Kashi Nath Sett &Anr vs Sadhu Charansett (Grocery) &Ors
2023 Latest Caselaw 2678 Cal

                     IN THE HIGH COURT AT CALCUTTA
                      CIVIL REVISIONAL JURISDICTION
                              APPELLATE SIDE
PRESENT:

THE HON'BLE JUSTICE AJOY KUMAR MUKHERJEE

                             C.O. 1658 of 2021

                           Kashi Nath Sett &Anr.
                                    Vs
                      Sadhu CharanSett (Grocery) &Ors.


For the Petitioner            :     Mr. NilanjanBhattacharjee


For the respondents           :     Mr. SubhasisDey
                                    Mr. Siddhartha Banerjee
                                     Mr. Victor Mukherjee

Heard on                      :     14.03.2023

Judgment on                   :     19.04.2023



Ajoy Kumar Mukherjee, J.

1. The present application under Article 227 of the constitution of India is

directed against the order dated 17thApril 2021passed by the Learned Civil

Judge (Senior Division), 1st Court at Howrah in Title Suit No. 254 of 2015

whereby andwhereunder the Court below was pleased to reject

defendant/Petitioner's application under order VII Rule 11 of the Code of Civil

Procedure, 1908 (CPC).

2. The said Suit was institutedby the plaintiffs/oppositeparty no 2 &3

claiming inter-alia a decree for declaration to the effect that the plaintiffs are

entitled to have an access to and enter into the premises no 327, N.S. road,

Howrah wherefrom the business is being carried on in the name of the opposite

party no. 1. In the said suit, the plaintiffs/Opposites parties also claimed

interalia a decree for declaration to the effect that the defendants are obliged to

disclose to the plaintiffs, the day to day cash balances in relation to the

business run in the name of the opposite party no. 1 along with a decree for

discloser of accounts and a decree for perpetual injunction.

3. The defendants /petitioners hadfiled written statement in the said suit

denying all material allegations. Long after filing the written statement the

defendants/petitioner took out said application under order VII Rule 11 on the

allegation that the court below had no jurisdiction to entertain the suit since

the said suit is barred under section 430 of the Companies Act, 2013. The

plaintiffs/opposite parties filed written objection against the said application

and it was heard by Learned Court below in presence of both the parties

anduponhearing the said prayer was rejected by the order impugned.

4. Mr. Nilanjan Bhattacharjee learned counsel appearing on behalf of the

petitioner submits that the court below failed to appreciate that if there are

disputes between the directors of a company, said disputes should be referred

to the Tribunal and the Tribunal only has the jurisdiction to decide such

dispute between the directors of the company. Learned court below was erred

in holding that the plaintiffs / opposite parities can file a suit in a civil court

even though the Companies Act, 2013 specifically states that in case of dispute

between the directors which is a company issue, the said dispute should be

tried by tribunal or a law board.

5. Mr. Bhattacharjee further submits that plaintiffs' prayer for declaration

of his right to enter into the premises of the company can very well be dealt

with by the National company Law Tribunal, Kolkata bench (here in after called

as NCLT) who has every power to execute the same under section 424(3) of the

Companies Act 2013. He further submits that plaintiffs prayer regarding

declaration of discloser of day to day cash balance, Cash book or bank

reconciliation statements to enable the plaintiffs to check the day to day sells of

the company can be dealt with under section 241 (1)(a) of the Companies Act

read with Rule 11 of the NCLT Rules.The plaintiff's prayer regarding decree for

accounts for non-payment of the remuneration to the opposite party no. 2 and

3can also be dealt with under the provision of the Companies Act 2013. Section

450 of the Companies Act read with Rule 11 and Rule 146 of the NCLT

rules,expressly deals with such situation and prescribes punishment for non-

payment of remuneration to the members and other directors in compliance of

the Article of Association of the company. Similarly the prayer regarding decree

for permanent injunction restraining the defendant from dealing with the

business as well as from the cash and turn over vested with them can be dealt

with under section 242(4) of the Companies Act which deals with action and

or restraining order which may have been prayed for by way of filling

application under the said act. The plaintiff/opposite partys' payer for passing

decree for account commissioner and for appointment of receiver can also be

dealt with rule 11 read with Rule 146 and 150 of the NCLT Rules, 2016 which

gives the Tribunal inherent power tomake such order or orders for the ends of

justice and to prevent abuse of the process of the Tribunal and to pronounce

order under rule 150 of the NCLT Rules. In this connection he also referred

section 166, Section 152, Section 159, Section 452, Section 241,Section 128

read with rule 11, rule 146, rule 150 and other relevant rules which are

appropriate to deal with paragraph wise allegations leveled in the plaint.

6. Mr. Bhattacharjee further submits that NCLT has every power to

determine each and every issue alleged in the plaint and topass orders under

section 242(2), 420, 450 of the Companies Act. The Companies Act 2013 is a

code under which the execution provision i.e. section 424(3) is there for

execution of the order passed by the Tribunal as has been prayed by the

plaintiff in the said plaint before the court below in the said suit.In this context

he further contended that section 241 of the Act cannot be given a restricted

meaning. It is essential to apply the doctrine of "reading down" to make the

provisions under chapter XVI of the Act purposeful. Under the new actof 2013,

the intention of the legislature is to vest the power of adjudication to the

Tribunal under section 242 read with section 241. He further contented that

the phrase "member of the company" in section 241 means and include person

not only member of the company in strict sensebut also person who bears the

character of a member or have substantial interest in the internal affairs of the

company and it comes under the jurisdiction of section 241 of the Companies

Act, 2013. In this context he relied upon judgment in

(i) Needle Industries (India) Ltd. & others Vs. Needle Industries

Neway (India) Holding Ltd. & others reported in (1981) 3 SCC 333,

(ii) Kamal Kumar Dutta & another Vs. Ruby General Hospital ltd. &

others reported in(2006)7SCC 613,

(iii) V.S. KrishnanVs. Westfort Hi-Tech Hospital Ltd.reported in(2008)

3SCC 363.

7. In order to support his aforesaid contention and that the term

"oppression" has been expanded by the apex court, he also relied upon

judgments passed in :-

(i) Saleem Bhai and others Vs. State of Maharashtra and others

reported in AIR 2003 SC 759,

(ii) In SAS Hospitality Pvt. Ltd. &Anr. Vs Surya Constructions Pvt. Ltd.

& Ors. reported in(2018) SCC Online Del 11909,

(iii) In Vikram Jairath and Another Vs Middleton Hotels Private

Limited and Others reported in(2019)(4)CHN 107.

8. Mr. Subasish Dey learned counsel appearing on the behalf of the

opposite party submits that the provision of the Companies Act as relied by the

petitioner in support of his contention that the Suit is barred under order VII

Rule 11 (d) of the code is completely misplaced and misconceived. Section 166

of the Act of 2013 does not say anything as regards the jurisdiction of a forum

to entertain a dispute even in case of breach of his duties by a director. Section

152 and 153 equally misplaced.Section 152 deals with mode of appointment of

directors in a company and section 155 provides a restriction for obtaining

more than one director identification number. Accordingly he submits neither

section 152 nor section 155 of the Companies Act has nothing to do with the

jurisdiction of a forum to address the issues raised by the plaintiffs. Similarly

section 146 could not have been an impediment for the court below to

entertain the said suit. He further submits section 146 does not suggest that

for adjudication of the issues involved in connection with convening the general

meeting of a company, one has to necessarily approach before NCLT. Section

197 of the Act has also not taken away the jurisdiction of the learned court

below to entertain the suit. In fact section 197 of the Act provides for overall

maximum managerial remuneration payable by a public company and as such

section 197 also has nothing to do with the jurisdiction of a civil court.

9. Mr. Dey further argued that the provision laid down in section 213 of the

Companies Act apply within a very restricted zone upon fulfillment of the

conditions as are prescribed under clause (b) of the said section which

contemplates certain eventualities that may entitle a specific class of people to

approach NCLTand present suit was not triggered by any of such eventualities.

Mr.Dey further submits that section 216 provides for investigation into the

ownership of a company when it appears to the Central Governmentthat

there is a reason so to do and it does not have any connection with the case

made out by the plaintiffs or with the adjudication of the issues involved.

Similarly section 241 deals with prevention of oppression and mismanagement

in a company.The provision laid downtherein can be taken resort to by a

member of a company only in those cases that may come within the ambit of

sub clauses (a) and (b) of subsection (1) of section 241. The case made out in

the plaint pertaining to the said suit is not contemplated under sub section (1)

of section 241 nor had the plaintiffs fulfilled the qualification to approach the

NCLT under the said section. The reliefs contemplated in sub section (1)

ofsection 245 of the Companies Act are clearly distinct and separate from the

reliefs claimed by the plaintiffs in the said suit. He further submits that

petitioner has referred section 452 of the Act but it does not confer exclusive

jurisdiction upon the NCLT debarring a civil court to entertain a suit involving

civil disputes. According to Mr.Dey subsection (2) of section 452 of the Act

rather recognizes the jurisdiction of other forums to entertain disputes

concerning the affairs of a company. According to Mr.Dey the disputes involved

in the said suit is purely civil in nature and as such there is no express or

explicit exclusion of the jurisdiction of the learned court to entertain the suit,

and there was no plausible reason available to the learned court below to

reject the plaint on account of alleged lack of jurisdiction.

10. In this connection Mr.Dey referred section 9 of the Code of Civil

Procedure which mandates the civil court to try all suits of a civil nature

excepting suits, of which their cognizance is either expressly or impliedly

barred. The Companies Act, 2013 has neither explicitly nor by necessary

implication debarred the court below to entertain the said suit as the principal

reliefs claimed in the said suit are all declaratory in nature under the Specific

Relief Act, 1963 and the court below is the sole and appropriate forum to

entertain the suit. He further argued it is trite law that the exclusion of the

jurisdiction of a civil court can never be readily inferred. The courts have

repeatedly held that a provision of law taking away the jurisdiction of a civil

court must be strictly construed and the onus lies on the party seeking to oust

the jurisdiction to establish his right to do so. In this context he relied upon

judgment in Sahebgouda (dead) by LRS & others Vs. Ogeppa& others

reported in (2003) 6SCC 151 and in Swamy Atmananda and others Vs. Sri

Ramkrishna Tapovanam and others reported in (2005) 10SCC 51. In this

context he also contended that in Dwarka Prasad Agarwal and another Vs.

Ramesh Chander Agarwal and others reported in (2003) 6SCC 220it was

held that the civil suit is maintainable since apart from general law such suit

was also covered under the Specific Relied Act 1963. He further relied in

Panipat Woollen and General Mills Company Limited Vs. R.L Kaushik

and others reported in (1969) 39 Camp Cas 249 (PH) where the validity and

regularity of the general meeting of a company and election of the directors

were challenged and question arose as to whether civil courts had jurisdiction

to try such suit and the answer given by the court was in the affirmative. He

also referred Marikar (Motors) and another Vs. M.I. Ravi Kumar and

others, reported in 1981 SCC Online Ker 283: (1982) 52 Comp Cas 362

where question arose whether an annual general meeting of a company

convened in violation of section 166 of the Companies Act can be tried by a civil

court on the ground that the Companies Act is complete and self-contained

code and only the Tribunal is competent to resolve the dispute between a

company and its members and the Act excludes the jurisdiction of the ordinary

courts in such matters. Kerala High court was pleased to reject such

contention and did not accept the contention that the Companies Act is a

complete and self-contained code and held, the Act does not oust the

jurisdiction of civil courts to deal with the disputes raised by the plaintiffs.

11. In this context his further argument is that it is well settled that the

Tribunal can entertain proceedings/application only in respect of matters for

which the jurisdiction specifically conferred by the Companies Act or by any

other law inforce and all residuary claims for which an express provision has

not been made in the Companies Act conferring exclusive jurisdiction on NCLT,

Civil court can exercise jurisdiction. In this context he placed reliance upon

Prakash Timbers private Limited & others Vs. Smt. Sushma Shingla &

another reported in (1997) 89 comp Cas 770 (All):1995 SCC Online All

427, Minno H. Mody, Vs. Hemand D Vakil& others reported in(1997) 89

comp cases 456 (Bom): 1993 SCC Online Bom 237,Tin Plates dealers

association Pvt. Ltd.Vs. Satish Chandra Sanwelka & others reported in

(2002) 108 comp cas 295: 2001 SCC Online Cal 675. He accordingly

contended that the Tribunal does not have power to deal with the issues where

declaration has sought for or where payment of remuneration has been claimed

by a director or appointment of receiver etc. In this context he also relied

upon the explanation given in wolver hampton New Water works company

Vs. Hawkesford reported in (1859) 6 C.B. (NS) 336 case. And The Secretary

of State Vs. Mask and Company reported in AIR 1940 PC 105.

12. Mr.Dey in this context also contended that the powers exercised by a

Tribunal areinrespect of corporate right and not individual rights. In this

context he relied upon Poonam Chand Kothari Vs. Rajasthan tube

manufacturing company ltd.reported in (1996) 87 comp cas 842 (Raj):

1995 SCC Online Raj 88.Accordingly Mr.Dey concluded that it would be

absolutely incorrect to suggest that the suit instituted by the plaintiff in the

case in hand is barred by the section 430 of the companies act or that court

below had no jurisdiction to entertain the Suit and as such there was no

occasion for the court below to reject theplaint at the instance of the defendant.

Accordingly the order impugned is quite justified and does not call for

interference by this court.

13. I have carefully considered submission made by the parties. Before going

to further details let me reproduce order VII Rule 11 of the code.

"11. Rejection of plaint.----The plaint shall be rejected in the following cases-

(a) where it does not disclose a cause of action;

(b) where the relief claimed is undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so;

(c) where the relief claimed is properly valued, but the plaint is written upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to doso;

(d) where the suit appears from the statement in the plaint to be barred by any law:

(e) Where it is not filed in duplicate;

(f) where the plaintiff fails to comply with the provisions of rule 9: Provided that the time fixed by the Court for the correction of the valuation or supplying of the requisite stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the plaintiff was prevented by any cause of an exceptional nature for correcting the valuation or supplying the requisite stamp-paper, as the case may be, within the time fixed by the Court and that refusal to extend such time would cause grave injustice to the plaintiff."

14. Needless to say that clause (d) of Rule 11of order VII applies only when

the Suit appears from the statement in the plaint to be barred by any law. It is

only where on the face of the plaint a suit appears to be barred by any law that

the court shall dismiss the suit. But where it does not so appear but requires

further consideration or, in other words, if there be any doubt or if the court is

not sure and certain that the suit is barred by some law, the court can not

reject the plaint and the ground as embodied in clause (d) & (a) of Order VII

Rule 11 must appear on the face of the plaint. It is settled law that for the

purpose of disposal of an application for rejection of plaint under Order VII

Rule 11 (d) of the Code, the Court must treat all the averments made in the

plaint to be true and if it appears that the statements so made if treated to be

true, the suit is barred by any law for the time being in force, the court can

reject the plaint. In short the statements made in the plaint without addition

or subtraction must show that it is barred by any law to attract Order VII Rule

11 (d) and court can reject only on the basis of the pleadings in the plaint and

not by referring to materials placed on record by the defendant in answer to the

plaint.

15. In the light of aforesaid settled proposition of law, let me consider the

present dispute between the parties. On Perusal of the plaint of Title Suit no.

254 of 2015 its appears that in paragraph 3 of plaint, plaintiffs have

specifically averred "That Monoj Seth, the Defendant no. 2 has become

appointed as the director of plaintiff no. 1 company without following the

norms of the Companies Act 1956 amended thereon 2013, hence his

appointment is put on hold by the Hon'ble Company Law Board Bench,

Kolkata."

16. Accordingly it is quite clear, if the statements made in the plaint are

treated to be true then the defendant no. 2 Manoj Sett is not the director of the

plaintiff no. 1 company. If that be soprima facie it appears that the dispute is

in-between director and a person who is not a director. Learned counsel on

behalf of the petitioner in this context argued that the golden rule of statuary

construction is that the phrases or sentences should be interpreted according

to the intention of the legislature and section 241 and 242 should be read

together and as such under the Act of 2013 the intention of the legislature is to

vest the power of adjudication of the matter referred in section 242, to the

Tribunal. He further submits that applying the doctoring of "Reading Down",

an internal aid to construct the word in a statute to give reasonable meaning,

the word "member" refers in section to 241 of the Act should not be read in

isolation or in strict meaning and it should be read down along with section

242 of the Act. Accordingly he further submits that the phrase "member of a

company" in section 241 means and includes person not only member of the

company in strict sense but also who bears the character of a member or have

substantial interest in the internal affairs of the company.

17. Even for the time being if the aforesaid argument of the petitioner is

accepted, then also the question as to whether defendant no. 2 comes within

the definition of the member of a company under section 241 can only be

adjudicated on perusal of documentary or oral evidence to be adduced by

the parties and the plaint cannot be thrown away at the threshold construing

that defendant no. 2 comes within the definition of 'member' of the company

under section 241of the Act.

18. Apart from that plaintiff in paragraph 7 has alleged specifically that

Kasinath Seth and aforesaid defendant no. 2 Manoj Seth are running a parallel

business just siphoning of funds as well as private personal withdrawer from

the suit business for their own selfish gain irrespective of considering of rights

responsibilities and benefits of the plaintiff. Paragraph 9 of the plaint further

discloses that taking advantage of ownership of the funds, the defendant now

taking as well as creating pressure for hostile taking over the entire

administrative control with a situation of not allowing the head directors

namely plaintiff and others to enter and interferer the business against the

norms of Companies Act. Cause of action of the suit as it appear also arose

due to dead lock situation of the alleged attempt being taken by the principal

defendant along with said Manoj Seth and Mainakseth. Now section 245 as

referred by the opposite party deals with the restraining order to be passed

against company and not against a person whose appointment has been put on

hold by the company Law Board Bench, Kolkata as averred in the plaint.

Moreover in the plaint beside declaration and injunction plaintiff has also

prayed for payment of their remuneration. Admittedly thereis no direct

provision controlling payment of remuneration tobe paidto the director in

aPrivate Ltd. Company. Section 197of the Companies Act deals with over all

maximum managerial remuneration, which has got no application in the

present context. The Act also does not deal with the provision for execution of

an individual's right and Companies Act practically silent about granting

decree for declaration as there is no specific provision in the Act for granting

declaration. As averment made in the plaint which is considered to be true for

the present purpose, discloses conflict of two individual alleging that the

plaintiffs' personal right got affected by a person whose membership in the

company is not beyond doubt, suit under section 34 of the specific relief act is

not barred in the present context specially when plaintiff averred in the plaint

that they are not allowed to enter into the premises of the company and

thereby they prayed for enforcement of their civil right rather than right as

director. In view of settled proposition of law that ouster of civil court

jurisdiction cannot be readily inferred and consolidating all previous

judgment, apex court in Church of North India Vs. Lavaji bhai Ratanji

bhai and others reported in (2005) 10 SCC 760 has laid down the principles

relating to the exclusion of jurisdiction of civil court which are as follows :-

"40.. In Dhulabhai v. State of M.P. [(1968) 3 SCR 662 : AIR 1969 SC 78] Hidayatullah, C.J. summarised the following principles relating to the exclusion of jurisdiction of civil courts: (SCR pp. 682 B-H-683 A-C)

"(1) Where the statute gives a finality to the orders of the special tribunals, the civil courts' jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure."

"(2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not." "(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals."

"(4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit."

"(5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies."

"(6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry."

"(7) An exclusion of the jurisdiction of the civil court is not readily to be inferred unless the conditions above set down apply."(See also Rajasthan SRTC v. Krishna Kant [(1995) 5 SCC 75 : 1995 SCC (L&S) 1207 : (1995) 31 ATC 110] , Dwarka Prasad Agarwal v. Ramesh Chander Agarwal [(2003) 6 SCC 220] , Sahebgouda v. Ogeppa [(2003)

6 SCC 151] , Dhruv Green Field Ltd. v. Hukam Singh [(2002) 6 SCC 416] and SwamyAtmananda v. Sri Ramakrishna Tapovanam [(2005) 10 SCC 51 : (2005) 4 Scale 117] .)"

19. As the question about ouster of jurisdiction of a civil court must be

constructed having regard to the schemes of the act, it can be said that the

preamble of the act of 2013 have not taken away the jurisdiction of acivil court

in each and every matter connected with company affairs. The preamble

speaks that this is an act to consolidate and amend the law relating to

companies. The normal civil remedies associated with action lies in civil courts.

If not prescribed in the act, plea of bar to jurisdiction of a civil court may not

be considered having regards to the contentions raised in the plaint and for

this purpose reliefs sought in the plaint must be considered in their entirety on

the basis of factual averment made in the plaint.In fact what was observed in

the judgment as the main guiding factor is that the court has to consider in

substance and not merely in form about the nature of the claim made in the

suit and the underline object in seeking the real relief therein. In view of above

and considering the averments made in the plaint, it appears that the suit is

apparently in between director and a person whose appointment is put on

hold by the Company Law Bench, Kolkata and as relief relates to decree for

declaration of right of plaintiffs as individual and for decree for account

for non-payment of remuneration along with injunction, an appointment of

accounts commissioner and receiver, I find that the suit is not barred under

section 430 of the companies act 2013.

In viewof above C.O 1658 of 2021 is dismissed but considering the fact of the

circumstances of the case without cost.

Urgent photostat certified copy of this judgment, if applied for, be supplied to

the parties upon compliance with all requisite formalities.

(AJOY KUMAR MUKHERJEE, J.)