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2020 DIGILAW 517 (JK)

Kashmir Chamber of Commerce v. Zubair Mahajan

2020-10-01

ALI MOHAMMAD MAGREY

body2020
ORDER This appeal has been preferred against the order dated 02.09.2020 passed by the learned 4th Additional District Judge, Srinagar, in an application for grant of interim relief filed by the plaintiffs alongside the civil suit titled Zubair Mahajan & ors. v. Kashmir Chamber of Commerce & Industry and ors., bearing File No. 90/Misc., whereby the trial court has allowed the prayers for interim relief made by the plaintiffs. The operative portion of the order reads as under: “66. Thus considering all pros and cons of the case, this court finds that the application filed by the plaintiffs for temporary injunction deserves to be allowed. Thus till the disposal of the suit, the operation of decisions taken by the defendant no. 2 to 7 / non-applicant no. 2 to 7 in the meeting held on 19.09.2019 whereby term of the defendant no. 2 to 7 was extended is kept in abeyance and also the defendants no. 2 to 7 are further restrained in using/operating the bank accounts having no. SB- 0005040100009440 and SB-0005040100041830 in the J and K Bank Branch Residency Road Srinagar either themselves or through their agents / employees in any manner till the final disposal of the suit. However only for purpose of the payment of salary of the staff / employees of the defendant no. 1, payment for purposes of electricity bills / telephone bills and rental charges, if obliged to be paid by the defendant no. 1, the defendant no. 7 is authorized to operate only one of the aforementioned bank accounts of the defendant no. 1 under his name and signature with due maintenance of each and every withdrawal to be so made by him and the monthly record of the same shall be furnished by him in this case before this court till any further / fresh order / direction to the contrary is passed by this court during the pendency of this suit. A copy of this order shall be provided by the defendant no.7 to the concerned bank for the compliance on their part. Nothing observed herein shall be taken as impacting the adjudication of the suit on merits but was meant to be only for the purpose of disposal of the application at hand.” 2. A copy of this order shall be provided by the defendant no.7 to the concerned bank for the compliance on their part. Nothing observed herein shall be taken as impacting the adjudication of the suit on merits but was meant to be only for the purpose of disposal of the application at hand.” 2. Briefly put, the respondents herein, claiming to be active members of Kashmir Chamber of Commerce & Industries (KCC&I), a non-government public company, incorporated under the Indian Companies Act, registered with the Registrar of Companies, Srinagar, under Registration no.000041 dated 27.04.1937 with CIN no.U91110JK1937NPL00041, having its registered office at Residency Road, Srinagar, Kashmir, filed a suit for declaration and permanent mandatory injunction before the trial court against the appellants herein with the following prayers: “31. It is, therefore, prayed in the above mentioned facts and circumstances that this Hon’ble court may be pleased to pass: A. A Decree in the nature of declaration in favour of the plaintiffs and against the defendants, declaring the decision dated 19.09.2019 taken by defendants 2 to 7 in the emergency meeting held in the office of defendant no.1 granting extension / continuation of the term against the posts of office bearers as illegal, null and void and against the provisions of the Constitution of the defendant no.1 and consequently declaring all the decisions taken by the defendants with effect from expiry of one year term on 29.09.2019 as illegal and non-est in the eyes of law. B. A decree in the nature of permanent, prohibitory injunction in favour of the plaintiffs and against the defendants, restraining the defendant nos. 2 to 7 from taking any decision in respect of defendant no.1, claiming, projecting, acting, working and further continuing and holding the posts of office of KCC&I in the capacity of President, Sr. Vice President, Jr. Vice President, Secretary General, Joint Secretary General and Treasurer. Further restraining the defendants nos. 2 to 7 from dealing in any manner whatsoever with moveable and immoveable properties/assets including bank accounts and allied security either personally or through agents in any manner whatsoever. Vice President, Jr. Vice President, Secretary General, Joint Secretary General and Treasurer. Further restraining the defendants nos. 2 to 7 from dealing in any manner whatsoever with moveable and immoveable properties/assets including bank accounts and allied security either personally or through agents in any manner whatsoever. C. A decree in the nature of mandatory injunction in favour of the plaintiffs and against the defendants, directing appointment of Election Committee for holding fresh elections of the office bearers of KCC&I in accordance with the Memorandum and Articles of Association of KCC&I. D. A decree order or direction be issued against the defendants and a committee consisting of past Presidents be constituted in order to run the day to day affairs of the defendant no.1 till the time new elected body takes over with a further direction to them to scrutinize all the actions, accounts and related activities undertaken by defendants 2 to 7 from the date they completed their term of one year till date. E. Pass any such order as this Hon’ble court deems proper in the circumstances of the case against the defendants and in favour of the plaintiffs.” 3. It is seen that in terms of Article 12 of the Articles of Association of the Company, the administration of its affairs is vested in a body, called Committee, comprising of President, Senior Vice President, Junior Vice President, Secretary General, Joint Secretary and Treasurer as its office bearers. Clause (iii) of Article 12 provides that the term of the Committee shall be for a period of one year and the election to elect the Committee and office bearers shall be held by or before 30th September each year. Appellants 2 to 7 herein were elected as such officer bearers pursuant to the elections held in September, 2018. In July, 2019, a notice for the conduct of election to the 21- Member Executive Committee and consequently the election of office bearers of the Chamber for the year 2019-20 was issued. However, on account of certain political developments in the State on 05.08.2019 and the fall out thereof, the election was not held. In July, 2019, a notice for the conduct of election to the 21- Member Executive Committee and consequently the election of office bearers of the Chamber for the year 2019-20 was issued. However, on account of certain political developments in the State on 05.08.2019 and the fall out thereof, the election was not held. Instead, on 19.09.2019, it appears, the Senior Vice President and Secretary General, elected pursuant to the 2018 election, alongwith some 14 other persons, claimed to be Executive Members, held a meeting and passed resolutions, inter alia, deferring the 85th Annual General Meeting and extending the term of Executive Committee and office bearers elected in September 2018 for one year from the date of expiry of its term till ending September, 2020. The case of the respondents-plaintiffs in their plaint is that this is not permitted by the Articles of Association of the Chamber and that the above decisions and the steps taken by the office bearers thereafter are all illegal. Hence they filed the suit seeking the reliefs quoted hereinabove. 4. Alongwith the suit, the respondents filed an application for grant of interim relief. 5. The trial court, while issuing notice in the main suit as well as in the application for grant of interim relief, on 20.06.2020 ordered as under: “…In the meanwhile, subject to objections from other side, until next date of hearing, the non-applicants 2 to 7 are temporarily restrained from taking any decision in respect of defendant No.1 and also restrained from operating the bank account numbers No. SB-0005040100009440 and SB-0005040100041830 maintained by J&K Bank branch Residency road Srinagar. Defendants/non-applicants No.2 to 7 are at liberty to seek modification/cancellation of this order before the due date fixed…”. The case was ordered to be listed on 27.06.2020. In the interregnum, the respondents-plaintiffs appear to have made an application under O. XL CPC read with Section 151 CPC seeking appropriate direction from the Court. This application was taken up by the trial court on 25.06.2020 and, while issuing notice for objections, the trial court passed an order, the operative part whereof is extracted below: “…In the meanwhile the non-applicants No. 2 to 7 are directed to preserve the record as on today and not to meddle with any document, emails, communications and transactions issued by or in favour of the defendant No.1/Non-applicant no.1 till date….”. The aforesaid application was ordered to be listed on 27.06.2020d alongwith the main suit. 6. The order passed by the trial court on 27.06.2020 reveals that defendant no.1 and defendants 2 to 7 had filed their respective written statements. It further reveals that, in the meantime, an application was filed by some other members of the KCC&I for impleadment as party- plaintiffs in the suit. Apart from that, the plaintiffs had also moved an application for appointment of receiver with respect to the Company. The order mentions that copies of these applications were furnished to the learned counsel for defendants 2 to 7 for their objections. The file was ordered to come up for arguments on interim application as well as other miscellaneous applications on 30.06.2020. Meanwhile orders dated 20.06.2020 and 25.06.2020 were ordered to continue till next date of hearing. On account of Covid-19 and the lockdown, on 30.06.2020, no effective hearing could take place. However, order dated 10.07.2020 passed by the trial court reads that arguments in the interim application and other miscellaneous applications were concluded on the said date and the trial court ordered the learned counsel for the parties to submit their written arguments and law points by or before 11.07.2020. Inbetween the lockdown on account of Covid-19 intervened. Ultimately, the trial court announced the detailed order on 02.09.2020, the operative portion whereof has been quoted at the very outset of this order, whereby the trial court disposed of the interim application. Curiously, nothing was said in the said order about the application for impleadment and application for appointment of receiver which by order dated 10.07.2020 were shown to have been heard, too. However, by a separate order dated 02.09.2020 passed in the main suit, the trial court ordered that perusal of the file reveals that in the application for appointment of receiver till date non-applicants have not filed the objections. It was ordered to be put for filing of objections in the application for appointment of receiver and for announcing order in the application for impleading as plaintiffs on 22.09.2020. 7. It was ordered to be put for filing of objections in the application for appointment of receiver and for announcing order in the application for impleading as plaintiffs on 22.09.2020. 7. Be that as it may, in the written statement filed on behalf of defendant no.1, there was a specific plea taken that the suit against it was not maintainable as, according to the plaintiffs, defendant no.1 was a company incorporated under Indian Companies Act, and that any controversy which relates to any company, cannot be dealt with by a civil court. It was averred that the civil court has no jurisdiction to deal with the issues raised in the plaint under the Companies Act, and that the civil court has no jurisdiction to grant any injunction. Defendants 2 to 7 in the suit filed a separate written statement, adopting therein the written statement filed on behalf of defendant no.1. 8. The above averment about the lack of jurisdiction of civil court taken on behalf of defendant no.1 and adopted by the other defendants in the suit has been stated by the trial court in para 5 of the impugned order. 9. It is seen that instead of framing an issue – whether preliminary or regular in nature – in the main suit and hearing the parties in that regard to determine such issue, as is provided by law in this behalf, the trial court has proceeded to return a finding on this score while deciding the application for interim relief. This becomes clear from a reading of paras 22 onwards of the impugned order. This Court is of the view that this was not the proper procedure adopted by the trial court. Reference in this regarding may be made to Order XIV, Rule 1 sub-rule (1) and Rule 2 sub-rule (2) CPC. Rule 1(1) of Order XIV of the CPC says that issues arise when a material proposition of fact or law is affirmed by the one party and denied by the other. In the instant case, as said above, defendants took a specific proposition of law about the lack of jurisdiction of the trial court. Rule 1(1) of Order XIV of the CPC says that issues arise when a material proposition of fact or law is affirmed by the one party and denied by the other. In the instant case, as said above, defendants took a specific proposition of law about the lack of jurisdiction of the trial court. Sub-rule (2) of Rule 2 of the aforesaid Order of the CPC says that where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to the jurisdiction of the Court, or a bar to the suit created by any law for the time being in force and for that purpose may, if it thinks fit, postpone the settlement of the other issues until after that issue has been determined, and may deal with the suit in accordance with the decision on that issue. So, once an averment was taken about the lack of jurisdiction of the trial court and bar created by the Companies Act, and that it was likely that the case or any part thereof could be disposed of on such issue of law, it was incumbent upon the trial court to frame an issue in relation thereto as a preliminary issue and return a finding thereon, instead of returning a finding on such objection/averment while deciding the application for interim relief. 10. Furthermore, as mentioned earlier, whereas in terms of order dated 10.07.2020, the application for impleadment as party plaintiffs filed by some other members of the company and the application for appointment of receiver are shown to have been heard, in the subsequent order dated 22.09.2020 it is recorded that insofar as application for appointment of receiver is concerned, objections thereto have not been filed and insofar as the other application for impleadment as plaintiffs is concerned, it is recorded to be listed for announcing the order on 22.09.2020. The appropriate course would have been to decide the application for impleadment simultaneously. 11. The appropriate course would have been to decide the application for impleadment simultaneously. 11. Be that as it may, in light of the above, this Court is of the view that it would be appropriate to require the trial court to frame an issue with regard to the jurisdiction of the court, treat it as a preliminary issue and proceed to hear and determine the same in accordance with law, and, thereafter, to consider the final disposal of the application for interim relief and application for appointment of receiver filed by the plaintiffs. Consequently, to the above extent the order impugned in this appeal deserves be set aside. However, the lis needs to be preserved by making appropriate directions. 12. Accordingly, this appeal is disposed of and the impugned order to the extent indicated above is set aside. However, with a view to preserving the lis till the trial court frames the requisite issue(s), determines the same and passes fresh orders on the application(s) for grant of interim relief, it is ordered that the orders of interim stay passed by the trial court on 20.06.2020 and 25.06.2020 shall continue to be in operation. This disposes of all the connected CMs, if any, pending. 13. The Registry is directed to immediately return the record to the trial court alongwith a copy of this order. The parties are directed to appear before the trial court on 08.10.2020. 14. No order as to costs.