Civil Court Jurisdiction Barred Under Companies Act for Alleged Oppression, Case Directed to National Company Law Tribunal
In a significant ruling, the Calcutta High Court's Division Bench, comprising Justices Madhuresh Prasad and Supratim Bhattacharya, dismissed an appeal challenging the legality of an Extraordinary General Meeting (EOGM) of Calcutta Club Limited, asserting that the matter falls under the exclusive jurisdiction of the National Company Law Tribunal (NCLT) as per the Companies Act, 2013.
The appellant, Bhaskar Gupta, a senior chartered accountant and long-term member of the club, had initially filed a civil suit seeking declarations that the EOGM held on December 12, 2020, and subsequent actions, including a show cause notice and suspension of his membership, were illegal. Gupta contended that the investments he made as Chairman of the club's finance sub-committee were legitimate and ratified by the Managing Committee, and that the EOGM violated the Companies Act.
However, the trial court dismissed the suit, citing lack of jurisdiction under Section 430 of the Companies Act, which bars civil courts from adjudicating matters within the NCLT's purview, particularly those involving allegations of oppression or mismanagement. Gupta's appeal against this decision was also dismissed by the High Court.
The High Court emphasized that the issues raised in Gupta's appeal, such as the alleged oppressive nature of the EOGM and the club's subsequent actions, fall squarely within the scope of Sections 241 and 242 of the Companies Act. These sections grant the NCLT the authority to address grievances related to the conduct of a company's affairs that are prejudicial or oppressive to any member.
The court also referenced precedents, including the Supreme Court's interpretation of Section 430, affirming that the NCLT has exclusive jurisdiction over such disputes. The court further noted that the reliefs sought by Gupta were contingent upon setting aside the EOGM, thus underscoring the NCLT's jurisdiction.
The ruling reinforces the legal framework established by the Companies Act, which aims to streamline corporate governance disputes to specialized tribunals like the NCLT, ensuring that civil courts do not entertain matters explicitly designated to these tribunals.
Gupta's legal counsel had argued that the civil court had jurisdiction under Section 9 of the Civil Procedure Code, which permits civil suits unless expressly barred. However, the High Court held that the Companies Act's jurisdictional bar supersedes this provision.
The decision is a reminder of the delineated roles between civil courts and the NCLT in corporate governance issues, emphasizing the legislative intent to provide a specialized forum for resolving complex corporate disputes.
Bottom Line:
The jurisdiction of Civil Court is ousted under Section 430 of the Companies Act, 2013, in cases where the matter involves oppression or mismanagement of a company, and such issues are exclusively within the purview of the National Company Law Tribunal (NCLT).
Statutory provision(s): Companies Act, 2013 Sections 241, 242, 430, Civil Procedure Code, 1908 Section 9
Bhaskar Gupta v. Calcutta Club Limited, (Calcutta)(DB) : Law Finder Doc Id # 2825924
