Jurisdiction of Civil Courts in Company Law Matters

Introduction

Civil courts have the authority to try every suit which is of civil nature excluding those suits the cognizance of which is either impliedly or expressly barred. The Code of Civil Procedure, 1908 guides the working of the Civil Courts in India. Civil courts have jurisdiction in the  matters of company law but then subsequently the National Company Law Tribunal was presented by the Companies Act, 2013 and the authority to try all the matters associated with company law has been given to the National Company Law Tribunal .

Civil court’s jurisdiction in the case of  company law matters

The civil courts have the jurisdiction to try the suit of a civil nature, the cognizance of which  should not have stood impliedly or expressly barred, according to Section 9 of the Code of Civil Procedure, 1908. The civil court’s jurisdiction has been maintained to be at par with that of Company Law Board to facilitate in any case in which the civil court has been barred from deciding a specific issue it might be transferred to the National Company Law Tribunal .

It has been held that the matters for which the authority is conferred to the National Company Law Tribunal the jurisdiction of the civil court is entirely barred, in the case of Shashi Prakash Khemka v NEPC Micon & Ors, during the determination of the question with regard to whether an issue concerning to the transfer of shares ought to be decided by the Company Law Board or by the civil courts. It had been alleged that dispute which was in question had been the title of shares, thus the civil court ought to have the authority to judge the matter.

Power Of the National Company Law Tribunal

Section 241 and section 242 in the Companies Act, 2013  has given the powers to National Company Law Tribunal  which provide that the National Company Law Tribunal  has got the authority to do justice towards the parties and can also pass an order intended for the smooth conduct of businesses even in the case of absence of discovering oppression and misconduct.

Section 242 of the Companies Act, 2013 has provided that without any prejudice to generality of powers of Company Law Board, an order under Section 241 might provide for-

  • The buying of the interest or the shares of any of the members by other members of the company or by company. This sort of relief had been decided in the case of Mohan Lal Chandumall v Punjab Co Ltd.
  • Dismissal of any of the director or of the managing director or the manager of the company.
  • Selection of individuals as directors who might be needed by the National Company Law Tribunal  to report to National Company Law Tribunal in matters as the National Company Law Tribunal  might direct.
  • Imposition of charges as might be considered appropriate by the National Company Law Tribunal
  • Any further matter for which it is fair and reasonable that provision ought to be made in the opinion of the National Company Law Tribunal ,.

National Company Law Tribunal has the authority to give directions for the partition of properties of even that of a listed company besides decreasing the company’s capital to that degree.

National Company Law Tribunal  had not stopped the allotment and the acquisition of shares by the respondents although the same had been evidenced to be an item of coercion against minority in case of Sanjivbhai Kirtibhai Patel v Biocare Remedies P. Ltd.

The presence of an arbitration clause does not affect the authority of the National Company Law Tribunal.

National Company Law Tribunal  has got the authority to make available interim relief on the request of any  of the party to any proceeding. The authority to deliver the interim relief is only incidental to the authority of offering substantive relief in a case.

Any of the order which has been passed by the National Company Law Tribunal  has got a binding effect on the corporation and on whole of the members, the depositors and the auditor together with the audit firm or else expert or the consultant or the advisor or any other individual related to the company. In the circumstance of the application being discovered to be frivolous or troublesome, it ought to be disallowed for explanations to be noted in writing.

Any of the company that is unsuccessful in obeying with the order passed by the National Company Law Tribunal shall be indictable with a fine that shall not be less than Rs 5,00,000 but then again might range to Rs 25, 00,000. Every single defaulting officer is indictable with imprisonment ranging to three years in addition to fine which shall not be less than Rs 25,000 ranging up to Rs 1,00,000.

Civil court to not have jurisdiction

Civil court does not have the jurisdiction to consider any proceeding or any suit with respect to a matter that the National Company Law Tribunal  or the Appellate Tribunal is authorized to decide by or under the Companies Act, 2013  or any of the laws for the moment applicable, as stated in section 430 of the Companies Act, 2013. Section 430 of the Companies Act, 2013 in addition has provided that court or other authority should not grant  jurisdiction with regard to any action which is taken or else which is to be taken in fulfilment of any of the powers that is conferred under or by the Companies Act, 2013 or any law for the moment effective by the National Company Law Tribunal  or the Appellate Tribunal.

A suit was established that suspected wrongdoings in the management by a company and an injunction was required against the directors of company from transferring the property of the company, in the case of Yogesh K Shah v Dilipbhai K Shah. It had been held that civil court had jurisdiction to that degree.

Conclusion

Matters that are of a civil nature are the ones over which the civil courts have jurisdiction. The Companies Act, 2013 has made available the power to the National Company Law Tribunal for dealing with the matters associated with company law. The Code of Civil Procedure, 1908 has made available numerous matters in which the civil court has the jurisdiction which further consists of matters associated with rights of franchise, , accounts, shares in offerings, etc. As the power has been provided to both the National Company Law Tribunal as well as the civil courts, the jurisdiction is unclear and is contingent on the case.

References

  1. The Code of Civil Procedure, 1908, § 9, No. 5, Acts of Parliament, 1908 (India).
  2. Sanjivbhai Kirtibhai Patel v Biocare Remedies P. Ltd, (2017) 203 Comp Cas 5 (NCLAT).
  3. Shashi Prakash Khemka v NEPC Micon & Ors, (1999) 95 Comp Cas 583 (CLB).
  4. Yogesh K Shah v Dilipbhai K Shah, 2013 SCC OnLine Guj 2901
  5. The Companies Act, 2013, § 241,242, No. 18, Acts of Parliament, 2013 (India).
  6. Avtar Singh, Company Law 510 (Easten Book Company 2018).
  7. Mohan Lal Chandumall v Punjab Co Ltd, AIR 1961 Punj 485.
  8. Solitaire Hotels (P) Ltd, re, (1992) 3 Comp LJ 119 (CLB).

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