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TMI Blog2007 (9) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... , Delhi. Later on Sh. Bal Kishan Das who was the only son of Sh. Banwari Lal along with his son constituted six private limited companies and registered them under the Indian Companies Act for the purpose of taking over the entire capital, assets and liabilities of M/s. Bhana Mal Gulzari Mal. Defendants Nos. 7 to 12, took over the entire capital assets and liabilities of the said sole proprietary concern, M/s. Bhana Mal Gulzari Mal. According to the plaintiffs all the shareholders of these companies were and presently are also heirs of late Sh. Banwari Lal and as such these companies are family concerns. Plaintiffs contended that out of the funds, money and estate of M/s. Bhana Mal Gulzari Mal, the companies which were created being defendants Nos. 7 to 12, heirs of Sh. Banwari Lal have acquired, purchased, constructed and built up various movable and immovable properties whose details are given in Schedule C of the plaint. The plaintiffs' allegation is that defendants Nos. 2 to 6 are controlling and running defendants Nos. 7 to 12 and they are keeping profits and assets of defendants Nos. 7 to 12 to themselves only and are not rendering any accounts and the plaintiffs have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such transfer the remedy lies either before the Company Law Board or the company court. Defendant No. 4 has also opposed the claim of plaintiffs on the ground that the plaintiffs have not shown any document or proof of inheritance regarding plaintiffs claim of one-eighth share of plaintiff No. 1 and one-third share of one-eighth shares each of plaintiff Nos. 2 to 4. According to the said defendants the plaintiffs have not specified as to how they own the said properties or any share in them and why the partition is necessary on account of alleged mismanagement in the companies by not filing the income-tax returns and not holding the annual general meeting. It is contended that the said allegations cannot be decided in a suit for partition and rendition of accounts and the remedy available is before Company Law Board or the company court. In reply to para 9 of the plaint making a specific allegation that the plot and construction of the house at A-3, Soami Nagar was done by defendant No. 3, Sh. J.K. Das from the funds of the company it is averred by defendant No. 4 that the allegations cannot be looked into in the present proceedings which is for partition and the plaintiffs canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 II Delhi 459, a suit for declaration was filed against the defendant council, a private limited company seeking declaration that notice issued by defendant for annual general meeting is illegal, inoperative and invalid and that the existing members are not entitled to hold office as they have retired by rotation. The suit was contested on the ground that the civil court has no jurisdiction to entertain the petition and also on the ground that the notice is invalid. A single judge of this court had held that section 10 of the Companies Act defines the jurisdiction of the court to entertain the suits. The definition of the "court" in section 2(11) and section 10 of the Companies Act, 1956, dealing with jurisdiction of courts, read together enables the shareholders to decide as to which court they should approach for remedy in respect of a particular matter. On the issue regarding whether the court had jurisdiction to try the suit it was held that where wrong is done to an individual member he can insist by recourse to a civil suit on "strict observance" of the legal rules, statutory provisions and provisions in the memorandum and articles of association which cannot be waived by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 399 of the Act, to apply to the court for appropriate reliefs. These sections do not, either expressly or by necessary intendment, oust the jurisdiction of the civil court to entertain suits on the same subject-matter. Where shareholders complain of mismanagement or oppression and of acts prejudicial to the interest of the company or prejudicial to public interest, the civil court may entertain a suit by the shareholders and grant appropriate reliefs. Moreover, unless a statute, by express provision or by necessary implication, ousts the jurisdiction of the civil court, the civil court will have jurisdiction to try all suits of a civil nature. The ouster of the jurisdiction of the civil court shall not be readily inferred. In a proper case, there is no impediment in the exercise of power by the court to supersede the board of directors of a company, although it has the support of the majority, if it is found that it is acting illegally, mala fide or in a manner oppressive to the minority shareholders or in a manner prejudicial to the interests of the company or to the public interest. The court always has jurisdiction to prevent abuse of majority power. In fact, it is incumbent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ringed at any rate if the wrong to the plaintiff could not be rectified by an ordinary resolution of the company; (iv) where those who control the company are perpetrating a fraud on the minority and (v) any other case where the interests of justice require that the general rule, requiring suit by a company, should be disregarded. The objection of the defendants is that the suit is barred on account of sections 397 to 407 of the Companies Act. Section 397 provides that any member of a company having a grievance that its affairs are being conducted in a manner oppressive to them may apply to the court for an order under this sub-section. Section 398 makes a like provision where the grievance that the affairs are conducted in a manner prejudicial to the company's interests can be raised. However, only a group of members having a specified voting strength under section 399 could resort to these remedies. Section 408 also empowers the Central Government to grant some relief from oppression and mismanagement to the minority, but here again the application must be by a specified number of shareholders. If the argument of the defendants is to be accepted that these provisions exclude re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther expressly or by implication, from trying such a suit. In the dispute before the Supreme Court in the said case the plaintiff had sought that all the 27 members of the existing executive committee were not entitled to hold the respective office in view of the judgment of this court and further that the 18 members of the executive committee who had retired by rotation were not entitled to continue in office as members of the executive committee. It was held by the apex court that the civil suit was maintainable. The apex court in Ammonia Supplies Corporation P. Ltd. v. Modern Plastic Containers P. Ltd. [1998] 94 Comp Cas 310 ; [1998] 7 SCC 105, had also held that the company court under section 155 of the Companies Act, 1956, is to adjudicate the facts and circumstances whether the dispute raised really pertains to rectification or under the garb of rectification questions of fact involving contentious issues are raised. If dispute found to be relating to the peripheral field of rectification, then the company court under section 155 will have exclusive jurisdiction and jurisdiction of civil court will be impliedly barred but if finding is otherwise then civil court shall have j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r personal use and could not be transferred are also such disputes which cannot be determined by the company court under the provisions of the Companies Act, 1956. For partitioning of the assets of the companies, defendants Nos. 7 to 12, after determination that they were started from the assets of common ancestor and the share of the plaintiff if dissolution of the companies is required for which invocation of the company court may be required, the civil suit for partition will not be completely barred. Therefore it cannot be inferred that the suit of the plaintiffs is barred under sections 397 to 407 of the Companies Act, 1956. In the circumstances, the preliminary issue framed on November 14, 2002, "Whether the suit as framed is not maintainable in view of the provisions of sections 397 to 407 of the Companies Act," is decided against the defendants holding that the suit of the plaintiffs is not barred and is maintainable. The said issue is thus decided accordingly. Since it is held that the suit is maintainable, learned counsel for the defendants seek time to file the documents. Original documents or certified copies of documents, if not already filed be filed within four we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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