The suit for enforcement of a shareholder's right under a Board Resolution, based on a family settlement, is not maintainable in a civil court and falls within the jurisdiction of the NCLT as per the Companies Act, 2013, Section 430.

JUDGMENT

1. The present appeal under Section 96 read with Order XLI of the Code of Civil Procedure, 1908 [hereinafter referred to as the CPC ] arises from the Judgment and Decree dated 21.03.2020 passed in CS (OS) No. 226/2016 [hereinafter referred to as the Impugned Judgment ]. The learned Single Judge held, inter alia, that the suit is not maintainable before a civil court on account of lack of a specific plea of family settlement in the pleadings, with further reasoning that the issues raised were covered under the Companies Act, 2013, and thus the remedy, if any, too lay before the specialized tribunal constituted therein, being the National Company Law Tribunal [hereinafter referred to as the NCLT ].

2. The facts of the case have been noted elaborately in the impugned judgment, and therefore, shorn of unnecessary details, we are noting the factual background only to the extent it is relevant for deciding the present appeal:

2.1 In 1945, a prominent builder and real estate developer in Delhi, (Late) Sir Sobha Singh, incorporated an eponymous, family-owned private company named Sir Sobha Singh & Sons Pvt. Ltd [hereinafter referred to as, Respondent No. 1 ]. All his family members and descendants were made shareholders, including the Appellant herein, and its Board of Directors have always been chosen from amongst them. Respondent No. 1 is engaged in real estate activities such as buying, selling and renting of properties, and has, inter alia, built Sujan Singh Park as Delhi s first housing complex, consisting of 84 residential flats. The land thereunder is also leased in the name of Respondent No. 1.

2.2 The Appellant herein claims that it was decided that both male and female descendants of Late Sir Sobha Singh, up to the fourth generation, will receive a flat each in Sujan Singh Park. To this effect, a seniority-wise list of 23 great grand-children was made, to whom an allotment would be made by Respondent No. 1 whenever a flat fell vacant. It is also claimed by the Appellant, and denied by Respondent No. 1, that the same was recorded by way of a family settlement, as well as a Board Resolution dated 21st July 1990 of Respondent No. 1. Such documents were not produced before the Court. Nevertheless, this practice was being followed, and 17 grandchildren were allotted flats by way of seniority. The Appellant (being a 4th generation descendant) stood at number 18 in the list.

2.3 Despite being next in line, the Appellant claims he was overlooked and the next vacant flat was allotted in 2014 to one Rahul Singh [hereinafter referred to as, Respondent No. 2 ] who was below the Appellant in the list. Thereafter, when another flat became vacant, Respondent No. 1, instead of allotting the flat to the Appellant, resolved to sell it.

2.4 Aggrieved by the actions of Respondent No. 1, the Appellant approached this Court in CS (OS) No. 226/2016, claiming a right to preferential allotment of flat on the basis of Board Resolution dated 21st July 1990. On the strength of his right arising out of said Board Resolution, he prayed seeking possession of flat, mandatory injunction to Respondent No. 1 to allot said flat, and cancellation of allotment made out-of-turn, as well as damages (being notional rent that could have been accumulated from timely allotment of flat).

3. Notice was issued in the suit on 10th May 2016. Later, vide Order dated 8th August, 2018, issues were framed and parties were relegated to lead evidence in trial. On 27th September, 2019, during the hearing, issue of maintainability of the suit came up for consideration and arguments were heard on the same. Thereafter, the learned Single Judge, vide the Impugned Judgment, dismissed the suit for reasons summarised as follows:

IMPUGNED JUDGMENT:

3.1. The plea of breach of a family settlement was not taken up by the Plaintiff in the plaint. The learned Single Judge noted that this ground was an ingenious concoction of the arguing counsel, first presented during oral arguments itself.