2022 (3) TMI 118 - AT - Companies Law

Review application - bonafide error or not - Oppression and Mismanagement by the then Managing Director - company is incorporated for charitable purpose - HELD THAT - What is an error apparent on the face of record cannot be defined precisely or exhaustively, there being an element of indefiniteness inherent in its very nature and it must be left to be decided judiciously, on the facts of each case. It is to be remembered that the Companies Act, 2013 does not clothe the Tribunal to Review its own order and Judgment. But Section 420(2) of the Companies Act, 2013 is empowering the Tribunal to act any time within two years from the date of the order in order to rectify any mistake apparent from the record, amend any order passed by it and to make such amendment, if a mistake is brought to its notice by the Litigants/Stakeholder. Undoubtedly, a Tribunal has no inherent power of review as per Civil Procedure Code. However, the Tribunal has the requisite power to set right/rectify any mistake apparent from record and to amend an order accordingly - The power of Review is not an Inherent Power and Rule 11 of the National Company Law Rule, 2016 cannot be pressed into service. Furthermore, there is no express provision that showers Power of Review upon the National Company Law Tribunal either in an express fashion or by means of necessary implications, as the case made be. As far as the present case is concerned, even though the Appellant has preferred the instant Company Appeal (AT)(CH) 11 of 2022 before this Tribunal, as against the impugned order dated 11.03.2020 in IA No. 29/KOB/2020 in TCP/21/KOB/2019, under Section 421 of the Companies Act, 2013, since the Central Government has established the Serious Fraud Investigation Office to investigate fraud relating to a Company and that the Central Government is to assign the investigation into affairs of a Company by Serious Fraud Investigation Office and its Director may designate such numbers of Inspectors, as he may consider necessary, for the purpose of such investigation vide Section 212 of the Companies Act, 2013 by following the procedure under Section 213 of the Companies Act, 2013, in stricto sense of the term. When the Prime Grievance of the Appellant is that the impugned Order dated 11.03.2020 in IA No. 29/KOB/2020 in TCP 21/KOB/2019 on the file of the National Company Law Tribunal, Kochi Bench that the said Order was passed without hearing the Central Government being the Primary Competent Authority then, the Central Government/Union of India (through Serious Fraud Investigation Office) ought to have preferred the Appeal against the impugned order dated 11.03.2020. However, such recourse has not been resorted to. Viewed in that perspective, this Tribunal unresistingly comes to a consequent conclusion that the Appellant/Registrar of Companies, Kerala is not the proper and competent person to prefer the instant Company Appeal. Appeal dismissed.

Issues Involved:
1. Filing of statutory returns and financial statements by the company.
2. Allegations of oppression and mismanagement.
3. Appointment of an interim administrator.
4. Non-cooperation by the company's managing director and other directors.
5. Appointment of an auditor and investigation by the Serious Fraud Investigation Office (SFIO).
6. Legal validity of the Tribunal's order directing SFIO investigation.
7. Authority of the Central Government in initiating investigations.
8. Competency of the appellant to file the appeal.

Detailed Analysis:

1. Filing of Statutory Returns and Financial Statements:
The Learned Counsel for the Appellant stated that the 1st Respondent/Company had filed the statutory returns, including annual returns and financial statements, up to the financial year ending 31.03.2017. The company had 57 promoters/members, a net worth of ?1,23,87,566.43, and a turnover of ?15,49,421/- as per the latest annual returns filed.

2. Allegations of Oppression and Mismanagement:
In CP No. 29/2017, the petitioners alleged numerous acts of oppression and mismanagement by the then Managing Director of the company. The Tribunal, on 28.08.2018, ordered that the company's affairs needed to be put on the right track and appointed an interim administrator to oversee the company’s operations.

3. Appointment of an Interim Administrator:
The Tribunal, on 31.10.2018, appointed Hon’ble Mr. Justice Narayana Kurup (Retd.) as an administrator, superseding the existing board to manage the company’s functions until further orders. The case was later transferred to the National Company Law Tribunal, Kochi Bench, and renumbered.

4. Non-cooperation by the Company's Managing Director and Other Directors:
The administrator reported non-cooperation from the then Managing Director and other directors in providing necessary documents. Despite several requests and directions from the Tribunal, the required documents were not submitted, leading the administrator to appoint a Chartered Accountant to review the available records and identify irregularities.

5. Appointment of an Auditor and Investigation by SFIO:
The National Company Law Tribunal, Kochi Bench, directed the Serious Fraud Investigation Office (SFIO) to investigate the company's affairs and appointed Mr. Babu A Kallivayalil as an auditor. The appellant contended that this order was passed without considering the provisions of Sections 210 and 212 of the Companies Act, 2013, which authorize only the Central Government to sanction such investigations.

6. Legal Validity of the Tribunal's Order Directing SFIO Investigation:
The appellant argued that the Tribunal's order was bad in law as it did not consider the judgment of the National Company Law Appellate Tribunal, New Delhi, which stated that an adjudicating authority is not competent to directly order an SFIO investigation. The Tribunal should have followed the procedure laid down in Section 213 of the Companies Act, 2013, and referred the matter to the Central Government for investigation if a prima facie case was made out.

7. Authority of the Central Government in Initiating Investigations:
The appellant referred to judgments emphasizing that only the Central Government has the power to direct SFIO investigations under Sections 210, 211, and 212 of the Companies Act, 2013. The Tribunal’s order was passed without hearing the Central Government, the primary competent authority, thus granting more relief than what was sought in the interim application.

8. Competency of the Appellant to File the Appeal:
The Tribunal concluded that the appellant, Registrar of Companies, Kerala, was not the proper and competent person to file the appeal. The appropriate authority to appeal the Tribunal's order was the Central Government (Union of India through SFIO), as they are the aggrieved party authorized to initiate investigations under the Companies Act, 2013.

Conclusion:
The appeal was dismissed on the grounds that the appellant was not the proper authority to file it. The dismissal does not preclude the Central Government from challenging the impugned order before a competent forum if it so desires.

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