Case Note & Summary
The appellants, M/s. Candolim Developers Pvt. Ltd. and its director Sunil Thukral, filed a suit before the Civil Judge Senior Division, Panaji, seeking a declaration that Form No.5 filed by the first respondent (since deceased) with the Registrar of Companies, purporting to increase share capital from 51% to 70%, was null and void. The suit alleged that the first respondent, while managing the affairs of the company, committed fraud and fabricated documents. The trial court rejected the plaint under Order VII Rule 11(d) of the Code of Civil Procedure, 1908 (CPC), holding that the civil court's jurisdiction was barred by Section 10GB of the Companies Act, 1956, which vests jurisdiction in the Company Law Board (now Tribunal) for matters relating to oppression and mismanagement. Aggrieved, the appellants appealed to the High Court of Bombay at Goa. The High Court allowed the appeal, holding that the suit did not pertain to oppression or mismanagement under Sections 397-398 of the Companies Act, 1956, but rather alleged fraud and fabrication of documents, which is a civil wrong. The court observed that the bar under Section 10GB applies only to matters that the Tribunal is empowered to deal with, and the plaint disclosed a cause of action. The court set aside the impugned order and directed the trial court to proceed with the suit in accordance with law.
Headnote
A) Civil Procedure - Rejection of Plaint - Order VII Rule 11(d) CPC - Bar of Jurisdiction - The trial court rejected the plaint holding that the civil court had no jurisdiction in view of Section 10GB of the Companies Act, 1956. The High Court held that the suit alleging fraud in the management of the company and seeking declaration that a Form No.5 filed with the Registrar of Companies was null and void, was not barred by Section 10GB as the dispute did not relate to oppression or mismanagement under Sections 397-398 of the Companies Act, 1956. The court further held that the plaint disclosed a cause of action and the bar of jurisdiction must be decided after trial. (Paras 5-10) B) Company Law - Jurisdiction of Civil Court - Section 10GB Companies Act, 1956 - Fraud - The High Court held that Section 10GB ousts civil court jurisdiction only in respect of matters which the Tribunal is empowered to deal with under Sections 397-398 of the Companies Act, 1956. A suit alleging fraud and fabrication of documents by a director, not relating to oppression or mismanagement, is maintainable before the civil court. The court set aside the order rejecting the plaint and restored the suit to the trial court for disposal in accordance with law. (Paras 6-10)
Issue of Consideration
Whether the civil court's jurisdiction is barred under Section 10GB of the Companies Act, 1956 in a suit alleging fraud in the affairs of a company, and whether the plaint was rightly rejected under Order VII Rule 11(d) CPC.
Final Decision
The High Court allowed the appeal, set aside the order dated 12.11.2013 passed by the Civil Judge Senior Division, Panaji, and restored the suit to the trial court for disposal in accordance with law. The court directed the parties to appear before the trial court on 14.11.2016.
Law Points
- Jurisdiction of Civil Court
- Bar of jurisdiction under Companies Act
- Fraud exception to ouster of civil court jurisdiction
- Order VII Rule 11 CPC
- Section 9 CPC
