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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

242

CR-1531-2017(O&M)

Date of decision: 06.11.2025

Rajen Chandrakant

...Petitioner(s)

Vs.

Divya Investment Consultants & Another

...Respondent(s)

***

CORAM: HON’BLE MS. JUSTICE NIDHI GUPTA

Present:- Mr. Sanjay Jain, Advocate

for the petitioner.

Mr. Ashok Gupta, Advocate

for the respondents.

***

NIDHI GUPTA, J.

Present Revision Petition has been filed by the

petitioner/defendant No.1 under Article 227 of the Constitution of India,

against the order dated 18.02.2017 (Annexure P1) passed by the Civil Judge

(Senior Division), Ambala whereby application filed by the petitioner under

Order 7 Rule 11 CPC for rejection of the plaint, has been dismissed.

2. It is inter alia submitted by learned counsel for the petitioner

that the impugned order is prima facie unsustainable because as per the

plaint/suit (Annexure P2), the total controversy is with regard to the sale

and purchase of equity shares and money transaction between the

investor/respondent-plaintiff and the Stock Broker/petitioner-defendant. It

is submitted that as such, in terms of provisions of the Securities and

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Exchange Board of India Act, 1992 (hereinafter referred to as “the SEBI Act”)

jurisdiction of the Civil Suit is barred. Learned counsel argues that as per

Section 11 of the said Act, the Board under the Act has the same powers as

are vested in a Civil Court under CPC. The Board under Section 15-I of the

Act, has powers to adjudicate the present controversy; and to deal with

regard to penalty for default in case of Stockbrokers (Section 15-F of the

Act). Learned counsel takes this Court extensively through the provisions of

the Act to further substantiate his said arguments. It is contended that

accordingly, the learned trial Court has wrongly interpreted the provisions

of the Act resulting into passing of the illegal impugned order.

3. It is further argued that Order 7 Rule 11 CPC casts a duty on

the Court to perform its obligation in rejecting the plaint when the same is

hit by any of the infirmities provided in the four clauses of Rule 11, even

without intervention of the defendant. Learned counsel submits that this is

especially so in the present case as suit of the plaintiff was not maintainable;

as respondent has filed suit only for mandatory injunction and not for

declaration or recovery.

4. Furthermore, in passing the impugned order, the learned trial

court has also ignored the fact that previously also, an application filed by

the petitioner under Order 7 Rule 11 CPC had been dismissed by the

learned trial Court; which had been challenged by the petitioner before this

Court vide Civil Revision No.2154 of 2007; which had been allowed by this

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Court vide order dated 13.11.2014 and the learned trial Court was directed

to decide the issue afresh. It is submitted that despite that again an order

has been passed by the learned trial Court rejecting the application of the

petitioner. Learned counsel accordingly prays that Revision Petition be

allowed and impugned order dated 18.02.2017 (Annexure P1) be set aside.

5. On the other hand, learned counsel for the

plaintiff/respondent No.1 submits that the prayer sought by the plaintiff

can only be granted through Civil Suit. Learned counsel accordingly prays

for dismissal of the present Revision Petition.

6. No other argument is made on behalf of the parties.

7. I have heard learned counsel and perused the case file in detail.

8. Brief facts of the case are that the petitioner is a registered

Stockbroker. It is the case of the plaintiff/respondent No.1 that he had

invested through the petitioner; however, the petitioner had shortchanged

the plaintiff. Accordingly, plaintiff filed the instant Civil Suit No.148 dated

11.03.1995 (Annexure P2) seeking a decree of mandatory injunction against

the petitioner; inter alia praying that the petitioner be directed to: –

“(I) The defendant No.1 may please be directed to make deliver

of the following shares and debentures: -

(a) 300 shares of the Apples Industries, vide the bill No. B-01-247

dated 17.4.1992.

(b) 200 shares of Usha Baltron, Contract Note No. C/13/50/037

dated 14.10.91.

(c) 100 share of Gobind Rubber.

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(d) 100 shares of Indian Sewing, Bill No. B- 01-0218 dated

16.4.1991.

(e) 20 Deventure R.P. L. NO. B-05 of 7.7.92

(f) 24 shares of the Reliance Industries

Ltd.

(g) Alongwith Right, dividends, bonus, preferential and bonous

of various group of companies from time to time.

Amount of Rupees 50,000/- which has been wrongly debited in

the account as the Plaintiff may please be declared as illegal, null

and void.”

9. A reading of the entire prayer clause in the Civil Suit shows that

similar prayers as above, have been made therein.

10. The SEBI Act is: “An Act to provide for the establishment of a

Board to protect the interests of investors in securities and to promote the

development of, and to regulate, the securities market and for matters

connected therewith or incidental thereto.”

11. A perusal of the Act shows that the Board has been vested with

comprehensive powers to protect the interest of the investors. Under Section

11-C of the Act, Board has the power to investigate matters and transactions

in security which are being dealt with in a manner detrimental to the

investors, or the Securities Market, and such like. Relevant Sections are as

follows: –

“11. Functions of Board. — (1) Subject to the provisions of this

Act, it shall be the duty of the Board to protect the interest of

investors in securities and to promote the development of, and

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to regulate the securities market, by such measures as it thinks

fit.

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(2)(b) registering and regulating the working of stock brokers,

sub-brokers, share transfer agents, bankers to an issue,

trustees of trust deeds, registrars to an issue, merchant

bankers, underwriters, portfolio managers, investment

advisers and such other intermediaries who may be associated

with securities markets in any manner;

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(2)(i) calling for information from, undertaking inspection,

conducting inquiries and audits of the [stock exchanges,

mutual funds, other persons associated with the securities

market] intermediaries and self-regulatory organisations in

the securities market;

[(ia) calling for information and record from any bank or any

other authority or board or corporation established or

constituted by or under any Central, State or Provincial Act in

respect of any transaction in securities which is under

investigation or inquiry by the Board;]

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[(3) Notwithstanding anything contained in any other law for

the time being in force while exercising the powers under

[clause (i) or clause (ia) of sub-section (2) or sub-section (2-A)],

the Board shall have the same powers as are vested in a civil

Court under the Code of Civil Procedure, 1908 while trying a

suit, in respect of the following matters, namely:—

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(i) the discovery and production of books of account and other

documents, at such place and such time as may be specified by

the Board;

(ii) summoning and enforcing the attendance of persons and

examining them on oath;

(iii) inspection of any books, registers and other documents of

any person referred to in section 12, at any place;]

[(iv) inspection of any book, or register, or other document or

record of the company referred to in sub-section (2-A);

(v) issuing commissions for the examination of witnesses or

documents.]” (Emphasis added)

12. As per Section 11(3) the Board is vested with the same powers

as a Civil Court under the CPC.

13. Further Sections of the Act which are relevant to the present

case are reproduced hereinbelow:-

“[15-C. Penalty for failure to redress investors' grievances.—

If any listed company or any person who is registered as an

intermediary, after having been called upon by the Board in

writing, to redress the grievances of investors, fails to redress

such grievances within the time specified by the Board, such

company or intermediary shall be liable to a penalty of one

lakh rupees for each day during which such tailure continues or

one crore rupees, whichever is less.]

Objects and Reasons-Clause 11.—This clause seeks to

substitute section 15-C by a new section in the Securities and

Exchange Board of India Act, 1992 providing for imposition of

penalty for failure to redress investors' grievances.

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Under the existing provisions, contained in the said section if

any person, who is registered as an intermediary, after having

been called upon by the Securities and Exchange Board in

writing to redress the grievances of investors, fails to redress

such grievances, he shall be liable to a penalty not exceeding

ten thousand rupees for each such failure.

It is proposed to substitute section 15-C to provide that if any

listed company or any person who is registered as an

intermediary, after having been called upon by the Board in

writing, to redress the grievances of investors, fails to redress

such grievances within the time specified by the Board, such

company or intermediary shall be liable to a penalty of one

lakh rupees for each day during which such failure continues or

one crore rupees, whichever is less.

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15-F. Penalty for default in case of stock brokers.—If any

person, who is registered as a stock broker under this Act,—

(a) fails to issue contract notes in the form and manner

specified by the stock exchange of which such broker is a

member, he shall be liable to a penalty not exceeding five times

the amount for which the contract note was required to be

issued by that broker;

b) fails to deliver any security or fails to make payment of the

amount due to the investor in the manner within the period

specified in the regulations, he shall be liable to a penalty of

one lakh rupees for each day during which such failure

continues or one crore rupees, whichever is less;]

c) charges an amount of brokerage which is in excess of the

brokerage specified in the regulations, he shall be liable to [a

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penalty of one lakh rupees] or five times the amount of

brokerage charged in excess of the specified brokerage,

whichever is higher.

Objects and Reasons-Clause 14.—This clause seeks to amend

section 15-F of the Securities and Exchange Board of India Act,

1992 providing for imposition of penalty for default in case of

stock brokers.

(a) Under the existing provisions, contained in clause (b) of the

said section if any person, who is registered as a stock broker

under the Act, fails to deliver any security or fails to make

payment of the amount due to the investor in the manner

within the period specified in the regulations, he shall be liable

to a penalty not exceeding five thousand rupees for each day

during which such failure continues.

It is proposed to enhance the penalty to one lakh rupees for

each day during which such failure continues or one crore

rupees, whichever is less.

(b) Under the existing provisions, contained in clause (c) of the

said section if any person, who is registered as a stock broker

under the Act, charges an amount of brokerage Which is in

excess of the brokerage specified in the regulations, he shall be

liable to a penalty not exceeding five thousand rupees or five

times the amount of brokerage charged in excess of the

specified brokerage, whichever is higher.

It is proposed to enhance the amount of penalty from five

thousand rupees to one lakh rupees. After the proposed

amendment he shall be liable to a penalty of one lakh rupees

or five times the amount of brokerage charged in excess of the

specified brokerage, whichever is higher.

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15-I. Power to adjudicate.—(1) For the purpose of adjudging

under sections 15-A, 15-B, 15-C, 15-D, 15-E, 15-F, 15-G [, 15-H,

15-HA and 15-HB], the Board shall appoint any officer not

below the rank of a Division Chief to be an adjudicating officer

for holding an inquiry in the prescribed manner after giving any

person concerned a reasonable opportunity of being heard for

the purpose of imposing any penalty.

(2) While holding an inquiry the adjudicating officer shall have

power to summon and enforce the attendance of any person

acquainted with the facts and circumstances of the case to give

evidence or to produce any document which in the opinion of

the adjudicating officer, may be useful for or relevant to the

subject matter of the inquiry and if, on such inquiry, he is

satisfied that the person has failed to comply with the

provisions of any of the sections specified in sub-section (1), he

may impose such penalty as he thinks fit in accordance with

the provisions of any of those sections.

Objects and Reasons-Clause 18.—This clause seeks to amend

section 15-I of the Securities and Exchange Board of India Act,

1992 relating to power to adjudicate. Clause 17 proposes to

insert new sections 15-HA and 15-HB in the Act. It is proposed

to insert references of sections 15-HA and 15-HB in section 15-

I. The proposed amendment is of consequential nature.

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15-Y. Civil Court not to have jurisdiction.—No civil Court shall

have jurisdiction to entertain any suit or proceeding in respect

of any matter which an adjudicating officer appointed under

this Act or a Securities Appellate Tribunal constituted under

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this Act is empowered by or under this Act to determine and no

injunction shall be granted by any Court or other authority in

respect of any action taken or to be taken in pursuance of any

power conferred by or under this Act.”

14. A bare reading of the above provisions shows that under the

Act comprehensive mechanisms have been provided for safeguarding the

interests of the investors. The Act is a complete Code in itself, that deals

with each and every aspect in respect of investing in securities. It will not

be far-fetched to state that the Board, established under the SEBI Act, is the

watchdog of the Stockbrokers. In the instant case, as the plaintiff is seeking

release of shares alleged to have been wrongfully withheld by the petitioner.

As such, case of the plaintiff would fall under Section 15-F(b) which provides

for imposition of penalty in case of default by the stockbroker/petitioner.

As per the Act, the Board would be required to issue notice to the petitioner

under Section 15-C of the Act. Under Section 15-I of the Act, the Board has

the power to appoint an adjudicating officer who would adjudge upon

issues/disputes falling under the mentioned sections including Sections 15

F and 15 C. Thus, the Board is competent to adjudicate the matter in

controversy as per Sections 15-C, 15-F, 15-I of the SEBI Act, 1992. It is trite

law that in face of the prevalence and availability of the Special Act, the

plaintiff could not have taken resort to remedy under the General Act.

Reference judgment of the Hon’ble Supreme Court in Om Aggarwal v.

Haryana Financial Corporation (SC) : Law Finder Doc ID # 652739, wherein

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it is held that provisions of the Special Act will prevail over the General

Provisions. Thus, suit of the plaintiff was not maintainable.

15. Furthermore, suit of the plaintiff was not maintainable even as

per the above-reproduced Section 15-Y of the Act, under which jurisdiction

of the Civil Court is specifically barred. Reliance may be placed upon

judgment of the Bombay High Court in Kesha Appliances P. Ltd. v. Royal

Holdings Services Ltd. (Bombay) : Law Finder Doc ID # 229676 wherein it

is held as under:-

“A. Companies Act, 1956 Sections 81 and 111A Civil Procedure

Code, 1908 Sections 9, 9A, Order 39 Rules 1 and 2 - Security

Exchange Board of India (Substantial Acquisition of Shares and

Takeovers) Regulations, 1997, Regulations 12, 10 and 3(1) -

Security Exchange Board of India Act, 1992, Sections 15Y and

20A - Jurisdiction of Civil Court in the matters altering to

transfer of shares and securities on the grounds that in view of

sections 15Y and 20A of SEBI Act, 1992, Civil Court has no

jurisdiction to entertain the dispute - Held that, unless

jurisdiction of Civil Courts is expressly barred by a statute, the

civil courts will have the jurisdiction by virtue of section 9 of

Civil Procedure Code - A decision is an authority for what it

actually decides and what can be read into as assumes

intention of Judges - The decisions reported in 2002 (Bom.) Vol.

109 and Division Bench decision in 2002(1) Bom.C.R. (O.S.) 419

cannot be said to have held that Section 15Y and 20A of SEBI

Act create a bar for the Civil Courts to entertain this suits

because this issue was not pressed in said cases - Plea that

Section 111A of the Companies Act is a bar of jurisdiction

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cannot be accepted - Both above decisions have held that

section 111A is a summary remedy and if complicated

questions of facts or fraud are arise, civil court will have

jurisdiction under section 9 of Civil Procedure Code - However,

the subject-matter not cover by those contingencies -

Therefore, suits dismissed for want of Civil Court jurisdiction.

B. Companies Act, 1956 Section 111A Security Exchange Board

of India Act, 1992, Sections 15Y and 20A - Civil Procedure Code,

1908, Order 39 Rules 1 and 2 - Grant of interim relief in the

matter relating to transfer of shares and rectification of

shareholders registers etc. - Sections 15Y and 20A of SEBI Act

bar the Civil Court jurisdiction - Civil Court cannot grant interim

reliefs - Held that, even if Civil Court has the jurisdiction, it is

not obligatory that it must exercise discretionary power to

grant rectification of registers relate to take over regulations -

Once the said provisions are invoked the bar under sections 15Y

and 20A of SEBI Act which gives these powers to SEBI

authorities comes into play - Therefore, the suits are liable to

be dismissed as the Civil Court has no jurisdiction to decide the

subject-matter - Applications for interim relief as well as the

suits also dismissed.

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26. In the light of the aforesaid view I have taken it is now

necessary for me to consider as to whether the provisions of

Section 15Y and 20A on the facts of the case bars the

jurisdiction of this court to entertain the present suit which has

been filed before me. Before I do so it is necessary to consider

the settled position of law as to the interpretation of section 9

of the Civil Procedure Code. The law as to the jurisdiction of this

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court and its exclusion thereof has been the subject matter of

diverse judgments of the apex court commencing from the

judgment of the 7 judges bench in the case of Kamala Mills Ltd

v. State of Bombay, reported in AIR 1965 Supreme Court page

1942 the apex court has held as under:

"The normal rule prescribed by section 9 of the Code of

Civil Procedure is that the courts shall (subject to the

provisions contained in the Code) have jurisdiction to try

all suits of a civil nature excepting suits of which their

cognizances is either expressly or impliedly barred. A

claim by the dealers for the refund of sales tax which is

alleged to have been paid by them through mistake is a

claim of a civil nature. It should normally be triable by

the ordinary courts of competent jurisdiction as

provided by Section 9. But the jurisdiction of the civil

courts to try suits of a civil nature can be excluded either

expressly or impliedly. This is laid down in this section

itself. The question about the exclusion of the jurisdiction

of civil courts either expressly or by necessary

implication must be considered, in every case, in the

light of the words used in the statutory provision on

which the plea is rested the scheme of the relevant

provisions, their object and their purpose.

Whenever a plea is raised before a civil court that its

jurisdiction is excluded either expressly or by necessary

implication to entertain claims of a civil nature, the court

naturally afforded by an alternative provision prescribed

by a special statute is sufficient or adequate. Where the

exclusion of the civil courts jurisdiction is expressly

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provided for the consideration as to the scheme of the

statute in question and the adequacy or the sufficiency

of remedies provided for by it may be relevant, it cannot,

however be decisive. But when exclusion is pleaded as a

matter of necessary implication, such considerations

would be very important, and in conceivable

circumstances, might even become decisive. If a statute

creates a special right or a liability and provides for the

determination of the right and liability to be dealt with

the tribunals specially constituted in that behalf and it

further lays down that all questions about the said right

and liability shall be determined by the tribunals so

constituted, it is pertinent to enquire whether remedies

normally associated with actions in civil courts are

prescribed."”

16. Even further, the respondent/plaintiff had filed a Civil Suit only

for mandatory injunction and not for recovery or declaration. The suit for

mandatory injunction filed by the plaintiff was even not maintainable in

view of the provisions of the Specific Relief Act. This Court in Spectrum Life

Medical Device Private Limited v. EMC Super Speciality Hospital Private

Limited, (Punjab And Haryana) : Law Finder Doc ID # 1489248; has held

that when efficacious remedy in the form of suit for recovery is available to

the plaintiff filing suit for mandatory injunction would be hit by section 41(h)

of the Specific Relief Act, as follows: –

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“Specific Relief Act, 1963 Section 41(h) Civil Procedure Code,

1908, Order 7, Rule 11 - Recovery of money - Mandatory

injunction - Maintainability of suit - Substantive prayer made

by the plaintiff for recovery of amount of Rs. 9 lakhs which was

wrongly credited in the account of the petitioner - When

efficacious remedy in the form of suit for recovery is available

to the plaintiff, the filing of suit for mandatory injunction would

be hit by section 41(h) of the Specific Relief Act.”

17. The Co-ordinate Bench of this Court further observed that it

appeared that in order to avoid payment of Court fees, suit for mandatory

injunction had been filed. In the present circumstances, only suit for

recovery was maintainable and the plaintiff ought to affix ad valorem Court

fee in order to maintain such suit. Same view has been taken by a Division

Bench of the Allahabad High Court in State of U.P. v. Tara Singh Jaiswal

(Allahabad) (DB) : Law Finder Doc ID # 400545.

18. Last but not the least, the impugned order deserves to be set

aside also on the ground that the petitioner had previously also sought

rejection of the plaint by way of an application under Order 7 Rule 11 CPC

inter alia on the ground that the suit was barred by the provisions of the

Act. This said application of the petitioner was dismissed vide order dated

07.04.2007 by the learned trial Court on the ground that written statement

was yet to be brought on file; and when issues were framed, same would

be treated as preliminary issues. The petitioner had challenged the said

order dated 7.4.2007 before this Court by way of Civil Revision No.2154 of

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2007. Vide order dated 13.11.2014 this Court had set aside the order dated

7.4.2007 and remanded the matter back to the trial Court to decide the said

issue afresh. However, now again vide impugned order dated 18.02.2017

(P-1), the learned trial Court has again dismissed the Order 7 Rule 11 CPC

application of the petitioner. Thus, the impugned order is unsustainable.

19. Therefore, present petition is allowed; and the impugned

order dated 18.02.2017 is set aside; and suit of the respondent/plaintiff

stands rejected.

20. Pending application(s) if any also stand(s) disposed of.

06.11.2025 (Nidhi Gupta)

Sunena Judge

Whether speaking/reasoned: Yes/No

Whether reportable: Yes/No