Legal Heirs Of Company's Director Cannot File Suit Over Company's Property: Jammu & Kashmir And Ladakh High Court

The Jammu & Kashmir and Ladakh High Court has reiterated that only a company can sue in respect of its property through shareholders or directors, and the legal heirs of the directors cannot file suit in their personal capacity.

The Court was considering a Petition under Section 115 of the Code of Civil Procedure seeking to set aside the order passed by the Court of Civil Subordinate Judge.

The Bench of Justice Javed Iqbal Wani observed, "Having regard to the aforesaid position obtaining in the matter, the only inescapable conclusion that could be drawn that the plaintiffs/respondents herein did not have any right to sue inasmuch as the plaint as well did not disclose the cause of action. The Trial Court having overlooked these fundamental aspects in the matter seemingly has grossly erred in the law, while passing the impugned order."

The Petitioner was represented by Advocate Shariq J. Reyaz, while the Respondent was represented by Advocate Fayaz Ahmad Mir.

Facts of the Case

The Respondents filed a Suit for permanent prohibitory and mandatory injunction against the Petitioner, including the State Industrial Development Corporation (SIDCO) and States Manager SIDCO, Srinagar initially, which Defendants later came to be deleted from the array of party-defendants. The premises of the suit was that they are lessees in possession of land measuring 18 kanals along with a factory established thereon situated at Industrial Estate Khanmoh, which land had been allotted by SIDCO in the year 1985 in favour of their father being Managing Director of M/s Hamid Oil Mills Private Limited, a Company incorporated under the Companies Act.

The father of the Plaintiffs died in the year 2009 whereafter, the plaintiffs initiated a process of reviving the said factory for having remained non-functional on account of the ailment of their father and that during the said time the defendant/petitioner herein without any right would encroach upon the said factory and besides committing theft of various articles including four motors lying in the said factory also caused loss and damage to the property of the factory including the trees standing thereon and while using his muscle power with the assistance of land mafia tried to usurp factory, thus necessitating the filing of the suit after the requests made by the Plaintiffs to the Defendant to refrain from his said illegal activities did not yield any fruitful result.

During the pendency of the Suit, supra the Defendant/ Petitioner besides filing the Written Statement to the Suit also maintained an Application in order 7 Rule 11 CPC for rejection of the plaint on the grounds that the Plaintiffs had no locus to maintain the Suit in that the Unit along with assets including the land whereupon the same is established was leased out by SIDCO to M/s Hamid Oil Mills Private Limited, a company incorporated under the Companies Act and that the Plaintiffs are not clothed with any right, in law, to maintain the suit or else a cause of action has accrued to the Plaintiffs in this regard and that the Suit per se does not disclose a cause of action as is understood in law to the Plaintiffs to maintain the suit.

Aggrieved of the order of rejection of the Application by the Trial Court, the Defendant/ Petitioner filed the instant revision petition on multiple grounds urged in the instant revision petition.

Reasoning By Court

The Court referred to the Supreme Court's ruling in S. S. DHANOA vs Municipal Corporation Delhi and ruled, ".....Since the land in question admittedly stands leased out to the M/s Hamid Oil Mills Private Limited pursuant to the lease deed dated 04.05.1985 and the factory/unit as well undisputedly stands in the name of said M/s Hamid Oil Mills Private Limited, the plaintiffs/respondents herein could not by any sense of imagination said to be possessed of a right to sue in the first place or else a cause of action in the matter inasmuch as the plaint disclosing a cause of action more so in view of the fact, it could have been either a shareholder or the Director of the M/s Hamid Oil Mills competent alone to maintain the suit against the defendant for and on behalf of the said M/s Hamid Oil Mills which admittedly being a company, as a distinct legal entity could have sued the defendant."

The Court concluded that the Plaintiffs/ Respondents did not have any right to sue in as much as the plaint also did not disclose the cause of action, and the Trial Court having overlooked these fundamental aspects in the matter, seemingly has grossly erred in the law, while passing the impugned order.

The Petition was accordingly disposed of.

Cause Title: Mir Mouzam vs. Farhana Dilshad & Ors.

Appearances:

Petitioner- Advocate Shariq J. Reyaz, Advocate Taha Khalil

Respondent- Advocate Fayaz Ahmad Mir

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