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2024 (5) TMI 1003 - HC - Companies LawQuashing Disciplinary proceedings against the Regional Director (NR) of ROC - executive function under the Act - Whether an act of an authority qualifies as a quasi-judicial act - Transfer (shifting) of registered office of 5 companies from Delhi to Maharashtra - siphoning off funds - Allowing application without exercising due diligence - violation of Section 13(4) of the Act and 30(9) of the Rule. The primary ground on which the petitioner has assailed the findings of the learned Tribunal is that the respondent s action of approving the request of shifting of the registered offices of the 5 companies of the Carnoustie Group was not a quasi-judicial function but an executive act. HELD THAT - It is found that the main plank of the petitioner s contention that under Section 13 of the Act an authority cannot be treated as an authority discharging quasi-judicial function is that, unless the authority is required to determine a lis between two contesting parties, the exercise of deciding shifting application cannot be treated as a quasi-judicial act. What emerges from the dicta of the Apex Court in STATE OF ANDHRA PRADESH VERSUS S.M.K. PARASURAMA GURUKUL 1973 (5) TMI 98 - SUPREME COURT is that, for an act of an authority to qualify as a quasi-judicial act, it is not a sine qua non that there must be two competing parties. No doubt when there are two parties to the lis, the decision of the authority qua their inter se claims will necessarily be a quasi-judicial act. This, however, does not imply that unless there are two parties whose competing rights the authority is required to decide, and the function of the authority can never be a judicial function. The question whether an authority is required to act judicially and whether its function can be termed as quasi-judicial, would have to be gathered from the cumulative effect of all attending circumstances, including the nature of rights affected by its decisions, as also the manner in which the duty imposed on the authority is to be discharged - Cases where policy and expediency are the guiding factors for a final decision, would no doubt be an executive decision, while on the other hand, where objective criteria are required to be adopted and objections to claims need to be considered, the act would generally qualify as a quasi-judicial function. It would be also apposite to refer to a recent decision of the Apex Court in ORISSA ADMINISTRATIVE TRIBUNAL BAR ASSOCIATION VERSUS UNION OF INDIA (UOI) AND ORS. 2023 (3) TMI 1490 - SUPREME COURT , relied upon by the respondent, wherein the Apex Court has reiterated that the question as to whether the function of an authority is quasi-judicial or administrative, is not always well defined and has to be determined after considering several factors, including the nature of the rights affected. Unlike as contended by the learned ASG, the Apex Court has consistently held that for determining as to whether an action of an authority is a quasi-judicial act or an administrative one, it is not necessary that there must be adjudication of a lis between the two parties before the authority. Thus, holding otherwise would be going against the settled position of law. Before passing an order under Section 13, the competent authority is required to not only seek information regarding the creditors and debtors of the applicant company, but is also obliged to invite objections from the general public. Further, in case objections are received, an oral hearing is required to be granted to all the parties and it is only upon examination of these objections, that a shifting order can be passed and that too, after considering the reports of the concerned RoCs. What, thus, emerges is that an elaborate procedure has been laid down under Rule 30 for dealing with a shifting application filed under Section 13 of the Act; it being incumbent upon the authority to not only take into account the detailed information supplied by the company under Rules 30(1) to 30(4), but also to hear objections - there are no infirmity with the finding of the learned Tribunal in this regard and hold that the act of the respondent in allowing the shifting applications was only in discharge of a quasi-judicial function. Thus, it is evident that despite the respondent having allowed the applications for shifting of the registered offices of all the 5 companies of the Carnoustie Group, which action the petitioner contends constitutes misconduct, he continued with the inspection not only against these companies but against other companies of the said Group. It is based on this inspection that the respondent submitted a detailed report setting out the gross mismanagement and siphoning off of funds, not only by these 5 companies but also other companies of the same Group, There is no dispute about the fact that this report was promptly accepted by the petitioner and directions were issued to the respondent to take penal and other appropriate actions against the said companies. Taking the case of the petitioner to the hilt, there certainly seems to be more than one officer barring the respondent involved in processing of the application, however, strangely and for no plausible reason absolutely no explanation has been provided by the petitioner as to why no action has been initiated against the two RoCs as also the other officers involved in forwarding the files to the respondent for approval, who failed to inform him about the order for inspections against the 5 companies of the Carnoustie Group. Strangely, the petitioner is also silent as to why no alert message was generated in the MCA 21 system. The fact cannot be lost sight that the respondent, as a Regional Director, was dealing with about 500 cases every month and therefore, had to rely on the information supplied by the RoCs as also the officers dealing with the files. In the present case, these officers had while putting up these applications before the respondent admittedly annexed a check-list where there was no mention of any pending inspection against any of the company. It is also not the case of the petitioner that there are any other allegations and/ or complaints of the similar nature or of any other kind filed/ pending against the respondent. There are no reason to differ with the finding of the Tribunal that the respondent was not apprised of the pending inspections when he allowed the shifting applications - there are no infirmity with the impugned order - petition dismissed.
Issues Involved:
1. Whether the respondent's act of approving the shifting of registered offices of companies was a quasi-judicial function. 2. Whether the initiation of disciplinary proceedings against the respondent was justified in the absence of allegations of recklessness or financial impropriety. 3. Whether the respondent acted with due diligence in allowing the shifting of registered offices of the companies. Summary of Judgment: Issue 1: Quasi-Judicial Function The court examined whether the respondent's action of approving the shifting of registered offices of companies under Section 13 of the Companies Act, 2013, was a quasi-judicial function. The court referred to Rule 30 of the Companies (Incorporation) Rules, 2014, which lays down a detailed procedure for such approvals, including inviting objections from the public and considering reports from the Registrar of Companies (RoC). The court concluded that the authority's duty to act judicially in considering all objective criteria prescribed under the statutory rules qualifies the function as quasi-judicial. The court found no infirmity in the Tribunal's finding that the respondent was exercising quasi-judicial functions. Issue 2: Justification of Disciplinary Proceedings The court considered whether disciplinary proceedings against the respondent were justified in the absence of allegations of recklessness or financial impropriety. The court referred to the Supreme Court's decision in Krishna Prasad Verma (Dead) Through LRs v. State of Bihar & Ors. (2019) 10 SCC 640, which emphasized that disciplinary action should not be initiated against a judicial or quasi-judicial authority merely because an order is wrong or erroneous unless there are allegations of misconduct, extraneous influence, or financial irregularity. The court noted that the respondent's actions were in public interest, as his inspection report led to the discovery of fraud and the attachment of assets worth Rs. 870 crores. The court found that the disciplinary proceedings were initiated based on a confidential report by Mr. Juneja, who had a grudge against the respondent. The court held that permitting the inquiry to continue would be a grave injustice to the respondent. Issue 3: Due Diligence The court examined whether the respondent acted with due diligence in allowing the shifting of registered offices of the companies. The court noted that the RoC, Delhi, and RoC, Kanpur, as well as the Processing Officer and the Dealing Assistant, did not report any pending inspections against the companies. The court found that the respondent relied on the information supplied by these officers and the MCA-21 system, which did not generate any alert regarding pending inspections. The court concluded that the respondent acted with due diligence and was not aware of the pending inspections when he allowed the shifting applications. Conclusion The court upheld the Tribunal's decision to quash the charge memorandum issued against the respondent and directed the petitioner to grant all consequential benefits flowing from the setting aside of the charge memorandum. The writ petition was dismissed as meritless.
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