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1975 Supreme(Cal) 386
High Court Of Calcutta
N.C.Mukherji, J.
Hirendra Bhadra
Vs.
Titwn Eng Co P Ltd
Decided On : Dec 23, 1975
Advocate Appeared:
Girija Sankar Sengupta, Manab Banerjee, N.N.Chakraorty, Tapash Chandra Ray
The civil court does not have jurisdiction to entertain a suit for declaration and injunction against a director for breach of Section 299(1) of the Companies Act, 1956, as the matters alleged against the director are covered by the Companies Act and can only be dealt with by the courts specified in Section 10 of the Act.
Headnote:
COMPANY LAW - JURISDICTION OF CIVIL COURT - SUIT FOR DECLARATION AND INJUNCTION AGAINST DIRECTOR FOR BREACH OF SECTION 299(1) OF THE COMPANIES ACT, 1956 - WHETHER CIVIL COURT HAS JURISDICTION - COMPANIES ACT, 1956, SECTIONS 299(1), 283, 284, 2(11), 10.
Fact of the Case:
The plaintiff company filed a suit against the defendant director for breach of Section 299(1) of the Companies Act, 1956, seeking declarations that the defendant had vacated the office of director and had no right to act as such, and an injunction restraining him from doing so. The defendant challenged the jurisdiction of the civil court to entertain the suit, arguing that the matters alleged against him were covered by the Companies Act and that only the courts specified in Section 10 of the Act had jurisdiction.
Finding of the Court:
The court held that the civil court did not have jurisdiction to entertain the suit. It found that the acts alleged against the defendant were all matters under the Companies Act and that the plaintiff could have sought relief under the provisions of the Act itself, such as by filing a complaint with the Registrar of Companies or by seeking a winding-up order. The court also noted that Section 10 of the Act specified the courts that had jurisdiction under the Act and that the civil court was not one of them.
Issues: 1. Whether the civil court had jurisdiction to entertain the suit for declaration and injunction against the director for breach of Section 299(1) of the Companies Act, 1956. 2. Whether the matters alleged against the director were covered by the Companies Act and could only be dealt with by the courts specified in Section 10 of the Act.
Ratio Decidendi: The court relied on the following principles and provisions of law in reaching its decision: 1. Where a statute creates a liability not existing in general law and provides 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 proceed by action at general law. 2. The courts nominated under the Companies Act have exclusive jurisdiction to take cognizance in the matters covered by the Companies Act, and by necessary implication excludes jurisdiction of other courts in regard to matters covered by the Companies Act. 3. Section 10 of the Companies Act specifies the courts that have jurisdiction under the Act and the civil court is not one of them.
Final Decision: The court allowed the defendant's application and set aside the order of the lower court that had rejected the defendant's challenge to the jurisdiction of the civil court. The court held that the civil court had no jurisdiction to entertain the suit and directed that the plaint be returned to the plaintiff's lawyer for presentation to the proper court.
1. THIS application is directed against Order 8 dated 26th of March, 1974 passed by Shri p. Jethwani, Munsif, First Court, Durgapur, in Title Suit No. 2 of 1974 rejecting the application of the defendant petitioner dated February 18, 1974 challenging the inherent jurisdiction of the said Court to try the suit. Facts of the case may briefly be stated as follows : -On January 4, 1074, the opposite party filed a Title Suit No. 2 of 1974 in the Court of the Munsif, Durgapur against the petitioner on the allegation that keeping in dark the opposite party and/or its other Directors, the petitioner though a permanent Director of the opposite party company carried on business of supply of spare parts and other materials in violation, of Section 299 of the Companies Act, 1956, and by reason thereof the petitioner became disqualified to hold the office of the Director of the opposite party company. It was alleged that on December 3. 1973 shri P. K. Basu, another Director of the opposite party company, learnt the said fact. It was further alleged that the nineteenth meeting of the Board of Directors of the company was held on December 28, 1973 at the registered office of the company at Durgapur and the petitioner came to attend the said meeting, duly accepted the fee of rs. 50/- for attending the said meeting and signed the relevant vouchers. It was further alleged that in the said meeting a resolution was passed, inter alia, resolving that the petitioner has or must be deemed to have vacated the office of the Director of the opposite party company with effect from at least January 29, 1972 under Section 283 of the Companies Act, 1956 read with clause 42 of the opposite party company's Articles of Association for contravention of the provisions of Section 299 of the Companies Act. In the suit it was prayed that a decree be passed declaring (1) that the Resolution dated December 28, 1973, passed by the Board of Directors of the plaintiff company is valid, operative and binding on the defendant; (2) that the defendant has vacated or must be deemed to have vacated the office of the Director of the plaintiff company with effect from January 29, 1972, or from such earlier date as will be found from the evidence to be the date when the defendant has contravened the provisions of section 299 of the Companies Act, 1956 and (3) that the defendant has no manner of right, title and interest to act as Director of the plaintiff company and/or to interfere and intermeddle with the affairs of the plaintiff company. Another prayer was made to the effect that a decree for perpetual injunction be passed restraining the defendant from acting or attempting to acts as Director of the plaintiff company and from interfering intermeddling with the plaintiff company's affairs. Long after the institution of the suit the petitioner came to know about the filing of such a suit against him, appeared in the suit and filed an application challenging the jurisdiction of the Court. It was submitted chat the plaintiff has based its right and/or claim the suit under the provisions of the Companies Act, 1956. The company and its Directors being creature of the said Companies Act, the plaintiff was not entitled to any relief in the suit on the basis of any common law right. The learned Munsif after hearing both the parties dismissed the application holding that he had jurisdiction to entertain the suit. Being aggrieved by the aforesaid order the defendant has come up in this Court.
2. MR. Tapas Chandra Ray, learned Advocate appearing on behalf of the petitioner, submits that the learned munsif acted illegally and in excess of jurisdiction by rejecting the petitioner's application. It is contended that the learned Munsif failed' to appreciate properly the true import of the suit of the opposite party and acted with material irregularity by proceeding on the basis that the plaintiff in the suit did not seek to enforce any of the special rights created by the Companies
