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RDF Power Projects Ltd. v/s 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

    CA NOS. 25 OF 2003 & 37 OF 2004

    Decided On, 20 April 2004

    At, Company Law Board Southern Region Bench Chennai

    By, K.K. BALU
    By, MEMBER

    For the Appearing Parties: ---------.



Judgment Text

K.K. Balu, Member


1. In the company petition filed under Sections 111 A, 397, 398, 402 & 408 of the Companies Act, 1956 ("the Act") alleging acts of oppression and mismanagement in the affairs of M/s RDF Power Projects Limited ("the Company") and seeking rectification of the register of members of the Company, the applicants have filed an application in CA No. 37/2004 for stay of the proceedings before the Company Law Board, in view of the mandatory provisions of Section 10 of the Civil Procedure Code, 1908, as amended, until disposal of the civil suit in O.S. No. 61/2002 on the file of the City Civil. Court, Hyderabad, filed by the applicants 1 & 2, especially when the subject of the company petition as well as the civil suit is materially the same.


2. Shri L.V.V. Iyer, learned Counsel appearing for the applicants pointed out that the matter in issue in the company petition is also directly and substantially is the issue in the first suit viz., O.S.No. 61/2002; that the parties in the second proceedings are the same; that the city civil court,) Hyderabad, where the first suit is instituted is competent to grant the reliefs claimed in subsequent proceedings before the CLB and that the previously instituted suit is pending in the City civil court, Hyderabad, meeting the requirements of Section 10 of the CPC. The applicants 1 & 2 are seeking for a decree of permanent injunction restraining the defendants, being the petitioners and the third respondent in the company petition and their agents from interfering with the management and functioning of the first applicant, as the Managing Director of the Company and for a decree of permanent injunction restraining the defendants and their agents from interfering with the management of the Company save in accordance with law. The main prayers in the company petition are to remove the first applicant from the post of the Managing Director and gain management control by the petitioners, who are the defendants in the civil suit. Learned Counsel contended that the "matter in issue" does not mean the entire subject matter in issue in the two proceedings, as propounded by the courts in a number of cases and further urged that the provisions of Section 10 of the CPC are clear, definite and mandatory and that where there is a special provision like Section 10 of the CPC for dealing with contingencies of two such suits being instituted, even recourse to the inherent powers of the court under Section 151 of the CPC is not justified, in support of which reference has been made to the decision of the Apex Court in Manoharlal Chopra v. Rai Bahadur Ray Raja Seth Hiralal - AIR 1962 SC 527. In these circumstances, Shri Iyer, learned Counsel sought to stay the trial of the proceedings before the CLB until final disposal of the suit in O.S.No. 61/2002.


3. Shri Karthik Seshadri, learned Counsel appearing for the respondents submitted that the reliefs sought by the petitioners in the company petition under Sections 397 and 398 are exclusively within the jurisdiction of the CLB and that the civil suit in O.S. No. 61/2002 does not have any bearing whatsoever on the issues raised in the company petition. Any action under Sections 397 and 398 is a representative one and the CLB has jurisdiction to adjudicate the corporate rights of the shareholders. Accordingly, the petitioners aggrieved on account, of certain acts of oppression and mismanagement in the affairs of the Company at the hands of the respondents have sought intervention of the CLB for appropriate relief. No civil court has jurisdiction to grant reliefs with a view to bringing to an end the matters complained of in the company petition, but can adjudicate the civil rights of individual parties. Shri Karthik Seshadri, learned Counsel pointed out that the issues raised and the reliefs claimed in the company petition are not the same before the civil court. The present application is filed with the object of delaying the proceedings before the CLB, especially when arguments have been advanced at length and concluded on behalf of either of the parties. For these reasons, the application deserves to be dismissed.


4. Shri L.V.V. Iyer in his reply reiterated that the prayers made in the civil suit are directly covered in the civil suit and further that the proceedings under Section 397 and 398 can be subject matter of the civil suit, in support of which he relied on Shanti Prasad Jain v. Kalinga Tubes Ltd.- (1965) XXXV CC 351 and further contended that the law does not make any distinction between corporate rights and civil rights of a shareholder.


5. I have considered the arguments of learned Counsel. The issue that arises for my consideration is whether the proceedings of the company petition shall be stayed in view of the provisions of Section 10 of the CPC, until final disposal of the civil suit in O.S. No.61/2002 on the file of the City civil court , Hyderabad, in the facts and circumstances of the case. Before answering the contentious issue, the provisions of Section 10 of the CPC must be borne in view, which reads as under:


"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 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."


The object of Section 10 is to avoid the conflicting decisions of two competent courts over the same matter and save the time of the court, where the subsequent proceedings are initiated in the same matter. By virtue of Section 10, a court shall not proceed with the trial of a suit in which the matter is directly and substantially the same as the one in issue in a previously instituted pending suit between the 'same parties or parties under whom they claim to litigate under same title. The following are essential conditions for application of the provisions of Section 10: -


(a) There must be two pending suits on same matter.


(b) These suits must be between same parties or parties under whom they or any of them claim to litigate under same title.


(c) The matter in issue must be directly and substantially same in both the suits.


(d) The suits must be pending before competent Court or Courts.


In the light of the provisions of Section 10, the subject matter involved both in the civil court and the CLB must be examined. The main plea of applicants 1 & 2 before the civil court is that the first applicant being one of the promoters and founder directors of the Company was appointed as the Managing Director of the Company for a period of five years by virtue of an agreement dated 27.12.1998 and that the petitioners in the company petition are unlawfully interfering with the management and functioning of the first applicant as the Managing Director of the Company, compelling them to apply for a decree of permanent injunction restraining the petitioners and their agents from interfering with the management and functioning of the first applicant as the Managing Director of the Company and for permanent injunction restraining them and their agents interfering with the management of the Company except in due accordance with law; The grievances of the petitioners in the company petition are:-


Manipulation and fabrication of shareholding by the first applicant and his group.


While the first applicant and his group claim an aggregate investment of Rs. 30 lakhs prior to incorporation of the Company and pre-incorporation expenses of Rs. 13.39 lakhs, according to the petitioners, the first applicant and his group had invested only Rs. 3 lakhs and incurred pre-incorporation expenses of only Rs. 38,000.


Misappropriation of funds on account of land development charges, interest payment, annual maintenance expenses, traveling expenses, office rental, cash withdrawals from the bank account aggregating several lakhs of rupees.


Contravention of many of the statutory provisions of the Act by the applicants, as set out in the company petition.


Manipulation and falsification of the annual return of the Company for the period ended 31.03.2000.


The continuance of the first applicant as the Managing Director and other directors of the Company is questioned.


Aggrieved by the above acts of oppression and mismanagement in the affairs of the Company, the petitioners have sought interference of the CLB claiming the following reliefs: -


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 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 & void;


to set-aside the allotment of shares made to M. Venkateswarlu (100000 shares), M. Durga (50000 shares), G. Ravikumarreddy (80000 shares), G. Anitha Reddy (50000 shares) and Prof. K. Rajeshwar Rao (40000 shares) and direct the 1 ^st respondent company to rectify the register of members.


to declare that the Form no.2 as stated at Para D-h as null & void.


to confirm the Form No. 2 as stated at Para D-c as valid and effective.


to appoint an independent auditor to ascertain total amount siphoned off by the respondents 2-4 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 31.031999; 31.03.2000 and 31.03.2001 after getting audited by an independent auditor and verification and approved by the CLB.


to declare that all the violation as per section Nos. 58A, 70, 94, 97, 165, 159, 166, 210, 224,225, 285, 309 and other statutory violations done only by the respondents 2-7 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.


5. A careful analysis of the issues both before the civil court and the CLB would indicate that the whole of the subject matter in these proceedings is not identical. Section 10 is not attracted if one or some of the issues are in common as held by the courts in a number of decisions. The entire subject matter of the company petition is not covered by the previously instituted suit. It is free from doubt that there is no substantial identity of the subject matter before the civil court and the Company Law Board. The only issue before the civil court is in regard to the right of the second applicant to continue in the office of the Managing Director of the Company. As a result the petitioners shall not interfere in the functioning of the Company. Thus, none of the other contentious issues raised in the company petition is before the civil court. Therefore, the decision of the civil court will not definitely affect the decisions in the present company petition, save the continuance of the second applicant as the Managing Director, in which case it cannot be said that the matter in issue is directly and substantially is the same in both the proceedings. Section 10 would only apply, in my view, where the decision in the previous suit will definitely affect the decision in the later proceedings. Moreover, Sections 397 and 398 provide adequate relief to the aggrieved members on account of the possible oppression by the majority and a civil court cannot usurp the powers of a company court, whose jurisdiction brings from an enactment of Parliament and adjudge common law rights on a prior considerations, in support of which beneficial refe

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rence is drawn to V.M. Rao v. Rajeswari Ramakrishnan - 89 L.W. 243. A shareholder has two accounts of rights - individual rights and corporate rights. While every shareholder can enforce his individual rights singly, corporate rights have to be enforced by the majority as held in Suresh Chandra Marwaha v. Lauls Private Limited - [1978] 48 CC 110. The relief of rectification of register of members of a company is not within the judicial competence of civil courts. It is far from doubt that; the provisions of Section 10 of the CPC are mandatory as held by the Apex Court in Manoharlal Chopra v. Rai Bahadur Ray Raja Seth Hiralal (supra), if only the conditions of Section 10 are satisfied, which, as observed hereabove, are not duly met in the present case before us. For these reasons, there is no merit in the plea of the applicants that the proceedings before the CLB must be stayed until disposal of the civil suit filed by the applicants 1 & 2 must fail. Accordingly, the application is dismissed. 6. The elaborate arguments on merits of the company petition have already been concluded on behalf of both the sides and learned Counsel appearing for the applicants earlier sought to file written submissions, which may accordingly be done within three weeks from the date of receipt of this order, upon which the company petition will be disposed of on merits. Ordered accordingly.
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