disputes.