2013 (2) TMI 283 - HC - Companies Law

Whether the interim order granted by the CLB is in accordance with law or not Appeal filed under section 10F of the Companies Act, 1956 - Challenge was made to an interlocutory order passed by the CLB - Held that - Order has been passed without disclosing any reasons and it does not show application of mind. It is now well-settled that the conferment of quasi-judicial power implies that the person concerned must follow the rules of natural justice and must give reasons for making the order which he is empowered to make. Purely administrative bodies are also bound to act justly and fairly which may bring in the requirement of natural justice as also the duty to give reasons. Even a non-statutory private body which is not a State under article 12 of the Constitution, but which exercises public functions is bound to follow the principles of fairness and good faith and to act reasonably and its orders are amenable to judicial review. Section 4(1)(d) of the recently enacted statute, the Right to Information Act, 2005, also requires every public authority of India to provide reasons for its administrative or quasi-judicial decisions to affected persons . Reading of the impugned order, makes it is clear that no reason has been given by the authority for staying the proceedings of the appellant-company - The order, therefore, suffers from inherent defect of not following the rules of natural justice For these reasons, set aside the impugned order Remanded the matter to the Company Law Board with a direction to decide the interlocutory application afresh, in accordance with law after following the principles of natural justice In favour of appellant

Summary

Issues:
- Challenge to an interlocutory order dated October 15, 2008, passed by the Company Law Board in Company Application No. 533 of 2008
- Allegation of suppression of facts by the appellants
- Consideration of the maintainability of the company petition
- Compliance with the rules of natural justice in passing the impugned order

Analysis:
1. The appeal was filed challenging an interlocutory order dated October 15, 2008, passed by the Company Law Board in Company Application No. 533 of 2008. The appeal was made under section 10F of the Companies Act, 1956. The order restrained board meetings in respondent-companies except for approving quarterly results. The appellant filed for vacating the stay granted by a Vacation Bench.

2. The respondent argued suppression of facts by the appellants, citing another pending petition where a similar order was challenged. The respondent contended that the appellants obtained the interim order by withholding information about the previous order. The respondent sought to vacate the stay based on the Supreme Court judgment in Tamilnad Merchantile Bank Shareholders Welfare Association v. S.C. Sekar [2009] 2 SCC 784.

3. The appellant argued against the maintainability of the winding-up petition and the stay order. It was contended that the winding-up petition was not maintainable as per section 399 of the Companies Act. The appellant also disputed the respondent's role in seeking the stay, emphasizing the merits of the company petition before the Company Law Board.

4. The High Court analyzed the impugned order and found it lacking reasons and not following the rules of natural justice. Citing legal principles, the Court emphasized the importance of providing reasons for quasi-judicial decisions. The Court noted the duty to act justly and fairly, even for administrative bodies, and the obligation to give reasons for decisions.

5. Consequently, the High Court set aside the impugned order and remanded the matter to the Company Law Board for a fresh decision following the principles of natural justice. The Court allowed the appeal to set aside the order dated October 15, 2008. As the main prayer of setting aside the order was granted, further adjudication on the maintainability of the proceedings before the Company Law Board was deemed unnecessary. The Court disposed of the appeal, and the application for vacating the stay was finally disposed of.