Case Note & Summary
The writ petition arose from an order passed below Exhibit-144 in Special (Commercial) Civil Suit No.23/2017 (earlier S.C.S. No.422/2003) rejecting the petitioners' application under Section 10 of the Code of Civil Procedure, 1908 for stay of the suit. The respondent had earlier instituted Company Petition No.9/2001 before the Company Law Board, New Delhi, which was allowed on 2/12/2004, directing the petitioners to allot 14,75,998 equity shares of Rs.10 each to the respondent or refund the amount with 6% simple interest. Neither shares were allotted nor amount refunded. The order was challenged by the petitioners in Appeal No.7/2004 before the High Court, which was dismissed on 8/6/2009, and thereafter in SLP (C) No.19733 of 2009, where leave was granted on 18/10/2010. Meanwhile, by Resolution dated 15/12/2004, 14,75,998 equity shares were allotted to the respondent. The manner of allotment was challenged by the respondent in Company Petition No.1/2005, resulting in a judgment dated 9/8/2007 directing that the shares allotted to the respondent be purchased either by the company or the other respondents at par value with 6% interest. That judgment was challenged by the petitioners in Company Appeal No.9/2008, dismissed on 21/4/2010, and thereafter in SLP(C) No.16760 of 2010, where by order dated 2/8/2010 the petitioner No.1 was directed to deposit Rs.2,59,18,525, which was deposited; leave was granted on 18/10/2010. The respondent had already instituted Special Civil Suit No.422 of 2003 on 9/6/2003 against the petitioners, claiming decree for refund of share application money, recovery of unpaid secured loans and interest. The petitioners filed their written statement on 1/10/2003 along with a counter-claim based on a judgment of the Superior Court of California, County of Orange, USA, dated 11/4/2002, allowing the claim of petitioner No.2 for US $2,89,562 with 18% interest, seeking a decree in terms of that foreign judgment due to absence of a reciprocating agreement under Section 44-A CPC. The petitioners contended that leave granted by the Supreme Court in the SLPs put the entitlement in share money in issue, warranting stay of the suit, and alternatively invoked Section 151 CPC. The respondent argued that Company Law Board proceedings are summary and not suits; Section 10 requires two suits in competent courts with concurrent jurisdiction, which is absent; and only a part of the claim regarding shares is pending before the Supreme Court, not the entire subject matter of the suit. The court quoted Section 10 CPC and discussed the scope and test for its applicability by referring to National Institute of Mental Health and Neuro Sciences v. C. Parameshwara and Aspi Jal v. Khushroo Rustom Dadyburjor, reiterating that Section 10 applies only to suits, not other proceedings, and requires identity of the whole subject-matter; the fundamental test is whether the decision in the previous suit would operate as res judicata. The extracted judgment text ends without recording the final operative order or decision on the writ petition.
Headnote
A) Civil Procedure - Stay of Suit - Section 10, Code of Civil Procedure, 1908 - Applicability to proceedings before Company Law Board - Court observed that Section 10 CPC requires two suits between same parties where matter in issue is directly and substantially in issue in previously instituted suit; proceedings before Company Law Board are not suits. Court referred to National Institute of Mental Health and Neuro Sciences and Aspi Jal for proposition that Section 10 applies only when whole subject-matter of both suits is identical and does not apply to proceedings under other statutes. (Paras 10-13) B) Civil Procedure - Inherent Powers - Section 151, Code of Civil Procedure, 1908 - Stay in absence of Section 10 - Petitioners argued that even if claim not strictly within Section 10, court may invoke inherent powers under Section 151 to stay suit; reliance placed on Manohar Lal Chopra and other precedents. Court noted the contention but the extracted text does not record a final ruling on this argument. (Paras 8-9) C) Civil Procedure - Res Judicata Test - Section 10, Code of Civil Procedure, 1908 - Identity of subject-matter - Court referred to Aspi Jal stating that for Section 10, entire subject-matter of two suits must be the same; provision will not apply where only a few matters in issue are common. The extracted portion ends while discussing this principle. (Paras 12-13)
Issue of Consideration
Whether proceedings before the Company Law Board and pending Special Leave Petitions before the Supreme Court constitute a previously instituted suit for purposes of Section 10 CPC, warranting stay of Special (Commercial) Civil Suit No.23/2017; and whether Section 151 CPC can be invoked for stay even if Section 10 does not apply.
Law Points
- Section 10 CPC requires two suits between same parties with matter in issue directly and substantially in issue
- applies only when whole subject-matter identical
- fundamental test is res judicata
- Section 10 does not apply to proceedings before Company Law Board or other statutory tribunals
- inherent powers under Section 151 CPC may be invoked where Section 10 does not strictly apply but stay is necessary
