2015 (7) TMI 703 - Board - Companies Law

Charges of oppression and mismanagement - Section 397-398 read with Sections 402 to 408 of the Companies Act, 1956 - Application for impleadment - Held that - it is thus clear that the CLB is competent to implead a party as a Respondent in a petition filed under Section 397/398 of the Act, if it is satisfied that there is a sufficient cause for doing so. This provision, in my opinion, is akin to the provisions contained in Order I Rule 10(2) of the C.P.C. It is well settled proposition of law that a necessary party is one, without whom no order can be made effectually, a proper party In whose absence an effective order cannot be made and whose presence is necessary for a complete and final decision on the question involved in the proceeding. Rule 10 (2) of Order 1 of the CPC also indicates as to who is to be termed as a necessary or proper party . These provisions, inter alia, empower the Court to add the name of any person, namely (1) who ought to have been joined and (2) whose presence before the court may be necessary in order to enable the court to effectually and completely adjudicate upon and settle all the issues involved in the matter. In light of the above stated proposition of law, I have examined the material available on record and the report of the ROC, Pune filed by it pursuant to the order passed by the CLB dated 18/12/2014. Taking into consideration that the EOGM whereat the applicants are allegedly removed as Directors of the Company is in dispute, I am of the opinion, that the applicants are the necessary parties and their presence is required for effective and complete adjudication of the Company Petition. I, therefore, allow the application for impleadment. The Petitioner is, therefore, directed to implead the Applicants as Respondents in the array of the parties within 3 days and also to carry out consequential amendments, if required. Let the amended copy of the Company Petition be served upon the Respondents including the newly added Respondents who may file their reply(s) before the date fixed. The Respondents may also file their additional reply(s), if any, before the date fixed.

Summary

Issues:
1. Impleadment of Third Parties-Interveners as Respondents in a Company Petition.
2. Allegations of oppression, mismanagement, and illegal removal of Directors.
3. Application of Section 405 of the Companies Act for adding respondents.
4. Impleadment of necessary parties for effective adjudication.
5. Appointment of an administrator for the Company in the public interest.

Analysis:

1. The Third Parties-Interveners filed an application seeking impleadment as Respondents in a Company Petition alleging oppression and mismanagement by the Petitioner and other shareholders. They claimed to be shareholders and Directors of the Company, disputing their alleged removal through false means. The ROC, Pune marked the Company under "management dispute" based on the Applicants' complaint, supporting their plea for impleadment.

2. The Applicants' application was analyzed in light of Section 405 of the Companies Act, allowing the Company Law Board (CLB) to add respondents if there is sufficient cause. The provision is compared to Order I Rule 10(2) of the CPC, emphasizing the importance of impleading proper and necessary parties for effective adjudication. The Applicants were deemed necessary parties as their presence was crucial for complete resolution of the Company Petition.

3. The judgment highlighted that a necessary party is essential for making an effective order, while a proper party's presence aids in a comprehensive decision on the matter. It stressed the significance of avoiding multiplicity of suits and protecting the interests of all parties involved. Third parties likely to be impacted by the petition's outcomes must be impleaded for a just and conclusive resolution.

4. Consequently, the CLB allowed the impleadment of the Applicants as Respondents in the Company Petition, directing the Petitioner to make necessary amendments within a specified timeline. The newly added Respondents were granted the opportunity to file their replies, ensuring a fair and inclusive adjudicatory process.

5. Additionally, considering the gravity of the allegations and the public interest involved, the judgment hinted at the potential appointment of an administrator to oversee the Company's affairs. Parties were given a chance to present their views through affidavits before a future hearing date, emphasizing the importance of safeguarding the interests of all stakeholders, including the shareholders.

In conclusion, the judgment disposed of the Company Application accordingly, without any cost implications, and scheduled further proceedings for a comprehensive hearing on the appointed date.