Dismissed

Pooram Kuries and Loans (P) Ltd. v. Rojan Pellissery

Kerala HC12 Feb 2013CRP/15/2013

Case brief

AI extract

What is this about?

The court dismissed a civil revision petition challenging a lower court's finding that a suit was maintainable. The suit sought injunctions against a private limited company's alleged practice of issuing new shares without rectifying audit report deficiencies.

What did the court decide?

Dismissed the civil revision petition and upheld the order that the suit for injunctions was maintainable.

Pooram Kuries and Loans (P) Ltd. Vs Rojan Pellissery — Company and Corporate | Kerala HC (2013)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE THOMAS P.JOSEPH

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TUESDAY, THE 12TH DAY OF FEBRUARY 2013/23RD MAGHA 1934

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CRP.No. 15 of 2013 () --------------------AGAINST THE ORDER/JUDGMENT IN OS.1170/2010 of II ADDL.M.C.,THRISSUR DATED 10-07-2012

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REVISION PETITIONER(S)/REVISION PETITIONERS/DEFENDANTS:

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POORAM KURIES AND LOANS (P) LTD THRISSUR TOWN, THRISSUR VILLAGE AND TALUK REPRESENTED BY ITS CHAIRMAN, ANILKUMAR.C.K. S/O. CHOZHIANKUNNATH KRISHNAN, POOTHOLE DESAM ARANATTUKARA VILLAGE, THRISSUR.

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POORAM KURIES AND LOANS (P) LTD. THRISSUR TOWN, THRISSUR VILLAGE AND TALUK REPRESNTED BY ITS MANAGING DIRECTOR, M. RAJAGOPALAN S/O. KAILASATHIL KUNJU NAIR CHEMBUKKAVU VILLAGE AND DESOM, THRISSUR.

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BY ADV. SRI.K.B.GANGESH

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RESPONDENT/PLAINTIFF:

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ROJAN PELLISSERY

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S/O. PELLISSERY GEORGE, AMMADOM VILLAGE AND DESOM THRISSUR.

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BY ADV. SRI.G.SREEKUMAR (CHELUR)

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THIS CIVIL REVISION PETITION HAVING COME UP FOR ADMISSION ON 12-02-2013, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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THOMAS P.JOSEPH, J. ========================= C.R.P.No.15 of 2013

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============================ Dated this the 12^th day of February, 2013

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O R D E R

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Defendants in O.S.No.1170 of 2010 of the second Additional Munsiff Court, Thrissur are aggrieved by the order dated 10.07.2012 holding that the suit is maintainable.

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Respondent is presently a shareholder and formerly, Director of the first petitioner (the company) which is a private limited company. He alleged mismanagement of the company and that steps are being taken by the company to issue new shares without rectification of its accounts. Hence he prayed that petitioners be restrained from issuing new shares and mandatory injunction to direct petitioners produce the accounts of the company.

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Petitioners contended that the suit is not maintainable in view of provisions of the Companies Act (for short, "the Act”) and in particular Sec.10GB. Trial court rejected that contention and found the suit to be maintainable.

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Learned counsel for petitioners contends that trial court has overlooked Sec.10GB of the Act and in particular, its second limb. It is argued that the issue of shares is a matter which the

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C.R.P.No.15 of 2013

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authorities under the Act has to deal with and that at any rate, there could be no decree for prohibitory injunction with respect to any action which is taken or required to be taken in pursuance of any power conferred by or under the Act.

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Learned counsel for the respondent has contended that in the way the suit is framed, it is perfectly maintainable since it is not a case where challenge is made to the authority of the company but the manner in which it is proposed to be done. According to the learned counsel, there was attempt on the part of petitioners in the meeting of the company to issue new shares without rectification of mistakes in the accounts pointed out by respondent. It is contended that there is no provision in the Act which enables any of the parties therein to deal with rectification of accounts or, to decide upon validity of the resolution taken by the company. Reliance is placed on the decision in John Vs. M/s. Catholic Syrian Bank Ltd. and Ors. (2009(1) KHC 337 ).

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I am given a copy of the plaint. Prayer in the plaint is for a decree for prohibitory injunction against issue of new shares until the deficiencies/mistakes in the audit report are rectified and proper accounts are prepared. There is also a prayer for mandatory injunction to direct petitioners produce accounts of the company in

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C.R.P.No.15 of 2013

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Court. In paragraph 7, cause of action alleged is receipt of information by the respondent of attempt of petitioners to resolve to issue of new shares without rectifying mistakes and deficiencies pointed out by him on 23.03.2010 and that was refused by the petitioners on 25.03.2010. The question is whether on the face of the averments in the plaint, the suit could be said to be not maintainable?. Sec.10GB of the Act dealing with ouster of jurisdiction of the Civil Court says,

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“No Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force.”

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It is the second limb of the said provision which learned counsel for petitioners have emphasized, to contend that a Civil Court cannot grant a decree for prohibitory injunction in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act or any other law for the time being in force. But I must notice that it is not as if there is a blanket ouster of jurisdiction of the Civil Court. As per the first limb of Sec.10GB,

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C.R.P.No.15 of 2013

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inhibition is against jurisdiction of the Civil Court in respect of any matter which the Tribunal or Appellate Tribunal is empowered to determine by or under the Act or any other law for the time being in force. The second limb of Sec.10GB only says that the Civil Court cannot grant a decree for prohibitory injunction in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act or any other law for the time being in force. Prohibition is only against grant of injunction concerning any action taken or to be taken pursuant to the provisions of the Act. In other words, if the action taken or proposed to be taken falls outside the purview of the Act, jurisdiction of the Civil Court is not ousted but the necessary implication is that it has jurisdiction. Sec.81 of the Act deals with the issue of capital. Here, challenge is not to the power of the company to issue capital but, its authority to issue shares without rectifying mistakes/deficiencies in the accounts stated to be pointed out in the audit report.

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Learned counsel for petitioners contends that such power is conferred under Secs.397 and 398 of the Act.

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Sec.397 of the Act deals with applications to the Tribunal for relief in the cases of oppression and Sec.398, in the case of mismanagement. But the right to apply under Secs.397 and 398 of

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C.R.P.No.15 of 2013

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the Act are controlled by Sec.399 of the Act. The said provision states in what manner Secs.397 and 398 of the Act can be invoked. Admittedly, it does not enable a single share holder to move under Secs.397 and 398 of the Act. True, sub-sec.(4) of Sec.399 states that the Central Government may, if in its opinion circumstances exist which makes it just and equitable so to do, authorise any member or members of the company to apply to the Tribunal under Sec.397 or 398, notwithstanding that requirements of clause(a) or clause (b) as the case may be, of sub-sec(1) are not fulfilled. That is not a right with any corresponding duty, but a privilege given to a member or members of the company to apply to the Tribunal under Sec.399(1) and the discretionary power is vested with the Central Government to authorise such member or members to move under Secs.397 or 398 of the Act. That cannot be said as an alternative remedy available to the respondent as of right. That cannot oust jurisdiction of the civil court.

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It is within the power of Civil Court to entertain the complaint of a member or members of the company so far as it does not fall within the category (a) and (b) of Sec.399(1) of the Act.

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I must also notice the decision of this Court in John Vs. M/s. Catholic Syrian Bank Ltd. and Ors. (supra), where

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distinction is drawn in paragraph 9 of the power of Civil Court to consider legality of resolution taken by the company. If the Civil Court has the power to go into the legality of a resolution taken by the company, it can go into the question whether a resolution going to be adopted by the company is as per law. According to the respondent, it is without rectifying mistakes or deficiencies in the accounts even as pointed out in the audit report that the company is attempting to issue new shares. If that contention of respondent is true, the Civil Court can exercise its power in the matter of issue of shares.

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Having regard to the allegations made in the plaint and the reliefs sought for, decision of the learned Munsiff that the suit is maintainable has to be accepted.

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Civil revision is dismissed.

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Sd/-

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THOMAS P.JOSEPH, JUDGE

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Sbna

Pooram Kuries and Loans (P) Ltd. v. Rojan Pellissery

Case brief

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Pooram Kuries and Loans (P) Ltd. v. Rojan Pellissery

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