2021 (8) TMI 550 - HC - Companies Law

High Court rejects Title Suit No.13 of 2019 due to lack of jurisdiction and issue estoppel

The High Court set aside the trial court's order and rejected the plaint of Title Suit No.13 of 2019. It held that the Civil Court lacked jurisdiction ... Jurisdiction of civil courts barred by Companies Act where tribunal has cognizance - res judicata and issue estoppel arising from prior Company Law Board adjudication - rejection of plaint under Order VII Rule 11(d) CPC where suit is barred by lawJurisdiction of civil courts barred by Companies Act where tribunal has cognizance - exclusive jurisdiction of company tribunal for reliefs under Sections 241 and 242 - Whether the Civil Court has jurisdiction to entertain a suit seeking declarations and reliefs in relation to company shareholding or whether such jurisdiction is barred by the Companies Act, 2013. - HELD THAT: - The court held that the reliefs claimed in the plaint - declarations and injunctions concerning ownership, transfer and regulation of conduct in relation to shares of the companies - fall broadly within the jurisdiction conferred on the Tribunal by the Companies Act. Sections 241 and 242 (2013 Act) contemplate the Tribunal's power to regulate conduct of affairs of the company, purchase of shares, and restrictions on transfer or allotment of shares. Section 430 bars cognate jurisdiction of Civil Courts where the statutory forums under the Companies Act have jurisdiction. A plain and meaningful reading of the plaint, including the subject-matter described in Schedules A and B, shows that the family arrangement and pleaded controversies relate solely to shares and their transferability, bringing the dispute within the exclusive domain of the company forum. Consequently, the Civil Court is not the appropriate forum to grant the principal reliefs sought in the suit. [Paras 21, 22, 23, 31]The suit is barred for want of jurisdiction of the Civil Court under the Companies Act and must be rejected on that ground.Res judicata and issue estoppel arising from prior Company Law Board adjudication - cause of action estoppel and issue estoppel where identical issues were earlier adjudicated - Whether the plaint is barred by the principles of res judicata and issue estoppel in view of the prior adjudication by the Company Law Board (CLB) on the same family arrangement and share transfers. - HELD THAT: - The plaint itself quoted and relied upon the CLB order (C.P. No.31 of 2006) and admitted that an appeal from that order was pending. The CLB had considered the family settlement/arrangement and the transfers of shares of the companies at length under the earlier statutory regime (Sections 397/398 of the 1956 Act), which are similar in scope to Sections 241/242 of the 2013 Act. By participating in the CLB proceedings and in view of the CLB's adjudication on the relevant issues, the plaintiffs are estopped from relitigating identical issues in a subsequent civil suit. The prior adjudication therefore operates as issue estoppel/res judicata against the plaintiffs, and a plain and meaningful reading of the plaint and the documents referenced therein shows the suit is palpably barred by these doctrines. [Paras 25, 26, 27, 28, 31]The plaint is barred by res judicata and issue estoppel arising from the prior CLB adjudication and must be rejected.Final Conclusion: The revisional application is allowed; the impugned order is set aside and the plaint in Title Suit No.13 of 2019 is rejected in toto as barred by the Companies Act (tribunal jurisdiction) and by res judicata/issue estoppel; the plaintiffs' application for abandonment of one relief is rendered infructuous; no order as to costs. Issues Involved:1. Jurisdiction of the Civil Court vs. NCLT.2. Application of res judicata and issue estoppel.3. Grounds for rejection of plaint under Order VII Rule 11 of CPC.4. Abandonment of relief under Order XXIII Rule 1 of CPC.Detailed Analysis:1. Jurisdiction of the Civil Court vs. NCLT:The primary issue was whether the Civil Court had jurisdiction to entertain the suit or if it was barred under Section 430 of the Companies Act, 2013, which grants exclusive jurisdiction to the National Company Law Tribunal (NCLT) for matters related to oppression and mismanagement in companies. The court noted that Sections 241 and 242 of the 2013 Act empower the NCLT to decide on issues related to the conduct of the affairs of a company, including shareholding disputes. The reliefs sought in the suit, including declarations regarding shareholding and the interpretation of a family settlement, fell within the purview of the NCLT's jurisdiction. Therefore, the Civil Court's jurisdiction was barred.2. Application of Res Judicata and Issue Estoppel:The petitioners argued that the suit was barred by res judicata and issue estoppel because the Company Law Board (CLB) had previously adjudicated similar issues in a company petition under Sections 397 and 398 of the Companies Act, 1956. The court agreed, noting that the CLB had already considered the family settlement and the transfer of shares in its order, which was cited in the plaint. The plaintiffs had also appealed the CLB's decision, which was still pending. Thus, the principle of res judicata and issue estoppel applied, barring the plaintiffs from raising the same issues in the present suit.3. Grounds for Rejection of Plaint under Order VII Rule 11 of CPC:The petitioners filed an application under Order VII Rule 11 of the Code of Civil Procedure (CPC) for rejection of the plaint on the grounds that it did not disclose a cause of action and was barred by law. The court emphasized that a meaningful reading of the plaint showed that the issues pertained to shareholding and the family settlement, which fell under the NCLT's jurisdiction. Additionally, the court found that the plaint was barred by the principles of res judicata and issue estoppel. Consequently, the plaint was rejected under Order VII Rule 11(d) of the CPC.4. Abandonment of Relief under Order XXIII Rule 1 of CPC:The plaintiffs sought to abandon the relief related to the rectification of the Register of Members of the defendant companies and intended to approach the NCLT for such relief. The trial court allowed this application. However, the High Court found that since the entire plaint was rejected, the application for abandonment of relief became infructuous and was dismissed.Conclusion:The High Court allowed the revisional application, set aside the trial court's order, and rejected the plaint of Title Suit No.13 of 2019. The court held that the Civil Court lacked jurisdiction under Section 430 of the Companies Act, 2013, and that the suit was barred by res judicata and issue estoppel due to the prior adjudication by the CLB. The application for abandonment of relief was rendered infructuous and dismissed. No order as to costs was made, and urgent certified copies of the order were directed to be supplied to the parties upon compliance with requisite formalities.