2013 (10) TMI 59 - HC - Companies Law

Validity of order - Whether CLB was justified in directing the petitioner to argue the main case first and thereafter to argue the interlocutory applications - Held that - Company Law Board was not justified in exercising its wisdom in changing the order of hearing of the interlocutory applications and the main matter. After hearing the Learned Advocate of the parties and after considering the materials on record this court feels that justice would be subserved if the interlocutory application filed by the petitioner for interim injunction and the application filed by the respondent for dismissal thereof are considered in isolation of the main proceeding and prior to its disposal. - However, since the hearing of the main case was consolidated with the hearing of these two interlocutory application, with consent of parties, this court, by giving effect to such agreement arrived at between the parties, disposes of this appeal by directing the Company Law Board to hear out those two interlocutory applications along with the parent proceeding being C.P No.01 of 2011 and dispose of all at a time by passing a common judgment and/or order as early as possible - matter remitted back with rider - Decided in favour of appellant.

Summary

Issues:
Challenge to the order passed by the Company Law Board directing the sequence of arguments in C.P No. 01 of 2010 and interlocutory applications C.A No. 332 of 2011 and C.A No. 338 of 2011. Justification of changing the order of hearing by the Company Law Board.

Detailed Analysis:

1. Order Sequence Challenge:
The appeal challenges the Company Law Board's order directing the appellants to argue the main case C.P No. 01 of 2010 before the interlocutory applications C.A No. 332 of 2011 and C.A No. 338 of 2011. The direction was based on previous orders from the court in related appeals, suggesting a consolidated hearing. The main petition alleged oppression and mismanagement, specifically siphoning of funds through a charitable trust. Initially, no permanent injunction was sought, but later added through an amendment. The interlocutory application sought interim relief similar to the main petition. The Company Law Board's decision to hear them together was challenged in the appeal.

2. Justification of Order Sequence Change:
The Company Law Board justified the sequence change based on wisdom and efficiency. The respondents supported this citing Supreme Court precedents allowing trial courts to decide the order of hearing. However, the court disagreed, emphasizing that the purpose of an interlocutory injunction would be defeated if heard after the main case. The principles for granting injunction differ from deciding permanent relief, making separate consideration necessary. The court concluded that justice would be better served by hearing the interlocutory applications separately before the main case, despite the parties' consent to consolidated hearing.

3. Court's Directions:
The court directed the Company Law Board to hear and dispose of the interlocutory applications before the main proceeding, ensuring a common judgment within a specified timeframe. The court considered previous court orders directing reconsideration of interlocutory applications and emphasized the need for the Company Law Board to address the pending interlocutory application seeking a restraint order on fund siphoning. The appeal was disposed of with modified directions, allowing parties to seek further directions if needed.

This detailed analysis covers the issues raised in the appeal challenging the Company Law Board's order and provides a comprehensive understanding of the legal reasoning and considerations involved in the judgment.