JUDGMENT N.K. Mehrotra, J.
1. This is a revision against the order dated 30.11.2002 passed by Civil Judge (Senior Division), Lucknow allowing the application 25A under Order VI, Rule 17 of the Code of Civil Procedure. The copy of the application for amendment of the plaint of the suit filed by the opposite party is Annexure-S-1 and the objection filed by the defendant-revisionist is Annexure-S-2. It appears that the plaintiff filed a suit for the following reliefs :
"(a) That a decree of permanent Injunction may be passed restraining the defendant from holding its extra-ordinary general meeting in pursuance of the notice dated 18.2.2002 or any other general meeting containing the same or similar resolutions ;
(b) That a decree of permanent injunction may be passed restraining the defendant from adopting or passing the resolutions, contained in the notice dated 18.2.2002 convening the said extraordinary general meeting or any other general meeting containing the same and similar resolutions ;
(c) That a decree of permanent injunction may be passed restraining the defendant from declaring/informing the results of the notice of postal ballot dated 1.2,2002 ;
(d) That a decree of permanent Injunction may be passed restraining the defendant from acquiring the equity shares of Jaypee Hotels Ltd. from the persons and/or corporate bodies in the promoter group Including the companies namely Jaiprakash Enterprises Limited and Jaypee Ventures Ltd. ;
(e) That cost of this suit be awarded to the plaintiff against the defendant and such other relief or reliefs as may be deemed to be fit and proper in the circumstances of the case may also be granted to the plaintiff against the defendant."
2. After the filing of the suit, the plaintiff sought an ad-interim Injunction and when the injunction was not granted and meeting was held, the plaintiff moved an application for amendment of the plaint with the allegations that the defendant has already acquired shares of M/s. J. P. Hotels Limited from the persons and the corporate body in the promoter group including the company, namely, J. P. Enterprises Limited, J. P. Ventures Limited and also allotted shares and the decision with respect to providing dividend were also taken in the Board's meeting held on 29.7.2002 and this dividend is also to be provided/distributed to the persons to whom the impugned shares have been transferred. It is also alleged that in view of the subsequent development, the reliefs earlier sought be deleted and substituted by the following reliefs :
"(a) It be declared by a declaratory decree that the purported extra-ordinary general meeting allegedly held on 21.3.2002 stated to be pursuant to the notice dated 18.2.2002 and the resolution/resolutions if any passed in the said meeting of the defendant, may kindly be declared to be Illegal, arbitrary, null and void, legally ineffective and non-existent.
(b) It be declared by declaratory decree that all resolutions passed as contained and pursuant to the notice of postal ballot dated 1.2.2002 by the defendant, may kindly be declared illegal, nonexistent, null and void.
(c) It be declared by a declaratory decree that the acquisition of equity shares of M/s. Jaypee Hotels Ltd. from the persons and/or corporate bodies in the Promoter Group including the companies namely Jai Prakash Enterprises Limited and Jaypee Ventures Limited and the impugned shares transferred/allotted to the persons, being henchmen of the defendant, should be declared as illegal, nonexistent, null and void.
(cc) By means of a decree for perpetual injunction, the defendant and its agents may kindly be restrained from getting or permitting the impugned shares, as mentioned in paras above, further alienated/transferred or to declare the profit or disburse the dividend upon the impugned shares, as aforesaid, to the transferees or allottees."
3. It is against this application for amendment, the defendant filed objection. The defendant-revisionist contended that the proposed amendment concerned the allotment of the shares and It Is the Security and Exchange Board of India (hereinafter referred to as "S.E.B.I.") which is proper forum to agitate the same. It also contended that the declaratory relief as proposed to be sought through the amendment cannot be granted by the Court inasmuch as the petitioner is not seeking any declaration with regard to his legal character as shareholder of the company but is seeking to undo the majority rule which majority rule being a creature of the Companies Act, 1956, no judicial order can be passed against the landlord of the provisions of the Companies Act. It was also contended that the court below lacks jurisdiction to interfere the conduct of the company meeting. The cause of action does not continue to arise to the plaintiff. In short, the main objection of the defendant-revisionist against the application for amendment of the plaint is that the civil court has no jurisdiction to enter into the cause of action to the plaintiff-opposite party.
4. The learned trial court allowed the amendment without deciding the question of jurisdiction. On the point of jurisdiction, the learned trial court recorded his finding as follows :
"In my opinion so far as the amendment of the present suit is concerned, it is matter of later on and it should be decided after Incorporation of the amendment prayed for .................."
5. In my opinion, the issue of jurisdiction should have been decided at the first instance. In Pandit Rudra Nath Mishir and Ors. v. Pandit Sheo Shanker Mishir and Ors., AIR 1993 Pat 53, after referring the view of the Allahabad High Court in Tirkha v. Ghasi Ram, AIR 1935 All 842, it was held that granting of amendment postulates an authority of the Court to enter the suit. But where there is Inherent lack of jurisdiction in the Court to entertain the suit itself, it cannot make any order for amendment of the plaint to bring the suit within its jurisdiction. In such a case, the Court would be exercising its jurisdiction which is not vested in it and, therefore, passing of any order would amount to usurping the jurisdiction not vested in It. Therefore, before the question of jurisdiction in allowing the amendment, the trial court must have decided the issue of jurisdiction.
6. In order to determine the jurisdiction, the trial court has to see the averments in the plaint first because the cause of action is determined from the facts, which are required to be proved by the plaintiff. Now the question is what is the cause of action. Lord Esher M. R. in Read v. Brown, (1889) 22 QBD 128, defined a cause of action as "every fact which it would be necessary for the plaintiff to prove if traversed in order to support its right to the judgment of the Court." In Kamala Chopra v. L.I.C. of India, AIR 1975 Del 15, it was held by the Delhi High Court that the cause of action comprises every fact which Is necessary to be proved. In Rajasthan High Court Advocates Association v. Union of India and Ors., AIR 2001 SC 416, the expression 'cause of action' has been interpreted as follows :
"The expression 'cause of action' has acquired a judicially settled meaning in the restricted sense. Cause of action means the circumstances forming the infraction of the right or the immediate occasion for the action. In the wider sense it means the necessary conditions for the maintenance of the suit, including not only the infraction of the right, but the infraction coupled with the right itself. Compendiously the expression means every fact, which It would be necessary for the plaintiff to prove, if traversed in order to support his right to the judgment of the Court. Every fact which is necessary to be proved, as distinguished from every piece of evidence which is necessary to prove each fact, comprises in 'cause of action.'"
7. So in order to determine the cause of action to the plaintiff in filing the suit, one has to see the bundle of facts averred in the plaint. For this purpose, I would like to refer the case of the plaintiff as set out in the plaint which are as follows :
"6. That it is submitted that the present share capital of the defendant company, as per its, balance sheet of the defendant company as on 31st March, 2002, is Rs. 158 crores against this the Promoters Directors of the Defendant Company have taken huge loans aggregating, Rs. 1,399 crores from Banks and Financial Institutions, as Secured Loan or through Non-convertible Debentures on a very high rate of Interest ranging upto 16.5% per annum that while the defendant company is paying heavy Interest, its funds have been diverted to purposes, where no Income is there since several years. That besides investments and loans, the Promoter-Directors of the Defendant Company have also exposed the defendant company to heavy risks by giving guarantees against loans taken by its subsidiaries, as otherwise the companies were not entitled to obtain any loan from Banks and financial institutions. The details of investments, loans and guarantees are given in the following paras.
7. That a summary of such Investments made and loans and guarantees given by the defendant company, as per their balance sheet as on 31st March, 2001 are given as follows :
Summary of Investment and Loans Rs. In Crores Investment is Subsidiaries 800 Loans to Subsidiaries 510 Guarantees given for loans by Subsidiaries 926 Loans to other Companies 32 Investment in other Companies 35 Further Investment Proposed 138 Total 2,441
8. That in addition to the above, the defendant company has also given huge advances to suppliers, which aggregate to another Rs. 427.67 crores (These advances constitute about 41.5% of the shareholders fund and 35.5% of the total sales-turnover of the company). In fact the beneficiary of such advances are the Proxy and Front Companies of the Promoters of the Defendant Company. This is a clear attempt to diversion of funds, which is detrimental to the interests of the shareholders of the defendant company.
9. That it is submitted that the defendant company has also invested, besides the subsidiary companies, in the shares of the other entities including unlisted companies like Jai Prakash Enterprises Ltd. :
These all included aggregate to Rs. 2,698.15 crores, as against the share capital of the defendant company of Rs. 158 crores. This is funded by huge borrowings as secured Loans from Banks and Financial institutions and by issue of Non-Convertible Debentures aggregating Rs. 1,399.10 crores.
10. That it is submitted that no return on these funds invested and/or given on loans is received by the defendant company and the shareholders are put to severe loss and consequently no financial return to the shareholders of the defendant company is given. Resultantly, the asset value of the shareholders of the defendant company is decreasing steeply and market price of Its shares has fallen down considerably from Rs. 90 in the past to about Rs. 33 per shares recently.
11. That it is submitted that Promoter-Directors of defendant company have put into stake the hard earned money of more than a lac of small, poor and gullible investors who had invested their hard earned saving money in the shares of the defendant company. By the above diversion of funds by the defendant company, the future of the company and its shareholders has been put at serious and grave risk, harzard and great peril.
12. That recently a news-item titled as "Something Rotten in J. P. Empire" was published in the Pioneer dated 9.3.2002, which also speaks of the same truth.
13. That it is submitted that the various projects claimed to be undertaken by the defendant company through its subsidiaries are in shambles and their status has not been correctly disclosed by the defendant company. However, the facts about the subsidiary companies are summarized hereunder.
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14. That it is submitted that in furtherance of the fraudulent, obnoxious and mischievous acts and conducts of the Promoter-Directors of the Defendant Company, the defendant company has issued a "Notice with Postal Ballot" to its shareholders seeking ex-post facto approval/ratification for the unauthorized guarantees of Rs. 167 crores and payment guarantees of 2.62 Milton U.S. Dollar given by the Board of Directors of the defendant Company against Loans taken by M/s. Jaiprakash Hydro Power Limited. In addition, Security is also being provided by the defendant company by pledge of 19,59,19,900 equity shares of Jaypee Hydro Power Limited which was owned and held by the defendant company.
15. That in addition to the above, a notice dated 18.2.2002 has been Issued by the defendant company for convening an extraordinary general meeting of the shareholders of the defendant company on 21st March, 2002, in which the defendant company has proposed to pass the following resolutions in respect of the following matters :
(a) Resolution No. 1 for making investment of Rs.
10.00 crores in J. P.
Karcham Hydro Corporations Ltd.
(b) Resolution No. 2 for making an investment of Rs. 76.50 crores in the shares of J.P.S.D.C. Venture Ltd.
(c) Resolution No. 3 is for making an investment of Rs. 49.95 crores in Jaypee Hotels Ltd.
(d) Resolution No. 4 is for allotment of 20,99,740 equity shares of Rs. 10 each of the defendant company to Jai Prakash Enterprises Limited and 1,18,34,560 equity shares of Rs. 10 each of the company to Jaypee Ventures Limited at a price of Rs. 35.85 per equity shares against purchase of 3,26,50,000 fully paid equity shares of Rs. 10 each of Jaypee Hotels Limited.
16. That it is submitted, as already stated earlier, the Promoter-Directors of the defendant company has already drained and siphoned out huge amount of funds, as already explained in the earlier, paragraphs, on the purported ground that it is expanding and undertaking various grand projects, but it is apparent that none of the projects have been properly set up and cost of projects have been doubled and their completion is still out of sight. The plaintiff submits if these acts and deeds of the Promoter-Directors of the defendant company are allowed to be continued and such investments, loans and guarantees are allowed to be given by the defendant company, the defendant company would meet with the same fate as has happened with Enron of U.S.A. i.e., "A bankrupt and insolvent" The exposure of the acts and deeds of the company shall at that point of time shall ruin out only the shareholders of the company but also cause immense damage to the Financial Institutions and banks.
17. That it is submitted that if the abovementioned Resolution Nos. 3 and 4 are passed, the Promoter-Directors of the defendant company are perpetrating a fraud on the shareholders of the defendant company for their own ulterior benefits.
18. That it is submitted that for carrying put the above dubious exchange/swap of shares of the defendant company with the shares of Jaypee Hotels Ltd. from the two companies owned by the Promoters, the Rules and Regulations have been grossly violated and valuation reports have been got prepared, without substance and without applying the established norms by valuation of shares. It is submitted that the defects and fraudulent aspects of valuation are summarized as under.
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25. That it is submitted that a special appeal has been filed by H.B. Stockholdings Ltd. as associate company of the plaintiff before the Division Bench of Allahabad High Court challenging the scheme of arrangement of the defendant company which is not the subject matter of this suit. The said special appeal has been admitted.
26. That it is submitted that from the above, it is apparently clear that the Promoter-Directors of the defendant company are deliberately with mala fide intentions and by misuse of their fiduciary capacity as Director of the defendant company and ignoring all the norms and provisions of law, are perpetrating a fraud on the shareholders of the company. This is a tyranny of the Promoter-Directors of the defendant company, who are majority shareholders on the small and gullible shareholders like the plaintiff."
8. The learned trial court must have decided the question of jurisdiction on the aforesaid bundle of facts stated by the plaintiff in the light of the provisions of Sections 10, 397 and 398 of the Companies Act. Section 10 of the Companies Act is as follows :
"Section 10. Jurisdiction of Courts.--(1) The Court having jurisdiction under this Act shall be :
(a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of Sub-section (2) ; and
(b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the Jurisdiction conferred, in respect of companies having their registered offices in the district.
(2) The Central Government may by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the Jurisdiction conferred :
(a) in respect of companies generally, by Sections 237, 391, 394, 395 and 397 to 407, both inclusive
(b) in respect of companies with paid-up share capital of not less than one lakh of rupees by Part VII (Sections 425 to 560) and the other provisions of this Act relating to the winding up of companies.
(3) For the purposes of jurisdiction to wind-up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up."
9. In exercise of the power conferred by Sub-section (2) of Section 10 of the Companies Act, 1956, the Central Government has conferred the jurisdiction on the District Court by sections hereafter specified in G.S.R. 663 dated 29.5.1959 :
"Section 89.--Termination of disproportionately excessive voting rights in existing companies.
Section 113.--Limitation of time for issue of certificate.
Section 118.--Right to obtain copies of and inspect trust deed.
Section 144,--Right to inspect copies of instrument creating charges and company's register of charges.
Section 163.--Place of keeping, and inspection of registers and returns.
Section 196.--Inspection of minute books of general meetings.
Section 219.--Right of member to copies of balance-sheet and auditor's report.
Section 234.--Power of Registrar to call for information or explanation.
Section 304.--Inspection of the register of Directors.
10. The aforesaid provisions go to show that even the Central Government could not confer the jurisdiction to the District Court with regard to the provisions in Sections 397 to 407 of the Companies Act. Section 397 of the Companies Act is as follows :
"Section 397.--Application to (Company Law Board) for relief in cases of oppression.--(1) Any members of a company who complain that the affairs of the company (are being conducted in a manner prejudicial to public interest or) in a manner oppressive to any member or members (including any one or more of themselves) may apply to the (Company Law Board) for an order under this section, provided such members have a right so to apply in virtue of Section 399.
(2) If, on any application under Sub-section (1), the (Company Law Board) is of opinion :
(a) that the company's affairs (are being conducted in a manner prejudicial to public interest or) in a manner oppressive to any member or members ; and
(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up ; the (Company Law Board) may, with a view to bringing to an end the matters complained of, make shall order as it thinks fit."
11. Section 398 of the Companies Act is as follows :
"Section 398. Application to (Company Law Board)-for relief in cases of mismanagement.--(1) Any members of company who complain :
(a) that the affairs of the company (are being conducted in a manner prejudicial to public interest or) in a manner prejudicial to the interests of the company ; or
(b) that a material change (not being a change brought about by, or in the interests of, any creditors including debenture-holders, or any class of shareholders, of the company) has taken place in the management or control of the company whether by an alteration in its Board of Directors, (*********) (or manager) (********) or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company (will be conducted in a manner prejudicial to public interest or) in a manner prejudicial to the interests of the company, may apply to the (Company Law Board) for an order under this section provided such members have a right so to apply in virtue of Section 399.
(2) If, on any application under Sub-section (1), the (Company Law Board) is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the (Company Law Board) may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit."
12. Earlier, if any member of the company complained with the affairs of the company which were being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members, he was empowered to apply to the Court but by the Companies Amendment Act, 1988, the provisions of Sections 396 to 405 have been amended and in place of word "Court" word "Company Law Board" have been substituted. The result of this amendment is that now if the affairs of the company are being conducted in a manner prejudicial to the public interest or in the manner prejudicial to the interest of any member of the company as the case may be, it is the Company Law Board which has the jurisdiction to entertain such complaints of the members.
13. In its' objection, the revisionist has also contended that M/s. H. B. Stock Holding Limited of which the plaintiff-opposite party is the director had also filed another Civil Suit No. 1722 of 2001 against the defendant company for the similar relief in the Delhi High Court and the Delhi High Court in its order dated 20.3.2002 has held that the prayer made by the plaintiff could not be allowed as she sought to restrain the defendant/revisionist from allotting its' shares to any body corporate or from investing in or pleading, selling, or otherwise disposing of his shares to any body corporate in favour of any other person/body corporate and also from providing any loans to any other body corporate. The plea taken by the defendant-revisionist is that the suit is pending in the Delhi High Court and the present suit is also not maintainable before the Court at Lucknow because of the provisions of Section 10 of the Code of Civil Procedure. This contention has also been left undecided before passing the impugned order.
14. The learned counsel for the opposite party has placed reliance on Prem Buxi and Ors. v. Dharam Deo, 2002 (1) AWC 484 (SC) : 2002 (2) SBR 36, Devi Das v. State of U. P.. AIR 2003 All 14, Sampat Kumar v. Ayyakannu and Ors., 2003 (1) AWC 18 (SC) : 2002 (20) LCD, 1186 and B. K. N. Pillai v. P. Pillai, (2000) 1 SCC 712, In support of his contention that the proposed amendment can be allowed and the revision against that order is not maintainable in view of the proviso of the Code of Civil Procedure Amendment Act, 1999, but these legal propositions can be considered only when the trial court finds that the bundle of facts averred in the plaint constitute a cause of action which lies within the jurisdiction of the civil court. Since the trial court has left the question of jurisdiction open and decided the application for amendment without looking to the question of jurisdiction raised by the defendant, in my opinion, the action of the trial court in allowing the amendment without deciding the question of jurisdiction would amount to usurping a jurisdiction not vested in it. Therefore, the revision is to be allowed. Since the cause of action in the plaint contain the complaint of the opposite party, a member of the revisionist-company that the affairs of the company are being conducted in a manner prejudicial to the public Interest and in the manner oppressive to the opposite party (plaintiff) and the other members, the civil court has no jurisdiction to entertain such complaint under Section 397 of the Companies Act and the impugned order amounts to usurping of the jurisdiction.
15. In result, the revision is allowed. The impugned order dated 30.11.2002 passed by the Civil Judge (Senior Division), Lucknow in Suit No. 129 of 2002. Lalit Bhasin v. Jaiprakash Industries Limited is set aside with the direction to the trial court to return the plaint for want of jurisdiction.