2014 (6) TMI 644 - HC - Companies Law

Oppression and mismanagement of the company - Non compliance with section 400 - Held that - In view of the language used in Section 400 and the decisions in the cases of Cosmosteels Private Ltd. and others Vs. Jairam Das Gupta and others 1977 (12) TMI 92 - SUPREME COURT OF INDIA and Bilasrai Joharmal and others Vs. Akola Electric Supply Co. Pvt. Ltd. 1958 (3) TMI 22 - HIGH COURT OF BOMBAY it can safely be held that the provisions of Section 400 of the Act are mandatory in nature and the Company Law Board/Tribunal is obliged to issue notice to the Central Government as and when a petition under Section 397 or 398 of the Act is entertained and it is only after considering the representation of the Central Government if any that a final order can be passed - It is important to keep in mind that a statute of a mandatory nature if provides for doing a particular thing in a particular manner than that thing should be done in the manner provided or not at all. Therefore it is not open for the Company Law Board/tribunal to pass a final order on a petition under Section 397 or 398 of the Act except for its summary dismissal without giving notice to the Central Government as contemplated vide Section 400 of the Act. There is nothing in the impugned order which could reflect or indicate that the Company Law Board had issued any notice as envisaged under Section 400 of the Act to the Central Government before proceeding to decide the petition under Section 397 or 398 of the Act. - There is no material to show that any notice was issued to the Central Government before passing the impugned order - in the absence of notice under Section 400 of the Act the impugned order dated 20th March 2009 cannot be sustained in law and his hereby set aside - Decided in favour of appellant.

Summary

Issues:
- Appeal under Section 10-F of the Companies Act, 1956 against Company Law Board's order
- Compliance with Section 400 notice to Central Government
- Mandatory nature of Section 400 provisions

Analysis:
The judgment pertains to an appeal under Section 10-F of the Companies Act, 1956 against an order of the Company Law Board regarding a petition filed under Sections 397 and 398 of the Act alleging oppression and mismanagement in a company. The appellants contested the order, arguing that it was vitiated due to the lack of notice to the Central Government under Section 400 of the Act. The provision mandates that the tribunal must give notice to the Central Government for applications under Sections 397 or 398 and consider any representation by the government before passing a final order.

The judgment highlighted the mandatory nature of issuing notice to the Central Government under Section 400. Referring to previous legal decisions, including a Bombay High Court case and a Supreme Court ruling, it emphasized that the court must provide notice to the Central Government and consider any representations made before making a final decision on petitions under Sections 397 and 398. Failure to comply with this requirement renders the proceedings invalid.

In this case, the Court found that the impugned order did not reflect any notice being issued to the Central Government as required by Section 400. As a result, the order dated 20th March, 2009 was deemed unsustainable in law and was set aside. The matter was remanded to the Company Law Board for fresh proceedings after issuing notice to the Central Government, in line with legal provisions. The judgment concluded by allowing the appeal with no order as to costs, emphasizing the importance of adhering to mandatory statutory requirements for a fair and lawful process.