2018 (11) TMI 774 - AT - Companies Law

NCLT permitted to withdrawal of the Company Petition - withdrawal application referred to settlement and amendment of Articles of Association - Held that - The Appellant is not a member or shareholder. The Company Petition filed u/s 397 and 398 of the old Act cannot be continued at the behest of an Intervener seeking impleadment when he is not a shareholder or member of the Company. It is settled position that such application of oppression and mismanagement can be filed only by a member of the Company. If the Appellant could not file such a Petition, the Appellant cannot insist on independently maintaining the same so as to hear out his grievances against the Petitioner and Respondents claiming that they are in collusion. As argued that under Section 402 of the old Act, NCLT has wide powers to pass any Orders when Petition of oppression and mismanagement is filed. The argument is that in the present matter, there were various earlier Orders of NCLT which showed that things were not being legally conducted in the Company and the NCLT had even passed Orders to appoint Administrator. As argued by the learned counsel for the Appellant that in such situation merely because the withdrawal application was filed, NCLT should not have allowed the withdrawal. It is claimed that withdrawal under Order XXIII Rule 1 of Code of Civil Procedure, 1908 is different as there the Plaintiff has a right to withdraw the suit while the same cannot be said with regard to Rule 82 where the provisions say that an application under Clause A or Clause B of Sub-Section (1) of Section 241 shall not be withdrawn without the leave of the Tribunal. No reason as to why the NCLT should have kept the Petition pending only because the Appellant wanted it to do so. The impleadment of the Appellant had been refused and he had been permitted only to intervene when the Company Petition was taken up for hearing so that he could point out wrong, if any. That by itself did not create such a vested right that the Appellant could claim that Company Petition should not be allowed to be withdrawn. No doubt powers of NCLT in a petition complaining oppression and mismanagement are very wide to safeguard the interest of the Company. But it would still be matter of discretion to permit withdrawal of the Petition in the given set of facts. When a claim of settlement between the warring group is stated and simple withdrawal is asked, NCLT cannot be asked to continue with the petition on a roving enquiry at the instance of a non-member. Although the withdrawal application referred to settlement and amendment of Articles of Association, the withdrawal application did not seek any directions or orders on that count. The application did not seek recording of any settlement or terms of settlement. The application merely made statement as to what according to the Respondent No.22 the Petitioner has happened between him and Respondents 1 to 11 and sought withdrawal of the Company Petition. It is a simple withdrawal. There is apparently no operative order. Thus, the original Petitioner and Respondents remain as much liable to answer for their acts to the Hon ble High Court and Hon ble Supreme Court in the litigation pending at the instance of the Appellant, as they were before withdrawal. For all such reasons, we are not interfering with the Impugned Order dated 19.12.2017 passed by the learned NCLT. Consequently, the Company Appeal is dismissed. The result is that the original Company Petition having been withdrawn, Company Appeal does not survive for impleadment. Company Appeal is disposed accordingly.

Summary

Issues Involved:
1. Impleadment of the Appellant in the Company Petition.
2. Withdrawal of the Company Petition by the Original Petitioner.
3. Compliance with procedural requirements for withdrawal.
4. Impact of ongoing litigation in other courts on the Company Petition.

Detailed Analysis:

1. Impleadment of the Appellant in the Company Petition:
The Appellant, not being a member or shareholder of Respondent No.1 Company, filed an application for impleadment in the Company Petition, citing ongoing litigation and orders from the High Court against some Respondents. The NCLT allowed the Appellant to intervene but not to be impleaded as a necessary or proper party. The Appellant appealed against this decision, arguing that their rights and interests would be prejudiced if not allowed to participate fully in the proceedings.

2. Withdrawal of the Company Petition by the Original Petitioner:
The Original Petitioner sought to withdraw the Company Petition, stating that the matter had been amicably settled. The NCLT allowed the withdrawal, dismissing the Company Petition as withdrawn. The Appellant challenged this decision, arguing that the withdrawal was collusive and intended to overreach the High Court's orders. The Appellant contended that they were not given an opportunity to oppose the withdrawal, which they claimed was necessary to protect their interests.

3. Compliance with Procedural Requirements for Withdrawal:
The Appellant argued that the withdrawal application was not filed in the prescribed Form NCLT-9 and lacked proper verification and notarization. Additionally, the application did not declare the pending appeal (CA 370/2017). The NCLT, however, accepted the withdrawal application despite these procedural defects, noting that the Appellant's counsel was present during the withdrawal hearing and had an opportunity to address the NCLT.

4. Impact of Ongoing Litigation in Other Courts on the Company Petition:
The Appellant highlighted various orders from the High Court and Supreme Court restraining the Respondents from dealing with their assets, including shares in the Respondent Company. The Appellant argued that the Company Petition was filed to obtain collusive orders from the NCLT, thereby overreaching the High Court's orders. The NCLT, however, found that the Appellant's concerns about collusion and overreaching were not sufficient grounds to prevent the withdrawal of the Company Petition. The NCLT emphasized that the Appellant's rights were being addressed in the ongoing litigation in the High Court and Supreme Court.

Conclusion:
The NCLT's decision to allow the withdrawal of the Company Petition was upheld. The Appellant's appeal (CA 57/2018) was dismissed, and the related appeal (CA 370/2017) for impleadment was disposed of as infructuous. The NCLT exercised its discretion appropriately, considering the settlement between the Original Petitioner and the Respondents and the fact that the Appellant's interests were being protected in other ongoing litigation. The procedural defects in the withdrawal application were deemed non-fatal, given that the Appellant's counsel was present and had an opportunity to address the NCLT. The Appellant's apprehensions about collusion and overreaching were not sufficient to prevent the withdrawal of the Company Petition.