Calcutta High Court: Share deal with outsiders fell outside the shareholders’-agreement clause; sellers’ later cancellation suit was barred after they sought performance of the same agreements

The plaintiffs sued to cancel agreements dated 16 May 2012 and 10 April 2013 concerning the transfer of their shares in Venkateswar Medicare Private Limited (VMPL).

VMPL’s assets included leasehold land and a building at Salt Lake, outside the territorial limits of the High Court’s ordinary original jurisdiction.

Before filing the cancellation suit, the plaintiffs had brought an earlier money suit seeking payment under the same agreements; its plaint referred to alleged deception involving the transfer of VMPL shares and its assets.

The defendants sought dismissal or rejection of the later plaint, including under Order II Rule 2 CPC. The Single Judge rejected that application but directed transfer of the suit to the Commercial Division. The defendants appealed both parts of the order.

1. Whether the dispute arose out of a “shareholders’ agreement” and was therefore a commercial dispute under Section 2(1)(c)(xii) of the Commercial Courts Act, 2015

2. Whether the cancellation suit was a “suit for land” under Clause 12 of the Letters Patent, given the agreements’ terms concerning VMPL’s land and building outside the Court’s jurisdiction

3. Whether the later suit was barred by Order II Rule 2(3) CPC and the doctrine of election, and whether that bar justified rejection of the plaint

Section 2(1)(c)(xii) of the Commercial Courts Act covers disputes arising out of shareholders’ agreements; the Court distinguished such agreements from share-purchase agreements, relying on Vodafone International Holdings v. Union of India, (2012) 6 SCC 613, and Bhaskar Naidu v. Aravind Yadav, 2025 SCC OnLine Kar 5

Under Clause 12 of the Letters Patent, a suit for land must be brought where the land is situated; whether a suit is one for land depends on the plaint and the substance and effect of the reliefs, as explained in Adcon Electronics Pvt. Ltd. v. Daulat, (2001) 7 SCC 698, and Tridandeeswami Bhakti Kusum Sraman Maharaj v. Mayapore Sree Chaitanya Math, (1983) 1 CHN 395

Order II Rule 2(3) CPC bars a subsequent suit for a relief omitted from an earlier suit when the plaintiff was entitled to that relief on the same cause of action and had not obtained leave to sue later; the Court considered the tests in Cuddalore Powergen Corporation Ltd. v. Chemplast Cuddalore Vinyls Ltd., 2025 SCC OnLine SC 82, and S. Valliammai v. S. Ramanathan, 2026 SCC OnLine SC 603.

The Court held that, where the necessary elements of the bar are apparent from the subsequent plaint and documents referred to in it, the bar may be considered at the threshold; it treated the plaintiffs’ choice of mutually inconsistent reliefs as also engaging the doctrine of election

The agreements were not shareholders’ agreements because the appellants were outsiders to VMPL when the agreements were executed; the commercial-dispute basis for transfer therefore failed.

On the Court’s reading, however, the agreements went beyond a share transfer: the plaintiffs signed both personally and as VMPL’s directors, and the terms contemplated transfer of control over the company together with its land, building and related rights. Since those assets were outside the Court’s original territorial jurisdiction, the Court concluded that the suit was a suit for land under Clause 12.

As to Order II Rule 2, the current plaint itself referred to the earlier money suit, and the Court found that the earlier plaint had already alleged deception involving the transfer of VMPL’s shares and assets.

It concluded that cancellation was an available relief on the same cause of action, but the plaintiffs had instead sought monetary relief under the agreements, without obtaining leave to sue later. The Court therefore treated the later cancellation claim as barred and inconsistent with the plaintiffs’ prior election.

It also held that the suit was a suit for land concerning property outside the Court’s original jurisdiction.

Allowing A.P.O. No. 85 of 2021, it set aside the transfer direction; allowing A.P.O. No. 84 of 2021, it set aside the refusal to reject the plaint and rejected it as barred by Order II Rule 2(3) CPC and the doctrine of election, and as vexatious and harassive.