TMI Blog2016 (7) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... iness, which had caused a considerable adverse impact on the Company's business leading to "substantial damages to the tune of ₹ 500 crores" can only be described as "material in the context of the Company's business". In the circumstances it is clear that as per the Plaintiffs' own case, the alleged defamatory statements are extremely material in the context of Plaintiff No.1's business and the Plaintiffs cannot be heard to say that the present suit is not in the context of the Company's business , let alone not being material to it. The present suit qua Plaintiff No. 1 is not maintainable for want of authority of Plaintiff No. 2 to file the suit on behalf of Plaintiff No.1 and the Suit is accordingly dismissed qua Plaintiff No.1 - Suit No. 965 of 2011 - - - Dated:- 12-5-2016 - S. J. KANTHAWALLA, J. For the Plaintiff : Mr. R. Subramanian For the Defendant : Mr. J.P. Sen, Senior Advocate, along with Dr. Birendra Saraf, along with Mr. Rohaan Cama, Mr. Rohan Dakshini, Mr. Vineet Unnikrishnan, Ms. Rajashree Ram and Ms. Anuja Abhyankar, instructed by M/s. Federal and Rashmikant For the Official Liquidator : Gautam Ankhad, Mr. V. Patil , Vinod Sharma JUD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied first, is, whether, in the face of the resolution passed by Plaintiff No.1 on 9th April 2000 and the Articles of Association of Plaintiff no. 1 as amended, both of which are not matters of dispute, Plaintiff No. 2 has the requisite authority in law to file the present suit on behalf of Plaintiff No.1. This issue is a pure issue of law. It relates to the bar of law in filing the suit and also jurisdiction of the Court to try the suit. In that view of the matter, the issue satisfies the requirements of Order 14 Rule 2 of the CPC. It is an issue purely of law; it relates to jurisdiction of the Court or bar to the suit by any law for the time being in force; and it disposes of a part of a case. As the only factual dispute was in relation to the existence of the resolution dated 9th April 2000 on a concession by the Defendant the same was taken on record and marked in evidence as Exhibit P-8. 5. Being aggrieved by the order dated 5th May 2015, the Plaintiffs filed Review Petition (L) No.25 of 2015 before this Court on 12th June 2015. In the said Review Petition, the following points/grounds were raised: 5. The Hon ble Court has passed the above-mentioned Order in err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the order dated 5th May 2015. 8. The actual facts from the pleadings of the parties and the material and documents on record of the Suit are as set out hereunder and are wholly contrary to the claims of the Defendant s Counsel based on which the Court passed the impugned order:- a. Neither the original Articles as formulated in 1997 at the time of incorporation of the said Plaintiff no.1 company as a private limited company nor any of the various amendments made to the same from time to time over the last 18 years of the company s existence are on record before the Court marked as evidence. Such material if relevant can be brought on record only by way of evidence of the witnesses of the Parties. In such circumstance, the claimed existence of any clause barring initiation of litigation de-hors the consent of investor, as claimed by the Defendant and as relied upon by the Court as being a matter of record, is in fact not a matter on record of the Court nor is the same a matter of record in the suit and as such cannot be considered by the Court as a mere issue of law, and evidence is required to be led on the same and proved by the party seeking to rely on sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Order 14 Rule 2(2), as there is a bar in Order 14 Rule 2(2) in considering any matter of fact. The High Court has wrongly assumed the resolution dated 9th April 2000 was the sole authority on which the suit was instituted by the 2nd Plaintiff on behalf of the 1st Plaintiff and further erred in not noting that the said resolution itself having been only tendered in evidence the same was a matter of fact and was not capable of being considered in proceedings under Order 14 Rule 2(2) CPC merely because the Defendant seeks determination of issue after trial has commenced. d. The Petitioner s also submit that the Order dated 5th May, 2015 is further bound to be reviewed as the said order, apart from being in error and such error apparent on record, is also incapable of being performed de hors evidence and any further proceeding in the mater as per the said order would therefore only be infructuous since no facts F::: Uploaded on or evidence can be considered under Order 14 Rule 2(2). There is nothing on record to prove the existence of such a covenant requiring investor s consent for filing of the suit as herein nor of conditions attaching thereto even assuming such covenants ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oday are marked X for identification. 7. Accordingly, the hearing on issue No.3 viz. whether Plaintiff No. 2 has authority to file Suit on behalf of Plaintiff No. 1, has now commenced before me. 8. The Learned Senior Advocate appearing for the Defendant has submitted that the Articles of Association prevailing on the date of the filing of the Suit have been tendered by the Plaintiff No. 2 before this Court (Coram: S.C. Gupte, J.) on 28th July, 2015. The same was taken on record and marked X for identification. The Defendant is not disputing the contents of the said Articles. However, from Article 17A and in particular clause (t) thereof, it is clear that to commence or discontinue any litigation or arbitration which is material in the context of the Company's business, there would have to be a resolution of the Board of Directors or shareholders of Plaintiff No. 1 to which at least one Director nominated by the VC Investor [as defined in Article 2 (k)] or the VC Investor consents or votes in favour of. It is submitted that in the present case, no such resolution has been passed by the Board of Directors or the shareholders of Plaintiff No.1 to which consent as requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel relied on the judgment of this Court in the case of All India Reporter Ltd. vs. Ramchandra Dhondo Datar1. 1 AIR 1961 Bom 292 10. The Plaintiff No. 2 appearing in person has made the following submissions: 10.1 That the Articles of Association produced on record by the Defendant is an incomplete and inchoate document and cannot be relied upon by the Defendant. Article 37 of the document relied upon by the Defendant as the Articles of the Company holds that the contents and terms of three agreements mentioned therein namely (i) Investment Agreement; (ii) Investment Agreement - I; and (iii) Subscription Agreement, would form part of the Articles and further that the clauses in the said Agreements would supersede the covenants of the other Articles if the terms therein were to be in conflict with the other Articles. In such circumstances the document sought to be placed before this Court by the Defendant as the Articles, suppressing the three documents referred to in Article 37 and held thereunder to be part of the Articles, cannot be relied upon by this Court as evidence that clause 17A (t) is in force either presently or as on the date of the filing of the suit as the ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consent as required under Article 17A cannot be accepted as it would amount to an opportunistic misuse of the provisions of law. The judgment in the case of All India Reporter Ltd. (supra) relied upon by the Learned Counsel for the Official Liquidator has no application in the present case. 12. In response to the submissions advanced on behalf of Plaintiff No.2 appearing in person, the Learned Senior Advocate appearing for the Defendant has submitted as follows: 12.1 that the submission of Plaintiff No. 2 that the Articles of Association produced by the Defendant were incomplete and inchoate is baseless and untenable since the Defendant himself has tendered a copy of the Articles of Association of the Plaintiff Company before this Court (Coram: S.C. Gupte, J.) on 28th July, 2015 which the Learned Judge has taken on record and marked X for identification. The Defendant has not disputed the contents of the document tendered by Plaintiff No.2 and have proceeded to make their submissions on the basis of the said document produced by Plaintiff No.2. The question of suppressing any documents referred to in Article 37 of the Articles of Association by the Defendant does not arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no reference to Plaintiff No.2 being authorised on behalf of Plaintiff No. 1 to file the suit. The Defendant in his written statement challenged the maintainability of the suit on the ground that the Plaintiff No. 2 has no authority to file the Suit on behalf of Plaintiff No.1 and further that under the Articles of Association of Plaintiff No. 1, any resolution for commencement or discontinuance of any litigation as set out therein requires the consent of one Director nominated by the VC Investor i.e. ICICI Trusteeship Services Ltd. or the VC Investor itself. It was further submitted that there was no Board Resolution authorising Plaintiff No. 2 to file the present suit on behalf of Plaintiff No.1. Accordingly, this Court (Mrs. R.S. Dalvi, J. as she then was) framed issues in the suit including issue No.3 Whether the plaintiff No. 2 has authority to file suit on behalf of plaintiff No.1? Plaintiff No. 2 filed an affidavit of evidence notarized on 9th April, 2014 claiming to be authorized to deal with all legal matters in respect of the Company pursuant to a resolution passed in a Board Meeting held on 9th April, 2000. 15. The Articles of Association of the first Plaintif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt of the company s business From the aforesaid Article, which forms part of the Articles of Association, tendered in Court by Plaintiff No. 2 on 28th July, 2015 which prevailed on the date of the filing of the suit, it is clear that to commence or discontinue any litigation or arbitration which is material in the context of the Company's business, there would have to be a resolution of the Board of Directors or shareholders of Plaintiff No.1 to which at least one Director nominated by the VC Investor consents or votes in favour of. Admittedly, in the present case, no such resolution has been passed by the Board of Directors or Shareholders of Plaintiff No. 1 to which consent as required under Article 17A has been accorded. Thus, ex facie no authority is given to any person including Plaintiff no. 2 to institute the present suit. The Resolution dated 9th April, 2000 relied upon by Plaintiff No. 2 was admittedly not consented to in the manner contemplated in Article 17A and hence on the date of filing of the present Suit there existed no authority for Plaintiff No. 2 to file the same on behalf of Plaintiff No.1. The Plaintiff No. 2 has neither in his affidavit of evidence n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such Scheme sanctioned by the Madras High Court, and there is no question of the shares of the company being listed in this manner. The judgment of the Madras High Court being a document relied upon by the Plaintiffs themselves, cannot be disputed. Even otherwise, it is not the case of the Promoter and Managing Director of the Plaintiff No.1 i.e. Plaintiff No.2 that the position has changed from the date of the above order till the filing of the Suit i.e. the company was thereafter listed on a Stock Exchange. 20. As regards the Plaintiffs' contention that the Articles of Association submitted by the Defendant is an incomplete and inchoate document and the documents set out in Article 37 are intentionally suppressed by the Defendant by not producing the same before this Court along with the said Articles, it is pertinent to note that the copy of the Articles of Association containing Article 17A (t) as well as Article 37 is tendered in Court by the Plaintiff No.2 which the Court has taken on record and marked X for identification and the identity and contents of which are not disputed by the Defendant. Article 37 of the Articles of Association is reproduced hereunder: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. - This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred. Exception 2 : Saving of contract to refer questions that have already arisen. - Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arising, or affect any provisions of any law in force for the time being as to references to arbitration. Firstly Article 17A does not contain a bar to the filing of a suit, it simply prescribes a condition precedent for filing the same. There is nothing in law to prevent a company s Articles of Association having such a provision. Again, as can be seen from the said Section reproduced above, the same refers to an agreement by which a party is restricted absolutely , which is clearly not the case as Article 17A only provides a pre-condition for filing of the suit, as stated above. Furthermore, Section 28 relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir views, especially when such views can have catastrophic consequences against whom there are directed against and are driven by malice. In addition to the foregoing, it is evident that at the time when the views were published, the Plaintiffs were in the process of reviving and restructuring their businesses on the basis of the goodwill, which was established over a period of time. As a result of the views expressed by Defendant the goodwill which was created by the Plaintiffs was tarnished so much so that the business associates and bankers of Plaintiff No. 1 were reluctant to support the Plaintiffs during the process of restructuring of Plaintiff No. 1. The published statements of Defendant also seriously impaired the Plaintiff 2's ability to get franchisees as also support from the creditors and vendors of goods and services for the resumption of business being worked upon by his company Blue Green Construction and Investments Limited. 25. The Plaintiff states that considering the credibility that Defendant enjoys in society that such defamatory averments have been published in a widely circulated newspaper publication as The Economic Times there can be no doubt that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-E is the Particulars of Claim mentioned hereinabove. Sub-clause (t) of Article 17A makes it clear that the litigation must be material in the context of the Company's business and need not actually relate to its business. A defamatory allegation concerning the Company's business, which had caused a considerable adverse impact on the Company's business leading to substantial damages to the tune of ₹ 500 crores can only be described as material in the context of the Company's business . In the circumstances it is clear that as per the Plaintiffs' own case, the alleged defamatory statements are extremely material in the context of Plaintiff No.1's business and the Plaintiffs cannot be heard to say that the present suit is not in the context of the Company's business , let alone not being material to it. 24. As regards the submission advanced on behalf of the Official Liquidator attached to the Madras High Court that under Section 441 read with Section 457 of the Companies Act, 1956, the Official Liquidator was entitled to prosecute the suit on behalf of Plaintiff No. 1 and in light of Section 9 of the Companies Act, 1956, as the Officia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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