2006 (5) TMI 187 - HC - Companies Law

Summary

Issues Involved:
1. Assailment of the Company Law Board (CLB) order dated 5-8-2005.
2. Non-inclusion of IDBI in the proceedings under sections 397 and 398 of the Companies Act.
3. Legal propriety and jurisdiction of the CLB's order.
4. Maintainability of the writ petition under Article 226 of the Constitution of India.
5. Availability of alternative remedy under section 10F of the Companies Act.

Detailed Analysis:

1. Assailment of the Company Law Board (CLB) order dated 5-8-2005:
The writ petition challenges the CLB's order dated 5-8-2005, which observed that Indian Oil Corporation (IOC) is a bona fide allottee of impugned shares for valuable consideration and directed Haldia Petrochemicals Ltd. (Haldia) to defer allotment of further shares, including shares valued at Rs. 134 crores to the Industrial Development Bank of India (IDBI). The CLB also directed the maintenance of the status quo of shareholding as of that date.

2. Non-inclusion of IDBI in the proceedings under sections 397 and 398 of the Companies Act:
IDBI was not a party to the proceedings under sections 397 and 398 of the Companies Act (CP No. 58/2005) and was not afforded an opportunity to be heard. Consequently, IDBI filed CA No. 236/2005 seeking permission to intervene in CP No. 58/2005 and to vary/modify the orders dated 5-8-2005.

3. Legal propriety and jurisdiction of the CLB's order:
The petitioner argued that the CLB lacked jurisdiction to pass orders injuncting the transfer of equity to IDBI in its absence and without any prayer in this regard. It was contended that the restraint orders adversely affected the contractual rights of IDBI and other consortium lenders. The petitioner asserted that the CLB should not have passed the impugned order dated 5-8-2005 without hearing IDBI.

4. Maintainability of the writ petition under Article 226 of the Constitution of India:
The maintainability of the writ petition was challenged on the grounds that an effective alternative remedy was available under section 10F of the Companies Act. The court noted that if an order is passed without jurisdiction, the extraordinary relief under Article 226 can be invoked. However, the court decided not to exercise its extraordinary powers under Article 226, as it would not be expedient or proper in the present case.

5. Availability of alternative remedy under section 10F of the Companies Act:
Section 10F of the Companies Act provides for an appeal to the High Court within sixty days by any person aggrieved by any decision or order of the CLB. The court noted that Haldia, being a party to the proceedings before the CLB, could have filed an appeal within the prescribed period. The court observed that IDBI, as a 'person aggrieved,' could have filed an appeal under section 10F but failed to do so. The court emphasized that the availability of an effective remedy by statute should be preferred over invoking writ jurisdiction.

Conclusion:
The court concluded that it would be inappropriate to exercise the extraordinary powers under Article 226 of the Constitution of India. The CLB had already held detailed hearings on the dispute, and the court expected the CLB to pass final orders by July 2006. Consequently, the writ petition was rejected with no order as to costs.