Shivashankar Bhat, J.:—
Defendants are the petitioners before me, questioning the order of the Trial Court upholding the maintainability of the suit. For the sake of convenience parties are referred with reference to their rankings in the Trial Court. Admittedly the plaintiff is a shareholder of the first defendant-Company. He asserts that his shareholding constitute 10.22% of paid up share capital of the Company. The plaintiff took steps under Sections 257 and 284 of the Companies Act (‘the Act’ for short) by issuing notices under the said provisions. According to the plaintiff, the second defendant managed/manoeuvred to effect a change in the directorship of the Company and to become the Chairman of the Company. It is also stated in the plaint that one Bharath Bhushan Narang became the Deputy Managing Director. It is further alleged that these persons have been in management and control of the Company and as such committed several illegal acts, benefiting themselves, etc. Therefore the plaintiff lodged with the Company a notice under Section 284 read with Section 190 of the Act giving notice of his intention to move four Resolutions at the ensuing Annual General Meeting to be held on 30.9.93 The notice was lodged on 13.9.93 Plaintiff also got published a public notice relating to the matter in the Times of India dated 15.9.93 According to the plaintiff, a letter dated 20.9.93 was issued to the plaintiff rejecting the application of the plaintiff which was received by the plaintiff on 22.9.93 A notice was also issued by the Counsel for the defendants dated 20.9.93 It is further stated in the plaint that the plaintiff had given a notice under Section 257 of the Act proposing the name of one Harban Singh Nagpal for election as Director of the Company at the ensuing Annual General Meeting. A similar notice had been issued by another shareholder proposing the name of the plaintiff for being appointed as Director at the same General Meeting. Two other members also issued similar notices proposing the election of the two more Directors. All those notices were lodged on 13.9.93 There was also a paper publication in the Times of India regarding these matters. Further, the requisite amount stated in Section 257 had been deposited by all the four persons but the defendants rejected the applications. It is unnecessary to refer to other averments in the plaint. The plaint proceeds to say that the defendants have violated the mandate of Sections 257 and 284 with impunity. The Company also refused to accept the proxies which were sought to be lodged by the plaintiff. Therefore the plaintiff asserts that the defendants are bent upon preventing the plaintiff from exercising the rights as members of the Company and that four Directors sought to be replaced have entrenched themselves in the management of the Company contrary to the desire and wish of the majority of the members of the Company. It is alleged that the action of the Company in preventing the plaintiff from exercising its legal right under Section 284 is motivated and illegal. Therefore the plaintiff sought the relief of declaration that the actions of the defendants referred in the plaint were illegal and contrary to law. There is a prayer for mandatory injunction to the defendants to allow the plaintiff and other members to propose and transact the business in terms of the notices issued by the plaintiff and others. The plaintiff sought the appointment of a Receiver to preside over the Annual General Meeting of the Company. The suit was filed on 24.9.93 I.As 1 to 3 were also filed. As per I.A 1 plaintiff sought the grant of an order of mandatory injunction directing the defendants, etc. to consider the Resolutions regarding the removal and appointment of the Directors as per the notices referred already. I.A 2 filed by the plaintiff sought the appointment of a Receiver to preside over the ensuing Annual General Meeting to be held on 30.9.93, etc. I.A 3 was filed by the first defendant under Section 9 read with Section 151 CPC read with Section 10 of the Companies Act, requesting the Court to hear the question regarding the maintainability of the suit before considering any other I.As
2. According to the defendants the suit was not maintainable and the plaintiff at the most could have invoked the forum created under the provisions of the Companies Act for the redressal of his grievances. The rights and liabilities of the parties are governed by the said Act and therefore the same shall have to be considered only by the Court on which the jurisdiction has been conferred by the Act.
3. On 29.9.93 the Trial Court rejected I.A 3 but allowed I.As 1 and 2. The defendants challenged the orders on I.As 1 and 2 in M.F.A 1800 and 1801 of 1993 respectively, in this Court. The present Revision Petition is against the order rejecting I.A 3.
4. The two Appeals were presented before a learned Judge of this Court dealing with such Appeals at 9.20 p.m on the very day of pronouncement of the order by the Trial Court (i.e on 29.9.93). The learned Judge directed the posting of the Appeals on the next day at 10.30 a.m and directed the postponement of the General Body Meeting till 3.00 p.m of 30.9.93 Thereafter on 30.9.93 certain Interim Order was made governing the proceedings of the Annual General Meeting to be held on the said day which covered the subjects proposed by the plaintiff; however the Court permitted the Chairman of the Company to preside over the Meeting but directed the Receiver appointed by the Trial Court to be seated along with the Chairman to make a note of the proceedings and submit a detailed report to the Court after the Meeting is over. The Court also stated that the decision taken at the Meeting with regard to removal or appointment of the Directors shall not be given effect to until further orders of this Court. The Court also directed the records to be called for from the Trial Court immediately by 5.00 p.m This order refers to the contention of the appellants that the order of the Trial Court does not give any indication that the Trial Court had applied its mind over the dispute and points raised by the plaintiff and defendants. The said order of this Court also refers to the contention advanced on behalf of the plaintiff that the Trial Court has passed a separate detailed order and that only operative portion of the order was noted in the order sheet. The learned Judge of this Court observed that there is a serious dispute as to the factum of the Trial Court having made any detailed speaking order. The records of the said Appeals show that the learned Counsel for the respondent filed a Memo on 14.10.93 along with the certified copy of the detailed order made by the Trial Court. However, on 3.11.93 those Appeals were disposed of. The Court held that it was unnecessary to consider the merits of the contentions regarding the order of the Trial Court on I.As 1 and 2 since the said order of the Trial Court stood merged in the order made by this Court on 30.9.93 The Court gave certain directions to the Trial Court while disposing of the Appeals according to law. However, it was made clear that the said order made in M.F.As shall be subject to the result of the present C.R.P In those Appeals the Trial Court sent the records immediately on receipt of the order of this Court conveyed over telephone to it on 30th September itself. I am referring to this aspect because the learned Counsel for the defendants contended that the records sent on the said day did not contain the detailed order made by the Trial Court.
5. The Civil Revision Petition was filed on 19.10.93 though dated 18.10.93 The affidavit of the second defendant filed in support of the I.A for stay of further proceedings is also dated 18.10.93 I.A 2 for dispensing with the production of certified copy of the Trial Court's order is supported by the affidavit of the Secretary of the Company calling himself as the first petitioner, wherein he stated that the certified copy of the order had already been filed in M.F.As and that the Trial Court records were not in the Trial Court. These affidavits are silent about the non-availability of the alleged detailed order. The affidavits are also silent about the factum of the certified copy of the detailed order made by the Trial Court which was produced by the learned Counsel for the plaintiff in the Appeals along with a Memo dated 14.10.93 However, in the Memorandum of Civil Revision Petition, as if by an after thought ground called “additional grounds” is raised in para 21 stating that no separate order other than the order sheet existed on 29.9.93 and no other order was signed and that the only order which was pronounced and signed by the learned Trial Judge on 29.9.93 in the open Court was the order which has been enclosed as a certified copy (obviously referring to the order sheet).
6. Sri S. Vijay Shankar, learned Counsel for the petitioners, raised two contentions: (1) The order of the Trial Court was not a speaking order and except that order, contained in the order sheet of the Trial Court, no detailed order was made on 29.9.93 (2) The suit was not maintainable in the Trial Court and the remedy of the plaintiff, if at all, was to invoke the jurisdiction of the Companies Law Board in view of Section 10 and 10E of the Act.
RE. CONTENTION No. 1:
7. On 29.9.1993 the Court purported to dispose of I.As 1 to 3. The first sentence in the order-sheet itself says that ‘Order on I.As 1 to 3: Pronounced in open Court’. Thereafter the order to be given effect to are repeated. The order further states that an application was filed thereafter by the Counsel for the defendants to keep the order passed on I.As 1 and 2 in abeyance as he intends to seek an Appeal against the said order before the High Court. The order sheet further notes that the Counsel were heard. It further states “by a detailed order this Court has allowed I.As 1 and 2 and rejected I.A 3.” Thereafter the Court gives reasons as to why there cannot be any interim order of stay. The order further appointed a Counsel of this Court as a Receiver. This was made because the earlier order provided for the appointment of a Receiver. On 30.9.1993 when the Appeals were heard by this Court the learned Counsel for the plaintiff had asserted that the Trial Court had passed a detailed order which was pronounced in the open Court. In fact a certified copy of the same was produced subsequently by the learned Counsel for the plaintiff. Mr. Vijay Shankar contends that the defendants were not furnished with any certified copy of the detailed order so far. The nature of the application filed by the defendants for the certified copy is not forthcoming. If the Ministerial Branch of the Court committed any mistake in furnishing the certified copy, the same cannot be attributed to the Presiding Officer of the Court and only on that ground it cannot be said that the learned Judge failed to write a speaking order. While rejecting the prayer for stay, the Trial Court categorically observed that I.As 1 to 3 were rejected by a detailed order; this statement is not specifically challenged in the grounds of Appeals. The Trial Court had to despatch the records immediately on 30.9.1993 and it is quite obvious that whatever records available in the record Section were despatched. There is a presumption that statement of facts in the judgment and the orders of the Court are correctly recorded and that the legal requirements have been complied with by those who discharge public functions. A reading of the order sheet also indicates that it was not possible to make such an order before considering the respective contentions in detail. In view of the above, it is not possible to accept the contention of the learned Counsel for the petitioners (defendants) that there was no speaking order at all made by the Trial Judge when he pronounced the order on 29.9.93 It is also necessary to note that the petitioners filed an I.A in the Trial Court for staying the operation of the order and in the said I.A also there is no reference to the present contention. If the speaking order was not available the first reaction of any party to the litigation will be to point out that the said litigant is not in a position to know the basis for the order and that it was not possible to challenge the said order properly and therefore its operation should be stayed. The said I.A for stay was supported by the Memorandum of Fact signed by the learned Counsel for the defendants.
RE: CONTENTION No. 2:
8. Mr. Vijay Shankar contended that the removal of the Director and the election of a Director to a vacant office are matters specifically provided for under the Act. If the persons in management of the Company refused to comply with the reasonable demands and give effect to the statutory requirements, it will be a case of mis-management and the aggrieved persons who seek redress could do so only as provided under the Act. The learned Counsel referred to Section 9 under which the provisions of the Act are declared as having overriding effect. As per Section 10 the Court having jurisdiction under the Act is the Court referred therein and under Section 2(11) the term ‘Court’ is defined. Section 10E provides for constitution of the Board of Company Law Administration. Sections 397 to 403 were referred to contend that any member of the Company may apply to the Company Law Board for the reliefs referred therein under circumstances provided for. The defendants contend that, having regard to the plaint averments, the plaintiff has been projecting a case of oppression and mismanagement on the part of the defendants. The provisions of Sections 257 and 284 were referred to contend that these are statutory rights given to the members in general because the Directors are to be elected by majority of the members and therefore the said right shall have to be enforced only by recourse to the provisions of the Act. The learned Counsel for the petitioners agreed that a single member by himself cannot invoke the Company Law Board under Section 397 because he has to satisfy the requirements of Section 399 whereunder Sections 397 or 398 can be invoked by any member or members holding not less than 1/10th of the issued share capital of the Company. Sub-section (3) of Section 399 also provides for the same situation. According to the defendants this requirement is a salutary requirement to prevent abuse of the provisions of the Act by a member or a small number of members so that the Company and those who are in its management may not be harassed by frivolous suits and petitions; therefore the law contemplates that a member should have the backing of 10% of the shareholding to agitate for the matters provided under the Act and the said agitation can be only through the Forum created under the Act.
9. The present suit involves the enforcement of a right claimed by the plaintiff to elect directors and to remove the existing directors. Electing a director or removing a director, no doubt requires the support of the majority, as otherwise the candidate for the election would not muster sufficient strength to get elected. Similarly a director cannot be removed unless the majority votes him out. The manner of notifying the candidature as well as the proposal to remove any director are specifically provided for under these provisions. With regard to the respective subjects, both Sections 257 and 284 are self-contained. No other provision of the Act was brought to my notice requiring any further compliance by the person invoking these provisions. Section 188 provides for the circulation of members' resolutions. But the said provision has nothing to do with Sections 257 and 284. On this aspect I need not discuss the question in detail in view of the Decision of a learned Judge of this Court in Karnataka Bank Ltd. v. A.B Datar . M.F.A Nos. 2385 & 2386 of 1992 DD. 22.4.1993 The said Appeals arose out of the suits filed to restrain the moving of resolutions to remove a few directors of the appellant-Company. The Trial Court had granted an order of temporary injunction restraining the resolutions to be moved. There was also a prayer in the suit for the declaration that the special notices issued under Section 284, etc., were void and unenforceable. The Court was concerned with the propriety and the correctness of the order of temporary injunction made by the Trial Court. But the Court had to consider the scope of Section 284 because the right asserted directly arose under the said provision. This Court negatived the contention that Section 188 has to be read along with Section 284 and the requirements of Section 188 also should be complied with, while seeking the removal of director under Section 284. The learned Judge after an elaborate discussion observed as follows:
“A comparative view of the two sections shows that Section 284 is an independent provision providing for removal of the directors and it is available for any share holder for moving a resolution for removal of a director in the meetings called by the company and there is nothing to insist on compliance of provisions in Section 188(2) to call a meeting to move a resolution as urged. Therefore, prima facie the view of the law to be taken having regard to the provisions of the two sections would be to hold that Section 284 of the Companies Act is not subject to Section 188 of the Companies Act and it is independent of that Section.”
10. Thereafter the Decision of the Supreme Court in Life Insurance Corporation of India v. Escorts Ltd. . 1986 1 SCC 264 was referred wherein the Supreme Court observed at para 100 thus:
“Thus, we see that every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to call an extraordinary general meeting in accordance with the provisions of the Companies Act. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolutions proposed to be moved at the meeting. Nor are the reasons for the resolutions subject to judicial review. It is true that under Section 173(2) of the Companies Act, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting including, in particular, the nature of the concern or the interest, if any, therein, of every director, the managing agent, if any, the secretaries and treasurers if any, and the manager, if any. This is a duty cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. It does not require the shareholders calling a meeting to disclose the reasons for the resolutions which they propose to move at the meeting. The Life Insurance Corporation of India, as a shareholder of Escorts Limited, has the same right as every shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some Directors and appoint others in their place. The Life Insurance Corporation of India cannot be restrained from doing so nor is it bound to disclose its reasons for moving the resolutions.”
From the above Decision of the Supreme Court in Escort Ltd.'s case it is clear that every shareholder of a Company has the right to call an Extraordinary General Meeting. The said right could be enforced after complying with the procedural and other requirements. It is his individual right. The enforcement of this right is independent of the requirements of Section 188 governing other kinds of resolutions. Therefore, before considering the contention advanced by the defendants it has to be assumed that the right sought to be enforced by the plaintiff in the suit is an individual right statutorily recognised in him and the enforcement of the said right cannot be restrained even by a Court of Law. If the attempt of the individual to remove a director or to elect any other director in a vacancy is frivolous, the said attempt will be lost at the meeting and there will not be any undue harassment of the Company at all to prevent speculative ventures to get elected. Under Section 257, the Act itself provides a safeguard by requiring a deposit of Rs. 500/- by the person invoking Section 257. It is for the person invoking Sections 257 or 284 to persuade the members at the Annual General Meeting to accept his proposals. If a person in the management of the Company, controlling its affairs could ignore the demands made under those provisions without any immediate remedy to enforce the said provision, the individual right conferred on the members would be stultified. In the very nature of things the remedy provided under Section 397 of the Act and other similar provisions is not available to the individual member immediately since it requires the member to get consent letters of others, in case he is not possessed of the requisite percentage of shareholdings.
11. The fact that the plaintiff in the instant case possesses more than 10% of the shareholding is irrelevant to consider the question of law about the maintainability of the suit in view of the provisions of the Act.
12. It is also necessary to note that under Section 397 it is not only the oppression that gives a cause of action but also the applicant or the applicants shall have to show that the facts would justify the making of winding up order on the ground that it is just and equitable that the Company should be wound up. In other words it is necessary to show that the facts are such that normally the Company could be sought to be wound up under “just and equitable” clause but such winding up would unfairly prejudice the members. Therefore I am of the view that Section 397 is not an effective forum to grant any relief to an individual member under all circumstances. Similar is the situation under Section 398 also. Being a constituent of the company a shareholder has several individual rights and those rights could be enforced by invoking the civil jurisdiction of the Courts. Further, the Act nowhere specifically excludes the jurisdiction of the Civil Courts.
13. It was contended that the rights and liabilities under the Act are statutory and the same could be enforced only in the manner provided under the Act. Dhulabhai etc. v. State of Madhya Pradesh . AIR 1969 SC 78., was cited in this regard. At page 89 the Supreme Court summarised the various principles. The Supreme Court held as follows:
“….The result of this inquiry into the diverse views expressed in this Court may be stated as follows:
(1) Where the statute gives the finality to the orders of the special tribunals the civil Court's jurisdiction must be held to be excluded if there is adequate remedy to do what the Civil courts would normally do in a suit. Such provision however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.
(2) Where there is an express bar of the jurisdiction of the Court, an examination of the scheme of the particular Act to find the adequacy of the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the Civil Court.
Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted and whether remedies normally associated with actions in civil Courts are prescribed by the said statute or not.
(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before tribunals constituted under the Act. Even the High Court cannot go into that question on a revision or reference from the decision of the tribunals.
(4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.
(5) Where the particular Act contains no machinery for the refund of the tax collected in excess of Constitutional limits or illegally collected a suit lies.
(6) Questions of correctness of the assessment apart from its Constitutionality or for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry.
(7) An exclusion of the jurisdiction of the civil Court is not readily to be inferred unless the conditions above set down apply.”
Mr. Vijay Shankar contended that, in the instant case the Act creates a special right or a liability and provides for the determination of the said right or liability and relied upon the second principle stated above. I don't think that the right to elect a director of a Company is a special right. Such a right is inherent in the shareholder of the Company. It is true that the Company itself, is the creation of law. It is an artificial person. But that does not mean that everything connected with the Company and all matters governing the constitution and the management of the Company are special rights or liabilities. When a person has contributed to the shareholding of the Company, which is the very basis of the Company, a right to participate in the matter of electing or removing a director should be considered as a right inherent in such a member. No individual member can directly participate in the management of the Company. Therefore the Company Law provides for the Board of Directors. This inherent right of the member cannot be considered as the creation of the statute though the statute provides for the incorporation of the Company. This apart, no particular provision of the Act was brought to my notice, which specifically provides for the enforcement of the right under Sections 257 and 284, by invoking the jurisdiction of a particular Court or Tribunal. It is also necessary to bear in mind that exclusion of the jurisdiction of the Civil Courts is not to be readily inferred and such exclusion must either be explicitly expressed or clearly implied (the relevant statement of the law also is found in the above Decision of the Supreme Court in Dhulabhai's case).
14. Mr. Naganand, learned Counsel for the respondent herein, referred to a Decision of the Supreme Court in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd. . 1981 3 SCC 333 At para 49 the Supreme Court pointed out that every illegality committed by a Company or persons in its management need not be oppressive and that every act of oppression need not be illegal. At page 1319, the Supreme Court observed as follows:
“The question sometimes arises as to whether an action in contravention of law is per se oppressive. It is said, as was done by W.H Bhagwati, J. in S.M Ganapatram v. Sayaji Jubilee Cotton and Jute Mills Co., (1964) 34 Com. Cas. 777 at pp. 830-81 : AIR 1965 Guj. 96 at p. 103 that ‘a resolution passed by the directors may be perfectly legal and yet oppressive, and conversely a resolution which is in contravention of the law may be in the interests of the shareholders and the company’. On this question, Lord President Cooper observed in Elder v. Elder (1952) SC 49:
‘The decisions indicate that conduct which is technically legal and correct may nevertheless be such as to justify the application of the ‘just and equitable’ jurisdiction and, conversely, that conduct involving illegality and contravention of the Act may not suffice to warrant the remedy of winding up, especially where alternative remedies are available. Where the ‘just and equitable’ jurisdiction has been applied in cases of this type, the circumstances have always, I think been such as to warrant the inference that there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy.”
15. A few more Decisions require to be referred as they have been cited before me.
In British India Corporation, Ltd.…(Opposite-Party); v. Robert Menzies…(Applicant).* . AIR 1936 Allahabad 568. a Bench of Allahabad High Court held that the Company Judge alone has jurisdiction to enforce compliance with the provisions of the Companies Act, though such power is not expressly conferred on the Judge by the provisions of the Act. It was also held that the Company Judge may issue a mandatory injunction to ensure compliance with the mandatory provisions of the Act, even though the proceedings are of a summary nature. It was a case where the shareholder filed an application before the Company for a copy of register of the members which was denied and therefore he moved the Company Court. The Court said that there was no particular remedy provided under the Act and therefore it should be assumed that such a remedy is available and therefore the Company Court had jurisdiction. The Court was not considering the exclusiveness of the jurisdiction any where. The Court was not concerned in the said case whether the ordinary Court had jurisdiction or not. The High Court observed that it is a fundamental principle of legal administration that where the law requires something to be done, there must be in existence a Court that can directly order it to be done. In Hirendra Bhadra v. Titwn Eng. Co. (P) Ltd. . 80 Calcutta Weekly Notes 242. it was held that the Court of Munsiff had no jurisdiction to entertain the suit which was filed to enforce the resolution of the Board of Directors and to declare that the defendant had vacated or deemed to have vacated the office of the director of the plaintiff Company consequent upon the resolution. The learned Judge of the Calcutta High Court held that in view of Section 10 of the Act mainly the High Court had jurisdiction with regard to the matters under the Act and in certain cases the district Court may have jurisdiction, but not the Munsiff Court. The Court held that the matters alleged in the suit are of matters under the Act and therefore only the Court under the Act had jurisdiction to entertain the suit. This was followed by a learned Judge of the Bombay High Court in Vitthalrao Narayanrao Patil v. Maharashtra State Seeds Corporation Ltd. . 68 CC 608.. That was a matter where the plaintiff filed a suit challenging the intimation received by him that he ceased to be a director of the Company. The suit was held to be not maintainable in the Court of Civil Judge, in view of Section 10 of the Act. However, in R. Prakasam v. Sree Narayana Dharma Paripalana Yogam. . 50 CC 611., a learned Judge of Kerala High Court held that a suit filed challenging the validity of the meeting of the Company was maintainable. The Court negatived the contention based on Section 10 of the Act. The Court pointed out that, the Act gives the members some personal rights but it does not confer on him a general right to have all the provisions of the memorandum or articles duly observed or to initiate action for violation of all the obligations the Act imposes on the Company. Therefore, in such a situation civil suit was held as maintainable. The Court also pointed out that the Forum under Sections 397 and 398 provided for relief against oppression and mismanagement. But that was not an individual right. At para 6291, after referring to the definition under Section 2(11) the learned Judge held as follows:
“It appears to me that what the above definition clause does is to indicate that wherever other provisions of the Act contain the term ‘the Court’ with respect to any matter relating to a company, that has to be understood as the Court having jurisdiction under Section 10 with respect to that matter. And Section 10, dealing with ‘jurisdiction of courts’ lays down that the High Court of the territory where the registered office of the company is situate is to have jurisdiction over all matters except to the extent such jurisdiction has been conferred by notification on District Courts. Take, for example Section 107. This section provides that dissentient shareholders ‘may apply to the Court’ to have the variation cancelled. The shareholders concerned will have to find out which Court they should resort to. It may be the High Court of one State or of another, depending upon where the head office of the company is situated. It may be the District Court of one place or another, again depending upon the notifications issued under Section 19(2). The purpose of Section 2(11) read with Section 10 is only to enable the shareholders to decide as to which Court they should approach for remedy, in respect of that particular matter. It is difficult to construe the definition clause as one conferring jurisdiction, exclusive or otherwise; and even Section 10 refers only to ‘the Court having jurisdiction under this Act’, i.e, where such jurisdiction is conferred by the Act, as under Sections 107, 155, 163(2), 237, 397, 425, etc. In other words, the conferment of jurisdiction on ‘the Court’ is not under Section 10, but by other provisions of the Act like those enumerated above. If, on the other hand, sections 2(11) and 10 are construed as not only nominating the courts, but also conferring exclusive jurisdiction on them, the specific provisions in the other sections conferring jurisdiction on the Court to deal with the matters covered by them will become redundant. It may be that where the Act specifies the Company Court as the forum for complaint in respect of a particular matter, the jurisdiction of the Civil Court would stand ousted to that extent. This depends, as already noticed, on the language of the particular provisions like sections 107, 155, 397 and others and not on sections 2(11) and 10. For instance, there are decisions to the effect that the concurrent jurisdiction of the civil courts to rectify share registers is not affected by section 155 which confers power on the company court over the same matter.”
The above Decision clearly lays down that in the realm of individual rights, suit alleging wrongs done to the individual members could be agitated by recourse to the Civil Courts. I respectfully agree with the above observation.
In Maharaja Exports v. Apparels Exports Promotion Council . 60 CC 353., a learned Judge of the Delhi High Court also took a similar view. The Court pointed out that in view of the elaborate provisions contained in the Act the scope or interference by the Civil Court may have become very limited but the power of the Civil Court is not completely taken away. It was held that where wrong is done to an individual member he can file a civil suit and compel the performance of the statutory duties. The Court also pointed out that the Act does not contain any express provision barring the jurisdiction of the ordinary Civil Courts in matters covered by the provisions of the Act. The fact that Civil Courts are not deprived of the jurisdictions in all matters covered by the Act is clear form: (1) Karnal Distillery Co. Ltd. v. Ladli Parshad Jaiswal . AIR 1958 Punjab 190. and (2) Public Passenger Service Ltd. Chidambaram v. M.A Khadar . AIR 1966 SC 489.. Both these Cases arise under Section 155 of the Act.
In Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, Tirupathi, . 62 CC 301. the view taken by the Kerala High Court, aforesaid, was followed. A civil suit was filed involving disqualification of the director of the Company. The question was whether the suit was maintainable. Justice M. Jagannatha Rao, (as he then was) held that when the case deals with an individual right then the suit filed by him is maintainable. There may be some regulatory provisions in the Act but from it, it cannot be inferred that the general right of suit is taken away.
In M.G Kadali v. A. Krishna* . ILR 1990 KAR 3446., a learned Judge of this Court also took a similar view. A suit questioning the rejection of nomination paper by the management of the company was held as maintainable. The learned Judge observed at page 3465 that no particular provision of the Act barred the jurisdiction of the Civil Court from entertaining a suit for granting the reliefs of the nature sought for in the said case.
16. It is necessary always to note the distinction between the individual membership rights and the rights available to the qualified minorities under Company Law. Palmer's Company Law (23rd Edition) in Para 58-03 makes an observation that there should not be any confusion between these sets of rights. The learned author thereafter proceeds to discuss the nature of the individual membership rights. Para 59 deals with the qualified minority rights. It can be safely said that these “qualified minority rights” are generally enforceable by recourse to the provisions of the Act while the individual rights could be enforced by recourse to civil suits except in cases where specific provision is found in the Act for its enforcement elsewhere.
17. The theme of the discussion in Palmer's Company Law referred above governs the procedural aspects, especially whether the action can be brought in the name of the Company or shall have to be brought in the name of the individual members. But at the same time the discussion certainly indicates that an individual is entitled to seek protection against the invasion of the individual right as a member and in such a case naturally the question will arise as to the Forum to be approached to seek the protection.
18. The right sought to be enforced in the instant case is an individual right. The two statutory provisions relied upon by the parties, Sections 257 and 284 regulate the exercise of the said right. No particular provision of the Act creates a specific jurisdiction to enforce the said right exclusively. Therefore the civil suit filed by the plaintiff is maintainable.
19. Consequently, I affirm the order of the learned Trial Judge. Civil Revision Petition is dismissed.