Final Order 1

Order Details: Notice of Motion
Pdf Text: 1 Common order in NM 223-19 & 224-19
IN THE CITY CIVIL COURT FOR GREATER BOMBAY
AT BOMBAY.
COMMON ORDER
ON
NOTICE OF MOTION NO. 223 OF 2019
(CNR no. MHCC010005812019)
IN
L.C. SUIT NO. 2435 OF 2018
(CNR no. MHCC010117592018)
Mr. Ravi Radheshyam Goenka ]..Plaintiff
Versus
1. The Bombay Presidency Radio Club Ltd & 17 ors. ]... Defendants
AND
NOTICE OF MOTION NO. 224 OF 2019
(CNR no. MHCC010005822019)
IN
L.C. SUIT NO. 2880 OF 2018
(CNR no. MHCC010120462018)
Mr. Ravi Radheshyam Goenka ]..Plaintiff
Versus
1. The Bombay Presidency Radio Club Ltd & anr. ]... Defendants
Coram : Dr. M. S. Deshpande, Judge
(Court Room no. 01)
Date : 11th March, 2019.
Ms. Mamta Sadh i/b Ms. Anju Mishra, advocate for plaintiff.
Mr. Raghuvanshi i/b Mr. Sandip A. Bhagawat, advocate for defendant
nos. 1 and 2.
Mr. Ratnesh Dubey, advocate for defendant nos. 4 to 6 in Suit no. 2435
of 2018.
-- 1 of 17 --
2 Common order in NM 223-19 & 224-19
COMMON ORDER
1. The defendant nos. 1 and 2 (defendants) in both the suits
have taken out these notices of motion seeking rejection of the plaint
under Order VII Rule 11 (a & d) of the Code of Civil Procedure (C.P.C.).
In addition to that in Notice of Motion no. 224 of 2019, the said
defendants are seeking dismissal of the suit for want of seeking leave
under Order II Rule 2 of the C.P.C. at the time of filing earlier suit no.
2435 of 2018.
2. The learned advocate for the defendants submitted that the
plaintiff challenged the process of election of the defendant no. 1 club,
however, in view of completion of the election process, the reliefs
claimed under prayer clause (a to c) of the plaint do not survive. The
relief which could survive would be under prayer clause (d) of the
plaint. According to him, the jurisdiction of the Civil Court is barred
under the Section 430 of the Companies Act, 2013 (Companies Act).
The plaintiff has to apply to the Tribunal as contemplated under the
Section 241 of the Companies Act as whatever reliefs the plaintiff is
seeking are covered under the Section 242. Thus, considering the
specific bar of the provisions of Companies Act, the plaint is required to
be rejected. He further submitted that earlier the plaintiff instituted suit
no. 2435 of 2018 without seeking all the reliefs which were available to
him on the said cause of action. He has also not sought leave under
Order II Rule 2 of C.P.C. and therefore, the suit no. 2880 of 2018 is
required to be dismissed.
3. On the other hand the learned advocate for the plaintiff
submitted that in order to consider issue relating to rejection of plaint,
-- 2 of 17 --
3 Common order in NM 223-19 & 224-19
averments made in the plaint alone should be considered. According to
her, it is a mixed question of facts and law and the same can not be
considered at the threshold. Such issue should be considered after
leading evidence with all other issues. In the first suit no. 2435 of 2018
actions of the defendant no. 1 for the last 10 years (2008 to 2018) are
challenged. In the second suit no. 2880 of 2018 the plaintiff is seeking
declaration about the legality and vires of the procedure adopted by
defendant no. 1 for holding the elections. Thus, she submits that the
suit is not barred under Order II Rule 2 of the C.P.C.
4. She further submitted that the suits have nothing to do
with the mismanagement of the defendant no. 1 company. The
jurisdiction of the Tribunal under the Companies Act is summary in
nature. Allegation of fraud can not be dealt with by the Tribunal.
According to her, reliefs of injunction and other consequential relief can
only be granted by the Civil Court. According to her, in order to apply
the Tribunal, the member must hold minimum 10% of share capital.
She placed reliance on the following authorities :
I. (2017)5 M.L.J. 447.
N. Ramaji vs. Ashwath Narayan Ramaji.
Ratio : The issue relating to rectification of register of members
has to be decided by the Tribunal and as per Section 430 of the
Companies Act, 2013 the Civil Court has no jurisdiction. At the
same time it is clear that the Tribunal has power only to decide
the issue of rectification as per Section 58 and has no power to
decide the issue of title. It was held that a seriously disputed
question of title can not be decided by the Company Court or
Company Law Board in summary nature.
-- 3 of 17 --
4 Common order in NM 223-19 & 224-19
II. (2016)1 Supreme Court Cases 423.
Jaimahal Hotels Pvt. Ltd. vs. Devraj Singh and others.
Ratio : By relying on the ratio in the case of Public Passenger
Service Ltd. vs. M.A. Khadar (A.I.R. 1966 S.C. 489) it was held
that jurisdiction under the Section 155 was summary in nature. It
was further held that if the issue is alien to rectification, such
matter may not be within the exclusive jurisdiction of the
Company Court or Company Law Board.
III. (2006)5 Supreme Court cases 658.
Balsaria Constructions (P) Ltd. vs. Hanuman Seva Trust.
Ratio : Question of limitations is a mixed question of law and
facts and that the suit could not be dismissed as barred by
limitations without proper pleadings and taking evidence. Plaint
can not be rejected under Order VII Rule 11(d) of the C.P.C.
IV. A.I.R. 1964 Supreme Court Cases 1810.
Gurbax Singh Vs. Bhooralal.
Ratio : The plea of bar under Order II Rule 2(3) of the C.P.C. is
required to be established satisfactorily by the defendant and can
not be presumed on the basis of inferential reasoning.
V. (2005)7 Supreme Court Cases 510.
Popat and Kotecha Property vs. State Bank of India staff asso.
Ratio : Disputed question can not be decided at the time of
considering an application filed under Order VII Rule 11 of the
C.P.C. Clause (d) of Rule 11 of Order VII applies in those cases
only where the statement made by the plaintiff in the plaint,
-- 4 of 17 --
5 Common order in NM 223-19 & 224-19
without any doubt or dispute shows that the suit is barred by any
law in force.
5. On the other hand, the learned advocate for the defendant
nos. 4 and 5 submitted that the plaintiff did file nomination for
contesting the elections of the defendant no. 1 club, and therefore, he
was knowing well the procedure, however, he did not challenge the
election process in the first suit. He challenged the same in the second
suit and therefore, the same is barred under the provision of Order II
Rule 2 of C.P.C. as he did not seek requisite leave from the Court at the
relevant time. He further submitted that an efficacious remedy to
approach the Tribunal is provided under the Companies Act and
therefore, the plaint is liable to be rejected.
6. The Hon'ble Supreme Court in the case of Sopan
Sukhdev Kamble vs. Asst. Charity Commissioner and ors. reported
in A.I.R. 2004 Supreme Court 1801 has held that the consideration of
an application for rejection of plaint should not be on the basis of the
allegations made by the defendant in his written statement or
application for rejection of the plaint. The Court has to consider the
plaint as a whole and in case the plaint comes under the situations
covered by Order VII Rule 11 (a to f) of C.P.C., the same has to be
rejected. The Hon'ble High Court of Bombay in the case of Bajaj Auto
vs. Sandip Polymers reported in 2004(4) Mh.L.J. 396 has held that
for the purpose of deciding issue of rejection of plaint, averments made
in the plaint alone are germane. Plea in the written statement is wholly
irrelevant at that stage.
-- 5 of 17 --
6 Common order in NM 223-19 & 224-19
7. On the basis of aforesaid ratio it is necessary to scrutinize
the averments made by the plaintiff in the plaints filed in respective
suits. The plaintiff in suit no. 2435 of 2018 is seeking a relief of
declaration that appointments of all the members of committee and
subcommittees are null and void and further seeking a relief to
examine the legality and validity of the contracts and tenders awarded
by the defendant no. 1 club from 01.08.2008 till the filing of the suit on
the allegation of mismanagement and further to appoint an
administrator, chartered accountants and float tenders etc. and to direct
the defendants to supply copies etc. and lastly, the consequential relief
of temporary injunction etc. The sum and substance of the averments
made in the plaint are that the board of directors of the defendant no. 1
since 2008 are ruling the defendant no. 1 club without any opposition
and it is a case of total mismanagement as per their whims and wishes.
They are not considering the minority members or anybody opposing
them.
8. The averments made in the plaint of suit no. 2880 of 2018
pertain to mismanagement done by the defendant no. 1, and various
contentions regarding the procedure adopted by the defendant no. 1 for
conducting elections of the members of the managing committee which
was to be held on 28.09.2018 in the 94th Annual General Meeting and
further the plaintiff was required to deposit Rs.1,00,000/ for his
nomination and he was not supplied with the requisite copies of
Memorandum, Articles and the complete details like Cell phone
numbers, Email IDs of the members. According to the plaintiff, because
of the modus operendi adopted by the defendant no. 1 and its ruling
members, the plaintiff could not canvass the members and contest the
-- 6 of 17 --
7 Common order in NM 223-19 & 224-19
election. He was prevented by adopting undemocratic means. According
to plaintiff, the method of evoting is defective and can not be adopted
by the defendants. The defendants used unfair techniques and unethical
process during the election and it was gross violation of the Companies
Act and the rules framed there under. On the basis of such pleadings,
the plaintiff if seeking declaration that the process adopted in
conducting 94th Annual General Meeting is illegal and the process of e
voting was illegal. It was further sought for appointment of retired High
Court Judge or any other suitable person for conducting and
supervising the Annual General Meeting and election and further
consequential reliefs etc.
9. The Section 430 of the Companies Act specifically bars the
jurisdiction of the Civil Court which can be read as under :
“Civil Court not to have jurisdiction.
430. No Civil Court shall have jurisdiction to
entertain any suit or proceedings in respect of any
matter which the Tribunal or the Appellate Tribunal
is empowered to determine by or under this Act or
any other law for the time being in force and no
injunction shall be granted by any Court or other
Authority in respect of any action taken or to be
taken in pursuance of any power conferred by or
under this Act or any other law for the time being in
force, by the Tribunal or the Appellate Tribunal”.
10. The Chapter XVI of the Companies Act, 2013 deals with
prevention of oppression and mismanagement. The Section 241
-- 7 of 17 --
8 Common order in NM 223-19 & 224-19
provides for application to the Tribunal for the relief in cases of
oppression etc. which can be read as under :
“241. (1) Any member of a company who
complains that
(a) the affairs of the company have been or are
being conducted in a manner prejudicial to public
interest or in a manner prejudicial or oppressive
to him or any other member or members or in a
manner prejudicial to the interests of the
company; or
(b) the material change, not being a change
brought about by, or in the interests of, any
creditors, including debenture holders or any
class of shareholders of the company, has taken
place in the management or control of the
company, whether by an alteration in the Board
of Directors, or manager, or in the ownership of
the company's shares, or if it has no share
capital, in its membership, or in any other
manner whatsoever, and that by reason of such
change, it is likely that the affairs of the company
will be conducted in a manner prejudicial to its
interests or its members or any class of members,
may apply to the Tribunal, provided such member
has a right to apply under Section 244, for an
order under this Chapter.”
-- 8 of 17 --
9 Common order in NM 223-19 & 224-19
11. The Section 242 provides for the powers of the Tribunal
which can be read as under :
“242. (1) If, on any application made under
Section 241, the Tribunal is of the opinion
(a) that the company's affairs have been or
are being conducted in a manner prejudicial
or oppressive to any member or members or
prejudicial to public interest or in a manner
prejudicial to the interests of the company;
and
(b) ******
(2) Without prejudice to the generality of the
powers under subSection (1), an order under
that subSection may provide for
(a) the regulation of conduct of affairs of the
company in future;
(b) ******
(c) ******
(d) ******
(e) the termination, setting aside or
modification, of any agreement, howsoever
arrived at, between the company and the
managing director, any other director or
manager, upon such terms and conditions as
may, in the opinion of the Tribunal be just
-- 9 of 17 --
10 Common order in NM 223-19 & 224-19
and equitable in the circumstances of the
case;
(f) the termination, setting aside or
modification of any agreement between the
company and any person other than those
referred to in clause (e);
Provided *****
(g) ******
(h) removal of the managing director,
manager or any of the directors of the
company;
(i) ******
(j) the manner in which the managing
director or manager of the company may be
appointed subsequent to an order removing
the existing managing director or manager of
the company made under clause (h);
(k) ******
(l) imposition of costs as may be deemed fit
by the Tribunal;
(m) any other matter for which, in the
opinion of the Tribunal, it is just and
equitable that provision should be made.
(3) ******
(4) The Tribunal may, on the application of
any party to the proceeding, make any
-- 10 of 17 --
11 Common order in NM 223-19 & 224-19
interim order which it thinks fit for
regulating the conduct of the company's
affairs upon such terms and conditions as
appear to it to be just and equitable.
(5) ******
(6) ******
(7) ******
(8) ******
12. The proviso to the Section 241 spells out that the member
of a company who has a right to apply under the Section 244 for an
order may apply to the Tribunal for redress of his complaints about
conducting the affairs of the company in a manner prejudicial or
oppressive to him or any other member/s or public. It appears from
reading of the averments made in the plaint as a whole that the
plaintiff's claim squarely falls within the ambit of the Section 241 and
the Tribunal has power to deal with the same as contemplated under
the Section 242. The plaintiff has not made out any case that he has no
right to apply under the Section 244 for an order under Chapter XVI.
Considering the powers of the Tribunal under the sub Sections 1(a),
2(a) (e) (f) (h) (j) (l) (m) and 4 of the Section 242 the plaintiff can
very well seek reliefs from the Tribunal for redress of his grievance/s.
-- 11 of 17 --
12 Common order in NM 223-19 & 224-19
13. So far as, the term, “any member of a company” as
contemplated under the Section 241 of the Companies Act is concerned,
the same is explained in Appendix II of the Companies Act and is wide
enough to include the plaintiff or such other aggrieved persons as
applicability of the Section 241 is an equitable jurisdiction which is
intended to protect the minority members of the company from
oppression and mismanagement at the hands of the majority of
members in view of the ratio laid down by the Hon'ble Supreme Court
in the case of World Wide Agencies (P.) Ltd. vs. Margarat P. Desor
reported in (1990)1 Supreme Court cases 536 to the effect that the
wider meaning of the term, “member” should be given in the context of
the Section 397 and the Section 398 [of the Companies Act, 1956
corresponding to the Section 241 (1) of the Companies Act, 2013]. The
term “member” defined under Companies Act has to be construed on a
larger connotation, which means that a person other than the bearers of
share warrants are to be treated as members. Thus, the plaintiff being
member of a company limited by guarantee can apply very well to the
Tribunal as the averments made in the plaint speaks about the
oppression of minority and mismanagement of the affairs of the
company since about 2008 when the plaintiff was admitted as the
member in the company.
14. The learned advocate for the defendant no. 1 relied on the
ratio laid down by the Hon'ble Supreme Court (Coram : Hon'ble Mr.
Justice L. Nageswara Rao and Hon'ble Mr. Justice Sanjay Kishan
Kul) by order dated 08.01.2019 passed in Civil Appeal nos. 1965
1966 of 2014 [Shashi Prakash Khemka vs. N.E.P.C. Micon (N.E.P.C.
India Ltd.)] to the effect that in the matters in respect of which power
-- 12 of 17 --
13 Common order in NM 223-19 & 224-19
has been conferred on the N.C.L.T., the jurisdiction of the Civil Court is
completely barred and the civil suit would not be an appropriate
remedy, especially considering the manner in which the Section 430 of
the Act is widely worded and thus, the appropriate course of action to
relegate the appellants to the remedy before the N.C.L.T. under the
Companies Act, 2013. The aforesaid ratio would cover the matter in
controversy as the plaintiff has not shown from the plaint that his right
to sue only lie before the Civil Court from the plaint by reading it as a
whole.
15. So far as, the reliance placed by the learned advocate for
the plaintiff on the authorities in the cases of N. Ramaji and Jaimahal
Hotels are concerned, they relate to the issue regarding the rectification
of register of member maintained by the company. Moreover, an issue
relating to title of shares which was also a mixed question of law and
facts was involved in the said matters and therefore, it was held that
such matters may not be within the exclusive jurisdiction of the then
Company Court / Company Law Board. Here, the matter in dispute
relates to the oppressive modus operendi adopted by the defendants for
more than last 10 years and the mismanagement for the entire period
by executing certain contracts by issuing tenders as per the wishes and
whims of the committee members. These allegations are squarely
covered under the powers of the Tribunal as contemplated under the
Section 242 of the Companies Act as narratted in paragraph no. 12
above and therefore, any member of the company like plaintiff or other
members may apply to the Tribunal seeking redress of their grievances.
Consequently, by virtue of the Section 430 of the Companies Act the
jurisdiction of Civil Court is barred. Therefore, reliance is placed on the
-- 13 of 17 --
14 Common order in NM 223-19 & 224-19
ratio laid down in the case of Shashi Prakash Khemaka vs. N.E.P.C.
Micon referred to above and therefore, the plaint is required to be
rejected under Order VII Rule 11(d) of the C.P.C. in both the suits.
16. So far as the submissions made by the learned advocate for
the plaintiff that the learned Predecessor of this Court while passing
order dated 24.09.2018 on draft notice of motion in the second suit had
been pleased to hold that the issue of jurisdiction is to be decided on
merits and not at that stage and therefore, the same should be heard
upon leading evidence etc. are concerned, on perusal of the said order it
appears that the learned Predecessor had heard the respective parties
for grant of adinterim reliefs and while coming to the conclusion
whether such issue as to jurisdiction should be considered at the stage
of deciding the grant or refusal of adinterim reliefs had made such
observation. However, that will not help the plaintiff in any way to
protract the hearing of this motion on that point till the final hearing of
the suit, as it is well settled position of law that when the objection
under Order VII Rule 11(d) or Order II Rule 2 of the C.P.C. is raised, it
should be decided at the earliest.
17. So far as, the contention regarding the bar of second suit
under Order II Rule 2 of the C.P.C. is concerned, the Hon'ble Supreme
Court in the case of Gurbux Singh has laid down that in order that a
plea of a bar under Order II Rule 2 of the C.P.C. should succeed, the
defendant who raises the plea must make out – (1) that the second suit
was in respect of the same cause of action as that on which the previous
suit was based; (2) that in respect of that cause of action the plaintiff
was entitled to more than one relief; (3) that being thus, entitled to
-- 14 of 17 --
15 Common order in NM 223-19 & 224-19
more than one relief the plaintiff, without leave obtained from the
Court omitted to sue for the relief for which the second suit had been
filed. The defendant has to establish primarily the precise cause of
action upon which the previous suit was filed.
18. The suit no. 2435 of 2018 was instituted on 29.08.2018.
The cause of action for institution of the said suit is not specifically
pleaded but it appears to have been arisen at the time when the process
of election in 94th Annual General Meeting was started. Had been in the
case that the plaintiff was so oppressed for the last 10 years since 2008,
he not being a lay man and being a practicing advocate could have
approached to appropriate Court / Forum for redress of his alleged
grievance, however, for the reasons best known to him, he avoided to
initiate appropriate action for the alleged mismanagement and
oppression of members. The suit no. 2880 of 2018 has been instituted
on 21.09.2018 i.e. within a period of one month from the institution of
the earlier suit by making similar and extended averments. The plaintiff
has made averment in paragraph no. 21 of the plaint that the cause of
action is based on continuous acts of the defendants from day to day. It
is pertinent to note that the plaintiff has not specified the starting point
for his cause of action to institute the second suit and therefore, it can
well be concluded that the cause of action for the second suit was
available on the date of first suit i.e. on 29.08.2018 when the elections
were completed. The plaintiff did neither in first suit nor in second suit
has given any explanation for his failure to seek all reliefs at the first
available opportunity. Under such circumstances, I do not find any
substance in the submissions made on behalf of the plaintiff that the
earlier suit was drafted long back and affirmed on 23.08.2018 and
-- 15 of 17 --
16 Common order in NM 223-19 & 224-19
therefore, there are separate causes of action for both the suits.
Undisputedly, the plaintiff did not seek any leave from the Court while
presenting the plaint of earlier suit under Order II Rule 2 of the C.P.C.
Be that as it may, even the plaint of the second suit is much silent as to
why the plaintiff presented the same at much belated stage on
21.09.2018. Therefore, the cause of action for both the suits was
available at least on 28.08.2018 when the first suit was instituted.
Therefore, the second suit is clearly barred under Order II Rule 2 of the
C.P.C. In the circumstances, both the suits fail being barred by the
provisions of Companies Act, 2013 and the plaints therein are required
to be rejected. In addition to that the suit no. 2880 of 2018 is barred by
the provisions of Order II Rule 2 of the C.P.C. Therefore, the following
order is passed:
ORDER
1. The Notice of Motion no. 223 of 2019 in Suit no. 2435 of 2018 is
made absolute in terms of prayer clause (a).
2. The Notice of Motion no. 224 of 2019 in Suit no. 2880 of 2018 is
made absolute in terms of prayer clause (a) & (b).
3. Parties to bear their own costs of the motion.
4. An ordinary copy of this order duly authenticated by the
Sheristedar of this Court be supplied to both the parties.
Sd/
(Dr. M. S. Deshpande)
Judge,
Date : 11.03.2019 City Civil Court, Mumbai.
Directly dictated & typed on dias computer : 11.03.2019
Checked by HHJ on : 12.03.2019
Signed by HHJ on : 12.03.2019
-- 16 of 17 --
17 Common order in NM 223-19 & 224-19
CERTIFIED TO BE TRUE AND CORRECT COPY OF THE ORIGINAL
SIGNED JUDGMENT/ORDER.”
UPLOAD DATE AND TIME : 14.03.2019 at 12.30 p.m.
NAME OF STENOGRAPHER : Mrs. Gayatri P. Acharekar
Name of the Judge (With Court
Room no.)
HHJ Shri. M. S. Deshpande
C.R. no.01
Date of Pronouncement of
JUDGMENT/ORDER
11/03/2019
JUDGMENT/ORDER signed by
P.O. on
12/03/2019
JUDGMENT/ORDER uploaded
on
14/03/2019
-- 17 of 17 --