1. The Civil Revision Petition has been filed challenging the order dated 29.1.2022 in CMA No.33 of 2021 on the file of Additional District Judge-V, Ernakulam. The 1st respondent filed O.S.No.302 of 2021 before the Second Additional Munsiff Court, Ernakulam seeking a permanent prohibitory injunction restraining defendants 1 to 4 from unlawfully accessing the accounts of the 5th defendant and that of the Directors' accounts, maintained in the office of the 5th defendant, from tampering or destroying any accounts kept in the office of the 5th respondent, and for other reliefs. Prior to the filing of the above suit, the 1st respondent herein had filed Company Petition No.23 of 2021 before the National Company Law Tribunal, Kochi Bench ['NCLT' for short] for initiating action against respondents 2 to 4 in the said petition, for acts of oppression and mismanagement under Section 232 of the Companies Act, 2013, for removal of the above said persons as Directors of the 1st respondent Company, to order recovery of undue gain made by them, to disqualify and debar the said respondents for the fraudulent practice administered by them, etc. Interim reliefs were sought for in the Company Petition to prevent further diversion of funds of the 1st respondent Company and to restrain the Directors from creating any third party rights or mortgaging or alienating immovable assets partly or fully owned, apart from other reliefs.
2. Petitioners 1 to 3 in the revision petition are defendants 1 to 3 in the suit and the 4th petitioner is the 5th defendant in the suit. The 2nd respondent in the revision petition is the 4th defendant in the suit. Along with the suit, the 1st respondent (plaintiff) had filed IA No.2 of 2021, praying for an ad interim injunction restraining the defendants 1 to 4 from illegally and unauthorisedly accessing the accounts and files of the 5th defendant and making illegal corrections, alterations, modifications or changes or committing any acts of waste in the accounts, files and books of the 5th defendant Company, etc. The trial court by order dated 2.7.2021 dismissed the application finding that the issue raised is one which the National Company Law Tribunal is empowered to adjudicate, as it comes within the purview of mismanagement under Sections 241 and 242 of the Companies Act, 2013. The court held that a conjoint reading of Sections 241, 242 and 430 of the Companies Act would make it clear that such matters are to be dealt with by the NCLT and the jurisdiction of the Civil Courts would be barred. The 1st respondent challenged the order in CMA No.33 of 2021 before the District Court and by the impugned judgment dated 29.01.2022, the order of the trial Court has been set aside and the appeal has been allowed. The District Court held that the Civil Court has jurisdiction to adjudicate the relief sought for in the petition.
3. The counsel for the petitioners submitted that the reasoning contained in paragraph 16 of the appellate order are erroneous. The Appellate Court has stated that from Ext.A1 petition, it is seen that the relief sought for in the petition before the NCLT was to initiate action against respondents 2 to 4 therein for acts of oppression and mismanagement, and in the injunction application the 1st respondent has not complained of any oppression or mismanagement of the Company. It is further stated in the order that (i) the 1st respondent never agitated that any provision of the Companies Act was prejudicial to the members or oppressive in nature, (ii) what has been challenged are the discrepancies committed by the 4th respondent along with respondents 1 to 3 in a collusive manner, (iii) the 4th respondent being a Company Secretary has involved in committing illegal and unauthorised access to the accounts and files of the 5th defendant Company, and (iv) that he has made illegal corrections and alterations, etc. and is attempting to remove the accounts, files, etc. with the intention to tamper evidence. The contention is that such acts are completely outside the purview of the adjudication by the NCLT. The counsel for the petitioners countered by stating that the reasons stated are without any legal basis and that, an act which is intended to cover up an oppression also has to be dealt with by the NCLT. It is submitted that the allegations in the injunction application are only regarding actions which aid the oppression and mismanagement. It is hence submitted that the Civil Court did not have jurisdiction. It is further contended that when there is an exclusive forum created for deciding such disputes, all powers have to be conceded to the forum to adjudicate the lis. Reference is made to Sections 213, 241, 242, 280, 424, 430, 432 and 433 of the Companies Act and Rule 11 of the NCLT Rules.
4. Reliance is placed on the judgment of a Division Bench of this Court in C.M.Z. Musliar v. Aboobacker [1998 (1) KLT 136], the decisions of the Hon'ble Supreme Court in Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers Pvt. Ltd. & Ors. [(1998) 7 SCC 105], Shashi Prakash Khemka & Ors. v. NEPC Micon Ltd. & Ors. [(2019) 18 SCC 569], Nusli Neville Wadia v. Ivory Properties & Ors. [(2020) 6 SCC 557], Greater Noida Industrial Development Authority v. Prabhjit Singh Soni [2024 (1) KLT 1195 (SC)] and the decision of the Bombay High Court in CDS Financial Services (Mauritius) Ltd. v. BPL Communications Ltd. & Ors. [(2001) SCC OnLine Bom. 1112] in support of his contentions.
5. The counsel for the respondents submitted that the judgment of the Appellate Court was fully justified since the issues raised do not come within the jurisdiction of the NCLT. The counsel submitted that the jurisdiction also depends on the person and not on the cause alone. Reliance is placed on the judgments of the Hon'ble Supreme Court in Dhulabhai v. State of M.P. [AIR 1969 SC 78], Dwarka Prasad Agarwal v. Ramesh Chander Agarwal [(2003) 6 SCC 220], Abdul Gafur v. State of Uttarakhand [(2008) 10 SCC 97], Madras Bar Association v. Union of India [(2010) 11 SCC page 1], Sahebgouda & Ors. v. Ogeppa & Ors. [(2003) 6 SCC 151], Mahant Dooj Das v. Udasin Panchayati Bara Akhara [(2008) 12 SCC 181] and the judgment of the Karnataka High Court in Ravindra Veer Singh v. TBH Breweries India Pvt. Ltd. [(2016) 195 Comp. Cases 209]. The counsel also referred to the decisions in CDS Financial Services (supra), Nusli Neville Wadia (supra) and Karan Singh Grewal v. Culcutta Cricket and Football Club [2021 KHC 3139].
6. Heard Sri Rajesh R.Kormath for the petitioners, Sri P.G. Jayasankar for the 1st respondent, Sri K.C. Harish for the 2nd respondent and considered the pleadings and the judgments referred to by the counsel.
7. The question involved is whether the Civil Court had jurisdiction to entertain O.S.No.302 of 2021, which has been filed praying for a permanent prohibitory injunction restraining the defendants 1 to 4 from unlawfully accessing the accounts of the 5th defendant and that of the Director's accounts maintained in the office of the 5th defendant, from tampering or destroying any accounts kept in the office of the 5th defendant and for other reliefs. The 1st respondent had filed Company Petition No.23/2021 before the NCLT, Kochi, prior to the initiation of the suit. C.P.No.23/2021 has been filed challenging acts of oppression and mismanagement under Section 232 of the Companies Act, 2013, for removal of respondents 2 to 4 in the said petition as Directors of the Company, to order recovery of undue gain made by them, etc. The contention of the petitioners is that the prayer in the suit are incidental to the prayers in the Company Petition relating to oppression and mismanagement, that the actions complained of in the suit are actions which aid the oppression and mismanagement, and hence the issue has to be dealt with by NCLT and not by a civil court. The contention of the respondents on the other hand is that the prayers in the suit are more in the nature of a common law remedy, not expressly barred by the provisions of the Companies Act, and hence the suit is maintainable.
8. Section 430 of the Companies Act, 2013 says that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under the Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal. There is no ambiguity in the wordings of the Section which excludes jurisdiction of the civil court. The only question to be considered is whether the issue involved in the suit is a matter which the Tribunal is empowered to determine under the Act or any other law for the time being in force. Section 213 of the Act empowers the Tribunal to investigate into the affairs of a Company on an application made to it, if it is satisfied that there are circumstances suggesting that the business of the Company is being conducted with the intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a manner oppressive to any of the members or that the Company was formed for any fraudulent or unlawful purpose and on other aspects. Section 241 enables a member of the Company to apply to the NCLT for relief in case of oppression, etc. Section 242 deals with the powers of a Tribunal while dealing with an application made to it under Section 241 and the powers available under Section 242 are very wide.
9. Section 242 of the Companies Act, 2013 reads as follows.
“242. Powers of Tribunal.—
(1) If, on any application made under section 241, the Tribunal is of the opinion—
(a) that the company’s affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and
(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.
(2) Without prejudice to the generality of the powers under sub-section (1), an order under that subsection may provide for—
(a) the regulation of conduct of affairs of the company in future;
(b) the purchase of shares or interests of any members of the company by other members thereof or by the company;
(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital;
(d) restrictions on the transfer or allotment of the shares of the company;
(e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case;
(f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e): Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned;
(g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;
(h) removal of the managing director, manager or any of the directors of the company;
(i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims;
(j) the manner in which the managing director or manager of the company may be appointed subsequent to an order removing the existing managing director or manager of the company made under clause (h);
(k) appointment of such number of persons as directors, who may be required by the Tribunal to report to the Tribunal on such matters as the Tribunal may direct;
(l) imposition of costs as may be deemed fit by the Tribunal;
(m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made.
(3) A certified copy of the order of the Tribunal under sub-section (1) shall be filed by the company with the Registrar within thirty days of the order of the Tribunal.
(4) The Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company’s affairs upon such terms and conditions as appear to it to be just and equitable. [(4A) At the conclusion of the hearing of the case in respect of sub-section (3) of section 241, the Tribunal shall record its decision stating therein specifically as to whether or not respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.
(5) Where an order of the Tribunal under sub-section (1) makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make, without the leave of the Tribunal, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles.
(6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum or articles of a company shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act and the said provisions shall apply accordingly to the memorandum or articles so altered.
(7) A certified copy of every order altering, or giving leave to alter, a company’s memorandum or articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same.
(8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.“
10. Section 242(4) empowers the Tribunal to make any interim order which it thinks fit for regulating the conduct of the Company's affairs. Section 242(2)(m) empowers the Tribunal to pass an order providing for any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made. A reading of the statutory provision would make it clear that an equitable relief like an order of injunction can be granted by the Tribunal in an application which has been filed alleging oppression and mismanagement if the injunction sought for relates to actions of the persons against whom oppression and mismanagement is alleged and relates to the affairs of the company.
11. Rule 11 of the NCLT Rules, 2016 framed under Section 469 of the Act, is in pari materia with Section 151 of the Code of Civil Procedure and reserves the inherent power of the Tribunal in the following terms;
“11. Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.”
The above Rule also supports the conclusion arrived above, regarding the power of the Tribunal to grant an order of injunction. Section 424 of the Act lays down the procedure to be followed before the Tribunal. It says that the Tribunal shall not be bound by the procedure laid down in the Code of Civil Procedure, but shall be guided by the principles of natural justice, and subject to the other provisions of the Act or the Insolvency and Bankruptcy Code, 2016 and any rules made thereunder, it shall have power to regulate its own procedure. Section 424(2) indicates the powers that are available to the Tribunal and the statutory provisions indicate that the Tribunal has all the trappings of the civil court.
12. Section 280 of the Act deals with jurisdiction of the Tribunal and it reads thus;
“280. Jurisdiction of Tribunal;- The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of,—
(a) any suit or proceeding by or against the company;
(b) any claim made by or against the company, including claims by or against any of its branches in India;
(c) any application made under section 233;
(d) any question of priorities or any other question whatsoever, whether of law or facts, including those relating to assets, business, actions, rights, entitlements, privileges, benefits, duties, responsibilities, obligations or in any matter arising out of, or in relation to winding up of the company,
whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made or such scheme has been submitted, or is submitted, before or after the order for the winding-up of the company is made.”
The above Section also does not indicate otherwise. In view of the above statutory provisions, the Tribunal has jurisdiction to entertain an application with prayers similar to the prayers made in O.S.No.302 of 2021 and I.A.No.2 of 2021 in O.S.No.302 of 2021. Then the only question is whether the said jurisdiction is exclusive and cannot be exercised by a civil court.
13. In C.M.Z. Musliar (supra), a Division Bench of this Court, while considering the power of the Registrar under Section 4 of the Societies Registration Act, held that it is a well accepted proposition that the conferment of statutory powers must be construed as impliedly authorising everything which could fairly and reasonably be regarded as incidental or consequential to the power itself. In Shashi Prakash Khemka (supra), the Hon'ble Supreme Court considered the scope of Section 430 of the Act and held that in matters in respect of which power has been conferred on the NCLT, the jurisdiction of the Civil Court is completely barred. In Greater Noida Industrial Development Authority (supra), the Hon'ble Supreme Court was considering the maintainability of a recall application under the Insolvency and Bankruptcy Code, 2016. The Court considered the effect of Rule 11 of the NCLT Rules and Section 151 of the Code of Civil Procedure and after referring to several judgments on the issue held that the Tribunal is invested with such ancillary or incidental powers as may be necessary to discharge its functions effectively for the purpose of doing justice between the parties and in the absence of a statutory prohibition, in an appropriate case, it can recall its order in exercise of such ancillary or incidental powers.
14. The trial court had dismissed the application filed by the 1st respondent finding that the relief is one which the NCLT is empowered to adjudicate. The court held that on a conjoint reading of Sections 251, 242 and 430 of the Act, the jurisdiction of the Civil Court will be expressly barred. The above finding has been reversed by the First Appellate Court. The reasoning of the court is available in paragraph 16 of the impugned judgment, which reads thus;
“16. Though the learned counsel for the respondents vehemently argued that the petitioner/appellant has filed suit and injunction application seeking the very same relief as sought for in the application before the National Company Law Tribunal, the argument of the learned counsel cannot be accepted if Ext.A1 has to be looked into. Ext.A1 is the petition filed by the petitioner/appellant before the National Company Law Tribunal seeking reliefs against respondents 1 to 4 (ie., the respondents 5 & 1 to 3 herein respectively). On going through Ext.A1, it could be seen that the reliefs sought for in the petition before the National Company Law Tribunal are to initiate actions against the respondents 2 to 4 therein for acts of oppression and mismanagement u/s 242 of the Companies Act 2013. Whereas, in the injunction application and in the suit the petitioner/appellant has not complained of any oppression or mismanagement of the company. In the instant case, the petitioner/appellant never agitated any provisions of the Companies Act as prejudicial to its members or oppressive in nature. The petitioner/appellant has challenged the discrepancies committed by the 4th respondent along with respondent Nos.1 to 3 in a collusive manner and the 4th respondent being a company secretary has been involved in committing illegal and unauthorised access to the accounts and files of the 5th respondent company and making illegal corrections and alterations etc., and from removing the accounts, files etc., with intention to tamper evidence and the remedy sought for against the illegal acts is completely outside the purview of the adjudication by the National Company Law Tribunal.”
15. It is seen from the above paragraph that the First Appellate Court did not consider the question whether the prayer in the interlocutory application was related to the oppression or mismanagement of the Company and a relief which could have been prayed for before the Tribunal, in the light of the provisions mentioned above. Referring to the allegations in the application filed by the 1st respondent that the Company Secretary was involved in committing illegal and unauthorised access to the accounts and files of the Company and making illegal corrections and alterations with intention to tamper evidence, the court has concluded that remedy against such illegal acts is completely outside the purview of the adjudication by the National Company Law Tribunal. The above conclusion cannot be legally sustained in view of the specific provisions available under the Companies Act, which provide for seeking relief before the Tribunal for such actions also. The order of the trial court could not have been reversed on the above reasoning. It can be seen that there are no other prayers in the suit. The relief has necessarily to be granted by the NCLT in the application filed against oppression and mismanagement.
16. A contention was taken by the counsel for the 1st respondent that the Tribunal cannot consider the issue which had been raised in the suit. The counsel for the respondents relied on the judgment in Dhulabhai (supra), wherein it was held that where a Statute gives finality to the orders of the Special Tribunals, the Civil Court's jurisdiction must be held to be excluded, if there is adequate remedy to do what the Civil Court would normally do in a suit and that such provisions will not exclude those cases where the provisions of the particular Act have not been complied with or the Statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure. In the said judgment, the Hon'ble Supreme Court also held that an exclusion of jurisdiction of the civil court is not readily to be inferred unless the conditions set down in the judgment apply. In the case on hand, the Companies Act provides sufficient remedies, which includes granting of all remedies which the civil court would normally grant in a suit relating to the very same issue. The said judgment is hence of no help to the arguments advanced by the counsel for the 1st respondent.
17. Reliance was sought to be placed on the decision in CDS Financial Services (supra). A reading of the said judgment would show that it was rendered under the Companies Act, 1956. In the said case, the allegation was that certain resolutions are vitiated by mala fides and it was contended that in substance they are allegations of oppression and mismanagement and hence have to be agitated before the Company Law Board. The said contention was repelled by the court. The Hon'ble Supreme Court held that where there is no express provision excluding jurisdiction of the civil court, 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 and that if the right is traceable to general law of contract or is a common law right, it can be enforced in the civil court, even though the forum under the Statute also will have jurisdiction to enforce that right. In view of the subsequent decision of the Hon'ble Supreme Court in Shashi Prakash Khemka (supra) which was rendered after the 2013 Act came into force, I am of the opinion that in matters in which power has been conferred on the NCLT, jurisdiction of the Civil Court is completely lost.
18. The other judgments referred to by the counsel need not be gone into in the light of the above conclusions. The petitioners are entitled to the relief.
Civil Revision Petition petition is allowed. The order dated 29.01.2022 in C.M.A. No. 33 of 2021 on the file of the Additional District Judge – V, Ernakulam is set aside and the order dated 02.07.2021 in IA No.2 of 2021 and OS No.302 of 2021 on the file of the Second Additional Munsiff Court, Ernakulam is upheld.
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