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Judgment
P.V.Kunhikrishnan, J
The above writ petition is filed mainly challenging Ext.P3 order passed by the National Company Law Tribunal, Kochi Bench (for short NCLT). When this writ petition was filed, the Registry noted a defect about the maintainability of the writ petition. This Court as per order dated 5.1.2021 directed the Registry to number the writ petition and also observed that the question of maintainability can be decided later.
The petitioner represents an association of persons who had deposited money in the financial establishment by name 'Popular Finance Pvt. Ltd' which had its office at Vakayar, Pathanamthitta and branches under various names and styles across the State as well as in various other cities across India. The 3rd respondent herein is one such entity and claims itself to be a Nidhi Company, which is defined under Sec. 406 of the Companies Act, 2013. Nidhi Company ultimately is a mutual benefit society which transforms into a body corporate by notification in the official gazette. The Central Government has promulgated rules for and incidental to with regard to Nidhi Companies, which are in the statute book as Nidhi Rules, 2014.
According to the petitioner, they are a group formed out of the many thousands of depositors in various entities of holding entity which is Popular Finance Pvt. Ltd. under whose label, deposits were solicited from the petitioner. It is also stated in the writ petition that many of the depositors and investors had individually and in groups filed writ petitions before this Court for taking action against respondent Nos.4 and 8 herein, who are the promoters/directors of the Popular Group. This Court directed Investigating agencies like SFIO and CBI to initiate appropriate investigation against them.
It is stated in the writ petition that, the 2nd respondent who was in charge of the accounts and audit of the Popular Group along with certain others, filed a Company Petition as CP 35/2020 before the NCLT arraying the promoters of the Popular Group as the respondents with the Director General of Police as the official respondent. It is the case of the petitioner that this is done ostensibly to take over the assets of Popular Group. The Company Petition is filed by the 2nd respondent herein. It is the case of the petitioner that he is directly involved in the day to day affairs of the Popular Group of Companies. Along with the Company application, an application was filed under Rule 11 of NCLT Rules. It is stated by the petitioner that Company Petition itself is filed without arraying any member of the depositors of the 3rd respondent - Nidhi Company. According to the petitioner, the Company Petition was designed to be considered unopposed with an intention obviously with malafides to obtain orders behind the back of the affected parties, who are the depositors and investors. Interlocutory application was filed seeking inter alia for appointment of an interim management committee consisting of independent professionals to operate as Board of Directors of the 3rd respondent-Nidhi Company. Consequently, Ext.P3 order was passed. According to the petitioner, Ext.P3 order virtually handed the management of a financial institution which is under investigation for embezzlement and fraud pursuant to the orders from this Court. Hence, Ext.P3 order is challenged in this writ petition. The prayers in this writ petition are extracted hereunder :
"(i) Call for the records leading upto Ext.P3 records passed by the Company Law Tribunal, Kochi Bench and quash the same by way of an appropriate Writ, Order or Direction or in lieu of the same.
(ii) Issue a Writ of Mandamus directing the 1st respondent Regional Director to take appropriate action against the erring Nidhi Company for non compliance of the mandatory stipulations.
(iii) Any other writ, order or direction which the Honorable Court deems fit and proper in the circumstances of the case
And
(iv) Award costs."
Heard the learned counsel for the petitioner and the learned counsel who appeared for the contesting respondents.
The learned counsel for the petitioner reiterated his contentions in the writ petition and argued that Ext.P3 order is per se illegal and the same is unsustainable because, this Court in a batch of writ petitions already considered the issue and passed certain specific orders. In such circumstances, NCLT has no jurisdiction to pass such an order. The counsel also raised various contentions to substantiate that, this is a fit case in which this Court should exercise the jurisdiction under Article 226 of the Constitution of India to set aside Ext.P3 order passed by NCLT. The counsel for the petitioner also submitted that, if this Court is not inclined to entertain this writ petition, the interim order already passed may be extended for a breathing time, so that the petitioner can avail the alternative remedies.
Adv.Manoj V. George appeared for certain investors who deposited money with M/s.Mary Rani Popular Nidhi Pvt.Ltd. also supported the case of the petitioner. The counsel also takes me through the written submissions submitted by him. According to the counsel, the 2nd respondent, who approached NCLT with a prayer that forensic audit need to be carried out, is without any bonafides. The counsel submitted that this Court in W.P.(C.) No. 24535/2020 filed by the applicant before the NCLT who made attempt to get the attachment released was directed to approach the special court/designated court had a clear understanding that the Popular Group cases are intrinsically connected. Adv.Manoj, the counsel who appeared for the investors also submitted that many FIRs filed against MRPN and its directors and the CBI is also investigating the affairs of the Company. According to him, the application moved by the applicant in Company Petition No.35/2020 before the NCLT is collusive and with malafide reasons. It is also specifically stated in the written submissions submitted by Adv.Manoj that the listing, hearing and adjudication of the petition before the NCLT on scrutiny would open procedures unheard of in any legal system. The respondents in that petition who were lodged in the jail participated in a collusive litigation. It is also stated that, they planted the Business Development Manager of M/s.Mary Rani Nidhi Pvt.Ltd. as petitioner and filed the Company Petition. It is the case of the petitioner that, suppressing the attachment under the Banning of Unregulated Deposit Schemes Act, 2019 (for short BUDS Act) and proceedings against the Company and directors, based on the judgment delivered by this Court, the company petition is filed. The interlocutory application is moved in NCLT behind the back of the investors. It is also submitted that, when the respondents who was in judicial custody, even without the leave or permission from the court concerned, a video conference was arranged from the jail to attend the NCLT proceedings in violation of all jail rules and obtained an interim order to handle all the cash and other assets of the Company and for the purpose of a namesake forensic audit by co-conspirators. The counsel submitted that Ext.P3 is unsustainable.
On the other hand, the counsel who appeared for the 2nd respondent, Adv. Pratap Pillai submitted that there is nothing to interfere in Ext.P3 order. The counsel also submitted that the writ petition itself is not maintainable because the writ petition is filed under Article 226 of the Constitution of India and the order passed by the Tribunal cannot be interfered by this Court under Article 226 of the Constitution of India. The counsel relied the judgement of this court in W A No.1083/2020 to support the above argument. Moreover, the counsel for the 2nd respondent also submitted that paragraph 8(v) of Ext.P3 order clearly says that the operation of the bank account would be with the permission of the Tribunal or order of any competent court and hence, the malafides alleged by the petitioner will not stand.
I considered the contentions of the petitioner and the respondents. The following points are to be decided in this case.
1) Whether this writ petition filed under Article 226 of the Constitution is maintainable against Ext.P3 order passed by the NCLT.
2) If the writ petition is maintainable, whether Ext.P3 order is to be interfered by this Court in the facts and circumstances of this case.
3) If the writ petition is not maintainable, whether this Court should pass any interim arrangement for facilitating the petitioner to avail his alternative remedy, if any in the peculiar facts and circumstances of this case.
Point Nos. 1 and 2
These two points are inter linked and therefore, I will consider these points together. This writ petition is filed under Article 226 of the Constitution of India. The respondent Nos.2 to 8 and 11 to 13 in this writ petition are all private parties and respondent No.10 is an association. The respondent No.1 herein is the Regional Director, Southern Region, Ministry of Corporate Affairs and the 1st respondent herein is not a party in Ext P3 order. The 9th respondent is the Director General of Police, Police Headquarters, Trivandrum. No relief is prayed against respondent Nos.1 and 9 in this writ petition. Even NCLT is not a party in this writ petition. The challenge in this writ petition filed under Article 226 of the Constitution of India is Ext.P3 order passed by the NCLT. Whether a writ petition filed under Article 226 is maintainable in such situation is considered by a Division Bench of this Court in the judgment dated 9.9.2020 in Writ Appeal No. 1083/2020 after considering almost all the earlier decisions on this point and held like this :
"117. Writ petition filed under Article 226 of the Constitution of India, can be for the enforcement of fundamental rights or for any other purpose, as envisaged under Article 226 of the Constitution. There is no pleadings or materials to substantiate that the appellants are discharging public duties or public functions, and thus, amenable to writ jurisdiction under Article 226 of the Constitution of India.
On a scrutiny of the decisions extracted above, it is clear that in so far as challenge to the judicial acts of the Courts or the Tribunals, in exercise of the powers under Article 227 of the Constitution of India, the High Court exercises overall superintendence on such Tribunals under Article 227. Orders by Courts or Tribunals, as the case may be, can be challenged by way of filing a writ petition under Article 227 of the Constitution of India, and the administrative orders passed by the Courts, or the Tribunals, as the case may be, can be challenged under Article 226 of the Constitution. Administrative orders passed by the State, authority or instrumentality of the State, can be challenged by way of a writ petition under Article 226 of the Constitution of India, as they do not fall under the ambit of superintendence and control, in exercise of Article 227 of the Constitution of India.
Difference between the exercise of powers under Articles 226 and 227 of the Constitution of India has been explained in the foregoing paragraphs. Thus, in the case on hand, when none of the parties, State or authority or instrumentality of the State, or any private body, discharging public functions, have been arrayed as respondents, when the writ petition has been filed under Article 226 of the Constitution of India, having regard to the roster followed in listing the cases, writ court ought to have directed the respondents/writ petitioners to make necessary amendments, to the provisions under which the writ petition ought to have been filed, or in the alternative, directed that the writ petition be placed before the concerned court, dealing with the challenges made to the orders passed by Courts, or Tribunals, as the case may be. Admittedly, the order impugned in the writ petition (Exhibit-P1) is not an administrative order, passed by the National Company Law Tribunal.
Writ court, without drawing a distinction between a writ petition filed under Articles 226 and 227 of the Constitutions of India, has erroneously proceeded to entertain the writ petition under Article 226 against an interim order passed by the NCLT, Kochi Bench, in I.A. No.83/2020 in C.P.No.114/KOB/2019 dated 9.7.2020.
Therefore, according to me, the above writ petition is not maintainable under Article 226 of the constitution of India and consequently, no relief can be granted, in the light of the above authoritative judgment of this Court.
Point No.3
The remaining question is whether this Court should pass any interim arrangement to facilitate the petitioner to avail his alternative remedy in the peculiar facts and circumstances of this case. When this writ petition came up for consideration on 6.1.2021, a learned judge of this Court passed the following order:
"Admit.
Learned CGC takes notice for R1. Notice to R2 to R8. Learned Govt.Pleader takes notice for R9.
There shall be a stay of operation of Ext.P3 order."
The above order is extended regularly and even now is in force. This Court already found that this writ petition is not maintainable because Ext.P3 order cannot be challenged invoking the powers under Article 226 of the Constitution of India. In such circumstances, this Court may not be able to pass any orders invoking the powers under Article 226 of the Constitution of India for facilitating the petitioner to avail his alternative remedy. But I considered the grievance of the petitioner and the additional respondents who appeared through Adv.Manoj V. George. This Court, in a batch of writ petitions, considered the "Unregulated Deposit Scheme" of Popular Group of Companies and its office bearers, directors, promoters, etc. in judgment dated 23.11.2020 in W.P. (C).No.18716 of 2020 and connected cases. After an elaborate consideration of the question in detail, this Court issued certain directions in those writ petitions. The directions issued by this Court are extracted hereunder:
"1) The State Government is directed to frame Rules for the implementation of BUDS Act as expeditiously as possible, at any rate within a period of two weeks from today. There will be a further direction to the State Government to appoint/notify Designated Court in accordance with the mandate under the BUDS Act within that time.
2) The 'competent authority' under the BUDS Act shall exercise its powers under Section 7(3) of the BUDS Act by provisionally attaching the deposits held by the deposit takers either in their name or in the name of any other person on their behalf either independently or jointly, including all the properties which are under attachment under the provisions of KPID Act and all other assets directly or indirectly connected with the various firms run by respondent No.7 to 14 either independently or jointly forthwith.
3) The CBI Courts (Special Court) constituted within Kerala shall hold and exercise the jurisdiction pertaining to the matters within their respective territorial jurisdiction, both civil and criminal under the provisions of the BUDS Act, till the appointment/notification of a Designated Court by the State Government in accordance with provisions of BUDS Act. All actions/ orders/proceedings taken by the CBI Court during the interregnum will stand deemed to have been taken by the Designated Court constituted under the BUDS Act. The provisions contained in the Code of Civil Procedure, Civil Rules of Practice, Code of Criminal Procedure and Criminal Rules of Practice in so far as it is applicable shall be followed in the matter of all proceedings/actions and orders that may be initiated or passed pertaining to the issues, till Rules are framed by the State Government in that behalf. The entire records together with the proceedings/actions and orders shall be forwarded to the Designated Court as soon as it is appointed/notified.
4) The entire investigation pertaining to all crimes with respect to the alleged 'Unregulated Deposit Scheme' including the FIR registered in 1368 crimes is hereby transferred and handed over to the Central Bureau of Investigation. The CBI shall forthwith take over the entire investigation and shall constitute a Special Investigation Team having sufficient expertise in the field of economic offences. There will be a direction to provide sufficient manpower and logistical support to constitute an effective special investigation team, taking into account the voluminous nature of the cases involved and the number of crimes registered. While constituting special investigation team, persons of unblemished integrity and competency should be selected. The State Government shall provide all logistical support to the investigation team."
The above judgment was delivered by this Court on 23.11.2020. Ext.P3 order was passed on 26.11.2020. In the light of the above judgment, whether Ext.P3 order is sustainable or not, is to be decided by the authority concerned, if it is challenged. The counsel for the petitioner submitted that if this Court is not inclined to entertain this writ petition, the interim order already passed may be extended for a short further period so that the petitioner can avail his alternative remedy. Adv.Manoj V. George who appeared for the additional respondent Nos 11 to 13 has got serious allegations even against the procedure adopted by the NCLT. The counsel submitted that the NCLT conducted video conference of a remanded accused by a competent court, even without informing the court concerned. The petitioner and the additional respondent Nos 11 to 13 have got a case that no depositors are impleaded in the company petition and it is an order passed behind the back of depositors. The counsel who appeared for these parties submitted that the applicant before the NCLT is an accused in a criminal case registered in connection with 'Popular Finance scam' which is now investigated by the CBI and other authorities. This Court in the earlier case (W P (c) No.18716/2020) already directed the CBI and other authorities to conduct investigation in the matter. Moreover, this Court also observed that CBI courts (Special Court) constituted within Kerala shall hold and exercise the jurisdiction pertaining to the matters within their respective territorial jurisdiction, both civil and criminal under the provisions of the BUDS Act, till the appointment / notification of a Designated Court by the State Government in accordance with provisions of the BUDS Act. The petitioner and the additional respondents are aggrieved parties. According to them they represent thousands of depositors. The 2nd respondent herein who filed petition before the NCLT also claims that he is also an aggrieved party. According to the petitioner and the additional respondents, Ext.P3 order is passed to take over the assets of the company which is under investigation by the CBI and other authorities. As per Ext.P3 order, an interim management committee is constituted and the committee is directed to carry out certain duties which include the financial, business, operational aspects and to take control of assets, property and bank accounts of the respondents. But this court in W P (c) No.18716/2020, directed the 'competent authority' under the BUDS Act to exercise its powers under Section 7(3) of the BUDS Act by provisionally attaching the deposits held by the deposit takers either in their name or in the name of any other person on their behalf either independently or jointly, including all the properties which are under attachment under the provisions of KPID Act and all other assets directly or indirectly connected with the various firms run by respondent No.7 to 14 in that case either independently or jointly forthwith. Hence the sustainability of Ext P3 order in the light of the judgment of this Court in W.P. (C).No.18716 of 2020 and connected cases has to be decided by the appellate authority, if the same is challenged before the appellate Tribunal. The petitioner submitted that he intends to file an appeal. According to the petitioner and contesting respondents, it is a matter which affect about 30,000 depositors of the company. A perusal of Ext.P3 order will show that the NCLT has not considered the judgment of this Court in W.P.(C). No.18716 of 2020 and connected cases. In such an extra ordinary situation in which it is stated that the order will affect the interest of thousands of depositors, an extra ordinary order can be passed in the peculiar facts and circumstances of this case. Therefore, according to me, in the light of the peculiar facts and circumstances of this case narrated above, by invoking my jurisdiction under Article 227 of the Constitution, it can be ordered that Ext.P3 order should be kept in abeyance for a period of 6 weeks so that the parties can avail their alternative remedy, if any.
Therefore, this writ petition is disposed in the following manner:
Challenge against Ext.P3 order under Article 226 of the Constitution of India is not maintainable.
Invoking the inherent supervisory jurisdiction of this Court under Article 227 of the Constitution of India, operation of Ext.P3 order is stayed for a period of 6 weeks, during which period, the parties are free to avail their alternative remedy.