2019 (8) TMI 1628 - Tri - Companies Law

Territorial Jurisdiction - whether the impugned ex parte order dated 12.06.2019, affecting the interest of Applicants/ Respondents are liable to be vacated or not mainly on the ground the Tribunal lacks territorial jurisdiction on the Applicants Companies? - HELD THAT - Section 1 (4) of the Companies Act, 2013, which says that the provisions of this Act shall apply to the Companies incorporated under this Act or under any previous Company law; insurance Companies except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 or the Insurance Regulatory and Development Authority Act, 1999, banking Companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949, companies engaged in the generation or supply of electricity, except in so far as the paid provisions are inconsistent with the provisions of the Electricity Act, 2003 or any other Company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with provisions of such special Act, and such body corporate, incorporated by any Act for the time being in force, as the Central Government may by notification, specify in this behalf, subject to such exceptions modifications or adaptation, as may be specified in the notification etc. The Contention of the Learned Counsel that since the main Company petition is filed under Sections, 210, 213, 219 of Act by inter alia seeking investigation in the affairs of Applicants/ Respondents, and by virtue of Section 228 of Act, the Tribunal is having extra jurisdiction over the affairs of foreign Companies, Applicants/ Respondent herein, is farfetched argument, and it is not all tenable and it is without any basis. The Tribunal cannot expand its territorial jurisdiction on the alleged principle of defacto/ de jure relationship between the Respondent No. 1 Company and Applicants/ Respondents. When the Tribunal do not have jurisdiction over the affairs of Applicants/ Respondents herein, it cannot have any right to lift corporate veil so as to see alleged acts of Oppression and Mismanagement and to order any investigation into their affairs. It is not in dispute that the Applicants/ Respondents are foreign legal entities having incorporated and governed by their respective laws and they are not amenable to Indian Laws. Therefore, we agree with the contention of the Learned Senior Counsels for the Applicants/ Respondents that the Tribunal do not have any jurisdiction to interfere in their affairs by passing any interim order (s) and thus the impugned interim order is liable to vacated with immediate effect. Since the parties have not completed their respective pleadings to the main Company Petition, we are not directing the Petitioner to delete the Applicants/ Respondents at present, and it will be considered at the time of final hearing of the case. Petition disposed off.

Summary

Issues Involved:
1. Jurisdiction of the Tribunal over foreign companies.
2. Validity of ex parte ad-interim orders.
3. Proper and necessary parties in the Company Petition.
4. Potential irreparable harm to the parties involved.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Tribunal over Foreign Companies:
The primary issue was whether the Tribunal had jurisdiction over the foreign companies (Respondents No. 4 & 5) involved in the case. The Tribunal concluded that it did not have extra-territorial jurisdiction over these entities, as they are incorporated and governed by US law. The Tribunal stated, "The Tribunal cannot expand its territorial jurisdiction on the alleged principle of de facto/de jure relationship between the Respondent No. 1 Company and Applicants/Respondents." The Tribunal emphasized that it cannot interfere in the affairs of foreign companies by passing any interim orders.

2. Validity of Ex Parte Ad-Interim Orders:
The Tribunal had initially passed an ex parte ad-interim order on 12.06.2019, restraining Respondent No. 5 from altering the shareholding composition of Respondent No. 4 and directing Respondents No. 2 to 5 to provide access to the Petitioner's company data. The Tribunal vacated this order, stating that it lacked jurisdiction over the foreign entities involved. The Tribunal noted, "The impugned interim order passed by the Tribunal with reference to the Applicants/Respondents is without jurisdiction and it ought to be vacated immediately."

3. Proper and Necessary Parties in the Company Petition:
The Tribunal examined whether Respondents No. 4 & 5 were proper and necessary parties to the Company Petition. The Respondent/Petitioner argued that these entities were essential for adjudicating the controversies involved. However, the Tribunal decided not to direct the deletion of these respondents at this stage, stating, "Since the parties have not completed their respective pleadings to the main Company Petition, we are not directing the Petitioner to delete the Applicants/Respondents at present, and it will be considered at the time of final hearing of the case."

4. Potential Irreparable Harm to the Parties Involved:
The Tribunal considered arguments from both sides regarding potential irreparable harm. The Respondent/Petitioner argued that vacating the interim orders would cause irreparable loss and injury to the Petitioner and the Respondent No. 1 Company. Conversely, the Applicants/Respondents argued that maintaining the interim orders would harm their free trading rights. The Tribunal ultimately decided to vacate the interim orders, emphasizing its lack of jurisdiction over the foreign entities.

Conclusion:
The Tribunal vacated the ex parte ad-interim orders dated 12.06.2019, citing a lack of jurisdiction over the foreign companies involved. The decision to delete Respondents No. 4 & 5 from the Company Petition was deferred until the final hearing. The Tribunal acknowledged the potential irreparable harm to both parties but emphasized the importance of jurisdictional boundaries in its ruling.