Civil Court Has Jurisdiction Over Director Disputes, Rejecting NCLT Exclusivity Argument

The court held that the civil court has jurisdiction to entertain the suit involving disputes between directors of a company, rejecting the argument that the National Company Law Tribunal (NCLT) should have exclusive jurisdiction. The court ruled that the suit was not barred under the Companies Act, 2013, and dismissed the application under Order VII Rule 11 of the Code of Civil Procedure. The court emphasized that the reliefs sought, including declaration of rights and payment of remuneration, are civil in nature and fall within the purview of the civil court.

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Issues Involved:
1. Jurisdiction of Civil Court vs. National Company Law Tribunal (NCLT) under Companies Act, 2013.
2. Applicability of Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC).

Summary:

1. Jurisdiction of Civil Court vs. NCLT:
The petitioner argued that the disputes between the directors of a company should be referred to the NCLT, as per Sections 241 and 242 of the Companies Act, 2013. The petitioner contended that the civil court lacked jurisdiction to entertain the suit, claiming it was barred under Section 430 of the Companies Act, 2013. The petitioner emphasized that matters such as the declaration of right to enter company premises, disclosure of cash balances, and remuneration issues fall under the purview of the NCLT.

The respondents countered that the Companies Act does not explicitly or implicitly bar the jurisdiction of civil courts in such matters. They argued that Sections 152, 155, 166, 197, 213, 216, 241, and 452 of the Companies Act do not restrict civil courts from addressing disputes involving civil rights. The respondents cited various judgments to support their claim that civil courts retain jurisdiction over such disputes.

2. Applicability of Order VII Rule 11 of CPC:
The court noted that Order VII Rule 11(d) of CPC applies only when the suit appears to be barred by any law on the face of the plaint. The court emphasized that for the purpose of disposing of an application under Order VII Rule 11, all averments made in the plaint must be treated as true. The court observed that the plaintiffs had alleged that the defendant's appointment as director was put on hold by the Company Law Board, implying a dispute between a director and a non-director.

The court concluded that the determination of whether the defendant qualifies as a "member" under Section 241 of the Companies Act requires examination of evidence and cannot be decided at the threshold. The court also noted that the plaintiffs sought reliefs such as declaration of rights, payment of remuneration, and injunctions, which are civil in nature and not exclusively within the jurisdiction of the NCLT.

Conclusion:
The court held that the suit is not barred under Section 430 of the Companies Act, 2013, and rejected the application under Order VII Rule 11 of CPC. The court dismissed the petition, affirming the jurisdiction of the civil court to entertain the suit, considering the nature of the reliefs sought and the factual averments made in the plaint.

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