Delhi High Court
Mr Jaiveer Singh Virk vs Sir Sobha Singh & Sons Pvt Ltd & Anr on 21 March, 2020
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 21st March, 2020
28th February, 2020
+ CS(OS) 226/2016
JAIVEER SINGH VIRK .... Plaintiff
Through: Mr. Raman Kapur, Sr. Adv. with Mr.
Piyush Kaushik & Mr. P. Shekhar,
Advs.
Versus
SIR SOBHA SINGH & SONS PVT. LTD.
& ANR. ......Defendants
Through: Mr. Aabhas Kshetarpal & Ms.
Monika Phartyal, Advs. For D-1.
Mr. Anand Singh, Adv. for D-2.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The plaintiff has instituted this suit pleading, that (i) the plaintiff is
one of the maternal great grandson of Late Sir Sobha Singh who had set up
and incorporated defendant no.1 Sir Sobha Singh & Sons Pvt. Ltd.; the
defendant no.1 company was incorporated as far back as on 23rd July, 1945
as a Non-Government Company for the benefit of the family members of Sir
Sobha Singh and the same is a family owned company which is inter alia
engaged in real estate activities with own or leased property which includes
buying, selling, renting and operating of self-owned or leased real estate
such as apartment buildings and dwellings, non-residential buildings etc.;
(ii) all the shareholders of the defendant no.1 company are family members;
(iii) Sujan Singh Park is made up of 84 flats, arranged in seven blocks viz.
„A‟ to „G‟; (iv) this residential complex was built by Sir Sobha Singh in the
CS(OS) No.226/2016 Page 1 of 27
year 1945; (v) Sir Sobha Singh divided all his properties among his five
children during his lifetime; (vi) Sujan Singh Park was meant to be shared as
family space, in which each of his four sons and one daughter and their
children receives a flat; (vii) however in 1947 several non-family members
were given accommodation on rent in Sujan Singh Park; (viii) since the
family members of Sir Sobha Singh held shares in defendant no.1 company,
in order to extend benefit to the shareholders of the defendant no.1
company, it was decided that the flats of defendant no.1 company at Sujan
Singh Park be allotted to family members and shareholders of defendant
no.1 company in lieu of shares held by them in defendant no.1 company;
(ix) as the family expanded, allocation of flats became an issue and which
was settled by arriving at an understanding among the family
members/descendants that all the properties will be allotted to the family
members / descendants up to the fourth generation; (x) a Board Resolution
dated 21st July, 1990 recording the aforesaid agreement was passed, which
named all descendants of Sir Sobha Singh upto the fourth generation,
wherein each member of the family, whether boy or girl were entitled to a
flat; (xi) accordingly a family tree was built in order to decide the
entitlement; (xii) thereafter whenever a flat fell vacant, the topmost on the
waiting list was allotted a flat; this system prevented family squabbles; (xiii)
all the shares of defendant no.1 company are held by family members and
all the directors in the defendant no.1 company are family members only;
(xiv) after the demise of Gurbux Singh son of Sir Sobha Singh, Preminder
Singh, grandson of Sir Sobha Singh took charge as head of defendant no.1
company and has been looking after allocation, maintenance and presiding
over Annual General Meeting (AGM) of shareholders of defendant no.1
CS(OS) No.226/2016 Page 2 of 27
company; (xv) the family tree for allotment of flats included 23 members of
Sir Sobha Singh‟s family; (xvi) out of the said 23 members, all the
grandchildren of Mrs. Mohinder Jaspal Singh, one of the daughters of Sir
Sobha Singh, were allotted flats leaving only the plaintiff; (xvii) the plaintiff
in the list aforesaid is positioned at serial no. 18 and is next in line for
allotment of the flat, as the flats were in occupation of tenants and as and
when the flats were vacated / tenants evicted, eligible persons from the list
were allotted the same; this practice is being followed since the Resolution
dated 21st July, 1990; (xviii) one of the flats bearing no. B-15, Sujan Singh
park, New Delhi was vacated in early 2014; the plaintiff vide his e-mail
dated 25th March, 2014 requested defendant no.1 company to allot the said
vacant flat to the plaintiff; (xix) however ignoring the Resolution dated 21 st
July, 1990, one of the elder family members viz. defendant no.2 Rahul
Singh herein, whose name was not figuring in the list, was allotted the said
flat which had fallen vacant in 2014, without offering any explanation for
not allotting the same to the plaintiff; (xx) on repeated requests of the
plaintiff, finally the defendant no.1 company assured that it will offer the
plaintiff the next flat falling vacant; (xxi) in view of the said assurance, the
plaintiff did not object to allotment of flat no. B-15 in the name of defendant
no.2 Rahul Singh and communicated so to the defendant no.1 company on
17th May, 2014; (xxii) another rented flat fell vacant on 31st December, 2014
and the plaintiff, vide e-mail dated 12th January, 2015 requested the
defendant no.1 company to allot the said flat bearing No.D-38 to the
plaintiff; (xxiii) on receiving no response, the plaintiff zealously followed up
and was given to understand that an AGM / Board Meeting of the defendant
no.1 company was likely to take place on 28th August, 2015; (xxiv) the
CS(OS) No.226/2016 Page 3 of 27
plaintiff got legal notice dated 18th August, 2015 issued to the defendant,
seeking status of his allotment in the meeting scheduled on 28 th August,
2015; (xxv) on 22nd August, 2015, plaintiff received a copy of the Board
Resolution acknowledging receipt of legal notice dated 18th August, 2015
and that the plaintiff was first in the queue and to whom allotment was due
and assuring the plaintiff that allotment will be considered after the issue of
freehold is resolved; (xxvi) in view of the same, the plaintiff conveyed his
willingness to withdraw the legal notice dated 18th August, 2015; (xxvii)
however it has come to the notice of the plaintiff that allotment of flat No.D-
38 was being considered to a third party, in complete defiance of the Board
Resolution dated 21st July, 1990; and, (xxviii) had the plaintiff been allotted
the flat in January, 2014, the plaintiff would have generated rental income to
the tune of Rs.3,45,000/- per month, being the prevailing letting value of
such a flat; thus by allotment of the said flat to the defendant no.2 instead of
to the plaintiff, loss of Rs.96,60,000/- had been caused to the plaintiff. On
the aforesaid pleas, reliefs of (a) declaration that the plaintiff is entitled to be
allotted flat No.B-15 in B-Block Apartments, Sujan Singh Park, New Delhi
in terms of Resolution dated 21st July, 1990 and to put the plaintiff into
possession thereof and in the alternative of mandatory injunction directing
the defendant no.1 company to allot flat No.D-38, D-Block Apartments,
Sujan Singh Park, New Delhi in terms of Resolution dated 21st July, 1990
and delivery of possession thereof to the plaintiff; (b) cancellation of
allotment of flat no.B-15 in B-Block Apartments, Sujan Singh Park, New
Delhi in favour of defendant no.2 Rahul Singh; (c) permanent injunction
restraining the defendants from creating any third party rights in favour of
any other person with respect to flat no.D-38, D-Block Partments, Sujan
CS(OS) No.226/2016 Page 4 of 27
Singh Park, New Delhi; and, (d) recovery of damages of Rs.96,60,000/- with
interest, are claimed in the suit.
2. The suit came up first for admission before this Court on 10th May,
2016 and thereafter on 12th May, 2016, when summons thereof were ordered
to be issued, without going into the aspect of maintainability thereof, though
no ex parte relief claimed granted.
3. The defendant no.1 company, on being served with the summons,
appeared before this Court on 30th May, 2016 and made a statement that (a)
the defendant no.1 company had no intention to sell the flat no.G-81, Sujan
Singh Park, New Delhi except to rent out the same for generating revenue
and that the prospective tenant would be informed of the present
proceedings; and, (b) with respect to flat no.D-38, it was stated that the same
had been earmarked for sale and was not available for allotment to any
family member.
4. The defendant no.1 company has filed a written submission pleading
that, (i) the plaint discloses no cause of action; (ii) no Resolution dated 21 st
July, 1990 was passed by the Board of Directors of the defendant no.1
company; (iii) the list of prospective allottees of flats filed by the plaintiff is
signed by three persons only but the true typed copy thereof is depicted to be
signed by five persons; (iv) the list in any case is not a Board Resolution and
has no legal binding; (v) the plaintiff has no vested or enforceable interest
for allotment against the defendant no.1 company; (vi) lease to defendant
no.2 Rahul Singh of flat no.B-15 was executed in 2012, to the knowledge of
the plaintiff and was not challenged by the plaintiff and the claim for
cancellation thereof stands waived and / or is barred by time; the family
CS(OS) No.226/2016 Page 5 of 27
members of Late Sir Sobha Singh had no right to any of the flats of the
defendant no.1 company; (vii) the defendant no.1, in the recent past had
allotted flat no.A-12 and flat no.G-80 to non-family members; (viii) 47% of
the shares of defendant no.1 are owned by Sir Sobha Singh Public
Charitable Trust and not by family members; (ix) the plaintiff is not entitled
to any relief in equity since he and his family members have been in illegal
possession of property No.1A, Janpath owned by Sir Sobha Singh Public
Charitable Trust; a civil suit for mandatory injunction has been filed by the
Trust against the plaintiff‟s father namely Shivinder Singh, in 2006 and the
plaintiff and his father have been repeatedly informed that no allotment will
be made in their favour till they vacate the said property No.1A, Janpath; (x)
flat no.B-15 was earmarked for defendant no.2 Rahul Singh, as far back as
in 1978, to the knowledge of the plaintiff; (xi) the defendant no.1 company
is prioritising its resources towards getting freehold rights for the property at
Sujan Singh Park and for which purpose compensation is to be paid and
funds therefor are being generated and the plaintiff cannot assert any rights
contrary to the interest of defendant no.1 company; (xii) funds are also
required by defendant no.1 company for payment of enhanced property tax
and for maintenance; (xiii) the defendant no.1 company has not even been
distributing dividend to its shareholders; (xiv) flat no.D-38 earmarked for
sale for generating revenue for defendant no.1 company is to meet the
expenses and is not available for leasing to anyone; (xv) flat no.G-81 was
offered to the plaintiff vide Resolution dated 7th May, 2016 of defendant
no.1 company on the condition that the plaintiff and his family members
will vacate illegally occupied property at 1A, Janpath, New Delhi; the said
offer was time bound and the plaintiff did not accept the same; (xvi) denying
CS(OS) No.226/2016 Page 6 of 27
that Sujan Singh Park was meant to be shared by family members though
admitting that many members of the family had been leased out flats in the
said Sujan Singh Park; (xvii) denying that it was ever resolved that each
child of Sir Sobha Singh and their children will receive a flat in Sujan Singh
Park; (xviii) the lease of land underneath Sujan Singh Park is in the name of
defendant no.1 company and Sir Sobha Singh did not have any right to
divide the properties of defendant no.1 company; (xix) the plaintiff had not
even placed before the Court the Resolution dated 21st July, 1990; (xx) an
informal understanding was arrived at between some family members that
the flats may be leased out to certain family members but not
unconditionally and uniformly; no such understanding is binding on the
defendant no.1 company and grant of any lease even to a family member is
subject to the discretion of defendant no.1 company; (xxi) Preminder Singh
is only one of the Directors on the Board of defendant no.1 company and is
not the „head‟ of the defendant no.1 company; (xxii) though other
grandchildren of Mrs. Mohinder Jaspal Singh had been leased out flats in
Sujan Singh Park but not on the basis of alleged Board Resolution dated 21 st
July, 1990 or the alleged seniority list; (xxiii) no assurances were ever meted
out to the plaintiff; and, (xxiv) in the meeting dated 22nd August, 2015 it was
resolved by the Board of defendant no.1 that allotment of flats be put on
hold in view of financial requirements of defendant no.1 company.
5. The defendant no.2 has filed separate written statement, additionally
pleading other facts disentitling the plaintiff to the relief claimed with
respect to flat no.B-15 and / or against the defendant no.2.
6. The plaintiff has filed replications to both the written statements.
CS(OS) No.226/2016 Page 7 of 27
7. Though the parties, vide order dated 14th September, 2017 were
referred to the Mediation Cell of this Court but mediation remained
unsuccessful.
8. Vide order dated 8th August, 2018, the following issues were framed
in the suit:
"1. Whether the suit is not properly instituted by an
authorised person, as alleged? OPD-1
2. Whether the suit does not disclose any cause of action,
as alleged? OPD-1
3. Whether the suit is barred by limitation, as alleged?
OPD-2
4. Whether the plaintiff is entitled to a decree of
declaration, as prayed? OPP
5. Whether the plaintiff is entitled to a decree of
mandatory injunction, as prayed? OPP
6. Whether the plaintiff is entitled to a decree of
cancellation, as prayed? OPP
7. Whether the plaintiff is entitled to a decree of
permanent injunctions, as prayed? OPP
8. Whether the plaintiff is entitled to a decree for damages
of Rs.96,60,000/-, as prayed? OPP
9. Whether the plaintiff is entitled to interest, if so, at what
rate and for what period? OPP
10. Relief, if any."
and the parties relegated to evidence:
9. The suit came up before this Court on 11th July, 2019 on the
application of defendant no.2 Rahul Singh for filing additional documents
and the application of the plaintiff under Order XI Rules 12 and 14 of the
Code of Civil Procedure, 1809 (CPC) and for disposal of the application for
CS(OS) No.226/2016 Page 8 of 27
interim relief. After noticing the nature of the suit, inter alia the following
order was passed:
"9. The counsel for the plaintiff states, (i) that defendant
no.1 is a family company and vide Resolution dated 21st July,
1990, of which discovery is inter alia sought, it was decided
that one flat each in the property of the defendant no.1 at
Sujan Singh Park, New Delhi will be given to each grandchild
of Sir Sobha Singh; and, (ii) that in pursuance thereto, 17
grandchildren have been allotted the flats and the defendant
no.1 admitted that the plaintiff is next in the line; however no
flat has been allotted.
10. I am still not satisfied as to how the aforesaid can be a
legally enforceable right.
11. The counsel for the plaintiff has contended that he has a
legally enforceable right because the defendant no.1 made an
offer and which has been accepted by the plaintiff and the
plaintiff by this suit is enforcing the same.
12. The counsel for the plaintiff in this context has drawn
attention to page 46 of Part-IIIA file which is an e-mail dated
8th May, 2016 of Binny Singh to the plaintiff informing the
plaintiff that at the Board meeting held on 7 th May, 2016, the
Board was informed that flat No.G-81 was likely to be vacated
for allotment on 31st May, 2016 and the plaintiff being top of
the list, will get it.
13. However the aforesaid e-mail dated 8th May, 2016 also
contains a "caveat / provision" for allocation of the said flat
to the plaintiff viz., that the parents of the plaintiff "must
vacate kothi annex".
14. On enquiry, the counsel for the plaintiff states that the
parents of the plaintiff have not vacated the „kothi annex‟.
15. I have enquired from the counsel for the plaintiff, that if
the plaintiff bases his case on offer and acceptance, whether
not acceptance had to be complete, and without the parents of
the plaintiff vacating the „kothi annex‟, the plaintiff cannot
enforce the offer.
CS(OS) No.226/2016 Page 9 of 27
16. The counsel for the plaintiff contends that the condition
imposed is illegal.
17. In my prima facie view, once the plaintiff bases his
claim on offer and acceptance, it is not open to the plaintiff to
challenge the condition contained in the offer.
18. The counsel for the plaintiff then states that he is not
fully prepared to argue on the aspect of maintainability of the
suit.
19. List on 27th September, 2019."
10. Thereafter on 27th September, 2019, the following order was passed:
1. This order is in pursuance to the order dated 11 th July,
2019.
2. The senior counsel appearing for the plaintiff, instead of
pursuing the line of argument qua which query was raised on
11th July, 2019 and as recorded in the order of that day, has
contended that what the plaintiff is enforcing is a Family
Settlement and on enquiry, whether a Family Settlement is
applicable qua a company, places reliance on Deepa Anant
Bandekar Vs. Rajaram Bandekar (Sirigao) Mines Pvt. Ltd.
MANU/MH/0101/1992 against which Special Leave Petition is
stated to have been dismissed in limine.
3. On enquiry, whether the plaintiff has based his case on
Family Settlement or only on offer of acceptance as was argued
on the last date, the senior counsel for the plaintiff though states
that there is a plea of Family Settlement in the plaint but admits
that the words „Family Settlement‟ have not been used and
contends that the tenor of the plaint is of the defendant being a
family company.
4. Deepa Anant Bandekar supra is found to be a judgment
of a Hon‟ble Single Judge of the High Court of Bombay in a
Company Petition. On enquiry, whether an appeal to the
Division Bench was preferred thereagainst, it is stated that the
same has not been checked.
CS(OS) No.226/2016 Page 10 of 27
5. The senior counsel for the plaintiff, during his arguments
has also used the words „piercing of the corporate veil‟.
However, at least at this stage no ground for piercing the
corporate veil also has been made out and for piercing a
corporate veil, all the directors / shareholders would have to be
made party and which has also not been done.
6. I have thus requested the senior counsel for the plaintiff
to kindly look up, whether the suit, after the Companies (Second
Amendment) Act, 2002 constituting the National Company Law
Tribunal (NCLT) and National Company Law Appellate
Tribunal (NCLAT) and after coming into force of the
Companies Act, 2013, is maintainable before this Court and
whether the jurisdiction would be of NCLT or NCLAT and the
jurisdiction of this Court would be barred inasmuch as it is felt
that the plaintiff, instead of pursuing a wrong remedy for
another long period of time merely for the reason of a wrong
remedy having been invoked in instituting this suit, should not
waste more time and should take appropriate remedies.
7. The senior counsel for the plaintiff states that he will look
up the law.
8. The counsel for the defendant to also look up the law in
this regard.
9. List on 16th October, 2019."
11. Thereafter the matter was adjourned from time to time on request of
the counsel for the plaintiff. Today, the senior counsel for the plaintiff has
been heard and has also handed over written submissions on maintainability.
12. It is the contention of the senior counsel for the plaintiff, that (i)
Section 430 of the Companies Act, 2013 bars the jurisdiction of the Civil
Court to entertain any suit or proceeding only in respect of matters which
the National Company Law Tribunal (NCLT) or the National Company Law
Appellate Tribunal (NCLAT) is empowered to determine by or under the
CS(OS) No.226/2016 Page 11 of 27
said Act or any other law in force; (ii) the bar contained under Section 430
came into operation prospectively, with effect from 1st June, 2016; however
the present suit was instituted prior thereto on 9 th May, 2016 - thus at the
time of institution of the present suit, there was no bar to the jurisdiction of
this Court; (iii) the remedy even if any available to the plaintiff under the
Companies Act is to, as a shareholder, complain against acts which are
prejudicial or oppressive to the shareholder; (iv) however if the plaintiff was
to now approach the NCLT, he would encounter the difficulty of Section
241(1) read with Section 244 of the Companies Act which only permits
shareholder/s holding one-tenth of the issued share capital of the company to
apply to NCLT for relief in case of oppression etc.; the plaintiff holds only
five equity shares of defendant no.1 company and thus cannot agitate his
grievance before the NCLT; (v) NCLT even otherwise cannot grant the
reliefs claimed in the present suit; (vi) reliance is placed on Jai Kumar Arya
Vs. Chhaya Devi 2017 SCC OnLine Del 11436 (DB); (vii) Section 430 of
the Companies Act does not create a bar as the plaintiff is deriving his legal
right on the basis of Resolution dated 21st July, 1990 which is in the nature
of Family Settlement / arrangement; reliance is placed on Dinesh Gupta Vs.
Rajesh Gupta 2018 SCC OnLine Del 12387; (viii) the legal right canvassed
by the plaintiff in this suit is premised exclusively on the Resolution dated
21st July, 1990 which is a Family Settlement / arrangement; (ix) once the
corporate veil is lifted, the whole situation will become crystal clear; (x) the
Resolution dated 21st July, 1990 acknowledges and establishes the seniority
of grandchildren and the great grandchildren of Sir Sobha Singh family for
allotment of apartments; (xi) out of the 23 members whose name have been
recorded in the list prepared pursuant to Resolution dated 21 st July, 1990, all
CS(OS) No.226/2016 Page 12 of 27
the children of Mrs. Mohinder Jaspal Singh have been allotted flats except
the plaintiff; (xii) the said Resolution has been diligently implemented; (xiii)
the defendant no.1 company also in its written statement has admitted the
informal understanding between some of the family members; (xiv) the
Board of Directors of the defendant no.1 company have ratified the said
Resolution; (xv) the said Resolution is binding on the defendant no.1
company as also evident from the Resolution of the Board of Directors
meeting dated 8th September, 2012 in which all the current Directors were
present as well as from Resolution of the meeting of Board of Directors on
17th December, 2015; reliance is placed on Deepa Anant Bandekar Vs.
Rajaram Bandekar (Sirigao) Mines Pvt. Ltd. 1990 SCC OnLine Bom 435;
(xvi) the defendant no.1 company, by giving effect to the said Resolution,
has consciously allotted flats as per the allotment list and has thus accepted
the Resolution dated 21st July, 1990 to be binding on it; (xvii) Family
Settlements are governed by a special equity and are to be enforced; reliance
is placed on Kale Vs. Deputy Director of Consolidation (1976) 3 SCC 119
and K.K. Modi Vs. K.N. Modi (1998) 3 SCC 573; (xvii) the condition
imposed on the plaintiff, of vacating property No.1A, Janpath, New Delhi is
illegal, being in repudiation of the Resolution dated 21st July, 1990 / Family
Settlement; (xviii) the defendant no.1 company and Sir Sobha Singh Public
Charitable Trust are separate legal persons and the defendant no.1 company
cannot impose conditions for the benefit of Sir Sobha Singh Public
Charitable Trust, on the plaintiff; and, (xiv) thus on the basis of Resolution
dated 21st July, 1990, the plaintiff has an enforceable right.
13. Per contra, the counsel for the defendant no.1 company has (a) drawn
attention to the subsequent judgment dated 25th January, 1994 in Deepa
CS(OS) No.226/2016 Page 13 of 27
Anant Bandekar supra reported as 1994 SCC OnLine Bom 602 and to my
judgment in ICP Investments (Mauritius) Ltd. Vs. Uppal Housing Pvt. Ltd.
2019 SCC OnLine Del 10604; (b) handed over the download on 5th
February, 2020 from the website of Ministry of Corporate Affairs - MCA
service, of the Master data with respect to Rajaram Bandekar (Sirigao)
Mines Pvt. Ltd., to show that the said company is still in existence and that
the judgment of 1990 in Deepa Anant Bandekar supra cited by the counsel
for the plaintiff was not upheld in appeal; and, (c) handed over in the Court,
a copy of a petition filed before the NCLT in or about the year 2017 by
Gobinder Singh Chopra & Others, impleading the defendant no.1 company
and Company Secretary of defendant no.1 company and others as
respondents thereto, claiming an enquiry into the affairs of defendant no.1
company herein under Sections 206 to 210 and 447 to 449 of the Companies
Act and inter alia to restrain the defendant no.1 company from leasing or
selling any of its properties; it is contended that father of the plaintiff is one
of the petitioners therein; and, (d) also drawn attention to the additional
affidavit filed in the said petition seeking direction to the defendant no.1
company to allocate flats to the remaining six third generation members of
the family of Sir Sobha Singh as mandated and enshrined as per Family
Settlement dated 21st July, 1990.
14. I have considered the rival contentions with respect to maintainability
of the suit.
15. At the outset, it may be stated that though the suit has been pending
before this Court for over three years and issues have also been framed
therein and the parties relegated to evidence but the same is not a ground to
put the said suit to trial, if otherwise it was found to be not maintainable. A
perusal of the order sheets shows that the question of maintainability of the
suit has never been gone into at any earlier point of time. Once doubts as to
the maintainability of the suit have arisen, the suit cannot be permitted to
pedantically proceed to trial, taking up resources of this Court which can be
better utilized for other deserving cases which cannot be adjudicated without
trial. Even otherwise, it is the settled law that framing of issues is not a bar
to an application under Order XII Rule 6 of the CPC for decreeing the suit
forthwith without any new material coming before the Court and allowed on
the same record on which issues were framed. Reference in this regard may
be made to Charanjit Lal Mehra Vs. Kamal Saroj Mahajan (2005) 11 SCC
279, Meera Gupta Vs. Dinesh Chand (2001) SCC OnLine Del 830 (DB),
State Trading Corporation of India Ltd. Vs. Nirmal Gupta 2012 SCC
OnLine Del 3556 (DB), Sanjay Sharma Vs. Madan Mohan Sharma 2013
SCC OnLine Del 2434 and Parivar Seva Sansthan Vs. Dr. Veena Kalra
2000 SCC OnLine Del 469.
16. The plaintiff, along with the plaint, even till now, has not filed the
Resolution dated 21st July, 1990 of the Board of Directors of the defendant
no.1 company and on which the case of the plaintiff is premised, as
contended by the defendants also. The plaintiff along with the plaint has
inter alia filed (i) photocopy of a two page document described as „Appx B‟
and bearing the title "INTER SE SENIORITY OF ALLOTMENT" bearing
the names of Bhagwant Singh, Khushwant Singh, Brig. Gurbux Singh, Mrs.
Mohinder Jaspal Singh and Daljit Singh at the bottom but signed only by
Bhagwant Singh, Khushwant Singh & Brig. Gurbux Singh and not by Mrs.
Mohinder Jaspal Singh and Daljit Singh; the same contains the name of the
plaintiff at serial no.18 under the sub-title „2nd Round‟; the same on the first
page bears a handwritten notation "Decision taken on July 21.90 G.77 given
to G.S. Chopra HUF on 1.11.89 Why did Geeta get hers taken? Early 90tees
after.... (......illegible)"; (ii) extract of e-mail dated 30th June, 2015 from
[email protected] to [email protected] with CC to
[email protected] addressed to the Board of Directors (purportedly
of defendant no.1 company), stating that his father, a shareholder of
defendant no.1 company, had requested for the transfer of his shares in
defendant no.1 company to his daughter Anisa Singh and his son Jaiveer
Singh i.e. the plaintiff herein, but the Board has still not done so as per the
request and asking for the reasons therefor and from which it appears that
the plaintiff as on date is not even a shareholder of defendant no.1 company
(in the copy of the petition filed by the father of the plaintiff before the
NCLT handed over by the counsel for the defendants during the arguments,
the father of the plaintiff has claimed to be the holder of 40 shares in the
defendant no.1 company; though the plaintiff in the plaint has claimed to be
the holder of five shares bearing No.3210 to 3124 issued on 13 th August,
1985 but does not plead whether the said shares were originally allotted or
have been transferred to the plaintiff by his father; (in the said
communication it has not been stated that the plaintiff already holds five
shares); (iii) draft Minutes of the Meeting of the Board of Directors
purportedly of defendant no.1 company in the meeting held on 22 nd August,
2015 to the effect that the request of Kiran Shivinder Singh i.e. the father of
the plaintiff, for transfer of his shares to his family be not acceded till he
moves out of the property unauthorizedly occupied by him; and, (iv) e-mail
dated 8th May, 2016 from Binny Singh <[email protected]> to
[email protected], "Brig.Gurbux Singh", [email protected],
Raymon Singh <[email protected]> with subject "Allocation of
flat in SS Park" addressed to the plaintiff informing the plaintiff that at a
Board Meeting held on 7th May, 2016, the Board was informed that flat
no.D-38 had been earmarked for sale to facilitate payments towards getting
freehold rights and therefore was not available for allotment; that flat no.G-
81 should be vacated for allotment on 31st May, 2016 and the plaintiff being
top of the list will get it; the caveat / provision for the plaintiff being
allocated this flat is that the plaintiff‟s parents must vacate Kothi annex; and,
Binny Singh had been asked to inform the plaintiff of the same and asking
the plaintiff to urgently respond his acceptance.
17. What is to be considered next is, whether the suit on the pleas in the
plaint and the documents aforesaid ought to have been entertained in the
first place.
18. Though the senior counsel for the plaintiff, with his ingenuity has
now after more than four years of the institution of the suit sought to create a
case for the plaintiff on the basis of Family Settlement but suits are to be
tested within the confines of their pleading and engagement of an
accomplished senior counsel to argue with all the experience at his
command cannot be permitted to change the nature and character of the suit.
The senior counsel for the plaintiff also admits that no whisper even of the
word „Family Settlement‟ exists in the plaint filed. Not only so, the counsel
for the plaintiff who issued the legal notices preceding the suit and who filed
the suit and who on 11th July, 2019 addressed on the aspect of
maintainability, also did not argue on the basis of any Family Settlement, as
evident from the order of that date reproduced above. The senior counsel
arguing today, with his ingenuity has given an entirely different colour and
basis to the suit. It further becomes evident from the fact that though an
argument of Family Settlement is urged but none of the family members
privy to the settlement have been impleaded as parties to the suit. Certainly
no enforcement of the Family Settlement can be claimed without impleading
the family members.
19. Though the senior counsel for the plaintiff has contended that from
the plea existing in the plaint of defendant no.1 company being a family
owned company, the plea of Family Settlement is implicit but forgetting that
the company as the defendant no.1 is, is a separate legal entity in law from
its shareholders and Directors. Thus even if all the shareholders and all the
Directors of a company are family member, the company does not become a
family member and remains a distinct legal entity. This is the genesis of
corporate law and though corporate veil is permitted to be pierced, as again
sought by the senior counsel for the plaintiff, but only when foundation
therefor is laid in the pleadings. No case of piercing of the corporate veil of
the defendant no.1 company is made out in the plaint and no foundation has
been laid therefor and again maintainability of a suit cannot be justified by
arguing outside the pleaded case. It has been held in Singer India Ltd. Vs,
Chander Mohan Chand (2004) 7 SCC 1, Elof Hansson (I) Pvt. Ltd. Vs.
Shree Acids & Chemicals Ltd. 2012 SCC OnLine Del 572 (DB), Saga
Lifestyle Pvt. Ltd. Vs. Bang & Olufsen A/S 2019 SCC OnLine Del 8412,
Anirban Roy Vs. Ram Kishan Gupta MANU/DE/3524/2017, V.K. Uppal
Vs. Akshay International 2010 SCC OnLine Del 538, R.K. Chaddha Vs.
State of U.P. 2014 SCC OnLine All 6248 (DB), M.V. Sea Success I Vs.
Liverpool and London Steamship Protection and Indemnity Association
Ltd. 2001 SCC OnLine Bom 1019 (DB), Binatone Computers Pvt. Ltd. Vs.
Setech Electronic Ltd. 2009 SCC OnLine Del 2522, Kimiya Shipping Inc.
Vs. M.V. Western Light 2014 SCC OnLine Bom 257 and Gopi Vallabh
Solutions Pvt. Ltd. Vs. State of West Bengal 2018 SCC OnLine Cal 9035
that a corporate veil can be pierced only on the pleas inter alia of fraud,
misrepresentation and diversion of funds, by making specific pleading to
that effect, as veil piercing is not a rule but an exception which is undertaken
only in certain specified circumstances.
20. The basis for the reliefs claimed by the plaintiff in the plaint and also
argued on 11th July, 2019 are (i) the Resolution dated 21st July, 1990 of the
defendant no.1 Company (which has been denied by the defendants); (ii)
implementation thereof; and, (iii) an offer having been made by the
defendant no.1 company to the plaintiff in terms of the Resolution dated 21st
July, 1990 and which was accepted by the plaintiff and an enforceable
contract having come into existence entitling the plaintiff to seek
implementation thereof and the plaintiff being entitled in law to challenge
the condition subject to which the offer was made on the ground of the same
being legal.
21. Even though the plaintiff has not even filed a copy of the Resolution
dated 21st July, 1990 of the Board of Directors on which the reliefs claimed
in the suits rests and for the last four years has not taken any steps in proof
thereof and filed the application seeking disclosure thereof only now and
even though the plaintiff has not even pleaded acceptance of the offer but to
test the maintainability of the suit at this stage, I will proceed believing that
the plaintiff in trial proves all the three crucial pleas aforesaid without
proving which the plaintiff cannot succeed.
22. The first plea is the right of the plaintiff to a flat in terms of the
Resolution dated 21st July, 1990 of the Board of Directors of the defendant
no.1 Company to the effect that flats in Sujan Singh Park owned by
defendant no.1 company will be allotted to all descendants of Sir Sobha
Singh upto the fourth generation and in terms thereof a list was prepared
detailing the priority of allotment of each of the said descendants.
23. The actions and functioning of a company which is a juristic person,
unlike that of a natural person who is free to act on his whims and fancies, is
limited by the Memorandum of Association and Articles of Association of
company. It has been enshrined in Ashbury Railway Carriage and Iron Co.
Ltd. Vs. Riche (1875) LR 7 HL 653 (DC) and held in A. Lakshmanaswami
Mudaliar Vs. Life Insurance Corporation of India AIR 1963 SC 1185, In
re Steel Equipment and Construction Co. (P) Ltd. 1966 SCC OnLine Cal
44 and Nellai Metal Rolling Mills (P) Ltd. Vs. Southern Indian Central
Benefit Fund (P) Ltd. MANU/TN/0294/1985 that (a) a corporation created
under the company law is not a corporation with inherent common law
rights; (b) any act of the company ultra vires its Memorandum and Articles
of Association, even if backed by the Resolution of the Board of Directors,
is void and not enforceable against the company (save when a case of indoor
management is pleaded and which is not the case here); (c) a contract made
by the Directors of a company upon a matter not included in the
Memorandum of Association is ultra vires of the Directors and is not
binding on the company; (d) such a contract does not become binding on the
company even though afterwards expressly assented to at a General Meeting
of shareholders, being in its inception void as beyond the provisions of the
statute, it cannot be ratified even by the assent of whole of the body of
shareholders; (e) a company is competent to carry out its objects specified in
the Memorandum of Association and cannot travel beyond the objects; (f)
where a company does an act which is ultra vires, no legal relationship or
effect ensued therefrom - such an act is absolutely void and cannot be
ratified even if all the shareholders agree; (g) an ultra vires contract by a
company is analogous to and stands on the same footing as a contract by an
infant or a minor and in which case there is total incapacity; (h) a purported
contract by a company cannot give birth to any legal obligation and cannot
be binding on a company; and, (i) just like a consent decree founded on the
incompetency of an infant or minor is void and a nullity, likewise a contract
founded on the incompetency of the company is void and a nullity. The
plaintiff is enforcing a right under a Board Resolution dated 21 st July, 1990
without referring to the Memorandum of Association or Articles of
Association of defendant no.1 company and without even pleading that the
Resolution dated 21st July, 1990 is in terms of the Articles of Association.
The flats in Sujan Singh Park, lease of land underneath which is in the name
of defendant no.1 Company and which are owned by the defendant no.1
company, are in the ownership of defendant no.1 company and not in the
ownership of its shareholders or directors. The plaintiff forgets that the
defendant no.1 company is a distinct legal entity. It has been held in V.B.
Rangaraj Vs. V.B. Gopalakrishnan (1992) 1 SCC 160, Vodafone
International Holdings BV Vs. Union of India (2012) 6 SCC 613 and
World Phone India Pvt. Ltd. Vs. WPI Group Inc. USA (2013) SCC OnLine
Del 1098 and HTA Employees Union Vs. Hindustan Thompson Associates
Ltd. MANU/DE/3005/2013 than an agreement arrived at even between the
shareholders and Directors of a company with respect to management of the
affairs of the company, without being incorporated in the Articles of
Association of the company is not enforceable against the company. Thus,
even if the shares of the defendant no.1 company are held by members of a
family and the members of the family arrived at an understanding between
them that the flats owned by the defendant no.1 company at Sujan Singh
Park will be allotted to each of the descendants of Sir Sobha Singh upto the
fourth generation, without the same being incorporated in the Articles of
Association of the defendant no.1 company, the plaintiff, even as a member
of the family, cannot claim enforcement. The plaintiff, claiming to be a
shareholder and a family member, ought to be aware of the contents of the
Articles of Association and adverse inference has to be drawn against the
plaintiff for not pleading so, to the effect that the Resolution dated 21st July,
1990 is ultra vires the Articles of Association. The Court will not permit a
trial to be converted into a wild goose chase and a fishing and roving
enquiry and the Court is not required to apprise the plaintiff how to make
out a right and the plaintiff has to suffer for its own failures.
24. The defendants as aforesaid have denied the very existence of any
Resolution dated 21st July, 1990 and it is obvious therefrom that the
Resolution dated 21st July, 1990, even if any, is now being not acceded to by
the defendant no.1 company and the defendant no.1 company is fully
entitled to, from time to time, change its decisions with respect to its assets
and properties.
25. As far as the second crucial plea aforesaid forming the basis of the
case of the plaintiff, of the defendant no.1 company having acted in terms of
the Resolution dated 21st July, 1990 is concerned, again even if the plaintiff
succeeds in proving the same, the same would still not vest any right in the
plaintiff. The right of the plaintiff as a shareholder of the defendant no.1
company would only be to aver mismanagement of the affairs of the
defendant no.1 company and the remedy wherefor is not before the Civil
Court, neither under the prevalent Companies Act, 2013 nor under the
earlier Companies Act, 1956 as in force immediately prior to coming into
force of the 2013 Act. Even otherwise, the Courts do not issue any
mandatory direction to do any act which is illegal even if such illegality has
been practiced in the past.
26. The legislature in its wisdom, while providing for creation of a juristic
entity such as a company, incorporated provisions in the company law, of
remedies available to the shareholders of a company in the event of
oppression and mismanagement. The same was in consonance with the
principles that the law having providing for management of affairs of a
company by its Board of Directors or as laid down in the Articles of
Association of a company, individual shareholders should not be permitted
to interfere in the affairs and business of the company by filing civil suits
against the company. The words „oppression‟ and „mismanagement‟ are of
wide amplitude as held in Jai Kumar Arya supra and Viji Joseph Vs. P.
Chander 2019 SCC OnLine Mad 10424 (DB) and would include the
grievances as of the plaintiff herein with respect to the management of
affairs of defendant no.1 company. Civil action cannot be brought with
respect thereto, exclusive jurisdiction having been conferred earlier in the
Company Law Board and in appeal in the High Court and now in the NCLT
and NCLAT.
27. I may in this regard mention that though in Ammonia Supplies
Corporation (P) Ltd. Vs. Modern Plastic Containers Pvt. Ltd. (1998) 7
SCC 105 with respect to disputes as to rectification of Share Register, it was
held that the Company Law Board could not go into adjudication of disputed
issues of title to the shares but recently in Shashi Prakash Khemka Vs.
NEPC Micon 2019 SCC OnLine SC 223 in the context of 2013 Act, it has
been held that the exclusive jurisdiction is of NCLT and NCLAT.
28. That brings me to the third limb of the basis of the claim of the
plaintiff i.e. the plaintiff by acceptance of the offer contained in the
communication dated 8th May, 2016 has a vested right to allotment of a flat.
29. The said plea is also made forgetting the principles of Contract Law.
Section 7 of the Contract Act, 1872 provides that in order to convert a
proposal into a promise, the acceptance must be absolute and unqualified
and be expressed in some usual and reasonable manner, unless the proposal
prescribes the manner in which it is to be accepted. It goes on to further
provide that if the proposal prescribes a manner in which it is to be accepted
and the acceptance is not made in such manner, the proposer may, within a
reasonable time after the acceptance is communicated, insist that the
proposal be accepted in the prescribed manner and not otherwise but if
proposer fails to do so, he accepts the acceptance. The counsel for the
plaintiff on 11th July, 2019 admitted that the acceptance was not absolute
and unqualified. He however stated that the plaintiff in law was / is entitled
to impugn the condition subject to which the offer was made. However
neither during the hearing on that date nor in subsequent hearing any law
interpreting Section 7 of the Contract Act in this manner has been shown. I
am not aware of any law permitting offer to be accepted in part with right to
the acceptor to challenge the other part of the offer. Any such interpretation
would be in the teeth of Section 7 of the Contract Act. Thus no contract in
pursuance to the offer contained in the communication dated 8th May, 2016
came into existence.
30. I may even otherwise state that such an argument was also sought to
be created for the first time during the hearing on 11th July, 2019 and which
argument also has been given up in the hearing today. Had that been the
case, the suit would not have been for mandatory injunction but for specific
performance. Once the relief sought to be claimed by way of injunction can
be obtained by any other usual mode of proceeding, Section 41(h) of the
Specific Relief Act, 1963 bars the grant of injunction.
31. It is also not the case of the plaintiff that the plaintiff was privy to the
Resolution dated 21st July, 1990 for it to be said that the same became a
binding agreement between the plaintiff and other family members. The
justification today of the suit on the basis of Family Settlement seeks to
gloss over the said aspect also of the case.
32. From the 1994 judgment in Deepa Anant Bandekar supra handed
over by the counsel for the defendant no.1, it transpires that in an appeal
preferred against the 1990 judgment in Deepa Anant Bandekar supra relied
upon by the counsel for the plaintiff, a compromise was arrived at and
Rajaram Bandekar (Sirigao) Mines Pvt. Ltd., for winding up of which
order was passed in 1990, was set aside in terms of the compromise, and
ultimately also the company was not ordered to be wound up and exists till
date. Thus reliance by the counsel for the plaintiff on the 1990 judgment in
Deepa Anant Bandekar supra which was not affirmed in appeal, is not
apposite. Dinesh Gupta supra was cited by the senior counsel for the
plaintiff to also contend that the remedy of approaching the NCLT is not
available to the plaintiff and the Civil Suit is thus not barred. However, it
was not controverted that NCLT has indeed been approached by the father
of the plaintiff and certain others inter alia on the same facts as urged by the
plaintiff i.e. of mismanagement of the affairs of the defendant no.1 company
in the context of allotment of flats and which proceedings is pending. Once
action for oppression and management is pending in NCLT, the argument,
of the plaintiff being not qualified as per the shares held by him to approach
the NCLT, is not available to the plaintiff. Rather, the plaintiff is found to
have suppressed this material fact from this Court.
33. Not only so, once the Legislature in its wisdom has deemed it
appropriate that less than the prescribed number of shareholders or
shareholders holding less than the prescribed number of shares should not be
permitted to initiate legal proceedings with respect to management and
affairs of the company, it would be travesty of the statute to hold that less
than the prescribed number of shareholders or shareholders having less than
the prescribed shares, though not entitled to approach the NCLT, can
interfere with the management of affairs of the company by approaching the
Civil Court. The Legislature having prescribed the minimum for exercising
such a right, it has to be held that less than the said minimum have no right
to interfere in the management.
34. Mention in this regard may also be made of the proviso to Section 244
of the Companies Act, 2013, which though prescribing the minimum
number of shares below which NCLT cannot be approached, empowers the
NCLT to waive the said qualification.
35. The counsels for the plaintiff have thus been unable to lift the doubt
which had arisen during the hearing on 11th July, 2019 as to the
maintainability of the suit. The suit on the basis of pleas in the plaint does
not disclose any right in favour of the plaintiff to any of the reliefs claimed.
36. Resultantly, the suit is dismissed with costs of Rs.1 lacs each payable
by the plaintiff to each of the two defendants.
Decree sheet be drawn up.
RAJIV SAHAI ENDLAW, J.
MARCH 21, 2020
FEBRUARY 28, 2020
„gsr‟
