2020 (3) TMI 1316 - HC - Companies Law

Dismissed lawsuit due to lack of authorization and limitation; not maintainable under Companies Act, 2013.

The court dismissed the suit, finding it lacked proper authorization, was barred by limitation, and was not maintainable under the Companies Act, 2013. ... Suit instituted by an authorised person or not - suit disclose any cause of action or not - suit is barred by limitation or not - entitlement to a decree of declaration - entitlement to a decree of mandatory injunction - entitlement to a decree of cancellation - entitlement to a decree of permanent injunctions - entitlement to a decree for damages - entitlement to interest, if so, at what rate and for what period - HELD THAT:- It may be stated that though the suit has been pending before this Court for over three years and issues have also been framed therein and the parties relegated to evidence but the same is not a ground to put the said suit to trial, if otherwise it was found to be not maintainable. A perusal of the order sheets shows that the question of maintainability of the suit has never been gone into at any earlier point of time. Once doubts as to the maintainability of the suit have arisen, the suit cannot be permitted to pedantically proceed to trial, taking up resources of this Court which can be better utilized for other deserving cases which cannot be adjudicated without trial. Even otherwise, it is the settled law that framing of issues is not a bar to an application under Order XII Rule 6 of the CPC for decreeing the suit forthwith without any new material coming before the Court and allowed on the same record on which issues were framed. Whether the suit on the pleas in the plaint and the documents aforesaid ought to have been entertained in the first place? - HELD THAT:- The legislature in its wisdom, while providing for creation of a juristic entity such as a company, incorporated provisions in the company law, of remedies available to the shareholders of a company in the event of oppression and mismanagement. The same was in consonance with the principles that the law having providing for management of affairs of a company by its Board of Directors or as laid down in the Articles of Association of a company, individual shareholders should not be permitted to interfere in the affairs and business of the company by filing civil suits against the company. Once the Legislature in its wisdom has deemed it appropriate that less than the prescribed number of shareholders or shareholders holding less than the prescribed number of shares should not be permitted to initiate legal proceedings with respect to management and affairs of the company, it would be travesty of the statute to hold that less than the prescribed number of shareholders or shareholders having less than the prescribed shares, though not entitled to approach the NCLT, can interfere with the management of affairs of the company by approaching the Civil Court. The Legislature having prescribed the minimum for exercising such a right, it has to be held that less than the said minimum have no right to interfere in the management - Mention in this regard may also be made of the proviso to Section 244 of the Companies Act, 2013, which though prescribing the minimum number of shares below which NCLT cannot be approached, empowers the NCLT to waive the said qualification. 35. The counsels for the plaintiff have thus been unable to lift the doubt which had arisen during the hearing on 11th July, 2019 as to the maintainability of the suit. The suit is dismissed with costs of ₹ 1 lacs each payable by the plaintiff to each of the two defendants. Issues Involved:1. Proper institution of the suit.2. Disclosure of cause of action.3. Bar by limitation.4. Entitlement to a decree of declaration.5. Entitlement to a decree of mandatory injunction.6. Entitlement to a decree of cancellation.7. Entitlement to a decree of permanent injunction.8. Entitlement to damages and interest.9. Maintainability of the suit.Detailed Analysis:1. Proper Institution of the Suit:The defendant no.1 company challenged the proper institution of the suit by alleging that it was not instituted by an authorized person. The court did not find sufficient grounds to dismiss the suit on this basis and proceeded to examine other issues.2. Disclosure of Cause of Action:The defendant no.1 company argued that the plaint disclosed no cause of action. The plaintiff's claim was based on a Board Resolution dated 21st July, 1990, which the defendants denied. The court found that the plaintiff did not produce the said resolution or provide adequate proof of its existence, thus failing to establish a cause of action.3. Bar by Limitation:Defendant no.2 argued that the suit was barred by limitation. The court noted that the plaintiff had knowledge of the lease to defendant no.2 in 2012 but did not challenge it in a timely manner, thus the claim for cancellation was barred by time.4. Entitlement to a Decree of Declaration:The plaintiff sought a declaration that he was entitled to be allotted a specific flat based on the resolution. The court found no evidence of the resolution being legally binding or enforceable, and the plaintiff failed to prove a vested or enforceable interest against the defendant no.1 company.5. Entitlement to a Decree of Mandatory Injunction:The plaintiff sought a mandatory injunction for the allotment of another flat. The court held that without proving the existence and enforceability of the resolution, the plaintiff could not claim such relief.6. Entitlement to a Decree of Cancellation:The plaintiff sought the cancellation of the allotment of flat no. B-15 to defendant no.2. The court found that the lease was executed in 2012 and the plaintiff's challenge was barred by limitation and waiver.7. Entitlement to a Decree of Permanent Injunction:The plaintiff sought to restrain the defendants from creating third-party rights in another flat. The court found no basis for such an injunction as the plaintiff failed to prove any enforceable right.8. Entitlement to Damages and Interest:The plaintiff claimed damages for loss of rental income due to the alleged wrongful allotment of the flat. The court dismissed this claim as the plaintiff did not establish any legal entitlement to the flat.9. Maintainability of the Suit:The court questioned the maintainability of the suit under the Companies Act, 2013, which bars civil courts from entertaining suits in matters that fall within the jurisdiction of the National Company Law Tribunal (NCLT) or National Company Law Appellate Tribunal (NCLAT). The court found that the plaintiff's grievances pertained to the management and affairs of the company, which should be addressed before the NCLT. The plaintiff's argument of a family settlement was not pleaded in the plaint, and the court found no grounds to pierce the corporate veil. The suit was dismissed as not maintainable.Conclusion:The court dismissed the suit with costs, holding that the plaintiff failed to establish any enforceable right or cause of action. The suit was found to be barred by limitation, lacked proper authorization, and was not maintainable under the Companies Act, 2013. The court awarded costs of Rs. 1 lakh each to the two defendants.