Choudhary & Ors v Bhatter & Ors (Rev 1)

Article 22 of the Council Regulation (EC) No 44/2001 confers exclusive jurisdiction within the Member State framework for disputes concerning a company’s constitution and organs. The words regardless of domicile do not confer jurisdiction over a defendant domiciled outside the Member States. Jurisdiction over such a defendant remains governed by national law, subject to the regulation’s relevant exceptions. Whether Article 22(2) applies depends on the subject matter, not merely the relationship between the parties. A claim under sections 89–92 of the Companies Act 1985 for compensation for an unlawful allotment is not a claim concerning the validity of the company’s constitution or board decision, since the allotment remains valid. Interim orders must serve a proper purpose and respect foreign court supervision.

The claimants challenged alleged resignations and appointments of directors, changes to the company secretary and registered office, the forfeiture of shares, and allotments of shares in Barnagore Jute Factory Plc. The company was incorporated in England, but its business, assets and management were in India and its affairs were subject to proceedings before the Indian courts.

Mr David Donaldson QC, sitting as a Deputy Judge of the High Court, granted an interim injunction on 11 February 2009, restraining Mr Bhatter from managing the company except as directed by two claimants or by an Indian court. The appeal concerned whether Article 22 of the Judgments Regulation conferred jurisdiction over Mr Bhatter, who was not domiciled in a Member State, and whether the injunction was properly granted. The lower court decision is reported at [2009] EWHC 314 (Ch).

1. Appeal allowed. The order of 11 February 2009 was set aside.
2. The proceedings did not fall within the winding-up exclusion in Article 1(2)(b) of the Council Regulation (EC) No 44/2001. The claim against Mr Bhatter was for compensation under section 92 of the Companies Act 1985. The declarations concerning shares, directors, the company secretary and the registered office were properly understood as claims against the company, Namokar, the new directors or the new secretary, rather than against Mr Bhatter.
3. Article 22 did not confer jurisdiction over Mr Bhatter. The phrase regardless of domicile displaced the ordinary domicile rule between the courts of Member States. It did not confer jurisdiction over a defendant domiciled outside the Member States, or exclude the jurisdiction of the Indian courts. The court relied on the purpose and structure of the Regulation, including Article 4(1).
4. Alternatively, the claim against Mr Bhatter did not fall within Article 22(2). The provision depends on the subject matter of the proceedings, not simply the corporate relationship between the parties. Claims concerning the composition of a board or the validity of organ decisions may fall within it, as explained in Grupo Torras SA v Al-Sabah and Speed Investments Ltd v Formula One Holdings Ltd. A claim under section 92 was different. Contravention of the pre-emption provisions created liability to compensate; it did not invalidate the board decision or the allotment.
5. For completeness, the court explained that Owusu v Jackson concerned Article 2 jurisdiction over a defendant domiciled in a contracting state and did not decide the Article 22 question arising here. The wider question whether exclusive Article 22 jurisdiction could be stayed on forum non conveniens grounds was left unresolved.
6. In the alternative, the injunction was wrong in principle. An order should serve a proper purpose, particularly where enforcement would be required abroad. Given that the company’s business and management were in India and supervised by the Indian court, any English intervention should have been confined to matters requiring action or restraint in England.
7. The Court of Appeal declined to grant permission to serve out. There was no effective cross-appeal, Namokar was not a party to the appeal, and the court lacked the material needed to exercise the discretion afresh. It also declined to make a new order against the company.

• Court of Appeal (Civil Division) — In [2009] EWCA Civ 1176, the appeal was allowed and the interim injunction was set aside. Permission to serve out and a replacement order against the company were refused.
• High Court of Justice, Chancery Division — In [2009] EWHC 314 (Ch), Mr David Donaldson QC granted an interim injunction restraining Mr Bhatter from managing the company except as directed by the claimants or an Indian court.