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TMI Blog2017 (1) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... have locus standi to file the Company Petition complaining of oppression and mismanagement, as postulated by sections 397 and 398 of the Companies Act, 1956; (iii) The Registrar of Companies inquired into the complaint made by the father of the petitioner and observed that the shares were held jointly in the name of Mr. R. P. Bagla and Mr. H. S. Bagla and dropped the investigation; (iv) The Petitioner in the CP has filed a suit in Civil Court, Kanpur (O.S. No. 313 of 2014) substantially with the same prayers made in the CP and this would amount to forum-shopping; II. The non-applicant in this Application who is the petitioner in the CP filed a detailed counter contending inter alia that, the CP is a composite petition for Rectification of Register of Members as well as oppression and mismanagement is maintainable in the Tribunal only because those reliefs cannot be granted by a civil court; that, the Respondents 1 to 5 have deliberately refused to transfer 40497 shares of Late Rameshwar Prasad Bagla, the grandfather of the petitioner and therefore, the legal representatives of deceased share holder are entitled to maintain a petition in the Tribunal if their names are not recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 42 envisages filing of rejoinder by the petitioner. The Rules did not contemplate any 'additional pleadings' after Rule 42, except where the Bench calls for further information or evidence under Rule 43. Rule 55 of the Rules is important and it reads thus: Rule 55: Pleadings before the Tribunal: No pleadings, subsequent to the reply, shall be presented except by the leave of the Tribunal upon such terms as the Tribunal may think fit. Further, Rule 39 postulates production of Evidence by Affidavit and this Rule comes into play when the Tribunal directs the parties to give evidence, if any. The non-applicant did not seek leave of the Tribunal to receive the affidavit which is perceptibly in the nature of pleadings. Certain documents are referred to in that affidavit, but there is no prayer therein that documents may be received as evidence as envisaged by Rule 39, On the other hand, the title of the application with which the affidavit is filed is shown to have been filed under Regulation 44 of the Company Law Board Regulations, 1991 'for urgent directions'. But no 'urgent directions' are prayed for in the affidavit. Apart from all these shortfalls, there is no reason given as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of records to show 40497 shares showing them to have been jointly held by RP Bagla with HS Bagla, in the year 2001; (iii) Denial of transfer of share of RP Bagla to the father of petitioner (B.P. Bagla) and after him, to the petitioner; and, (iv) Sale of property in Municipal No. 117/SN/l, Sarvodaya Nagar, Kanpur by the Respondent No. 2; The Respondents in the CP who are applicants herein have not filed their reply in the Company Petition; but, on the other hand, filed the application taking the preliminary objections against the maintainability of the Petition on the grounds mentioned in the above paragraphs of the order. V. Points for Consideration: Keeping in view the claims made in the Company Application and the pleadings in the Company Petition, the following points appear to be germane for decision in the application: 1. Whether the Company Petition is not maintainable in view of the pendency of Original Suit No.313 of 2014 on the file of Civil Judge (Sr. Division), Kanpur and also because of the complex issues involved in the matter? 2. Whether the Petitioner has no locus standi to maintain the petition under Sections 397 and 398 of the Companies Act, 1956? 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecuted and subsequently on various dates when the defendants have refused to accede to the request of the plaintiff. The 'cause of action' mentioned in para 17 is not the singular cause giving right to the plaintiff to file the suit and for that purpose the bundle of facts pleaded in the entire plaint have to be examined to find out what is the substantial cause that compelled the plaintiff to file the suit, to obtain the relief. What is a 'cause of action' is no more res-integra. In Om Prakash Srivastava case Supreme Court said-Om Prakash Srivastava vs. Union of India & Anr (2006) 6 SCC 207 "The expression "cause of action" has acquired a judicially settled meaning. In the restricted sense "cause of action" means the circumstances forming the infraction of the right or the immediate occasion for the reaction." In the wider sense, it means the necessary conditions for the maintenance of the suit, including not only the infraction of the right, but also the infraction coupled with the right itself. Compendiously, as noted above, the expression means every fact, which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are material facts which give the plaintiff (Company petitioner herein) a right to sue though the relief however is limited to declaration as to void nature of the sale of company property. The fact remains is the non-transfer of shares from R.P. Bagla to B.P. Bagla, and showing of 40497 shares in the joint names of RP Bagla and HS Bagla, of course, 'fraudulently' by 'manipulation' of the Register of Members which are the core of the allegation common both in the Suit and the present Company Petition. Unless the Civil Court in a properly constituted suit records a finding positively in favour of the plaintiff on those questions, that there was fraud and manipulation of Members' Register and that shares of RP Bagla are not transferred to BP Bagla for legally unsustainable reasons, the Court cannot give a declaration that the sale of property of the Company by the Second Respondent herein (Defendant No. 3 in the civil suit) is void and unenforceable. In other words, the right to sue and to obtain the relief in the civil suit is based on the finding about the refusal of the defendant to transfer the shares in favour of the father of the plaintiff and also on the question whether a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for the suit and Company Petition are substantially the same. The reliefs on the basis of oppression, mis-management and for rectification of Register of Members shall be granted only on proof of facts alleged by the non-applicant, like fraud, misrepresentation, manipulation of records etc. These complicated issues of fact cannot be decided by the Tribunal and it is within the province of the Civil Court only. Whether or not the non- applicant's father Mr. BP Bagla is the adopted son of RP Bagla is not the question before us; even had there been any such question, we are sure, it is beyond our jurisdiction to hold about the status of BP Bagla to inherit the shares of RP Bagla and that question also will fall within the power of Civil Court only. To support our view, we are feeling appropriate to quote relevant excerpt from the Ammonia case-Ammonia Supplies Corpn (P) Ltd vs Modern Plastic containers (P) Ltd (1998) 7 SCC 105 "Field or peripheral jurisdiction of the Company Court under it would be what comes under rectification, not projected claims under the garb of rectification. So far exercising of power for rectification within its field there could be no doubt the court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are beyond the exclusivity of the jurisdiction of the Tribunal under Sec. 111 for ordering rectification of Register of Members, and the non applicant has remedy in civil court to get adjudicated upon those issues. As a result, we hold that the reliefs (ix), (x), (xi) relating to sale of immovable property of the Company by the Respondent No. 2 in the CP (applicant herein) cannot be granted by this Tribunal as they are subjudice before a competent civil court. Similarly we also hold that the reliefs (i), (ii), (iii) relating to Rectification of Members' Register, cannot be adjudicated by this Tribunal as the same involves decision on the allegations of fraud, manipulation etc attributed to the 2nd Respondent in relation to the sale transaction as well as to the affairs of management of the Company are opaque questions of fact which have to be decided by the Civil Court only and not by this Tribunal in a summary enquiry. Other reliefs are either ancillary or consequential to the reliefs stated above in one way or the other. VIII. Point No. 2: The locus standi of the petitioner to file the Company Petition is the next objection taken by the applicant. The Learned Senior Counsel S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board. Thus, the entitlement of RP Bagla to the 40497 number of shares exclusively, itself was under challenge even long prior institution of the proceedings by the non applicant in the civil court and before the Company Law Board the predecessor of this Tribunal. It is essential to note that RP Bagla never approached either the civil court or the CLB seeking reliefs for rectification of Register, so also BP Bagla after the shares are 'devolved' on him after the death of RP Bagla. However, BP Bagla made a complaint to Registrar of Companies, which is not a competent authority to resolve the conflict. Annexure P-7 dated 21.05.2004 shows that BP Bagla applied for transfer of 40497 shares held by RP Bagla to his name. It is important to note, at the cost of repetition, that by the date of Annexure P-7, the 40497 shares are not in the exclusive holding of RP Bagla but to the knowledge of petitioner's father, they were shown as jointly held by RP Bagla and HS Bagla in the Register of Members. Again on 01.12.2005 BP Bagla issued a reminder for transmission of shares, with reference to P-7 application. As there was no response from the 2nd respondent, BP Bagla made a complaint to Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the matters complained of, make such order as it thinks fit. Section 398: Application to Tribunal for relief in eases of mismanagement:(1) Any members of a company who complain- (a) that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company; or (b) that a material change not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company has taken place in the management or control of the company, whether by an alteration in its Board of directors, or manager or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, if is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company; -may apply to the Tribunal for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1), the Tribunal is of opinion that the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless that rectification is ordered, BP Bagla cannot get right to those shares exclusively, to be inherited by the petitioner. To claim herself as 'member', the petitioner shall establish the fraud alleged in the company petition and also in the pending civil suit. It is significant to note that the petitioner made application to the Company to transfer the 40497 shares and 500 shares respectively in her name, on 01.03.2014 (Annexure P-26) stating that other heirs of her father BP Bagla have relinquished their rights in those shares in her favour. X. The learned Counsel Mr. Nayyar for the Petitioner in the CP (non applicant) argues that the Petitioner being the legal representative of the deceased BP Bagla is entitled to initiate proceedings under Sec. 397 and 398 as a 'member' and placed reliance upon the judgment of Apex Court inWorld Wide Agencies Pvt. Ltd vs. Margarat T. Desor, AIR 1990 SC 737, to prop-up his contention. In that case, facts show that the petitioners who were the wife and children of late S. K. Desor had obtained Letters of Administration under Sec. 290 of the Indian Succession Act read with Sec. 273 and also permission from the Reserve Bank of India to treat t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt suit." With that finding, the Division Bench set aside the order of trial court rejecting the plaint under Order VII Rule 11 of the Code of Civil Procedure. It is thus clear from a reading of the above legal proposition, where there are many disputed issues to be resolved by the Tribunal before exercising its jurisdiction to direct rectification of the Register of Members, those complicated issues have to be adjudicated by the Civil Court only and the Tribunal cannot decide them in a summary enquiry. The issues of fraud, manipulation of Registers, entitlement of shares exclusively by RP Bagla and BP Bagla, and the issue whether HS Bagla has no joint share in the disputed shares of 40497 and whether the sale of property by Respondent No. 2 is by fraudulent means, are the key issues that require full-dressed trial by taking oral and documentary evidence which cannot be done by the Tribunal. XI. Thus, the petitioner who is not having prima facie title to claim the entire quantum of 40497 shares can at best claim to have interest and title to 500 shares held by her father. We have to examine whether the Petitioner (non applicant) satisfies the minimum eligibility criteria prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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