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Judgment
The Court : Learned Senior Counsel appearing for the petitioner, at the outset submits that this action is in the nature of a derivative action. For the
sake of convenience, it may be noted that the plaintiff has a 17.52% shareholding in the defendant No. 1 Company and 0.06% shareholding in the
defendant No. 11 Company. On the other hand, the defendant No. 1 Company has 33% shareholding in the defendant No. 11 Company, namely
Century Textiles and Industries Limited.
It is submitted on behalf of the plaintiffs/petitioners in support of the interlocutory application, that by virtue of shifting the Cement Division of the
defendant No. 11 Company to a stranger Company, by way of a scheme of demerger between respondent No. 11 Company and one Ultra Tech
Cement Limited, the primary profit-earning section of defendant No. 11 is being sought to be shifted to the said stranger Company, to the detriment of
the interest of defendant No. 11. It is argued that the defendant Nos. 2 to 10 and 12 to 18, in particular, defendant Nos. 2 and 3, are the controlling
share holders in Ultra Tech, the stranger Company mentioned above, and, in an oblique manner, are trying to use such scheme as proposed to affect
adversely the interest of defendant No. 11-Company, in favour of the Stranger Company.
Learned Senior Counsel appearing for the plaintiffs/petitioners argues that the plaintiff, for the first time, learnt of such proposed scheme from a
newspaper publication dated September 21, 2018, whereby it was notified that, by an order dated September 12, 2018 the National Company Law
Tribunal (NCLT), Mumbai, had directed a meeting to be held of the equity share holders and preferential share holders of the second applicant
Company (Ultra Tech) for the purpose of considering, and if thought fit approving, with or without modification, the proposed CAP scheme of CAP
demerger amongst Secretary Textiles and Industries Limited (demerged Company) and Ultra Tech Cement Limited (resulting Company) and their
respective share holders and creditors Under Sections 230 to 232 and other applicable provision of the Companies Act, 2013. It is submitted that, the
ratio of the worth of the shares of Ultra Tech and defendant No. 11, at least at the juncture when such notice was issued, was 8:1 whereas the
scheme, if accepted, would reduce such worth to a much lesser value.
It is further submitted that since the interest of the defendant No. 11-Company would be adversely affected if the share holders of the defendant No.
11 Company vote in favour of such scheme of demerger, it is in the interest of the defendant No. 11 Company that such injunction ought to be
granted. It is also submitted that the present action is of a derivative nature since the controlling share holders and the management are acting in the
interest of the majority share holders as well as company itself, which entitles the petitioner to maintain the present action in the interest of the
company and the majority share holders.
While controverting such argument, learned Senior Counsel appearing for the respondent No. 1 submits at the inception that a Civil Court does not
have the jurisdiction to take up the instant application, since the same falls within the purview of Sections 230 and 232 of the Companies Act, 2013 and
a civil court was, by virtue of Section 438 of the said Act, debarred from taking up such matters. It is further submitted that the plaintiff itself has
admitted in paragraphs 49 and 50 of the plaint, from which the instant interlocutory application emanates, that a proceeding was previously taken out
by the plaintiff before the Company Law Board, Kolkata Bench, which was turned down on the ground that the plaintiff did not have qualifying share-
holding in the defendant nos. 11, 19 and 20 and consequently, could not have claimed any relief against the said defendants. Three appeals preferred
from such order also met with the same fate. Ultimately, while dismissing Civil Appeal Nos. 5239-41 of 2017, from such orders, the Supreme Court
clarified that the dismissal of those appeals would not stand in the way of the appellant taking steps “in appropriate proceedings in accordance with
lawâ€. As such, it is argued, the present application is mala fide and ought to be dismissed.
Learned Senior Counsel for the defendant no. 1 further submits that the scope of the suit, if read in proper perspective, is entirely different from the
prayers of the present interlocutory application. In the suit, a previous scheme was challenged and consequential reliefs were claimed. The proposed
scheme in respect of which orders are being sought in the present application does not find any mention in the plaint and as such, the interlocutory
application itself is beyond the purview of the suit itself.
It is further argued that the well settled principle of law is that civil courts do not readily interfere with the indoor management of a company. Learned
Senior Counsel cites a judgment reported at 2014 SCC Online Cal 19639, where a co-ordinate bench of this Court had observed that the appellate
court therein had completely ignored the doctrine of indoor management and that courts are loathe to interfere with the internal matters of bodies
corporate and societies unless a manifest case of injustice or fraud is made out. It is argued that since no such case has been made out by the plaintiff,
the interim prayers made by the plaintiff ought to be refused. Learned Senior Counsel further places reliance on Section 179 of the 2013 Act to
impress upon this Court that the Board of directors of a company is entitled to exercise all the powers as the company is authorised to exercise and
points out to the exception thereto laid down in Sub-Section (3) of Section 179 and submits that none of those exceptions cover the present case.
Learned Senior Counsel next submits that it is incorrect to say that the plaintiff did not get any notice of the meeting with regard to demerger and that
notice had been sent duly by e-mail as far back as during the period from September 18, 2018 to September 20, 2018. In such view of the matter, it is
argued that the present reliefs ought to be refused.
Learned Senior Counsel appearing for the defendant no. 11 submits that the reliefs sought in the suit itself are palpably barred under Sections 34 and
39 respectively of the Specific Relief Act. It is argued that the plaintiff company does not come within the purview of “any person entitled to any
legal character, or any right as to any propertyâ€, as envisaged in Section 34 of the Specific Relief Act, 1963. Moreover, it is argued, the basic pre-
requisite of there being a breach of an obligation, for the grant of mandatory injunctions, as contemplated in Section 39 of the 1963 Act, is entirely
absent in the present case.
It is further argued that what the plaintiff could not directly do as a miniscule shareholder in defendant no. 11 (0.06% share holding), the plaintiff is
now trying to achieve with the blessings of the Court by way of the interlocutory orders prayed for. Learned Senior Counsel for the defendant no. 11
next cites Clause-6 of the explanatory statement under Section 230(3) read with Section 232(1) and (2) and 102 of the Companies Act, 2013 read with
(Compromises, Arrangements and Amalgamation) Rules, 2016, given in the relevant notice for the proposition that the said clause provides sufficient
safeguard to the interest of the majority shareholders of the applicant company, i.e., the present defendant no. 11. As such, it is argued that the basis
of the derivative action stands on fluid ground.
In reply, learned Counsel appearing for the plaintiff/petitioner submits, by placing reliance on a Division Bench judgment of this Court reported in 75
CWN 704 (The Asansol Electric Supply Co. and Ors. Vs. Chunilal Daw and Ors.) that the ouster of jurisdiction of civil court is not readily inferred
unless a statement by express provision or by necessary implication ousts such jurisdiction. The said judgment was rendered in the context of Sections
397 and 398 of the Companies Act, 1956. It is, thus, submitted that the present action is not barred by Section 430 of the Companies Act, 2013 since it
is not a class action as is envisaged in Section 245 of the said Act but is in the nature of a derivative action in the interest of the majority shareholders.
Upon considering the rival contentions of the parties, it appears that in the event the plaintiff as a shareholder of the defendant no. 11 company, was to
participate in the voting for demerger, which is under challenge, the plaintiff would wield little or no power to exercise an option worth the name, in
view of the shareholding of the plaintiff in defendant no. 11 company being only 0.06%. As such, the effect of the interlocutory orders prayed for, if
granted, would confer upon the plaintiff a benefit with the blessings of the Court, which the plaintiff could not otherwise get in accordance with law.
Consequently, in order to be elevated to the claim of derivative action, a mis-management and/or oppression of a higher plane ought to have been
exhibited by the plaintiff. In the present case, the prayers sought in the interlocutory application are in apprehension of a particular way in which the
shareholders of defendant no. 1 company might vote, which would, in turn, allegedly affect the interest of the defendant no. 1 company. Such cause of
action, even if existent, would in the opinion of the Court be far too remote to entitle the plaintiff to get an injunction as sought for, more so in the
nature of a derivative claim.
Moreover, the present attempt borders on forum-shopping, since having failed to obtain a relief in a previous proceeding which went up to the
Supreme Court where it was held that the plaintiff did not have qualifying shareholding in the defendant no. 11 company and other companies, the
present attempt of the plaintiff at obtaining a related relief is improper, to say the least. Although the Supreme Court added a rider, while dismissing
the appeals of the plaintiff previously, that the dismissal of those appeals would not stand in way of the present plaintiff (appellant therein) taking steps
in appropriate proceeding in accordance with law, the present interlocutory application cannot be termed exactly as an ‘appropriate proceeding in
accordance with law’, sufficient to entitle the plaintiff to the reliefs prayed for.
Moreover, there is substance in the contention of the respondent no. 1 that the scope of the suit itself, from which the interlocutory application arises,
is entirely different from the reliefs claimed in the said application. The primary reliefs claimed in the plaint relate to a cause of action previous to the
notice and consequent meeting for demerger, impugned in the interlocutory application. In such view of the matter, this Court finds that the
plaintiff/petitioner has not made out a sufficient prima facie case to go for trial to entitle the petitioner to the interlocutory reliefs as sought for. This
apart, the petitioner has not come with clean hands in the present application, since what could not be achieved directly by participating in the voting to
be held in the impugned proposed meeting, the petitioner has sought to get by way of an order of the Court. Accordingly, GA 2966 of 2018 is
dismissed on contest without any order as to costs.
It is made clear that, since the defendants/respondents were not invited to use any affidavit-in-opposition, the allegations made in the interlocutory
application are deemed to be denied by the respondents. It is further made clear that this Court has not gone into the merits of the matter and the
observations made herein were entirely for the purpose of adjudication of the present interlocutory application. Such observations will not bind any of
the parties at any further stage of the proceeding.