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TMI Blog2018 (12) TMI 1123X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - CS (COMM) 1496/2016, I.As. 4565/2014, 8964/2014, 2523/2017& 2524/2017 - - - Dated:- 16-10-2018 - PRATHIBA M. SINGH J. Plaintiffs Through: Mr. Brij Bhushan Gupta, Senior Advocate with Mr. Amarjeet Singh and Mr. Uday Khanna, Advocates. Defendants Through: Ms. Anisha Mahajan, Advocate for D-1. Mr. Dhruv Surana and Mr. Ashish Choudhury, Advocates for D-2 and 3. Mr. Jayant Mehta, Mr. N. Raja Singh and Mr. Sumit Malhotra, Advocates for D-4, 6 to 9. JUDGMENT Prathiba M. Singh, J. 1. The Plaintiff - SAS Hospitality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by transferring the moneys belonging to the Company and showing artificial deposit of ₹ 1.6 crores. In fact, the same amount of ₹ 48 Lakhs belonging to the Company was rotated repeatedly to show that the Defendant Nos.5 to 9 had paid the Company between 6th and 9th September, 2013, whereas in fact they had not made the said payments. d) That in a fraudulent manner the shareholding of the Plaintiff in the Company, which was to the tune of 99.96%, was diluted to 21.44%. e) That the share warrants, which were purportedly issued on 30th March, 2013, were illegal as the share capital did not permit issuance of share warrants. Moreover, share warrants could only be issued by a public limited company and not by a private limited company. f) That by circulating the same amount on four different occasions and showing that the Defendant Nos.5 to 9 had subscribed to the share capital, allotment of share was made in their names, which is completely illegal. 4. The plaint also mentions that one of the directors approached the Company Law Board ( CLB ) seeking redressal and vide order dated 24th October, 2013, a status quo order was passed by the CLB. Proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations. 8. On behalf of the Defendants, Mr. Jayant Mehta, Advocate seeks rejection of the plaint on the following grounds. a) Lack of jurisdiction of this Court in view of Section 59 of the Companies Act, 2013 read with Section 430 and Section 434 (1)(c) of the Companies Act, 2013. b) That the board resolution authorizing filing of the suit is defective as no board meeting was, in fact, conducted on 21st January, 2014 on which date Mr. Mohit Mittal, who has signed the plaint, had been purportedly authorised. Thus the suit is defective. c) That the matter, in any case, was before the CLB and has, now, been transferred to the NCLT. Thus, two different forums cannot adjudicate the same issue. He relies upon the judgment of the Supreme Court in Amonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers Pvt. Ltd. AIR 1998 SC 3153 (hereinafter, Ammonia Supplies SC ). He also relies upon the judgment of this Court in Jai Kumar Arya v. Chhaya Devi (2018) 142 CLA 365 (hereinafter, Jai Kumar Arya ) to argue that the interpretation given in this judgment supports his case. d) Mr. Mehta also relies upon Telecommunications Consultants India Ltd. v. TCIL Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hinks fit . The Tribunal is also vested with the power of review. Under Section 424 of the Companies Act, 2013, the Tribunal also has the same powers and functions as are vested with a Civil Court. In addition to the above, the Tribunal also has the power to punish for contempt which was hitherto not available with the CLB. In various ways, the NCLT is not merely exercising the jurisdiction of a Company Court under the new Act, but is also vested with inherent powers and powers to punish for contempt. It is in this background that the court has to decide the issue of jurisdiction, which has been raised by the Defendant. 12. Under Section 62 of the 2013 Act, a procedure has been prescribed for issuance of share capital. The said procedure involves sending of a letter of offer to existing shareholders [Section 62(1)(a)] and to employees [Section 62(1)(b)]. The manner of sending of the said offer is also prescribed. The said offer also has to contain the details as to the terms under which the offer is being made, including the terms for conversion of debentures or loans to shares. Upon this procedure being followed, the subscribed share capital can be increased by the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the stipulations in Section 62 of the 2013 Act. The non-compliance of any conditions contained in Section 62 of the 2013 Act also constitutes mismanagement of the company, inasmuch as under Section 241 of the 2013 Act, the conduct of affairs of the company in a manner prejudicial to any member or in a manner prejudicial to the interest of the company , would be governed by the same. The jurisdiction to go into these allegations, vests with the Tribunal under Section 242 of the 2013 Act. Under Section 242(2), the NCLT has the power to pass such order as it thinks fit , including providing for regulation of conduct of affairs of the company in future . These powers are extremely broad and are more than what a Civil Court can do. Even if in the present case, the Court grants the reliefs sought for by the Plaintiff, after a full trial, the effective orders in respect of regulating the company, and administering the affairs of the company, cannot be passed in these proceedings. Such orders can only be passed by the NCLT, which has the exclusive jurisdiction to deal with the affairs of the company. 17. Moreover, the powers of the NCLT being broader and wider than what can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision making which was the hallmark of judiciary and essentially a judicial function. Argument went to the extent that it amounted to negating the Rule of Law and trampling of the Doctrine of Separation of Powers which was the basic feature of the Constitution of India. What we are emphasising is that the petitions spearheaded the attack on the constitutional validity of both NCLT as well as NCLAT on these common grounds. The Court specifically went into the gamut of all those arguments raised and emphatically repelled the same. 12. The Court specifically rejected the contention that transferring judicial function, traditionally performed by the Courts, to the Tribunals offended the basic structure of the Constitution and summarised the position in this behalf as under: We may summarize the position as follows: (a) A legislature can enact a law transferring the jurisdiction exercised by courts in regard to any specified subject (other than those which are vested in courts by express provisions of the Constitution) to any tribunal. (b) All courts are tribunals. Any tribunal to which any existing jurisdiction of courts is transferred should also be a Judicial Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. Various facets of the challenge laid to the validity of these two fora were thoroughly thrashed out. No doubt, most of the discussion contained in paras 107 to 119 refers to NCLT. However, on an insight into the said discussion contained in these paragraphs, would eloquently bear it out that it is inclusive of NCLAT as well. In para 121 of the judgment, which is already extracted above, the Court specifically affirmed the decision of the High Court which held that creation of NCLT and NCLAT was not unconstitutional. In view of this, it is not open to the Petitioner even to argue this issue as it clearly operate as res judicata. 19. The bar under Section 430 of the 2013 Act being absolute in nature, this Court is of the view that the jurisdiction to adjudicate the disputes raised in the present case vests with the NCLT. 20. While deciding so, this Court is conscious of the difference between the terms High Court and Civil Court . Under the Companies Act prior to the amendments, references to the High Court mean the High Court exercising jurisdiction as a Company Court and not as a Civil Court. Section 434 of the 2013 Act, relating to transfer of the proceedings, is ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n does not mean the court cannot see the substance after removing the cloak. 28 29....... 30. All the above indicates the limitation and the peripheral jurisdiction with which court has to act. In spite of its exclusiveness, it cannot take within its lap outside this scope of rectification. This is indicated even by Section 155 itself: Section 155: Power of Court to rectify Register of Members.- (1) If - (a) the name of any person - (i) is without sufficient cause, entered in the Register of Members of a company, or (ii) after having been entered in the register, is, without sufficient cause, omitted therefrom; or (b) default is made, or unnecessary delay takes place, in entering on the Register the fact of any person having become, or ceased to be, a member; the person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the Register. 31. Sub-section (1) (a) of Section 155 refers to a case where the name of any person is without sufficient cause entered or omitted in the Register of Members of a company. The word 'sufficient cause' is to be tested in relation to the Act and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the civil court. So we conclude that the principle of law as decided by the High Court that the jurisdiction of the court under Section 155 is summary in nature cannot be faulted. 22. The observations of the Supreme Court in the context of the earlier Act, above make it clear that if the jurisdiction of the Company Court was exclusive, the jurisdiction of the Civil Court was barred in respect of power to rectify the register of members. However, the Court therein was dealing with Section 446(1) of the Companies Act, 1956, in its earlier avatar. The provisions have undergone a sea change since then. In fact, in Section 446(1) of the Companies Act, 1956 itself the leave of the `Tribunal was to be taken after the Act was amended in 2013, i.e., the leave of the CLB had to be taken. 23. Learned counsel for the Plaintiff places strong reliance on the judgment of the Full Bench of this Court in Ammonia Supplies Corporation Pvt. Ltd. v. Modern Plastic Containers (Pvt.) Ltd. Ors. 52 (1993) DLT 252 (hereinafter, Ammonia Supplies DHC ), to argue that this Court has jurisdiction. The reasoning in the said Full Bench judgment was that complex questions cannot be decided by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 7 clear principles (of which only the first and last are really relevant to the present case), to be applied for deciding whether a suit was barred under Section 9 of the CPC: (1) Where the statute gives a finality to the orders of the special Tribunals the civil courts' jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure. (2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court. Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to whether the Tribunal s order is attributed finality and as to whether the Tribunal would be able to do what a Civil Court could do, it is clear that an order under Section 59 of the 2013 Act has specific consequences for non-compliance. The order is appealable to the appellate tribunal. The Tribunal has to apply the principles of natural justice. Under Section 242(2)(d) of the 2013 Act, the Tribunal can impose restrictions on the transfer or allotment of the shares of the company. It can also pass an interim order under Section 242(4) of the 2013 Act. Consequences for non-compliance have also been provided under Section 242(4) of the 2013 Act. The Plaintiffs have a right to apply Section 242 of the 2013 Act as they own 99.96% shareholding which has been diluted to 21.44%. Any member with more than 1/10th of the issued share capital can approach the Tribunal. Thus, even as per Jai Kumar Arya (supra), the order being one, which can be passed under Section 242 of the 2013 Act, the NCLT has the jurisdiction. In Jai Kumar Arya (supra), the Court was concerned with the power of removal of directors, which is distinct from the disputes involved in the present case. However, by applyi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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