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2023 (7) TMI 216 - HC - Companies LawMaintainability of suit - Rejection of plaint on the ground that the dispute raised in the plaint cannot be decided by a Civil Court - appellant contended that the disputes in the plaint, falls within the exclusive jurisdiction of the National Company Law Tribunal (NCLT) - Section 9 of the Code of Civil Procedure and Section 430 of the Companies Act. HELD THAT - It is clear from the averments made in the plaint that it is not a proceeding for refusal of registration or rectification of register under Section 58 or 59 of the 2013 Act. Section 58 contemplates a situation where a private company limited by share refuses whether in pursuance of any power of the Company under its article or otherwise to register the transfer of or the transmission by operational law of the right to any security or interest within a period of 30 days from the date on which the instrument of transfer or the intimation of such transmission was delivered to the company if there is a refusal the transferee may appeal to the tribunal under Section 58(5) of the Companies Act, 2013 where, however, the name of a person is erroneously entered in the register in place of a rightful owner and such error appears to be apparent a proceeding under Section 59 would be permissible. In ADESH KAUR VERSUS EICHER MOTORS LIMITED AND ORS. 2018 (8) TMI 836 - SUPREME COURT the jurisdiction of the tribunal in a proceeding under Section 59 was not interfered with as the Hon ble Supreme Court observed that it was an open and shut case of fraud in which the appellant has been victim, and respondent no. 2 the perpetrator . As a corollary if it appears that the disputed questions of the facts are complicated and cannot be conveniently decided in a summary procedure the jurisdiction of the Civil Court is not ousted. Although it cannot be disputed that the NCLT may have jurisdiction to decide the title of any person who is a party to the application urging that his name has been wrongly omitted from the register or should have been entered in the register in a proceeding under Section 59 of the present Act or Section 155 read with Section 111 of the Companies Act, 1956, however, the issue in the suit is not one of rectification. NCLT thus, would have jurisdiction to decide a rectification proceeding where facts are self evident and does not call for any serious enquiry or adjudication of fraud. It would depend on the facts of a case. However, the present proceeding is not for rectification although eventually it may lead to the same in the event the suit is decreed - the appellant has not filed any written statement and the time had expired in the meantime the appellant shall be permitted to file written statement within three weeks from date, in default, the suit may proceed ex parte against the appellant. Appeal dismissed.
Issues Involved:
1. Jurisdiction of Civil Court vs. NCLT 2. Allegations of Fraud and Fiduciary Breach 3. Rectification of Share Register Summary: Jurisdiction of Civil Court vs. NCLT: The appellant contended that the disputes in the plaint fall within the exclusive jurisdiction of the National Company Law Tribunal (NCLT) and thus, the suit is not maintainable in a Civil Court. The learned Single Judge dismissed this application, prompting the appeal. The appellant argued that under Section 430 of the Companies Act, 2013, the jurisdiction of the Civil Court is ousted by the NCLT for matters concerning control, management, and issuance of shares. The appellant cited various legal precedents to support this position, emphasizing that disputes under Sections 58 and 59 of the Companies Act, 2013, should be adjudicated by the NCLT. However, the court concluded that the suit is not merely for rectification of the register but involves serious allegations of fraud and fiduciary breach, which require adjudication by a Civil Court. Allegations of Fraud and Fiduciary Breach: The plaintiff alleged that the defendant, who was the auditor of the company, committed fraud by acquiring shares in breach of fiduciary duties. The plaintiff claimed that the shares were issued to the defendant's family companies without the knowledge of the original owner, Sambhunath. The plaintiff provided detailed particulars of fraud in the plaint, asserting that the defendant concealed the true ownership of the companies and misled Sambhunath. The court noted that the allegations of fraud and breach of fiduciary duty necessitate a thorough examination of evidence, which can only be conducted by a Civil Court. Rectification of Share Register: The appellant argued that the dispute essentially revolves around the rectification of the share register, which falls under the exclusive jurisdiction of the NCLT. However, the court observed that the primary relief sought in the suit is a declaratory relief based on allegations of fraud. The court emphasized that while the NCLT has jurisdiction over rectification matters, it cannot adjudicate serious allegations of fraud in a summary proceeding. The court cited various legal precedents to support this position, concluding that the Civil Court has the jurisdiction to adjudicate the dispute. Conclusion: The court affirmed the judgment of the learned Single Judge, holding that the Civil Court has jurisdiction to adjudicate the dispute involving allegations of fraud and fiduciary breach. The appeal was dismissed, and the appellant was granted three weeks to file a written statement, failing which the suit may proceed ex parte against the appellant.
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