Pankaj Kamalkishor Maliwal And Ors v. Dattatray Raghunath Kokadwar And Anr

Judgment

1. This civil revision application takes except to the order dated 1st March, 2011 passed by the learned Civil Judge, Junior Division, Nanded, below Exhibit-16 in Regular Civil Suit No.465 of 2010.

2. The Applicants herein are original defendant Nos.1, 2 and 4 in Regular Regular Civil Suit No.465 of 2010. Respondent No.1 is the original plaintiff and the Respondent 2 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. No.2 is original defendant No.3. . It is case of the Applicants that, the plaintiff Dattatraya instituted Regular Civil Suit No.465 of 2010 under the provisions of section 397 and 398 of the Companies Act, 1956 on 25th November, 2010. . It is the case of the applicants that, section 397 and 398 of the Companies Act provides for a remedy to the Directors of the Companies against oppression mismanagement of the company. The remedy provided is by way of an application to the Company Law Board. .

On 28th December, 2010 defendant Nos.1 and 2 i.e. applicants herein, filed their written statement raising objection about jurisdiction of the civil Court to entertain the suit. A separate application at Exhibit-16 was also filed by defendant Nos.1 and 2 praying for deciding the issue about 3 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. jurisdiction of the civil Court as a preliminary issue. On 23rd December, 2010, the plaintiff filed his say to the application Exhibit-16. On 1st March, 2011 learned trial Court pleased to reject the application.

3. While deciding the application, no opportunity of hearing is afforded to the defendants. In the order, learned trial Court observed that for argument on the application, time till 11.00 a.m. was granted to the defendants and as the defendant was not present when the matter was called out, the order was passed without hearing the defendants.

4. Learned senior counsel appearing for the Applicants submitted that the dispute is arising out of provisions of the Companies Act. The provisions of section 397 and 398 of the Companies Act provides remedy before 4 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. the Tribunal if there are allegations about mismanagement or oppression. The special forum is provided under the Companies Act. The sum and substance of the arguments of the learned senior counsel appearing the revision applicants is that since the remedy is provided under the Companies Act and dispute raised by the plaintiff is about the alleged mismanagement and oppression, therefore, the jurisdiction of the civil Court is ousted and the plaintiff should have filed the proceedings before the appropriate forum as provided under the Companies Act. The learned senior counsel invited my attention to the grounds taken in the revision application and also written arguments which are placed on record. He also invited my attention to the various judgments which are referred in the notes of written arguments and also the following judgments are tendered 5 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. across the bar by the learned senior counsel for the revision applicants. (i) "Sahara Fabrics Pvt. Limited and others V/s Kailash Ramprashad Mehra and others" 2006 (1) Bom. C. R. 328. (ii) "Allahabad Bank V/s Canara Bank and another" (2000) 4 SCC 406. (iii)"St. Ulai High School and another V/s Devendraprasad Jagannath Singh and another" 2007 (1) Mh.L.J. 597. (iv) "General Manager, Telecom V/s M. Krishnan and another" (2009) 8 SCC 481. (v) "The Premier Automobiles Ltd. V/s Kamlekar Shantaram Wadke of Bombay and others" (1976) 1 SCC 496. . Therefore, relying upon the grounds taken in the civil revision application, written notes of arguments tendered across the bar and also other documents, learned senior counsel appearing for the revision 6 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. application would submit that the revision application deserves to be allowed.

5. On the other hand, learned counsel appearing for the Respondents submitted that there is a specific statement of the original plaintiff in paragraph 5 and 12 of the affidavit in reply, which is filed before this Court, that he is not pressing prayer clause 1 which pertains to section 397 and 398 of the Companies Act. There is also a specific undertaking to make the proper amendments in the civil suit if the stay is granted by this Court. Learned counsel also invited my attention to the provisions of section 2(94A) of the Companies Act, 1956 as National Company Law Tribunal is constituted under subsection (i) of section 10-FB. Section 10FB is part and parcel of Part 1-B of the Companies Act, 1956 which came into force by Act XI of 2003 with effect from 1st 7 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. April, 2003. It is his further contention that, the Apex Court in the case of "Union of India V/s R. Gandhi, President Madras Bar Association" reported in (2010) 11 SCC 1, has specifically framed whether constitution of National Company Law Tribunal and National Law Company Appellate Tribunal under Part 1-B and 1-C of the Companies Act is valid and after examining the said aspect, it is declared that part 1-B and 1-C of the Act as presently structured, are unconstitutional for the reasons stated in the said judgment. However, it is further observed that, Part 1-B and 1-C of the Act may be made operational by making suitable amendments as indicated in the judgment of the Supreme Court in case necessary steps are taken by the Union Government in accordance with judgment of the Supreme Court, cited supra, and restructuring is done as directed 8 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. by the Supreme Court. Learned counsel further submitted that till date no amendments are made in the Companies Act as observed by the Supreme Court and Company Law Tribunal is not established in accordance with directions of the Supreme Court in the aforesaid pronouncement. Learned counsel also invited my attention to other part of the said judgment and submitted that since there is no alternate forum, the plaintiff cannot be asked to approach the alternate forum. Learned counsel, in support of his contentions, placed reliance on the following judgments: (i) "State of Uttar Pradesh and others V/s Hirendra Pal Singh and others" (2011) 5 SCC

305. (ii) "Raje Viyankatrao Jagjiwanrao Deshmukh V/s Sitalprasad Sivnath" 1965 The Bombay Law Reporter Vol. LXVII 868. 9 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. (iii) "Sahara Fabrics Pvt. Limited and others V/s Kailash Ramprashad Mehra and others" 2006 (1) Bom.C.R. 328. (iv) "Dwarka Prasad Agarwal (D) By LRs. and another V/s Ramesh Chander Agarwal and others" (2003) 6 SCC 220, and (v) "Santosh Poddar and another V/s Kamalkumar Poddar and others" 1992 (3) Bom.C.R. 310. . Learned counsel for the respondents, relying upon affidavit in reply filed in the civil revision application, written arguments placed on record and relying upon the aforesaid judgments, submitted that the civil revision application deserves to be rejected.

6. One of the main grievance raised by the Revision Applicants herein is that, while deciding the application, no opportunity of hearing is afforded to the defendants. On perusal of the impugned judgment and order 10 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. passed by the trial Court I find that the trial Court, in paragraph 3 observed, thus: "3. As per order below Exh.29, the time was granted to the defendants for their argument on exhibit below exh. 16, till 11 a.m. of 1st of March, 2011. Defendant's Advocate when repeatedly called remained absent. Therefore, his argument could not be heard." . Therefore, it is abundantly clear that the order impugned in this revision application is passed without hearing the counsel for the defendants.

7. The another aspect of the matter is that, this matter was heard by this Court on 6th May, 2011. The learned counsel appearing for Respondent No.1 i.e. original plaintiff, on instructions, stated that his client is desirous of deleting prayer (1) in the plaint. Accordingly, this Court granted liberty to Respondent No.1 original plaintiff 11 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. to file affidavit in that regard and move the matter before the learned Vacation Judge. At this juncture, it would be appropriate to refer to the prayers of the plaintiff in the suit, which read thus: "1) The decree to prevent the defendants 1 and 2 to adopt oppressive tactics while running the business of the company formed and registered under the said Act and particularized as under:- Name : Gopal Ginning and Processing Pvt. Ltd. Date of registration:

30.04.2008. Names of directors: The plaintiff and defendant No.1 and 2. Head office : New Mondha, Nanded. kindly kindly be passed in favour of the plaintiff and against the defendants 1 and 2. 2) A decree for declaration that the plaintiff is entitled to participate in the routine corporate matters and entitled to receive profits of the businesses of the company on pro-rata basis over the proportionate basis of the capital share 12 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. of the plaintiff may kindly be passed in favour of the plaintiff and against the defendants 1 and 2. 3) A decree for perpetual injunction restraining the defendant no.3 to allow the defendant no.1 and 2 to withdrawn the amounts from the defendant no.3 bank and prohibit the defendant no.3 to allow to withdraw any amounts from the account of the company. 4) Any other relief may kindly be granted in favour of the plaintiff and against the defendants 1 and 2 to which he found entitled to."

8. The trial Court decided the application filed by the Revision Applicants raising preliminary objection about jurisdiction of the trial Court to entertain the suit filed by the respondent, considering all prayers including the prayer clause (1) of the suit. Now, in this civil revision application, stand is taken by the Respondent No.1 that he 13 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. wish to delete prayer clause (1) from the suit. However, due to pendency of this civil revision application and interim orders passed by this Court he is not able to delete prayer clause (1) from the prayer clauses in the original suit.

9. The Revisional Applicants had no opportunity to put forth their case through arguments since their counsel was absent before the trial Court on the relevant date. They had also no opportunity to put forth their contention on the merits of the suit, in case the prayer clause (1) is allowed to be deleted from the prayers in the suit. Even the findings given by the trial Court would have some bearing if prayer clause (1) in the suit is not there.

9. Certain factual aspects have been addressed for the first time in this civil revision application by the parties. As 14 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. stated herein above, the one of the important grievance raised by the revision applicants is that, they are not heard before passing the impugned judgment and order. The ground which is assigned by the trial Court, as apparent from perusal of paragraph 3 of the impugned judgment is that, the counsel for the applicants was absent for arguments. I am of the opinion that, for the mistake/ negligence of Advocate the party should not suffer and the party should get fair opportunity to address its contentions. In that view of the matter, for the aforesaid two reasons, I feel it appropriate to relegate the parties to the trial Court by restoring application Exhibit-16 to its original file.

10. In the aforesaid background, the impugned judgment and order deserves to be quashed and set aside. Accordingly, same is 15 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. quashed and set aside. Parties are relegated back to the trial Court. All the contentions of the parties are left open to be agitated before the trial Court. The trial Court first consider the prayer of the plaintiffs to delete prayer clause (1) in the suit. The trial Court is futther directed to hear the application afresh and if possible on day to day basis without granting any adjournments to the parties unless there is extraordinary circumstances to grant such adjournment and dispose of the said application as expeditiously as possible, however, within one month from the date of appearance of the parties before the trial Court. Parties are directed to appear before the trial Court on 10th October, 2011 and furnish copy of this order to the trial Court.

11. It is needless to mention that this Court has not expressed any opinion on merits 16 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. of the matter and the matter is remanded back to the trial Court on aforesaid two grounds for fresh hearing.

12. During pendency of this civil revision application, civil application No. 9117 of 2011 is filed by the original plaintiff. However, in view of final disposal of the civil revision application, such application cannot survive. Therefore, same stands disposed of. Interim relief stands vacated in civil revision application as well as in civil application. It will be open to the parties to ask for appropriate interim relief before the trial Court in accordance with law. It is needless to mention that unless the application Exhibit-16 is finally decided, the trial Court should not proceed further to adjudicate the pending suit on merits. The trial Court should send compliance report of the direction of this 17 FARAD CONTINUATION SHEET NO. IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD. CIVIL REVN. APPLN. NO.: 64 OF 2011 Office Notes, Office Memoranda of Coram, appearances, Court’s orders or directions and Registrar’s orders. Court’s or Judge’s orders. CORAM: S. S. SHINDE, J. Court to dispose of the application, within one month from the date of appearance of the parties before the trial Court.

13. Civil Revision Application and also Civil Application No.9117 of 2011 stand disposed of on above terms. Dated:03/10/2011. ans/64 [S. S. SHINDE, J.]