2023 (4) TMI 879 - HC - Companies Law

Rejection of defendant/Petitioner s application under order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC) - whether the court below had jurisdiction to entertain the suit since the said suit is barred under section 430 of the Companies Act, 2013? - HELD THAT - It is quite clear, if the statements made in the plaint are treated to be true then the defendant no. 2 Manoj Sett is not the director of the plaintiff no. 1 company. If that be so prima facie it appears that the dispute is in-between director and a person who is not a director. Learned counsel on behalf of the petitioner in this context argued that the golden rule of statuary construction is that the phrases or sentences should be interpreted according to the intention of the legislature and section 241 and 242 should be read together and as such under the Act of 2013 the intention of the legislature is to vest the power of adjudication of the matter referred in section 242, to the Tribunal. As averment made in the plaint which is considered to be true for the present purpose, discloses conflict of two individual alleging that the plaintiffs personal right got affected by a person whose membership in the company is not beyond doubt, suit under section 34 of the specific relief act is not barred in the present context specially when plaintiff averred in the plaint that they are not allowed to enter into the premises of the company and thereby they prayed for enforcement of their civil right rather than right as director. In view of settled proposition of law that ouster of civil court jurisdiction cannot be readily inferred and consolidating all previous judgment, apex court in CHURCH OF NORTH OF INDIA VERSUS LAVAJIBHAI RATANJIBHAI ORS 2005 (5) TMI 636 - SUPREME COURT has laid down the principles relating to the exclusion of jurisdiction of civil court stating that The Civil Court will have no jurisdiction in relation to a matter whereover the statutory authorities have the requisite jurisdiction. On the other hand, if a question arises, which is outside the purview of the Act or in relation to a matter, unconnected with the administration or possession of the trust property, the Civil Court may have jurisdiction. In this case, having regard to the nature of the lis, the jurisdiction of the Civil Court was clearly barred. As the question about ouster of jurisdiction of a civil court must be constructed having regard to the schemes of the act, it can be said that the preamble of the act of 2013 have not taken away the jurisdiction of a civil court in each and every matter connected with company affairs. The preamble speaks that this is an act to consolidate and amend the law relating to companies. The normal civil remedies associated with action lies in civil courts. If not prescribed in the act, plea of bar to jurisdiction of a civil court may not be considered having regards to the contentions raised in the plaint and for this purpose reliefs sought in the plaint must be considered in their entirety on the basis of factual averment made in the plaint - it appears that the suit is apparently in between director and a person whose appointment is put on hold by the Company Law Bench, Kolkata and as relief relates to decree for declaration of right of plaintiffs as individual and for decree for account for non-payment of remuneration along with injunction, an appointment of accounts commissioner and receiver, it is found that the suit is not barred under section 430 of the companies act 2013. Application dismissed.

Summary

Issues Involved:
1. Jurisdiction of Civil Court vs. National Company Law Tribunal (NCLT) under Companies Act, 2013.
2. Applicability of Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC).

Summary:

1. Jurisdiction of Civil Court vs. NCLT:
The petitioner argued that the disputes between the directors of a company should be referred to the NCLT, as per Sections 241 and 242 of the Companies Act, 2013. The petitioner contended that the civil court lacked jurisdiction to entertain the suit, claiming it was barred under Section 430 of the Companies Act, 2013. The petitioner emphasized that matters such as the declaration of right to enter company premises, disclosure of cash balances, and remuneration issues fall under the purview of the NCLT.

The respondents countered that the Companies Act does not explicitly or implicitly bar the jurisdiction of civil courts in such matters. They argued that Sections 152, 155, 166, 197, 213, 216, 241, and 452 of the Companies Act do not restrict civil courts from addressing disputes involving civil rights. The respondents cited various judgments to support their claim that civil courts retain jurisdiction over such disputes.

2. Applicability of Order VII Rule 11 of CPC:
The court noted that Order VII Rule 11(d) of CPC applies only when the suit appears to be barred by any law on the face of the plaint. The court emphasized that for the purpose of disposing of an application under Order VII Rule 11, all averments made in the plaint must be treated as true. The court observed that the plaintiffs had alleged that the defendant's appointment as director was put on hold by the Company Law Board, implying a dispute between a director and a non-director.

The court concluded that the determination of whether the defendant qualifies as a "member" under Section 241 of the Companies Act requires examination of evidence and cannot be decided at the threshold. The court also noted that the plaintiffs sought reliefs such as declaration of rights, payment of remuneration, and injunctions, which are civil in nature and not exclusively within the jurisdiction of the NCLT.

Conclusion:
The court held that the suit is not barred under Section 430 of the Companies Act, 2013, and rejected the application under Order VII Rule 11 of CPC. The court dismissed the petition, affirming the jurisdiction of the civil court to entertain the suit, considering the nature of the reliefs sought and the factual averments made in the plaint.