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Judgment
KANTHI NARAHARI, MEMBER (TECHNICAL)
Preamble:
The Present Application is filed by the Appellant under Rule 11 and 31 of the National Company Law Appellate Tribunal Rules, 2016 to seek appropriate directions in furtherance of NCLAT Judgment dated 02.08.2022, in light of wilful refusal by Respondent No.1 / ABT Ltd. and its nominees in complying with and give effect to the NCLAT judgment.
Brief Facts:
Appellant’s Submissions:
The Learned Senior Counsel for the Appellants submitted that this Tribunal allowed the Appeal filed by them vide its judgment dated 02.08.2022 by setting aside the order of the NCLT dated 29.03.2022.
It is submitted that the Learned NCLT in CP No. 25 of 2022 filed by the 1st Respondent herein, by way of interim order dated 29.03.2022 restrained the Respondents / Appellants from in any manner acting upon or giving effect to any resolution purportedly passed at the EGM held by the requisitionists on 25.01.2022, till the disposal of the Company Petition.
Aggrieved by the said interim order the Appellant / Respondent preferred the Appeal before this Tribunal in CA (AT) (CH) No. 27 of 2022 and this Tribunal after hearing the respective counsel passed judgment on 02.08.2022 by setting aside the interim order passed by the Learned NCLT dated 29.03.2022, thereby the resolutions passed in the EGM held on 25.01.2022 shall be given effective.
It is submitted that the Respondent No.1 herein and its nominees are obstructing the implementation of the EGM Resolutions. This has resulted in a situation where the Appellants, despite holding 77.04% shares in SACL and investing in excess of INR 1000 crores are being unlawfully prevented from acting in pursuance of the EGM Resolutions and take control of their own company (including taking access to the company premises, its factory as well as records). This is contrary to law and the rights under the Articles of Association read with Shareholders Agreement. Such conduct is not only in the face of the NCLAT judgment (which has recognised these rights) but also the well settled principles of corporate democracy.
The NCLAT in its judgment recognised that the EGM was validly held and the Appellant had a right of representation on the SACL Board under the AOA read with SHA. The Learned Counsel relied upon para 76 of the judgment which is reproduced hereunder:
“76.For the foregoing reasons this Tribunal comes to an irresistible and inescapable conclusion that the impugned order passed by the Learned NCLT dated 29.03.2022 in CP No. 25/2022 is hereby set aside. Consequently, the Appeal is allowed with a request to the Learned NCLT to dispose of the CP No. 25/2022 within a period of one month from the date of receipt of copy of this order. The Learned NCLT [at] is liberty to decide all aspects of the respective parties uninfluenced [by] the observations made in this order.”
He further submitted that this Tribunal observed in various paragraphs that the order passed by the NCLT by restraining the Appellants from giving effect i.e. implementing the EGM Resolution is without any proper analysis and no finding recorded. Accordingly, this Tribunal struck down the injunction passed by the NCLT, meaning thereby that the Appellants are allowed to act upon in consonance with and implementing the EGM Resolutions passed at the EGM held on 25.01.2022.
It is submitted that the Respondents have not filed any appeal against the NCLAT judgment before the Hon’ble Supreme Court of India as on the date of filing of this application. Therefore, the resolutions became implementable with immediate effect. The Appellants have filed necessary forms with the Registrar of Companies (ROC), Coimbatore in relation to the appointment of the Appellant nominee directors and the independent directors and complied with the relevant provisions of the Companies Act, 2013.
On 01.09.2022 the new SACL Board held a board meeting and passed certain resolutions. The Company (SGAH) was entitled to access company records and servers, accessing the registered office and the factory, communicating with employees, customers, vendors etc. to effect smooth transition of management. Further on 02.09.2022 the nominee director of Appellant issued an e-mail to the erstwhile MD and CEO of SACL and certain key employees intimating them of the appointment of the CFO and CEO of SACL and also stated and the team of CFO and CEO would be accessing the registered office and the factory premises of SACL. Further requested for a meeting at the registered office on 05.09.2022 at 10:00 AM.
However, the erstwhile MD i.e. Mr. Manickam Mahalingam vide his e-mail dated 03.09.2022 stated that the team coming to access the office / factory would not be entertained, detailed out reasons in the e-mail. However, the said e-mail has not been received by the Nominee of the Appellant. However, in the alleged e-mail Mr. Manickam sought to give a dishonest interpretation to the NCLAT judgment in order to render it an empty decree by stating as under:
“There is no mandatory injunction or order that has been granted by NCLAT in favour of AAPICO for implementing the resolution passed by AAPICO at the EGM held on 25.01.2022. On the contrary, NCLAT has left open all issues for adjudication on the validity of resolutions passed at EGM on 25.01.2022 by the NCLT in a time bound manner. Therefore, in the meanwhile, you cannot take law in your own hands to implement the resolution stated to have been passed in the EGM on 25.01.2022.
With reference to the above e-mail of erstwhile MD, the Learned Senior Counsel submitted that the nominees of the Respondent No.1 are giving a disingenuous interpretation to the NCLAT judgment. He submits that no mandatory injunction is required under law to implement the resolutions passed by the Company. Once resolutions are validly passed by a company in accordance with law, they are immediately implementable. He further submits that the pendency of the CP would not itself mean that the stay or injunction on the EGM resolutions continues and that the same cannot be acted upon. If the Respondents view is accepted it would seriously obstruct the functioning of the company and render corporate democracy nugatory. Therefore, it is unsustainable in law to contend that the EGM resolution cannot be acted until the NCLT gives a final order in the CP.
The Learned Senior Counsel further submitted that this application is inconsequence of and to ensure compliance with the NCLAT judgment and the present application is in furtherance of the judgment passed by this Tribunal.
In view of the reasons as stated above, the Learned Counsel prayed this Bench to grant the following reliefs as prayed in para 37 of the Application viz.:
“(a)This Hon'ble Tribunal be pleased to hold or declare that the pendency of the NCLT proceedings (in CP 25 of 2022) should not serve as an impediment on the management of SACL by its current board of directors;
(b)This Hon'ble Tribunal be pleased to hold or declare that in view of the NCLAT Judgment, the Appellants are entitled to undertake such actions such as holding a board meeting, appointing a CEO, statutory auditor, etc. as is necessary under law and in the interest of SACL;
(c)This Hon'ble Tribunal be pleased to direct Respondent No. 1, its nominees, agents, representatives (including those in occupation of Respondent No. 2) in Respondent No. 2, be directed to comply with and act in accordance with the EGM resolutions passed on January 25, 2022 and any subsequent resolutions passed by the SACL Board at the meeting held on September 1, 2022 or any other resolutions passed by the Board;
(d)This Hon'ble Tribunal be pleased to direct Respondent No. 1, its nominees, agents, representatives (including those in occupation of Respondent No. 2), to immediately cease and desist from obstructing/refusing co-operation or hindering access, either directly or indirectly through his agents, to the company registered office and/or the factory premises by the duly authorised representatives and key management personnel duly appointed by the board on September 1, 2022;
(e)Grant the Appellants ad-interim relief and order in terms of prayers (a) and (c) above; and
(f)Pass any other relief as this Hon'ble Tribunal may deem fit.”
Respondent’s Submissions:
Sh. R. Vidhya Shankar Learned Counsel appeared for the 1st Respondent submitted that the present application is not maintainable for the reason that the directions seeking in this application are beyond the scope of application and the appeal. He submits that this Tribunal (NCLAT) becomes functus officio soon the appeal was disposed of.
He further submits that the jurisdiction of this Tribunal stands exhausted under Section 421(4) of the Companies Act, 2013 as the relief sought for in the appeal has been granted. No further relief expanding the scope of the appeal and the order of the NCLT can be sought for.
The Learned Counsel further submitted that the present application under Rule 31 and 11 of NCLAT Rules, 2016 are not maintainable for the reason that Rule 31 of NCLAT Rules expressly confines the power to pending matters. However, the appeal is not a pending appeal and no recourse can be taken to Rule 31 post disposal of the appeal. With regard to maintainability of the present application under Rule 11 of NCLAT Rules, the Learned Counsel relied upon decision of this Tribunal in Agarwal Coal Corporation Pvt. Ltd. Vs. Sun Paper Mill Pvt. Ltd. (2021) SCC Online NCLAT 367. The Tribunal held as under:
“The Applicant / Appellant cannot fall back upon Rule 11 of the NCLAT Rules, 2016 which provides for “inherent powers”. In fact, Rule 11 of NCLAT Rules, 2016 is not a substantive Rule which showers any power or jurisdiction upon the “Tribunal”.
The Learned Counsel further submitted that under the guise of present application what is sought for is to review the order and get certain directions which were not forming part of original appeal or prayers of either parties. Such power and this Tribunal did not also deem fit to grant at the first instance. The Learned Counsel relied upon the judgment of the Hon’ble Supreme Court on the point that once Court becomes functus officio, judicial orders cannot be called upon to be passed in State of Punjab Vs. Darshan Singh AIR 2003 SC 4179 held as under:
“Section 152 provides for correction of clerical or arithmetical mistakes in judgments, decrees or orders or errors arising therein from any accidental slip or omission. The exercise of this power contemplates the correction of mistakes by the Court of its ministerial actions and does not contemplate of passing effective judicial orders after the judgment, decree or order. ……”
The Learned Counsel further submitted that the Appellant pleads fresh cause of action and multiple reliefs for regulating the conduct of the affairs of SACL. Such new cause of action is beyond the scope of even original Appeal proceedings and such reliefs cannot be now pleaded to seek directions post disposal of appeal.
The Learned Counsel submitted that the remedy of the Appellant is to move appropriate original proceedings since the Company Petition is pending for adjudication.
In view of the reasons as stated above the Learned Counsel prayed this Bench to dismiss the application.
Analysis / Appraisal:
Heard the Learned Counsel for the respective parties, perused the pleadings and citations relied upon by them. After analysing the pleadings, the moot point for consideration is whether this Tribunal exercising its jurisdiction as Appellate Tribunal can grant the reliefs as sought in the Application.
Before proceeding to address the point, it is beneficial to refer to the brief history of the case.
The Applicant filed Appeal before this Tribunal in CA (AT) (CH) No. 27 of 2022 aggrieved by the order dated 29.03.2022 passed by the NCLT, Division Bench-II, Chennai in CP No. 25/CHE/2022. The Company Petition No. 25 of 2022 was filed by the 1st Respondent herein under Section 241 & 242 of the Companies Act, 2013 by arraying the Appellants and the Company as Respondents alleging certain acts of oppression and management in the affairs of the Company. While matter stood thus, the Learned NCLT on 29.03.2022 passed the interim order as follows:
“The Respondent are restrained from in any manner acting upon or giving effect to any resolution purportedly passed at the EGM held by the requisitionists on 25.01.2022, till the disposal of the present Company Petition.”
Aggrieved by the aforesaid interim order, the Appellant being the Respondent before the NCLT filed the Appeal bearing No. 27 of 2022 with the following main reliefs:
“(a)Set aside the order dated 29.03.2022 passed by the Hon’ble NCLT, Division Bench, Chennai in Company Petition No. 25/2022; or
(b)Grant any other reliefs and pass any other orders as this Hon’ble Tribunal may deem fit and proper in the facts and circumstances of the case and in the interest of justice; and
(c)for costs.”
The Appeal was contested by the Respondent/Petitioner and after hearing the Appeal elaborately this Tribunal allowed the Appeal on 02.08.2022 by setting aside the order passed by the NCLT dated 29.03.2022.
The Learned NCLT vide order dated 29.03.2022 restrained implementing or giving effect the resolutions purportedly passed at the EGM held on 25.01.2022. The NCLT did not restrained from convening and holding the EGM scheduled on 25.01.2022, however, only restrained from implementation of the resolutions passed at the EGM till the disposal of the CP.
It is to state that the SGAH (Sakthi Global Auto Holdings Limited) on 15.11.2021 issued a requisition under Section 100(2)(a) of the Companies Act, 2013 calling upon the current SACL (Sakthi Auto Component Limited) Board to call an EGM inter-alia to pass resolution for removing the existing Directors who are Sakthi Groups/ABT Nominees from the SACL Board and appointing Additional Aapico Nominee Directors in accordance with articles.
However, the SACL Board failed to act on the notice dated 15.11.2021 accordingly, the SGAH exercised its statutory right under Section 100 and issued a notice dated 29.12.2021 (EGM notice) calling for the EGM of SACL to be held on 25.01.2022 by video conference at 10:00 am for passing resolutions relating to appointment of Aapico Nominee Directors and removal of the ABT Nominee Directors. The EGM notice was sent to the members and also all the Directors of SACL.
While so, the EGM meeting held on 25.01.2022 the resolutions were unanimously passed by the attending shareholders with the requisite majority, however, the resolutions have not been implemented in view of the interim order passed by the NCLT dated 29.03.2022.
As stated (supra) the Appellant in their Appeal sought an order / direction to set aside the order passed by the NCLT dated 29.03.2022 whereby the NCLT restrained in implementing the resolutions passed at the EGM held on 25.01.2022.
This Tribunal sets aside the order of the NCLT dated 29.03.2022 thereby the restraint order passed by the NCLT in implementing the resolution passed at the EGM dated 25.01.2022 stand vacated and the company is at liberty to implement the resolutions passed at the EGM dated 25.01.2022.
The Applicant categorically stated at para 12 & 13 of the Application that pursuant to passing of the judgment by this Tribunal, the SACL Board, the Company filed Forms with the Registrar of Companies (RoC) in relation to the appointment of Appellant nominee directors and the independent directors and complied with Section 117 of the Companies Act, 2013 and the appointment of the directors reflected on the website of the Ministry of Corporate Affairs. As per Section 117 of the Companies Act, 2013 a copy of every resolution or any agreement in respect of matters specified in sub-section (3) i.e. Special Resolution together with the explanatory statement under Section 102 shall be filed with the Registrar within 30 days of the passing or making thereof in such manner and with such fees as may be prescribed.
Thus, the judgment of this Tribunal dated 02.08.2022 has been complied with in toto with regard to implementation of the resolution passed at the EGM held on 25.01.2022.
It is made clear that the Appeal before this Tribunal is restricted to the relief that the interim order passed by the NCLT dated 29.03.2022 to be set aside and this Tribunal in its judgment dated 02.08.2022 allowed the Appeal by setting aside the order of the NCLT dated 29.03.2022. It is further made clear that no other reliefs sought in the Appeal and with the disposal of the Appeal this Tribunal becomes functus officio.
The Learned Senior Counsel for the Applicant contended that the Respondents have prevented the newly constituted Board from accessing the company / factory premises and the records / servers /books of accounts of the company, and also contended that the newly formed board unable to take any steps to meet Company’s (SACL) compliances under law including filing of Annual Returns, Financial Statements with the RoC and appointment of Statutory Auditors, hold Annual General Meetings etc. Further, it is contended that new board is facing as eminent risk of civil and criminal liability for non-compliances and sought the reliefs as detailed out in para 13 (supra).
From the reliefs, sought in this Application this Tribunal is of the view that the Applicants are seeking entirely new reliefs and the said reliefs are in the nature of fresh cause of action and completely out of the purview of this Tribunal. Further, the Applicants have not exercised its original jurisdiction with regard to these reliefs before the appropriate forum in accordance with law. By filing the present Application and seeking the reliefs are ‘per se’ is without jurisdiction and beyond the scope of Application / Appeal and wasting the precious time of this Tribunal.
Once the Appeal is disposed of, this `Tribunal’ becomes `Functus Officio’ and no further `Application’ is maintainable, with regard to the reliefs, which are in the nature of `Fresh Cause of Action’.
The `Application’ is an attempt of `vexatious act’, without approaching the `Proper Forum’, by exercising its jurisdiction as per `Law’.
Conclusion:
This `Tribunal’ comes to an irresistible conclusion that the Application is without jurisdiction and abuse of process of law and liable to be dismissed with costs. Accordingly, the point is answered against the Applicant. Resultantly, the I.A. No. 833 of 2022 in Company Appeal (AT) (CH) No.27 of 2022 is dismissed. However, this `Tribunal’, exercising its `subjective discretion’, refrain itself from `imposing the costs’.