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Jyoti Limited & Others (Appellants) Versus Bharat J. Patel & Others (Respondents)

May 6, 2015
Case Decided On: 17-03-2015 J. Chelameswar & R.K. Agrawal, JJ. [Decided on 17/03/2015] Section 186 of the Companies Act 1956 read with section 9 of Civil Procedure Code,1908 – disputes in holding general meeting – civil court admitted the suit filed by respondent – appellants contested that the issue should go before CLB – whether the civil court was right in admitting the suit – Held, No. Brief Facts: The respondents herein had filed a civil suit against the appellant company and sought certain interim reliefs restraining the appellant company from holding any meetings etc., Appellants contested that the suit is not maintainable as the proper remedy available is to approach the CLB under section 186. However, the suit was held to be maintainable and certain interim directions were also given. Hence, these appeals by special leave. Decision: Appeals allowed Reason: The question regarding the maintainability of a suit is a question of law. Section 9 of the CPC holds all suits of civil nature maintainable unless barred either by an express provision or by implication of law. The stance taken by the appellants in front of both the District Court and the High Court was that the suit was not maintainable and that any means of recourse could only be arrived by petitioning before the Company Law Board under Section 186 of the Companies Act 1956. The High Court dismissed the question of maintainability by examining two grounds: that of the appellants having a prima facie case and on the grounds of convenience. The High Court said that “the chequered history between the contesting parties and the chronology of the actions taken by the respondents” would decide the maintainability of the suit. The High Court also mentioned that the plaintiffs would have a strong prima facie case without actually establishing a causal link to this regard. The Supreme Court set aside the order of the High Court. During the passing of the judgement, the Apex Court criticized the reasoning of the High Court on grounds of arbitrariness. The Supreme Court held that grounds such as "the chequered history between the contesting parties and the chronology of the actions taken by the respondents" do not decide the maintainability of a case and hence we find the High Court’s conclusion to this regard to be highly unsatisfactory. The Supreme Court also said that the High Court’s contentions of prima facie were without reasoning and that the argument of convenience was ambiguous. In its final observation, the Supreme Court mentioned that the orders of status quo were signed by the Chamber judge during vacation, and that such a continuous practice without questioning the tenability of the orders themselves, should not be continued merely on grounds of following precedent. Hence, the Supreme Court set aside the impugned order. Conclusion: 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 validity 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. Appeals are, accordingly, allowed.  
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