2007 (9) TMI 419 - HC - Companies Law

Court affirms jurisdiction in inheritance dispute, rejecting Companies Act defense. Defendants to submit documents.

The court held that the suit is maintainable and not barred by sections 397 to 407 of the Companies Act. The defendants' argument that the civil court ... Oppression and mismanagement - whether the suit as framed is not maintainable in view of the provisions of sections 397 to 407 of the Companies Act ? - Held that:- Whether some of the properties of the companies have been misappropriated and transferred by defendants Nos. 1 to 6 for their personal use and could not be transferred are also such disputes which cannot be determined by the company court under the provisions of the Companies Act, 1956. For partitioning of the assets of the companies, defendants Nos. 7 to 12, after determination that they were started from the assets of common ancestor and the share of the plaintiff if dissolution of the companies is required for which invocation of the company court may be required, the civil suit for partition will not be completely barred. Therefore it cannot be inferred that the suit of the plaintiffs is barred under sections 397 to 407 of the Companies Act, 1956. In the circumstances, the preliminary issue framed on November 14, 2002, 'Whether the suit as framed is not maintainable in view of the provisions of sections 397 to 407 of the Companies Act,' is decided against the defendants holding that the suit of the plaintiffs is not barred and is maintainable. The said issue is thus decided accordingly. Since it is held that the suit is maintainable, learned counsel for the defendants seek time to file the documents. Original documents or certified copies of documents, if not already filed be filed within four weeks. Issues Involved:1. Whether the suit as framed is maintainable in view of the provisions of sections 397 to 407 of the Companies Act.Issue-Wise Detailed Analysis:1. Maintainability of Suit under Sections 397 to 407 of the Companies Act:The core issue in this judgment is the maintainability of the suit in light of sections 397 to 407 of the Companies Act. The plaintiffs have filed for partition and rendition of accounts, asserting that the companies involved were family concerns initiated from the assets of their common ancestor, Sh. Banwari Lal. They allege mismanagement and misappropriation of assets by the defendants.The defendants argue that the companies are separate legal entities and any grievances should be addressed under the Companies Act before the Company Law Board or the company court. They cite the case of *Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad* to support their claim that the civil court lacks jurisdiction.However, the plaintiffs counter this by referencing multiple cases, including *Naresh Kumar Aggarwal v. Davender Kumar Mittal* and *Ammonia Supplies Corporation P. Ltd. v. Modern Plastic Containers P. Ltd.*, to argue that the Companies Act does not explicitly bar the jurisdiction of civil courts, and that civil courts can adjudicate disputes unless expressly or implicitly barred by statute.The judgment examines precedents where civil courts have been deemed competent to handle disputes involving companies, particularly when the issues extend beyond mere mismanagement or oppression, such as inheritance claims and property rights. The court notes that sections 397 and 398 provide remedies for specific grievances by shareholders with requisite voting strength, but do not preclude civil suits for other disputes.The court emphasizes that the plaintiffs are not shareholders but claim rights to properties allegedly misappropriated by the defendants. Determining the extent of inherited shares and whether company assets were misappropriated are matters suitable for civil court adjudication, not exclusively for the company court.The judgment concludes that the suit is maintainable, as the plaintiffs' claims involve determining inheritance rights and property misappropriation, which are civil disputes beyond the purview of sections 397 to 407 of the Companies Act. Therefore, the preliminary issue is decided against the defendants.Conclusion:The court holds that the suit is maintainable and not barred by sections 397 to 407 of the Companies Act. The defendants are granted time to file documents, and the case is scheduled for further proceedings.