2013 (7) TMI 1195 - Board - Companies Law

Court stays company petition pending resolution of civil suit due to same issues of oppression and mismanagement.

The court found that the issues in the company petition and the civil suit were the same, involving oppression and mismanagement in the company's affairs. ... - Issues Involved:1. Whether the issue in the company petition and the issue in O.S. No. 10 of 2005 filed before the civil court are one and the same.2. Whether the company petition should be stayed under section 10 of the Code of Civil Procedure, 1908.Summary:Issue 1: Whether the issue in the company petition and the issue in O.S. No. 10 of 2005 filed before the civil court are one and the same.The second respondent filed a company petition u/s 397 and 398 of the Companies Act, 1956, alleging acts of oppression and mismanagement in the affairs of the first respondent-company. The reliefs sought included directing the company to issue share certificates, dividing the 50% share in the land, building, and machinery, and transferring the entire shareholding of the applicant to the second respondent. The applicant had previously filed a civil suit (O.S. No. 10 of 2005) before the Principal District Judge, Virudhunagar District, Srivilliputhur, seeking a declaration that certain gift deeds are null and void, partition of the plaintiff's half share in the properties, and other related reliefs. The civil suit included the properties and shares of the first respondent-company. The court noted that the parties in the company petition are also parties in the civil suit, and the issues in both cases are directly and substantially related to the same properties and shares.Issue 2: Whether the company petition should be stayed under section 10 of the Code of Civil Procedure, 1908.The applicant argued that the company petition should be stayed u/s 10 of the CPC, 1908, as the civil suit was filed prior to the company petition and involved the same issues. The court observed that section 10 of the CPC mandates that no court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties. The court found that the issues in the company petition and the civil suit are indeed the same, and proceeding with the company petition could result in conflicting decisions. Therefore, the court exercised its inherent powers u/r 44 of the Company Law Board Regulations, 1991, read with section 10 of the CPC, 1908, and stayed the company petition until the disposal of the civil suit.Conclusion:The court concluded that the issues in the company petition and the civil suit are one and the same, and the company petition should be stayed under section 10 of the CPC, 1908, until the civil suit is disposed of. The application (C.A. No. 262 of 2011 in C.P. No. 37 of 2011) was allowed, and the company petition was stayed with no order as to costs.