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TMI Blog2022 (8) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant company, misappropriated crores of rupees belonging to the appellant by withdrawing them or depositing them into his own account or to his family members' accounts, increased his shareholding from 1,25,000 shares to 19,65,000 shares illegally. The first respondent misused his capacity as Managing Director of the company and had transferred lands belonging to the appellant company illegally in his favour and in favour of his family members, who are the respondents 2 to 6 herein. 4. It is further case of the appellant that the first respondent had executed 49 sale deeds in his favour in his personal capacity and executed one sale deed in favour of the second respondent, who is his wife, four sale deeds in favour of respondent no.3, one sale deed in favour of respondent no.4, four sale deeds in favour of respondent no.5 and five sale deeds in favour of respondent no.6. The respondents 2 to 6 are his wife, sons and daughter-in-law. The respondent no.1 was also instrumental in executing the sale deeds in favour of respondent nos.15 to 21, who are other employees of the petitioner company, wife of the Chartered Accountant and Company Secretary of the company. It amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 25.02.2022 the trial Court dismissed both I.As. Challenging the decision of the trial Court these two Civil Miscellaneous Appeals are preferred. 11. During the course of hearing these two I.As., the first respondent raised the plea of maintainability of a suit in the civil Court and consequently the two I.As. It was contended that Section 430 of the Companies Act bars the jurisdiction of civil Court in disputes relating to companies and the aggrieved party has to invoke the jurisdiction of the National Company Law Tribunal. 12. This plea of respondents on maintainability of the suit in a civil Court is negatived and the trial Court held suit is maintainable. 13. The respondents 1 to 6 filed cross-objections raising the plea of maintainability of the suit and the CMAs arising out of interlocutory orders of the trial Court. 14.1. Learned counsel for appellant contended that large extent of land belonging to the company was illegally knocked away by the first respondent and his family members. With trust and confidence, the first respondent was appointed as Managing Director. But, he misused his position and transferred the land of the company to his name and in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntainable. He placed reliance on the decision of Hon'ble Supreme Court in Darshan Anilkumar Patel vs. Pravinkumar Jinabhai Patel and others MANU/SCOR/46567/2020. He would submit that Section 241 only deals with a member/shareholder of the company and does not envisage remedy before the Tribunal by the company. Therefore, to declare the sale transactions as void only civil Court has jurisdiction. 17. Issues for consideration: (i) Whether the suit of the appellant is maintainable in the civil Court ? (ii) Whether the appellant is entitled to injunctions prayed for ? Issue (i): 18. Section 430 of the Companies Act takes away jurisdiction of the civil Court to entertain any suit or proceeding in respect of any matter which the NCLT or the National Company Appellate Tribunal is empowered to determine by or under the Act or any other law for the time being in force. It also restrains civil Courts to issue injunction orders on such matters. Insofar as these cases are concerned, Sections 241 and 242 of the Act are relevant. Section 241(1)1 of the Act enables a member of a company to apply to the Tribunal complaining on various aspects enlisted in clauses (a) and (b). According to Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracted to the cases on hand. 22. Section 94 of the CPC vests jurisdiction in a civil Court to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred. Disputes concerning execution of sale deeds affecting immovable property are a civil dispute. Section 430 of the Companies Act bars jurisdiction of the civil Court only when a matter which the Tribunal or the appellate Tribunal is empowered to determine by or under the Act. What is required to be seen is whether there is express or implied bar of jurisdiction of civil Court. 23. In the facts of these cases, only Section 241 is applicable and whereas Section 241 is not attracted as the dispute is raised by the company against its former Managing Director. Therefore, the issue raised in the civil Court is not barred expressly ousting the jurisdiction of the civil Court. From the reading of Section 430 read with Sections 241 and 242, it cannot be said that impliedly also the jurisdiction of civil Court is ousted. The scheme of Section 241 can be understood by looking into provision in Section 59. According to this section, if the name of any person is entered in the register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1984 is null and void and also for further declaration that any change effected in the composition of the Board of the petitioner subsequent to 13.02.1984 is illegal. He also sought for permanent injunction restraining the defendants therein from interfering with the office of the 2nd respondent-plaintiff as Managing Director in the day-to-day affairs of the petitioner-company. 25.2. At that stage, instant Writ Petition was filed contending the disqualification specified in Section 283 (1)(i) and 299 of the Act relates to certain rights unknown to the common law and those rights as well as the remedies in that regard are those specially created by the Companies Act and the 2nd respondent ought to have approached the Company Court and not the civil Court for adjudication of disputes relating to his disqualification. 25.3. Having regard to the objection raised on maintainability of the civil suit, the question considered by the Court was "whether the civil Court has jurisdiction to decide the question relating to the alleged disqualification of the 2nd respondent". The learned single Judge held as under: "11. It will be noted that there is no express provision ousting the jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly in respect of matters covered by Sections 237, 391, 394, 395 and 397 to 407 (both inclusive) and in respect of matters covered by part VII of the Companies Act with a paid up capital of one lakh of rupees and over in respect of other provisions relating to winding up of the companies. Except in respect of these matters, the ordinary jurisdiction of the civil courts to decide the rights of parties is not excluded.". xx 25. Following the aforesaid rulings, with which I respectfully agree, I hold that the present case deals with an individual, right of the 2nd respondent and that the suit filed by him is maintainable. xx 32. I, therefore, hold that the general law of contracts is the basis of the rights of parties and that the companies Act, 1956 merely regulates these rights and does not create any new rights or remedies. Unless as stated in Wolverhampton's case (22) there is an exclusion of the jurisdiction of the civil court, by words express or implied, the suit is maintainable, and no such exclusion has been held existing by the courts in respect of individual rights." 26. The Division Bench of High Court in Tej Prakash S.Dangi and others vs. Coramandal Pharmaceu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in a summary proceeding. Given the relief solicited for by respondent no. 1 in the Suit for Declaration, Partition and Injunction, the Tribunal has no power to decide the title of the shares in summary proceedings. Section 58 of the Companies Act, provides that rectification of register of members has to be decided by Tribunal and as per Section 430, the Civil Court has no jurisdiction. At the same time, it is also a trite law that Tribunal has a power only to decide the issue of rectification of register of members and has no power to decide the issue of title. It is apt to mention here that as per Section 111A of the Companies Act, 1956, the Company Law Board was empowered to decide the issue of title also. The word 'title' has not been included in Section 58 of the Companies Act, 2013. Even while considering Section 111A, it was held by the Supreme Court that a seriously disputed question of title cannot be decided by the Company Court or Company Law Board. This conclusion was arrived at by the Supreme Court by taking into consideration jurisdiction of the Company Law Board being summary in nature. The procedure in National Company Law Tribunal constituted under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicate the dispute raised under Section 59. Paragraph-6 reads as under: "6. It is not in dispute that were a dispute to arise today, the civil suit remedy would be completely barred and the power would be vested with the National Company Law Tribunal (NCLT) under Section 59 of the said Act. We are conscious of the fact that in the present case, the cause of action has arisen at a stage prior to this enactment. However, we are of the view that relegating the parties to civil suit now would not be the appropriate remedy, especially considering the manner in which Section 430 of the Act is widely worded." 29.1. In Darshan Anilkumar Patel (supra), in a civil suit filed before the civil Court, it was contended that defendant no.1-Pravinkumar Jinabhai Patel was not competent to execute sale deeds on various properties in favour of defendants 2 to 19 and agreement to sell in favour of defendant no.20. By judgment and decree dated 15.04.2013, trial Court dismissed the suit. The trial court held that Sri Anilkumar was not a Director of Kalpita Buildings Pvt. Ltd., and further held that defendant no.1 was the Managing Director of Kalpita Builders Pvt. Ltd. and that the alienation done d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2020." 29.3. Learned senior counsel Sri S.Ravi contended that in that case cause of action arose prior to 01.06.2016 on which date Section 430 came into effect and, therefore, the decision rendered by the Bombay High Court, affirmed by the Hon'ble Supreme Court has no application to the facts of these cases. 29.4. What is contended by the learned senior counsel may be true, but Hon'ble Supreme Court held that jurisdiction to decide validity of the sale deed would fall within the ambit of the civil Court. In view of the said opinion, the Hon'ble Supreme Court upheld the decision of the Bombay High Court. 30. This view of the Hon'ble Supreme Court is in tune with the earlier decision of the Hon'ble Supreme Court and the decisions of the learned single Judge and the Division Bench of this Court. 31. Cumulatively, unless, there is specific bar excluding the jurisdiction of the civil Court on any matter, which is also traceable to Companies Act, the jurisdiction of the civil Court to decide the civil dispute is not ousted. At the cost of repetition, it is appropriate to note that the issue raised before the civil Court is regarding the illegality in the transactions undertaken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. Parties are entitled to lead evidence in support of respective claims. While so, if injunction is not granted, respondents/defendants are free to change the physical features of the land and create third party interests. If that happens, in the event of plaintiff succeeding in the suit it would be difficult to enforce the decree and secure possession of the land and might lead to more litigation. 35. Appellant has made out a prima facie case. In the peculiar facts of these cases, balance of convenience is in favour of the appellant and unless injunction is granted, grave prejudice would be caused to the appellant which cannot be remedied later. 36. The Civil Miscellaneous Appeals are accordingly allowed and Cross Objection No. 24 of 2022 is dismissed. It is made clear that there is no expression of opinion on merits. Since we have upheld the decision of Court below on maintainability of the suit, we leave open all issues to be urged in the pending suit. Pending Miscellaneous applications, if any, shall stand closed. --------------------- Notes: 1. S.241.Application to Tribunal for relief in cases of oppression, etc. -- (1) Any member of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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