Omprakash Soni vs Vijay
2021 Latest Caselaw 5103 MP

                                   1                                 CR-64-2021
        The High Court Of Madhya Pradesh
                    CR-64-2021
                       (OMPRAKASH SONI Vs VIJAY AND OTHERS)

2
Indore, Dated : 07-09-2021
      Shri Aniket Naik, learned counsel for the petitioner.
      This revision petition under Section 115 of CPC has been preferred by
the non-applicant taking exception to the order dated 30.01.2021 passed by
the Court below while rejecting the application under Order 7 Rule 11 CPC in
M.J.C. AV No.33/2020.

      Facts

relevant and necessary for disposal of this petition are in narrow compass: A company under the name and style of VVS Devcon Pvt. Ltd. is registered under the Companies Act, 1956 and engaged in the business of real estate as detailed in the articles of association of the Company. Article 49 of the approved/ registered articles of association provides for the arbitration and reads as under:-

"Whenever any difference or dispute arises between the company on the one hand and any of the members or their heirs, executor, administrators, nominees or assignees, on the other hand or between the

members inter-se or their respective heirs, executors administrators, nominees or assignees inter-se touching the true intents, construction, ingredients or consequences of these Articles or touching any thing done, executed, omitted or suffered in pursuance thereof or to any affairs of the Company, every such dispute or difference shall be referred to the sole arbitration of the Chairman for the time being of the Company or to some person appointed by both parties. The award made by such Arbitrator shall be final and binding on the parties. The arbitration shall be conducted according to the provisions of the Arbitration and Conciliation Act, 1996. "

It appears that a dispute arose between the applicant; Director of the Company and non-applicants; Director and share holder in the matter of business of the company. The factual dispute has been adumbrated in the application filed by the applicant under Section 9 of the Arbitration and 2 CR-64-2021

Conciliation Act, 1996 (for short 'the Act, 1996') running into 22 pages with the

following relief:

", - ;g fd] fnukad [email protected]@2020 dks izfrizkFkhZ dz-2 ds }kjk fcuk vf/kdkj ds cqykbZ xbZ ,DLVk vkWfMZujh tujy fefVax dh dk;Zo kgh ij jksd yxkbZ tkosA ch- ;g fd] izkFkhZ ds fgr esa izfrizkFkhZ ds fo#) bl vk'k; dk vkns'k tkjh fd;k tkos

fd izkFkhZ ,oa izfrizkFkhZ ds }kjk fufeZr daiuh oh-oh-,l Mso dkWu izk-fy- ds ek/;e ls Jh ;ksxsUnz ;kno ,oa jkds'k 'kqDyk ls tks Hkwfe vuqcaf/kr dh xbZ gS] mDr laca/k esa izkFkhZ dh lgefr ds fcuk muls dksbZ Hkh vuqcaf/kr Hkwfe ds laca/k esa le>kSrk djus ij jksd izfrizkFkhZ le>kSrk djus ij jksd izfrizkFkhZ le>kSrk uk djsA lh- ;g fd] izkFkhZ ds fgr esa izfrizkFkhZ ds fo#) bl vk'k; dk vkns'k tkjh fd;k tkos fd daiuh oh-oh-,l- Mso dkWu izk-fy- ds laca/k esa o"kZ 2012 ls vkt fnukad rd dk Vsyh MkVk ,oa ys[k tks[k] vk; o O;;] cSysal 'khV] cksMZ o Mk;jsDVj o va'k/kkjh dh cSBdksa ds dk;Zo `r izfrizkFkhZx.k ls izkFkhZ dks miyC/k djkos tkosA Mh- ;g fd] izkFkhZ ds fgr esa izfrizkFkhZ ds fo#) bl vk'k; dk vkns'k tkjh fd;k tkos fd daiuh dk fglkc fdrkc dj daiuh dh okLrfod iwath ds ckjs esa izfrizkFkhZx.k izkFkhZ dks tkudkjh iznRr djsA bZ- ;g fd] izkFkhZ ds fgr esa izfrizkFkhZ ds fo#) bl vk'k; dk vkns'k tkjh fd;k tkos fd izkFkhZ daiuh esa Mk;jsDVj gksdj 33 izfr'kr dk va'k/kkjh gS] mls mlds }kjk fofu;ksftr iwwath yxHkx 3]00]00][email protected]& gksdj dqy 6]00]00][email protected]& flD;wfjVh izfrizkFkhZx.k ls tek djkbZ tkosA ,Q- ;g fd] izkFkhZ ds fgr esa izfrizkFkhZ ds fo#) bl vk'k; dk vkns'k tkjh fd;k tkos fd vkfcZVsVj dh fu;qfDr gksus ,oa fookn ds fujkdj.k rd daiuh dh fdlh Hkh py&vpy laifRr dk fodz; ,oa varj.k fdlh Hkh jhfr ij jksd yxk, tkosA ,oa daiuh dh py&vpy laifRr dks fdlh Hkh izdkj ls cSad vFkok foRrh; laLFkk esa Hkkfjr vFkok cksf>r djus ij jksd yxk, tkosA ,p- ;g fd] izkFkhZ ds fgr esa izfrizkFkhZ ds fo#) bl vk'k; dk vkns'k tkjh fd;k tkos fd vkfcZVsVj dh fu;qfDr gksus ,oa fookn ds fujkdj.k rd izfrizkFkhZx.k ds }kjk oh-oh-,l- Mso dkWu izk-fy- ds Lo#i vFkok 'ks; j gksYMj vFkok vU; fdlh Hkh izdkj dk ifjorZu daiuh ds laca/k esa ,oa uohu Mk;jsDVj fu;qDr ij jksd yxk, tkosA ,Q- ;g fd] vU; lgk;rk tks ekuuh; U;k;ky; mfpr le>s] og Hkh izkFkhZ dks izfrizkFkhZ ls

fnyokbZ tkosA"

It further appears that the applicants have already given notice dated 16.03.2020 to non-applicants proposing for appointment of arbitrator.

However, the non-applicants denied the existence of dispute vide their reply as transpired during the course of heairng. In the aforesaid context, an 3 CR-64-2021 application under Section 9 of the Act, 1996 is now pending consideration before the trial Court. It further appears that non-applicant no.1 and 2 have filed an application under Order 7 Rule 11 CPC inter alia contending that the Court below lacks jurisdiction under Section 9 of the Act, 1996 as the reliefs sought for are not arbitrable as the same are in the realm of oppression and mismanagement falling under Section 241 r/w Section 242 and 244 of the Companies Act.

Section 241 of the Companies Act provides for application to Tribunal for relief in cases oppression etc. Section 242 of the Company Act provides for powers of Tribunal and Section 244 of the Company Act provides right to apply under Section 241. Therefore, the application under Section 9 of the

Act, 1996 is not competent and deserves to be rejected.

The trial Court while dealing with the contentions advanced has reached the conclusion that allegations of oppression and mismanagement amongst other allegations as alleged in the application are in the realm of facts and can be addressed only after parties file their respective pleadings and lead evidence. While reiterating the settled law in the context of Order 7 Rule 11 CPC, the trial Court has opined that the plaint may be rejected, if the plaint's averments do not disclose a cause of action and the provision does not contemplate that cause of action has not arisen. There is distinction between the two in as much as, in the former, the Court is required to see the averments in the application; whether disclose the cause of action and in the later, the Court to be satisfied whether cause of action has arisen upon consideration of the entire material placed on record during trial, both are in different realms.

With the aforesaid analysis of Section 11 of the Act, 1996, the trial Court has opined, averments in the application cannot be said to have not disclosed cause of action to reject the same on the strength of the application filed under Order 7 Rule 11 CPC. Further to appreciate that averments in the application fall within the scope of oppression and mismanagement as 4 CR-64-2021 provided for under Section 241 of the Companies Act, pleadings of both the parties and material to be brought on record are required to be seen. Under Section 244 of the Companies Act, there is no express exclusion of jurisdiction of the Court to exercise the power under Section 9 of the Act, 1996.

Shri Naik, learned counsel for non-applicant no.1 and 2 reiterated same submissions as advanced before the trial Court with further submission that if the tribunal constituted under the Companies Act is competent to address on oppression or mismanagement of the company, the Arbitration and Conciliation Act, 1996 shall have no application, therefore, the application under Section 9 of the Act, 1996 filed before the trial Court was incompetent.

Learned counsel relied upon the judgment of the Bombay High Court in 2014 SCC Online Bom 1146[Rakesh Malhotra Vs. Rajendra Kumar Malhotra] to bolster his submission.

This Court has carefully perused the application under Section 9 of the Act, 1996, application filed under Order 7 Rule 11 CPC filed by the non- applicants and the impugned order passed by the trial Court. The first and foremost question that arises for consideration relates to scope, limit, dimension and extent of the arbitration clause contained in Article 49 of the articles of association of the Company.

In the opinion of this Court, the said clause is wide enough to encompass any difference or dispute arises between the company on the one hand and any of the members or their heirs, executor, administrators, nominees or assignees, on the other hand or between the members inter-se or their respective heirs, executors administrators, nominees or assignees inter- se touching the true intents, construction, ingredients or consequences of these Articles or touching any thing done, executed, omitted or suffered in pursuance thereof or to any affairs of the Company as such every such dispute or difference shall be referred to the sole arbitration of the person nominated by designation in the clause. As such 'scope of dispute' is much 5 CR-64-2021 wider and not limited to oppression and mismanagement of the company.

Averments and relief sought in the application under Section 9 of the Act, 1996, prima facie do suggest that the same does not limit to oppression and mismanagement as contemplated under Section 241 of the Companies Act. On the contrary, the same prima fracie disclosed the cause of action for exercise of jurisdiction under Section 9 of the Act, 1996, regard being had to the scope of arbitration as provided for under Article 49 of the articles of association of the Company. That apart, the dispute of oppression and mismanagement may be raised by a person, provided he falls in class of persons as contemplated under Section 244 of the Companies Act whereas Article 49 of the articles of association of the Company is not restricted to such class of persons as provided for under Section 244 in the matter of any dispute or difference between the parties. Article 49 of the articles of association admits wider range of persons eligible to raise dispute or difference of the nature provided for under the said clause.

The trial Court is found to be justified having called upon the non- applicant to file pleadings to arrive at the conclusion as to whether the reliefs sought for are amenable to the jurisdiction of the Court under Section 9 of the Act, 1996.

That apart, the jurisdiction of the Court while deciding application under Order 7 Rule 11 CPC is well settled as rightly pointed out by the Court below i.e. only plaint averments are required to be seen. Besides, question of

jurisdiction, in fact, involves a bundle of facts and is in the realm of mixed question of law and facts which cannot be addressed on a mere evasive plea raised in the application under Order 7 Rule 11 CPC. The averments in the application under Section 9 of the Act, 1996 is required to be tested with the reply filed by the non-applicants to ascertain about the objection as regards jurisdiction of the Court under Section 9 of the Act, 1996.

Consequently, this Court is of the view that the trial Court has applied correct principles of law while rejecting the application under Order 7 Rule 11 6 CR-64-2021 CPC, therefore, no interference is warranted under Section 115 CPC.

Civil revision sans merits is hereby dismissed.

(ROHIT ARYA) JUDGE

Vibha VIBHA PACHORI 2021.09.09 13:08:08 +05'30'