2021 (2) TMI 656 - Tri - Companies Law

Jurisdiction - Whether civil courts have jurisdiction to decide over the affairs of a company arise out of memo and articles of association of a company in terms of various provisions of Companies Act, 2013? - oppression and mismanagement - waiver of requisite condition - sections 241 and 242 of the Companies Act, 2013. Jurisdiction of civil court vis-a-vis this Tribunal - HELD THAT - There cannot be any doubt that the issues raised in the suit mentioned supra, and in the instant main company petition, fell under the jurisdiction of this Tribunal, as those issues are admittedly affairs of the company - Therefore, undoubtedly, the Tribunal is empowered to deal with the issue raised in the main company petition, as same is filed under sections 241 and 242 of the Companies Act, 2013 by alleging various acts of oppression and mismanagement. Moreover, the issue raised in the said suit is only relating to acceptance of the resignation. It is nothing to do with the acts of oppression and mismanagement, which is subject-matter of the main company petition. Eligibility to maintain an application/petition - section 241 of Companies Act, 2013 - HELD THAT - The Tribunal is empowered to waive all or any requirements specified under section 242(1), on an application made to the Tribunal in the matter. Accordingly, the applicant/petitioner has filed the instant application under section 244(1) read with sections 241 and 242 of the Companies Act, 2013, read with rules 11 and 34 of the National Company Law Tribunal Rules, 2016, seeking to waive requisite conditions to file the main company petition. Therefore, the instant application is maintainable. The main company petition is filed by the petitioner by questioning various acts of oppression and mismanagement, which are found to be prima facie meritorious so as to consider those allegations at the time of final hearing of the case, after waiving the requisite condition as sought for. A meritorious/disputed litigation cannot be thrown at threshold without looking into merits of the case by the Tribunal/court by depriving aggrieved party remediless. The contention of the respondent that civil court has already decided the issues and thus the present application and main company petition are not maintainable, are baseless on facts and on law, as detailed supra. Moreover, the civil court has decided only in respect of the alleged acceptance of resignation, and civil court do not have any jurisdiction to decide the acts of oppression and mismanagement of the Companies Act, 2013. It is clearly established that the applicant/petitioner has made out a prima facie case to entertain the main company petition for its final adjudication. Moreover, it is a settled position of law that a meritorious litigation cannot be thrown at threshold without examining the merits of the case. It is not in dispute that the applicant is admittedly, a shareholder of the company by holding 09 per cent. of its total shares. Therefore, the applicant/petitioner is entitled for waiver as prescribed, under section 244(1) of the Companies Act - petition allowed.

Issues Involved:
1. Jurisdiction of civil courts over company affairs.
2. Decision of civil court on acts of oppression and mismanagement.
3. Eligibility to file a petition under sections 241 and 242 of the Companies Act, 2013.
4. Prima facie case in support of the applicant’s claims.
5. Reliefs entitled to the applicant.

Detailed Analysis:

1. Jurisdiction of Civil Courts Over Company Affairs:
The Tribunal referred to Section 430 of the Companies Act, 2013, which states that no civil court shall have jurisdiction over matters that the Tribunal or the Appellate Tribunal is empowered to determine. The Tribunal concluded that the issues raised in the civil suit and the main company petition fall under its jurisdiction as they pertain to company affairs.

2. Decision of Civil Court on Acts of Oppression and Mismanagement:
The Tribunal noted that the civil court's decision was limited to the acceptance of the applicant’s resignation and did not address acts of oppression and mismanagement. Therefore, the issues raised in the main company petition were not adjudicated by the civil court, making the Tribunal the appropriate forum to decide these matters.

3. Eligibility to File a Petition Under Sections 241 and 242 of the Companies Act, 2013:
Section 244 of the Companies Act, 2013, outlines the eligibility criteria for filing a petition under Section 241. The Tribunal has the authority to waive these requirements. The applicant, holding 9% of the company’s share capital after a disputed rights issue, sought such a waiver. The Tribunal found the application maintainable, allowing the applicant to proceed with the main company petition.

4. Prima Facie Case in Support of the Applicant’s Claims:
The Tribunal considered whether the applicant had made a prima facie case for acts of oppression and mismanagement. It found that the main company petition raised substantial issues that warranted a detailed examination. The Tribunal emphasized that a meritorious case should not be dismissed at the threshold without considering its merits.

5. Reliefs Entitled to the Applicant:
The Tribunal concluded that the applicant had made out a prima facie case and was entitled to a waiver of the requirements under Section 244(1) of the Companies Act, 2013. Consequently, the Tribunal allowed the application, admitted the main company petition, and granted the respondents 10 days to file their replies.

Conclusion:
The Tribunal allowed I.A. No. 170 of 2020 in C.P. No. 110/BB/2019, waiving the requisite conditions under Section 244(1) of the Companies Act, 2013, and admitted the main company petition for final hearing on June 18, 2020.

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