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TMI Blog2014 (9) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed by the company authorising the director to file specific suit against the defendant. The learned District Judge after considering the submission of both parties rejected application under order 7 rule 11(a) of the Code of Civil Procedure, 1908. It is not in dispute that the respondent did not challenge the said order passed by the District Court as far back as on 25th September 2006. It is thus clear that the defendant had accepted the fact that no such specific resolution was required to be passed authorising a director to file specific suit against the defendant. The respondent not having raised such issue in the earlier application filed under order 7 rule 11(a) of Code of Civil Procedure, 1908 and having relied upon the plaint could not have file another application under order 7 rule 11(d) though earlier application having been rejected holding that the plaint disclosed cause of action. Once the company had accepted and confirmed the authority granted to one of his Director to file such suit, the objection raised by the respondent was taken care of. The learned trial Judge therefore could not ignore such confirmation on the authority of the director or in the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006 passed by the learned District Judge II Nashik the said application filed in the year 2006 by the defendant under order VII rule 11 read with section 151 of Code of Civil Procedure came to be rejected. It is ordered that the issue as to territorial jurisdiction will be framed and decided alongwith other issues. The learned District Judge on perusal of the pleading, document produced on record and admitted fact rendered a prima facie finding that the defendant had issued letter to the plaintiff about alleged infringement of its patent which gave cause of action for the plaintiff to file the said suit. The defendant did not challenge the said order passed by the learned District Judge rejecting the said application filed by the defendant. 6. On 28th October, 2009 the defendant filed an application under order VII rule 11(d) of the Code of Civil Procedure, 1908 inter alia praying for rejection of the plaint. It is averred in the said application that the plaint was filed by Mr. Siddharth Sachdev claiming to be a director of the plaintiff company. It is submitted that order 29 rule 1 of Code of Civil Procedure does not authorise persons mentioned therein to institute suits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings to protect the Company's interests and in this regard to make, declare, swear, affirm, sign, verify, initiate and facilitate civil suits, criminal complaints and petitions on behalf of the company; appear before appropriate government authorities, tribunals, courts; and if thought fit to initiate arbitration and/or conciliation proceedings in any matter and in all aforesaid matters, to retain and appoint advocates, solicitors and other legal practitioners and advisors, and to sign vakalatnamas and other all necessary documents in this regard. 9. By an order dated 7th April 2011 the learned District Judge-1 Nashik allowed the application (Exhibit 28) filed by the defendant under order 7 rule 11(d) of the Code of Civil Procedure 1908 and rejected the plaint. The appellant has impugned the said order and judgment dated 7th April, 2011 in this appeal which order and judgment is deemed to be decree within the meaning of section 2(2) of the Code of Civil Procedure 1908 or is having force of a decree. 10. Mr. Dani, learned counsel appearing for the plaintiff submits that the application filed under order 7 rule 11(d) of Code of Civil Procedure 1908 itself wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the provisions of Companies Act, 1956 filing of such suit by a director is not barred. 14. It is submitted that in any event the resolution approving the power of attorney which empowered the said Mr. Siddharth Sachdev to file a legal proceeding on behalf of the plaintiff was an adequate compliance of the provisions of the Companies Act 1956. The company being a juristic person has to act by passing a resolution authorising the members of board to adopt such proceedings and represent the company. It is submitted that the learned trial judge did not give any opportunity to cure such alleged curable defect. It is submitted that the plaintiff had already filed an affidavit before the learned District court denying the allegation of the defendant that the said Mr. Siddharth Sachdev was not an authorised director to file a suit against the defendant. The plaintiff had reiterated that the said Mr. Siddharth Sachdev was authorised to file the said suit and the same was maintainable. 15. Mr. Dani, learned counsel placed reliance on the judgment of Supreme Court in case of Prem Lala Nahata and another vs. Chandi Prasad Sakaria AIR 2007 SC 1247 and in particular paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or a prevention at the entry of a suit defective for misjoinder of parties or of causes of action. The court is still competent to try and decide the suit, though the court may also be competent to tell the plaintiffs either to elect to proceed at the instance of one of the plaintiffs or to proceed with one of the causes of action. On the scheme of the Code of Civil Procedure, it cannot therefore be held that a suit barred for misjoinder of parties or of causes of action is barred by a law, here the Code. This may be contrasted with the failure to comply with Section 80 of the Code. In a case not covered by Sub-section (2) of Section 80, it is provided in Sub-section (1) of Section 80 that no suit shall be instituted . This is therefore a bar to the institution of the suit and that is why courts have taken the view that in a case where notice under Section 80 of the Code is mandatory, if the averments in the plaint indicate the absence of a notice, the plaint is liable to be rejected. For, in that case, the entertaining of the suit would be barred by Section 80 of the Code. The same would be the position when a suit hit by Section 86 of the Code is filed without pleading the obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endants No. 2 and 3 stood as guarantors for the repayment of the loan and if so, what is the extent of their liability? OPP 4. What is the balance amount? OPP 5. Whether the plaintiff varied the terms of loan and if so, its effect qua the liabilities of defendants No. 2 and 3, Onus on Parties. 6. Whether the statement of account produced by the plaintiff is admissible in evidence? OPP 7. Whether the defendants agreed to pay interest if so, at what rate and to what amount? OPP 8. Whether the plaintiff has no cause of action? OPP 9. Relief. 9. In cases like the present where suits are instituted or defended on behalf of a public corporation, public interest should not be permitted to be defeated on a mere technicality. Procedural defects which do not go to the root of the matter should not be permitted to defeat a just cause. There is sufficient power in the Courts, under the CPC, to ensure that injustice is not done to any party who has a just case as for as possible a substantive right should not be allowed to be defeated on account of a procedural irregularity which is curable. 10. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have exercised their jurisdiction under Order 41 Rule 27(1)(b) of the CPC and should have directed a proper power of attorney to be produced or they could have ordered Sh. L.K. Rohatgi or any other competent person to be examined as a witness in order to prove ratification or the authority of Sh. L.K. Rohatgi to sign the plaint. Such a power should be exercised by a court in order to ensure that injustice in not done by rejection of a genuine claim. 12. The Courts below having come to a conclusion that money had been taken by respondent No. 1 and that respondent No. 2 and husband of respondent No. 3 had stood as guarantors and that the claim of the appellant was justified it will be a travesty of justice if the appellant is to be non suited for a technical reason which does not go to the root of the matter. The suit did not suffer from any jurisdictional infirmity and the only defect which was alleged on behalf of the respondents was one which was curable. 17. Mr. Bijlani learned counsel for the defendant on the other hand submits that though the suit filed by the director of the company without any specific resolution authorising the director Mr. Siddharth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Rejection of plaint :- The plaint shall be rejected in the following cases :- (a) where it does not disclose a cause of action ; (b) where the relief claimed is under-valued, and the plaintiff, on being required by the Court to so correct the valuation within a time to be fixed by the Court, fails to do so; (c) where the relief claimed is properly valued, but the plaint is written upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so; (d) where the suit appears from the statement in the plaint to be barred by any law; 20. Learned counsel placed reliance on the judgment of Supreme Court in case of M/s. Dale and Carrington Invt.(P) Ltd., and another vs. P.K. Prathapan and others AIR 2005 SC 1624 and in particular paragraphs 11 in support of the plea that since no specific resolution of the board of directors of the plaintiff company was passed giving specific power to Mr. Siddharth Sachdev to file specific suit against the defendant, suit was not maintainable as barred. Paragraph 11 of the said judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Board of Directors in terms of Article No copy of the notice intimating Suresh Babu about the meeting of the Board of Directors and asking him to attend the same, has been placed on record to show that Suresh Babu was informed about holding of the meeting in question. Here reference is required to be made to certain other Articles of the company which are relevant for the controversy. Article provides that shares of the company shall be under the control of the Directors who may allot the same to such applicants as they think desirable of being admitted to membership of the company. Article provides that allotment of shares shall exclusively be vested in the Board of Directors, who may in their absolute discretion allot such number of shares as they think proper... Article requires that the Directors present at the Board Meeting shall write their names and sign in a book specially kept for the purpose. Article (iii) prohibits any invitation to the public to subscribe for any shares or debentures of the company. The above provisions of the Articles of Association show that the Board of Directors have an absolute discretion in the matter of allotment of shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article mandated that a book should be maintained to record presence of Directors at meetings of the Board of Directors. If a book for recording signatures of Directors attending meetings of the Board of Directors was not maintained, it was in clear violation of Article of the Articles of Association of the company. The Company Law Board without going into these relevant aspects, proceeded on an assumption that a meeting of the Board of Directors did take place on 24th October, 1994. This assumption of the Company Law Board is clearly without any basis. (b) When no meeting of the Board of Directors of the company was held on 24th October, 1994, the question of validity of the meeting does not arise. On the relevant date Suresh Babu was the only other Director of the company. He denies having attended any meeting of the Board of Directors of the company. There is nothing to rebut this stand of Suresh Babu. In his absence no valid meeting of the Board of Directors could be held. (c) For considering this point let us assume that a meeting of the Board of Directors of the company did take place as alleged by Ramanujam. First question that arises is whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard of Directors. An individual Director has no power to act on behalf of a company of which he is a Director unless by some resolution of the Board of Directors of the Company specific power is given to him/her. Whatever decisions are taken regarding running the affairs of the company, they are taken by the Board of Directors. The Directors of companies have been variously described as agents, trustees or representatives, but one thing is certain that the Directors action behalf of a company in a fiduciary capacity and their acts and deeds have to be exercised for the benefit of the company. They are agents of the company to the extent they have been authorized to perform certain acts on behalf of the company. In a limited sense they are also trustees for the shareholders of the company. To the extent the power of the Directors are delineated in the Memorandum and Articles of Association of the company, the Directors are bound to act accordingly. As agents of the company they must act within the scope of their authority and must disclose that they are acting on behalf of the company. The fiduciary capacity within which the Directors have to act enjoins upon them a duty to act on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporate the material facts in the election petition are not complied with. This Court in Samant N. Balkrishna and Anr. v. George Fernandez and Ors. 1969 3 S.C.C. 239, has expressed itself in no unclear terms that the omission of a single material fact would lead to an incomplete cause of action and that an election petition without the material facts relating to a corrupt practice is not an election petition at all. So also in Udhav Singh v. Madhav Rao Scindia [1976]2SCR246 , the law has been enunciated that all the primary facts which must be proved by a party to establish a cause of action or his defence are material facts. In the context of a charge of corrupt practice it would mean that the basic facts which constitute the ingredients of the particular corrupt practice alleged by the petitioner must be specified in order to succeed on the charge. Whether in an election petition a particular fact is material or not and as such required to be pleaded is dependent on the nature of the charge levelled and the circumstances of the case. All the facts which are essential to clothe the petition with complete cause of action must be pleaded and failure to plead even a single mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meant to be exercised to serve the purpose for which the same have been conferred on the competent Court so that the litigation comes to an end at the earliest and the concerned litigants are relieved of the psychological burden of the litigation so as to be free to follow their ordinary pursuits and discharge their duties. And so that they can adjust their affairs on the footing that the litigation will not make demands on their time or resources, will not impede their future work, and they are free to undertake and fulfil other commitments. Such being the position in regard to matters pertaining to ordinary Civil litigation, there is greater reason for taking the same view in regard to matters pertaining to elections. So long as the sword of Damocles of the election petition remains hanging an elected member of the Legislature would not feel sufficiently free to devote his whole-hearted attention to matters of public importance which clamour for his attention in his capacity as an elected representative of the concerned constituency. The time and attention demanded by his elected office will have to be diverted to matters pertaining to the contest of the election petition. Instea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed these powers without point or purpose, and we must close our mental eye to the presence of the powers which should be treated as non-existent. The Court cannot accede to such a proposition. The submission urged by the learned Counsel for the petitioner in this behalf must therefore be firmly repelled. 22. Mr. Bijlani learned counsel placed reliance on the judgment of Supreme Court in case of Popat and Kotecha Property vs. State Bank of India Staff Association in Appeal (C) No. 3460 of 2000 dated 29th August 2005 in support of the same submission. The relevant paragraphs relied upon read thus :- Rule 11 of Order VII lays down an independent remedy made available to the defendant to challenge the maintainability of the suit itself, irrespective of his right to contest the same on merits. The law ostensibly does not contemplate at any stage when the objections can be raised, and also does not say in express terms about the filing of a written statement. Instead, the word 'shall' is used clearly implying thereby that it casts a duty on the Court to perform its obligations in rejecting the plaint when the same is hit by any of the infirmities provided in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said power of attorney. Likewise, at the time of filing of the complaint by the said Director Shri Prashant Shirodkar, no Resolution nor any power of attorney was filed nor was there any statement made in the said complaint to the effect that the said Director Shri Prashant Shirodkar was authorized by the Complainant- Company to lodge the said complaint. 21. A Director, as an individual Director, has no power to act on behalf of the company. He is only one of a body of Directors called the Board of Directors and alone he has no power except such as may be delegated to him by the Board of Directors or given to him by the articles of association of a company. In the case at hand, the complaint was filed by one of the Directors and as already stated by a Director who had initially complained to the Police that the subject cheque was forged by the accused, and, without any resolution of the company or any authorization from the Board of Directors. The view held by me is consistent with the views expressed in the decisions referred to herein above, namely, those of the Madras High Court in Ruby Leather Exports v. K. Venu(supra), Andhra Pradesh High Court and Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. A Company is not required to sue as a part of its day to day affairs. The action in law is required to be filed only upon the cause of action accruing in favour of the Company. It cannot, therefore, be said that the power to sue is one of the substantial powers of management . The power to sue must, therefore, be separately given by the Company. Such power can be given only under the Articles and Associations of the Company. No such power is shown. If Articles empower the Managing Director to file suits on behalf of the company, the position would have been different. See All India Reporter Ltd. Vs. Ramchandra Dhondu Datar, A 1961 Bom 292 in which case upon such Articles of Association, the Managing Director was held entitled to sue or execute an authority to another to sue on behalf of the company. That power may be given by the Company to any officer including a Director, Managing Director, Secretary, etc. A Company acts only through its resolution. Hence power of the Company can be given only by the Company resolving to sue. That resolution may be passed by the Directors in the Board meeting or by the Company itself in its General Meetings. No resolution of the Company to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Ltd., AIR 1991 Delhi 25 , it has been held, upon considering the scope of Section 291 of the Companies Act, that unless a power to institute the Suit is specifically conferred on a particular Director, he has no authority to institute the Suit on behalf the Company. 11. The essential requirement of this provision is that the Company which is a juristic person must itself decide to sue. Once that is done, it would authorise one of its Directors who is the agent of the Company or its principal officers the Secretary of the Company or the Managing Director to file the Suit. The suing in each case is a separate act. The Company acts only through its meetings. Hence the Board of Directors in the day to day management of the company must decide and resolve to sue or not to sue. A blanket authority cannot be given to a particular Managing Director or Director to sign the papers and document s, including the power to sue. The power to sue requires application of mind upon the particular cause of action. It requires the Company to pay the requisite Court fee. It requires the Company to be represented by a legal officer being an Advocate of the Court. It is an act which, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... director to file a such suit against the defendant company (iii) whether defect if any was curable and plaint could not be rejected on that ground. 28. The learned counsel for the defendant placed reliance on section 291 of the companies act 1956. The defendant did not produce any copy of the memorandum of association or articles of plaintiff company providing for passing of a specific resolution by the board of directors empowering a director to file a specific suit. A perusal of section 291 of the Companies Act makes it clear that the board of directors of a company are entitled to exercise all powers and to do all things and acts as the company is authorised to exercise and to do subject to the provisions of the Act and unless the memorandum and articles of company provides for compliance of any other condition. The learned counsel appearing for the respondent could not point out any provisions in the Companies Act or any other provision which mandates passing of any such specific resolution for filing a suit against a particular party. 29. The plaintiff has produced on record before the trial court certified true copy of the minutes of the meeting of the boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode of Civil Procedure, 1908 at all. 31. Be that as it may, it is not in dispute that the defendant had already filed an application in the same suit in the year 2006 under order 7 rule 11(a) of the Code of Civil Procedure, 1908 relying upon the averments made in the plaint and inter alia praying that the plaint did not disclose any cause of action and was thus liable to be rejected. The defendant never raised any issue at that stage that the plaint itself was liable to be rejected on the ground that no specific resolution was passed by the company authorising the director to file specific suit against the defendant. The learned District Judge after considering the submission of both parties rejected application under order 7 rule 11(a) of the Code of Civil Procedure, 1908. It is not in dispute that the respondent did not challenge the said order passed by the District Court as far back as on 25th September 2006. It is thus clear that the defendant had accepted the fact that no such specific resolution was required to be passed authorising a director to file specific suit against the defendant. In my view the respondent not having raised such issue in the earlier applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80 which is mandatory, the plaint can be rejected if the same is indicated in the plaint itself. In my view, Court has to see while dealing with applications under Order VII Rule 11(d) of the Code of Civil Procedure 1908 whether plaint itself would indicate bar of such suit and its entry itself would indicate its exclusion from consideration. In my view, even if there is no specific resolution passed by the plaintiff company authorising its director to file a suit on behalf of the company, plaint cannot be rejected on that ground on the face of it. In my view, it may amount, at the most a procedural irregularity in filing a suit which can be cured even during the pendency of such suit and the plaint therefore cannot be rejected on such ground. 35. In so far as Judgment of Supreme Court in case of M/s Dale and Carrington Invt. (P) Ltd. and another (supra) is concerned, the Supreme Court has considered the provisions of Section 397 and 298 of the Companies Act and has held that a company is a juristic person and it acts through its Directors who are collectively referred to as the Board of Directors and has no power to act on behalf of a company of which he is a direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany pursuant to a resolution. A copy of the resolution however, was not filed along with the said Power of Attorney. In this case, the plaintiff company had already clarified by filing affidavit before the trial court bringing on record a copy of the resolution approving the Power of Attorney by which the Director was authorised to file a suit on behalf of the company and to file pleadings etc. Thus, the Judgment in case of Ashok Bampto Pagui (supra) does not assist the respondent and is clearly distinguishable in the facts of this case. 38. In so far as the Judgment of Supreme Court in case of Popat and Kotecha Property (supra) is concerned, the Supreme Court has held that disputed questions cannot be decided at the time of considering an application filed under Order VII Rule 11(d) of the Code of Civil Procedure. Such provision applies in cases only where the statement made by the plaintiff in the plaint, without any doubt or dispute shows that the suit is barred by any law in force. The averments in the plaint are the germane, the pleas taken by the defendant in the written statement would be wholly irrelevant at that stage. Supreme Court has held that it should appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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