w w w . L a w y e r S e r v i c e s . i n



RDF POWER PROJECTS LTD., HYDERABAD VERSUS M. MURALIKRISHNA


Company & Directors' Information:- RDF POWER PROJECTS LIMITED [Active] CIN = U40109TG1998PLC030670

Company & Directors' Information:- N T POWER PROJECTS ( INDIA ) PRIVATE LIMITED [Active] CIN = U40300TG2015PTC099992

Company & Directors' Information:- H S POWER PROJECTS PRIVATE LIMITED [Active] CIN = U31909DL2003PTC121326

Company & Directors' Information:- S M POWER PROJECTS PRIVATE LIMITED [Strike Off] CIN = U40101KA2007PTC043140

Company & Directors' Information:- M R K POWER PROJECTS PRIVATE LIMITED [Strike Off] CIN = U40108TG2009PTC064610

Company & Directors' Information:- V B S POWER PROJECTS PRIVATE LIMITED [Active] CIN = U40101HP2007PTC030760

Company & Directors' Information:- K M M POWER PROJECTS PRIVATE LIMITED [Active] CIN = U40101UR2008PTC032741

Company & Directors' Information:- K A J POWER PROJECTS PRIVATE LIMITED [Active] CIN = U40105UR2008PTC032742

Company & Directors' Information:- J J POWER PROJECTS PRIVATE LIMITED [Strike Off] CIN = U40108KA2009PTC050480

Company & Directors' Information:- POWER PROJECTS (INDIA) PRIVATE LIMITED [Strike Off] CIN = U31101DD1995PTC001793

Company & Directors' Information:- N T POWER PROJECTS PRIVATE LIMITED [Under Process of Striking Off] CIN = U40102TG2015PTC098830

Company & Directors' Information:- R P POWER PROJECTS PRIVATE LIMITED [Strike Off] CIN = U74900UP2009PTC038185

Company & Directors' Information:- R J POWER PROJECTS PRIVATE LIMITED [Active] CIN = U40102DL2013PTC258320

Company & Directors' Information:- T & A POWER PROJECTS PRIVATE LIMITED [Active] CIN = U40106DL2015PTC281726

Company & Directors' Information:- S C P POWER PROJECTS PRIVATE LIMITED [Strike Off] CIN = U40109DL2005PTC133742

Company & Directors' Information:- POWER ON PROJECTS PRIVATE LIMITED [Under Process of Striking Off] CIN = U74900AP2015PTC097760

Company & Directors' Information:- T V R POWER PROJECTS PRIVATE LIMITED [Strike Off] CIN = U40109AP2006PTC052062

Company & Directors' Information:- R Y POWER PROJECTS PRIVATE LIMITED [Active] CIN = U40104KA2012PTC066217

    C.A. 2 OF 2004

    Decided On, 10 September 2004

    At, High Court of Andhra Pradesh

    By, THE HONOURABLE MR. JUSTICE N.V. RAMANA

    For the Appearing Parties: L.V.V.Iyer, T.L.N.Chart, T.Surya Satish, Advocates.



Judgment Text

N.V. RAMANA, J.


( 1 ) THIS appeal under section 10-F of the Companies Act, 1956 (for short 'the Companies Act') is directed against the order dated 20-4-2004 passed by the Company Law Board, Additional principal Bench, Chennai, in C. A. No. 37 of 2004, refusing to stay the proceedings in C. P. No. 25 of 2003, pending before it, until the conclusion of the suit proceedings in O. S. No. 61 of 2002, pending on the file of the XIII Junior Civil Judge, City Civil court, Hyderabad.


( 2 ) THE facts necessary for disposing of this appeal, may briefly be stated, and they run thus:


( 3 ) APPELLANT No. 1, namely M/s. RDF power Projects Limited (hereinafter referred to as 'the company'), incorporated by appellant No. 2 and the respondents, for establishment of power generation plant by using municipal solid waste. Appellant no. 2, it appears, was appointed as Managing director of the company vide resolution dated 27-12-1998 for a period of five years. While functioning as such, he states that the respondents who made abortive attempts to divert the funds of the company, were removed as Directors from the Board of the Directors of the company. While so, on the basis of a resolution allegedly passed on 3-1-2002, in the meeting convened by the respondents, Appellant No. 2 was removed as Managing Director of the company. In pursuance of the alleged resolution, when the respondents tried to interfere with the management of the company and made attempts to seize the records and books of accounts of the company, Appellant No. 2 on his behalf and on behalf of the company, lodged reports before the police against the respondents, and also a suit in O. S. No. 61 of 2002 accompanied with applications in LA. Nos. 24 and 25 of 2002, on the file of the VIII Junior civil Judge, City Civil Court, Hyderabad, to restrain the respondents from interfering with the management and functioning of appellant No. 2 as Managing Director of the company and also with its management, except in accordance with law.


( 4 ) WHILE so, the Trial Court by common order dated 30-10-2002, dismissed the interim applications. Against the said common order, Appellant Nos. 1 and 2 filed appeals in C. M. A. Nos. 366 and 369 of 2002 on the file of the III Additional Chief judge, City Civil Court, Hyderabad. The appellate Court, vide common order dated 11-3-2003, while setting aside the orders passed by the Trial Court, allowed the appeals, granting interim injunction as prayed for in the interim applications. When the respondents against the order dated 11-3-2003 passed in C. M. A. No. 369 of 2002, filed revision in C. R. P. No. 2364 of 2003 under Section 115 of the Code of civil Procedure, 1908 (for short 'the Code') before this Court, the same by order dated 17-7-2003 was dismissed, giving liberty to file fresh revision under Article 227 of the Constitution of India. Thereafter, the respondents filed two revisions before this court under Article 227 of the Constitution of India in C. R. P. Nos. 3504 and 3460 of 2003 against the common order dated 11-3-2003 passed by the Appellate Court in c. M. A. Nos. 366 and 369 of 2002, which by common order dated 19-2-2004, were dismissed.


( 5 ) WHILE the suit proceedings before the civil Court were pending, the respondents filed petition in C. P. No. 25 of 2003 before the Company Law Board under Sections 111-A, 397, 398, 402 and 408 of the Companies Act, alleging acts of oppression and mismanagement in the affairs of the company by the appellants, and sought rectification of the register of members of the company. As the suit proceedings were pending, the appellants, having regard to the provisions of Section 10 of the Code, filed an application in C. A. No. 37 of 2004 before the Company Law board, to stay the proceedings in C. P. No. 25 of 2003, initiated by the respondents, until the conclusion of the suit proceedings before the Civil Court. The Company Law board, by order dated 20-4-2004, while refusing to grant stay of the proceedings before it, dismissed the said application, inter alia holding that the provisions of section 10 of the Code are not attracted, for there is no substantial identity of the subject-matter before the Civil Court and the subject-matter before it. It is this order of the Company Law Board, which the appellants have assailed in this Company appeal, filed under Section 10-F of the companies Act.


( 6 ) HEARD the learned Counsel for the appellants and the learned Counsel for the respondents.


( 7 ) THE learned Counsel for the appellants submits that inasmuch as the field of controversy between the matter in issue in the suit previously instituted before the Civil Court by the appellants and the company petition subsequently filed before the Company Law Board, is substantially the same, the Company Law board, having regard to the provisions of section 10 of the Code, ought to have stayed the proceedings pending before it until the conclusion of the suit, and in support of this submission, he placed strong reliance on the judgment of the Apex Court in Manohar Lal v. Seth Hiralal, AIR 1962 sc 527, High Court of Bombay in Jain hind Iron Mart v. Tulsiram Bhagwandas, AIR 1953 Bom. 117 and also the judgment of the Punjab and Haryana High Court in M/s. Sehgal Knitwears v. M/s. Shresth international, AIR 2001 Pandh 160.


( 8 ) HE submits that since Rule 6 of the Companies (Court) Rules, 1959 makes applicable the provisions of the Code even to the proceedings under the Companies act, having regard to Rule 2 (4) of the rules, which defines 'code' to mean the code of Civil Procedure, 1908, the provisions of Section 10 of the Code should also be made applicable to the proceedings even before the Company Law Board. In support of his submission that the provisions of the Code should be interpreted in a manner facilitating justice and its ends and not as an enactment for imposing punishments and penalties, he placed reliance on the judgment of the Apex Court in Sangram Singh v. Election Tribunal, AIR 1955 SC 425.


( 9 ) HE further submitted that the term 'suit' is generic in nature, and it should embrace all the proceedings before any authority or Court or forum, including the proceedings before the Company Law board, and as such, during the pendency of the previously instituted suit before the Civil court, the Company Law Board, ought to have stayed the proceedings subsequently initiated before it. In support of this submission, he placed reliance on the judgments of the Apex Court in Pandurang Ramachandra Mandlik v. Shantibai Ramachandra Ghatge, (1989) Supp. 2 SCC 527 = AIR 1989 SC 2440 and Patel roadways Ltd. v. Birla Yamaha Ltd., 2000 (3) ALD 21 (SC) = (2000) 4 SCC 91 and judgment of this Court in Subramanyya v. Narasimha, AIR 1972 AP 186.


( 10 ) IN the context of the provisions of Section 10 of the Code, the learned counsel for the appellants submitted that the company Law Board should be treated as a "court" and it need not be a "civil court", for it has all the trappings of a court, and in support of this submission, he placed strong reliance on the judgment of the Apex Court in P. Sarathy v. State bank of India, 2000 (4) ALD 68 (SC) = (2000) 5 SCC 455. Since in relation to the very subject-matter in the Company petition filed by the respondents subsequently before the Company Law Board, there is already a previously instituted suit filed by the appellants before the Civil Court, the learned Counsel for the appellants submitted that the Company Law Board has no jurisdiction to proceed with the Company petition, and in support of his submission that a decree passed by a Court in whom jurisdiction is not conferred would be a nullity, and such plea can be raised at any point of time, even before and after passing of the decree, he placed reliance on the judgment of the Apex Court in Kiran Singh v. Chaman Paswan, At any rate, he submits that in view of the dismissal of c. R. P. Nos. 3504 and 3460 of 2003, filed by the respondents against the common order dated 11-3-2003 passed by the appellate court in C. M. A. Nos. 366 and 369 of 2002 granting interim injunction restraining the respondents from interfering with the management of the appellants, by common order dated 19-2-2004, the proceedings before the Company Law Board, are required to be stayed.


( 11 ) ON the other hand, the learned counsel appearing on behalf of the respondents resisted the appeal and contended that there is no question of law to be decided in the appeal. He contended that the suit previously filed by the appellants before the Civil Court and the Company petition filed by the respondents before the company Law Board, are for different reliefs, which are distinct and independent of each other, and the matter in issue in the -Company Petition, filed by the respondents before the Company Law Board not being directly and substantially in issue in the suit previously filed by the appellants before the civil Court, the provisions of Section 10 of the Code are not attracted, and the Company law Board, was right in not staying the proceedings in the Company Petition before it. In support of this contention, he placed reliance on the judgments of the Gujarat, Calcutta and this Court in S. E. Works v. R. V. Mills, AIR 1981 Gujarat 110, Piyush kanti Guha v. West Bengal Pharmaceutical and Phytochemical Development corporation Ltd., AIR 1982 Cal. 94 and G. Bhavani Sankar v. B. Rajeswara Rao, 1999 (6) ALT 374.


( 12 ) HE contended that the proceedings in the Company Petition filed by the respondents before the Company Law Board cannot be equated with that of the suit previously instituted by the appellants before the Civil Court, and more so when the proceedings before the Company Law board, are summary in nature. In support of this contention, he placed reliance on the judgments of the apex Court in Indian bank v. M. S. Co-op Marketing Fedn., Ltd. , AIR 1998 SC 1952, and of this Court in Kona Kanthamma v. Guntamukkala Srinivasa Rao, 2002 Supp. (2) ALD 849. He thus prayed for dismissal of the appeal.


( 13 ) IN the background of the arguments advanced, the questions of law that arise for consideration in this appeal, are (1) Whether the Company Law Board, constituted under Section 10-E of the companies Act, for the purposes of section 10 of the Code, should be equated and treated as a Court? (2) Whether the Company Petition, filed by the respondents before the company Law Board, should be equated and treated as that of a suit before the Civil Court? (3) Whether the matter in issue in the company Petition, filed by the respondents before the Company Law board is directly and substantially in issue in the suit previously filed by the appellants before the Civil court, or is identical, attracting the provisions of Section 10 of the code, thereby warranting stay of the proceedings in the Company petition before the Company Law board, until the conclusion of the proceedings in the suit before the Civil court? In re Point Nos. 1 and 2:


( 14 ) POINT Nos. 1 and 2 are inter-related, and therefore, are dealt with together. Before proceeding to consider whether the company Law Board, constituted under section 10-E of the Companies Act, by the central Government, is a Court for the purposes of Section 10 of the Code, to wit, what are the essential ingredients that constitute a Court may be noted. To constitute "court", the authority or Tribunal, so constituted, should have the trappings of a judicial Tribunal, power to give a decision or a definitive judgment, which has finality and authoritativeness, and its mere following of the procedure, which is of a legal character, namely to administer on oath, would not make it a "court", even if the authority or Tribunal is deemed to be "court" for limited and specific purposes.


( 15 ) PART 1-A of the Companies Act deals with Board of Company Law administration. Section 10-E of the companies Act deals with the Constitution of Board of Company Law Administration. In terms of sub-section (1) of Section 10-E of the Companies Act, the Central government by Official Gazette, may constitute the Board of Company Law administration, known as "company Law board" to exercise and discharge such powers and functions conferred on the central Government by or under the Act or any other law as may be delegated to it by the Central Government, by notification in the Official Gazette under the provisions of the Act or any other law. Sub-section (2) of Section 10-E of the Companies Act empowers the Central Government to appoint members to the Company Law board, by notification in the Official Gazette, not exceeding nine. The tenure of the members and one of the members to be appointed as Chairman of the Company law Board does not exceed three years. For the purpose of sub-section (4-B) of section 10-E of the Companies Act, the powers exercised and functions discharged and the orders passed by the Benches authorized by the Company Law Board thereunder, shall be deemed to be an order. Under sub-section (4-C) of Section 10-E of the Companies Act, every Bench referred to in sub-section (4-B) shall have powers which are vested in a Court under the Code of Civil Procedure, while trying a suit, in respect of the matters mentioned thereunder, which are contained in Orders XI, XVI, xiii, XVIII, XVII and XIX of the Code, and under sub-section (4-D) of the companies Act, every Bench shall be deemed to be a Civil Court for the purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code and for the purpose of Section 196 of that Code. Without prejudice to the provisions of sub-sections (4-C) and (4-D) of the Companies act, the Company Law Board under sub-section (5) of Section 10-E of the Companies act shall in the exercise of its powers and discharge of its functions under the Act or any other law be guided by the principles of natural justice and shall act in its discretion, and under sub-section (6) of Section 10-E apart from the provisions of sub-sections (1) to (5) thereof, the Company Law Board shall have power to regulate its own procedure.


( 16 ) THE Company Law Board, it may be noted was established by the Central government vide G. S. R. No. 866, dated 1-2-1964 in pursuance of the Companies (Amendment) Act, 1963. The Central government established the Company Law board mainly to entrust most of its powers and functions under the Companies act or other laws. The Company Law Board is to function subject to the control of the central Government in all matters. Though the Bench created by the Board and exercising powers under sub-section (2) of section 10-E of the Companies Act, is deemed to be a Civil Court for the purposes of Section 195 and Chapter XXVI of the code of Criminal Procedure, which deal with prosecution for contempt of lawful authority of public servants for offences against public justice and for offences relating to documents given in evidence and the provisions as to offences affecting the administration of justice, and every proceeding before it is deemed to be a judicial proceeding within the meaning of sections 193 (punishment for false evidence) and 228 (intentional insult or interruption to public servant sitting in judicial proceeding) of the Indian Penal Code and for the purpose of Section 196 of that Code, which deals with using evidence knowing to be false, yet given the fixed tenure of the chairman and members of the Company law Board, the authority who appoints them, the powers and functions of the Central government which the Company Law Board exercises being quasi-judicial in nature, the limited powers (namely those mentioned in sub-section (4-C) relating to discovery and inspection of documents or other material objects producible as evidence; enforcing the attendance of witnesses and requiring the deposit of their expenses; compelling the production of documents or other material objects producible as evidence and impounding the same; examining witnesses on oath; granting adjournments and reception of evidence on affidavits), which the company Law Board exercises, which are vested in the Civil Court, and the control which the Central Government has over its functioning, the Company Law Board, can by no means be regarded as a "court", and more so when the proceedings before the company Law Board are summary in nature, and without prejudice to the provisions of sub-sections (4-C) and (4-D), under sub-section (5-C) of Section 10-E of the Companies Act, the Company Law board is to exercise its powers and discretion guided by the principles of natural justice and is empowered to regulate its own procedure under sub-section (6) of section 10-E of the Companies Act. This apart, Rule 47 of the Companies (Court) rules, 1959 clearly states that the Bench created by the Board shall be deemed to be a Court for certain purposes, namely for the purpose of prosecution or punishment of a person who disobeys any direction or order of such Bench.


( 17 ) IN this regard, a reference be made to Shell Company of Australia v. Federal Commissioner of Taxation, 1931 ac 275, wherein it was observed that a body or Tribunal may be constituted entrusting them work of judicial character, but they are not Courts in the accepted sense though they may possess some of the trappings of the Court. The Allahabad High court, in Prakash Timbers v. Sushma Shingla, AIR 1996 All. 262 = (1997) 89 comp Cases 770, quoting the above passage, observed the status of the Company Law board as follows: broadly speaking, the Company Law Board has trappings of a Court in the sense that it has to determine a matter placed before it judicially, give fair opportunity of hearing to the parties who may be affected by the order, to accept the, evidence, and also to order for inspection and discovery of documents compel the attendance of the witnesses and in the last, to pass a reasoned order which gives finality to its decision subject to the right of appeal to a party under Section 10-F of the Act or such other legal remedy which is available under law to a party".


( 18 ) OBSERVING so, the Allahabad High court, upon considering the scope, functions and special jurisdiction conferred on the company Law Board, concluded that the company Law Board can only be regarded as a Tribunal and not a Court. In that view of the matter, it has to be held that though the Company Law Board has some of the trappings of a "court", yet given the scope, functions, the special jurisdiction conferred upon it, and the control of the Central government over it, it cannot be regarded as a 'court', and reliance placed by the appellants on the judgment of the Apex court in P. Sarathy v. State Bank of India (supra), which has been made in the context of Section 14 of the Limitation act, 1963 holding that Court within the meaning of the word "court" occurring in section 14 of the Limitation Act, need not be a Civil Court, will be of no avail to him. As a consequence thereof, the proceedings before the Company Law Board, though judicial in nature, they being only for limited purposes, cannot be treated as a suit, within the generic meaning of the term "suit", and as such, reliance placed by the learned counsel for the appellants on the judgments of the various Courts in Pandurang Ramachandra Mandlik v. Shantibai Ramachandra Ghatge, Patel Roadways ltd. v. Birla Yamaha Ltd. and Subramanyya v. Narasimha (supra) are of no help to him. There can be no quarrel on the argument advanced by the learned Counsel for the appellants that the provisions of the code have been designed to facilitate justice and its ends and that it is not a penal enactment providing for punishments and penalties. Reliance, in support of such an argument, was placed on the judgment of the Apex Court in Sangram Singh v. Election Tribunal (supra), wherein the apex court held as follows: a code of procedure must be regarded as such. It is procedure something designed to facilitate justice and further its ends, not a penal enactment for punishment and penalties; not a thing designed to trip people up. Too technical a construction of sections that leaves no room for reasonable elasticity of interpretation should therefore be guarded against (provided always that justice is done to both sides) lest the very means designed for the furtherance of justice be used to frustrate it.


( 19 ) THE aforementioned observations, it is required to be noticed, were made by the Apex Court in the context of a complaint and argument advanced that the principles of natural justice were violated in the passing of the order assailed therein, in that no opportunity of hearing was given before the order impugned therein was passed, and not in the context of giving liberal meaning to the words "court" and "suit". Therefore, the decision of the apex court in Sangram Singh v. Election tribunal (supra), will not be of any assistance to the appellants. In re Point No.3:


( 20 ) EVEN otherwise, it may be noticed whether the matter in issue in the Company petition, filed by the respondents before the company Law Board, is directly and substantially in issue in the previously instituted suit by the appellants before the civil Court, requiring stay of the proceedings before the Company Law Tribunal in view of the provisions of Section 10 of the Code. Before proceeding to consider this point, it would be appropriate if a reference is made to the provisions of Section 10 of the Code dealing with stay and the provisions of section 10 of the Companies Act, dealing with jurisdiction of Courts. Section 10 of the Code, reads thus:70. Stay of suit. No Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in India having jurisdiction to grant the relief claimed, or in any Court beyond the limits of India established or continued by the Central government and having like jurisdiction, or before the Supreme Court. Explanation. The pendency of a suit in a foreign Court does not preclude the Courts in India from trying a suit founded on the same cause of action. Section 10 of the Companies Act, reads thus: 10. Jurisdiction of Courts. (1) The Court having jurisdiction under this Act shall be (a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and (b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district. (2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any district Court to exercise all or any of the jurisdiction conferred by this Act upon the court, not being the jurisdiction conferred (a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive; (b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII (Sections 425 to 560) and the other provisions of this Act relating to the winding up of companies. (3) For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding-up


( 21 ) FROM a reading of the provisions of Section 10 of the Code, it would become amply clear that if the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, then no Court shall proceed with the trial of the subsequent suit filed before it. And insofar as the provisions of section 10 of the Companies Act, is concerned, under sub-section (l) (a) thereof, the Court having jurisdiction shall be the high Court in relation to the place at which the registered office of the company 'concerned is situate, except to the extent to which jurisdiction has been conferred on the District Court in terms of sub-section (2) by the Central Government, by notification in the Official Gazette, and subject to such restrictions, limitations and conditions as it thinks fit, the Central Government may empower any District Court to exercise all or any of the jurisdiction conferred by the act upon the Court, not being the jurisdiction conferred (a) in respect of companies generally by Sections 237, 391, 394, 395 and 397 to 407, both inclusive, and in respect of those companies mentioned in clause (b) of sub-section (2 ). It is thus clear that the Central Government, in respect of matters covered by clauses (a) and (b) of sub-section (2) of Section 10 of the companies Act, is precluded from conferring jurisdiction on tile Civil Court. The jurisdiction in respect of the matters covered by sections 391, 394 and 395 in clause (a) and those relating to winding up of the companies under clause (b) is vested exclusively in the high Court, while the jurisdiction in respect of the matters covered by Sections 237 and 397 to 407, both inclusive, is exclusively vested in the Company Law Board. There being a statutory bar on the Central government to confer jurisdiction on the civil Court to entertain the disputes enumerated in clauses (a) and (b) of sub-section (2) of Section 10 of the Companies act, the Civil Court has no jurisdiction to try the matters referred to thereunder.


( 22 ) THIS being the position, it may be noticed whether the matter in issue in the company Petition before the Company Law board, is directly and substantially in issue in the previously instituted suit in before the Civil Court, filed by appellants, and to wit, it would be expedient, if the reliefs claimed by the respondents and the appellants before the Company Law Board and the Civil Court, is set out in a comparative tabular forum. Relief sought by the appellants before the City Civil Court, Hyderabad, in OS. No. 61 of 2002, under Order XXXIX, Rules 1 and 2 read with Section 151 of the Code. Relief sought by the respondents before the Company Law Board, Additional Principal Bench, Chennai, in CP. No. 25 of 2003, filed under Sections 111a, 397, 398, 402 and 408 of the Companies Act. TO direct the respondents not to interfere with the management and functioning of the first petitioner/plaintiff, i.e., Mr. M. Venkateswarlu as Managing Director of the second petitioner/plaintiff company, namely M/s. RDF Power Projects Limited., and; to declare that the appointment of M. Venkateswarlu as null and void and consequently direct him to refund all the monies drawn as remuneration and as perquisites to the first respondent-company. TO direct the respondents not to interfere with the management of the second petitioner/plaintiff company, except in accordance with law. TO declare that the Form No. 32 as stated at Para C-5 as null and void. TO declare that the appointment of fictitious persons as directors as stated in Para C-6 as null and void. TO set aside the allotment of shares made to M. Venkateswarlu (100000 shares), M. Durga (50000 shares), G. Ravikumar Reddy (50000 shares) and Prof. K. Rajeshwar Rao (40000 shares) and direct the 1st respondent-company to rectify the register of members. TO declare that the Form No. 2 as stated at Para D-b as null and void. TO confirm the Form No. 2 as stated at Para C-D as valid and effective. TO appoint an independent Auditor to ascertain total amount siphoned off by the Respondents 24 and surcharge them for fund diverted and utilized and for money siphoned off from the company's bank account, to the company with interest payable at the rate of 18% per annum. TO redraft the balance-sheet as at 31. 3. 1999; 31. 3. 2000 and 31. 3. 2001 after getting audited by an independent Auditor and verification and approved by the CLB. TO declare that all the violations as per Section Nos. 58-A, 70, 94, 97, 165, 159, 166, 210, 224, 225, 285, 309 and other violations done only by the Respondents 27 with full knowledge; and to work out a formula and mechanism to exit the company for the shareholders who wish to quit being disgruntled with the current management, to maintain a healthy atmosphere in the company.


( 23 ) A comparison of the reliefs sought by the appellants before the Civil Court and the respondents before the Company law Board, reveals a marked difference. In that, the appellants filed the suit before the Civil Court under Order XXXIX, Rules 1 and 2 read with Section 151 of the Code, alleging that the 2nd appellant was appointed as Managing Director of the 1st appellant-company vide resolution dated 27-12-1998, and that the respondents on the basis of an alleged resolution dated 29-12-2001 are trying to interfere with management of the 2nd appellant and affairs of the 1st appellant-company, and therefore, a direction be given to the respondents not to interfere with the management and functioning of the 2nd appellant/plaintiff,. e. Mr. M. Venkateswarlu as Managing Director of the 1st appellant /plaintiff company, namely m/s. RDF Power Projects Ltd., and; to direct the respondents not to interfere with the management of the second petitioner/ plaintiff company, except in accordance with law. And whereas the respondents filed the Company. Petition before the Company law Board under Sections 111 A, 397, 398, 402 and 408 read with Section 151 of the code, inter alia alleging acts of oppression and mismanagement in the affairs of the 1st appellant-company by the 2nd appellant, namely manipulation and fabrication of shareholding, misappropriation of funds, contravention of the statutory provisions of the Companies Act, manipulation and falsification of the annual returns of the company, the quantum of investments made, and continuance of Appellant No. 2 and others as Managing Director and directors of the 1st appellant-company.


( 24 ) THE scope of enquiry in the company Petition filed by the respondents before the Company Law Board, in relation to the matters alleged therein, is entirely different and distinct from the scope of enquiry in the suit previously instituted by the appellants before the Civil Court, which rests on the resolution dated 29-12-2001. The proceedings before the Company Law board, have nothing to do with the proceedings in the suit previously instituted by the appellants before the Civil Court. The proceedings before both the forums are independent and distinct of each other and are not identical even remotely. In that the various reliefs sought for and the provisions under which such reliefs have been sought for by the respondents before the Company Law Board, relate to rectification of register on transfer, oppression and mismanagement, to regulate the affairs of the company and to prevent mismanagement, and whereas in the suit filed by the appellants, they sought injunction against the respondents from interfering with the management of the company. It is required to notice that under Sections 397, 398 and 402 of the companies Act, the members of a company are entitled to approach the Company law Board against any oppression or mismanagement, and if any such approach is made, the Company Law Board shall look into the same. The power of looking into the aspects of oppression and mismanagement having been exclusively vested in the Company Law Board, it cannot be said that the matter in issue before the company Law Board is also directly and substantially in issue in the previously instituted suit before the Civil Court, warranting stay of the proceedings before the Company Law Board until the proceedings in the suit are concluded. In this context, it would suffice, if a reference is made to the judgment of the Calcutta high Court in Piyush Kanti Guha v. West Bengal Pharmaceutical and Phytochemical development Corporation Ltd. (supra), wherein in somewhat similar facts situation, it was held thus: where the main relief sought for in the company petition was on the ground of oppression and framing of a scheme and appointment of directors which was distinctly different from the relief asked for in the civil suit restraining some directors nominated by the Government from functioning, it was held that stay of the proceedings in the company petition could not be granted under section 10.


( 25 ) A reference may also be made to the judgment of the Gujarat High Court in s. E. Works v.. V. Mills (supra), wherein the Court while considering the words "directly and substantially in issue" appearing in Section 10 of the Code held thus: the key words in Section 10 are "the matter in issue is directly and substantially in issue" in the previously instituted suit. The words "directly and substantially in issue" are used in contra-distinction to the words "incidentally or collaterally in issue". That means that Section 10 would apply only if there is identity of the matter in issue in both the suits meaning thereby that the whole of the subject-matter in both the proceedings is identical and not merely one of the many 'issues which arise for determination in the two suits. That, however, does not mean that all the issues must be identical, that is, the subject-matter need not be the same in every particular case. . . It is, however, a question of fact to be gathered from the pleadings of the two suits as to whether the matter in issue in the subsequently instituted suit is directly and substantially in issue in the previously instituted suit.


( 26 ) RELIANCE placed by the learned counsel for the appellants on the judgments in Manohar Lal v. Seth Hiralal (supra), high Court of Bombay in Jain Hind Iron mart v. Tulsiram Bhagwandas (supra) and also the judgment of the Punjab and Haryana High Court in M/s. Sehgal knitwear v. M/s. Shresth International (supra) would not come to the rescue of the

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appellants inasmuch as in the said cases, parallel suits were filed by the plaintiffs as well as defendants in the Courts having jurisdiction, and in those circumstances, the courts held that the proceedings in the subsequently filed suits should be stayed until the conclusion of the proceedings in the previously instituted suit. In that view of the matter, it is held that the matter in issue before the Company Law Board is not directly and substantially in issue in the suit previously instituted before the court, for staying the proceedings before the Company Law Board in terms of section 10 of the Code until the conclusion of the suit proceedings in the previously instituted suit. ( 27 ) THE contention of the appellants that in view of the order passed by this court dismissing the C. R. P. filed by the respondents, confirming the grant of interim injunction by the appellate Court, the respondents could not have maintained the proceedings before the Company Law board, cannot be accepted. It may be noticed that the suit admittedly has been filed by the appellants taking the plea that the 2nd appellant was appointed as Managing director of the 1st appellant-company, vide resolution dated 27-12-1998, and contending that all the respondents colluded and tried to remove him by interfering with his management and management of the affairs of the 1st appellant-company. The respondents contended that the 2nd appellant was removed vide resolution dated 29-12-2001, and therefore, he cannot be continued as Managing Director of the 1st appellant-company. The Civil Court, vide order dated 30-10-2002 passed in LA. No. 24 of 2002, declined to grant interim injunction as prayed for. However, in the appeal filed there against by the appellants in c. M. A. No. 366 of 2002, the appellate Court, vide order dated 11-3-2003, set aside the order of the Civil Court, and granted interim injunction in favour of the appellants as prayed for. Thereagainst, the respondents filed C. R. P. in 3504 of 2003, and this Court by order dated 19-2-2004, dismissed the said C. R. P. inter alia observing whether the resolution dated 29-12-2001 is valid or not and whether Civil Court has jurisdiction, are all matters, which are required to be gone into in detail after enquiry, during the trial rather than at the interlocutory stage. It may be noticed that this Court had not expressed any opinion on the merits of the matter, and merely confirmed the order of the appellate Court granting interim injunction on the basis of prima facie case, pending enquiry into the contentious issues. Be that as it may, the appellants in the guise of interim injunction granted by the Appellate court, as confirmed by this Court in C. R. P. , cannot seek to protect their alleged acts of oppression and mismanagement for an indefinite period, and contend that the C. R. P. filed by the respondents against the order of the Appellate Court granting interim injunction, having been dismissed, the proceedings before the Company Law board cannot be maintained, and more so when the relief of approaching the company Law Board against acts of oppression and mismanagement under sections 397 and 398 of the Companies act, is provided to the members of the company and the respondents, in fact, having approached the Company Law board, and in the proceedings before the company Law Board, the appellants as well as the respondents, having advanced elaborate arguments, and the arguments on merits having been concluded, as is indicated in the order under appeal, I am of the considered opinion, that the order under appeal, does not warrant any interference by this Court, in exercise of its jurisdiction under Section 10-F of the companies Act. ( 28 ) FOR the foregoing reasons, the company Appeal fails, and the same is accordingly dismissed. No costs.
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