Thinking on a different plain, one can also add that so far as these two Companies are concerned, no cause of action to file a suit has ever arisen for them and had it arisen, these Companies would have certainly taken a decision to go ahead with the cause of action and seek redressal for the same by taking a decision to institute a suit. The fact that there is no pleading in the plaint about taking of such a decision and conferring of authority upon any of the respondents to file a suit by passing of a suitable resolution by the Board of Directors, itself is sufficient to say that from the perspective of these two Companies, the cause of action has not arisen and that is the reason why material pleadings disclosing cause of action in favour of these Companies are absent in the plaint. If it were not so, these Companies would have passed a resolution to institute a suit against the applicant and appointed an authorized person to file it. But as stated earlier, the plaint pleadings are devoid of these material facts. As such, I find that this way also, the plaint does not disclose cause of action.
26. The sum and substance of the above discussion would be that the plaint as filed by the respondents is liable to be rejected on the grounds that it does not disclose cause of action and it is barred by law under the provisions of clauses (a) and (d) of Order 7, Rule 11 of the Code of Civil Procedure.
IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)
Civil Revision Application No. 62 of 2017
Decided On: 21.07.2017
New Shelter Enterprises and Ors. Vs. Meenakshi and Ors.
Hon'ble Judges/Coram:
S.B. Shukre, J.
Citation: 2018(2) MHLJ 199
1. Rule. Heard forthwith by consent of parties.
2. By this revision application, the legality and correctness of the order dated 29th April 2017 passed by the Civil Judge, Senior Division, Nagpur in Special Civil Suit No. 310 of 2017, thereby rejecting application vide Exhibit 9, have been questioned.
3. The revision applicants are the original defendants against whom Special Civil Suit No. 310 of 2017 is preferred by the respondents/original plaintiffs. The suit was filed for seeking declaratory and injunctive reliefs. It was contended that two Companies, M/s. Shakambari Niketan Private Limited and TechInfra Developers and Engineers Private Limited (for short, "Shakambari Company" and "TechInfra Company" respectively), both registered under the provisions of the Companies Act having become the joint owners of Plot No. 625 situated at mouza Indora, Nagpur entered into a Memorandum of Understanding (MoU) dated 15th May 2014 with the revision applicant No. 1, through its Proprietor, the revision applicant No. 2. In this MoU dated 15th May 2014 executed between the two Companies and revision applicant No. 1, it was shown that for Shakambari Company and TechInfra Company, respondent No. 1 being the Director of both these Companies, had the authority to execute the document. The MoU was for development of Plot No. 625 into a multi-storied building having self-contained units or apartments to be developed and constructed by respondent No. 1 within a time-frame stipulated in the moU. The total cost of the project was of Rs. 14.87 crores out of which certain amount was considered to be invested by the two Companies. The estimated profit to be earned from out of this project was of about Rs. 7.29 crores and it was agreed to be shared between Shakambari Company and TechInfra Company on the one hand and New Shelter Enterprises on the other hand in the ratio of 45% and 55%. It was also agreed that applicant No. 2 would not appropriate to himself any money or income from out of this project till it was first applied towards reimbursement of initial cost of investment paid by the two Companies. Applicant No. 2 was also obliged to put in his own money to certain extent and was required to complete the project in all respect by the date stipulated in the MoU. In this MoU, the two Companies Shakambari and TechInfra were described as "land owners" and revision applicants No. 1 and 2 were shown as "developer/builder". However, as it turned out later on, many of the obligations imposed upon the revision applicants No. 1 and 2, the developer/builder, could not be performed by them and it was felt necessary to add to or modify some of the terms of the MoU and, therefore, two supplementary Memoranda of Understanding were executed between the land owners and developer/builder. Two more documents, one Development Agreement dated 22.9.2016 and another document dated 21.12.2016 were also registered between the Companies and the revision applicants. By the later documents, revision applicant No. 3 also entered the scene and was conferred with similar position as revision applicants No. 1 and 2. However, these later agreements between the parties also could not salvage the failing situation and ultimately, the respondents, owing to serious disputes between the parties, filed civil suit being Special Civil Suit No. 310 of 2017.
4. The revision applicants raised objection to the maintainability of the suit on three counts - (i) non-disclosure of the cause of action and (ii) the plaint being barred by law as the suit was filed by the Directors of the two Companies without any authority to file the suit for and on behalf of the Companies and (iii) arbitral clause contained in the MoU dated 15th May 2014 barring the jurisdiction of the Civil Court to entertain the suit. Therefore, application (Exhibit 9) was moved by the revision applicant. This application was filed with alternate prayers, one prayer made under the provisions of Order 7, Rule 11 of the Code of Civil Procedure for rejection of plaint and the other prayer made under Section 8 of the Arbitration and Conciliation Act for referral of the dispute to an arbitrator in view of clause 20 of the MoU dated 15th May 2014 and clause 23 of the Development Agreement dated 22nd September 2016.
5. Reply to this application was filed by the revision applicant strongly opposing the application. It was contended that Order XXX of the Code of Civil Procedure (sic Order XXIX of CPC) did not require any specific arraying of the parties to the suit by or on behalf of the incorporated Company and required only that the pleadings be signed and verified on behalf of the Company by the Secretary or any Director or any particular Officer well acquainted with the relevant facts of the Company. It was also submitted that even though there was no doubt at all that the suit was instituted on behalf of the Company by its Director, the objections taken in this regard by the applicant stood nullified in view of the fact that the plaint was signed and verified on behalf of the Company by its Director, respondent No. 1 (paragraph 2 of the reply vide exhibit 11). It was submitted that the revision applicants committed acts of fraud upon the respondents and, therefore, all the MoUs and the Agreements entered into between the Companies and the revision applicants stood vitiated and as such, the suit was maintainable. It was also submitted that the dispute was not arbitral as the issue of serious fraud on the part of the revision applicants was required to be adjudicated upon and it could be done only by a civil court.
6. After hearing both the sides and considering the case laws placed before it, the trial Court rejected the application (exhibit 9) entirely by the order dated 29th April 2017. Being aggrieved by the same, the revision applicants are before this Court in this revision application.
7. I have heard learned counsel for the parties at length. I have also perused the memoranda of understanding, development agreement and other documents placed on record by the parties including the impugned order.
8. Shri Dewani, learned counsel for the applicants submits that the plaint filed in the instant case by the respondents does not disclose any cause of action for the reason that the property as well as the agreements in respect of which reliefs have been sought, belong to and were executed by Shakambari Company and TechInfra Company and these two Companies have not authorized the respondents, by passing a Board Resolution, to institute the suit. He submits that when the cause of action is founded upon an agreement executed by the plaintiff-Company, unless and until a resolution is passed by the Board of Directors of the Company to institute a suit to seek relief for any loss or damage resulting from breach of the obligations under the agreements or for seeking a declaration that the agreement is null and void, no suit can be filed for and on behalf of the Company. He submits that a Company is a distinct and separate entity from its shareholders and members and, therefore, decision taken by the Company to institute a suit which is reflected in the Board Resolution passed in that regard is a condition precedent to institute a suit by it. He submits that no such Board Resolution has been filed along with the plaint and as a matter of record, there is not even a whisper about the respondents possessing an authority resulting from a Board Resolution passed for authorizing them to file the suit. Learned counsel for the applicants further submits that the suit is also barred by law. Alternatively, he submits that the Civil Court has no jurisdiction to entertain the suit, because there are specific clauses in the agreement making a provision for referral of any dispute between the parties arising from out of the terms and conditions of the agreement, to an arbitrator and therefore, the dispute was required to be referred to the arbitrator to be appointed by the civil court in terms of Section 8 of the Arbitration and Conciliation Act.
9. For rejection of plaint, the learned counsel for applicants has placed his reliance upon the cases of Hardesh Ores (P) Ltd. v. Hede & Company reported in MANU/SC/7671/2007 : (2007) 5 SCC 614; Church of Christ Charitable Trust And Educational Charitable Society v. Ponniamman Education Trust reported in MANU/SC/0515/2012 : (2012) 8 SCC 706; M/s. Nibro limited v. National Insurance Co. Ltd. reported in MANU/DE/0138/1991 : AIR 1991 Delhi 25; Mrs Bacha F. Guzdar v. Commissioner of Income Tax reported in MANU/SC/0072/1954 : AIR 1955 SC 74 and Heavy Engineering Mazdoor Union v. State of Bihar & Ors. reported in MANU/SC/0309/1969 : AIR 1970 SC 82. For arbitrability of dispute, learned counsel invites my attention to the cases of A. Ayyasamy v. A. Paramasivam & Ors. reported in MANU/SC/1179/2016 : (2016) 10 SCC 386; VBHC Mumbai Value Homes Pvt. Ltd. v. Laxman Bhoir & Ors. reported in MANU/MH/2008/2015 : 2015 (6) Mh. L.J. 385; Hindustan Petroleum Corpn Ltd. v. Pinkcity Midway reported in MANU/SC/0482/2003 : (2003) 6 SCC 503 and Milind Dattatraya Mahajan & Ors. v. Pramod Budhraja reported in MANU/MH/0201/2016 : 2016 (7) Bom. C.R. 317.
10. Shri Voditel, learned counsel for the respondents submits that the composite application filed for rejection of the plaint as well as referral of dispute to the arbitrator is not maintainable in law and, therefore, the impugned order need not be interfered with. He further submits that there have been serious allegations of fraud made against the revision applicants and based upon them, declaratory relief for declaring two registered documents dated 22.9.2016 and 21.12.2016 as sham, bogus and illegal has been sought. He submits that prayer for such a declaration can only be looked into by the civil court and the arbitral tribunal cannot adjudicate upon such an issue. He further submits that the allegations are of such a nature that they give rise to the complicated questions of fact and law, determination in respect of which cannot be rendered by the arbitral tribunal and can only be made by the civil court. He further submits that the suit has been filed not only by the Company through its Director, but also by the respondents in their individual capacities, they also being aggrieved by the fraudulent and illegal activities of the revision applicants and, therefore, the suit is maintainable. He further submits that the reason for doing so was that the cause of action was itself composite in nature, one in favour of the Company and the other in favour of the respondents. He also submits that the applicants have fraudulently obtained from the respondents a power of attorney and since it became clear that the applicants were likely to misuse the powers given under it, it became necessary for the respondents to file the suit seeking a declaration for cancellation of the power of attorney as well as the other registered agreements. Thus, he supports the impugned order.
11. Learned counsel for the respondents for his submissions has placed his reliance upon the cases of Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. reported in MANU/SC/0401/1999: (1999) 5 SCC 688; Orient Transport Co. Gulabra & Anr. v. M/s. Jaya Bharat Credit And Investment & Anr. reported in MANU/SC/0015/1987 : (1987) 4 SCC 421; N. Radhakrishnan v. Maestro Engineers & Ors. reported in MANU/SC/1758/2009 : (2010) 1 SCC 72; Dwarka Prasad Agarwal & Anr. v. Ramesh Chander Agarwal & Ors. reported in MANU/SC/0449/2003 : (2003) SCC 220; Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya & Anr. reported in MANU/SC/0310/2003 : (2003) SCC 531 and Booz Allen And Hamilton Inc. v. SBI Home Finance Ltd. & Ors. reported in MANU/SC/0533/2011 : (2011) 5 SCC 532.
12. In the case of Hardesh Ores (supra), it is held by the Hon'ble Supreme Court that it is well settled, whether or not a plaint discloses a cause of action is essentially a question of fact, but whether it does or does not must be found out from reading the plaint itself. Hon'ble Supreme Court further held that the test is whether on the averments made in the plaint, if taken to be correct in their entirety, a decree would be passed. It further held that it is the substance and not merely the form that has to be looked into and the pleadings have to be construed as they stand without addition or subtraction of words or change of their apparent grammatical sense and that the cause of action must be real and not illusory.
13. In Church of Christ Charitable Trust (supra), relying on the explanation given by the Hon'ble Supreme Court in the case of A.B.C. Laminart (P) Ltd. v. A.P. Agencies reported in MANU/SC/0001/1989 : (1989) 2 SCC 163. the Apex Court held that a cause of action means every fact which, if traversed, would make it necessary for the plaintiff to prove in order to support his right to a judgment of the Court or in other words, it is a bundle of facts which when taken with the law applicable to it gives the plaintiff a right to relief against the defendant. It is also held that the facts constituting a cause of action not only include the infringement of the right sued, but also include all those material facts on which the right to sue is founded. Of course, it was also clarified by the Hon'ble Supreme Court that the facts constituting cause of action would not comprise the evidence necessary to prove these facts.
14. It would be clear from these rulings of the Hon'ble Supreme Court that the question as to whether or not a cause of action has been set out in the plaint being one of fact, would have to be determined by reading the plaint in its entirety and construing the pleadings as they stand, without making any addition or subtraction of words or change of the grammatical sense conveyed by the words employed in the pleadings. It would also be clear that a cause of action is something which is real and not illusory, that illusions of cause of action are not permitted in law and cause of action must set out a clear right to sue. These rulings would further tell us that in order that a real cause of action is disclosed by the pleadings in the plaint, all material facts comprising not only actual infringement of right to sue, but also those on which the right is founded are averred in the plaint.
15. Bearing in mind the above referred principles of law, let us now examine the plaint in its entirety so as to find out whether it discloses any real cause of action or not from the view point of the two Companies.
16. Admittedly, the cause of action of the plaint is founded upon the MoU dated 15th May 2014. This is the basic agreement executed between the parties. It was this agreement which created rights and obligations between the parties and these rights and obligations were the cause for entering into subsequently executed two supplementary memoranda of understanding and two registered documents - one development agreement dated 22.9.2016 and another document dated 21.12.2016. Admittedly, these agreements including the basic agreement of 15.5.2014 were in relation to the development of Plot No. 625 situated at mouza Indora into a multi-storied building having self-contained units or apartments to be sold to the prospective purchasers for consideration and working out various modalities of the manner in which to perform the mutual obligations of the parties. Admittedly, Plot No. 625 of mouza Indora was jointly owned by two Companies - Shakambari Company and TechInfra Company, both registered and incorporated under the provisions of the Companies Act. These Companies, one can say without any difficulty here, were distinct and separate entities from their shareholders, members and directors, in accordance with the principles enunciated by Hon'ble Apex Court in Mrs. Bacha P. Guzdar and Heavy Engineering Mazdoor Union (supra). Admittedly, the basic agreement dated 15th May 2014 and even the subsequent agreements were executed for and on behalf of these Companies through their authorized director. All these facts plainly and clearly emerge from reading the averments in the plaint as well as the documents sued upon without making any additions or subtractions to the words used therein and considering the applicable law. I must add here that when a document issued upon and is also referred to in the plaint, as held in the case of Church of Christ Charitable Trust (supra), such document gets incorporated into the plaint by its reference in the pleadings. This position of law was also stated by the Hon'ble Supreme Court in U.S. Sasidharan v. K. Karunakaran reported in MANU/SC/0612/1989 : (1989) 4 SCC 482 and Manohar Joshi v. Nitin Bhaurao Patil reported in MANU/SC/0217/1996 : (1996) 1 SCC 169.
17. In this background, it would be useful for us to refer to the prayers sought in the plaint, the relevant clauses of which are reproduced thus:
"It is, therefore, most respectfully prayed that this Hon'ble Court may kindly be pleased to grant:
i. Decree of Declaration that the acts of the defendants of the breach of the terms of Memorandum of Understanding/Development Agreement dated 15.5.2014 and their conduct of committing serious illegal acts contrary to the interest of the plaintiffs are pre-judicial to the rights of the plaintiffs and that the defendants have no right to deal with flats of the project "Residencia Apartment";
ii. Decree declaring that the Agreement of Sale or any transaction entered into by the defendants in respect of the Flats of Residencia Apartments are illegal, null and void and not binding upon the plaintiffs;
iii. Decree declaring that the documents fraudulently got executed and registered by the defendant No. 3 from the plaintiff No. 1 on 22.9.2016 and 21.12.2016 are sham, bogus and illegal documents having no binding force;
iv. Decree directing the defendants to render the accounts of the transactions entered into by them to the plaintiffs right from the inception thereof;
v. Decree directing the defendants to refund the amount collected by them from the respective buyers of the Flats in the Project Residencia Apartment to such buyers;
vi. Decree of permanent, perpetual and prohibitory injunction restraining the defendants their agents, servants, representatives and any other person acting on their behalf from anyway disposing the subject property or creating any third party interest therein without the written consent and permission of the plaintiffs for the same;
vii. Decree of mandatory injunction ordering the defendants to remove themselves from the site of the Project "Residencia Apartments" and to tender apology for their offensive activities;...."
It is clear from these clauses that what is sought in the plaint is basically a remedy for the ills the applicants brought to bear upon the Companies through breach of their obligations under the agreements to the Companies.
18. The cause title of the plaint shows that respondent No. 1 is plaintiff No. 1 and respondent No. 2 is plaintiff No. 2. Respondent No. 1 has been described to be a former authorized Director of Shakambari Company and Director of TechInfra Company. Respondent No. 2 has been merely shown as having occupation of business. We have seen that all the agreements including the basic agreement in the nature of MoU dated 15th May 2014 were executed by these two Companies through the authorized Director and that the subject property of these agreements was jointly owned by these two Companies as disclosed by the plaint pleadings and the documents sued upon. The reliefs sought in the plaint prayer were also to remedy the infringement of rights of the Companies under these agreements. So, if any cause of action resulting from the infringement of rights of the Companies arose, it arose in favour of these two Companies and not the individual director acting in her individual capacity like respondent No. 1, muchless an individual businessman like respondent No. 2, as he has chosen to describe himself in the cause title of the plaint. The argument of learned counsel for the respondents that there was a composite cause of action, therefore, deserves to be rejected and it is rejected accordingly.
19. With such canvass of facts painted by pleadings and detailed by applicable law, one would have expected that all material facts disclosing cause of action were pleaded in the plaint. In particular, it was essential to aver in the plaint in a specific manner that the cause of action resulting from breach of obligations on the part of the applicants arose in favour of the Companies and the Companies took a decision to file a suit and accordingly authorized any of the respondents, through a resolution of its Board of Directors, to file a suit against the applicants. But, the pleadings in the plaint nowhere show that these two Companies felt aggrieved by the infringement of their rights under these agreements and, therefore, a suit was filed for vindication of those rights through their duly authorized Director. This way, I find that the pleadings in the plaint do not disclose any cause of action so far as the rights of these two Companies which are sought to be enforced in the suit, are concerned. I have already found that in this case, there can be no question of disclosure of any cause of action in favour of the respondents in their individual capacities, the cause of action having been based upon the agreements with the Companies and not with these two individuals.
20. There can be another way of looking at the issue. In fact, the respondents have also taken a ground that the suit is barred by law if one goes by pleadings in the plaint and, therefore, the plaint is liable to be rejected by virtue of the provisions of Order VII, Rule 11 of the Code of Civil Procedure. Such an objection, I find, has great substance in it, if we were to consider the settled position of law.
21. The trial Court in the impugned order has held that from the plaint it becomes clear that there is no other Director of these two Companies except for the plaintiffs and that it is apparent from the averments made in the plaint that though the present suit is not filed in the name of the Company, as Director of these two Companies, the respondent No. 1/plaintiff No. 1 can file suit by virtue of the provisions of Order XXX of the Code of Civil Procedure. The reliance placed upon the provisions of Order XXX CPC by the trial Court seems to be either misplaced or an inadvertent mistake. The provisions contained in Order XXX are in respect of suit by or against the partnership firm and persons carrying on business in the name other than their own. These provisions do not apply to a distinct entity like that of a registered company which is a body incorporate and treated in the eye of law as having a legal personality, separate and different from the share-holders and members who together constitute it. Such legal personality of the Company is clothed with its own rights under law. It is capable of owning, possessing, alienating the property and also instituting suits in its own name through its authorized person or defend itself through its authorized person in legal proceedings. In this context, I feel it necessary to refer to the relevant observations of the Hon'ble Supreme Court in Heavy Engineering Mazdoor Union (supra) appearing in paragraph 4, which are reproduced thus:-
"...... An incorporated company, as is well known, has a separate existence and the law recognises it as a juristic person separate and distinct from its members. This new personality emerges from the moment of its incorporation and from that date of its incorporation and from that date the persons subscribing to its memorandum of association and others joining it as members are regarded as a body incorporate or a corporation aggregate and the new person begins to function as an entity (cf. Saloman v. Saloman and Co. - 1997 AC 22). Its rights and obligations are different from those of its shareholders. Action taken against it does not directly affect its shareholders. The company in holding its property and carrying on its business is not the agent of its shareholders. An infringement of its rights does not give a cause of action to its shareholders. Consequently, it has been said that if a man trusts a corporation he trust that legal persona and must look to its assets for payment; he can call upon the individual shareholders to contribute only if the Act or charter creating the corporation so provides....."
We can have more enlightenment in this regard by following the observations of the Hon'ble Apex Court in the case of Mrs Bacha F. Guzdar appearing in paragraph 9 thus:
"..... This analogy is wholly inaccurate. Partnership is merely an association of persons for carrying on the business of partnership and in law the firm name is compendious method of describing the partners. Such is, however, not the case of a company which stands as a separate juristic entity distinct from the shareholders..."
22. Such being the standing in the eye of law of a Company registered under the provisions of the Companies Act or a body incorporate, provisions of Order XXX of the Code of Civil Procedure would never be attracted to the suits sought to be filed by or against a Company or a body incorporate. The provisions of Order XXIX of CPC would be applicable to such suits. Learned counsel for the respondents submits that the plaint in this case has been signed and verified on behalf of the Company by its Director and, therefore, the suit complies with the provisions of Order XXI, Rule 1 CPC. With due respect, I must say, this provision only explains as to how the pleadings be signed and verified. This provision of law nowhere clarifies anything about the institution of suit. Institution of the suit requires a decision to be taken in that regard by a Company and since the Company, for carrying on its affairs, acts through its Board of Directors and in certain cases, well through the directors or secretaries too, provided their authority springs forth from the Articles of Association or some decision taken in the annual general meeting or a resolution passed by the Board of Directors, there has to be a decision taken by the Company to file a suit. Without such decision, no suit can be instituted in the name of or by the Company. After all, the question of authority to institute a suit on behalf of the Company has never been considered a matter of mere technicality, the reason being that decision to institute a suit would have great consequences for the operation and functionality of the Company. If no such authority is produced or shown to exist or at least pleaded in the plaint, no suit can be instituted for and on behalf of the Company. In this regard, it would be useful to draw support from the observations of the learned single Judge of Delhi High Court in the case of M/s. Nibro Limited (supra) appearing in paragraphs 24 and 25 which are reproduced thus-
"24. In my view, the provisions of Companies Act 1956 and particularly Ss. 14, 26, 28, Schedule I Table A and Section 291 are very clear.
25. It is well settled that under Section 291 of the Companies Act except where express provision is made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting in all other cases the Board of Directors are entitled to exercise all its powers. Individual directors have such powers only as are vested in them by the Memorandum and Articles. It is true that ordinarily the court will not un-suit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has far-reaching effects. It often affects policy and finances of the company. Thus, unless a power to institute a suit is specifically conferred on a particular director, he has no authority to institute a suit on behalf of the company. Needless to say that such a power can be conferred by the Board of Directors only by passing a resolution in that regard."
23. In the case of State Bank of Travancore v. Kingston Computers India Private Limited reported in MANU/SC/0280/2011 : (2011) 11 SCC 524, the Hon'ble Apex Court referred to the decision of the Delhi high Court in the case of Nibro Limited (supra) and affirmed the view taken by the learned single Judge of the Delhi High Court when it held that unless a resolution is passed by the Board of Directors delegating its power to an individual to file a suit on behalf of the Company, the suit is not maintainable. It also observed that when a suit is filed by a person not duly authorized by the Company, it cannot be entertained by a civil court.
24. In the instant case, if we go through the plaint pleadings, we would instantly find that there is not even a whisper about the Board of Directors passing a resolution to authorize respondent No. 1 to file a suit on behalf of the two Companies. I have already found that the provisions of Order XXIX, Rule 1 of the Code of Civil Procedure are only about signing and verifying the pleadings in the plaint and not about the authority to institute a suit. The above-referred rulings would show that the authority to institute a suit would emanate from a resolution passed in that regard by the Board of Directors or authority given under the Articles of Association or even in the decision taken in the annual general meeting of the Company in view of the provisions of Section 291 of the Companies Act, 1956. If no such authority has been given, an individual director would have no authority to take a decision and file a suit for and on behalf of the Company. Apart from absence of any words regarding existence of such authority, the plaint in this case is also not accompanied by any Board resolution authorizing either of the respondents to institute a suit. These respondents may be the only Directors of these two Companies, as submitted. But, they must show or at least plead that there was a Board meeting in which a decision to institute a suit on behalf of the Company was taken. This was required as a necessity in law and facts. By way of reiteration, suffice it to say here that the agreements on which the cause of action in the instant suit was founded, were executed between the two Companies and the revision applicants and those agreements were in respect of an immovable property jointly owned by these Companies. The necessity of law, however, has not been quenched by pleadings in the plaint. So, one can very well say that the suit as filed by the respondents is also barred by law.
25. Thinking on a different plain, one can also add that so far as these two Companies are concerned, no cause of action to file a suit has ever arisen for them and had it arisen, these Companies would have certainly taken a decision to go ahead with the cause of action and seek redressal for the same by taking a decision to institute a suit. The fact that there is no pleading in the plaint about taking of such a decision and conferring of authority upon any of the respondents to file a suit by passing of a suitable resolution by the Board of Directors, itself is sufficient to say that from the perspective of these two Companies, the cause of action has not arisen and that is the reason why material pleadings disclosing cause of action in favour of these Companies are absent in the plaint. If it were not so, these Companies would have passed a resolution to institute a suit against the applicant and appointed an authorized person to file it. But as stated earlier, the plaint pleadings are devoid of these material facts. As such, I find that this way also, the plaint does not disclose cause of action.
26. The sum and substance of the above discussion would be that the plaint as filed by the respondents is liable to be rejected on the grounds that it does not disclose cause of action and it is barred by law under the provisions of clauses (a) and (d) of Order 7, Rule 11 of the Code of Civil Procedure. Learned Civil Judge, Senior Division by not considering these material aspects of law, has arrived at a conclusion contrary to the settled principles of law and, therefore, the impugned order is liable to be quashed and set aside and the application vide exhibit 9 deserves to be allowed, but only for its prayer for rejection of the plaint under Order 7, Rule 11(a) and (d) of CPC.
27. Application vide Exhibit 9 also makes an alternate prayer for referral of the dispute to the arbitrator under Section 8 of the Arbitration and Conciliation Act. However, I find that the issue of referral of the dispute to the arbitrator need not be gone into now as the first prayer of Exhibit 9 application has been allowed by this Court and the other prayer regarding referral of dispute to an arbitrator is not the additional, but the alternative prayer. An alternate prayer demands consideration when the prayer to which it stands an alternative, is rejected. But, I deem it appropriate to keep all the questions in this regard open.
28. In the result, revision application is allowed to the extent it seeks allowing of the applicants' prayer to reject the plaint. The impugned order, however, would have to be quashed and set aside in its entirety as I have kept all questions relating to arbitrability of the dispute open and is accordingly quashed and set aside completely. The plaint in Special Civil Suit No. 310 of 2017 on the file of Civil Judge, Senior Division, Nagpur is rejected. It is made clear that this order shall have no bearing upon the rights of the two Companies to initiate such action as may be available to them under the law. No costs.
At this stage, learned counsel for the respondents submits that the effect and operation of this order be kept in abeyance as the respondents would like to challenge this order before the Hon'ble Apex Court. He also submits that if the effect and operation is not kept in abeyance, the interim relief in the nature of maintenance of status-quo ordered by the trial Court would also go away.
The prayer is opposed by learned counsel for the applicants.
However, having regard to the submissions made by learned counsel for the applicants, I am of the view that this order can be kept in abeyance for a period of two weeks to enable the applicants to avail of the remedy available under the law.
Accordingly, the effect and operation of this order is kept in abeyance for a period of two weeks.
No comments:
Post a Comment