Choudhary v Bhattar

The Court of Appeal allowed the appeal and set aside the interim injunction made by the Deputy Judge on 11 February 2009. The court held that the Brussels / Judgments Regulation (Council Regulation (EC) No 44/2001) and article 22 should not be read as conferring jurisdiction in England over a person who is not domiciled in a Member State merely because the company has its seat in England. The only cause of action against Mr Bhatter was for compensation under section 92 of the Companies Act 1985, which did not have as its object the validity of the constitution or the decisions of the organs of the company for the purposes of article 22.

Further, the Court concluded that, even if jurisdiction had been available, the interim order made against Mr Bhatter was unnecessary and risked trespassing on the supervisory role of the Indian court which exercised authority over the company’s management; the English court should confine any interim relief to matters within its proper territorial and practical effect (for example, steps in England such as entries at Companies House).

The dispute concerned the management and shareholding of Barnagore Jute Factory Plc, an English-incorporated company whose business and assets are located and carried on in India and which was the subject of winding-up / rehabilitation proceedings in India. The claimants (including two directors who were appointed by an Indian court as a Committee of Management) alleged a series of purported meetings, resignations, appointments and allotments in December 2008 and January 2009 were forged or otherwise invalid and that a third party, Namokar, had been improperly allotted large shareholdings. The claim form sought declarations (void forfeiture, void allotment, invalid appointments and resignations), rectification of the register and, against Mr Bhatter (a director resident in India), compensation under section 92 of the Companies Act 1985; the claimants also sought an interim injunction restraining Mr Bhatter from acting except under direction of the Committee of Management or an Indian court.

Procedural posture: appeal from an order of Mr David Donaldson QC (Deputy Judge, Chancery Division), who had accepted jurisdiction under article 22 of Council Regulation (EC) No 44/2001 and granted the interim injunction. The appeal was heard by the Court of Appeal which analysed five sequential jurisdictional questions raised by article 22 and the Judgments Regulation and related authorities.

Issues framed by the court:

• Whether the proceedings fell within the exclusion for winding-up or analogous proceedings in article 1(2)(b) of the Judgments Regulation.
• Whether article 22 can be used to found jurisdiction as to a person not domiciled in a Member State.
• Whether the claim against Mr Bhatter fell within article 22(2) as an action about the validity of the constitution or decisions of organs of the company.
• Whether Owusu v Jackson prevented the English court declining jurisdiction if article 22 applied.
• If the court could decline jurisdiction, whether it should have done so on forum non conveniens grounds.

Reasoning and disposition: the Court of Appeal concluded the action was not excluded by article 1(2)(b). However, the court held that article 22 was not intended to confer jurisdiction over a person not domiciled in a Member State in the way the Deputy Judge assumed; the phrase "regardless of domicile" was intended to operate between Member States and not to extend article 22 to persons with no Member State domicile. Independently, the claim against Mr Bhatter was primarily a statutory compensation claim under section 92 (ancillary to allotment and pre-emption rules) and did not have as its object the validity of the constitution or the validity of the decisions of the company’s organs for the purposes of article 22(2). On the injunction, the court held that the order made against Mr Bhatter was unnecessary (it mirrored obligations created by the Indian court) and risked interfering with the Indian court’s supervisory role: the appropriate territorially effective remedy, if any, would be a tailored order against the company in England restricting steps affecting England (for example, entries at Companies House). The Court therefore allowed the appeal and set aside the Deputy Judge’s order of 11 February 2009. The Court declined to grant permission to serve out of the jurisdiction or to make fresh orders in the absence of fuller material from the Indian proceedings.

Appeal allowed. The Court of Appeal held that article 22 of Council Regulation (EC) No 44/2001 was not apt to confer jurisdiction over a person not domiciled in a Member State in the way assumed by the Deputy Judge and, in any event, the only claim against Mr Bhatter (compensation under section 92 Companies Act 1985) did not fall within article 22(2). The interim injunction against Mr Bhatter was unnecessary and risked trespassing on the Indian court’s supervisory jurisdiction; the order of 11 February 2009 was set aside.

Appeal from the High Court of Justice, Chancery Division (Deputy Judge David Donaldson QC), HC09C00275; judgment below reported as [2009] EWHC 314 (Ch). Permission to appeal given by Stanley Burnton LJ on 19 March 2009; Court of Appeal judgment ([2009] EWCA Civ 1176) delivered 11 November 2009.