TaxTMI 
TaxTMI 
2023 (2) TMI 1436
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting the plaint filed by the present Appellant as the Plaintiff, pressing into service the provisions contained in Order-7 Rule -11 of the Code has been confirmed. 2. For the sake of convenience, in order to avoid confusion and bring in clarity, the parties hereinafter have been referred to, as they have been arraigned in the Suit. 3. Plaintiff's case is that prior to its merger with the Union of India in pursuance of the agreement dated 14.11.1947, the title over all the properties, including the mineral resources of the Ex-State of Bonai was exclusively resting with the Ruler (Raja) of the State. The Ex-State of Bonai was having its own codified laws and orders of the Ruler were too taken and accepted as the law of the land. It is stated that Late Dharanidhar Indra Deo was the Ruler of Bonai State before its merger with the Union of India in the year 1947. Much prior to the merger; on 06.04.2019, a Company Limited by sharing had been formed and registered under the Indian Companies Act, 1913, under the name and style as "Bonai Industrial Company Limited" (Defendant No.1), having Registration Number :- 15/000246/1939-40. This was with the permission with the then Rule....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Company or any part of it, either in favour of Sitaram or in favour of Mano Gobinda at any given point of time. Thus, it is stated that inclusion of the name of Sitaram, Annapurna, wife of late Mano Gobinda and subsequently, the name of Defendant Nos. 2 to 10 as the Directors of share holders of the Company is wholly illegal, void, inoperative and based on false representation. Plaintiff's case is that simply taking over the management of the Company by the Defendant Nos. 2 to 10 by resorting to such deceitful means did never extinguish the right of Kumar Harishchandra over 54% of the share which he had in the Company nor that in any way stood affected. The predecessors of the Defendant Nos.2 to 6 Sitaram and Mano Gobinda by manipulating all officials records are said to have managed to shift the Office of the Company from Bonai to Barbil. It is stated that said change of the name of the Directors of the Company in the Official record is wholly illegal and not in conformity with the provisions contained either in the Memorandum of Associations or Articles of the Associations of the Company. All said actions are said to be in contravention of the provisions contained the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the Defendant No.1-Company. It is further stated that said mischievous deeds and actions at the behest of Defendant Nos. 2 to 6 in capturing the 54% share of Kumar Harishchandra which he had in the Defendant No. 1-Company is wholly (MC Rules). Having pleaded all these aforesaid, the Plaintiff advanced the following prayers seeking the decree granting those reliefs. "(a) Let a decree of declaration be passed that late Kumar Harishchandra Deo had/has right, title and interest over 54% share hold right in the Bonai Industrial Company Ltd .- Defendant No.1 from the date of its formation in the year 1939; and he has title over 54% i.e. 41,41,411.2 share out of the total existing 76,69,280 shares of the company; (b) Let a decree of declaration be passed that after the death of late Kumar Harishchandra Deo, the plaintiff and the defendant No.15 to 38 being the successors of Late Kumar Harishchandra Deo over the Bonai Industrial Company and they have jointly acquired the right, title and interest over the 54% shares i.e. 4141411.2 shares; (c) Let a decree for partition of the 54% shares amongst the plaintiff and defendant No.15 to 38 be passed allotting 1/25....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hchandra Deo had right, title and interest over the 54% share in the Bonai Industrial Limited, the Defendant No.1 that after his death, Plaintiff and Defendant Nos. 15 to 38 being his successors have succeeded to said 54% share, in view of the unambiguous admission contained in the plaint that the Plaintiff had full knowledge of the share holding in question and the alleged fraud said to have been perpetrated was to her knowledge, at least from the year, 2009, the suit having not been filed within three years being computed therefrom; but having been instituted after expiry of the said period of 3 years; is barred by law of limitation. C) The suit is barred by law contained in Section-59 & 430 of the Companies Act, 2013 :- (i) the Plaintiff when had challenged the transfer of shares of Kumar Harishchandra and as such the substitution of others in his place in the relevant records and sought for declaration of title to the share of the Company, the proper forum in consonance with the provisions contained in Section-59 of the Companies Act, 2013 as well as Section- 111 of the Companies Act, 1956 is the National Law Tribunal and in its absence, the Company Law Board. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of Court fee and rejection of the plaint for the same has found its answer in favour of the Plaintiff. The other question as regards the rejection of the plaint for mis- joinder and non-joinder of the necessary parties has also been answered against the Defendant No.1 holding the same to be not a ground to reject the plaint. With regard to the fraud pleaded in the plaint and lack of detail particulars be required to be pleaded under Order-6 Rule-4 of the Code, it has been stated that the same is beyond the arena of consideration while deciding the application under Order-7 Rule-11 of the Code. The next important question as to the suit being barred by limitation after detail discussion of the plaint averments and principles of law has however been emphatically answered against the Plaintiff. Lastly, it has been held that the real controversy arising in the suit being that the name of Kumar Harishchandra has been omitted as the Director of the Company and ultimately, in its place the names of members of Rungta family have been included which touches rectification in the Register of the members of the Company which can only be done by the Competent Authority under the C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it must be shown that there has been something to put on enquiry in respect of the matter itself and that if enquiry has been made, it would have led to the discovery of real facts. He also submitted that the Plaintiff in paragraph-17, 18, 19, 22, 23, 26 and 28 of the plaint has described all said facts disclosing the degree of diligence exercised by the Plaintiff to discover the fraud perpetrated by the contesting Defendants in capturing the share of Kumar Harishchandra, which he had in the Defendant No.1-Company and that being so, the First Appellate Court has completely failed to appreciate the material facts pleaded in the said paragraphs of the plaint that finally the fraud was discovered in the month of October, 2013, from the report of the Commission that the Company was captured by Sitaram and others by making entries in that record in the Company by adopting backdoor methods. He submitted that when at paragraph-17, 18 and 26, the Plaintiff has stated about the relevancy of giving legal notice to the contesting Defendants seeking disclosure of the documents as to in which manner they made the entry to the Company and refusal to provide such information when has given ris....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to appreciate all these aspects and therefore, by wrongly applying the provision of Companies Act have gone to hold that the suit is not maintainable being barred by law. He, therefore, submitted that the Courts below on a bare reading of the averments taken in the plaint ought not to have held the suit to be barred by limitation or that the jurisdiction of the Civil Court stands ousted. He in this regard lastly submitted that in fact, detail examination as has been made by the Courts below ought to have been avoided at this initial stage, leaving those to be finally addressed upon and adjudicated in the trial. In support of the submission, learned Counsel SS for the Appellant (Plaintiff) submitted several decision as per list cited which had been taken of record and would be discussed as and when necessary. 10. Mr. Sanjit Mohanty, learned Senior Counsel for the Respondent No.1 (Defendant No.1) first of all placed that the scope of the Second Appeal under Section-100 of the Code is very limited and interference in the Second Appeal is called for only in exceptional circumstances that too, upon proper circumspection. He next submitted that when on meaningful reading of the pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... presented on 30.03.2015, when as per the Plaintiff's own averment supported by affidavit in the plaint, she had the knowledge of being deprived of her right as she claims, way back in the year 2009 which had commenced from the capturing of the share holding of Kumar Harishchandra, way back in the year 1962, the Plaintiff's suit is barred by limitation and therefore, the First Appellate Court has rightly held so in passing the impugned order. He submitted that in the present suit, the Register of Member and transfer of share of the Company and its Management have been impugned as would be evident from the averments taken in the plaint at paragraph-8 to 10, 13 to 16, 20 to 23 and 25. He then inviting the attention of this Court to those averments submitted that in effect, the Plaintiff when seeks rectification of register under Section-59 of the Companies Act, 2013; the Civil Court has no jurisdiction to adjudicate upon said disputed facts. He thus submitted that on all these above grounds, the plaint filed seeking the reliefs has been rightly rejected and the Courts below upon due examination of only the plaint averments and having not at all gone for a roving enquiry as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....trial." 14. In case of Sopan Sukhdeo Sable & Others Vrs. Assistant Charity Commissioner and Others; 2004 (3) SCC 137, relying upon the aforesaid case of Saleem Bhai (supra) as well as another case ITC Limited Vrs. Debts Recovery Appellate Tribunal; 1998 (2) SCC 70, which was with reference to the question of lack of cause of action for filing the suit, it has been held :- "The trial court must remember that if on a meaningful and not formal reading of the plaint, it is manifestly vexatious and meritless in the sense of not disclosing a clear right to sue, it should exercise the power under Order-7 Rule-11 of the Code taking care to see that the ground mentioned therein is fulfilled. If cleaver drafting has created the illusion of a cause of action, it has to be nipped in the bud at the first hearing by examining the party searchingly under Order-10 of the Code." 15. With regard to the limitation projected as the ground for rejection of the plaint, in case of Ramesh B. Desai & Others Vrs. Bipin Vadilal Mehta & Others; (2006) SC 3672, it has been held :- "A plea of limitation cannot be decided as an abstract principle of law divorced from facts as in every cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or a passage and to read it out of the context in isolation. Although it is the substance and not merely the form that has to be looked into, the pleading has to be construed as it stands without addition or subtraction of words or change of its apparent grammatical sense. As observed earlier, the language of clause (d) is quite clear but if any authority is required, one may usefully refer to the judgments of this court in Liverpool & London S.P. & I Association Ltd. Vs. M.V. Sea Success I and another: (2004) 9 SCC 512 and Popat and Kotecha Property Vs. State Bank of India Staff Association: (2005) 7 SCC 510." 17. In a recent case, C.S. Ramswamy Vrs. V.K. Senthil and Others; 2022 SCC Online SC 1330, the Hon'ble Apex Court have held that while considering issues / questions whether the plaint filed by the Plaintiffs are required to be rejected on the ground of limitation in exercise of power under order-7 Rule-11 of the Code, the cause of action pleaded in the plaint is required to be referred to. Then referring to the averments in the plaint with regard to the date of knowledge of the Plaintiffs as to the fraudulent transactions which have been alleged, relying upon severa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on 08.05.1970; (f) sometime in the year 2009, the Plaintiff came to know about alleged irregularity in the mining operation and share holding of Kumar Harishchandra, which is after appointment of the Commission headed by Hon'ble Mr. Justice M.B. Shah. She then came to know that Kumar Harishchandra had majority of the shares in the Company and his ownership has been fraudulently captured by the Rungta Group (Ref :- Para -17 of the plaint); (g) in between 12.11.2009 to 14.03.2011, Late Digbijay Chandra Deo, filed several applications under the Right to Information Act, 2005, seeking details regarding the transfer of share of Late Kumar Harishchandra Deo (Ref :- Para -17 to the plaint); (h) Deputy Director of Mines on 14.12.2009 stated that as per the Memorandum of Association of the Company, there were three Directors at the initial stage and they were Kumar Harish Chandra, Mano Gobinda Mohanty and B. Panda (Ref :- Para -18 of the plaint); (i) on 02.01.2010, Director of Mines supplied the information to one of the successor of Late Digbijay Chandra Deo that no share transfer deed is available in the official records (Ref :- Para -27 of the pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Sitaram and others. It has been further pleaded that they authorized Digbijay Chandra Deo, the son of Defendant No. 17 to collect detail SS informations in that regard and he had made several applications from 12.11.2009 to 14.03.2011 seeking those from the proper quarters. The Director of Mines, the Defendant no.14 in reply to the informations supplied all the informations on 31.04.2009 indicating all those facts with regard to the transfer, in further stating that the share transfer deed was not available in the Office. 22. In paragraph-27, it has been assertively averred that the informations supplied by the Director of Mines on 02.01.2010 clearly established the fraud practised by the Defendant Nos. 2 to 6 in capturing 54% share of Kumar Harishchandra Deo over the Bonai Industrial Company from the year 1962 and they have no title whatsoever and thereby, have deprived Kumar Harishchandra from his legitimate right over the Company-Defendant No.1, during his lifetime and thereafter deprivation is to the present Plaintiff and Defendant Nos. 15 to 38. At this stage, let's also have a glance at paragraph-28 of the plaint, in which the cause of action arisen to file the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....came to know about the fraudulent and deceitful taking over of all 54% share of Kumar Harishchandra by Defendant Nos. 2 to 6 and the illegal capturing of Defendant No.1-Company on 14.12.2009 after lapse of 38 years. When the mining operation was being carried out by the Defendant No. 1- Company having its office at Barbil being shifted from Bonai, right from the year 1962 and such mining operations as well as all other associated activities were being carried out openly to the knowledge of tramite all including the public functionaries/authorities, there is absolutely no explanation as to how the Plaintiff could only know the same in the year 2009 when the mining operation by the Company-Defendant No.1 was not behind the back of the Plaintiff and she cannot feign total ignorance to all said activities of the Company-Defendant No. 1. 24. At this place, it would be apposite to refer paragraph -31 of the judgment of the Hon'ble Apex Court in case of C.S. Rama Swami (supra) which read :- "31. Even the averments and allegations in the plaint with respect to fraud are not supported by any further averments and allegations how the fraud has been committed/played. Mere stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s within the period of limitation, which otherwise are barred by limitation. Therefore, considering the decisions of this Court in the case of T. Arivandandam (supra) and other decision of Raghwendra Sharan Singh (supra), and as the respective suits are barred by the law of limitation, the respective plaints are required to be rejected in exercise of powers under Order 7 Rule 11 CPC." 25. The Plaintiff claims to be the granddaughter of Kumar Harishchandra, the erstwhile title holder of the shares in the Company- Defendant No.1 and the daughter of Lal Kadamba Sashi Deo. The plaint is wholly silent as to if any steps had been taken either by Kumar Harishchandra or Lal Kadamba Sashi Deo during their lifetime, when they had been directly affected by such actions as to the change in the sharing of the Company which are now said to be the outcome of fraud being practised upon Kumar Harishchandra. The plaint does not also lays the foundation of the alleged fraud indicating no such other material particulars. The averments with regard to fraud appear to be too vague. Thus, it clearly appear that by a clever drafting by using word 'fraud', the Plaintiff has tried to bring the sui....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s in the plaint itself, the period of limitation therefore commences from the year, 2009, RISSI when it has been specifically pleaded in paragraph-17 of the plaint that the Plaintiff came to know in the year, 2009 that Kumar Harishchandra's right, title to the shares in the Company-Defendant No.1 had been fraudulently transferred. Even thereafter, in paragraph-27 of the plaint, it has been averred that the alleged fraud was firmly established in the year, 2010. It has been averred therein that the transfer of share of Late Kumar Harishchandra in the Company coupled with the information supplied by the Directors of Mines to one of the successor of Late Digbijay Chandra on 02.01.2010 clearly established the fraud practised by the Defendant Nos. 2 to 6 in capturing 54% of share of Kumar Harishchandra over the Bonai Industrial Company from 01.11.1962 over which they have no title whatsoever and deprived Kumar Harishchandra from his legitimate right from the Defendant No. 1- established in the in the year, 2010, then it is further contended that even in spite of all those, the provisions of Section-17 of the Limitation Act would come to her rescue. As already noted above that in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In our case, thus the suit ought to have been filed within three years of the date of knowledge of the Plaintiff for asserting her title to the share in the Company-Defendant No. 1, which according to the plaint case, expired by the year, 2012. The same cannot be stretched over to the time of release of the report of the Commission and by issuing the Lawyer's notice and receipt of response by saying that the same have been the source of knowledge which actually is not surfacing from the averments in the plaint which are supported by affidavit of the Plaintiff. In the instant case, the Plaintiff in para-17 has pleaded that in the year 2009; first time she came to know that Kumar Harish Chandra had majority share over the Company and his ownership over the Company has been fraudulently captured. Then again in para-28, that being repeated it has been further stated that on 02.01.2010, the Director of Mines supplied the information stating therein that the share transfer deed is not available. 30. The legal proposition is established that issuance of legal notice does not extend the period of limitation (Kandimalla Raghavaiah and Company Vrs. National Insurance Company & Ano....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the plaint filed by the Plaintiff that the cause of action arose for the first time in the year 2009 and then firmly established in the year 2010; the suit has to be held to be barred by the law of limitation. Acceptance of further pleading in that light that those again and again recurred and therefore from the year 2013, the period of limitation for the suit would run; and thereby saying that fresh cause of action arose from the year 2013 and the period of limitation would be computed therefrom; in my view would run in opposition to provisions contained in Article-58 of Schedule-1 of the Limitation Act and thus make it redundant. Therefore, when it is the Plaintiff's own case that the cause of action as to discovery of fraud arose for the first time in the year 2009, and it was firmly established in the year 2010, as the suit has been instituted on 30.03.2015, the suit is clearly barred by limitation. The question of limitation here is thus clearly borne out from the averments made in the plaint without even drawing any inference from the facts pleaded or as Aplate consequential thereto. The First Appellate Court therefore, in holding the suit to be barred by limitation is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eing conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit." (2) Without prejudice to the generality of the powers under sub-section (1), an order under that subsection may provide for- (a) the regulation of conduct of affairs of the company in future; (b) the purchase of shares or interests of any members of the company by other members thereof or by the company; ............. (h) removal of the managing director, manager or any of the directors of the company; (i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor E....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... plaint is rejected." 40. In Shashi Prakash Khemka and Others Vrs. NEPC Micon Ltd. and Others; (2019) 212 Company Cases 385, the Hon'ble Supreme Court considered the provisions contained in section 430 of the Companies Act, 2013 and held as follows :- "4. Learned Counsel for the Appellants has drawn our attention to the view expressed in Ammonia Supplies Corporation P. Ltd. V. Modern Plastic Containers P. Ltd .; MANU/SC/0585/1998/1998 : (1998) 7 SCC 1053, to canvass the proposition that while examining the scope of Section 155 (the predecessor to Section 111), a view was taken that the power was fairly wide, but in case of a serious dispute as to title, the matter could be relegated to a civil suit. The submission of learned counsel is that the subsequent legal developments to the impugned order have a direct effect on the present case as the Companies Act, 2013 has been amended which provides for the power of rectification of the register Under Section 59 of the said Act. Learned Counsel has also drawn our attention to Section 430 of the Act, which reads as under :- ............. 5. The effect of the aforesaid provision is that in matters in respe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 of the register is required to be carried out owing to such allotment, or cancellation of allotment ordered, if any. The NCLT can also determine if in the interregnum, the Defendant Nos. 5 to 9 ought to exercise any voting rights. The NCLT would be empowered to pass any such orders as it thinks fit, for the smooth conduct of the affairs of the company, which would include an injunction order protecting the assets of the Defendant No.1 Company. The NCLT would also be empowered to oversee and supervise the working of the company, and also appoint such persons as it may deem necessary to regulate the affairs of the company. 16 ......... The jurisdiction to go into these allegations, vests with the Tribunal under Section 242 of the 2013 Act. Under Section 242(2), the NCLT has the power to pass "such order as it thinks fit", including providing for "regulation of conduct of affairs of the company in future". These powers are extremely broad and are more than what a Civil Court can do. Even if ....