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2018 (12) TMI 1123 - HC - Companies LawOppression and mismanagement - Allotment of share capital, alteration and rectification of the register of members wrongfully - Permanent injunction - allotment of shares in favour of the Defendant Nos.5 to 9 as null and void - whether the issues of further share capital, was contrary to the scheme provided under Section 62 of the 2013 Act - Jurisdiction of NCLT - Held that - Such issuance of share capital to the detriment of an existing member is prejudicial to the said member, as also the interest of the company. Moreover, under Section 242(2) of the 2013 Act, restrictions can be imposed on the transfer or allotment of shares and passing of such orders are within the domain of the NCLT. It is clear in the facts of this case that involving issues relating to allotment of share capital, alteration and rectification of the register of members, the NCLT is empowered to decide leading to the conclusion that this Court has no jurisdiction. The Legislative scheme having been changed, with the amendments which have brought about and for all the reasons stated herein above, this Court holds that the present suit is liable to be rejected leaving the Plaintiff to avail its remedies, in accordance with law before the NCLT. Yet another reason for holding that this Court would have no jurisdiction is fact that the matter is also pending before the CLB (now transferred to the NCLT at the instance of one of the directors). The interim order passed by this Court has been in operation since 12th March, 2014. The said interim order would, continue for a further period of 4 weeks in order to enable the Plaintiff to approach the NCLT. The plaint is rejected with liberty as provided above
Issues Involved:
1. Jurisdiction of the Civil Court 2. Legality of Share Allotment 3. Validity of Board Resolution 4. Pending Proceedings before CLB/NCLT 5. Application of Section 59 and Section 62 of the Companies Act, 2013 Issue-wise Detailed Analysis: 1. Jurisdiction of the Civil Court: The primary issue was whether the Delhi High Court had jurisdiction to entertain the suit filed by SAS Hospitality Pvt. Ltd. (Plaintiff) against the allotment of shares to Defendant Nos. 5 to 9. The Defendants argued that the jurisdiction lay with the National Company Law Tribunal (NCLT) as per Section 430 and Section 434(1)(c) of the Companies Act, 2013. The Court analyzed the scheme of the Companies Act, 2013, which vests the NCLT with extensive powers to manage and administer companies, including rectification of the register of members under Section 59 and regulation of the conduct of company affairs under Section 242. The Court concluded that the NCLT is empowered to determine the legality of share allotments and rectify the register of members, thus barring the jurisdiction of the Civil Court under Section 430 of the Companies Act, 2013. 2. Legality of Share Allotment: The Plaintiff alleged that the shares were allotted to Defendant Nos. 5 to 9 in an illegal and clandestine manner on 5th October 2013, without proper compliance with the procedures prescribed under Section 62 of the Companies Act, 2013. The Court noted that any dispute regarding the issuance of share capital and its compliance with Section 62 falls within the jurisdiction of the NCLT. The NCLT can also determine if the register of members needs rectification due to such allotment and can pass orders to regulate the company's affairs. 3. Validity of Board Resolution: The Defendants contended that the board resolution authorizing the filing of the suit was defective as no board meeting was conducted on the claimed date. The Court found that this issue could also be addressed by the NCLT, which has the authority to oversee and supervise the company's working and validate or invalidate board resolutions as part of its regulatory powers. 4. Pending Proceedings before CLB/NCLT: The Plaintiff mentioned that one of the directors had approached the Company Law Board (CLB), and a status quo order was passed, with proceedings still pending. The Court noted that with the constitution of the NCLT, all such matters are transferred to it. The existence of pending proceedings before the CLB (now NCLT) further supports the view that the NCLT has exclusive jurisdiction over the dispute. 5. Application of Section 59 and Section 62 of the Companies Act, 2013: The Court analyzed the interplay between Section 59 (rectification of register) and Section 62 (issuance of further share capital) of the Companies Act, 2013. It concluded that any non-compliance with Section 62, which affects the register of members, falls under the purview of the NCLT. The NCLT has the power to rectify the register and regulate the conduct of the company's affairs, making it the appropriate forum for such disputes. Conclusion: The Court held that the jurisdiction to adjudicate the disputes raised in the present case vests with the NCLT. The bar under Section 430 of the Companies Act, 2013, is absolute, and the Civil Court does not have jurisdiction to entertain the suit. The plaint was rejected with liberty for the Plaintiff to approach the NCLT. The interim order passed by the Court was extended for four weeks to allow the Plaintiff to seek appropriate relief from the NCLT. All pending applications were disposed of accordingly.
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