2023 (8) TMI 414 - AT - Companies Law

Oppression and Mismanagement - seeking to grant waiver to the Petitioners in order to enable them to file application under Section 241 of the Companies Act, 2013 - HELD THAT - A reading of the provision of Section 399 of Companies Act, 1956, much less Section 399(4) would show that for the purpose of maintaining the petition under Section 399(1)(a)(b) of the Act, 1956, the Central Government was given the power to form an opinion in this regard as to whether it is just and equitable to do so. It is categorically provided in Section 244 proviso that the Tribunal can waive all or any of the requirements specified in clause (a) or clause (b) of Section 244 to enable the members to apply under Section 241. Meaning thereby, if the conditions in Clause 244(a) and 244 (b) are not waived and the Applicant is not qualified so far as condition enumerated in Section 244(1)(a)(b) are concerned then the application itself would not be maintainable and the Tribunal cannot proceed with it for the purpose of taking it to any conclusion. It appears that original applicants sensed that it would be in their interest to seek waiver under Section 244 of the Act, therefore, application bearing 533 of 2020 was filed during the pendency of the main application. In the said application, the applicants of application bearing 272 of 2016, who have raised the issue regarding the maintainability of the application even under Section 399 of the Act, 1956. The deemed waiver, which has been granted, is nowhere provided in Section 244 of the Act rather the Act says that the Tribunal has to take a decision in regard to the merit of the application as to whether the waiter has to be given in respect of clause (a) and (b) of Section 244(1) and that order should not be arbitrary or capricious but should be speaking and reasoned. Since, the reasons are conspicuous by its absence in the order which has been passed in Para 8 of the impugned order, which goes to the root of the case because until and unless waiver is granted the petition shall not be considered as maintainable and no further order can be passed in it. There is serious error on the part of the Tribunal in recording its finding by which waiver has been granted and the petition has been held to be maintainable which deserves to be set aside - the impugned order is set aside. The matter is remanded back to the Tribunal - Appeal allowed.

Summary

Issues Involved:
1. Maintainability of the petition under Sections 397, 398, 402, 403 of the Companies Act, 1956.
2. Waiver of the qualification mandated in Section 244 of the Companies Act, 2013.
3. Preliminary issue regarding the validity of consents given by the consenting shareholders.

Summary:

This order disposes of four appeals against a common impugned order dated 06.12.2022. The original Company Petition No. 18/ND/2015 was filed by two shareholders against the Company and its shareholders and directors, invoking Sections 397, 398, 402, 403 of the Companies Act, 1956. The petition sought to supersede the Board, declare independent management of the Sonepat Unit, recommend demerger, and other reliefs. The petition was initially dismissed by the Company Law Board but was restored by the Punjab and Haryana High Court.

Issue 1: Maintainability of the Petition

Respondents raised an issue regarding the maintainability of the petition under Section 399 of the Companies Act, 1956, by filing CA No. 272 of 2016. The Company Law Board ordered that this application be taken up with the main case. The Tribunal later heard an application for waiver of the qualification mandated in Section 244 of the Companies Act, 2013, filed by the original petitioners (I.A. No. 533 of 2020).

Issue 2: Waiver of Qualification under Section 244

The Tribunal granted the waiver without providing reasons, which was contested by the appellants. The Tribunal's decision was challenged on the grounds that it was arbitrary and lacked a speaking and reasoned order. The appellants relied on the decision in Cyrus Investments Pvt. Ltd. & Anr. Vs. Tata Sons Ltd. & Ors., which emphasized that waiver orders must be judicial in nature and not arbitrary.

Issue 3: Preliminary Issue on Validity of Consents

The Tribunal did not decide the preliminary issue raised in CA No. 272 of 2016 regarding the validity of consents given by the consenting shareholders. The Tribunal's approach of not addressing this preliminary issue and proceeding with the waiver application without hearing the respondents was found to be against the principles of natural justice.

The Appellate Tribunal found serious errors in the Tribunal's order, particularly in granting the waiver and holding the petition maintainable without a reasoned order. The appeals were allowed, and the impugned order was set aside. The matter was remanded back to the Tribunal to consider and decide CA No. 272 of 2016 as a preliminary issue and CA No. 533 of 2020 after giving due opportunity to the respondents. The Tribunal was directed to decide the matter preferably before 30th September, 2023.