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SOUMEN SEN, UDAY KUMAR
Phool Chand Gupta – Appellant
Versus
Mukesh Jaiswal – Respondent
Key Points: - The Civil Court has jurisdiction to decide the dispute involving alleged fraud and breach of fiduciary duty by an auditor, and not limited to rectification of the register. (!) (!) - Section 430 of the Companies Act 2013 does not oust Civil Court jurisdiction in cases involving fraud and fiduciary breach by an auditor, though NCLT may handle certain rectification matters depending on self-evident facts. (!) (!) (!) - The suit seeks declaratory and injunctive relief regarding shares recorded in the names of outside entities related to the auditor’s family interests, not merely rectification; Civil Court proceedings are maintainable for such fraud-related relief. (!) (!) (!) - The NCLT may have jurisdiction in rectification proceedings where facts are self-evident and do not require serious fraud adjudication, but the present case is not a pure rectification suit. (!) (!) (!) - Interim orders restrained transfers and registrations involving shares of the company after recognizing fiduciary breaches by the auditor, indicating civil remedies for fraud-related relief. (!) (!) - The appellate court affirmed that the Civil Court could adjudicate the fraud and declaration aspects, and the suit was maintainable in Civil Court. (!) (!)
JUDGMENT :
(Soumen Sen, J.) :
1. The appeal is arising out of a judgment and order dated 5th December, 2022 passed in connection with an application filed by the appellant for rejection of plaint on the ground that the dispute raised in the plaint cannot be decided by a Civil Court.
2. The appellant contended before the learned Single Judge that the disputes in the plaint, falls within the exclusive jurisdiction of the National Company Law Tribunal (in short ‘NCLT’). Accordingly, the suit is not maintainable.
3. The learned Single Judge decided the issue against the appellant, hence, this appeal.
4. Before we advert to the submissions made it is necessary to consider the averments made in the plaint.
5. The plaintiff has filed a suit for declaration and injunction.
6. The defendant no.4 was incorporated as a closely held family company by one Sambhunath Shaw since deceased (in short ‘Shambhunath’) along with his wife and sister-in-law.
7. Sambhunath was in full control of the company and he used to run, manage and control the said respondent no.4.
8. Defendant no. 1 is a chartered accountant by profession. The defendant nos. 2 and 3 are the family companies of the defendant no.1. The
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