2019 (3) TMI 963 - HC - Companies Law

Application for grant of injunction made - maintainability of the suit - High court jurisdiction in the matter - suppression of material facts - praying for similar reliefs simultaneously before two different forums - HELD THAT - It can be said without hesitation that a person whose case is based on falsehood has no right to approach the Court. He can be summarily thrown out at any stage of the litigation. A litigant, who approaches the Court, is bound to produce all the documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court. Furthermore, a person who seeks equitable relief from the court must come to the court with clean hands and disclose all facts which are relevant to the case. In my considered view, the statement in the plaint that the plaintiff is intending to file an application before the NCLT, when the truth was that the application had already been filed is a case of misrepresentation and amounts to suppression of material facts. On this count itself, the application for injunction needs to be dismissed. Proviso to Section 58(2) states provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract . This power under Section 58 read with Rule 70(5)(b) that gives the power to the Tribunal to generally decide any question which is necessary or expedient to decide in connection with the application for rectification read with Section 70(4)(a) that gives the power to the Tribunal to pass any interim order including any orders as to injunction or stay makes it clear that it is the Tribunal that has the power to decide all issues in relation to transfer of shares by way of an oral or written contract. The very fact that the Tribunal has been empowered with these powers leads one to the inference that all issues relating to transfer of shares, registration and rectification of register of members and any matter incidental to the same including oppression and mismanagement would be retained by the Tribunal. Under these circumstances, it is of the prima facie view that this High Court does not have jurisdiction in the above matter. Plaintiff praying for similar reliefs simultaneously before two different forums - HELD THAT - A litigant cannot be allowed to seek similar reliefs in different forums at the same time. It would have been a different matter if the application before the NCLT had not been filed or was withdrawn before the filing of the suit. In the event both the applications before the NCLT and the interim application before this Court are allowed to run parallelly, a dichotomous situation would arise as the vital issues involved in both the suit and NCLT petition are the same. The rectification sought for before the Tribunal also proceeds on the argument that the defendants have acted in a fraudulent manner and did not register the name of the plaintiffs as shareholders. The same argument finds place in the suit and the interim application before this Court. The two parallel proceedings may result in diametrically opposite orders being passed with regard to the same core issue. Such a situation is not acceptable and contemplated in law. The present application for an ad interim order of injunction cannot be allowed on two counts (a) suppression of material facts and (b) the plaintiff praying for similar reliefs simultaneously before this Court and NCLT that would require adjudication on the identical core issue.

Summary

Issues Involved:
1. Jurisdiction of the High Court vs. NCLT.
2. Suppression of material facts.
3. Simultaneous reliefs sought in different forums.
4. Fraud and deceit allegations.

Detailed Analysis:

Jurisdiction of the High Court vs. NCLT:
The primary issue revolves around whether the High Court has jurisdiction to entertain the suit when the NCLT is empowered to decide the matter under the Companies Act, 2013. Section 430 of the Companies Act, 2013, explicitly bars civil courts from entertaining suits or proceedings over which the NCLT has jurisdiction. Rule 70 of the NCLT Rules further empowers the NCLT to pass orders, including interim orders, injunctions, and decisions on title and rectification of the register of members. The court observed that the Companies Act, 2013, intends to consolidate all company-related matters under the NCLT, thereby ousting the jurisdiction of civil courts in such matters. The court concluded that it does not have jurisdiction in the matter, as the NCLT is fully empowered to decide on the issues raised, including the enforcement of oral agreements related to share transfers.

Suppression of Material Facts:
The court found that the plaintiffs had suppressed material facts by not disclosing the filing of a similar application before the NCLT. The application for injunction did not mention that another application had been filed before the NCLT on February 15, 2019, three days before the present suit was instituted in the High Court. The court noted that the plaintiffs' failure to disclose this fact amounted to suppression of material facts, which is against the spirit of the law. Citing the Supreme Court's observation in S.P. Chengalvaraya Naidu (Dead) by Lrs. –v- Jagannath (dead) by LRs. And Ors., the court emphasized that a litigant must come to the court with clean hands and disclose all relevant facts.

Simultaneous Reliefs Sought in Different Forums:
The court addressed the issue of the plaintiffs seeking similar reliefs simultaneously before the High Court and the NCLT. The court found that the interim relief sought in both forums was the same, which could lead to contradictory orders. The court held that a litigant cannot seek similar reliefs in different forums at the same time, as it could result in a dichotomous situation. The court noted that the core issues in both the suit and the NCLT application were identical, and allowing parallel proceedings could lead to conflicting decisions.

Fraud and Deceit Allegations:
The plaintiffs alleged that the defendants committed fraud by increasing the authorized share capital and issuing bonus shares without informing the plaintiffs, thereby breaching an oral agreement. The court noted that the plaintiffs had claimed that the defendants owed them a significant sum of money and had pledged their shareholding as security. However, the court did not delve deeply into the fraud allegations, as the primary focus was on the jurisdictional issue and the suppression of material facts.

Conclusion:
The court dismissed the application for an ad interim order of injunction on two grounds: suppression of material facts and the simultaneous seeking of similar reliefs in different forums. The court directed that the matter be decided upon the exchange of affidavits and set a timeline for filing the opposition and reply affidavits. The court emphasized the importance of acting on the basis of the order downloaded from the High Court's official website.