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2013 (11) TMI 1543 - HC - Companies LawOppression and mismanagement - Scope of proceedings before the Company Law Board - Quasi Judicial Forum - CLB proceedings can be equated to suit (civil suit) - CLB to be considered as a Court or not - Simultaneous proceedings before CLB and Civil Court - HELD THAT - Though section 10 uses the expression suit the principle behind section 10 would be applicable even to proceedings . This is in view of section 141 of the Code. Section 141 makes it clear that the procedure prescribed by the Code in regard to suits shall be followed so far as it can be made applicable in all proceedings in any court of civil jurisdiction provided the proceedings under Article 226 of the Constitution. Therefore merely because the proceeding before CLB is not a suit it cannot be said that section 10 would not apply provided CLB is found to be a court of civil jurisdiction and the matter in issue therein is found to be directly and substantially in issue in a previously instituted suit. Another view is Section 4(1) that if any Special Law confers any power or prescribes any Special Form of Procedure the same shall not be deemed to be limited or otherwise affected by anything contained in the Code. In other words while construing the powers available to a Quasi Judicial Forum under a Special Enactment one must always keep in mind that the boundaries prescribed by the Code of Civil Procedure within which the Civil Courts are obliged to function would not apply to the Forum created by the Special Enactment. In view of the above the appeal is allowed and the impugned order of the Company Law Board is set aside and the Company Law Board is directed to proceed with the hearing of the company petition C.P.No.37 of 2011 and dispose it of in accordance with law preferably in a manner that would put an end to the sufferings of the company if not the sufferings of the applicant and the second respondent
Issues Involved:
1. Applicability of Section 10 of the Code of Civil Procedure (CPC) to proceedings before the Company Law Board (CLB). 2. Use of Regulation 44 of the Company Law Board Regulations 1991 to achieve the same result as Section 10 of the CPC. 3. Justification of the Company Law Board's decision to stay its proceedings due to the pendency of a civil suit. Issue-wise Detailed Analysis: 1. Applicability of Section 10 of the Code of Civil Procedure (CPC) to proceedings before the Company Law Board (CLB): The first question addressed was whether Section 10 of the CPC, which prohibits courts from proceeding with a trial if the matter is already substantially in issue in a previously instituted suit, applies to proceedings before the CLB. The court noted that the CLB is not a court within the meaning of the CPC or the Companies Act, 1956. The CLB is a quasi-judicial body created by a special law to adjudicate specific disputes under the Companies Act. It is predominantly manned by non-judicial members and has the power to regulate its own procedure, including the ability to dispense with certain procedural requirements. Therefore, the provisions of the CPC do not per se apply to the CLB, except for those specifically mentioned in Section 10-E(4C) of the Companies Act and analogous provisions in the Company Law Board Regulations 1991. The court concluded that the CLB is not a court within the meaning of Section 10 of the CPC, and hence, Section 10 does not apply to its proceedings. 2. Use of Regulation 44 of the Company Law Board Regulations 1991 to achieve the same result as Section 10 of the CPC: The second question was whether Regulation 44, which confers inherent powers on the CLB, could be used to stay proceedings in the same manner as Section 10 of the CPC. The court held that Regulation 44, which is analogous to Section 151 of the CPC, encompasses the power to stay proceedings to prevent abuse of the process and to ensure the ends of justice. The court noted that principles analogous to res judicata, which are based on public policy, can be applied even where the CPC does not apply. Similarly, the principles underlying Section 10 of the CPC, which aim to avoid conflicting decisions and multiplicity of litigation, can be invoked by the CLB under its inherent powers. Therefore, the court concluded that the CLB could use Regulation 44 to stay its proceedings pending the adjudication of a dispute in a previously instituted suit. 3. Justification of the Company Law Board's decision to stay its proceedings due to the pendency of a civil suit: The third question was whether the CLB was justified in staying its proceedings due to the pendency of a civil suit. The court compared the parties, issues, and reliefs sought in both the civil suit and the company petition. It found that while there was some overlap, the reliefs sought before the CLB under Sections 397 and 398 of the Companies Act were broader and aimed at ensuring the smooth running of the company, rather than resolving individual disputes. The court emphasized that the CLB's powers under Section 402 of the Companies Act are wide and can provide solutions that may not be available through a civil court, such as giving an exit option to one of the warring parties to alleviate the company's sufferings. Therefore, the issues before the CLB and the civil court were not directly and substantially the same, and the CLB's decision to stay its proceedings was not justified. The court set aside the CLB's order and directed it to proceed with the hearing of the company petition. Conclusion: The appeal was allowed, and the Company Law Board was directed to proceed with the hearing of the company petition in accordance with the law, preferably in a manner that would resolve the company's issues, if not the individual disputes between the parties.
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