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IN THE HIGH COURT OF CALCUTTA
Nishita Mhatre and R.K. Bag, JJ.
Sharmila Shetty - Appellant
Versus
Somnath Chatterjee and another - Respondents
F.M.A. No. 760 of 2015 With C.A.N. 11602 of 2014
Decided On : 8.5.2015
CITY CIVIL COURT JURISDICTION - SHARE OWNERSHIP - COMPANY MANAGEMENT - SHARE TRANSFER - COMPANY COURT RECTIFICATION - CAUSE OF ACTION - CIVIL DISPUTE - NOMINATION - COMPANIES ACT - SUIT FOR DECLARATION OF TITLE - COMPANY LAW BOARD - CITY CIVIL COURT ACT - COMPANY COURT - SECTION 397 OF THE COMPANIES ACT - SECTION 155 OF THE COMPANIES ACT - SECTION 5(4) OF THE CITY CIVIL COURT ACT - ENTRY 10 OF THE FIRST SCHEDULE OF THE CITY CIVIL COURT ACT - COMPANIES ACT, 1956 - COMPANIES ACT, 1913 - MINING, GEOLOGICAL & METALLURGICAL INSTITUTE OF INDIA & ORS. V. SHYAMALESH NATH BHADURI & ORS. - DILIP CHAND KANKARIA V. PRADIP KUMAR GHOSH & ORS. - HARSHA NITIN KOKATE V. SARASWAT CO-OPERATIVE BANK LTD. & ORS. - JAYANAND JAYANT SALGAONKAR V. JAYASHREE JAYANT SALGAONKAR & ORS. - SANGRAMSINH P. GAEKWAD & ORS. V. SHANTADEVI P. GAEKWAD - DWARKA PRASAD AGARWAL V. RAMESH CHANDER AGARWAL - M/S. AMMONIA SUPPLIES CORPORATION (P) LTD. V. M/S. MODERN PLASTIC CONTAINERS PVT. LTD. & ORS. - KUSUM INGOTS & ALLOYS LTD. V. UNION OF INDIA & ANOTHER - CHATTERJEE PETROCHEM (I) PVT. LTD. V. HALDIA PETROCHEMICALS LTD. & ORS. - SHAREHOLDERS - MANAGEMENT - JURISDICTION - TITLE - FRAUD - UNDUE INFLUENCE - TRANSFER - TRANSFER OF SHARES - SHARE REGISTER - NOMINEE - SUIT - CAUSE OF ACTION - JURISDICTION - MANAGEMENT - RECTIFICATION - CIVIL RIGHTS - TITLE - CAUSE OF ACTION - MATERIAL FACTS - COMPANY MANAGEMENT - CONSTITUTION - SHAREHOLDERS - PRIVATE ARRANGEMENT - BREACH OF AGREEMENT - COMPANY LAW BOARD - PRIVATE TRANSACTION - PRIVATE RIGHT - CIVIL DISPUTE - NOMINATION - FRAUD - UNDUE INFLUENCE - TERRITORIAL JURISDICTION - EMBARGO - SUIT - CLASS OF CASES - ERROR - PROVISIONS - BAR - APPEAL - JUDGMENT - APPLICATION - STAY - URGENT CERTIFIED PHOTOCOPIES.
Fact of the Case:
The appellant, daughter of the late Chairman and Managing Director of the respondent company, filed a suit in the City Civil Court, Calcutta, seeking a declaration that the recording of the name of the respondent as the holder of 2,42,430 shares in the company's books and registers was illegal, fraudulent, null, and void. The appellant claimed that the shares were never transferred by her father during his lifetime and were standing in his name until his death. The City Civil Court held that it had no jurisdiction to try the suit, as it was a "company matter" and the court lacked the authority to grant the reliefs sought by the appellant.
Finding of the Court:
The High Court allowed the appellant's appeal, holding that the City Civil Court had jurisdiction to entertain the suit. The court found that the suit was not related to the constitution, incorporation, or winding up of the company, and that the prayers sought by the appellant did not touch upon the management of the company. The court further held that the dispute was a pure question of title to movable property and that the appellant's claim to the shares did not, by itself, oust the jurisdiction of the City Civil Court.
Issues: 1. Whether the City Civil Court had jurisdiction to entertain the suit, considering its cause of action.2. Whether the suit, as framed, dealt with the constitution, incorporation, management, or winding up of a corporation as defined under the Indian Companies Act, 1913.
Ratio Decidendi: 1. The City Civil Court Act, 1953, specifically bars the City Civil Court from trying suits mentioned in the First Schedule, including those relating to or arising out of the constitution, incorporation, management, or winding up of corporations.2. A suit for a declaration regarding the title to shares is not a suit relating to the constitution, incorporation, management, or winding up of a corporation.3. The prayers sought by the appellant, such as directing the company to change the name of the holder of the shares, are ministerial acts that do not affect the management of the company.4. A dispute regarding the right of inheritance between parties is a civil dispute and cannot be said to be a dispute regarding oppression of minority shareholders by the majority shareholders and/or mismanagement.
Final Decision: The High Court allowed the appeal, set aside the decision of the City Civil Court, and disposed of the application filed by the appellant. The court also directed that urgent certified photocopies of the judgment be provided to the parties upon compliance with all formalities. However, on the application made by the respondent, the court stayed the operation of the order for a period of three weeks.
Nishita Mhatre, J.
1. The short question involved in the present appeal is whether the suit filed by the appellant for a declaration that the recording of the name of the Respondent No.1 as the holder of 2,42,430 shares in the books and registers of the Respondent No.2 company is illegal, fraudulent, null and void is maintainable before the City Civil Court, Calcutta. The City Civil Court was of the view that such a suit seeking the aforesaid declaration besides several other reliefs including that of a permanent injunction is not maintainable before the City Civil Court, Calcutta. The Court has held that it had no jurisdiction to try such a suit in view of the provisions of the City Civil Court Act, 1953 and the rules framed thereunder.
2. Hemendra Prasad Barooah was the Chairman and Managing Director of the Respondent No.2 company till he expired. The appellant, his youngest daughter, holds 38% of the paid up capital of the Respondent No.2 company and claims to be the single largest shareholder. After the appellant's father's death, she found from a declaration made by the company that 2,42,430 shares originally standing in the name of her father were transferred to the name of Respondent No.1. The appellant claims that the shares were never transferred by her father during his life time and that they were standing in her father's name till he expired on 31st July, 2013. According to the appellant, the Respondent No.1 was an employee of the company and had unduly influenced the decisions of her father who was ailing prior to his death. The appellant claims that her father could never have named the Respondent No.1 as his nominee for the shares held by him. Therefore, the transfer of shares to the name of Respondent No.1 after her father's death was illegal. The appellant therefore filed the present suit being T.S. No.306 of 2014 for the following reliefs:
(a) Declaration that the recording of name of the Defendant No.1 as holder of the 242430 shares in the books and registers of the Defendant No.2 is illegal, fraudulent, null and void;
(b) Mandatory injunction directing the Defendant No.2 to reverse every entry in its books and registers by which the Defendant No.1 has shown himself as the holder of the 242430 shares;
(c) Decree for perpetual injunction restraining the Defendant No.1 from exercising any ownership right in respect of the said shares in any manner whatsoever:
(d) Decree for perpetual injunction restraining the Defendant No.1 from exercising any voting right in respect of the said shares in any manner whatsoever;
(e) Declaration that the purported nomination of the Defendant No.1 in respect of 242430 shares standing in the name of Hemendra Prasad Barooah is null and void;
(f) Declaration that the purported transmission in respect of the shares being No.242430 in favour of the defendant No.1 is illegal and null and void:
(g) Receiver;
(h) Injunction;
(i) Costs:
(j) Further or other orders.
3. She also filed an application under Order 39 Rules 1 and 2 for an interim injunction.
4. On 11th March 2014 the City Civil Court granted an ad interim order restraining the Respondent No.1 from dealing with, transferring, alienating, encumbering or creating third party right or interest or exercising any right including voting right in respect of the disputed shares being 2,42,430 in number.
5. An application was filed by Respondent No.1 under Order 39, Rule 4 read with Section 151 of the CPC for vacating the ad interim injunction.
6. After hearing both parties the City Civil Court concluded that it had no jurisdiction to determine the disputes raised in the suit. The Court was of the view that the actual reliefs claimed in the suit were not only against the Respondent No.1 but against the Respondent No.2 also. The suit was "regarding companies matter" and therefore, the City Civil Court had no jurisdiction to entertain the suit. The plaint was therefore returned for being presented before the proper forum. Although the trial Co
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