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K. Saravanan, S. Thilagavathy Versus Cosmopolis Properties Pvt. Ltd. Rep. by its Managing Director S. Sidesh Kumar, Bejae Properties Pvt. Ltd., K. Kannappan, K.K. Govindamurthy

2012 (8) TMI 1091 - MADRAS HIGH COURT

Exclusive jurisdiction of the Company Court - Held that:- Having regard to the allegations made in the plaint, the plaintiffs are seeking the relief on the basis of the Memorandum of Understanding entered into between the parties and that cannot be brought within the exclusive jurisdiction of the Company Court and the rights under the Memorandum of Understanding are common law rights and therefore, such rights can be enforced in the ordinary civil courts. - Though in the plaint the main pray .....

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on the basis of the Memorandum of Understanding and hence, the ordinary civil courts have got jurisdiction. - C.R.P.(PD) No. 2009 and 2833 of 2012 And M.P. Nos. 1 and 1 of 2012 - Dated:- 31-8-2012 - R. S. Ramanathan, J. For the Petitioners : M. Venkatachalapathy, S. Xavier Felix For the Respondent : T. V. Ramanujan, R. Venkatavaradhan ORDER Defendants 1 and 2 in O.S.No.410 of 2011 on the file of the I Additional District Munsif, Salem are the revision petitioners in C.R.P. PD No.2009 of 2012. D .....

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2011 to declare the notice dated 19.4.2011 calling for the Board Meeting as sham and nominal as the notice is illegal and against the terms of the memorandum of understanding dated 17.4.2010 and for permanent injunction restraining the defendants in the suit from conducting any Board Meeting in respect of any subject covered under the memorandum of understanding dated 17.4.2010. Respondents 1 and 2 in C.R.P. PD No.2833 of 2012 filed the suit in O.S.No.862 of 2010 for declaration that the acts of .....

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f 2012 submitted that as per the provisions of section 2(11) and 10 of the Companies Act, 1956, in respect of Company matters, the court is the High Court when the cause of action arose within the jurisdiction of the city of Madras and in any other place, the District Court and therefore, the suits filed before the Munsif Court is not maintainable and the Munsif Court has no jurisdiction to entertain the matters relating to Company and therefore, the suits are liable to be struck off. The learne .....

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ts. The learned Senior Counsel further elaborated the arguments by submitting that in the suit in O.S.No.410 of 2011, respondents 1 and 2/plaintiffs seek for declaration that the notice dated 19.4.2011 calling for the Board Meeting is sham and nominal and it is against the terms of memorandum of understanding and also seek for injunction from conducting any Board Meeting and the Companies Act provides for convening of the Board Meetings and as per the Companies Act, Board Meetings are to be conv .....

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nce of any Tribunal, the court has to be approached and as far as the Companies Actis concerned, the court is "the court" as defined under section 2(11) and 10 of the Companies Act which is the High Court or District Court and therefore, the suit filed by respondents 1 and 2 before the Munsif Court is not maintainable. In support of his contention, the learned Senior Counsel relied upon the following judgments:- 1. Santosh Poddar & Another V. Kamalkumar Poddar & Others (CDJ 92 .....

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nsel Mr.Venkatachalapathy, submitted that under the provisions of the Companies Act, in respect of any matters relating to Company, only the Company Court has got jurisdiction to entertain any suits or petitions and the Munsif Court has no right to entertain any application relating to Company in respect of mattes arising under the Companies Act and therefore, the suit is not maintainable. He further submitted that in C.R.P.PD No.2833 of 2012, the revision petitioners seek to set aside the order .....

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usive power in the matter of transfer of shares and therefore, a suit praying for permanent injunction restraining the revision petitioners and any other from selling or transferring their share in the first plaintiff Company comes within the scope of section 111 of the Companies Act and therefore, such a relief can be prayed for only before the Company Court and not before the ordinary civil court and hence, the District Munsif Court has no jurisdiction to entertain the suit. He also relied upo .....

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f 2010, respondents 1 and 2 seek for implementation of commitment undertaken by the revision petitioners and another as per the memorandum of understanding dated 17.4.2010 and for further declaration that they should not go back from the terms of the memorandum of understanding or should not do any act which amounts to violating the terms of the memorandum of understanding and in O.S.Nos.410 of 2011, they also seek for declaration that the notice calling for the Board Meeting which is against th .....

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of the civil court is excluded only in respect of any matter which the Tribunal or the appellate authority constituted by the Act is empowered to determine by or under the Companies Act and or in law for time being in force and therefore, in respect of any matter which does not fall within the exclusive domain of the Company Court, the same can be filed before an ordinary civil court. He further submitted that though section 10GB was passed by the Parliament and has been brought into effect, th .....

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submitted that in respect of reliefs which are available under the common law, the civil court has got jurisdiction and is also made clear in various judgments having regard to the scope of section 9 of the Code of Civil Procedure and unless the relief sought for falls exclusively within the powers of the Company Court or Tribunal, the civil court has got jurisdiction to entertain a suit and also relied upon the following judgments in support of his contention:- 1) Kavita Trehan v. Balsara Hygie .....

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suits. Section 9 of the Code of Civil Procedure gives powers to the civil courts to try all suits of civil nature except the suits of which their cognizance is either expressly or impliedly barred. Section 9 reads as follows:- "The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred." 7. The scope of section 9 has been elaborately discussed in the .....

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form of remedy; there, unless the statute contains words necessarily excluding the common law remedy, the plaintiff has his election of proceeding either under the statute or at common law. Then there is a second class, which consists of those cases in which a statute has created a liability, but has given no special remedy for it; there the party may adopt an action of debt or other remedy at common law to enforce it. The third class is where the statute creates a liability not existing at com .....

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unals the civil court's jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. (2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particul .....

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liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not. (3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the tribunals. (4) .....

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the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry. (7) An exclusion of the jurisdiction of the civil court is not readily to be inferred unless the conditions above set down apply." 9. In the judgment in Rajastha .....

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) or Section 2-A of the Industrial Disputes Act, 1947. (2) Where, however, the dispute involves recognition, observance or enforcement of any of the rights or obligations created by the Industrial Disputes Act, the only remedy is to approach the forums created by the said Act. (3) Similarly, where the dispute involves the recognition, observance or enforcement of rights and obligations created by enactments like Industrial Employment (Standing Orders) Act, 1946 - which can be called 'sister .....

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Disputes Act. Otherwise, recourse to civil court is open. (4) It is not correct to say that the remedies provided by the Industrial Disputes Act are not equally effective for the reason that access to the forum depends upon a reference being made by the appropriate Government. The power to make a reference conferred upon the Government is to be exercised to effectuate the object of the enactment and hence not unguided. The rule is to make a reference unless, of course, the dispute raised is a t .....

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in case of industrial disputes covered by Section 2-A of the Industrial Disputes Act. This would go a long way in removing the misgivings with respect to the effectiveness of the remedies provided by the Industrial Disputes Act. (6) The certified Standing Orders framed under and in accordance with the Industrial Employment (Standing Orders) Act, 1946 are statutorily imposed conditions of service and are binding both upon the employers and employees, though they do not amount to 'statutory pr .....

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lethora of procedural laws and appeals upon appeals and revisions applicable to civil courts. Indeed, the powers of the courts and tribunals under the Industrial Disputes Act are far more extensive in the sense that they can grant such relief as they think appropriate in the circumstances for putting an end to an industrial dispute." 10. After analysing all those judgments, in the decision reported in (2009) 4 SCC 299, the Honourable Supreme Court held as follows:- "An assumption on th .....

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e reading of the above judgment, it is clear that whenever a person has got grievance of a civil nature, he has got a right to institute a civil suit in a competent civil court and the civil court can entertain such suits unless the suit is expressly or impliedly barred by any statute. Further, it is well settled that there is a presumption that the civil court has jurisdiction and the ouster of civil court's jurisdiction is not be readily infered and a person may taking a plea contra must e .....

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"A bare perusal of the aforementioned provisions leaves no manner of doubt that thereby the jurisdiction of the civil Court has not been ousted. The civil Court, in the instant case, was concerned with the rival claims of the parties as to whether one party has illegally been dispossessed by the ouster or not. Such a suit, apart from the general law, would also be maintainable in terms of Section 6 of the Specific Relief Act, 1963. In such matters the Court would not be concerned even with .....

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o relied upon wherein it has been held as follows:- "... The purpose of Section 2(11) read with Section 10 is only to enable the shareholders to decide as to which court they should approach for remedy, in respect of that particular matter. It is difficult to construe the definition clause as one conferring jurisdiction, exclusive or otherwise; and even Section 10 refers only to "the court having jurisdiction under this Act", i.e., where such jurisdiction is conferred by the Act, .....

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edundant. It may be that where the Act specifies the company court as the forum for complaint in respect of a particular matter, the jurisdiction of the civil court would stand ousted to that extent. This depends, as already noticed, on the language of the particular provisions (like Sections 107, 155, 397 and others) and not on Sections 2(11) and 10..." 14. Therefore, we will have to see whether the civil courts have got jurisdiction to entertain the plaint having regard to the allegations .....

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morandum of understanding till all the disputes are resolved as per the memorandum of understanding. In O.S.No.862 of 2010, the prayer is to declare that the acts of defendants 1 to 3 in going back upon and in violating the terms of the memorandum of understanding is illegal and arbitrary and for mandatory injunction directing defendants 1 to 3 to comply with the commitment as per the memorandum of understanding and for injunction restraining defendants 1 to 3 from selling or transferring their .....

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re coming within the exclusive jurisdiction of the Company Court. 16. Before going into that aspect, I want to make it clear that having regard to the judgments referred to above viz., (2009) 4 SCC 299 and AIR 2003 SC 2696 cited supra, the civil courts have got jurisdiction to entertain suits of civil nature unless the same is expressly or impliedly barred by statute. Further, a reading of section 2(11) of the Companies Act makes it clear that the court having jurisdiction under the Companies Ac .....

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f the Company Court, the civil court has got jurisdiction. 17. With this background, let me consider the judgments relied by the revision petitioners. In Maharaja Exports v. Apparels Export Promotion Council (CDJ 1985 Delhi High Court 189), it is held that the civil court has got jurisdiction in respect of matters which are not coming within the exclusive jurisdiction of the court and in the said judgment it is held as follows:- "Section 10 of the Companies Act defines the jurisdiction ' .....

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ntained in the 1956 Act in regard to management and conduct of a company's affairs, including even important internal matters of administration, the scope for interference by the civil court may have become more limited, but the power has not at all been taken' away. It has been rightly observed in a case reported as R. Prakasam v. Sree Narayana Dharma Paripalanayogem; 1980 Company cases page 611(2) that except in cases where the Companies Act 1956 confers jurisdiction on the Company Cou .....

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ved by a bare majority of share holders". Similar view was taken in a judgment reported as Panipat Woollen and General Mills Company Ltd. and another v. P.L.Kaushik and others; 1969 Company Cases 349(3). While interpreting the provisions of Section 9 of the Code of Civil Procedure viz.-a-viz the Companies Act, during the course of the Judgment it was observed as under : "under Section 9 of the Code of Civil Procedure 1908, Civil Courts have jurisdiction to try all suits of a civil natu .....

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rovision which bars the Civil Courts either expressly or by implication from trying such a suit." In the present suit also besides other reliefs the plaintiff has sought the declaration that all the 27 members of the existing executive committee are not entitled to hold the respective offices in view of the judgment of this court and further that the 18 members of the executive committee which have retired by rotation are not entitled to continue in office as members of the executive commit .....

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ferred to is the Court as set out in section 10. When under the Companies Act a section refers to an application to a Court on any matter relating to a Company other than an offence under the Companies Act, section 10 provides that the Court having jurisdiction under the Act shall be the High Court, except to the extent to which such jurisdiction is conferred on any District Court by a Notification issued by the Central Government under section 10(2). So that whenever there is any reference unde .....

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reditors or its members, the Court may, on the application of the company or a creditor or a member of the company, order a meeting of the creditors or members to be called, held and conducted in such manners as the Court directs. The meaning of the word 'Court' here is as provided in section 2(11) read with section 10 of the Companies Act. It will therefore be the High Court, in the absence of any Notification under section 10(2). Similarly under section 397 of the Companies Act, as it .....

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rt, as prescribed by the Companies Act, these proceedings will have to be taken before the concerned High Court or the District Court if there is any Notification relevant to that application and/or proceedings. 13. It is however, quite clear from a reading of these two sections that there is no ouster of the jurisdiction of a Civil Court in all cases where the provisions of the Companies Act may be attracted. It is only in respect of these proceedings which are expressly contemplated under the .....

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SC 3153, the Honourable Supreme Court dealt with the provisions of sections 155 and 446 of the Companies Act and held that unless the jurisdiction is expressly or impliedly barred under a statute, for violation or redress of any such right, the civil court would have jurisdiction and there is nothing under the Companies Act expressly barring the jurisdiction of the civil court and only in cases where certain powers are conferred on the Company Court, the jurisdiction of the civil court is implie .....

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ty under the Companies Act which is not contemplated under the common law and in respect of such matters, the application would lie only before the Company Court and ordinary civil court has no jurisdiction. 21. In the judgment reported in 1995 Supp. (3) SCC 81, the Honourable Supreme Court was considering the scope of section 9-A of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 and having regard to the provisions of that section, it was held that ordinar .....

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Tribunal constituted by the Companies Act and in respect of other matters, the civil court has got jurisdiction. As a matter of fact, under section 111 of the Companies Act, in cases of refusal by a Company to register the transfer or the transmission of shares by operation of law, the transferor or transferee may appeal to the court against any refusal to register the transfer or transmission and in respect of that power, the civil court has no jurisdiction and the Company Court alone has got j .....

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be ordered by the court under section 388B having regard to the circumstances elaborated in that section, when the Central Government forms an opinion for stating a case against the person regarding the conduct and management of the affairs of the Company, and may refer the same to the Tribunal or court requesting the Tribunal or court to enquire into the case and record a decision. 25. Similarly, under section 391, 392, 397 and 398, in the case of entering into a compromise or arrangement with .....

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has no jurisdiction and in respect of other matters, the ordinary civil court's jurisdiction is not excluded. 26. Further, under section 122 of the Companies Act, a contract with the Company to take up and pay debentures of the Company, may be enforced by a decree of specific performance and specific performance suit can be filed only before the civil court and therefore, it cannot be contended that in respect of all matters relating to Companies, only the Company Court has got jurisdiction .....

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