2021 (3) TMI 307 - HC - Companies Law

Court Dismisses Appeal, Reduces Costs, Emphasizes NCLT Jurisdiction

The appeal was dismissed by the court, with a modification to reduce the cost imposed by the learned Single Judge to Rs. 50,000. The court held that the ... Maintainability of suit before Civil Court instead of NCLT - lack of a specific plea of family settlement in the pleadings, with further reasoning that the issues raised were covered under the Companies Act, 2013 - Family arrangement - resolution of disputes amongst family members who are shareholders of Respondent No. 1 Company - Whether a plea of Family Settlement was made in the suit? - HELD THAT:- The law on pleadings is well-settled. Order VI Rule 2 of the CPC requires that the pleadings should contain a statement in a concise form of material facts which the party relies upon for pleading his case or defence. The material facts are those which must be proved in order to establish Plaintiff/Appellant’s right to the relief sought for in the plaint, or the Respondent No. 1’s defence in the written statement. The narration of material facts is essential to disclose the complete cause of action. It needs no emphasis to say that a case can only be decided on the particulars laid out in the pleadings, and a relief not founded thereon, cannot be granted. Parties cannot travel beyond the pleadings and necessary material facts must be stated in support of the case set-up. There can be no departure from them in evidence - the Appellant has not narrated any material facts in relation to the family settlement. In absence of pleadings, evidence cannot be permitted to be adduced. We cannot see any accidental slip or omission on the part of the Appellant in drafting the suit, deserving laxity. The suit has been drafted with serious thought and is intentionally vague on the plea of family settlement. Therefore, having regard to the frame-work of the suit, even if we were to give liberal construction to the pleadings, law does not permit the Appellant to supplement the deficiency and omission in the pleadings, by producing evidence, for which trial is being requested - there are no reason to upturn the finding of learned Single Judge on this score. Whether the Board Resolution constituted a Family Settlement/Arrangement and appellant as a shareholder can seek its enforcement against Respondent no.1 in a Civil Suit? - HELD THAT:- We are conscious of the fact that under the Companies Act, 1956 there was no provision like Section 430 providing for ouster of jurisdiction, however, there cannot be any dispute that as on this day, the civil remedy would be completely ousted under Section 430 of the Companies Act, 2013. Relegating the parties to continue with the civil suit would thus not be appropriate remedy, considering the manner in which Section 430 of the Act is couched and the appropriate course for the Appellant would be to avail its remedy before the NCLT. Further even if one were to examine the issue is the context of Companies Act, 1956, there is sufficient case law that holds that the jurisdiction of the Civil Court in matters relating purely to issues pertaining the management of the company can not be gone into any civil suit. Here it also becomes relevant that since the father of the Appellant was pursuing a remedy before the NCLT, the appropriate course of action for the Appellant is to approach the said forum. We therefore, do not find any error in the reasoning of the learned Single Judge on this count, as well - there are no merit in the submission of the Appellant that the Board Resolution was in line with the Article/ Memorandum of Company. This contention is advanced merely on the basis of the pleadings without placing any material on record and thus the observations made by the learned Single cannot be faulted with. Whether reliance placed on SMT. DEEPA ANANT BANDEKAR VERSUS RAJARAM BANDEKAR (SIRIGAO) MINES (P.) LTD. [1990 (11) TMI 322 - HIGH COURT OF BOMBAY] case by the appellant was correct? - HELD THAT:- Since it is already held that there is no family settlement on record, the proposition advanced by the Appellant is misconceived - We have also perused the decision of the Bombay High Court in Deepa Anant case. The Deepa Anant-1990 case, in para 1 notes the proposition as “whether the family arrangement dated March 11, 1987 is binding on the company”, however, the reasoning given in para 23 has not dealt with the same. Moreover, subsequently the 1990 decision was set-aside, but the Appellant did not bring the said fact to the notice of the court. Thus, the learned Single Judge was correct in noting that the Deepa Anant1990 case relied upon by the counsel for the Appellant, was later set aside in terms of a compromise arrived at by the parties, and the company is still existing till date. For these reasons, we do not find any merit in this contention of the Appellant, urged before us. Whether Respondent No. 1 made any admission in its written statement filed in the suit, and whether the Learned Single Judge was correct in exercising jurisdiction under order XII Rule 12 CP? - HELD THAT:- The jurisprudence relating to the exercise of power under Order XXII Rule 6 of CPC is now well established. Under the said provision the Court may, on its own, deliver judgment based on admissions either in the pleadings or otherwise. The said provision is to be interpreted widely having regard to its objective and the Court is thus not precluded to examine the question of maintainability of a suit at a stage after the issues have been framed. Indisputably, this aspect had not been examined at any anterior stage, and therefore we cannot find any error in the approach of the learned Single Judge in delving into this question and exercising jurisdiction under Order 12 Rule 6 of CPC. The Appellant had contended that the learned Single Judge erroneously held that the Appellant herein had failed to even establish that he was an independent shareholder in the Respondent No.1 and proceeded to rule adversely on this basis. To our minds, there is little doubt regarding the factum of shareholding of the Appellant in the Respondent Company, without which, a case for the Appellant’s right vis-à-vis the Company could not have prima facie not arisen. The learned Single Judge has proceeded in the matter with the presumption of shareholding, and thus this, debate is wholly immaterial. There are no infirmity in the impugned judgment - appeal dismissed. Issues Involved:1. Plea of family settlement in the suit.2. Enforceability of the Board Resolution as a family settlement/arrangement.3. Jurisdiction of the civil court versus NCLT.4. Relevance of the Deepa Anant-1990 case.5. Alleged admissions by Respondent No. 1.6. Shareholding status of the Appellant.Detailed Analysis:A. Plea of Family Settlement in the Suit:The learned Single Judge held the suit to be not maintainable due to the lack of a specific plea of family settlement in the plaint. The Appellant contended that the suit was premised upon a family arrangement, citing paragraphs 8-11 of the plaint. However, the court found these references to be unspecific and vague, noting that the suit primarily sought enforcement of a Board Resolution dated 21.07.1990. The court emphasized that pleadings must contain material facts to disclose a complete cause of action, which was lacking in this case. Hence, the argument for the family settlement was considered an afterthought and not foundationally pleaded in the suit.B. Enforceability of the Board Resolution as a Family Settlement/Arrangement:The court examined whether the Board Resolution constituted a family settlement and whether the Appellant, as a shareholder, could seek its enforcement against Respondent No. 1 in a civil suit. The non-production of the purported Board Resolution by the Appellant and the denial of its existence by Respondent No. 1 were critical. Even assuming its existence, the court held that any right arising from the Board Resolution falls within the domain of company management, which is not enforceable in a civil court but should be addressed before the NCLT. The court also noted that a company can change its decisions regarding its assets, and the Appellant’s right as a shareholder relates to management issues, thus falling under the jurisdiction of the NCLT.C. Jurisdiction of the Civil Court versus NCLT:The court addressed the argument that Section 430 of the Companies Act, 2013, which ousts the jurisdiction of civil courts, was notified after the suit was filed. However, it concluded that as of the present day, the civil remedy is completely ousted under Section 430, and the appropriate forum for the Appellant is the NCLT. The court also referenced case law under the Companies Act, 1956, which supports that civil courts do not have jurisdiction over management issues of a company. The Appellant’s father’s ongoing proceedings before the NCLT further supported this conclusion.D. Relevance of the Deepa Anant-1990 Case:The Appellant relied on the Deepa Anant-1990 case to argue that a family arrangement can be binding on a company. However, the court found this reliance misplaced as the purported family settlement was not satisfactorily pleaded. Additionally, the Deepa Anant-1990 case was set aside in a subsequent decision, which the Appellant failed to disclose. Thus, the court dismissed this argument.E. Alleged Admissions by Respondent No. 1:The Appellant claimed that Respondent No. 1 made admissions in its written statement that supported the Appellant’s case. The court found no such admissions and upheld the exercise of jurisdiction under Order XII Rule 6 of CPC, which allows for judgment based on admissions in pleadings or otherwise. The court noted that the maintainability of the suit could be examined at any stage, and the learned Single Judge appropriately exercised this jurisdiction.F. Shareholding Status of the Appellant:The Appellant argued that the learned Single Judge erroneously questioned his status as a shareholder. The court acknowledged the Appellant’s shareholding but found this point immaterial to the overall decision, as the suit was fundamentally flawed in its pleadings and jurisdictional basis.Holding:The appeal was dismissed, with a modification to reduce the cost imposed by the learned Single Judge to Rs. 50,000. The pending applications were also disposed of.