2013 Supreme(Mad) 3771

High Court of Judicature at Madras
V. RAMASUBRAMANIAN, J.
M.S.D. Chandrasekar Raja
Versus
M/s. Jayabharath Textiles Pvt. Ltd. & Another
Company Appeal No. 6 of 2011
Decided On : 06-11-2013

Headnote:

COMPANY LAW BOARD - JURISDICTION - STAY OF PROCEEDINGS - SECTION 10 OF THE CODE OF CIVIL PROCEDURE - APPLICABILITY - INHERENT POWER OF THE BOARD UNDER REGULATION 44 OF THE COMPANY LAW BOARD (REGULATIONS), 1991 - SCOPE - RES JUDICATA - PRINCIPLE OF - APPLICABILITY TO PROCEEDINGS UNDER ARTICLE 226 OF THE CONSTITUTION - POWER OF THE BOARD TO POSTPONE THE HEARING OF A CASE TO A FUTURE DATE BEYOND A DATE ON WHICH THE CIVIL COURT IS LIKELY TO DECIDE THE SUBSTANTIAL DISPUTE BETWEEN THE PARTIES - WHETHER AVAILABLE.

Fact of the Case:

The appellant, a shareholder in the first respondent-Company, filed a company petition before the Company Law Board (CLB) under Sections 397 and 398 of the Companies Act, 1956, complaining of oppression and mismanagement against the second respondent, who was the other shareholder and Director in the Company. The second respondent filed an application before the CLB under Section 10 of the Code of Civil Procedure (CPC) read with Regulation 44 of the CLB Regulations 1991, praying for a stay of further proceedings before the CLB, till the civil suit filed by him in a District Court was disposed of. The CLB allowed the application and stayed its own proceedings, on the ground that the reliefs sought by the appellant before the CLB and the reliefs sought by the second respondent before the Civil Court, are one and the same and that therefore, there is a likelihood of conflict of decisions if the CLB proceeded further with the hearing of the main petition.

Finding of the Court:

The Court held that the CLB is not a Court within the meaning of the expression "Court" appearing in the Companies Act, 1956 or within the meaning of the expression appearing in the Code of Civil Procedure. Therefore, all the provisions of the Code of Civil Procedure cannot be required to be followed in the proceedings before the CLB. It is only those provisions of the Code of Civil Procedure which are made applicable under sub-section (4C) of Section 10-E and those provisions of the Company Law Board Regulations 1991, which are analogous to the provisions of the Code of Civil Procedure, that can be applied to the proceedings before the CLB. The Court further held that the power under regulation 44 of the CLB (Regulations) 1991, would include a power to stay its own proceedings pending the adjudication of a dispute in a previously instituted suit. This is due to the fact that one test for the applicability of Section 10 of the Code is whether or not, the final decision in the previous suit would operate as res judicata in the subsequent suit. Therefore, if principles analogous to res judicata could be applied to proceedings to which CPC would not apply, then on the same analogy, the principles upon which the power under Section 10 of the Code is based, could also be invoked by the Tribunals, to which CPC would not apply. The absence in the Company Law Board Regulations 1991, of a provision similar to Section 10 of the Code, is not an indication of the restrictive nature of the inherent power under Regulation 44. The inherent power under Regulation 44 encompasses within itself, a power to do something, which finds an expression in specific terms in Section 10 of the Code.

Issues: 1. Whether the provisions of Section 10 of the Code of Civil Procedure would apply, per se to the proceedings before the Company Law Board or not. 2. Whether Regulation 44 of the Company Law Board Regulations 1991, which merely confers inherent powers upon the Board, could be used to produce a result that could have been achieved only under Section 10 of the CPC, when no analogous provision is incorporated in the Regulations? 3. Whether in the facts and circumstances of the case, the invocation of any such power, even if available, is warranted?

Ratio Decidendi: 1. The provisions of Section 10 of the Code of Civil Procedure would not apply, per se to the proceedings before the Company Law Board. 2. Regulation 44 of the Company Law Board Regulations 1991, which merely confers inherent powers upon the Board, could be used to produce a result that could have been achieved only under Section 10 of the CPC, when no analogous provision is incorporated in the Regulations. 3. In the facts and circumstances of the case, the invocation of the power under Regulation 44 of the CLB (Regulations) 1991, to stay its own proceedings pending the adjudication of a dispute in a previously instituted suit, is warranted.

Final Decision: The appeal was allowed and the impugned order of the Company Law Board was set aside and the Company Law Board was directed to proceed with the hearing of the company petition and dispose it of in accordance with law, preferably in a manner that would put an end to the sufferings of the company, if not the sufferings of the applicant and the second respondent.