M/S New Shelter Enterprises Thr. ... vs Smt. Meenakshi W/O Sudhir Gupta ...
2017 Latest Caselaw 4840 Bom

                                              1




                IN THE HIGH COURT OF JUDICATURE AT BOMBAY,

                                   NAGPUR BENCH : NAGPUR



Civil Revision Application No. 62 of 2017



Applicants              :          1)  M/s New Shelter Enterprises, A proprietory

                                   concern, through its Proprietor Salil Madhukar

                                   Majgaonkar

                                   2) Salil s/o Madhukar Majgaonkar, aged about

                                   53 years, Occ:  Business

                                   3) Smt Rashmi w/o Salil Majgaonkar, aged 

                                   about  53 years, Occ: Business

                                   residents of 81, Hill Road, Ramnagar, Nagpur

                                   versus

Respondents             :          1)    Smt Meenakshi w/o Sudhir Gupta, aged

about 48 years, Occ: Business, former autho-

rized Director of Shakambari Niketan Private

Limited and Director of TechInfra Developers

and Engineers Private Limited

2) Sudhir s/o Madanlal Gupta, aged about

52 years, Occ: Business

Both residents of 401, Bhagyashree Apart-

ments, Ramdas, Nagpur

Shri Shyam Dewani, Advocate for applicants

Shri J. B. Gandhi, Advocate for respondents

Coram : S. B. Shukre, J

Dated : 21st July 2017

Oral Judgment

1. Rule. Heard forthwith by consent of parties.

2. By this revision application, the legality and correctness of

the order dated 29th April 2017 passed by the Civil Judge, Senior Division,

Nagpur in Special Civil Suit No. 310 of 2017, thereby rejecting

application vide Exhibit 9, have been questioned.

3. The revision applicants are the original defendants against

whom Special Civil Suit No. 310 of 2017 is preferred by the

respondents/original plaintiffs. The suit was filed for seeking declaratory

and injunctive reliefs. It was contended that two Companies, M/s

Shakambari Niketan Private Limited and TechInfra Developers and

Engineers Private Limited (for short, "Shakambari Company" and

"TechInfra Company" respectively), both registered under the provisions

of the Companies Act having become the joint owners of Plot No. 625

situated at mouza Indora, Nagpur entered into a Memorandum of

Understanding (MoU) dated 15th May 2014 with the revision applicant

no. 1, through its Proprietor, the revision applicant no. 2. In this MoU

dated 15th May 2014 executed between the two Companies and revision

applicant no. 1, it was shown that for Shakambari Company and

TechInfra Company, respondent no. 1 being the Director of both these

Companies, had the authority to execute the document. The MoU was for

development of Plot No. 625 into a multi-storied building having self-

contained units or apartments to be developed and constructed by

respondent no. 1 within a time-frame stipulated in the moU. The total

cost of the project was of Rs. 14.87 crores out of which certain amount

was considered to be invested by the two Companies. The estimated

profit to be earned from out of this project was of about Rs. 7.29 crores

and it was agreed to be shared between Shakambari Company and

TechInfra Company on the one hand and New Shelter Enterprises on the

other hand in the ratio of 45% and 55%. It was also agreed that applicant

no. 2 would not appropriate to himself any money or income from out of

this project till it was first applied towards reimbursement of initial cost

of investment paid by the two Companies. Applicant no. 2 was also

obliged to put in his own money to certain extent and was required to

complete the project in all respect by the date stipulated in the MoU. In

this MoU, the two Companies Shakambari and TechInfra were described

as "land owners" and revision applicants no. 1 and 2 were shown as

"developer/builder". However, as it turned out later on, many of the

obligations imposed upon the revision applicants no. 1 and 2, the

developer/builder, could not be performed by them and it was felt

necessary to add to or modify some of the terms of the MoU and,

therefore, two supplementary Memoranda of Understanding were

executed between the land owners and developer/builder. Two more

documents, one Development Agreement dated 22.9.2016 and another

document dated 21.12.2016 were also registered between the

Companies and the revision applicants. By the later documents, revision

applicant no. 3 also entered the scene and was conferred with similar

position as revision applicants no. 1 and 2. However, these later

agreements between the parties also could not salvage the failing

situation and ultimately, the respondents, owing to serious disputes

between the parties, filed civil suit being Special Civil Suit No. 310 of

2017.

4. The revision applicants raised objection to the maintainability

of the suit on three counts - (i) non-disclosure of the cause of action and

(ii) the plaint being barred by law as the suit was filed by the Directors of

the two Companies without any authority to file the suit for and on behalf

of the Companies and (iii) arbitral clause contained in the MoU dated 15 th

May 2014 barring the jurisdiction of the Civil Court to entertain the suit.

Therefore, application (Exhibit 9) was moved by the revision applicant.

This application was filed with alternate prayers, one prayer made under

the provisions of Order 7, Rule 11 of the Code of Civil Procedure for

rejection of plaint and the other prayer made under Section 8 of the

Arbitration and Conciliation Act for referral of the dispute to an arbitrator

in view of clause 20 of the MoU dated 15th May 2014 and clause 23 of the

Development Agreement dated 22nd September 2016.

5. Reply to this application was filed by the revision applicant

strongly opposing the application. It was contended that Order XXX of

the Code of Civil Procedure (sic Order XXIX of CPC) did not require any

specific arraying of the parties to the suit by or on behalf of the

incorporated Company and required only that the pleadings be signed and

verified on behalf of the Company by the Secretary or any Director or any

particular Officer well acquainted with the relevant facts of the Company.

It was also submitted that even though there was no doubt at all that the

suit was instituted on behalf of the Company by its Director, the

objections taken in this regard by the applicant stood nullified in view of

the fact that the plaint was signed and verified on behalf of the Company

by its Director, respondent no. 1 (paragraph 2 of the reply vide exhibit

11). It was submitted that the revision applicants committed acts of fraud

upon the respondents and, therefore, all the MoUs and the Agreements

entered into between the Companies and the revision applicants stood

vitiated and as such, the suit was maintainable. It was also submitted that

the dispute was not arbitral as the issue of serious fraud on the part of the

revision applicants was required to be adjudicated upon and it could be

done only by a civil court.

6. After hearing both the sides and considering the case laws

placed before it, the trial Court rejected the application (exhibit 9)

entirely by the order dated 29th April 2017. Being aggrieved by the same,

the revision applicants are before this Court in this revision application.

7. I have heard learned counsel for the parties at length. I have

also perused the memoranda of understanding, development agreement

and other documents placed on record by the parties including the

impugned order.

8. Shri Dewani, learned counsel for the applicants submits that

the plaint filed in the instant case by the respondents does not disclose

any cause of action for the reason that the property as well as the

agreements in respect of which reliefs have been sought, belong to and

were executed by Shakambari Company and TechInfra Company and

these two Companies have not authorized the respondents, by passing a

Board Resolution, to institute the suit. He submits that when the cause of

action is founded upon an agreement executed by the plaintiff-Company,

unless and until a resolution is passed by the Board of Directors of the

Company to institute a suit to seek relief for any loss or damage resulting

from breach of the obligations under the agreements or for seeking a

declaration that the agreement is null and void, no suit can be filed for

and on behalf of the Company. He submits that a Company is a distinct

and separate entity from its shareholders and members and, therefore,

decision taken by the Company to institute a suit which is reflected in the

Board Resolution passed in that regard is a condition precedent to

institute a suit by it. He submits that no such Board Resolution has been

filed along with the plaint and as a matter of record, there is not even a

whisper about the respondents possessing an authority resulting from a

Board Resolution passed for authorizing them to file the suit. Learned

counsel for the applicants further submits that the suit is also barred by

law. Alternatively, he submits that the Civil Court has no jurisdiction to

entertain the suit, because there are specific clauses in the agreement

making a provision for referral of any dispute between the parties arising

from out of the terms and conditions of the agreement, to an arbitrator

and therefore, the dispute was required to be referred to the arbitrator to

be appointed by the civil court in terms of Section 8 of the Arbitration and

Conciliation Act.

9. For rejection of plaint, the learned counsel for applicants has

placed his reliance upon the cases of Hardesh Ores (P) Ltd. v. Hede &

Company reported in (2007) 5 SCC 614; Church of Christ Charitable

Trust And Educational Charitable Society v. Ponniamman Education

Trust reported in (2012) 8 SCC 706; M/s Nibro limited v. National

Insurance Co. Ltd. reported in AIR 1991 Delhi 25; Mrs Bacha F. Guzdar

v. Commissioner of Income Tax reported in AIR 1955 SC 74 and Heavy

Engineering Mazdoor Union v. State of Bihar & ors reported in AIR

1970 SC 82. For arbitrability of dispute, learned counsel invites my

attention to the cases of A. Ayyasamy v. A. Paramasivam & ors

reported in (2016) 10 SCC 386; VBHC Mumbai Value Homes Pvt

Ltd v. Laxman Bhoir & ors reported in 2015 (6) Mh. L. J. 385;

Hindustan Petroleum Corpn Ltd v. Pinkcity Midway reported in

(2003) 6 SCC 503 and Milind Dattatraya Mahajan & ors v. Pramod

Budhraja reported in 2016 (7) Bom. C.R. 317.

10. Shri Voditel, learned counsel for the respondents submits that

the composite application filed for rejection of the plaint as well as

referral of dispute to the arbitrator is not maintainable in law and,

therefore, the impugned order need not be interfered with. He further

submits that there have been serious allegations of fraud made against the

revision applicants and based upon them, declaratory relief for declaring

two registered documents dated 22.9.2016 and 21.12.2016 as sham,

bogus and illegal has been sought. He submits that prayer for such a

declaration can only be looked into by the civil court and the arbitral

tribunal cannot adjudicate upon such an issue. He further submits that

the allegations are of such a nature that they give rise to the complicated

questions of fact and law, determination in respect of which cannot be

rendered by the arbitral tribunal and can only be made by the civil court.

He further submits that the suit has been filed not only by the Company

through its Director, but also by the respondents in their individual

capacities, they also being aggrieved by the fraudulent and illegal

activities of the revision applicants and, therefore, the suit is

maintainable. He further submits that the reason for doing so was that

the cause of action was itself composite in nature, one in favour of the

Company and the other in favour of the respondents. He also submits

that the applicants have fraudulently obtained from the respondents a

power of attorney and since it became clear that the applicants were

likely to misuse the powers given under it, it became necessary for the

respondents to file the suit seeking a declaration for cancellation of the

power of attorney as well as the other registered agreements. Thus, he

supports the impugned order.

11. Learned counsel for the respondents for his submissions has

placed his reliance upon the cases of Haryana Telecom Ltd v. Sterlite

Industries (India) Ltd reported in (1999) 5 SCC 688; Orient Transport

Co. Gulabra & anr v. M/s Jaya Bharat Credit And Investment & anr

reported in (1987) 4 SCC 421; N. Radhakrishnan v. Maestro Engineers

& ors reported in (2010) 1 SCC 72; Dwarka Prasad Agarwal & anr v.

Ramesh Chander Agarwal & ors reported in (2003) SCC 220; Sukanya

Holdings (P) Ltd v. Jayesh H. Pandya & anr reported in (2003) SCC

531 and Booz Allen And Hamilton Inc. v. SBI Home Finance Ltd & ors

reported in (2011) 5 SCC 532.

12. In the case of Hardesh Ores (supra), it is held by the Hon'ble

Supreme Court that it is well settled, whether or not a plaint discloses a

cause of action is essentially a question of fact, but whether it does or

does not must be found out from reading the plaint itself. Hon'ble

Supreme Court further held that the test is whether on the averments

made in the plaint, if taken to be correct in their entirety, a decree would

be passed. It further held that it is the substance and not merely the form

that has to be looked into and the pleadings have to be construed as they

stand without addition or subtraction of words or change of their

apparent grammatical sense and that the cause of action must be real and

not illusory.

13. In Church of Christ Charitable Trust (supra), relying on the

explanation given by the Hon'ble Supreme Court in the case of A. B. C.

Laminart (P) Ltd. v. A. P. Agencies reported in (1989) 2 SCC 163. the

Apex Court held that a cause of action means every fact which, if

traversed, would make it necessary for the plaintiff to prove in order to

support his right to a judgment of the Court or in other words, it is a

bundle of facts which when taken with the law applicable to it gives the

plaintiff a right to relief against the defendant. It is also held that the

facts constituting a cause of action not only include the infringement of

the right sued, but also include all those material facts on which the right

to sue is founded. Of course, it was also clarified by the Hon'ble Supreme

Court that the facts constituting cause of action would not comprise the

evidence necessary to prove these facts.

14. It would be clear from these rulings of the Hon'ble Supreme

Court that the question as to whether or not a cause of action has been set

out in the plaint being one of fact, would have to be determined by

reading the plaint in its entirety and construing the pleadings as they

stand, without making any addition or subtraction of words or change of

the grammatical sense conveyed by the words employed in the pleadings.

It would also be clear that a cause of action is something which is real and

not illusory, that illusions of cause of action are not permitted in law and

cause of action must set out a clear right to sue. These rulings would

further tell us that in order that a real cause of action is disclosed by the

pleadings in the plaint, all material facts comprising not only actual

infringement of right to sue, but also those on which the right is founded

are averred in the plaint.

15. Bearing in mind the above referred principles of law, let us

now examine the plaint in its entirety so as to find out whether it

discloses any real cause of action or not from the view point of the two

Companies.

16. Admittedly, the cause of action of the plaint is founded upon

the MoU dated 15th May 2014. This is the basic agreement executed

between the parties. It was this agreement which created rights and

obligations between the parties and these rights and obligations were the

cause for entering into subsequently executed two supplementary

memoranda of understanding and two registered documents - one

development agreement dated 22.9.2016 and another document dated

21.12.2016. Admittedly, these agreements including the basic agreement

of 15.5.2014 were in relation to the development of Plot No. 625 situated

at mouza Indora into a multi-storied building having self-contained units

or apartments to be sold to the prospective purchasers for consideration

and working out various modalities of the manner in which to perform

the mutual obligations of the parties. Admittedly, Plot No. 625 of mouza

Indora was jointly owned by two Companies - Shakambari Company and

TechInfra Company, both registered and incorporated under the

provisions of the Companies Act. These Companies, one can say without

any difficulty here, were distinct and separate entities from their

shareholders, members and directors, in accordance with the principles

enunciated by Hon'ble Apex Court in Mrs Bacha P. Guzdar and Heavy

Engineering Mazdoor Union (supra). Admittedly, the basic agreement

dated 15th May 2014 and even the subsequent agreements were executed

for and on behalf of these Companies through their authorized director.

All these facts plainly and clearly emerge from reading the averments in

the plaint as well as the documents sued upon without making any

additions or subtractions to the words used therein and considering the

applicable law. I must add here that when a document is sued upon and

is also referred to in the plaint, as held in the case of Church of Christ

Charitable Trust (supra), such document gets incorporated into the plaint

by its reference in the pleadings. This position of law was also stated by

the Hon'ble Supreme Court in U. S. Sasidharan v. K. Karunakaran

reported in (1989) 4 SCC 482 and Manohar Joshi v. Nitin Bhaurao Patil

reported in (1996) 1 SCC 169.

17. In this background, it would be useful for us to refer to the

prayers sought in the plaint, the relevant clauses of which are reproduced

thus :

"It is, therefore, most respectfully prayed that this Hon'ble

Court may kindly be pleased to grant:

i. Decree of Declaration that the acts of the defendants of

the breach of the terms of Memorandum of

Understanding/Development Agreement dated 15.5.2014

and their conduct of committing serious illegal acts contrary

to the interset of the plaintiffs are prejudical to the rights of

the plaintiffs and that the defendants have no right to deal

with flats of the project "Residencia Apartment";

ii. Decree declaring that the Agreement of Sale or any

transaction entered into by the defendants in respect of the

Flats of Residencia Apartments are illegal, null and void and

not binding upon the plaintiffs;

iii. Decree declaring that the documents fraudulently got

executed and registered by the defendant No.3 from the

plaintiff No.1 on 22.9.2016 and 21.12.2016 are sham,

bogus and illegal documents having no binding force;

iv. Decree directing the defendants to render the accounts

of the transactions entered into by them to the plaintiffs

right from the inception thereof;

v. Decree directing the defendants to refund the amount

collected by them from the respective buyers of the Flats in

the Project Residencia Apartment to such buyers;

vi. Decree of permanent, perpetual and prohibitory

injunction restraining the defendants their agents, servants,

representatives and any other person acting on their behalf

from anyway disposing the subject property or creating any

third party interest therein without the written consent and

permission of the plaintiffs for the same;

vii. Decree of mandatory injunction ordering the defendants

to remove themselves from the site of the Project

"Residencia Apartments" and to tender apology for their

offensive activities;...."

It is clear from these clauses that what is sought in the plaint

is basically a remedy for the ills the applicants brought to bear upon the

Companies through breach of their obligations under the agreements to

the Companies.

18. The cause title of the plaint shows that respondent no. 1 is

plaintiff no. 1 and respondent no. 2 is plaintiff no. 2. Respondent no. 1

has been described to be a former authorized Director of Shakambari

Company and Director of TechInfra Company. Respondent no. 2 has been

merely shown as having occupation of business. We have seen that all the

agreements including the basic agreement in the nature of MoU dated 15 th

May 2014 were executed by these two Companies through the authorized

Director and that the subject property of these agreements was jointly

owned by these two Companies as disclosed by the plaint pleadings and

the documents sued upon. The reliefs sought in the plaint prayer were

also to remedy the infringement of rights of the Companies under these

agreements. So, if any cause of action resulting from the infringement of

rights of the Companies arose, it arose in favour of these two Companies

and not the individual director acting in her individual capacity like

respondent no. 1, muchless an individual businessman like respondent no.

2, as he has chosen to describe himself in the cause title of the plaint. The

argument of learned counsel for the respondents that there was a

composite cause of action, therefore, deserves to be rejected and it is

rejected accordingly.

19. With such canvass of facts painted by pleadings and detailed by

applicable law, one would have expected that all material facts disclosing cause

of action were pleaded in the plaint. In particular, It was essential to aver

in the plaint in a specific manner that the cause of action resulting from

breach of obligations on the part of the applicants arose in favour of the

Companies and the Companies took a decision to file a suit and

accordingly authorized any of the respondents, through a resolution of its

Board of Directors, to file a suit against the applicants. But, the pleadings

in the plaint no where show that these two Companies felt aggrieved by

the infringement of their rights under these agreements and, therefore, a

suit was filed for vindication of those rights through their duly authorized

Director. This way, I find that the pleadings in the plaint do not disclose

any cause of action sofar as the rights of these two Companies which are

sought to be enforced in the suit, are concerned. I have already found

that in this case, there can be no question of disclosure of any cause of

action in favour of the respondents in their individual capacities, the

cause of action having been based upon the agreements with the

Companies and not with these two individuals.

20. There can be another way of looking at the issue. In fact, the

respondents have also taken a ground that the suit is barred by law if one

goes by pleadings in the plaint and, therefore, the plaint is liable to be

rejected by virtue of the provisions of Order VII, Rule 11 of the Code of

Civil Procedure. Such an objection, I find, has great substance in it, if we

were to consider the settled position of law.

21. The trial Court in the impugned order has held that from the

plaint it becomes clear that there is no other Director of these two

Companies except for the plaintiffs and that it is apparent from the

averments made in the plaint that though the present suit is not filed in

the name of the Company, as Director of these two Companies, the

respondent no. 1/plaintiff no. 1 can file suit by virtue of the provisions of

Order XXX of the Code of Civil Procedure. The reliance placed upon the

provisions of Order XXX CPC by the trial Court seems to be either

misplaced or an inadvertent mistake. The provisions contained in Order

XXX are in respect of suit by or against the partnership firm and persons

carrying on business in the name other than their own. These provisions

do not apply to a distinct entity like that of a registered company which is

a body incorporate and treated in the eye of law as having a legal

personality, separate and different from the share-holders and members

who together constitute it. Such legal personality of the Company is

clothed with its own rights under law. It is capable of owning, possessing,

alienating the property and also instituting suits in its own name through

its authorized person or defend itself through its authorized person in

legal proceedings. In this context, I feel it necessary to refer to the

relevant observations of the Hon'ble Supreme Court in Heavy

Engineering Mazdoor Union (supra) appearing in paragraph 4, which

are reproduced thus :-

"...... An incorporated company, as is well known, has a

separate existence and the law recognises it as a juristic

person separate and distinct from its members. This new

personality emerges from the moment of its incorporation

and from that date of its incorporation and from that date

the persons subscribing to its memorandum of association

and others joining it as members are regarded as a body

incorporate or a corporation aggregate and the new

person begins to function as an entity (cf. Saloman v.

Saloman and Co. - 1997 AC 22). Its rights and obligations

are different from those of its shareholders. Action taken

against it does not directly affect its shareholders. The

company in holding its property and carrying on its

business is not the agent of its shareholders. An

infringement of its rights does not give a cause of action to

its shareholders. Consequently, it has been said that if a

man trusts a corporation he trust that legal persona and

must look to its assets for payment; he can call upon the

individual shareholders to contribute only if the Act or

charter creating the corporation so provides....."

We can have more enlightenment in this regard by following the

observations of the Hon'ble Apex Court in the case of Mrs Bacha F.

Guzdar appearing in paragraph 9 thus:

"..... This analogy is wholly inaccurate. Partnership is merely

an association of persons for carrying on the business of

partnership and in law the firm name is compendious method

of describing the partners. Such is, however, not the case of

a company which stands as a separate juristic entity distinct

from the shareholders..."

22. Such being the standing in the eye of law of a Company

registered under the provisions of the Companies Act or a body

incorporate, provisions of Order XXX of the Code of Civil Procedure would

never be attracted to the suits sought to be filed by or against a Company

or a body incorporate. The provisions of Order XXIX of CPC would be

applicable to such suits. Learned counsel for the respondents submits that

the plaint in this case has been signed and verified on behalf of the

Company by its Director and, therefore, the suit complies with the

provisions of Order XXI, Rule 1 CPC. With due respect, I must say, this

provision only explains as to how the pleadings be signed and verified.

This provision of law no where clarifies anything about the institution of

suit. Institution of the suit requires a decision to be taken in that regard

by a Company and since the Company, for carrying on its affairs, acts

through its Board of Directors and in certain cases, well through the

directors or secretaries too, provided their authority springs forth from the

Articles of Association or some decision taken in the annual general

meeting or a resolution passed by the Board of Directors, there has to be a

decision taken by the Company to file a suit. Without such decision, no

suit can be instituted in the name of or by the Company. After all, the

question of authority to institute a suit on behalf of the Company has

never been considered a matter of mere technicality, the reason being that

decision to institute a suit would have great consequences for the

operation and functionality of the Company. If no such authority is

produced or shown to exist or at least pleaded in the plaint, no suit can

be instituted for and on behalf of the Company. In this regard, it would

be useful to draw support from the observations of the learned single

Judge of Delhi High Court in the case of M/s Nibro Limited (supra)

appearing in paragraphs 24 and 25 which are reproduced thus -

"24. In my view, the provisions of Companies Act 1956 and

particularly Ss. 14, 26, 28, Schedule I Table A and Section 291

are very clear.

25. It is well settled that under Section 291 of the Companies

Act except where express provision is made that the powers of

a company in respect of a particular matter are to be exercised

by the company in general meeting in all other cases the Board

of Directors are entitled to exercise all its powers. Individual

directors have such powers only as are vested in them by the

Memorandum and Articles. It is true that ordinarily the court

will not unsuit a person on account of technicalities. However,

the question of authority to institute a suit on behalf of a

company is not a technical matter. It has far-reaching effects. It

often affects policy and finances of the company. Thus, unless a

power to institute a suit is specifically conferred on a particular

director, he has no authority to institute a suit on behalf of the

company. Needless to say that such a power can be conferred

by the Board of Directors only by passing a resolution in that

regard."

23. In the case of State Bank of Travancore v. Kingston

Computers India Private Limited reported in (2011) 11 SCC 524, the

Hon'ble Apex Court referred to the decision of the Delhi high Court in the

case of Nibro Limited (supra) and affirmed the view taken by the

learned single Judge of the Delhi High Court when it held that unless a

resolution is passed by the Board of Directors delegating its power to an

individual to file a suit on behalf of the Company, the suit is not

maintainable. It also observed that when a suit is filed by a person not

duly authorized by the Company, it cannot be entertained by a civil

court.

24. In the instant case, if we go through the plaint pleadings, we

would instantly find that there is not even a whisper about the Board of

Directors passing a resolution to authorize respondent no. 1 to file a suit

on behalf of the two Companies. I have already found that the provisions

of Order XXIX, Rule 1 of the Code of Civil Procedure are only about

signing and verifying the pleadings in the plaint and not about the

authority to institute a suit. The above-referred rulings would show that

the authority to institute a suit would emanate from a resolution passed in

that regard by the Board of Directors or authority given under the Articles

of Association or even in the decision taken in the annual general

meeting of the Company in view of the provisions of Section 291 of the

Companies Act, 1956. If no such authority has been given, an individual

director would have no authority to take a decision and file a suit for and

on behalf of the Company. Apart from absence of any words regarding

existence of such authority, the plaint in this case is also not accompanied

by any Board resolution authorizing either of the respondents to institute

a suit. These respondents may be the only Directors of these two

Companies, as submitted. But, they must show or at least plead that there

was a Board meeting in which a decision to institute a suit on behalf of

the Company was taken. This was required as a necessity in law and

facts. By way of reiteration, suffice it to say here that the agreements on

which the cause of action in the instant suit was founded, were executed

between the two Companies and the revision applicants and those

agreements were in respect of an immovable property jointly owned by

these Companies. The necessity of law, however, has not been quenched

by pleadings in the plaint. So, one can very well say that the suit as filed

by the respondents is also barred by law.

25. Thinking on a different plain, one can also add that so far as

these two Companies are concerned, no cause of action to file a suit has

ever arisen for them and had it arisen, these Companies would have

certainly taken a decision to go ahead with the cause of action and seek

redressal for the same by taking a decision to institute a suit. The fact

that there is no pleading in the plaint about taking of such a decision and

conferring of authority upon any of the respondents to file a suit by

passing of a suitable resolution by the Board of Directors, itself is

sufficient to say that from the perspective of these two Companies, the

cause of action has not arisen and that is the reason why material

pleadings disclosing cause of action in favour of these Companies are

absent in the plaint. If it were not so, these Companies would have

passed a resolution to institute a suit against the applicant and appointed

an authorized person to file it. But as stated earlier, the plaint pleadings

are devoid of these material facts. As such, I find that this way also, the

plaint does not disclose cause of action.

26. The sum and substance of the above discussion would be that

the plaint as filed by the respondents is liable to be rejected on the

grounds that it does not disclose cause of action and it is barred by law

under the provisions of clauses (a) and (d) of Order 7, Rule 11 of the

Code of Civil Procedure. Learned Civil Judge, Senior Division by not

considering these material aspects of law, has arrived at a conclusion

contrary to the settled principles of law and, therefore, the impugned

order is liable to be quashed and set aside and the application vide exhibit

9 deserves to be allowed, but only for its prayer for rejection of the plaint

under Order 7, Rule 11 (a) and (d) of CPC.

27. Application vide Exhibit 9 also makes an alternate prayer for

referral of the dispute to the arbitrator under Section 8 of the Arbitration

and Conciliation Act. However, I find that the issue of referral of the

dispute to the arbitrator need not be gone into now as the first prayer of

Exhibit 9 application has been allowed by this Court and the other prayer

regarding referral of dispute to an arbitrator is not the additional, but the

alternative prayer. An alternate prayer demands consideration when the

prayer to which it stands an alternative, is rejected. But, I deem it

appropriate to keep all the questions in this regard open.

28. In the result, revision application is allowed to the extent it

seeks allowing of the applicants' prayer to reject the plaint. The impugned

order, however, would have to be quashed and set aside in its entirety as I

have kept all questions relating to arbitrability of the dispute open and is

accordingly quashed and set aside completely. The plaint in Special Civil

Suit No. 310 of 2017 on the file of Civil Judge, Senior Division, Nagpur is

rejected. It is made clear that this order shall have no bearing upon the

rights of the two Companies to initiate such action as may be available to

them under the law. No costs.

S. B. SHUKRE, J

At this stage, learned counsel for the respondents submits

that the effect and operation of this order be kept in abeyance as the

respondents would like to challenge this order before the Hon'ble Apex

Court. He also submits that if the effect and operation is not kept in

abeyance, the interim relief in the nature of maintenance of status-quo

ordered by the trial Court would also go away.

The prayer is opposed by learned counsel for the applicants.

However, having regard to the submissions made by learned

counsel for the applicants, I am of the view that this order can be kept in

abeyance for a period of two weeks to enable the applicants to avail of the

remedy available under the law.

Accordingly, the effect and operation of this order is kept in

abeyance for a period of two weeks.

S. B. SHUKRE, J

joshi