2024 (12) TMI 475 - AT - Companies Law

Challenge to Impugned Order u/s 241 / 242 of the Companies Act, 2013 - failure to consider rival contentions and assigning the reasons, for either acceptance or the reasons for non-acceptance of the arguments while granting an Interim Order - violation of principles of natural justice - HELD THAT - It is needless to say that, the assigning of the reason is the basic guiding principles for the Court of Law to justify the logic, as to what has transpired under the given set of circumstances to pass an order, which impeaches upon the rights of the either of the parties to the proceedings. But, owing to the argument extended by the Appellant and the opposition as extended by the Respondents, there could not be any valid reason forthcoming, as to why the learned Tribunal while passing the order had not considered the arguments and assigned reasons, which was extended by the Respondent / the Appellant herein, while granting an Interim Order which was directed to continue till the closure of the Company Petition, even without meeting the principles of inviting objection, to the application for grant of interim protection. Since the parties are at the consensus, a consenting order is being passed that, it would be open for the Appellant to file an appropriate Stay Vacation Application, before the learned Adjudicating Authority, seeking vacation of the order dated 20.11.2024. The same could be filed within a period of one week from today and if it is filed within the aforesaid time period, the learned Tribunal is requested to decide the aforesaid Stay Vacation Application considering all the contentions, even the one raised in this Company Appeal, within a period of three weeks thereafter, and it goes without saying, obviously after considering the rival contentions, which are to be extended by the parties and after assigning reasons to justify, either to grant or denial of the Interim Order - It is made clear that whatsoever observations has been made in the Impugned Order of 20.11.2024 or by this Tribunal too in today s order, would not have any effect qua the decision to be taken on the Stay Vacation Application which will be independent to the findings recorded by the Impugned Order or by this Tribunal. Appeal disposed off.

Summary

Issues:
Challenge to Impugned Order of 20.11.2024 under Sections 241/242 of Companies Act, 2013; Lack of reasoning in granting Interim Order; Compliance with principles of natural justice in passing Interim Order; Reference to judgments mandating reasoning in orders.

Analysis:

The judgment pertains to Company Appeals challenging the Impugned Order of 20.11.2024 under Sections 241/242 of the Companies Act, 2013. The appeals were pursued on a narrow basis, specifically targeting the order rendered in CA No. 154/2024 concerning the holding of the 65th EGM. The High Court of Karnataka, in a related Writ Petition, highlighted the importance of reasons in judicial orders for legality and natural justice. Subsequent appeals to the Hon'ble Apex Court led to directions for approaching the NCLAT against the Impugned Order and keeping its effect in abeyance until further proceedings.

The Appellant contended that the Impugned Order lacked reasoning, depriving them of an effective hearing and violating principles of natural justice. They argued that even in proceedings under I & B Code, reasons for granting or denying injunctions are essential. Reference was made to established judgments emphasizing the necessity of assigning reasons in judicial orders to ensure fairness and legality.

While refraining from detailed analysis, the Tribunal acknowledged the importance of reasoning in judicial orders to justify decisions affecting parties' rights. The Tribunal noted the absence of valid reasons for not considering arguments and inviting objections before granting the Interim Order, as raised by the Appellant. The judgment emphasized the need for courts to provide reasoning to justify their decisions, as mandated by legal principles and precedents.

In light of the Hon'ble Apex Court's directions to maintain the status quo, a consenting order was passed allowing the Appellant to file a Stay Vacation Application seeking vacation of the Impugned Order. The Tribunal directed the Adjudicating Authority to decide on the Stay Vacation Application within three weeks after considering all contentions and providing reasons for the decision. It was clarified that observations in the Impugned Order or the Tribunal's order would not impact the decision on the Stay Vacation Application, which would be independent of previous findings.

Ultimately, the Company Appeals were disposed of, with pending Interlocutory Applications closed. The interim status prevailing on the date of the Hon'ble Apex Court's order was to continue until the Stay Vacation Application was decided by the Adjudicating Authority, ensuring clarity and procedural adherence in the ongoing legal proceedings.