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There are instances, where, recourse is
taken to section 430 of Companies Act 2013, in a pending civil suit, to the
effect that any issues related to share transactions of a company shall only be within the ambit
of section 430 of Companies Act 2013 and the only forum to agitate such an issue
shall be National Company Law Tribunal (NCLT) and the civil remedy shall be
expressly barred, in the face of blanket inhibition to institution of civil
suit, if it falls within the meaning of section 430 of Companies Act 2013. No doubt, Section 9 of Code of Civil
Procedure, clearly prescribes that civil suit shall be
maintainable in all disputes, if it is not specifically or impliedly
barred. The refuge is therefore taken to the Section 430 of Companies Act
2013 by an aggrieved party, who seeks to proscribe all cases related to
Companies Act 2013 pending in civil courts. It is however noticed that the
section 430 of Companies Act 2013 is invoked with impunity without any
corresponding fact or situation, as if the issues related to shares in a
company shall inevitably fall within the jurisdiction of NCLT. That is not
correct in all cases and jurisdiction of NCLT shall only be invoked in case
the disputes essentially arise within the limits and contour of Companies Act
2013 and relates to the disputes as regards wrongful transfer of share or
oppression and mismanagement to list a few. It is worthwhile to refer to the
provision as contained in Section 430 of Companies Act,2013: 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”. The very
recitation of the aforesaid section, if perused meticulously, shall reveal
that only such action taken or to be taken in pursuance of any power
conferred by or under the Companies Act and makes it abundantly clear that
the matter shall fall within the trap
of Companies Act and shall only be adjudicated by NCLAT or NCLAT i.e Appellate
Tribunal. The fallacy that is sought to be perpetuated is that any issue
regarding the company or arising out of company affairs, more so, in respect
of shares shall only fall within the trap of Companies Act and NCLT shall be
the only forum. Merely because, the disputes may be regarding shares or
debentures and recovery or wrongful action on the part of a company, the
matter shall not fall within the domain of NCLT. There may be issues and it
is generally evident in many cases that some disputes may require leading of
comprehensive evidence and in such cases civil court shall only have the
wherewithal to deal with that, hence, there is no straight jacket formula to
relegate the matter to NCLT or NCLAT even if the same relates to transactions
in shares.  JUDICIAL
WINDOW Interestingly,
very recently, Hon’ble Delhi High Court in a matter captioned as DR RAMESH
CHANDER MUNJAL & ORS. Vs DR SURAJ MUNJAL & ORS CS No. 22/2021 had
dealt with somewhat similar issues. The issue inter alia raised in the captioned case was in respect of the
title of the suit properties. Under the Companies Act, the NCLT does not have
the jurisdiction to grant declaratory reliefs in respect of immovable
properties, though, a company may claim ownership. As narrated above,
adjudication of such dispute shall entail detail evidence and only civil
court shall be a proper forum of adjudication. It is held
by hon’ble Supreme Court in Aruna
Oswal Vs. Pankaj Oswal and Ors, (2020) 8 SCC 79 that filing of a plaint
by the majority shareholder or by a minority shareholder shall make no
difference so far as the Proceedings under Sections 241 and 242 of the
Companies Act 2013 are concerned, in as much as, primarily, proceedings between
the members of the Company and that may also extend to employees, directors
and management of the said Company, whereas, all related or unrelated reliefs can be granted
by civil courts. Just because, one of the shareholders has chosen to invoke
their grievance under the provisions of the Companies Act, 2013 that shall
not imply that another shareholder with similar grievance cannot invoke their
grievance before a Civil Court, if the jurisdiction of the Civil Court is
otherwise made out. It is held as under: “29.
It is also not disputed that the High Court in the pending civil suit passed
an order maintaining the status quo concerning shareholding and other
properties. Because of the status quo order, shares have to be held in the
name of Mrs Aruna Oswal until the suit is finally decided. It would not be
appropriate given the order passed by the civil court to treat the
shareholding in the name of Respondent 1 by NCLT before ownership rights are
finally decided in the civil suit, and propriety also demands it. The
question of right, title, and interest is essentially adjudication of civil
rights between the parties, as to the effect of the nomination decision in a
civil suit is going to govern the parties' rights. It would not be
appropriate to entertain these parallel proceedings and give waiver as
claimed under Section 244 before the civil suit's decision. Respondent 1 had
himself chosen to avail the remedy of the civil suit, as such filing of an
application under Sections 241 and 242 after that is nothing but an
afterthought. xxxx xxxx xxxx 31.
We refrain to decide the question finally in these proceedings concerning the
effect of nomination, as it being a civil dispute, cannot be decided in these
proceedings and the decision may jeopardise parties' rights and interest in
the civil suit. With regard to the dispute as to right, title, and interest
in the securities, the finding of the civil Court is going to be final and
conclusive and binding on parties. The decision of such a question has to be
eschewed in instant proceedings. It would not be appropriate, in the facts
and circumstances of the case, to grant a waiver to the respondent of the
requirement under the proviso to section 244 of the Act, as ordered by the
NCLAT.” In
this regard, it may be relevant to refer to the observations made by the High
Court of Calcutta in Starlight Real Estate (Ascot) Mauritius
Limited 2015 SCC OnLine Cal 6583: “23. While making an
application under Order 7 Rule 11 of the Code of Civil Procedure, 1908 a
defendant has to show that the plaint filed in the suit and the statements
contained therein are clearly barred by law… …There is no bar in the majority
shareholders of a company filing a suit to protect the interest of the
company by joining the company as a proforma defendant, particularly, when
the directors on record of the company are the persons who are acting
contrary to the interest of the company”. The Supreme Court of India in Shashi Prakash Khemka V.
NEPC Micon & Others CA No. 1965-66/2014, while dealing
with an issue relating to transfer of shares has held that held that in such
matters where power has been specifically conferred on the National Company
Law Tribunal, the jurisdiction of the Civil Courts shall be ousted. The
dispute relating to the title of shares should also be decided by NCLT and civil
suit shall not be an appropriate remedy, in view of Section 430 of the
Companies Act, 2013 ("Act").
It is held as under: “The subject matter of dispute before us is the
exercise of power under Section 111-A of the Companies Act, 1956 (as amended
in 1988) and the Depositories Related Laws (Amendment) Act, 1997. In terms of
the impugned order of the Madras High Court, on an appeal filed against the
order of the Company Law Board, the view taken by the Company Law Board has
been reversed and thus, in effect, the appellants have been left to a remedy
of civil suit”. After analyzing Section 430 of
Companies Act 2013, the hon’ble Supreme Court has held as under: “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”. The law as laid down before the enactment of Companies Act 2013
may also be analysed in the context. The Supreme Court in the case of Dhulabhai
v. State of Madhya Pradesh and others AIR 1969 SC 78 (Constitutional
Bench) has held that the pith and substance
of the principles of the primary
indicia, which governs determination of the question whether the
jurisdiction of Civil Courts is, in any particular case, ousted, or not,
would appear to be (i) whether the decision of the tribunal, on which
jurisdiction is conferred, is also attributed finality by the statute, and
(ii) whether such tribunal can do what the Civil court would be able to do
and is, therefore, an efficacious alternative to the Civil Court. In the case of Abdul
Gafur v. State of Uttarakhand 2008 (10)SCC 97 ,
the Supreme Court, on recourse to the jurisdiction of Civil Court, has
observed the right to bring a suit of civil nature of one's choice, at one's
peril, howsoever frivolous the claim may be, unless it is barred by a
statute. On the other hand,
in Santhosh Poddar vs
Kamal Kumar Poddar (1992) 3 BCR310 (Bom) DB, the Court
held that there is no ouster of jurisdiction of a Civil Court in the cases
where the provisions of the Companies Act may be attracted. It is only in
respect of those proceedings which are expressly contemplated under the Act,
under any specific provision that the court which is referred to in that
section would be the special court, namely the High Court or the notified
District Court. In all other cases, ordinary Civil Courts would continue to
have the jurisdiction. In Jai Kumar Arya & Ors. vs Chhaya Devi &
Anr (2018) 142 CLA 365, the Division
Bench of Bombay High Court, while dealing with the bar under Section 430 of the 2013
Act, held that, "While examining the merits of these rival contentions,
we are fully aware of the interpretative principle, now trite in law, that
provisions which operate to exclude the ordinary jurisdiction of civil courts
are to be strictly construed, and exclusion of such jurisdiction is not to be
lightly inferred. The principle of exclusion of jurisdiction is, moreover,
never absolute." CONCLUSION From the bare perusal of the case laws as elucidated above, it is
clear that as regards pre 2013 period or subsequent to enactment of Companies
Act 2013 what really emerges is that the exclusion of the jurisdiction of the
Civil Courts is not to be readily inferred, but only when such exclusion must
either be explicitly expressed or clearly implied, the same should be construed
as such. It is also no res integra that even
if jurisdiction is so excluded, the Civil Courts shall have jurisdiction to
examine into cases where the provisions of the Act have not been complied
with, or the statutory tribunal has not acted in conformity with the
fundamental principles of judicial procedure or where leading of evidence shall
be necessary or still further, when fraud is alleged and mechanism of civil
courts shall have to be set in motion, since jurisdiction of NCLT constituted
under the Companies Act 2013 shall be limited to summary jurisdiction. The discussion aforesaid in the light of judicial precedents shall
make it clear that the Civil Court can adjudicate upon all the suits of civil
nature, unless, its jurisdiction is expressly or impliedly barred. While
doing so, the courts are unanimous in holding that the term 'impliedly'
should not be given liberal interpretation, rather strict approach should be
adopted and clear implication from the statute is mandatory for ousting the
jurisdiction of Civil Court. What is of further significance that individual
claim of Directors of a company in respect of shares of the said company held
by other Director or by any third party and money dispute arising there from,
including on the aspect of fraud and manipulation shall not fall within the ambit
of NCLT and Civil Courts in such a situation shall only have the wherewithal
to deal with the disputes. The National Company Law Tribunal (NCLT) or Appellate
Tribunal (NCLAT) shall however exclusively deal with any issues that the
tribunal is specifically empowered with. Anil K Khaware Founder & Senior Associate Societylawandjustice.com |
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