2019 (9) TMI 535 - HC - Companies Law

Oppression and Mis-management - appellate remedy provided under Section 421 of the Companies Act 2013 - Maintainability of petition u/s 241 of Companies Act - HELD THAT - In the instant case, the Companies Act, provides for an appeal from the order of the National Company Law Tribunal to the National Company Law Appellate Tribunal. Appeal is both on law and facts. Both can be adjudicated before the Appellate Tribunal. No doubt, the High Court has powers under Article 227 of the Constitution of India to entertain petitions where Courts and Tribunals under the jurisdiction of the High Court have acted in a manner which has resulted in abuse of process of law or where the facts are so gross that if the High Court does not entertain the petition, then it will result in such an injury which cannot be rectified. Under Section 248 (5) of the Companies Act were passed by the Registrar of Companies, removing the name of the Company from the register, without passing an order under Section 248 (6) of the Act. That was a case wherein it was brought to the notice of this Court that Registrar of Companies struck off the names of the Companies, without passing any order, under Section 248 (6) of the Act. This practise was sought to be rectified by exercising the powers under Article 227 of the Constitution of India. Such is not the scenario here. Efficacious alternate remedy is available to the petitioner, by challenging the order before the National Company Law Tribunal. Petitioner, if so advised can approach before the National Company Law Appellate Tribunal, by filing an appropriate appeal. It is needless to say that National Company Law Appellate Tribunal may entertain an appeal, even after the expiry of the said period applying Section 14 of the Limitation Act,1963. Civil Revision Petition is not maintainable and the same is dismissed.

Issues Involved:
1. Allegations of oppression and mismanagement under Section 241 of the Companies Act, 2013.
2. Maintainability of the petition under Section 241 given the membership status under Section 244 of the Companies Act, 2013.
3. Jurisdiction and powers of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT).
4. Application of Article 227 of the Constitution of India in the context of specialized tribunals.
5. Interim orders and their implications on company management.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The respondents filed a petition under Section 241 of the Companies Act, 2013, alleging several acts of oppression and mismanagement by the revision petitioner, including clandestine actions against stakeholders' interests, financial frauds, and misuse of assets meant for poor beneficiaries. The Registrar of Companies and the Regional Director had already found serious financial irregularities, recommending an enquiry by the Serious Frauds Investigation Office.

2. Maintainability of the Petition under Section 241:
The revision petitioner challenged the maintainability of the petition under Section 241, arguing that the petitioners did not meet the membership requirements under Section 244. According to the revision petitioner, the company did not have share capital, and the petition was maintainable only if not less than 1/5th of the total number of members presented the application. They contended that none of the petitioners were members of the company, thus failing to satisfy the requirements of Section 244.

3. Jurisdiction and Powers of NCLT and NCLAT:
The NCLT dismissed the application challenging the maintainability, stating that the petition required a detailed enquiry into the matter complained of. The NCLT exercised its powers under the proviso to Section 244 of the Companies Act, 2013, waiving the requirements of Section 244(1)(b) and treating the petition as a representative petition under Order 1 Rule 8 of the Civil Procedure Code, read with Section 241 of the Act, 2013. The NCLT removed all directors and managing committee members and appointed a retired judge as the chairman of the company.

4. Application of Article 227 of the Constitution of India:
The respondents raised a preliminary objection, arguing that the petition under Article 227 of the Constitution was not maintainable due to the appellate remedy provided under Section 421 of the Companies Act, 2013. The court noted that while the High Court has powers under Article 227, it should exercise these powers sparingly, especially when an effective alternative remedy is available. The court referred to several Supreme Court judgments emphasizing that when a statutory forum is created for redressal of grievances, writ petitions should not be entertained, ignoring the statutory dispensation.

5. Interim Orders and Their Implications:
The High Court had previously granted an interim stay of the NCLT's order, subject to the condition that the revision petitioner and others in management would not assign, alienate, or encumber any properties of the company. The court reiterated that the NCLT and NCLAT are specialized bodies created to adjudicate disputes under the Companies Act and the Insolvency and Bankruptcy Code. The court emphasized that the High Court should not interfere with the orders of these specialized tribunals unless there is a gross abuse of process or a jurisdictional error.

Conclusion:
The High Court dismissed the civil revision petition, stating that an efficacious alternative remedy was available to the petitioner by challenging the order before the NCLAT. The court noted that it had not gone into the merits of the case and emphasized the importance of utilizing the statutory appellate mechanisms provided under the Companies Act, 2013. Consequently, the connected miscellaneous petitions were also closed.

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