CR No. 7701 of 2009 1 In the High Court of Punjab and Haryana, Chandigarh. CR No. 7701 of 2009 (O&M) Date of Decision: 31.08.2010 Pawan Goel ....Petitioner Versus Basudev Garg and others ....Respondents. Coram:- Hon'ble Mr. Justice Alok Singh 1.Whether reporters of local news papers may be allowed to see judgement ? 2. To be referred to reporters or not ? 3. Whether the judgement should be reported in the Digest ? Present: Mr. A.S. Virk, Advocate for the petitioner. Mr. Anil Malhotra, Advocate for the respondents. ... Alok Singh, J. Defendant No.2 - petitioner has invoked jurisdiction of this Court under Article 227 of the Constitution of India, assailing the order dated 10.1.2009 passed by the Civil Judge, Junior Division, Kurukshetra, thereby dismissing the application filed on behalf of the defendants under Order 7 Rule 11 CPC, seeking rejection of the plaint. Brief facts of the present case, inter-alia, are that plaintiff – respondent No.1 herein filed Civil Suit No.295 of 2008 (Basudev Garg Vs. MKG Milkfood Ltd. and other), seeking following reliefs: - “a) Pass a decree of declarations in favour of the plaintiff and against the defendants declaring the purported Board meetings CR No. 7701 of 2009 2 of the defendant No.1 Company allegedly held on 15.3.2008, 12/4/2008 and 2.5.2008 as a nullity, invalid, void and nonest in the eyes of law. b) pass a decree of declaration in favour of the plaintiff and against the defendants declaring that defendant No.3 is not a director on the Board of defendant No.1 having vacated office in February, 2007 under Section 283(1)(g) of the Companies Act in terms of Form No.32 filed in May, 2007; c) pass a decree of declaration in favour of the plaintiff and against the defendant declaring the illegal appointment of defendants No.4 - 9 as additional directors of the defendant No.1 Company as a nullity, invalid, void and nonest in the eyes of law; d) pass a decree of declaration in favour of the plaintiff and against the defendants declaring that the allotment of the Director Identification No.3(DIN 3) to the defendant No.3 be declared as void. e) pass a decree of declaration in favour of the plaintiff and against the defendants declaring the illegal removal of the plaintiff and Mr. M.S. Ayer, Mr. Rangaswami Sunder Raj and Shashikant Vishnu Joshi as directors of the Defendant No.1 Company as a nullity, void and nonest in the eyes of law; f) pass a decree of declaration in favour of the plaintiff and against the defendants declaring the Board comprising of the plaintiffs, Mr. M.S. Ayer, Mr. Rangaswami Sunder Raj and Shashikant Vishnu Joshi, defendant No.2 as directors of the CR No. 7701 of 2009 3 Defendant No.1 Company is the legally constituted Board of defendant No.1 Company; g) pass a decree of cancellation of the illegal Form No.32 filed by the defendant No.2 with respect to the illegal appointment of defendants No.4 – 9 with the office of the Registrar of Companies, NCT of Delhi and Haryana. h) pass a decree of cancellation of the illegal Form No.32 filed by the defendant No.2 with respect to the illegal removal of Mr. M.S. Ayer as Director with the office of the Registrar of Companies, NCT of Delhi and Haryana. i) pass a decree of cancellation of the illegal Form No.32 filed by the defendant No.2 with respect to the illegal removal of Mr. Rangaswami Sunder Raj as Director with the office of the Registrar of Companies, NCT of Delhi and Haryana; j) pass a decree of cancellation of the illegal Form No.32 filed by the defendant No.2 with respect to the illegal removal of Mr. Vishnu Joshi as Director with the office of the Registrar of Companies, NCT of Delhi and Haryana. k) pass a decree of cancellation of the illegal Form No.32 filed by the defendant No.2 with respect to the illegal removal of the plaintiff as Director with the office of the Registrar of Companies, NCT of Delhi and Haryana. l) pass a decree of permanent injunction in favour of the plaintiff and against the defendants No.3 to 9 from holding themselves to be the directors of the defendant No.1 Company. m) pass a decree of permanent injunction in favour of the CR No. 7701 of 2009 4 plaintiff and against the defendants from taking any action without the authority of the Board of Directors of the defendant Company comprising of plaintiff, defendant No.2, Mr. M.S. Ayer, Mr. Rangaswami Sunder Raj and Shashikant Vishnu Joshi. n) pass a decree of permanent injunction in favour of the plaintiff and against the defendants restraining them from holding any meeting without the authority of the Board of Directors of the defendant Company comprising of plaintiff, defendant No.2, Mr. M.S. Ayer, Mr. Rangaswami Sunder Raj and Shashikant Vishnu Joshi. o) pass any other order(s) in the interest of justice.” The main contentions of the plaintiff in the plaint are that defendant No.2 – Pawan Goel is a shareholder and the Director in the defendant No.1 – Company; defendants No.3 to 9 have illegally and purportedly been appointed on the Board of Directors of defendant No.1 by defendant No.2 fraudulently and in flagrant violation of law, especially the Companies Act, 1956 (hereinafter referred to as the 1956 Act) and Articles 92, 93, 97 and 101 of the Articles of Association, and without giving any notice to the plaintiff or the other Directors, without convening any legal or valid meeting of the Board of Directors of defendant No.1 – Company; defendants No.10 and 11 are practicing Company Secretaries, who in collusion with defendants No.2 and 3 have participated in the fraud. According to the plaintiff, the acts of defendants No.2 and 3 are fraudulent and have been committed with a view to prejudice the plaintiff and to cast a doubt on the lawful management of the defendant Company. CR No. 7701 of 2009 5 The alleged resolutions dated 15.3.2008, 12.4.2008 and 2.5.2008 are false, fabricated, fraudulent and void ab initio. Forms No.32 being illegal and nonest are liable to be cancelled. Defendants Nos. 4 to 9 are not directors of the defendant Company and the plaintiff is entitled to a declaration to that effect. The alleged purported removal of Mr. M.S. Ayer, Mr. Rangaswami Sunder Raj and Shashikant Vishnu Joshi and the plaintiff is illegal and void and the plaintiff is entitled to a declaration to that effect. In the suit, defendant No.2 – petitioner along with other defendants moved an application under Order 7 Rule 11 CPC contending therein that the suit is not maintainable in the eyes of law. For grievances raised in the suit, special remedy has been provided under the provisions of Sections 397 and 398 of the 1956 Act. When a special remedy has been provided by the statute, the same would prevail upon the general remedy. It was further submitted that the plaintiff has wrongly and malafidely mentioned that other equally efficacious or speedy remedy is not available while the statute has provided such remedy and the plaintiff is even availing such special remedy as his similar petition is pending before the Company Law Board, New Delhi. Therefore, Company Law Board has the territorial and special jurisdiction to adjudicator the matter. It was further contended that the present suit is a repetition of Company Petition No.3 of 2007 filed by the plaintiff under Sections 397 and 398 of the 1956 Act, which is pending before the Company Law Board. The plaintiff is indulging in Forum Shopping as when the similar matter is pending before the Company Law Board and the special jurisdiction for the alleged grievances lies with the Company Law Board and the subject matter of suit is special domain under Sections 397 and 398 of the 1956 Act, then deliberately filing the CR No. 7701 of 2009 6 instant suit with malafide intention is not maintainable. The trial Court vide impugned order rejected the application filed by the petitioner under Order 7 Rule 11 CPC by observing as under: - “17. As already seen, Order 7 Rule 11 CPC does not deal with concealment of facts. Similarly existence of efficacious alternative remedy cannot be decided under Order 7 Rule 11 CPC. It is claimed that civil Court has no jurisdiction. Only Company Law Board is competent to decide this question as provided under Section 397 and 398 of the 1956 Act. But this does not speak about that situation. Civil Court is quite competent to entertain the suit for declaration. Whether plaintiff is entitled to declaration or not can be decided on merits after recording evidence of parties. Even pendency of petition before Company Law Board is no ground to reject plaint under Order 7 Rule 11 CPC. Case Law referred by defendants is not applicable to the present case set of facts. Therefore, this application has no merit, hence, rejected.” Order of the trial Court was challenged before the District Judge, Kurukshetra in CMA No.11/2009. However, the District Judge dismissed the appeal vide order dated 5.12.2009, having observed that no appeal lies under Order 43 Rule 1 CPC against an order passed under Order 7 Rule 11 CPC, refusing to reject the plaint or return the plaint for presentation before the appropriate Court. Feeling aggrieved, the petitioner has filed the present petition. I have heard learned counsel for the parties and perused the record very carefully. CR No. 7701 of 2009 7 Undisputedly, Company Petition No.114 of 2006 under Sections 397 and 398 of the 1956 Act was filed before the Company Law Board, New Delhi by Pawan Goel – petitioner herein against the plaintiff – respondent No.1 and others on 20.11.2006 for the following relief: - “a) the appointments of respondent No.3 to 5 as directors and the allotment of the Director Identification Number (DIN) to respondent No.3 to 5 be declared illegal, null and void. b) respondents No.2 to 5 be restrained from operating bank accounts of the Company and performing other functions in the capacity as of director. c) no voting rights be given to the respondents No.2 to 5 and they be barred from holding any meeting. d) respondents No.2 to 5 be restrained from disposing of the assets of the Company without leave or consent of the petitioner and other directors. e) respondents No.2 to 5 be prosecuted for committing the offenses of fabrication, forging, cheating, misleading and misappropriation and be punished according to law. f) such further orders or orders be made or other directions be given affording necessary relief to the petitioner as in the premises the Hon’ble Bench may deem fit and proper.” Undisputedly, plaintiff – respondent No.1 herein also filed Company Petition No.3 of 2007 under Sections 397, 398, 399, 402, 403 and 406 of the 1956 Act against defendant No.2 – petitioner herein and others for the following reliefs: - “a) Declare that the affairs of respondent No.1 Company are CR No. 7701 of 2009 8 being conducted by the respondents No.2 and 3 in a manner oppressive towards the shareholders of respondent No.1 Company. b) Declare that the affairs of respondent No.1 Company are being mismanaged by respondents No.2 and 3 towards the shareholders of the respondent No.1 Company. c) direct that respondents No.2 and 3 should not act as director of respondent No.1 Company. d) direct the respondents to bring back the amount siphoned away to the tune of Rs.20 Crores in lieu of the financial losses suffered by respondent No.1 Company due to the acts of respondents No.2 and 3 in lieu of the facts narrated in paragraph (6)(a) to (k) of the petition. e) award damages to the tune of Rs.10 Crores in lieu of the loss of goodwill suffered by respondent No.1 Company due to the acts of the respondent Nos.2 and 3 in lieu of the facts narrated in paragraph (6)(a) to (k) of the petition. f) direct the respondent to hand over the documents and other records of the respondent No.1 Company as per letter dated 2.12.2006 of the respondent No.1 Company to respondent No.2. g) award costs of the petition in favour of the petitioner. h) pass such other/further orders/directions which this Hon’ble Board may deem fit and proper in the facts and circumstances of the present case.” Learned counsel for the petitioner in view of the admitted facts CR No. 7701 of 2009 9 argued that for the same relief petitions were already pending before the Company Law Board, one filed by the petitioner – defendant No.2 and the other filed by plaintiff – respondent No.1 herein, hence, civil suit is not maintainable before the civil Court for the relief already sought before the Company Law Board and for the reliefs, which are consequential reliefs to the reliefs sought in the above said company petitions. Learned counsel for the petitioner further argued that the 1956 Act is a complete code in itself, hence jurisdiction of this Court should be deemed to have been barred. He further argued that alternatively, even if, it is held that Company Law Board as well as the civil Court has jurisdiction over the same matter, since plaintiff has elected Forum of the Company Law Board prior to the filing of the civil suit, hence jurisdiction of civil Court shall be impliedly barred under Section 9 CPC. Learned counsel for the plaintiff – respondent No.1 argued that filing of company petition prior to the filing of the civil suit has nothing to do with the filing of the suit, since, in the suit induction of defendants No.4 to 11 as directors by defendants No.2 and 3 after filing of company petition is under challenge, hence civil Court is the proper Forum to challenge all the appointments made by defendants No.2 and 3 and for seeking permanent prohibitory injunction not to interfere in the working of the plaintiff. Learned counsel for the respondents – plaintiffs while placing reliance on the judgement of the Apex Court in the matter of Dwarka Parsad Agarwal Vs. R.C. Agarwala, 2003 Company Case (Vol.117) 206 has argued that there is no provision in the 1956 Act barring jurisdiction of the civil Court. He further argued that civil Court has inherent jurisdiction to hear all the suits concerning the civil-rights of the person unless and until CR No. 7701 of 2009 10 suit is impliedly or specifically barred by any statute. Learned counsel for the respondents alternatively argued that even if it is presumed that the Company Law Board has jurisdiction over the matter and both the parties have approached the Company Law Board for redressal of the grievance, even then jurisdiction of the civil Court is not ousted. He states that the civil Court as well as the Company Law Board both have concurrent jurisdiction over the matter, hence, suit filed by the plaintiff-respondent is very well maintainable and is not impliedly barred. He has placed reliance on the judgement of the learned single Judge of this Court in the matter of Panipat Woollen and General Mills Vs. R.L. Kaushik, 1969 Company Cases (Vol.39) 249. He has further placed reliance on the Division Bench judgement of the Bombay High Court in the matter of CDS Finance Services (Mauritius) Ltd. Vs. BLP Communication Ltd. and others, 2004(121) Company Cases 374. I have carefully perused all the judgements cited by learned counsel for the plaintiffs/respondents. In the matter of Dwarka Parsad Aggarwal (supra), Hon’ble the Apex Court has held as under: - “The dispute between the parties was eminently a civil dispute and not a dispute under the provisions of the Companies Act. Section 9 of the Code of Civil Procedure confers jurisdiction upon the civil courts to determine all dispute of civil nature unless the same is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is not to be readily inferred. A provision seeking to bar jurisdiction of civil court requires strict interpretation. The court, it is well- settled, would normally lean in favour of construction, which CR No. 7701 of 2009 11 would uphold retention of jurisdiction of the civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is ousted. (See Sahebgouda (dead) by Lrs. and Ors. v. Ogeppa and Ors. [2003 (3) Supreme 13]. Even otherwise, the civil court's jurisdiction is not completely ousted under the Companies Act, 1956.” Before the Division Bench of the Bombay High Court in the matter of CDS Finance (supra), suit was filed seeking a declaration that the agreement dated 27.6.2001, without the approval and sanction by the shareholders of the company under Section 293(1)(a) of the Companies Act, is null and void. A declaration is also sought that the resolution of the Board of Directors in the meeting dated 25.7.2001 is null and void and also permanent injunction is sought restraining defendant Nos.1 to 8 and defendant Nos.13 to 17 from giving effect to the agreement dated 27.6.2001. A further declaration is sought that plaintiff is entitled to the exercise of all rights on the preference shares held by it under Section 87(2) (b) of the Companies Act. In view of the nature of the suit, the Division Bench of the Bombay High Court in the matter of CDS Finance (supra) has held as under: - “when there is no express provision excluding jurisdiction of the civil courts, such exclusion can be implied only in cases where a right itself is created and the machinery for enforcement of such right is also provided by the statute. If the right is traceable to general law of contract or it is a common law right, it can be enforced through civil court, even though the forum under the statute also will have jurisdiction to CR No. 7701 of 2009 12 enforce that right. There is a plethora of decisions of various High Courts including the decisions of the High Courts of Kerala, Andhra Pradesh, Madras, Punjab and Haryana, and Calcutta in favour of the view that these sections, 397, 398 and 408 do not confer exclusive jurisdiction on the Company Court to grant relief against oppression and mismanagement. The scope of these sections is to provide a convenient remedy for minority shareholders under certain conditions and the provisions therein are not intended to exclude all other remedies. The suits by minority shareholders against oppression and mismanagement,have been time-honoured exception to the rule in Foss vs Harbottle ( l843) 2 Hare, 46l and in the absence of word expressly or impliedly barring them it cannot be said that sections 397, 398 and 408 of the Companies Act exclude jurisdiction of the ordinary courts .” Learned Single Judge of this Court in the matter of Panipat Woollen Mills (supra) has held as under: - “The position is summed up in the well known dictum of Willes J. in Wolverhampton New Waterworks Co. v. Hawkesford, as under : “There are three classes of cases in which a liability may be established founded upon a statute. One is, where there was a liability existing at common law, and that liability is affirmed by a statute which gives a special and peculiar form of remedy different from the remedy which existed at common law ; there, unless the statute contains words which expressly or by CR No. 7701 of 2009 13 necessary implication exclude the common law remedy, and the party suing has his election to pursue either that or the statutory remedy. The second class of cases is, where the statute gives the right to sue merely but provides no particular form of remedy ; there, the party can only proceed by action at common law. But there is a third class, viz., where a liability not existing at common law is created by a statute, which at the same time gives a special and particular remedy for enforcing it. The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class.” However, in the matter of Sri Ramdas Motor Transport Ltd. and others Vs. Tadi Adhinarayana Reddy and others, AIR 1997 SC, page 2189, the Apex Court was dealing with the question as to whether a writ petition is competent during the pendency of the petition already filed under sections 397/398 of the 1956 Act before the Company Law Board. The Apex Court in Sri Ramdas Motor’s case (supra), has held that a shareholder has very effective remedies under the Companies Act for prevention of oppression and mismanagement. When such remedies are available, the High Court should not entertain a petition under Article 226. specially when the matter is still pending before the Company Law Board and has not yet been decided finally. There cannot be any excuse for the shareholder or for the High Court to bypass provisions of the 1956 Act. Another learned Single Judge of this Court in the matter of Anil Gupta Vs. J.K. Gupta, Vol.130, 2002(1) PLR 129, in paragraphs 16 and 23 has held as under: - CR No. 7701 of 2009 14 “16. A conjoint reading of above quoted Sections clearly shows that Companies Act provides in itself a complete code for redressal of any grievance in regard to oppression or mismanagement of any Company. It is not in dispute that under the Companies Act, it is no where specifically provided that jurisdiction of Civil Court is barred from entertaining any cause of action arising out of dispute under the Companies Act. Time and again, over-riding effect of a Special Law over the General Law where there is no specific bar under the Special Law for invoking General Law, has come up before the Apex Court for consideration and the Hon'ble Apex Court always held that where a complete code is provided under a Special Law, Jurisdiction of General Law stands excluded by implication. 23. In the present case, it is not in dispute that the plaintiffs have 40 per cent of the share capital and their simpliciter case against the defendants in the suit is with regard to oppression and mismanagement. This issue, under the Companies Act can be raised before the Company Law Board under Sections 397 and 398 and not before the Civil Court whose jurisdiction in the case of plaintiffs is impliedly barred because Companies Act itself provides a complete machinery for redressal or their grievance.” I am not inclined to accept the view taken by the learned Single Judge in the matter of Anil Gupta (supra) in view of the judgement of the Apex Court in the matter Sri Ramdas (supra). In the opinion of this Court, CR No. 7701 of 2009 15 Company Law Board as well as the civil Court both have jurisdiction in the matter, which are also covered under Sections 397, 398 and 399 of the Act. In the opinion of this Court, since plaintiff has himself opted to approach the Company Law Board challenging appointment, action and authority of defendant No.2 and 3 prior to the filing of the suit, again challenge to the authority and action of defendants No.2 and 3 in a civil suit, of course, is not permitted in view of implied bar under Section 9 CPC. None can be permitted to invoke both the forums simultaneously. Even If Company Law Board as well as civil Court both have jurisdiction over the matter and plaintiff has opted for one forum, then he cannot be permitted to seek redressal from another forum during the pendency of the petition before the earlier forum. Moreover, in Company Petition No.114 of 2006, authority of the plaintiff and his alleged three directors namely, M.S. Ayer, Rangaswami, Sunder Raj and Shashikant Vishnu Joshi is under challenge. Learned counsel for the plaintiff has further argued that during the pendency of company petition, defendants No.2 and 3 have inducted defendants No.4 to 9 as directors and have illegally shown the plaintiff and