TaxTMI 
TaxTMI 
2025 (8) TMI 507
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.... injunction. By the impugned judgment and deemed decree dated April 9, 2019, the learned Trial Judge rejected the plaint primarily on the grounds that the suit was barred under Section 80 of the Code of Civil Procedure and Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, "the SARFAESI Act"). 2. The premise of the suit was that the defendant/respondent no. 1, the Official Liquidator (O/L), as well as the defendant nos. 2 to 4/Banks (creditors), were negligent in preserving and maintaining a property of the Company, including plant, machinery, equipment and other assets, from damage and theft, seeking compensation for such damages. The suit was filed by the plaintiff nos. 2 and 3, two of the Directors of the plaintiff no. 1-Company, namely Shree Sanyeeji Steel and Power Limited, in the name of the plaintiff no. 1-Company as well as in the capacity of Guarantors in respect of a loan taken by the said Company from the respondent nos. 2 to 4/Banks. It was pleaded in the plaint that since the plaintiff nos. 2 and 3 were also liable to meet the debt which the plaintiff nos. 1-Company failed to repay to th....
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....elated stage of the suit. 7. Being aggrieved by the said order (deemed decree), the appellants have preferred the present appeal. On the other hand, the appellants also took out a revisional application, registered as CO No.2435 of 2019, against the portion of the impugned judgment whereby their application for withdrawal of the suit was dismissed with certain observations made thereon. 8. CO No.2435 of 2019 was disposed of by a learned Single Judge of this Court vide order dated December 12, 2023 upon observing that since the Trial Court proceeded for rejection of plaint, the plaintiffs' prayer for withdrawal of the suit had become redundant and did not call for enquiry on merit. Accordingly, CO No.2435 of 2019 was allowed in part, by holding that the observations in the impugned order, so far as those relate to the plaintiffs' application under Order XXIII Rule 1(3) of the Code, were set aside. Liberty was given to the parties to agitate all points in the appeal in respect of the disputes pertaining to the applications under Order VII Rule 11 of the Code. 9. During pendency of the appeal, it was pointed out by the parties that the plaintiff no. 1-Company was undergoing a....
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....t from being Directors of the borrower-Company, are also personal Guarantors in respect of the loan taken by the Company from the respondent nos. 2 to 4/Banks. Insofar as the Guarantors are concerned, if the relief sought in the suit is granted, the amount recovered would much exceed the payable dues to the Banks. Thus, the liability of the present appellants as Guarantors would be reduced to nil, due to which a declaration was sought in the suit to the effect that the present appellants would stand discharged and absolved of all Guarantees to the respondent nos. 2 to 4/Banks including the guarantees given by the appellants. 14. It is argued further that the reliefs sought in the suit do not overlap with the CIRP. Although a Resolution Plan was submitted by the present appellants in the CIRP, the same was turned down by the Adjudicating Authority/Tribunal. Thus, the said Resolution Plan was never approved. If it was allowed, it might still have been argued that the appellants are bound by the said Plan; however, since the same was not approved, the proposals given therein do not have any binding effect on the appellants. In the said Plan, proposals were given by the present appe....
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....fords sufficient remedy to the present appellants, since the appellants come within the definition of 'contributories' of the Company (in liquidation). Hence, the appropriate remedy before the plaintiffs would be to file an application under Section 543, in which the Company Court could very well have granted compensation for any deterioration or loss in respect of the property of the Company (in liquidation). 20. It is further argued that in the Resolution Plan, the present appellants categorically admitted their liability and sought to mitigate the same by payment. Hence, the relief sought in the plaint on the self-same score, seeking a mitigation of such liability, is self-contradictory, rendering the suit vexatious. 21. Learned counsel appearing for respondent nos. 2 to 4/Banks argues that it is the Company Court which has exclusive jurisdiction, since the winding up proceeding is still pending. Although this Court, by an order dated July 9, 2015, had granted liberty to the appellants to institute an appropriate proceeding, upon holding that a previous suit for self-same relief as the present one, filed in this Court, was not maintainable due to lack of territorial jurisd....
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.... Officer in the event a suit is filed against such an officer. The Section is couched in negative language, debarring any suit from being filed without such compliance, unless leave to file without such notice is granted specifically under Section 80(2) of the Code of Civil Procedure. It is nobody's case that leave under Section 80(2) was taken by the plaintiffs prior to filing the suit, nor has it been pleaded in the plaint that a prior notice was issued under Section 80 of the Code. Thus, the suit was definitely barred by Section 80 of the Code of Civil Procedure and was not maintainable in law for non-compliance of the said provision. 31. In V. Rajendran and another v. Annasamy Pandian (dead) through Legal Representatives Karthyayani Natchiar, reported at (2017) 5 SCC 63, the Supreme Court observed that 'formal defects' or 'sufficient grounds' under Order XXIII Rule 1 of the Code of Civil Procedure include want of notice under Section 80 of the Code. Thus, the plaintiffs were entitled to seek withdrawal of the suit with liberty to sue afresh within the contemplation of Order XXIII Rules 1 and 3 of the Code in view of want of notice under Section 80 being a 'formal defect' wit....
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....n by the secured creditor for enforcement of security, is in accordance with the provisions of the SARFAESI Act and the Rules made thereunder. Hence, the entire scope of consideration in a Section 17 application is circumscribed by the rider that the grievance has to relate to whether the measures taken under Section 13(4) of the said Act are in accordance with the provisions of the SARFAESI Act and its Rules. 36. The principal relief sought in the suit, however, is entirely unrelated to any such measure. The damages/compensation claimed from the O/L and the Banks is based on alleged negligence on the part of the defendants in preserving the Company's property and has nothing to do with the measures taken or to be taken by the Banks under Section 13 of the SARFAESI Act per se. 37. The jurisdiction of the Tribunal under the SARFAESI Act is of a limited nature, to consider only whether the measures under Section 13 (4) are in consonance with the provisions of the said Act. The bar under Section 34 relates to suits which seek to usurp such limited jurisdiction of the Tribunal. However, the powers of a Civil Court to adjudicate a claim for damages/compensation for loss/deteriorat....
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.... the orders passed therein that the Company Court had, inter alia, observed that upon payment of a particular monthly sum in a recurring manner by the Company, the O/L would unlock the property and hand over the same to the Company (in Liquidation). However, such order, by itself, did not suspend or drop and/or terminate the winding up proceeding. Under the contemplation of the 1956 Act, the moment an order is passed in a winding up proceeding, the Company Court assumes jurisdiction in respect of the assets of the Company (in Liquidation), to be exercised through the O/L appointed for such purpose. 47. Thus, we have to proceed on the premise that the winding up proceeding was pending and consider whether such pendency could oust the Civil Court's jurisdiction. In such context, we necessarily have to look into the provisions of the 1956 Act itself. 48. The respondent nos. 2 to 4/Banks have relied in particular on Sections 448(6)(c) and 460(6) of the 1956 Act. 49. Section 448(6)(c), however, contemplates proceedings against the O/L for professional misconduct and does not, within its scope, envisage the adjudication of any claim for damages. 50. On the other hand, Section....
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....amages or compensation independently. 55. Thus, the above two provisions, that is, Sections 448(6)(c) and 460(6) of the 1956 Act, do not exclude the jurisdiction of the Civil Court at all. 56. Section 543 of the 1956 Act is the closest provision which could arguably bring a conflict between the powers of the Company Court and the Civil Court. The said provision takes into account situations where the liquidator has misapplied any property of the Company or has been guilty of any misfeasance or breach of trust in relation to the company, in which case the Tribunal/Company Court may, inter alia on the application of a contributory, compel the liquidator to repay or restore the property with interest or to contribute such sum to the assets of the Company by way of compensation in respect of the misapplication, as the Tribunal/Company Court thinks just. 57. There cannot be any manner of doubt that the plaintiffs, either in their capacity as Directors or as guarantors, come within the broad purview of the expression "contributories" who, in Company Jurisprudence, are persons liable to contribute to the assets of the Company when it is being wound up. 58. However, the Section....
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....onferred on the Tribunal/Company Court under the said sub-section is not exclusionary, debarring Civil Courts from taking up similar suits. Rather, the use of language in sub-section (2) of Section 446 indicates that the power of the Tribunal to decide suits or proceedings by or against the Company, notwithstanding anything contained in any other law, is in addition to powers to other competent forums under other laws. Hence, Section 446 does not, in any manner, debar the Civil Court from taking up a suit by a company. Hence, the present suit, instituted also in the name of the company as plaintiff no. 1, is not barred as such. 64. If seen in contrast with the 1956 Act, it is found that Section 280(d) of the 2013 Act confers jurisdiction on the Tribunal to entertain or dispose of "any question whatsoever, whether of law or fact, including those relating to assets, business, etc., of the company or any matter arising out or relating to the winding up proceeding" (Italics supplied). 65. As opposed thereto, the corresponding provision in Section 446(2)(d) of the 1956 Act omits the words "relating to assets". 66. The plaintiffs' claim for damages/compensation against the O/L f....
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....is well-settled that there cannot be a partial rejection of plaint and/or the reliefs claimed in the suit cannot be segregated for the purpose of rejection of plaint. A plaint has to be rejected either as a whole or not at all. Even if the suit was not maintainable vis-a-vis the Company at the behest of Sandeep Khandelwal, since he did not have the authority at the relevant time (that is, April, 2016) to represent the plaintiff no. 1-Company since the winding up proceeding had already commenced, it would at best be open to the Trial Court, at the time of final adjudication of the suit, to refuse the reliefs to the plaintiff no. 1-Company on such ground, by holding that the reliefs claimed in the suit were not maintainable at the behest of the Company. However, at the same time, the Civil Court was duty-bound to decide the issues raised by the plaintiff nos. 2 and 3/present appellants, in their capacity as guarantors for the loan taken by the plaintiff no. 1-Company, since the liability of the guarantors are co-extensive with the borrower and the plaintiff nos. 2 and 3 had no impediment in authorising the said Sandeep Khandelwal to represent them in the suit. 74. Thus, for the pu....
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.... to repay the loan taken by the corporate debtor-company and cannot take a contradictory view by seeking mitigation of such liability in the suit. 79. However, there are two fallacies in the said argument. 80. First, even if the liability of the appellants as guarantors was admitted, there is no conflict in such admission with the premise of the suit from which the present appeal arises. The appellants, even in the plaint of the suit, admit their liability as guarantors of the corporate debtor-company but seek to mitigate the same and be relieved of such liability by virtue of their claim of compensation against the O/L for damages which, if granted, would be much in excess of the dues payable by the company and, by co-extensive liability, by the appellants/guarantors. Hence, there is no contradiction between the stand taken by the appellants in the suit and the Resolution Plan submitted by them in the CIRP. 81. The second fallacy in the argument is that the Resolution Plan was never approved by the Adjudicating Authority. A Resolution Plan becomes binding on all concerned, including the contributories, under Section 31 of the IBC only upon being approved by the Adjudicati....
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.... confined to the parameters of Order VII Rule 11 of the Code and the Appellate Court cannot delve into questions beyond those taken in the Trial Court for the purpose of rejection of the plaint. Not only did the Trial Court reject the plaint in the present case only on the grounds of Section 80 of the Code and Section 34 of the SARFAESI Act and did not adjudicate specifically on the other grounds taken, it is also to be noted that the bar under the IBC was never pleaded, argued or mentioned in the applications for rejection of plaint by any of the parties to the suit before the Trial Court. 88. Thus, the Appellate Court cannot, for the first time, permit a new ground of rejection of plaint to be taken, which was not taken before the Court of first instance. Although a Trial Court can even suo moto reject a plaint if it so feels, the Appellate Court cannot arrogate to itself the powers of a Trial Court, thus, usurping the jurisdiction of the Court of first instance, inasmuch as the scope of hearing of an application under Order VII Rule 11 of the Code is concerned. Hence, the CIRP ground now sought to be taken by the RP cannot even be gone into within the limited scope of this ap....