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Allahabad High Court · body

2020 DIGILAW 913 (ALL)

Moradabad Club (P) Ltd. v. Rajeev Kumar Singhal

2020-06-02

ANJANI KUMAR MISHRA

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JUDGMENT : ANJANI KUMAR MISHRA, J. 1. Heard Sri. Ashish Agrawal for the revisionist and Sri. Ajay Shankar, counsel for the opposite party nos. 1 to 5. 2. The revision is directed against the order dated 18.04.2018 passed by the Civil Judge (Senior Division), Moradabad in Original Suit No. 173 of 2017 whereby an application under Order 7, Rule 11 CPC filed by the revisionist has been rejected. 3. The facts of the case briefly stated are that plaintiffs/opposite parties filed a suit seeking a declaration that certain demands made by the Secretary of the Company, the revisionist, were void ab-initio, illegal, time barred and barred of estoppel, waiver, acquiescence etc. 4. Primarily the plaint case was that plaintiffs who are five in number are members of the Moradabad Club (P) Ltd. which is a Company. Till the year 1999 the membership fee was paid by means of annual subscriptions. Subsequently, a scheme for payment of life time subscription was introduced between years 2000-2005 and this scheme was availed by the plaintiffs. However, vide letters dated 01.07.2015 and 22.04.2016, a demand for outstanding annual membership dues, was raised. These letters also specified that outstanding dues be cleared within 7 days failing which it would be assumed that the addressees did not wish to continue their membership of the Club. 5. In paragraph no. 9 of the plaint, it had been averred that City Magistrate, Moradabad had intervened regarding affairs of the defendant Company, but subsequently, withdrew from such inquiry and that the Company had claimed that during the aforenoted inquiry that the minutes book of the Annual General Meeting held in the year 2012 had been lost. Allegations regarding expiry of the term of the Board of Directors were also raised. It is also the plaint case that the demand made from the plaintiffs/opposite parties, is contrary to the various Board resolutions. 6. The revisionist company, the defendant in the suit, filed an application under Order 7, Rule 11 CPC which as noted above has been rejected by the impugned order. 7. The contention raised by Sri. It is also the plaint case that the demand made from the plaintiffs/opposite parties, is contrary to the various Board resolutions. 6. The revisionist company, the defendant in the suit, filed an application under Order 7, Rule 11 CPC which as noted above has been rejected by the impugned order. 7. The contention raised by Sri. Ashish Agarwal, counsel for the revisionist before this Court is that since, it is admitted that revisionist is a Company, registered under the provisions of Companies Act and the plaintiffs are admittedly its members, the suit before Civil Court was barred in view of the provisions contained in Section 430 read with Sections 241 and 244 of the Companies Act, 2013. 8. It has been submitted that the plaintiffs are members of the revisionist Company, which term has been defined in Section 2(55) of the Companies Act. Its clause (ii) reads as follows:- “(ii) every other person who agrees in writing to become a member of the company and whose name is entered in the register of members of the company.” 9. The above quoted provision encompasses within it, the plaintiff-opposite parties. 10. It is submitted that this plea was raised and has been noticed by the Court below but has wrongly been repelled on the reasoning that nothing of the nature stated in Section 241 of the Companies Act, 2013 finds a mention in the plaint. 11. Sri. Ashish Agrawal, in support of his contentions, has relied upon the judgment of Hon'ble Apex Court Shashi Prakash Khemka (Dead) through Legal Heirs vs. NEPC MICON (Now Called NEPC India Ltd.) 2019 (212) Company Cases 385 and of this Court in Nirbhay Kapoor vs. Kamero Technosys Ltd. and Another, 2019 (4) AWC 3763 . 12. Sri. Ajay Shankar appearing for the contesting opposite party has submitted that the fact and circumstances which necessitated filing of the suit did not constitute a case of oppression and mismanagement. For this reason, the provisions contained in Section 430 read with Section 241 of the Companies Act are not attracted. 13. He has also referred to Section 9 of the Civil Procedure Code to submit that the Civil Court has jurisdiction to try every dispute of a civil nature unless the same is expressly barred or is barred by implication. 14. 13. He has also referred to Section 9 of the Civil Procedure Code to submit that the Civil Court has jurisdiction to try every dispute of a civil nature unless the same is expressly barred or is barred by implication. 14. He has contended that in view of Section 244 of the Companies Act, the Tribunal can be approached under Section 241 only where the members so approaching are at least 100 in number or are members holding 1/10th of the share holdings of the company or constitute 1/5th of the total members. The total membership of the revisionist Club is in excess of 1000 members, while the plaintiffs' in the case at hand are only five. Therefore, they cannot invoke the provisions contained in Section 241 of the Companies Act, 2013. 15. The plaintiffs have no role assigned to them under the Articles of Association insofar as Management of the revisionist is concerned therefore also Section 241 does not apply to them. 16. With regard to the proviso to Section 244, he has submitted that it grants an option to a party not fulfilling the criteria provided in Section 241, to either seek an exemption provided by the proviso or to approach the Civil Court. This is an option to be exercised by the plaintiff and for this reason the suit cannot be said to be barred. He is relied upon National Insurance Co. Ltd. vs. Maston, (2006) 2 SCC 649 which judgment in paragraph 23 observes “the doctrine of election postulates that when two remedies are available for the same relief, the aggrieved party has the option to elect either of them but not both.” The application under Order 7, Rule 11 CPC is therefore rightly been rejected. 17. He further reiterated that bar of Section 241 in the facts and circumstances of the instant case is not absolute. He has lastly submitted that two judgments cited by the counsel for the revisionist are not applicable to the case at hand for the simple reason that they do not deal with the merit of Section 241 of the Companies Act or its proviso. 18. In so far as, the impugned order is concerned in my considered opinion, it has failed to consider the arguments raised in support of application under Order 7, Rule 11 C.P.C. 19. 18. In so far as, the impugned order is concerned in my considered opinion, it has failed to consider the arguments raised in support of application under Order 7, Rule 11 C.P.C. 19. The arguments duly noted in the body of the judgment have been repelled merely on the reasoning that what is stated in Section 241 of the Companies Act, 2013 does not find any mention in the plaint. This reasoning in my considered opinion cannot be accepted. 20. The issue being raised was one of jurisdiction and that suit was barred by the provisions contained in Section 430 read with Section 241 to 245 of the Companies Act. 21. Section 9 of the C.P.C. provides that Civil Court has jurisdiction to decide all disputes unless the same is specifically barred by any law or is barred even by implication. 22. In my considered opinion while dealing with the issue as to whether the suit was barred or not, it is not just the bare plaint allegations which were required to be considered. In fact, the Court was required to consider the pith and substance of the plaint allegations and it was further required to address the issue as to whether the suit, after accepting the plaint allegations on their face value, was barred by implication. This exercise has not been undertaken while passing the order impugned and this is a manifest illegality. This Court, therefore, would be well within it rights to remand the matter back for fresh consideration. However, since the issue has been argued by counsel for the parties at length, this Court considers it appropriate to deal with the issue itself and to record a finding, thereon, so as to shorten the litigation between the parties. For this purpose, it would be necessary to refer to various provisions of the Companies Act, 2013. 23. Section 430 of the Companies Act provides that no Civil Court will have jurisdiction to entertain a suit or proceeding in respect whereof the Tribunal or the appellate tribunal constituted under the provisions of the Companies Act is empowered to determine. 24. The question, therefore, which arises is whether the controversy raised in the suit at hand is one which is within the domain of the Tribunal constituted under the Companies Act. For this purpose, one is required to refer to Section 241 of the Act which reads as follows:- “241. 24. The question, therefore, which arises is whether the controversy raised in the suit at hand is one which is within the domain of the Tribunal constituted under the Companies Act. For this purpose, one is required to refer to Section 241 of the Act which reads as follows:- “241. Application to Tribunal for Relief in Cases of Oppression, etc. (1) Any member of a company who complains that:- (a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company. (b) the 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 the 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, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter. (2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter.” 25. The case of the plaintiffs in the suit is that the demand for arrears of annual subscription are being wrongly raised by the Company. The claim under the circumstances would fall within the ambit of sub-section (a) of Section 241 because as per the plaintiffs, the affairs of the Company are being conducted in a manner prejudicial or oppressive to the plaintiffs, who are members of the Company. The plaintiffs-opposite parties are members being covered by the definition of a member contained in Section 2(55) II of the Act. 26. The plaintiffs-opposite parties are members being covered by the definition of a member contained in Section 2(55) II of the Act. 26. The next question which requires consideration is the submission that Section 241 cannot be invoked by the plaintiffs who are only 5 in number and that Section 241 can be invoked only by persons who constitute one-fifth of the total membership, which in the case at hand is in excess of 1000 members. 27. The persons who can invoke or apply under Section 241 of the Act is provided under Section 244. Sub-Section (1)(b) of Section 244 provides “in the case of a company not having a share capital, not less than one-fifth of the total number of its members.” 28. The case of the opposite party is that on account of the aforenoted embargo, the plaintiffs, who are only 5 in number cannot and have no right to apply under Section 241. 29. The argument appears attractive but the proviso to Section 244 (1)(b) noticed above enables the Tribunal to waive of the aforenoted condition mentioned in Section 241. It is therefore, clear that the bar upon the number of persons required to join, while applying under Section 241 of the Companies Act, is not an absolute bar. 30. Apart from the bar pleaded, the case of the plaintiffs as noticed above, is clearly covered by the provisions of Section 241 and the grievance raised in the suit falls within the ambit of the said section. However, since the bar under Section 241 is not an absolute bar, the suit would be clearly barred under Section 430 of the Act and in holding to the contrary the Court below has committed jurisdictional error. 31. The only other point, which survives for consideration is the plea of learned counsel for the opposite party as regards the doctrine of election and the judgment cited in this regard referred to above. However, in view of what has been held above, I do not agree with the submission of learned counsel for the opposite party that the plaintiffs had two remedies available to them, either to apply under Section 241 or to file a civil suit and that they have opted for availing one of the available remedies and therefore, the plaint is not liable to be rejected. 32. 32. As stated above and since the embargo under Section 244 is not an absolute one, the plaintiff-opposite parties could not have filed a suit especially in view of Section 430 of the Act, because the dispute raised in the suit is one, which can be raised and decided by the Tribunal constituted under the Companies Act. The suit in my considered opinion, could have been filed only, if the waiver had been applied for and had not been granted by the Tribunal and not otherwise. This situation would arise only if an application for waiver was filed and was rejected by the Tribunal and in no other, circumstance. 33. For the reasons given above, the suit filed by the plaintiff-opposite parties was clearly barred by Section 430 of the Companies Act. In my considered opinion, the provisions contained in Section 244 of the Companies Act, are aimed at ensuring that frivolous claims of operation and mismanagement are not raised. 34. For the same reason, the Court below has committed manifest illegality in rejecting the application under Order VII Rule 11 CPC. The order therefore, is manifestly illegal, suffers from jurisdictional error and must, therefore, be set-aside. The Court below has wrongly rejected the application under Order VII Rule 11 CPC, which application, in the facts and circumstances of this case was liable to be allowed. 35. Accordingly, I allow the revision, set aside the impugned order dated 18.04.2018 and allow the revisionist's application under Order VII Rule 11 CPC and reject the plaint.