TaxTMI 
TaxTMI 
2022 (9) TMI 1689
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....ice dt. 18.08.2021 wherein several allegations levelled against the plaintiff with regard to the investment decision taken by the plaintiff during his tenure as Chairman of the Finance Sub-Committee. The allegations levelled against the plaintiff were based on forensic audit conducted by the defendant no. 3. The allegations in the said show cause notice are as follows:- "Deviation in initial protocol in respect to financial investment: i) As per the established process, Financial Controller needs to inform Finance Chairman about the surplus fund available for investments. However, no documented communication from the Financial Controller to you as Finance Chairman was available. Deviations were noticed in case of investments in Yes Bank Tier I bond and Jana Bank Fixed Deposit. ii) You as Chairman - Finance informed the MC about purchase of Yes Bank Tier I Bond amounting to INR 1 Crore on 1st March, 2019 whereas the actual investment was made in November, 2018. iii) No communication of MC approval has been provided for investing INR 1.5 Crore in Jana Bank FD. iv) You as Chairman - Finance informed the MC abou....
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.... d. There are no 'general norms' to take quotations from banks while investing in fixed deposits. The investment in Yes Bank was made at an interest rate of 10.50 percent, which the Respondent No. 1 Club has been enjoying each year and the Bank is presently also showing a robust growth. Accordingly, the investment was a safe investment, and Respondent No. 1 has continued to reap the benefits of the investment, by earning an interest of Rs, 10,50,000/- every year for the last three years, amounting to Rs. 31,50,000/-, and the next interest is due to Respondent No. 1 on 31st December, 2021, to the tune of a further amount of Rs. 10,50,000/-. e. The nominal value is different from the market value with regard to purchase of bond. The Tier 1 Bond was bought at the market price quoted on the date of purchase." 3. On 27.09.2021, the defendant no. 2 on behalf of the defendant no. 1 had issued a letter wherein the membership of the plaintiff was suspended for a period of one year with immediate effect. 4. Mr. Bodhisatta Biswas, Ld. Counsel for the plaintiff submits that the suspension of the plaintiff is bad in law as the defendant no. 3 in its own repo....
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.... any inputs from the plaintiff. 9. Ld. Counsel for the plaintiff submits that on the overwhelming evidence on the face of record shows that malafide an premeditated decision of the new Management Committee of the defendant no. 1 with a view to wrongfully and illegally suspend the plaintiff on baseless ground by making unsustainable allegations against the plaintiff. 10. Counsel for the plaintiff relied upon the judgment reported in (2020) SCC OnLine Cal 1272 (Karan Singh Grewal -vs- Secretary, Calcutta Cricket and Football Club & Ors.), 2019 SCC OnLine Del 9010 (Vijay Chhibbar & Ors. -vsDelhi Gymkhana Club & Ors.) and the order passed by the Madras High Court in the case of D. Prandhaman -vs- The Towers Club representing by its Honorary Secretary dt. 06.112013. 11. Mr. Anirban Ray, Learned Counsel appearing for the defendants submits that the suit filed by the plaintiff is not maintainable under law in view of the provision under Sections 430, 435, 241 & 242 of the Companies Act, 2013. Mr. Ray submits that though the plaintiff has taken the ground that no opportunity of hearing given to the plaintiff but on receipt of the show cause notice the plaintiff h....
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....ubmits that in the present case, the petitioner has been imposed the least punishment and thus there is no mala fide action on the part of the defendant. 15. Mr. Ray further submits that the defendant no. 1 had taken an audit through M/s. Ernst and Young, which had found several financial discrepancies. He further submits that the investment made in respect of the Yes Bank has caused severe loss to the defendant no. 1. 16. Counsel for the defendant relied upon the judgment reported in (1996) 3 SCC 364 (State Bank of Patiala & Ors. -vs- SK. Sharma), (2011 ) 10 SCC 106 (Lalit Kumar Modi -vs- Board of Control for Cricket India & Ors.), AIR 1963 SCC 1144 (T.P. Daver -vs- Lodge Victoria No. 363 S.C. Belgaum & Ors.), (2019) 18 SCC 569 (Sashi Prakash Khemka -vs- NEPC Micon & Ors.), (2020) SCC OnLine Del 1223 (Delhi & District Cricket Association -vs- Sudhir Kumar Agarwal & Ors.), (2019) SCC OnLine Cal 6663 (Vikran Jairat & Ors. -vsMiddleton Hotels Pvt. Ltd. & Ors.), FMAT 211 of 2022 with CAN No. 1 of 2022 (Asha Agarwal & Ors. -vs- Williamson Magur & Company Ltd. & Ors.) dt. 02.06.2022 (Calcutta High Court). 17. Heard, the Learned Counsel for the respective parti....
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....s from 2/3 banks to compare interest rates before any investments, however they did not receive such quotations from other banks at the time of investment in 'Yes bank Tier I' bond. He was instructed to initiate the process of investment by Mr Sukumar Dutta." 20. Section 241, 242 and 430 of the Companies Act, 2013 reads as follows:- "241. Application to Tribunal for relief in cases of oppression, etc. - (1) Any member of a company who complains that - (a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or (b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and....
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....application under sub-section (3) - (a) shall contain a concise statement of such circumstances and materials as the Central Government may consider necessary for the purposes of the injury; and (b) shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908 (5 of 1908), for the signature and verification of a plaint in a suit by the Central Government.] 242. Powers of Tribunal. - (1) If, on any application made under section 241, the Tribunal is of the opinion- (a) that the company's affairs have been or are being 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 th....
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....ther matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made. (3) A certified copy of the order of the Tribunal under sub-section (1) shall be filed by the company with the Registrar within thirty days of the order of the Tribunal. (4) The Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company's affairs upon such terms and conditions as appear to it to be just and equitable. [(4A) At the conclusion of the hearing of the case in respect of subsection (3) of Section 241, the Tribunal shall record its decision stating therein specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.] (5) Where an order of the Tribunal under sub-section (1) makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make, without....
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....its, which are either expressly or impliedly barred by any law, hence, the Court below has got jurisdiction to try the suit. In that suit, I.A.No.15319 of 2013 was filed by the petitioner / plaintiff under Order 39 Rule 1 and 2 CPC. 22. Here in the instant case, as per the order, dated 18.10.2013, the petitioner was suspended by the Honorary Secretary of the respondentclub with effect from 19.10.2013. It is seen that the mandatory provisions of rule 28 (c) of the Bye-laws was not complied with by the respondent, as stipulated in the provision of law. 44. Having considered the facts and circumstances, this Court is of the view that the suspension orders passed against the petitioner is against bye-laws and principles of natural justice. It has been made clear that there is prima facie case made out and balance of convenience is also in favour of the petitioner. As contended by the learned Senior counsel appearing for the petitioner, if interim injunction is not granted, the orders of suspension, preventing the petitioner from entering into the premises of the club, either as member or guest of other members, would cause irreparable loss and even if the ....
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....ll sorts of arguments, did not allow the same to be seen immediately, resulting in the order being reserved. 27. Before parting, I may deal with another contention and in which context Shashi Prakash Khemka supra was cited. The remedy under Section 111 of the Companies Act, 1956 of rectification of Share Register is also available only after the name has not been removed from the Share Register and as of today the name has not been removed and the only question is of the legality of the proceedings initiated by issuance of show cause notice." 23. In the case of Karan Singh Grewal (Supra) the Coordinate Bench of this Court held that : "35. Be that as it may, the main question that falls for adjudication is as to whether Title Suit No. 781 of 2019 is maintainable under the facts and circumstances of this case or that under various provisions of the Companies Act 2013 Civil Court's jurisdiction is barred to entertain such suit. 36. Chapter 16 of the Companies Act starts with the heading "prevention of oppression and mismanagement". Section 241 of the said Act authorizes any member of the company to apply to the tribunal complaining t....
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....or implied. An express bar is whether statue it is contain a provision that the jurisdiction of a civil court is barred, as for example Section 430 of the Companies Act. An implied power may rise when a statue provides a special remedy to an aggrieve party like a right of appeal. In Sri Ramendra Kishore Biswas v. State Of Tripura reported in (1999) 1 SCC 472 : AIR 1999 SC 294 it is held by the Hon'ble Supreme Court that it is appropriate to relegate a person to exhaust Departmental remedies when he approaches the Court without exhausting departmental remedies under the service rules but to hold that the civil court had no jurisdiction while hearing a second appeal, after the matter has been litigated in civil court for more than five years was to say the least, not proper. Exclusion of civil court jurisdiction cannot be readily inferred on the ground of availability of remedy and forum under Special Act when the action in question was taken without complying with the provisions of the Act. The decision of the Hon'ble Supreme Court in M.P. Electricity Board, Jabalpur v. Vijaya Timber Co. reported in (1997) 1 SCC 68 may also be relied on in this regard. Even assuming that NCL....
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....ugned 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. 5. The learned counsel has also drawn our attention to Section 430 of the Act, which reads as under:- "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." The effect of the aforesaid provision is that in matters in respect of which power has been conferred on the NCLT, the jurisdiction of the civil court is completely barred. 6. It is not in dispute that were a dispute to arise today, the civil suit remedy would be completely barred and the power would be vested....
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....uit. 18. The learned Senior Advocate for the appellant submits that the Companies Act and the National Company Law Tribunal Rules, 2016, are together a complete code. Ample power has been provided to the NCLT - akin to a civil court - to deal with all issues for which powers have been conferred upon the Tribunal. For instance Rule 11 deals with inherent powers of the NCLT to conduct a full trial, in order to prevent abuse of justice; Rule 34 specifically allows for determination of procedure not provided for already in accordance with the principles of natural justice; Rules 39 and 40 provide for production of evidence; Rule 43 empowers the Tribunal to call for further information or evidence; Rule 47 provides for administration of oath to witnesses; Rule 51 gives power to regulate procedure; Rules 56 and 57 deals with the execution of orders passed by the Tribunal; Rule 58 provides for the effect of non-compliance with orders. Viji Joseph, as mentioned above in paragraph 24, also states that the powers of the Tribunal cannot be termed as 'summary'. As discussed hereinabove, complete jurisdiction has been given to the NCLT to deal with all aspects of issues, ....
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....illick Nixon (supra), that application would today have to be filed by the constructive trustee/respondent nos. 2 to 5 before the NCLT under sections 241 and 242 of the Companies Act 2013. For this reason, the reliefs claimed in the present suit cannot be granted by this court. The proper application would have to be made before the NCLT. 74. Additionally, Mr. Banerjee was quick to point out that if the suit were to be entertained by this court, an anomalous situation could possibly arise. The rights of the appellants as the supposed transferees of shares are predicated on them being able to prove that there was an oral agreement in June 2018 and that signed transfer deeds had been made over to them as security. The respondent no. 2 and 3 had contended first that the transfer deeds were merely for comfort and later that they were not signed. From the records herein, it appears that these were the reasons, amongst others, that weighed with the respondent no. 1 in its refusal to register the shares when called upon by the appellants to do so. Under section 58(5) or 59(2) of the 2013 Act, the NCLT could either dismiss the appeal or it could direct the respondent no. 1 t....
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....k Nixon (supra), the transferor transferee relationship was clearly established. All parties had understood the relationship between the constructive trustee and the cestui que trust to have been in place. However, in the present case, the respondent no. 2 and 3 deny that such a relationship exists. This is another reason why it is difficult to adjudicate the issues in the suit in light of the reliefs claimed. If, however, the NCLT does return a positive finding in favour of the appellants in their application under section 58 and 59 of the 2013 Act and directs the company to register them as members of the company, the NCLT could then also adjudicate and decide on the reliefs sought in this suit on the grounds of oppression and mismanagement. 75. For the aforesaid reasons, no reliefs as prayed for by the appellant can be granted at this stage since the court is of the prima facie view that if does not have the jurisdiction to try, receive and entertain the suit. During the hearing of the appeal, Mr. Saha submitted that after the filing of the civil suit, the appellants discovered that the respondent nos. 2 to 5 had caused the respondent no. 1 company to execute a de....
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....e to the members including the plaintiff who are responsible for the lapses. 28. The plaintiff has challenged the Extra Ordinary Meeting dt. 12th December, 2020 wherein a decision was taken to conduct a detailed forensic audit report by a reputed charted accountant firms as well as the show cause notice dt. 18th August, 2021 and the order of suspension dt. 27th September, 2021. 29. Section 241, 242 and 244 of the Companies Act, 2013 deal with the grievances raised in the suit. Section 430 of the Act of 2013 specifically ousts the jurisdiction of the civil courts apropos the matter with respect to such cases for which powers have been specifically conferred upon the Tribunal. The plaintiff has challenged the Extra Ordinary General Meeting of the defendant no.1 wherein it was decided to appoint a reputed Charted Accounted Firm to conduct a forensic audit for the year 2018-2019 and 2019-2020. On receipt of the said report, the committee of the defendant club has accepted the report and proceeding is initiated against the plaintiff and the other members of the club. 30. Section 241 of the Companies Act also gives a power that any member of a company who compl....