2020 (9) TMI 308 - HC - Companies Law

Qualification/disqualification of some of the independent Board of Directors and one or more agenda scheduled on 17.08.2020 - misappropriation of funds - Section 422 of the Companies Act, 2013 - HELD THAT - Pertinently the legislature being aware of the hard pressed situation where the judicial manpower is disproportionately way far lower than the quantum of the litigation has used the expression shall make an endevour in Section 422 while binding the Tribunal to a time frame and thus the Tribunal, and for that matter all judicial forums being hard pressed with the cases on its file can only make an endevour for expeditious hearings with the limited manpower and infrastructure. Under such situation, the petition can be entertained with the aforesaid grievance only and only when the default on the part of the Tribunal is explicitly demonstrated by the cogent facts. No such explicit material is placed on record; in absence whereof, it will be inappropriate to issue the direction which may result into expediting the case at the cost of other cases requiring hearing expeditious than the case on hand. That apart, it appears that except in one case where the directions were sought from the National Company Law Appellate Tribunal for expeditious hearing of the case, the petitioner does not seem to have moved any application with the Tribunal itself for the purpose. Therefore there would be no question of mandamus in absence of representation to the Tribunal itself and the related failure of the Tribunal in discharging its duties. There is no rebuttal to the submission of the learned senior counsel shri Soparkar that infact the dispute is a family dispute. The Board of Directors comprises of petitioner's father, his uncle, nephew etc. and viewed from that angle it appears that the platform under Article 226 of the Constitution of India is sought to be used for settling the family scores. Therefore also this court would not exercise the extra ordinary jurisdiction for the purpose. Petition dismissed.

Issues:
1. Delay in concluding company petitions before the National Company Law Tribunal (NCLT).
2. Allegations of misappropriation of funds and illegal appointments.
3. Maintainability of the petition under Article 226 of the Constitution of India.
4. Jurisdiction of the court to expedite cases pending with the NCLT.
5. Subsidiary relief against respondent no.2 in a writ petition.

Issue 1: Delay in concluding company petitions before the NCLT
The petitioner sought directions to conclude pending matters before the NCLT within 3 months, emphasizing the grievances in various company petitions and applications. The grievances included concerns about the qualification/disqualification of independent Board of Directors and alleged misappropriation of funds. The petitioner argued that illegal appointments and decisions were being made due to delays in the NCLT hearings. The court examined Section 422 of the Companies Act, 2013, which mandates expeditious disposal of applications by the Tribunal. However, the court noted that the Tribunal can only make an endeavor for expeditious hearings due to limited manpower and infrastructure constraints. The petitioner failed to provide explicit material demonstrating the Tribunal's inaction, leading the court to dismiss the petition for lack of evidence supporting the need for expedited hearings.

Issue 2: Allegations of misappropriation of funds and illegal appointments
The petitioner raised concerns about misappropriation of funds and other matters in the company petitions and applications before the NCLT. The petitioner argued that delays in the NCLT hearings were enabling illegal appointments and decisions. However, the court found no substantial evidence supporting these allegations, especially in the absence of explicit material demonstrating the Tribunal's failure to hear the case promptly. Without concrete proof of wrongdoing, the court dismissed the petition, emphasizing the need for factual support to substantiate such serious allegations.

Issue 3: Maintainability of the petition under Article 226 of the Constitution of India
The respondents contended that the petition was not maintainable under Article 226 as respondent no.2, a company, did not possess public attributes to be proceeded against in a writ petition. The court agreed that respondent no.2, not being a State or public authority, could not be targeted in a writ petition under Article 226. The court rejected the argument that subsidiary relief could be sought against respondent no.2, emphasizing that even subsidiary relief would not be maintainable against a company lacking public attributes under Article 226.

Issue 4: Jurisdiction of the court to expedite cases pending with the NCLT
The court addressed the question of whether it could exercise jurisdiction under Article 226 to expedite cases pending with the NCLT. While acknowledging the legislative intent for expeditious disposal of cases, the court noted the challenges faced by judicial forums due to the high volume of cases. The court emphasized that the petitioner needed to demonstrate the Tribunal's inaction explicitly to warrant expedited hearings. Without such evidence, the court declined to issue directions that could potentially disrupt the prioritization of cases within the Tribunal.

Issue 5: Subsidiary relief against respondent no.2 in a writ petition
The court rejected the notion of granting subsidiary relief against respondent no.2 in a writ petition under Article 226, as the company lacked public attributes and could not be targeted in such proceedings. The court emphasized that even if the main relief was against the Tribunal, subsidiary relief could not be maintained against a company not falling under the definition of a State or public authority. Additionally, the court noted that the dispute appeared to be a family matter involving the Board of Directors, indicating an attempt to settle family scores through the court. Consequently, the court declined to exercise jurisdiction for such purposes and dismissed the petition without delving into the detailed merits of the case.

In conclusion, the court dismissed the petition due to the lack of explicit evidence supporting the need for expedited hearings, the non-maintainability of the petition under Article 226 against respondent no.2, and the absence of substantial grounds for granting subsidiary relief. The judgment emphasized the importance of factual substantiation in legal proceedings and the limitations of court jurisdiction in matters involving private entities lacking public attributes.

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