Madras High Court Says the Civil Court has no jurisdiction over a company case as per Sections 242(2)(i) and Section 430 of the Companies Act, 2013.
TITLE: K. Prabhu Vs. G. Reghukumaran.
Decided On: September 11, 2023.
C.R.P.(MD)No.535 of 2014 and M.P.(MD)Nos.1 and 2 of 2014.
CORAM: Hon’ble Mr. Justice R. Vijayakumar.
Facts:
The present Civil Revision Petition has been filed to strike off the plaint on the ground that the Civil Court has no jurisdiction to entertain a suit for recovery of money from a Managing Director on the allegation of misappropriation of funds. According to the O.S.No.32 of 2014 the plaintiff is a Public Limited Company incorporated under the provisions of the Companies Act, 2013. As per the allegations in the plaint, the first defendant, namely, K.Prabhu, had officiated as a Managing Director of the plaintiff Company between 20.09.2010 and 13.09.2011. The plaintiff has contended that the first defendant, while officiating as the Managing Director of the Company, has misappropriated the funds of the Company and helped the third defendant to get rid of the financial constraints under the guise of entertaining a fake transaction of running a mineral water plant.
Legal Analysis and Decision:
The plaintiff has contended that the Managing Director had caused a huge financial loss to the plaintiff Company, while he was dealing with the funds generated from the general public. The plaintiff Company had relied upon the auditor’s report relating to the misappropriation alleged to have been done by the first defendant. According to the plaintiff, the first defendant was actively assisted by other defendants in the misappropriation. A careful perusal of the plaint allegations would reveal that a sum of Rs.89,02,461/- is sought to be recovered only on the basis that the first defendant, while officiating as the Managing Director of the plaintiff Company, has misappropriated the Company’s funds, for which, the other defendants have assisted.
Section 242(2)(i) of the Companies Act, 2013 Company Law Tribunal has got jurisdiction to recover any undue gains made by any Managing Director during the period of appointment.
Section 430 of Companies Act, 2013 to impress upon the Court that the Civil Court shall not have any jurisdiction to entertain any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act.
After a combined reading of Sections 242(2)(i) and Section 430 of the Companies Act, 2013 it clearly reveals that the present suit for recovery of money is solely based upon the allegations that the first defendant has misappropriated the funds of the plaintiff/Public Limited Company, while he was officiating as the Managing Director. Therefore, the Civil Court has no jurisdiction to entertain the said suit. In view of the said deliberations, the plaint in O.S.No.32 of 2014 on the file of the VI Additional District Court, Madurai, is hereby struck off. However, the plaintiff/Public Limited Company is at liberty to approach the appropriate forum for appropriate relief, if they are so advised.
Conclusion:
The court concludes that after looking carefully into Sections 242(2)(i) and Section 430 of the Companies Act, 2013 says that the suit is solely related to recovery of money and the Civil Court has no jurisdiction over the issue and the company may approach the appropriate forum.
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JUDGEMENT REVIEWED BY JANGAM SHASHIDHAR.