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Wednesday, March 18, 2015

The respondents herein preferred the above mentioned AFO No.548 of 2014. They were the plaintiffs in Civil Suit No. 652 of 2014. Alongwith the Civil Suit, they filed an interim application seeking certain interim reliefs. The prayer in the interim application is as follows:- "i) restraining defendant Nos.2 to 9 by an order and injunction from convening and/or holding and/or attending any meeting of the Board of Directors of the defendant company, and/or from voting threat and/or pass any resolution by Circulation, so as to frustrate and/or prevent the holding of EGM requisition by the plaintiffs pursuant to the Notice dated 18th December, 2014 (Ext. H and I hereto). ii) to order and direct the defendants by themselves, their servant, agents, officers and subordinates by an order and injunction to take all steps and do all things necessary and required under the provision of the Company's Act, 2013, including for furnishing list of shareholders as requested by the plaintiffs in their requisition notice dated 18.12.2014, so as to ensure, effectuate and facilitate the holding of EGM in accordance with law and as envisaged under the provisions of the Companies Act, 2013 pursuant to the requisition of the plaintiffs dated 18th December, 2014 (Exh. H and I)"

                                                              Non-Reportable

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                     CIVIL APPEAL NOS.  2935-36 of 2015
      (Arising out of Special Leave Petition (C) Nos.6513-6514 of 2015)

Jyoti Limited & Others                            ... Appellants

Versus

Bharat J. Patel & Others                                ...Respondents



                               J U D G M E N T

Chelameswar, J.

1.       Leave granted.    Heard   Mr.   Dushyant   Dave  and  Dr.  Abhishek
Manu Singhvi, learned senior counsel appearing for the  appellants  and  the
respondents respectively.

2.    Aggrieved by an order dated 19.02.2015 of the High  Court  of  Gujarat
in Civil Application No.14367 of 2014 in Appeal From Order  No.548  of  2014
and Civil Application No.222 of 2015 in Appeal From Order No. 548  of  2014,
the respondents therein preferred the instant appeals.

3.    The respondents herein preferred the above  mentioned  AFO  No.548  of
2014.  They were the plaintiffs in Civil Suit No. 652  of  2014.   Alongwith
the Civil Suit, they filed an interim application  seeking  certain  interim
reliefs.  The prayer in the interim application is as follows:-
"i)   restraining defendant Nos.2 to 9  by  an  order  and  injunction  from
convening and/or holding and/or  attending  any  meeting  of  the  Board  of
Directors of the defendant company, and/or from voting  threat  and/or  pass
any resolution by  Circulation,  so  as  to  frustrate  and/or  prevent  the
holding of EGM requisition by the plaintiffs pursuant to  the  Notice  dated
18th December, 2014 (Ext. H and I hereto).

ii)   to order and direct  the  defendants  by  themselves,  their  servant,
agents, officers and subordinates by an order and  injunction  to  take  all
steps and do all things necessary and required under the  provision  of  the
Company's Act, 2013,  including  for  furnishing  list  of  shareholders  as
requested by the plaintiffs in their requisition  notice  dated  18.12.2014,
so as to ensure, effectuate and facilitate the holding of EGM in  accordance
with law and as envisaged under the provisions of the  Companies  Act,  2013
pursuant to the requisition of the  plaintiffs  dated  18th  December,  2014
(Exh. H and I)"


4.    From the order dated 29.10.2014 passed by the trial Court on the  said
application, it appears that the respondents  sought  an  order  restraining
the appellants herein from attending and voting at a meeting  of  the  Board
of Directors scheduled on 13th October, 2014.  The trial Court  declined  to
grant the interim relief as sought for. The operative portion of  the  order
reads as follows:
"........ Therefore, above referred  judgments  are  not  applicable  in  my
humble opinion to the present case and therefore, there  is  no  prima-facie
case in favour of the plaintiff hence, there is no  prima-facie  case  there
is no question of balance of convenience and irreparable loss caused to  the
plaintiff and hence, further as per law laid down by the Apex  Court  relied
upon by the defendants Ld. Advocate Dr.  N.P.  Parmar  reported  in  2009(0)
GLHEL-SC-47882 in case of Dilipsing v. State of U.P.  Considering the  facts
that the plaintiff has challenged the issuance of the notice below mark  4/1
and therefore, this suit is itself is premature.  Hence, even on this  count
also the plaintiff is not  entitled  for  equitable  relief  and  therefore,
Points No.1 to 3 are accordingly answered in to negative and pass  following
other for deciding Point No.4.

                                    ORDER

      This application Exh.5 is hereby rejected."

5.    Aggrieved by the same, AFO 548  of  2014  came  to  be  filed  by  the
respondents herein before the High Court.   The  appellants  herein  took  a
definite stand both before the trial Court as well as before the High  Court
that the suit itself is not maintainable and the  remedy,  if  any,  to  the
respondents herein is to approach the Company Law Board  under  Section  186
of the Companies Act, 1956.

6.    The High Court recorded a conclusion that the  respondents  would  not
be able to maintain the proceedings before the Company Law Board.
"4.6  On conjoint reading of the above quoted  provisions  of  law  and  the
objection taken by the respondents, including the one that the voting  right
is already suspended by the Company qua the said share holding,  asking  the
plaintiffs to move the Company Law Board would be meaningless because  their
(plaintiffs') lack of voting right as contended  by  the  respondents  would
make  the  proceedings  before  the  Company  Law   Board   as   well,   not
maintainable.  This is  over  and  above  an  additional  aspect  that,  the
provision of Section 186 of the Companies Act, prima facie  cannot  be  read
to be meant for the circumstances like the present  one,  however  no  final
opinion needs to be expressed with regard to the  scope  and  ambit  of  the
said section, since that is not the controversy before this Court."

On the question of the maintainability of the suit, the High Court  recorded
as follows:
"Suffice it to hold that,  in  the  facts  of  this  case,  considering  the
material  on  record  and  the  chequered  history  between  the  contesting
parties, and the chronology of the actions  taken  by  the  respondents,  as
borne out from record, the suit in question  cannot  be  termed  to  be  not
maintainable.   The  suit  is  therefore  held  to  be  maintainable.    The
contention of the respondents in this regard is rejected. "

7.    The maintainability of a suit is question of law.  Though,  by  virtue
of declaration under Section 9 of the Code of  Civil  Procedure,  1908,  all
suits of civil nature are maintainable unless barred either  by  an  express
provision or by implication of law.  In the case on hand,  when  a  specific
stand is taken that in view of the provisions of Companies Act the  suit  is
not maintainable, "the checkered history between the contesting parties  and
the chronology of the actions taken by the respondents", in our opinion,  do
not decide  the  maintainability  of  the  suit.   We  find  the  conclusion
recorded by the High Court to be highly unsatisfactory.

8.    On the question whether the plaintiffs have a prima  facie  case,  the
High Court recorded a cryptic conclusion without recording any  reasons  (at
para 7.2) that they have a strong prima facie case.  On the question of  the
balance of convenience also, the order of the High Court is very  equivocal.
 But the High Court went on to issue certain directions:

9.    The High Court at para 7.4 held that in view of  the  fact  that  from
31.12.2014 orders of  status  quo  existed,  the  same  is  directed  to  be
continued to be considered on the next date  of  hearing,  i.e.  16.03.2015.
In the interregnum,  the  High  Court  directed  the  appellants  herein  as
follows:
"7.2  The respondents/original defendants, more particularly the  respondent
Company (original defendant No.1), are directed to consider the  requisition
notice in question dated 18.12.2014 given  by  the  plaintiffs,  and  comply
with  the  provisions  of  Rule  17(7)  of  the  Companies  (Management  and
Administration) Rules, 2014, within a period of one  week  from  today.   On
receipt of such list of members as per rules, from the company, it would  be
open to the appellants, to take further actions in accordance with  law,  to
convene the Extraordinary General Meeting of the Company,  within  the  time
stipulated under law.  For this purpose, the time taken by  the  respondents
in supplying the list  of  the  members,  as  required  under  law,  to  the
requisitionists (the plaintiffs), beyond  what  is  permissible  under  Rule
17(7) of the Rules, shall not count against the plaintiffs.

7.3   It  is  directed  that,  any  decision  that  may  be  taken,  or  the
resolution that may be passed in the  said  Extraordinary  General  Meeting,
shall not be given effect to, without prior permission of  this  Court,  and
further that, any  business  transacted  at  the  said  meeting  and/or  any
outcome thereof shall be subject to further orders that  may  be  passed  by
this Court."

10.   Hence, these appeals by special leave.

11.   We are of the opinion that the directions in paras  7.2  and  7.3  are
inconsistent with the directions in para 7.4.   Apart from  that,  the  fact
that the orders of status quo were  granted  by  the  Chamber  Judge  during
vacation, which have been  continued  from  time  to  time  without  further
consideration regarding the tenability of such  orders,  is  no  ground  for
continuing such orders.  In the circumstances, we  deem  it  appropriate  to
set aside the impugned order.  Having  regard  to  the  various  contentions
raised by the parties, it is better that the appeal before  the  High  Court
itself is disposed of on merits expeditiously.

12.   Appeals are, accordingly, allowed.
                                      ....................................J.
                                                            (J. Chelameswar)


                                      ....................................J.
                                                              (R.K. Agrawal)
New Delhi;
March 17, 2015


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