2017 (4) TMI 575 - HC - Companies Law

Court dismisses company application not related to sanctioned scheme; jurisdiction limited to Companies Act.

Shri Kashinath R. Jhunjhunwala and Others Versus M/s. Laxmichand Bhagaji Ltd. and Others

The Court dismissed the company application as not maintainable, stating that the reliefs sought did not relate to the sanctioned scheme but rather to a ... Maintainability of company application - claims of ownership - injunction in respect of the property in question - Held that:- A perusal of the averments made in the company application filed by the applicants for various reliefs and reply filed by the respondent no.3 indicates that both the parties are claiming their rival claims of ownership in respect of the property in question. The applicants have not challenged the documents executed by the respondent no.1 in favour of the respondent no.3 pursuant to the order passed by this Court. In my view, the rival claims of ownership inter se between the parties post sale of the property which originally belonged to the respondent no.2-company cannot be decided in this company application by the Company Court. The scheme of compromise has been implemented in so far as the sale of property by the respondent no.1 committee appointed by this Court is concerned. The only provisions relied upon by the learned counsel for the applicants for filing this company application for various directions and injunctive reliefs are Section 392 of the Companies Act, 1956 and the Rule 86 of the Companies (Court) Rules, 1959. In view thereof, since in this company application, the applicants are inter alia praying for an injunction in respect of the property in question against the parties on the premise that there is a dispute about title in respect of the property in question between the applicants and the respondent no.3 is not maintainable before the Company Court, Rule 86 of the Companies (Court) Rules, 1959 is not attracted. Reliance placed by the learned counsel for the applicants on Rule 86 of the Companies (Court) Rules, 1959 is totally misplaced. In my view, the Companies Act, 1956 being a self-contained code, all the proceedings which can be entertained by the Company Court are specifically prescribed therein. The Company Court cannot entertain any other proceedings which are not prescribed under the provisions of the Companies Act, 1956 or the Companies Act, 2013. This company application inter alia praying for an injunction and for taking various documents on record is not maintainable and is beyond the jurisdiction of this Court. Company Court cannot exercise jurisdiction in this case also for the reasons that (a) reliefs sought do not relate to the scheme sanctioned by this Court but seeks declaration of civil rights i.e. injunction against the auction purchaser of the property and indirectly seeking determination of title of the applicants; (b) reliefs relate to the property purchased by the respondent no.3 and does not relate to the company incorporated under the provisions of the Companies Act, 1956; (c) the applicants are not interested in the affairs of the respondent no.2 company or in the scheme of the company; and (d) the application is not made for the purposes of carrying out the scheme of compromise and/or arrangement of the respondent no.2 company. Issues Involved:1. Maintainability of the company application.2. Implementation of the scheme of compromise/arrangement.3. Rival claims of ownership and possession of the property.4. Jurisdiction of the Company Court under the Companies Act, 1956 and Companies (Court) Rules, 1959.Detailed Analysis:1. Maintainability of the Company Application:The primary issue raised by respondent no.3 was the maintainability of the company application. The applicants sought a declaration that respondent no.1 and its committee members, including Mr. Suman Chhabra, were not entitled to disturb the peaceful possession of the applicants over the disputed land. The Court examined whether such reliefs could be granted in a disposed petition filed under Sections 391 to 393 of the Companies Act, 1956. It was argued that the reliefs sought were substantive and pertained to the determination of rival claims over the property, which could not be adjudicated by the Company Court. The Court concluded that the application was not maintainable as it did not relate to the implementation of the sanctioned scheme but rather sought to resolve a civil dispute regarding property title.2. Implementation of the Scheme of Compromise/Arrangement:The Court noted that the scheme of compromise/arrangement between respondent no.2 and its depositors had been sanctioned by orders dated 24th October 1991 and 28th November 1991. A committee was appointed to implement the scheme, which included selling the immovable property in question. The respondent no.3 was the successful bidder for the property, and the full consideration was paid by November 2006. The Court emphasized that the scheme had already been implemented, and the property sale was completed. Any subsequent disputes arising from the sale did not fall under the purview of the Company Court's jurisdiction.3. Rival Claims of Ownership and Possession of the Property:The applicants claimed to have purchased the property from respondent no.3, who had initially bought it from respondent no.1. However, respondent no.3 terminated the agreement with the applicants, which was not challenged by the applicants. The Court observed that the applicants and respondent no.3 were asserting rival claims over the property, which were civil in nature and could not be resolved by the Company Court. The Court highlighted that the applicants did not challenge the termination notice or the subsequent documents executed in favor of respondent no.3, which included a Supplementary Agreement to Sell, a Deed of Settlement, and a Special Power of Attorney.4. Jurisdiction of the Company Court under the Companies Act, 1956 and Companies (Court) Rules, 1959:The Court analyzed the provisions of Section 392 of the Companies Act, 1956, and Rule 86 of the Companies (Court) Rules, 1959. It concluded that these provisions did not empower the Company Court to grant the reliefs sought by the applicants, which were essentially for an injunction and taking various documents on record. The Court cited precedents from the Kerala High Court and Gujarat High Court, which held that the Company Court's jurisdiction is limited to matters specified in the Companies Act and does not extend to adjudicating civil disputes arising after the sale of property. The Court emphasized that the applicants were not parties to the sanctioned scheme and their claims did not relate to the scheme's implementation.Conclusion:The Court dismissed the company application as not maintainable, stating that the reliefs sought did not relate to the scheme sanctioned by the Court but rather to a civil dispute over property title. The observations made were solely for deciding the issue of maintainability, and there were no orders as to costs.