2003 (7) TMI 481 - SC - Companies Law

Whether the High Court was justified in issuing a direction that its earlier direction contained in order dated 12-3-1993 directing the Appellate Board to dispose of the appeal within three months need not be adhered to if Ramesh Chander Agarwal files an application for stay of the inquiry by the District Magistrate during the pendency of the civil suit? Whether the civil court had any jurisdiction to entertain the suit? Held that - Appeal allowed. The dispute between the parties was eminently a civil dispute and not a dispute under the provisions of the Companies Act. Section 9 of the Code of Civil Procedure confers jurisdiction upon the civil courts to determine all dispute of civil nature unless the same is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is not to be readily inferred. A provision seeking to bar jurisdiction of civil court requires strict interpretation. The court it is well-settled would normally lean in favour of construction which would uphold retention of jurisdiction of the civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court s jurisdiction is ousted. Even otherwise the civil court s jurisdiction is not completely ousted under the Companies Act 1956. We fail to understand and rather it is strange as to how the High Court while rejecting relief to the original plaintiff (late Dwarka Prasad Agarwal) granted a similar relief in favour of the first respondent herein.

Summary

Issues Involved:
1. Whether the High Court was justified in issuing a direction that its earlier direction contained in order dated 12-3-1993 directing the Appellate Board to dispose of the appeal within three months need not be adhered to, if Ramesh Chander Agarwal files an application for stay of the inquiry by the District Magistrate during the pendency of the civil suit?
2. Whether the civil court had any jurisdiction to entertain the suit?

Issue-wise Detailed Analysis:

Re: Question No. 1

At the outset, the Supreme Court observed that when a disputed question regarding the right of one partner against the other to file a declaration under the provisions of the Press and Registration of Books Act, 1867, had arisen for consideration, the High Court was not correct in issuing a subsequent direction in the review petition. The High Court did not have such jurisdiction. The conflicting rights of the parties were required to be determined by the statutory authority in accordance with the law. The High Court's direction to defer the inquiry by the District Magistrate if an application was filed until the final outcome of the civil litigations was unjustified, especially when the High Court itself opined that the suit was not maintainable. The orders of the High Court were contradictory and inconsistent with each other. Consequently, the Supreme Court set aside the impugned orders and directed the Appellate Board to dispose of the appeal as expeditiously as possible, within three months from the date of communication of this order. The Appellate Board was also given the discretion to consider compensating the appellants monetarily if the appeal was found to be liable for dismissal.

Re: Question No. 2

Sections 9 and 10 of the Companies Act were examined to determine if the jurisdiction of the civil court was ousted. A bare perusal of these provisions left no doubt that the jurisdiction of the civil court had not been ousted. The civil court was concerned with the rival claims of the parties regarding whether one party had been illegally dispossessed by the other, which is maintainable under section 6 of the Specific Relief Act, 1963. The Supreme Court reiterated that a person cannot be forcibly dispossessed except in accordance with the law (Lallu Yeshwant Singh v. Rao Jagdish Singh AIR 1968 SC 620).

The court also referred to Suvvari Sanyasi Apparao v. Bodderpalli Lakshminarayana [1962] Supp. 1 SCR 8, which held that the matter relating to ownership of the press is a matter of general law, and the court must follow that law. Additionally, it was noted that the civil court's jurisdiction is not completely ousted under the Companies Act, 1956, and that bar of jurisdiction of a civil court is not to be readily inferred. The court would normally lean in favor of construction that upholds the jurisdiction of the civil court, and the burden of proof lies on the party asserting that the civil court's jurisdiction is ousted (Sahebgouda v. Ogeppa 2003 (3) Supreme 13).

In R. Prakasam v. Sree Narayana Dharma Paripalana Yogam [1980] 50 Comp. Cas. 611 (Ker.), it was held that sections 2(11) and 10 of the Companies Act do not confer exclusive jurisdiction but only enable shareholders to decide which court to approach. The Delhi High Court in Maharaja Exports v. Apparels Exports Promotional Council [1986] 60 Comp. Cas. 353 also held that civil courts have jurisdiction to try all suits of a civil nature unless expressly or impliedly barred by the statute.

The Supreme Court concluded that the civil suit was maintainable and found it strange that the High Court, while rejecting relief to the original plaintiff, granted similar relief to the first respondent. Consequently, the impugned orders were set aside, and the matters were remitted to the Collector/High Court for a fresh decision on merits within three months, keeping in view the observations made. The appeals were allowed with costs, and counsel's fee was assessed at Rs. 25,000.