The Calcutta High Court has clarified that having chosen performance (money) over cancellation in the first suit, the plaintiffs could not seek the opposite relief on the same cause of action. Essentially, the Court ruled that having sought payment under the agreements despite pleading the same alleged fraud, the plaintiffs had elected enforcement over cancellation and could not later pursue the opposite relief without obtaining leave under Order II Rule 2(3) of the Code of Civil Procedure, 1908.
The Court said that impleading beneficiary companies didn’t help, as adding the alleged transferees did not change the cause of action or defeat the bar. Further, the purchasers who held no shares when the agreements were signed fell outside Section 2(1)(c)(xii) of the Commercial Courts Act. The Court found that the agreements directly contemplated the company’s Salt Lake property. Since the land lay outside the High Court’s ordinary original civil jurisdiction, Clause 12 of the Letters Patent barred the suit.
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Briefly, Funidea Projects Private Limited challenged a Single Judge’s order refusing to dismiss or reject a suit filed by Dr. Dilip Kumar Ghosh, and transferring that suit to the Calcutta High Court’s Commercial Division. The suit sought cancellation of agreements dated May 16, 2012, and April 10, 2013, concerning the shares of Venkateswar Medicare Private Limited and its leasehold land and building at Salt Lake.
The plaintiffs had earlier filed a money suit seeking payment under the same agreements. The appellants argued that the cancellation suit was barred by Order II Rule 2 of the Code of Civil Procedure, 1908, was effectively a ‘suit for land’ outside the Court’s territorial jurisdiction and did not involve a commercial dispute under the provision concerning shareholders’ agreements. The earlier money suit was described in the present plaint as a last attempt to secure the agreed consideration.
The Division Bench comprising Justice Sabyasachi Bhattacharyya and Justice Sandip Kumar De distinguished a shareholders’ agreement from a share purchase agreement. It held that the appellants were outsiders with no shares in the company when the agreements were executed, and therefore, the agreements were not shareholders’ agreements within Section 2(1)(c)(xii) of the Commercial Courts Act, 2015. The transfer to the Commercial Division was consequently unsustainable. The Bench also held that such a transfer order was appealable under Clause 15 of the Letters Patent because bringing a suit under the commercial courts regime directly affects the parties’ procedural rights, particularly the defendants’ scope of defence.
On territorial jurisdiction, the Court accepted that share ownership does not, by itself, give a shareholder title to company assets. However, it found that these particular agreements went beyond an ordinary share transfer, as the plaintiffs signed on behalf of the company as its directors, and the terms expressly concerned the company’s land, building, possession and related rights. Cancellation would therefore directly affect rights in immovable property, making the proceeding a ‘suit for land’ under Clause 12 of the Letters Patent. Since the property was entirely at Salt Lake, outside the Court’s ordinary original civil jurisdiction, the Court lacked jurisdiction to receive, try and determine the suit.
On Order II Rule 2(3), the Bench found that the earlier money suit and the cancellation suit rested on the same allegations of deception and fraudulent share transfers. No leave had been obtained before filing the cancellation suit. The plaintiffs had elected to seek performance of the agreements through monetary relief, although cancellation was already available on the facts pleaded. The Court held that the bar could be identified from the plaint and the documents referred to in it without recording further evidence. It further held that adding the alleged beneficiary companies as defendants did not alter the underlying cause of action or defeat the bar.
