COMPANY LAW : The bar of jurisdiction of civil courts u/s 430 of CA 2013 shall not apply where parties relegated out of civil courts will be left sans adequate remedy or remediless.

HIGH COURT OF DELHI
Videocon Industries Ltd.
v.
Ram Raj Bhandari
CHANDRA DHARI SINGH, J.
RFA NO. 454 OF 2022
DECEMBER 23, 2022

The fundamental principle behind the bar on the jurisdiction of the civil court is that the there must adequacy of remedy being available to the parties who are relegated out of the civil Courts and they must not be rendered remediless. In case the company(TCL in the instant case) has been dissolved by the NCLT, there exists no corporate entity which can be proceeded under the Companies Act, 2013 and similarly, there exists no members of such a company. Therefore, appellants cannot approach NCLT and seek remedies under sections 39, 46, 58, 241 to 243 against a company which has been dissolved.

PER COURT

• There is an inherent right in every person as per Section 9 of the Code of Civil Procedure to bring a civil suit setting forth as to how the plaintiff’s legal rights have been violated for which he/she is seeking the indulgence of the Court and every interpretation must be made by which the jurisdiction of the civil Court is not readily ousted. Further, in case of suspicion, an interpretation should be made which leans in favour of the jurisdiction of the civil Court

• By way of Section 430 of the Act, 2013, a company has an existing remedy to approach the NCLT in terms of Section 241 read with Section 244 of the Act, 2013 and consequently, the Tribunal has been given wide powers to pass such orders as it may think fit in terms of Section 242 of the Act, 2013. Chapter XXVII deals with the constitution of the Tribunals. Powers have been given to the Tribunal to ‘pass such orders thereon as it thinks fit’ in terms of Section 420 of the Act, 2013. Moreover, under Section 424 of the Act, 2013 the Tribunal also has the same powers and functions as are vested with a Civil Court. Section 425 of the Act, 2013 has vested with the Tribunal the power to punish for contempt which was not available with the Company Law Board. In various ways, the NCLT is not merely exercising limited jurisdiction under the new Act, but is also vested with inherent powers and powers to punish for contempt. The NCLT is also empowered to determine as to whether rectification of the register is required to be carried out owing to such allotment, or cancellation of allotment ordered, if any. Section 39 of the Act, 2013 deals with the allotment of securities by a Company on the satisfaction of certain conditions and Section 46 inter alia pertains to issuance of duplicate shares on satisfaction of certain conditions as have been stated therein.

• The bulk of the dispute between the parties pertain to the ownership of the 50.21% shareholding in TCL and the validity of the meeting of the board of directors which is alleged to have taken place on 27th August 2013. Having perused the scheme of the Act, 2013, on the first sight though it appears that the disputes at hand between the parties can be adjudicated by the NCLT but such a decision would render the Appellants herein remediless as TCL has been dissolved and is no more in existence.

• The fundamental principle behind the bar on the jurisdiction of the civil court is that the there must adequacy of remedy being available to the parties who are relegated out of the civil Courts and they must not be rendered remediless. Among other relevant sections of the Companies Act, 2013 governing the dispute at hand, a glance at Section 241 read with Section 244 requires the following essentials to be satisfied before an application can be made to the Tribunal: a) In case the company does not have a share capital, an application under Section 241 can be made by not less than 1/5th of the total number of its members. b) In case the company does have a share capital, an application under Section 241 can be made by not less than 100 members or not less than 1/10th of the total number of its members, whichever is less; or any member(s) of the company holding not less than 1/10th of the issued share capital of the company.

• In case the company has been dissolved by the NCLT, there exists no corporate entity which can be proceeded under the Companies Act, 2013 and similarly, there exists no members of such a company. Therefore, such provisions cannot be said to be applicable to the disputed governing TCL.

• Therefore, there is no merit in the objection of the Respondents that the subsequent liquidation of TCL will have no bearing on the present case. No corporate entity now exists in the form of TCL which may be governed by the provisions of the Companies Act, 2013. Hence, it cannot be said that the suit filed by the plaintiff companies was barred under Section 430 of the Companies Act, 2013.

• In view of the reasons aforesaid, it is to be held that the trial court has erred in rejecting the plaint as being barred by Order VII Rule 11(d) of the Code inasmuch as the suit was not barred under Section 430 of the Act, 2013. The present appeal succeeds and the impugned order dated 21st March 2022, passed by the learned trial court is set aside. The suit is restored to the file. Considering the facts and circumstances of the case, there shall be no order as to costs.

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The bar of jurisdiction of Civil Courts us 430 of CA 2013 shall not apply where parties relegated out of Civil Courts without remedy

 

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