2020 (3) TMI 527 - HC - Companies Law

Conversion of company from an Unlimited Liability Company to a Limited Liability Company - Section 18 of the Companies Act, 2013 - Non-speaking order - HELD THAT - The reasons supplied in the counter affidavit are of no help to the respondents and the non-speaking order dated 05.10.2016 remains a non-speaking order, even if, the reasons have been given in the counter affidavit filed by the respondent in this writ petition - Thus, the impugned order dated 05.10.2016 deserves to be quashed and set aside. The impugned order is quashed on the ground that it is not a speaking order as no reasons have been given by the concerned respondent authority - petition allowed.

Summary

Issues involved:
Challenge to impugned rule notified by First Respondent, challenge to communication passed by Second Respondent, validity of rejection of company conversion application, non-speaking order issue, application of legal principles regarding reasons for order, necessity of speaking order, direction for fresh consideration of application.

Analysis:
1. The petitioner sought the quashing of the Impugned Rule and Communication, arguing that they were ultra vires the Act and the Constitution. The Senior Counsel for the petitioner contended that the order dated 05.10.2016 should be set aside due to various grounds. It was highlighted that the petitioner's application for company conversion was rejected without reasons provided in the order, constituting a non-speaking order.

2. The court observed that the rejection order lacked reasons, which were later mentioned in the counter affidavit, a practice not permissible in law. Citing the M.S. Gill judgment, the court emphasized that the validity of an order must be judged based on the reasons mentioned in the order itself, and fresh reasons cannot be introduced later. The court reiterated the importance of public orders being clear and objective without the need for subsequent explanations.

3. Relying on legal precedents, the court held that a non-speaking order cannot be converted into a speaking order through subsequent affidavits. The court found the rejection order to be non-speaking and directed the concerned authority to reconsider the petitioner's application, emphasizing the need for a speaking order with reasons provided. The court allowed the writ petition, quashed the impugned order, and instructed a fresh decision on the application within a specified timeframe.

4. The judgment underscored the importance of providing reasons in orders to ensure transparency and accountability in administrative decisions. By setting aside the non-speaking order and directing a fresh consideration with proper adherence to legal requirements, the court upheld the principles of natural justice and procedural fairness. The ruling serves as a reminder of the legal standards governing administrative actions and the necessity of reasoned decisions in legal proceedings.