IN THE HIGH COURT OF DELHI AT NEW DELHI
Yogesh Khanna, J.
Ms. Shazia Rehman – Appellant
Versus
Mr. Anwar Elahi & Ors. – Respondents
CS(COMM) 245 of 2019
Decided On : 09-08-2023
Shares - Commercial Suit - Companies Act, 2013, Section 59, 424, 430
Fact of the Case:
The plaintiff filed a commercial suit seeking relief for the declaration, permanent and mandatory injunction with regard to 4556 shares transferred by defendant no.1. The defendants challenged the maintainability of the suit as a commercial suit under the Commercial Courts Act, 2015, arguing that the dispute was a family dispute and pertained to rectification of the register of members, falling under the jurisdiction of the NCLT.
Finding of the Court:
The court found that the plaintiff's suit was maintainable as a commercial suit under the Commercial Courts Act, 2015, and that the jurisdiction of the civil court was not barred by the Companies Act, 2013. The court held that the individual rights of a member of a company, such as the plaintiff, could be enforced in the civil court, and that the NCLT did not have jurisdiction to decide the disputed title and fraudulent transfer of shares.
Issues: The main issue was whether the suit was maintainable as a commercial suit and whether the jurisdiction of the civil court was ousted by the Companies Act, 2013.
Ratio Decidendi: The court held that the NCLT did not have jurisdiction to decide the disputed title and fraudulent transfer of shares, and that the individual rights of a member of a company could be enforced in the civil court. The court also emphasized that the jurisdiction of the civil court was not barred unless explicitly expressed or clearly implied.
Final Decision: The application seeking rejection of the plaint was dismissed, and the suit was held to be maintainable as a commercial suit under the Commercial Courts Act, 2015. The court also scheduled the framing of issues for the next hearing.
JUDGMENT
Yogesh Khanna, J.
I.A.1143/2020
1. This application is filed by the applicant under Order VII Rule 10 and 11 CPC read with Section 151 CPC seeking rejection of plaint. The plaintiff has filed the suit as a commercial suit under the Commercial Courts Act, 2015 seeking relief of declaration, permanent and mandatory injunction with regard to 4556 shares, got transferred by defendant no.1 in his favour. The defendants no.1 and 2 have challenged the maintainability of the present suit as a commercial suit under the Commercial Courts Act, 2015.
2. It is submitted as per definition of "commercial dispute" as provided in Section 2(1)(c)(xii) of Commercial Courts Act, 2015 only disputes arising out of shareholders agreement with regard to shares shall be commercial disputes but in the present suit there is no shareholders agreement being entered into between the parties, hence it cannot be treated as a commercial suit.
3. It is submitted present suit relate to a family dispute between the family of defendant no.3-the father-in-law of plaintiff on the other hand and family of defendant no.1. It is submitted the plaint be rejected as the case pertain to rectification of register of members, hence only the NCLT shall have the jurisdiction and per Section 430 of Companies Act no civil suit is maintainable for rectification of the shares. Sections 59, 424 and 430 of the Companies Act are as under:
"59. Rectification of register of members.-(1) If the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company, or the company may appeal in such form as may be prescribed, to the Tribunal, or to a competent court outside India, specified by the Central Government by notification, in respect of foreign members or debenture holders residing outside India, for rectification of the register.
424. Procedure before Tribunal and Appellate Tribunal.-(1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice, and, subject to the other provisions of this Act and of any rules made thereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure.
(2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of the following matters, namely:
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public record or document or a copy of such record or document from any office;
(e) issuing commissions for the examination of witnesses or documents;
(f) dismissing a representation for default or deciding it ex parte;
(g) setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and
(h) any other matter which may be prescribed.
(3) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to send for execution of its orders to the court within the local limits of whose jurisdiction,-
(a) in the case of an order against a compan
The jurisdiction of the Civil Court is not ousted by Section 430 of the Companies Act, 2013, in cases where the dispute involves allegations of fraud and breach of fiduciary duty by an auditor of a c....
The court reaffirmed that civil courts retain jurisdiction over contested ownership of shares and related disputes, despite the company's dissolution and the provisions of the Companies Act restricti....
The court established that the NCLT must conduct a thorough examination of evidence in cases involving rectification of the Register of Members under the Companies Act, 2013.
The Companies Act, 2013 bars civil court jurisdiction in company disputes, mandating adjudication by the National Company Law Tribunal.
The court ruled that a plaintiff’s limited interest in property, dictated by the will, cannot be construed as absolute ownership; undue influence invalidates share transfers.
Point of law: There is specific bar excluding jurisdiction of civil Court on any matter, which is also traceable to Companies Act, jurisdiction of civil Court to decide civil dispute is not ousted.
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