TaxTMI 
TaxTMI 
2018 (12) TMI 1123
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....Schedule I to the Plaint to be null, void and illegal; b. Issue a decree of Permanent Injunction restraining the Defendant No.1 and Defendant No.2-4 from giving effect to allotment dated 05th October, 2013. c. Issue a decree of Permanent Injunction restraining the Defendant No. 5-9 to exercise any voting rights or whatsoever rights in Defendant No.1 Company in view of the illegal allotment of shares dated 05th October, 2013. d. Issue a decree of Permanent Injunction restraining the Defendant No.1 from selling, disposing or creating third party rights on the assets of the Defendant No.1, that is, the hotel property, J-14, Community Centre Rajouri Garden, New Delhi-110027. e. And/or pass any other order as your lordship may deem fit in the facts and circumstances of the case." 2. SAS Hospitality Pvt. Ltd. is the Plaintiff No.1 in the present suit and Plaintiff No.2 Mr. Anant Kumar Aggarwal is the shareholder of the Plaintiff No.1. The Defendant No.1 - Surya Construction Pvt. Ltd. (Company) is a company, which owned a hotel property at J-14, Community Centre, Rajouri Garden, New Delhi-110027. The authorised share capital of the Company was 1 crore divided into 1 Lakh eq....
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....f Securities Interest Act, 2002 (hereinafter, 'SARFAESI Act') and the same has, in fact, been sold. The purported sole asset of the Defendant No.1 Company is no longer an asset of the Plaintiff Company. 6. The Defendants, further, contend that in view of the notification and coming into effect of the National Company Law Tribunal ('NCLT'), this Court has no jurisdiction to try and entertain the suit in view of the bar contained in Section 430 and Section 434(1)(c) of the Companies Act, 2013 (hereinafter, '2013 Act'). Applications under Order VII Rule 11 CPC have been filed seeking rejection of the plaint. The Plaintiffs have also filed an application under Order XXXIX Rules 1 & 2 CPC in which an ex-parte injunction order was granted in the following terms vide order dated 12th March, 2014. 9. I am satisfied that the plaintiff has made out a prima facie case for grant of an ex parte ad interim injunction and in case the ex parte ad interim injunction is not granted, the plaintiff shall suffer an irreparable loss and injury. The balance of convenience is also in favour of plaintiff. It is directed that till the next date of hearing defendants No. 5 to 9 shall not exercise any r....
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....th the issuance of further share capital. He also submits that this issue has now been decided by a learned Single Judge of this Court in Satish Chandra Sanwalka v. Tinplate Dealers Association Pvt. Ltd. & Ors. 189 (2012) DLT 785 (hereinafter, 'Satish Chandra Sanwalka') and the Division Bench judgment of this Court in Jai Kumar Arya (supra) which hold that the jurisdiction of the civil court under Section 9 CPC is not ousted. In fact, he relies upon the judgment of the Supreme Court in Amonia Supplies SC (supra) to argue that if the matter required rectification of the register of the Company under Section 155 of the Companies Act, 1956, it is to be adjudicated before the civil Court. He further submits that the argument of the Defendants that Mr. Mohit Mittal is not duly authorised by the board is untenable as he can produce the original board meeting minutes dated 21st January, 2014 to show that the board meeting, in fact, took place. Analysis & Findings 10. Before going into the question as to whether this Court has the jurisdiction to entertain and try the present suit and grant reliefs prayed for, it is necessary to analyze the scheme of the Companies Act, 2013, along with ....
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....n aggrieved to the Tribunal i.e., the NCLT. 14. Section 430 of the 2013 Act, which bars the jurisdiction of the Civil Court, has to be given effect to in this background, and reads as under: "Section 430: Civil court not to have jurisdiction. No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal." 15. The bar contained in Section 430 of the 2013 Act is in respect of entertaining "any suit", or "any proceedings" which the NCLT is "empowered to determine". The NCLT in the present case would be empowered to determine that the allotment of shares in favour of the Defendant Nos.5 to 9 was not done in accordance with the procedure prescribed under Section 62 of the 2013 Act. The NCLT is also empowered to determine as to whether rectification o....
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....titution of the NCLT has been upheld. The relevant observations in the said R. Gandhi (supra) is set out below: "33. The argument that there cannot be 'whole-sale transfer of powers' is misconceived. It is nobody's case that the entire functioning of courts in the country is transferred to Tribunals. The competence of the Parliament to make a law creating Tribunals to deal with disputes arising under or relating to a particular statute or statutes cannot be disputed. When a Tribunal is constituted under the Companies Act, empowered to deal with disputes arising under the said Act and the statute substitutes the word 'Tribunal' in place of 'High Court' necessarily there will be 'whole-sale transfer' of company law matters to the Tribunals. It is an inevitable consequence of creation of Tribunal, for such disputes, and will no way affect the validity of the law creating the Tribunal." 18. In Madras Bar Association (supra), relying upon the decision in R. Gandhi (supra), the Supreme Court observed as under: "11. First of all the creation of Constitution of NCLAT has been specifically upheld in 2010 judgment. It cannot be denied that this ve....
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....om courts to Tribunals, on the ground of pendency and delay in courts, and the jurisdiction so transferred does not involve any technical aspects requiring the assistance of experts, the Tribunals should normally have only judicial members. Only where the exercise of jurisdiction involves inquiry and decisions into technical or special aspects, where presence of technical members will be useful and necessary, Tribunals should have technical members. Indiscriminate appointment of technical members in all Tribunals will dilute and adversely affect the independence of the Judiciary. (d) The Legislature can re-organize the jurisdictions of Judicial Tribunals. For example, it can provide that a specified category of cases tried by a higher court can be tried by a lower court or vice versa (A standard example is the variation of pecuniary limits of courts). Similarly while constituting Tribunals, the Legislature can prescribe the qualifications/eligibility criteria. The same is however subject to Judicial Review. If the court in exercise of judicial review is of the view that such tribunalisation would adversely affect the independence of judiciary or the standards of judiciary,....
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.... the issue of Section 59 and Section 62, the judgment of the Supreme Court, relied upon by the Defendants in Ammonia Supplies SC (supra) is categorical. The Supreme Court observed as under: "25. Now we proceed to examine the power of the court to rectify the Register of Members of a company under Section 155. The question raised for the appellant is that the court under this Act cannot direct an applicant to seek his remedy by way of suit but the court under the Act having exclusive jurisdiction should decide itself..................... 26.......... 27. In other words, in order to qualify for rectification, every procedure as prescribed under the Companies Act before recording the name in the Register of the Company has to be stated to have been complied with by the applicant - at least that part as required by the Act - and assertion of what has not been complied with under the Act and the Rules by the person or authority of the respondent-Company before the applicant claims for the rectification of such Register. The court has to examine on the facts of each case whether an application is for rectification or something else. So field or peripheral jurisdiction of the cou....
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....not be doubted to be summary in nature. So, whenever a question is raised the court has to adjudicate on the facts and circumstances of each case. If it truly is rectification, all matters raised in that connection should be decided by the court under Section 155 and if it finds adjudication of any matter not falling under it, it may direct a party to get his right adjudicated by a civil court. Unless jurisdiction is expressly or implicitly barred under a statute, for violation or redress of any such right the civil court would have jurisdiction. There is nothing under the Companies Act expressly barring the jurisdiction of the civil court, but the jurisdiction of the 'court' as defined under the Act exercising its powers under various sections where it has been invested with exclusive jurisdiction, the jurisdiction of the civil court is impliedly barred. We have already held above the jurisdiction of the 'court' under Section 155, to the extent it has is exclusive, the jurisdiction of the civil court is impliedly barred. For what is not covered as aforesaid the civil court would have jurisdiction. Similarly we find even under Section 446(1), its words itself indica....
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....to the constitution of the NCLT in its present form. The constitution of the NCLT was subject matter of litigation before the Supreme Court of India, and the amended Act came into effect from 22nd August, 2013 and some of the provisions constituting the NCLT came into effect from 30th August, 2013 as corrected on 1st January, 2014. Moreover, the learned Single Judge had applied the ratio of Clausde-Lila Parulekar v. Sakal Papers (P) Ltd. & Ors. (2005) 11 SCC 73 (hereinafter, 'Sakal Papers') and Ammonia Supplies SC (supra), that disputed questions of fact ought to be decided by the Civil Court. Sakal Papers (supra) while dealing with Ammonia Supplies (supra) was decided in a fact situation where the matter had remained pending for 18 years before the Civil Court and the Supreme Court felt it to be grossly inequitable to relegate the parties to an alternate remedy after the lapse of such a long time. 25. In Jai Kumar Arya (supra), a Division Bench of this Court, dealing with the bar under Section 430 of the 2013 Act, held as under: "99. While examining the merits of these rival contentions, we are fully aware of the interpretative principle, now trite in law, that provisions wh....
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.... decision of the Tribunals. (4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit. (5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegality collected a suit lies. (6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry. (7) An exclusion of the jurisdiction of the civil court is not readily to be inferred unless the conditions above set down apply." (Emphasis supplied)" 27. The Division Bench in Jai Kumar Arya (supra), after applying Dhulabai (supra), lays down the following test: "102 From the above authorities, the ....
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.... if there are issues of fraud and collusion or any other complicated questions, the NCLT would not have the jurisdiction to adjudicate the same. The High Court, however, holds that the Trial Court can examine this issue in an application under Order VII Rule 11 CPC, and under those circumstances rejected the appeal. In the present case, this Court is examining the question of jurisdiction in an application under Order VII Rule 11. 30. In Chiranjeevi Rathnam & Ors. v. Ramesh & Ors 2017 (6) CTC 568, an injunction was sought restraining the conduct of the EGM, While interpreting Section 430 of the 2013 Act, the Court held that the Civil Court has no jurisdiction and the suit would be barred under Section 430. 31. In N. Ramji v. Ashwath Narayan Ramji & Ors, [2017] 140 CLA 13 (Mad.) a learned Single Judge of Madras High Court has held that if issue of title of shares is raised, the same cannot be decided by the NCLT, but by the Civil Court. Such a question of title has not been raised in the present case. 32. None of the above judgments, would be squarely applicable in the present case, inasmuch as the question here is whether the issues of further share capital, was contrary to t....