TMI Blog2004 (9) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... d as Managing Director of the company vide resolution dated 27-12-1998 for a period of five years. While functioning as such, he states that the respondents who made abortive attempts to divert the funds of the company, were removed as Directors from the Board of the Directors of the company. While so, on the basis of a resolution allegedly passed on 3-1-2002, in the meeting convened by the respondents, Appellant No. 2 was removed as Managing Director of the company. In pursuance of the alleged resolution, when the respondents tried to interfere with the management of the company and made attempts to seize the records and books of account of the company, Appellant No. 2 on his behalf and on behalf of the company, lodged reports before the police against the respondents, and also a suit in O.S. No. 61 of 2002 accompanied with applications in I.A. Nos. 24 and 25 of 2002, on the file of the VIII Junior Civil Judge, City Civil Court, Hyderabad, to restrain the respondents from interfering with the management and functioning of Appellant No. 2 as Managing Director of the company and also with its management, except in accordance with law. 4. While so, the Trial Court by common or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the respondents. 7. The learned Counsel for the appellants submits that inasmuch as the field of controversy between the matter in issue in the suit previously instituted before the Civil Court by the appellants and the company petition subsequently filed before the Company Law Board, is substantially the same, the Company Law Board, having regard to the provisions of section 10 of the Code, ought to have stayed the proceedings pending before it until the conclusion of the suit, and in support of this submission, he placed strong reliance on the judgment of the Apex Court in Manohar Lal v. Seth Hiralal AIR 1962 SC 527, High Court of Bombay in Jain Hind Iron Mart v. Tulsiram Bhagwandas AIR 1953 Bom. 117 and also the judgment of the Punjab and Haryana High Court in M/s. Sehgal Knitwears v. M/s. Shresthi International AIR 2001 P H 160. 8. He submits that since Rule 6 of the Companies (Court) Rules, 1959 makes applicable the provisions of the Code even to the proceedings under the Companies Act, having regard to Rule 2(4) of the Rules, which defines Code to mean the Code of Civil Procedure, 1908, the provisions of section 10 of the Code should also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 granting interim injunction restraining the respondents from interfering with the management of the appellants, by common order dated 19-2-2004, the proceedings before the Company Law Board, are required to be stayed. 11. On the other hand, the learned Counsel appearing on behalf of the respondents resisted the appeal and contended that there is no question of law to be decided in the appeal. He contended that the suit previously filed by the appellants before the Civil Court and the Company Petition filed by the respondents before the Company Law Board, are for different reliefs, which are distinct and independent of each other, and the matter in issue in the Company Petition, filed by the respondents before the Company Law Board not being directly and substantially in issue in the suit previously filed by the appellants before the Civil Court, the provisions of section 10 of the Code are not attracted, and the Company Law Board, was right in not staying the proceedings in the Company Petition before it. In support of this contention, he placed reliance on the judgments of the Gujarat, Calcutta and this Court in S.E. Works v. R.J.V. Mills AIR 1981 Guj. 110, Piyush K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ister on oath, would not make it a Court , even if the authority or Tribunal is deemed to be Court for limited and specific purposes. 15. Part I-A of the Companies Act deals with Board of Company Law Administration. Section 10E of the Companies Act deals with the Constitution of Board of Company Law Administration. In terms of sub-section (1) of section 10E of the Companies Act, the Central Government by Official Gazette, may constitute the Board of Company Law Administration, known as Company Law Board to exercise and discharge such powers and functions conferred on the Central Government by or under the Act or any other law as may be delegated to it by the Central Government, by notification in the Official Gazette under the provisions of the Act or any other law. Sub-section (2) of section 10E of the Companies Act empowers the Central Government to appoint members to the Company Law Board, by notification in the Official Gazette, not exceeding nine. The tenure of the members and one of the members to be appointed as Chairman of the Company Law Board does not exceed three years. For the purpose of sub-section (4B) of section 10E of the Companies Act, the powers exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shment for false evidence) and 228 (intentional insult or interruption to public servant sitting in judicial proceeding) of the Indian Penal Code and for the purpose of section 196 of that Code, which deals with using evidence knowing to be false, yet given the fixed tenure of the Chairman and members of the Company Law Board, the authority who appoints them, the powers and functions of the Central Government which the Company Law Board exercises being quasi-judicial in nature, the limited powers [namely those mentioned in sub-section (4C) relating to discovery and inspection of documents or other material objects producible as evidence; enforcing the attendance of witnesses and requir- ing the deposit of their expenses; compelling the production of documents or other material objects producible as evidence and impounding the same; examining witnesses on oath; granting adjournments and; reception of evidence on affidavits], which the Company Law Board exercises, which are vested in the Civil Court, and the control which the Central Government has over its functioning, the Company Law Board, can by no means be regarded as a Court , and more so when the proceedings before the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he context of section 14 of the Limitation Act, 1963 holding that Court within the meaning of the word Court occurring in section 14 of the Limitation Act, need not be a Civil Court, will be of no avail to him. As a consequence thereof, the proceedings before the Company Law Board, though judicial in nature, they being only for limited purposes, cannot be treated as a suit, within the generic meaning of the term suit , and as such, reliance placed by the learned Counsel for the appellants on the judgments of the various Courts in Pandurang Ramachandra Mandlik s case ( supra ), Patel Roadways Ltd. s case ( supra ) and Subramanayya s case ( supra ) are of no help to him. There can be no quarrel on the argument advanced by the learned Counsel for the appellants that the provisions of the Code have been designed to facilitate justice and its ends and that it is not a penal enactment providing for punishments and penalties. Reliance, in support of such an argument, was placed on the judgment of the Apex Court in Sangram Singh s case ( supra ), wherein the Apex Court held as follows : . . . a code of procedure must be regarded as such. It is procedure, something designed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 10 of the Companies Act, reads thus: 10. Jurisdiction of Courts. - (1) The Court having jurisdiction under this Act shall be- ( a )the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and ( b )where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction coffered, in respect of companies having their registered offices in the district. (2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred- ( a )in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive; ( b )in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII (Sections 425 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereunder. 22. This being the position, it may be noticed whether the matter in issue in the Company Petition before the Company Law Board, is directly and substantially in issue in the previously instituted suit in before the Civil Court, filed by appellants, and to wit, it would be expedient, if the reliefs claimed by the respondents and the appellants before the Company Law Board and the Civil Court, is set out in a comparative tabular form : Relief sought by the appellants before the City Civil Court, Hyderabad, in OS. No. 61 of 2002, under Order XXXIX, Rules 1 and 2 read with section 151 of the Code Relief sought by the respondents before the Company Law Board, Additional Principle Bench, Chennai, in CP No. 25 of 2003, filed under sections 111A, 397, 398, 402 and 408 of the Companies Act. (1) (2) uTo direct the respondents not to interfere with the management and functioning of the first petitioner/plaintiff, i.e., Mr. M. Venkateswarlu as Managing Director of the second petitioner/plaintiff company, namely M/s. RDF Power Projects Limited, and; uTo declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the 1st appellant-company vide resolution dated 27-12-1998, and that the respondents on the basis of an alleged resolution dated 29-12-2001 are trying to interfere with management of the 2nd appellant and affairs of the 1st appellant-company, and therefore, a direction be given to the respondents not to interfere with the management and functioning of the 2nd appellant/plaintiff, i.e. Mr. M. Venkateswarlu as Managing Director of the 1st appellant/plaintiff company, namely M/s. RDF Power Projects Ltd., and to direct the respondents not to interfere with the management of the second petitioner/plaintiff company, except in accordance with law. And whereas the respondents filed the Company Petition before the Company Law Board under sections 111A, 397, 398, 402 and 408 read with section 151 of the Code, inter alia alleging acts of oppression and mismanagement in the affairs of the 1st appellant-company by the 2nd appellant, namely manipulation and fabrication of shareholding, misappropriation of funds, contravention of the statutory provisions of the Companies Act, manipulation and falsification of the annual returns of the company, the quantum of investments made, and contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings in the company petition could not be granted under section 10. (p. 95) 25. A reference may also be made to the judgment of the Gujarat High Court in S.E. Works case ( supra ), wherein the Court while considering the words directly and substantially in issue appearing in section 10 of the Code held thus: . . .The key words in section 10 are the matter in issue is directly and substantially in issue in the previously instituted suit. The words directly and substantially in issue are used in contradistinction to the words incidentally or collaterally in issue . That means that section 10 would apply only if there is identity of the matter in issue in both the suits meaning thereby that the whole of the subject-matter in both the proceedings is identical and not merely one of the many issues which arise for determination in the two suits. That, however, does not mean that all the issues must be identical, that is, the subject-matter need not be the same in every particular case. . . . It is, however, a question of fact to be gathered from the pleadings of the two suits as to whether the matter in issue in the subsequently instituted suit is directly and substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court by order dated 19-2-2004, dismissed the said C.R.P. inter alia observing whether the resolution dated 29-12-2001 is valid or not and whether Civil Court has jurisdiction, are all matters, which are required to be gone into in detail after enquiry, during the trial rather than at the interlocutory stage. It may be noticed that this Court had not expressed any opinion on the merits of the matter, and merely confirmed the order of the Appellate Court granting interim injucntion on the basis of prima facie case, pending enquiry into the contentious issues. Be that as it may, the appellants in the guise of interim injunction granted by the Appellate Court, as confirmed by this Court in C.R.P. cannot seek to protect their alleged acts of oppression and mismanagement for an indefinite period, and contend that the C.R.P. filed by the respondents against the order of the Appellate Court granting interim injunction, having been dismissed, the proceedings before the Company Law Board cannot be maintained, and more so when the relief of approaching the Company Law Board against acts of oppression and mismanagement under sections 397 and 398 of the Companies Act, is provided to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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