ORDER
K.K. Balu, Vice Chairman
1. In the company petition filed under Section 111 of the Companies Act, 1956 (“the Act”) seeking directions against M/s. Swagath Marine Products Private Limited (“the Company”) to rectify the register of members of the Company by substituting the name of the petitioner in respect of 500 equity shares impugned in the company petition and restore the name of the petitioner as a director, the Company has filed the present application for stay of the proceedings before the Company Law Board, in view of the mandatory provisions of Section 10 of the Code of Civil Procedure, 1908, until disposal of the civil suit in C.S. No. 128/2003 on the file of the High Court of Judicature at Madras, more so when, the subject-matter in the company petition as well as the civil suit is materially the same.
2. Shri R. Shanmugam, learned Senior Counsel in support of the stay application submitted:
The Company and its Managing Director have approached the High Court of Madras as early as in February, 2003 seeking for a decree and judgment in C.S. No. 128/2003 against the petitioner herein and his two sons to declare that the petitioner, herein had ceased to have any connection with the Company as and from 2.12.1998, when he ceased to be a director and on 27.11.2000 when the impugned shares were sold on his request. The High Court by an order dated 21-3-2003 made in Application No. 1405/2003 and O. A. No. 192/2003 in C.S. No. 128/2003 restrained the petitioner, his sons, their men, agents, servants or persons claiming under them in any manner interfering with the carrying on of the business of the Company by its Managing Director.
• The matter in issue in the company petition is directly and substantially the same in the civil suit filed before the High Court of Judicature at Madras. The previously instituted civil suit is pending adjudication.
• In yet another civil suit filed by the petitioner’s sons in O.S. No. 81/2003 on the file of Additional Junior Civil Judge, Visakhapatnam, in relation to the affairs of the Company, the contentious issues viz, (a) resignation of the petitioner from the office of director; and (b) transfer of the shares of the petitioner are being agitated and adjudicated.
• The fabrication of letters perpetuating the fraudulent resignation of the petitioner from the office of director as well as the transfer of impugned shares by the petitioner are the subject-matter of the criminal proceedings, initiated by the petitioner in this behalf.
3. Shri G.K.R. Pandiyan, learned Counsel appearing for the respondent opposed the application on the following grounds:
• The application is not maintainable in law or on facts of the present case.
• The petitioner suppressed material facts without disclosing the relevant portion of the order dated 21.3.2003 of the High Court of Madras made in O.A. No. 192/2003 in C.S. No. 128/2003, which reads thus : “…the application in O.A. No. 192 of 2003 (for grant of interim injunction) is allowed. Consequently, Application in Application No. 1405 of 2003 (for vacating the order of interim injunction) is rejected. But this will not stand in the way of the respondents to get a clarification from this Court, if they are able to get any favourable order from the concerned authorities under the Companies Act regarding the resignation and sale of shares as alleged by the plaintiff.” Hence, the bar under Section 10 of the Civil Procedure Code is not attracted.
• The civil suit in O.S. No. 81 /2003 on the file of the Court of Additional Junior Civil Judge, Visakhapatnam, being an injunction suit filed by the petitioner’s sons in the affairs of the Company is in no way connected to the company petition.
• The Metropolitan Magistrate on the complaint filed by the petitioner, by an order dated 11.9.2003 found that the complaint was purely civil in nature and further not proceeded with the complaint. The criminal revision petition preferred by the petitioner before the High Court of Madras came to be dismissed and the special leave petition filed before the Supreme Court was also not entertained.
• The application is an abuse of process of the CLB proceeding and must be dismissed.
4. I have considered the arguments of learned Counsel. The issue that arises for my consideration is whether the proceedings of the company petition shall be stayed in view of the provisions of Section 10 of the CPC, until final disposal of the civil suit in C.S. No. 128/2003 on the file of the High Court of Judicature at Madras, in the facts and circumstances of the case. Before answering the contentious issue, the provisions of Section 10 of the CPC must be borne in view, which reads thus:
10. Stay of suit. – No Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in India having jurisdiction to grant the relief claimed, or in any Court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court.
Explanation – The tendency of a suit in a foreign Court does not preclude the Courts in India from trying a suit founded on the same cause of action.
The object of Section 10 is to avoid the conflicting decisions of two competent courts over the same matter and save the time of the court, where the subsequent proceedings are initiated in the same manner. By virtue of Section 10, a court shall not proceed with the trial of a suit in which the matter is directly and substantially the same as the one in issue in a previously instituted pending suit between the same parties or parties under whom they claim to litigate under same title. The following are essential conditions for application of the provisions of Section 10:
(a) There must be two pending suits on same matter.
(b) These suits must be between same parties or parties under whom they or any of them claim to litigate under same title.
(c) The matter in issue must be directly and substantially same in both the suits.
(d) The suits must be pending before competent Court or Courts.
In the light of the provisions of Section 10 of the CPC, the subject-matter involved both in the High Court, and CLB proceedings must be examined. The main grievances of the petitioner before the CLB are that the Managing Director of the Company (a) conspired and forged the petitioner’s signature and fabricated a resignation letter purported to have been written by the petitioner, whereby, he ceased to be director of the Company; and (b) forged and fabricated yet another letter by which the petitioner reportedly transferred all his shares in the Company. In this context, the petitioner is seeking for (i) rectification of the register of members of the Company; and (it) restoration of the petitioner’s name as a director of the Company. The CLB, while adjudicating the rights of the parties will have to consider and adjudicate the genuineness or otherwise of the letters purportedly given by the petitioner discussed supra The specific defense raised before the civil court at Visakhapatnam is that the petitioner herein had resigned from his directorship on 9.11.1998 and that Form No. 32, was filed with Registrar of Companies, Chennai on 4.12.1998. The petitioner sold away his shares on 6-11-2000 and the transfer was effected on 27.11.2000 in the name of the third respondent before the Civil Court. The prima facie findings in the interlocutory proceedings, as borne out by the order dated 21.3.2003 made in LA. No. 28/2003 in O.S. No. 81 / 2003 are that the petitioner is not the director since 2.12.1998 and that he has subsequent to 27.11.2000 no shares at all in the Company. The substantial issues involved in O.S. No. 81/2003 will have to be dealt with in the present company petition. The criminal proceedings having been finally disposed of on the premises that they were purely civil in nature, have no bearing on the CLB proceedings. The petitioner and the respondent in the CLB proceedings being effective parties are the first defendant and the first plaintiff respectively in the High Court proceedings. The issues involved in the High Court proceedings revolve around the disputed letters of the petitioner, purportedly transferring his 500 shares, being subject-matter before the CLB and resigning from the office of director of the Company. The High Court while adjudicating the disputes between the parties will investigate the same documents which are seriously in dispute before the CLB. Thus, the matters in issue in the company petition are directly and substantially are the issues in the C.S. No. 128/2003 on the file of the High Court of Judicature at Madras. There is substantial identity between the matter in disputes and parties in these two proceedings. While the prayer made before the High Court is for a declaration that the petitioner herein ceased to be a director with effect from 3.12.1998 and that he has sold all his shares as early as on 27.11.2000, the claim of the petitioner in the CLB proceedings is for substituting his name in the register of members in respect of the very same shares and restoring his directorship. The civil suit filed before the High Court is prior in point of time, which is pending. The High Court, where the civil suit has been instituted is empowered to grant the reliefs claimed in the subsequent proceedings before the CLB. The decision of the High Court will definitely affect the decision in the present company petition, which is later in point of lime. The disputed facts, cause of action and vital documents before the High Court and the CLB being common, any decision by the CLB on the very same issues which are before the High Court, may probably result in conflicting decisions which must, therefore, be desisted by the CLB. Section 10 would therefore, in my view, apply where the issues in both the proceedings directly and substantially are the same and that where the decision in the previous suit would definitely affect the decision in the later proceedings. The provisions of Section 10 are mandatory, in support of which beneficial reference is invited to a decision of the Apex Court in Manoharlal Chopra v. Rai Bahadur Ray Raja Seth Hiralal . It is far from doubt from my foregoing conclusions that the conditions of this section are duly met in the present case before me. The provisions of Section 10 are clear and definite. In view of this, the subsequent CLB proceedings must await the decision of the earlier pending suit as rightly pointed out by learned Senior Counsel representing the Company. Accordingly, the company petition is stayed till disposal of the civil suit in C.S. No. 128/2003 on the file of the High Court of Madras as prayed for in the company application. Ordered accordingly.