2002 (7) TMI 824 - HC - Companies Law

Club AGM injunction stayed due to territorial jurisdiction issues and suppression of material facts by plaintiff

Calcutta HC stayed an ex parte ad interim injunction order restraining a club's AGM due to lack of territorial jurisdiction, as the club's registered ... Lack of jurisdiction - Validity of the ex parte ad interim order of injunction - registered office of the Club is outside the territorial jurisdiction of the Trial Court - without notice and without following the requirement of Order 39 Rule 3 - suppression of facts - Conduct of the Annual General Meeting (AGM) - HELD THAT:- We are of the view that we are entitled to consider the contents of the supplementary affidavit. Going through the same we find that the plaintiff/respondent on 5th June, 2002 came to know of the AGM of the said Club on 21st June, 2002 and proposed the candidature of some member for election in the said AGM. But this fact has not been stated clearly in the injunction petition. The statement made in Paragraph 41 of injunction petition is quite misleading and does not disclose the real facts. This Court finds that it is not a case of suppression of facts unknowingly. The plaintiff/respondent had referred to something happening on 5th June, 2002, in Para 41 but facts have been pruned to such an extent that the real state of affairs are not disclosed. So there is a clear lack of candour on part of the plaintiff. This Court is firmly of the view that on this ground alone the order dated 20th June, 2002 passed by the Court below should be stayed. In the instant case also there is a last minute approach for stay to the Court within whose territorial limits the registered office of Club is not located. This last minute approach was made even though the plaintiff was aware of the said meeting from 3rd June, 2002. This appears from the pleadings in the injunction petition itself. Therefore, the Court below has not properly exercised its discretion in the matter of granting ex parte ad interim order of injunction and it should not have issued the ad interim ex parte order on 20th June, 2002 restraining the holding of AGM on 21st June, 2002. So far as the jurisdiction of the Civil Court is concerned, the Court, having regard to the submission of Mr. Roy Chowdhury, the learned Counsel for the respondent, is of the opinion that such questions raise an arguable issue and need not be decided at the ad interim stage. The point may be decided first when the injunction petition will be heard. Assuming the Civil Court has the jurisdiction, the appropriate Civil Court will be the Court within whose local limits the registered office of the company is situate. But here the Court below has not followed that principle and why the lower Court departed from that well settled principle has not been indicated in the order under appeal. This also shows that the Court below exercised its jurisdiction improperly. This Court also does not understand how the learned Judge passing the impugned order came to the finding that he is passing the order for the interest of the majority of the members of the Club. The majority members of the Club are not before him. Therefore, the learned Judge had no right to assume that he was exercising his discretion to protect the interest of the majority members. This Court also finds that the balance of convenience or inconvenience of issuing such an order on 20th June, 2002 which is the day before the date of AGM was not at all considered by the learned Judge. Therefore, this Court, for the reasons aforesaid, is compelled to stay the said ad interim order till the hearing of the injunction petition. Thus both the appeal and the application are disposed of with the certain directions. But one thing is made clear that the observations and findings on the particular facts of this case are all tentative and the learned trial Judge need not be influenced by those while hearing the injunction petition or the suit. This Court gives the following directions : We dispose of both the appeal as also the stay application as above. There will be no order as to costs. Issues Involved:1. Jurisdiction of the Civil Court.2. Validity of the ex parte ad interim order of injunction.3. Suppression of material facts by the plaintiff.4. Proper exercise of discretion by the Trial Court.5. Conduct of the Annual General Meeting (AGM).Issue-wise Detailed Analysis:1. Jurisdiction of the Civil Court:The appellant challenged the jurisdiction of the Civil Court in passing the ex parte ad interim order of injunction, citing Section 10 of the Companies Act read with Section 2(11). It was argued that the registered office of the Club is outside the territorial jurisdiction of the Trial Court. The plaintiff/respondent countered that the jurisdiction of the Civil Court under Section 9 of the CPC is very wide and should be decided based on the averments made in the plaint. The Court held that the question of jurisdiction raises an arguable issue and should be decided when the injunction petition is heard.2. Validity of the ex parte ad interim order of injunction:The appellant contended that the Trial Court did not follow the mandate of recording reasons under Order 39 Rule 3 of the CPC when granting the ex parte ad interim order of injunction. The Court referred to the Supreme Court's rulings in Shiv Kumar Chadha v. Municipal Corporation of Delhi and Morgan Stanley Mutual Fund v. Kartick Das, which emphasized the mandatory nature of recording reasons for such orders. The Court found that the Trial Court's failure to record reasons invalidated the order.3. Suppression of material facts by the plaintiff:The appellant argued that the plaintiff suppressed material facts, particularly his awareness of the AGM scheduled for 21st June 2002, as evidenced by a document dated 5th June 2002. The Court agreed, noting that the plaintiff's pleadings lacked candor and clarity, which is essential for ex parte applications. The Court held that this suppression of facts warranted staying the Trial Court's order.4. Proper exercise of discretion by the Trial Court:The Court found that the Trial Court did not properly exercise its discretion in granting the ex parte ad interim order of injunction. The Court highlighted that the plaintiff approached the Court at the last minute, despite being aware of the AGM well in advance. The Court also noted that the Trial Court failed to consider the balance of convenience or inconvenience of issuing such an order a day before the AGM.5. Conduct of the Annual General Meeting (AGM):The Court permitted the Club to hold the AGM on 19th July 2002 at its registered office, based on the notice dated 24th May 2002. The Court directed that the AGM be conducted under the supervision of Hon'ble Justice Chittatosh Mookerjee, assisted by two learned advocates, to ensure fairness. The decisions taken at the AGM would be subject to the final order of the Court below in the injunction petition or the suit.Conclusion:The ex parte ad interim order of injunction passed by the Trial Court was stayed until the hearing of the injunction petition. The AGM was allowed to proceed under judicial supervision, with the decisions taken at the AGM to abide by the final order in the ongoing suit. The appeal and the stay application were disposed of with specific directions to ensure a fair process.