2020 (1) TMI 1319 - HC - Companies Law

Permission to petitioner herein to induct 4 more directors in the Board of Directors of the 2nd respondent Company Cetex Petro Chemical, in the Board to have representation in proportionate to the equity share - HELD THAT - In the present case, the petitioner has alleged that the respondent Nos.3 to 6, who are private parties have usurped the controlling interest of the 2nd respondent by getting 4.5% of the shares transferred to the 3rd respondent without adhering to the conditions of the agreement between the parties to relieve the personal guarantee. It had been stated that the 3rd respondent did not adhere to the conditions of the agreement with the 1st petitioner to release the personal guarantee given by T.G.S.Mahesh, which was a pre-condition for the transfer of 4.5% shares in dispute. It was therefore stated that the transfer was illegal and unlawful. It had also been stated that the respondent Nos.3 to 6 have been trying to undermine the interests of the petitioners to dispossess the controlling stake held by the petitioners. The learned counsel for the petitioner stated that a fraud had been conducted by holding the Annual General Meeting on 14.10.2019. It had been stated that the fact that the decision had been kept in abeyance and has not been disclosed in the audit report. If fraud is alleged then the petitioner may very well agitate the same before the Tribunal, which as held by the Hon'ble Supreme Court can examine allegation of fraud - The actual grievance of the petitioners for filing the Writ Petition is that the Presiding Officer is on leave and a mention was made before the Co-ordinate Bench of the NCLT, Chennai. The said Presiding Officer had adjourned the case to February 2020. That will not be a ground for the writ petitioner to file this writ petition with the very same relief before this Court. The Writ jurisdiction cannot be exercised to grant the relief sought by the petitioners, particularly since the Company Petition No.20 of 2018 is already pending before the NCLT with respect to the very same parties and with respect to the very same issue - Petition not maintainable and is dismissed.

Summary

Issues Involved:
1. Maintainability of the Writ Petition under Article 226 of the Constitution of India.
2. Allegations of fraud and illegal transfer of shares.
3. Re-agitation of the same issue before different forums.
4. Jurisdiction of NCLT to adjudicate on the matter.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition under Article 226 of the Constitution of India:
The petitioner sought a Writ of Mandamus to direct the Registrar of Companies and other respondents to permit the induction of four more directors in the Board of Directors of the 2nd respondent company. The Registry questioned the maintainability of the Writ Petition under Article 226 of the Constitution, given the availability of a remedy before the National Company Law Tribunal (NCLT). The petitioner’s counsel cited a Supreme Court judgment (Civil Appeal No. 9170 of 2019) to argue the maintainability. However, the Court found the facts of the cited case distinguishable, noting that the Supreme Court had addressed whether High Courts should interfere with NCLT orders under Article 226/227, especially when statutory remedies are available.

2. Allegations of Fraud and Illegal Transfer of Shares:
The petitioner alleged that respondents 3 to 6 usurped the controlling interest of the 2nd respondent by transferring 4.5% of shares to the 3rd respondent without adhering to the agreement conditions. The petitioner claimed the transfer was illegal and undermined their interests. However, the Court noted that allegations of fraud could be addressed by the NCLT, as established by the Supreme Court, which held that NCLT and NCLAT have jurisdiction to inquire into questions of fraud.

3. Re-agitation of the Same Issue Before Different Forums:
The Court observed that the petitioner had already filed Company Petition No. 20 of 2018 before the NCLT, Chennai, seeking similar reliefs. The reliefs sought in the writ petition were practically identical to those in the pending NCLT petition, indicating re-agitation of the same issue. The Court cited the Supreme Court’s stance against re-litigation, emphasizing that it constitutes an abuse of the process of the court and is contrary to justice and public policy.

4. Jurisdiction of NCLT to Adjudicate on the Matter:
The Court referenced the Supreme Court’s decision in the Embassy Property Developments case, which clarified that NCLT did not have jurisdiction to entertain applications against government actions related to statutory or quasi-judicial decisions. However, the NCLT could inquire into fraud allegations. In the present case, the petitioner’s grievances, including the alleged fraud, were already under consideration by the NCLT. The Court held that the writ jurisdiction could not be exercised to grant relief when the matter was pending before the NCLT.

Conclusion:
The Court concluded that the writ petition was not maintainable, given the pending proceedings before the NCLT on the same issues and the principle against re-litigation. Consequently, the writ petition was rejected at the stage of SR, with no costs awarded.