2021 (2) TMI 165 - Tri - Companies Law

Oppression and Mismanagement - Seeking declaration that the applicant is not a necessary party and to remove him from the array of parties - contention of the applicant is that the Applicant being the statutory auditor of the 1st Respondent Company has not in any manner failed to discharge his statutory as well as fiduciary duties - HELD THAT - Impleadment of parties' is only a matter of fact and not a matter of law. Addition of parties/ striking out parties, of course, is a matter of discretion to be exercised by a Tribunal/ Court based on sound judicial principles. The said discretion can be exercised either on the application of a Petitioner/ Respondent or suo-motu or on the application of a person who is not a party to any pending proceedings. However, the said discretion cannot be exercised in a cavalier and whimsical fashion. On 28.09.2020, an order has been passed in I.A/ 107/ KOB/2020 directing that Mr. Paul Sebastian (M.No.037057), Paul Joseph Chartered Accounts, New Kalavath Road, Palarivattom, Cochin-682025 be impleaded as Respondent No.5 in the above Company Petition. Whether a party is a proper/ necessary party for an effective and efficacious adjudication of the controversy involved in a given case, although it is for the concerned Tribunal/ Court/ Authority to subjectively consider the same based on facts and circumstances of a case, which will be evident from C.P/12/KOB/2020 only. In this regard, with an utmost care and caution a finding has to be rendered by passing necessary orders in an objective and dispassionate manner for not removing R5 from party array and to take part in the main arena of proceedings. Undoubtedly, a just, fair and final order in main Company Petition can only be passed after hearing the Objections/ Reply of the said party along with the other Respondents - Once a party has been impleaded in a petition/application, after considering his contentions and hearing him, that party cannot subsequently come forward and say that the order is not correct and he may be removed from the party array. Judicial propriety has to be given the utmost importance in such matters. Hence, this Tribunal do not find any reason to pass an order to remove the applicant/ 5th respondent applicant from the party array. Application dismissed.

Summary

Issues:
Impleadment of statutory auditor as a necessary party in a Company Petition under Sections 241 and 242 of the Companies Act, 2013.

Analysis:
1. The applicant, who is the statutory auditor of the 1st Respondent Company, filed an application seeking removal from the array of parties in the Company Petition No. 12/KOB/2020. The Tribunal had earlier allowed the impleadment of the applicant as the Additional 5th Respondent in the main Company Petition.

2. The applicant argued that he had not failed to discharge his statutory and fiduciary duties. Reference was made to a previous case where statutory auditors were initially included as respondents but subsequently removed from the party-array. However, in the present case, the statutory auditor was impleaded later by order of the Tribunal.

3. The respondents contended that the applicant was a necessary party for the adjudication of the Company Petition due to his role as the auditor and alleged failure to perform duties properly, leading to illegal activities causing losses to shareholders.

4. The Tribunal considered the arguments from both sides and reviewed the documents on record. It noted that the applicant was impleaded based on the contentions raised in the application, and the order for impleadment was made after due consideration.

5. Referring to a Supreme Court case, the Tribunal highlighted the principles of impleadment, emphasizing the importance of joining parties necessary for effective adjudication. The discretion to add or remove parties is based on judicial principles and should not be exercised arbitrarily.

6. The Tribunal concluded that once a party has been impleaded and given the opportunity to present their contentions, it is not appropriate for that party to later seek removal from the party array. Upholding judicial propriety, the Tribunal dismissed the application to remove the applicant from the party array.

7. The judgment emphasized the importance of rendering a fair and final order in the main Company Petition after hearing all parties involved. The decision to retain the applicant as a party was deemed necessary for an effective adjudication of the controversy.

8. Ultimately, the Tribunal dismissed the application to remove the applicant from the party array, affirming the decision to implead the applicant as the Additional 5th Respondent in the Company Petition No. 12/KOB/2020.

In summary, the Tribunal upheld the impleadment of the statutory auditor as a necessary party in the Company Petition, emphasizing the importance of fair adjudication and judicial propriety in maintaining the party array for effective resolution of the dispute.