Author Default– By Hemant Chaudhry
ABSTRACT
The jurisdiction of the company matters had been in a longer dispute since a longer period of time. Now such legal dispute pertaining to the jurisdictional issues regarding establishment of National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) had come to an end. A five judge bench of the Hon’ble Supreme Court had pronounced a judgment pertaining to the NCLT and had struck down some provisions of the Companies Act, 2013 pertaining to NCLT and NCLAT in the case of Madras Bar Association vs. UOI[1]. One of the important notifications was the notification pertaining to the NCLT and NCLAT provisions of the Companies Act, 2013 which is considered as the welcome step for the litigation of the companies and the jurisdiction in India. This article has explained the legal framework regarding the jurisdiction of company in adjudicating the matters along-with the legal issues which were raised pertaining to the jurisdiction which were resolved with the help of landmark case laws.
INTRODUCTION
Multiple jurisdictions of the company matters have given rise to the unanticipated altercations. A number of years had been passed while observing the jurisdictions pertaining to company matters like jurisdiction of High Court would be used for winding up and corporate reconstruction. On the other hand, the Company Law Board would be used for the Prevention of Incorporation, etc. To get curbed from this dispute, a certain change pertaining to jurisdiction was made by virtue of the Companies (Second Amendment) Act, 2002 and as a consequence to the Justice Eradi Committee recommendation, a unified jurisdiction in the administration of the Company Law’s administration was entered into picture with the primary objective of establishing the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT). The main purpose of such amendment was to avoid the multiple jurisdictions. However, such amendment was remained on paper due the petition filed by Mr. R Gandhi pertaining to the Constitutional Validity of such Companies (Second Amendment) Act, 2002, in the Madras High Court and the same was answered by the Hon’ble Supreme Court in 2010 in the case of UOI vs. Madras Bar Association[2]. In the mean time, the Companies Act, 2013 was passed by the Parliament which was having the substantial provisions pertaining to the NCLT and NCLAT. Later a writ petition was filed by the Madras Bar Association pleaded that the relevant provisions of the Companies Act, 2013 were ultra vires to Article 14 of the Constitution and hence liable to be struck down as unconstitutional. Thereafter, on 14/05/2015, a five judge bench of the Hon’ble Supreme Court pronounced the judgment pertaining to NCLT and NCLAT and struck down several relevant provisions of the Companies Act, 2013.
If we talk about the Dr. JJ Irani Committee Report on Company Law, 2005[3] then the report of the Expert Committee on Company Law 2005, prescribed institutional construction changes to have a fast corporate resolution. The report called attention to that the time taken in the current system should be assessed especially so with regards to liquidation and winding up. It established the Companies (Second Amendment) Act, 2002 which the Government has visualized setting up of the National Company Law Tribunal and the National Company Law Appellate Tribunal, the single forum to manage corporate issues.
As of late, the Supreme Court of India in Shashi Prakash Khemka vs. NEPC Micon and Others[4], while deciding the question regarding whether an issue pertaining to transfer of shares ought to be adjudicated by Civil Courts or by the Company Law Board, it was held that the issues where power has been vested in the National Company Law Tribunal, the jurisdiction of the Civil Courts is totally barred. In the said case, it was alleged that the dispute that was being referred to was the title of shares and along these lines the Civil Courts ought to have the power to adjudicate the matter. The Court, while, setting aside the judgment given by the Madras High Court had observed that consigning the parties to the civil suit would not be a proper remedy since Section 430 of the Companies Act, 2013 is generally provided pertaining to these things.
JURISDICTION OF COMPANY LAW BOARD
The Companies (Second Amendment) Act 2002, brought out new forum namely “National Company Law Tribunal and National Company Law Appellate Tribunal” to take the complete jurisdiction of the company matters but Company Law Board and to an exceptionally huge extent that of the Civil Courts and High Courts. The Act accommodates the making of the identical forums where National Company Law Tribunal has been vested with powers that are sweeping in regard of the executives and administration of the companies. The primary powers of National Company Law Tribunal incorporate powers as wide as “regulation of conduct of affairs of the company” under Section 242 (2) (a). It is appropriate to note that the jurisdiction of the Civil Court over the Company law matters has consistently been a disputable issue. The principle dispute set forth against the Civil Court’s jurisdiction is that the position of the Company Law Board has been kept at standard with that of Civil Court. It is constantly discussed that, since a special forum has been set up to adjudicate the issues pertaining to Company law, it consequently bars the jurisdiction of the Civil Court.
In the case of Avanti Explosives (P) Ltd vs. Principal Subordinate judge[5], a civil suit was filed including exclusion of the director of the Company. The question before the court was whether the suit was maintainable? The Court held that because of some provisions in the Act, the common right of the suit can’t be removed or taken away. Accordingly, a suit for declaration that the plaintiff is and keeps on being the Managing Director of the Company, that the Board meeting is invalid and void and for the injunction order to restrain the respondents from interfering with the office of the plaintiff as a Managing Director is maintainable.
The issue of jurisdiction regarding whether a Civil Court or the National Company Law Tribunal (NCLT) under the Act came up for consideration before the Delhi High Court in the case of SAS Hospitality Pvt. Ltd vs. Surya Constructions Pvt. Ltd[6]. The Court in its order found down that the NCLT has exclusive jurisdiction and in the present suit, the plaintiff filed a suit looking for a declaration that the allotment of shares by Surya Constructions for five financial backers is null and void. The defendant in the suit challenged the jurisdiction of the Civil Court in adjudicating the matter and contended that the NCLT was the appropriated forum and the Court held that the NCLT is the appropriate forum to adjudicate the matter.
Also in the case of Jai Kumar Arya and Ors. vs. Chhaya Devi and Anr[7], the Division Bench of the Court, managing the bar under Section 430 of the Companies Act 2013, held that, “While examining the merits of these rival contentions, we are fully aware of the interpretative principle, now trite in law, that provisions which operate to exclude the ordinary jurisdiction of civil courts are to be strictly construed, and exclusion of such jurisdiction is not to be lightly inferred. The principle of exclusion of jurisdiction is, moreover, never absolute.”
JURISDICTION OF CIVIL COURT
Section 9 of the Code of Civil Procedure, 1908 has the jurisdiction to try all suits of a civil nature excepting the suits of which cognizance is either explicitly or impliedly barred. Appropriately, however, the appropriate forum to settle on an issue is the Civil Court, and Section 9 of the CPC bars suits of civil nature which is being enabled by the Special Act on the Tribunal.
The Hon’ble Supreme Court in the case of Dhulabhai v. State of Madhya Pradesh and others[8] set down seven standards or principles to be applied for deciding whether a suit is barred under Section 9 of CPC. It is pertinent to draw the reference of the wordings of Lord Thankerton in the case of The Secretary of State vs. Mask and C[9] where he explained the scope of the exclusion clause in the following words:
“It is settled law that the exclusion of the jurisdiction of the Civil Courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. It is also well settled that even if jurisdiction is so excluded, the Civil Courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure”.
In the case of CDS Financial Services (Mauritius) Limited vs. BPL Communications Limited and ors.[10] it was held that, “when there is no express provision excluding the jurisdiction of the Civil Courts, such exclusion can be implied only in cases where a right itself is created and the machinery of enforcement of such right is also provided by the statute. If the right is traceable to general law of contracts or it is a common law right, it can be enforced through the Civil Court, even though the forum under the statute also will have jurisdiction to enforce that right. Sections 397, 398 and 408 of the Companies Act, 1956 do not confer exclusive jurisdiction on the company court to grant reliefs against oppression a nd mismanagement. The scope of these sections is to provide a convenient remedy for minority shareholders under certain conditions and the provisions therein are not intended to exclude all other remedies.”
Therefore, from the above-mentioned judgments, it is clear that the Civil Court can adjudicate upon all the suits of civil nature unless its jurisdiction is expressly or impliedly barred.
CONCLUSION
It very well may be concluded or induced that there is no express provision under the Company Act, 1956, which bars the jurisdiction of Civil Court in the Company matters. It is additionally obvious from the decisions that express or implied condition barring the jurisdiction is very vital. Primarily from the above-mentioned research, one can observer a divergence of various perspectives under the Companies Act 2013. While one bunch of decisions is seems to be in favor of Civil Courts for having the jurisdiction over the Company Law Matters, the courts have interpreted diversely in many different cases while holding that NCLT is the appropriate forum to adjudicate the company related matters. Ultimately it is extremely challenging to bar the jurisdiction of civil court in pertaining to Company law matters and the situation comparable to it has effectively been settled through different case laws in the present article.
Reference
[1] (2015) 8 SCC 583
[2] (2010) 11 SCC 1
[3] Report of the Expert Committee on Company Law, 2005, Ministry of Corporate Affairs, 31st May, 2005, http://reports.mca.gov.in/Reports/23Irani%20committee%20report%20of%20the%20expert%20committee%20on%20Company%20law,2005.pdf
[4] CA 1965-66/2014
[5] (1987) 62 Com Cases 301 (AP)
[6] MANU/DE/379/2018
[7] (2018) 142 CLA 365
[8] AIR 1969 SC 78
[9] AIR 1940 PC 105, 110
[10] (2004) 121 Comp Cases 375
Manik Tanwar