Case Summary and Outcome

An Indian High Court dismissed a defamation suit filed by a private company against the wife of a deceased shareholder, for writing letters to statutory authorities about non-transfer of shares and benefits. The private company argued that the complaints damaged its reputation. However, the Court found that the wife, as an interested party, was within her rights to seek redress from lawful authorities and that her actions did not constitute defamation. The Court determined that the suit did not “disclose cause of action and the cause of action pleaded is only illusory and imaginary”. The Court observed that the suit appeared to deter Iyer from pursuing her legal remedies and discussed how Strategic Lawsuits Against Public Participation (SLAPP) are filed to deter individuals from exercising their rights.

Facts

Metallic Bellows India Pvt Ltd., is a private limited company engaged in the business of designing and manufacturing bellows for space, aerospace and defense. Mr. R. Gopalakrishnan is the Promoter of the company. It is a “closely held company” with all the shareholders being family members. [para. 4]

On September 18, 2015, G. Hari, an employee of the company and son of the promoter of the company passed away. G. Hari’s wife, Vidyaa Hari Iyer became the surviving legal heir. She alleged that the other shareholders did not transmit her husband’s shares to her.

On September 8, 2017, Iyer wrote a letter to the Registrar of Companies, a government body dealing with the administration of companies and alleged that her husband’s Employment Provident Fund (EPF) was not settled. She also approached the Central Provident Fund Commissioner and other statutory authorities. She further filed a complaint to the Police Station.

Metallic Bellows filed a defamation suit against Iyer and sought a sum of INR 10,00,00,000 as damages (approx 1,189,481 USD). Iyer requested for dismissal of the suit while suggesting that there was no cause of action for the suit.

Decision Overview

Justice R. Subramanian of the Madras High Court delivered this order. The central issue before the Court’s consideration was “whether the plaint discloses the cause of action for the suit”. [para. 16]

Iyer argued that Metallic Bellows had not transferred 2,770 equity shares held by her husband along with the non-processing of the Employment Provident Fund (EPF) and other benefits, even after two years from her husband’s death. Iyer contended that she wrote a letter to the Registrar of Companies to draw attention to Metallic Bellow’s illegal actions. She argued that “mere writing of letters to the Statutory Authorities that too by person interested as a shareholder would by no means amount to defamation”. [para. 20] She contended that Metallic Bellows, being a company, could not argue loss of reputation. She relied on Maung Chit Tay v. Maung Tun Nyun [AIR 1935 Rangoon 108] to emphasize that unless the allegations are targeted against the Company, the Company cannot allege defamation. Iyer argued that the defamation suit was a mere attempt to “prevent her from seeking remedy before the appropriate Authorities”. [para. 11]

Metallic Bellows argued that the contents of Iyer’s letters were false which negatively impacted their business. They argued that Iyer had mala fide intention to defame the company’s reputation and ruin its goodwill. They requested damages as Iyer’s false allegations of fraud by the Company had affected their reputation. They relied on South Hetton Coal Co. v. North-Eastern News Association, Ltd. ([1891-4] All E.R. Rep. 548) and Dr.R.Krishnamurthy v. Sun TV Network Limited [2008 (1) MWN (Cr.) 196] to emphasize that a Company can file a defamation case. They referred to Raj Nath Khosla v. Acharya Dr John [197 (2013) DLT 728] to argue that writing letters to Authorities can be defamatory.

The Court observed that a Company can file a defamation suit if defamatory material is published against it or if a non-interested party makes complaints to lawful Authorities. The Court referred to Raj Nath Khosla v. Acharya Dr John R Biswas [197 (2013) DLT 728] where the Delhi High Court extracted  Patna High Court’s observations in Pandey Surendra Nath Sinha v. Bageshwari Pd. [AIR 1961 Patna 164] to emphasize that “if a person who makes the statements has an interest or duty……..and the person to whom it is so made has as corresponding interest or duty to receive it such statement…….cannot be made the basis of an action for defamation”. [para. 39]

In the instant case, the Court found that Iyer is an interested party since she is the wife of the deceased shareholder. The Court determined that she is entitled to shares and employee benefits’ upon her husband’s death. The Court noted that she wrote letters to Authorities which had an obligation to ensure a Company’s proper and smooth functioning. The Court highlighted Iyer’s “right to complaint to the statutory Authorities about the non-disbursement of the benefits or non-transfer of the shares of her husband”. [para. 42] The Court underlined that her actions might have been defamatory if she had no interest in the Company, however, that was not the case.