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Judgment
[Per: Justice Sharad Kumar Sharma, Member (Judicial)]
These are three Company Appeals which are listed today as fresh. They commonly arise out of the proceedings which were held in CP No. 44/241/HDB/2023 before NCLT, Hyderabad Bench. There are some very crucial issues, which are required to be dealt by this Tribunal. But we make it clear at this stage itself, that we are not at all disturbing the order of 07.03.2025, which is a subject matter of challenge, in Company Appeal (AT) (CH) No.39/2025. Today's order would be an order exclusively relating to the Company Appeal (AT) (CH) No.43/2025 and Company Appeal (AT) (CH) No.44/2025.
In Company Appeal (AT) (CH) No.43/2025, the Appellant challenges the impugned order dated 25.03.2025, which was passed on a memorandum preferred by the Administrator on 20.03.2025, seeking clarification/rectification of the order passed on 07.03.2025 by NCLT, Hyderabad, in confirming the order dated 10.03.2025, which was said to have been passed in a suo motu proceedings drawn under Rule 154 of NCLT Rules. The said order of 10.03.2025 by virtue of which certain rectifications were ordered to be carried out in the order passed on 07.03.2025 is a subject matter of challenge in Company Appeal (AT) (CH) No.44/2025. The principal order dated 07.03.2025 is a docket order, which was delivered on the said date, in which the Ld. Tribunal had passed an order for deferring the enforcement of the order under challenge, i.e., 07.03.2025. The docket order is extracted hereunder: -
“5.Though we have ordered for appointment of an Administrator for Escientia Advanced Sciences Private Limited (EASPL), the consent of the person whom we intend to appoint is not yet received. Likewise, we are yet to receive the consent of Valuer. As a result, we are unable to get the order uploaded or issue certified copy thereof.
6.No doubt, the findings that we have arrived at in our order have come into force/ effect upon pronouncement of the order today, however, actual takeover of EASPL by the Administrator can take place only when we confirm his appointment. In our order we have given three days' time for the proposed Administrator to signify his consent.
7.In this backdrop, we are of the opinion that only to facilitate the 'aggrieved' party to go in Appeal against our order, we are of the view that enforcement of today's order be deferred till 18.03.2025 with a direction to the respondents 2, 3, 4, 5 and 6 not to take any policy decision and/or major decisions including changes in financial and administrative matters of EASPL.
Ordered accordingly”.
After passing of the order on 07.03.2025, the proceedings of the CP No. 44/241/HDB/2023, was shown to have been taken up, by way of a suo motu proceedings, upon a mention by the Ld. Senior Counsel for the Respondent herein alleged to have been conducted in exercise of the powers under Rule 154 of the NCLT Rules, for the purposes of making a minor rectification, chanced due to clerical error, which chanced in the judgment of 07.03.2025. Rule 154 of the NCLT Rules reads as under: -
“154. Rectification of Order.-
(1)Any clerical or arithmetical mistakes in any order of the Tribunal or error therein arising from any accidental slip or omission may, at any time, be corrected by the Tribunal on its own motion or on application of any party by way of rectification.
(2)An application under sub-Rule (1) may be made in Form No.NCLT 9 within two years from the date of the final order for rectification of the final order not being an interlocutory order.”
The provision of Rule 154 of the NCLT Rules, provides power with the Tribunal of ‘rectification’. The rectification herein would mean only making any clerical or arithmetical mistakes in the order within the scope contemplated under it, arising out of an accidental slip or omission, which could only be corrected by the Tribunal, “on its own motion” or on an application preferred under Sub-rule (2) of Rule 154, which prescribes the format i.e., NCLT-9, under which the application contemplated under Sub-rule (1) of Rule 154, is to be preferred. Exercising the aforesaid powers, the Ld. Tribunal is shown to have passed an order on 10.03.2025, whereby certain rectifications were permitted to be carried in the light of the observations made in Para 11 of the order dated 10.03.2025. The corrections, which are thus permitted to be carried were dealt with in Para 11 of the said judgment, are extracted hereunder: -
The original para reads as under: -
“11.Learned senior counsel Mr. Vivek Reddy also mentioned that in the order dated 07.03.2025 in CP No. 45/241/HDB/2023 instead of mentioning “EASPL” which is typographical error. Therefore same needs to be corrected. We are satisfied that it is typographical error crept in inadvertently. Therefore amended order by deleting the “EASPL” and substituted as “EBPL”. Let the correct order by uploaded at the earliest.”
The rectified order is as under: -
11.Learned senior counsel Mr. Vivek Reddy also mentioned that in the order dated 07.03.2025 in *CP No. 44/ 241/ HDB/ 2023 instead of mentioning “EBPL” it has been stated as “EASPL” which is typographical error. Therefore same needs to be corrected. We are satisfied that it is typographical error crept in inadvertently. Therefore amended order by deleting the “EASPL” and substituted as “EBPL”. Let the correct order by uploaded at the earliest.
It is contended by the Respondents that, since the rectifications as ordered by the order as issued on 10.03.2025, was rendered by the Tribunal, while exercising powers under Rule 154 of the NCLT Rules, was not incorporated in the order passed on 07.03.2025, the Administrator filed a memorandum praying for, passing of the following orders. The relevant part is extracted hereunder: -
“10.That the typographical omissions occurred in the Common Order dated 07.03.2025, along with the corresponding rectifications are detailed in the table below:
Page Ref. Extract from Order Correct Version Pg. 589 (A)Mr. Devaki Vasudeva Rao … as the Administrator of Escientia Advanced Sciences Private Limited… (A)Mr. Devaki Vasudeva Rao … as the Administrator of Escientia Advanced Sciences Private Limited and Escientia Biopharma Private Limited…
Pg. 590 (ii) Upon the appointment of the Administrator, the powers of the present Board of EASPL, shall stand suspended until further orders and the Administrator shall take control of all the affairs and the management of EASPL. ii) Upon the appointment of the Administrator, the powers of the present Board of EASPL and EBPL, shall stand suspended until further orders and the Administrator shall take control of all the affairs and the management of EASPL and EBPL. Pg. 590 (iii) The Directors of EASPL shall provide all the required support to the Administrator for proper administration of all the affairs of the EASPL. (iii) The Directors EASPL and EBPL shall provide all the required support to the Administrator for proper administration of all the affairs of the EASPL and EBPL. Pg. 592 (vii) If the petitioners themselves or through any investor agree to buy out the shares of EASPL within the time stipulated as above, the 2nd respondent is bound to accept the offer and exit from EASPL.
(viii) …shares of 2nd respondent in EASPL within … Petitioners in EASPL within a period of 15 (fifteen) days of offer.
(vii) If the petitioners themselves or through any investor agree to buy out the shares of EASPL and EBPL within stipulated as EASPL and the time above, the 2nd respondent is bound to accept the offer and exit from EASPL and EBPL. (viii) …shares of 2nd respondent in EASPL and EBPL within … Petitioners in EASPL and EBPL within a period of 15 (fifteen) days of offer. Pg. 593 (x) If the company is acquired by either of the group with the exit of the opponent group, the Administrator is directed to report the same to the Tribunal immediately, so that appropriate orders can be passed for taking control of EASPL by the acquirer groups. (x) If the company is acquired by either of the group with the exit of the opponent group, the Administrator is directed to report the same to the Tribunal immediately, so that appropriate orders can be passed for taking control of EASPL and EBPL by the acquirer groups. Pg. 594 (xii) … launched in or outside the country against EASPL/ and its directors... Legal proceedings for and against EASPL For the acts of omission ог commission in EASPL, in … (xii) …launched in or outside the country against EASPL, EBPL and its directors ... Legal proceedings for and against EASPL and EBPL … For the acts of omission or commission in EASPL and EBPL, in … Pg. 595 (xiii) The officers/ managerial persons of EASPL... (xiii) The officers / managerial persons of EASPL and EBPL … Pg. 595 (xv)... any of the assets of the of EASPL... (xv) ... any of the assets of the of EASPL and EBPL... Pg. 596 (xvi) Bank Account of ... the EASPL maintained ... (xvi) ... Bank Account of the EASPL and EBPL maintained… Pg. 596 … herewith to operate the Bank Account of EASPL... ... herewith to operate the Bank Account of EASPL and EBPL.. Pg. 596 (xvii) … Bank Account of the EASPL.. (xvii) ... Bank Account of the EASPL and EBPL Pg. 598 …as the Valuer for valuing the shares of the Company Petitioners in EASPL and the 2nd respondent ... ... as the Valuer for valuing the shares of the Company Petitioners in EASPL and EBPL and the 2nd Respondent… 11.That it is also submitted that an inadvertent typographical error has also occurred in the Bench Order dated 07.03.2025 of CP No. 44/241/HDB/2023 which are as follows:
| Page Ref. | Extract from Judgment | Corrected Version |
|---|---|---|
| Pg. 3 | 4… we have ordered for Escientia Advanced Sciences Private Limited (EASPL),… | 4. … we have ordered for Escientia Biopharma Private Lmited (EBPL)… |
| 5. … actual takeover of EASPL,… | 5. … actual takeover of EBPL. | |
| Pg. 4 | 6. … financial and administrative matters of EASPL. | 6. … financial and administrative matters of EBPL. |
This memorandum, as preferred by the Administrator, seeking rectification of the typographical omission, in the order of 07.03.2025 and 10.03.2025, was filed on 20.03.2025. However, if the memorandum thus preferred, is taken into consideration in its entirety, it cannot be said to be exclusively confined to the implementation of the order of 10.03.2025, as it was passed under Rule 154 of the NCLT Rules for making necessary corrections in the judgment of 07.05.2025 on basis of order of 10.03.2025, which was based on a so-called percept of suo motu cognizance taken by the Tribunal under Rule 154 of the NCLT Rules, 2016.
On detailed scrutiny and particularly the schedule, as contained in para 10 of the memorandum filed by the Administrator, under no common prudence, it could be said that, it was simpliciter intending to implement the order of 10.03.2025. Rather, it was intended to add something more than what was contemplated or intended in the order of 10.03.2025. Learned Tribunal has passed an order on the said application on 25.03.2025, which is now subject matter of challenge in the Company Appeal (AT) (CH) No.43/2025, while putting a challenge to the order passed on it dated 25.03.2025 and 10.03.2025.
The basic parameters for putting a challenge to the said order dated 25.03.2025, as agitated by the Ld. Senior Counsel for the Appellant, is that the order dated 10.03.2025, involving rectification of order under Rule 154 of the NCLT Rules, and the order passed on 25.03.2025, on a memorandum filed by the Administrator, ordering rectification of orders of both 07.03.2025 & 10.03.2025 it is in utter derogation to the principle of natural justice, as the Appellants were not served with its copy nor were heard, and the order was permitted to be modified on the basis of a memorandum preferred by the Administrator above. Thus, they contend that the order happens to be bad in the eyes of law as it suffers from vices of audi alteram partem.
Another question which emerged for consideration was that, how could there be a rectification of a docket order dated 07.03.2025, by an order passed on 10.03.2025 when the order of 07.03.2025 effecting substantive rights, itself was uploaded for the first time on 11.03.2025. It is argued by the Ld. Senior Counsel for the Appellant that if the order was uploaded on 11.03.2025, the same couldn't have been modified a day prior to it, that is by an order dated 10.03.2025.
But the same is being answered to the contrary by the Respondents stating that since the docket order was uploaded on 07.03.2025 itself, i.e., the day when it was passed, the modification made by exercising of Suo motu powers under Rule 154 of the NCLT Rules was justified even though the main order was uploaded later.
The said contention is being vehemently opposed by the Ld. Senior Counsel for the Appellant on the ground that,
When the docket order of 07.03.2025, which a summarized extract of judgment, itself was uploaded on 07.03.2025, the inference would be that in fact the principal judgment of 07.03.2025 was brought in public domain on 07.03.2025 itself, though detailed reasons were uploaded on 11.03.2025. And it is because of that reason the docket order of 07.03.2025, also containing an interim order, attained finality even though part of it was uploaded later on 11.03.2025.
ii) Secondly, it was submitted that, the order couldn't have been rectified under Rule 154 of the NCLT Rules, by an order passed on 10.03.2025 when the main judgment of 07.03.2025 was uploaded on 11.03.2025, that is a day prior to it.
iii) The Ld. Senior Counsel for the Appellant submits that, in either of the circumstances, whether it is a rectification under Rule 154 of the NCLT Rules, by exercise of suo motu powers or on an application or by drawing a suo motu proceedings, no rectification could have been permitted by the Tribunal, even in the exercise of its suo motu powers, until and unless, all the parties to the proceedings were noticed about the probable order to be passed by the Tribunal on the proposed rectification in the exercise of powers Rule 154 of the NCLT Rules.
It is an admitted case that at the stage of passing of the order on 10.03.2025, or even prior to it no notice of any nature whatsoever was ever issued to any of the parties to the proceedings. Hence, even if the orders of 10.03.2025, is taken as to be an order passed in the exercise of suo motu powers, it would be bad, suffering from derogation of the principles of natural justice, as prior to passing of an order, on much less substantial changes such as arithmetical corrections, the parties are required to be heard, which apparently was not done nor does it reflect that the said power was exercised by the Tribunal in the exercise of suo motu powers.
There is another limb of argument which has been extended by the Ld. Senior Counsel for the Appellant, which is in the context of the provisions contained under Section 420 of the Companies Act, 2013, which prescribes for, that once the appeal under Section 420 of the Companies Act, 2013, has been preferred against an order, no rectification or correction would be permissible of any nature whatsoever. Section 420 of the Companies Act, 2013, and proviso contained in it, is extracted hereunder: -
“420.Orders of Tribunal.—(1) The Tribunal may, after giving the parties to any proceeding before it, a reasonable opportunity of being heard, pass such orders thereon as it thinks fit.
(2)The Tribunal may, at any time within two years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it, and shall make such amendment, if the mistake is brought to its notice by the parties:
Provided that no such amendment shall be made in respect of any order against which an appeal has been preferred under this Act.
(3)The Tribunal shall send a copy of every order passed under this section to all the parties concerned.”
The relevant part, which would be required to be dealt with by this Tribunal, is that of the proviso contained under Section 420(2). What has been argued, by the Ld. Senior Counsel for the Appellant is that the appeal as against the impugned order of 07.03.2025, was already e-filed before the Registry on 14.03.2025 with an advance copy served on the Respondents. He contends that when the appeal was already preferred before the Appellate Tribunal on 14.03.2025, Ld. NCLT could not have entertained the application/memorandum by the Administrator, which was filed on 20.03.2025 i.e., much after filing of the appeal on 14.03.2025. Thus, owing to the restriction imposed by the proviso to Sub-Section 2, as the memorandum as preferred on 20.03.2025, is not maintainable.
It was further argued by the Ld. Senior Counsel for the Appellants, that when the appeal was preferred on 14.03.2025, the same was on the board before the Appellate Tribunal on 19.03.2024, and hence the subsequent memorandum which was filed only on 20.03.2024, by the Administrator would not be maintainable, in view of the bar created by the proviso to Section 420 (2). It has been contended that even the memorandum on which the impugned order of 25.03.2025 was passed, the copy of the said memo/application was never even supplied to the appellants which is fact not denied by Respondents, and as such the orders passed on 25.03.2025 would be bad. And accordingly, based on the grounds that have been agitated by the Appellant that once they have not been served with the copy of the memo filed by the Administrator, passing an order of 25.03.2025, was on the basis of an application filed on 20.03.2025 i.e., subsequent to the e-filing of the appeal on 14.03.2025, against the principal judgment of 07.03.2025. Which is not legally sustainable because of bar of Section 420 of the Companies Act, 2013, that had the copy of the application been served on them before its consideration by Tribunal on 25.03.2025, so as to enable them to place their case before the Tribunal, before passing of the order of 25.03.2025 they could have their say about the propriety of the relief sought for, in the memorandum preferred on 20.03.2025, which was deemed, the impugned order of NCLT dated 25.03.2025 would be in utter derogation of principles of natural justice and will suffer from the vices of audi alteram partem and being in violation of the provisions contained under Section 420 of the Companies Act, 2013.
The docket order of 07.03.2025 itself attaches finality to it, upon being uploaded on 07.03.2025. Finality is more particularly attached when, by the docket order of 07.03.2025, itself was directed not to be enforced for the time specified there. The question would be whether the said order at all subsequently without notice to the other party could be suo motu rectified by the Ld. Adjudicating Authority. What effect such rectification would have to the final order, is altogether a different question which can be answered, only when such rectification, if any is passed after hearing the parties to the proceedings.
The controversy, which we have marginally dealt with as above the implication would be that when the docket order was published, it would be deemed to have been brought into public domain and since it contained an interim arrangement, it would have an effect that once it is uploaded on 07.03.2025, no subsequent alterations could have been permitted without a prior notice. Hence, Comp App (AT) (CH) Nos.43 & 44/2025 Page 18 of 20 as far as the order, dated 10.03.2025 as rendered in CP No. 44/241/HDB/2023, is concerned, being in violation of the uploading of the docket order of 07.03.2025, coupled with the fact, that, as per available records, no prior notice was issued by the Tribunal even while taking a suo motu cognizance, while passing the order of 10.03.2025, the order would be bad in the eyes of law. Hence, the order of 10.03.2025 deserves to be quashed, and is hereby quashed. The Company Appeal (AT) (CH) No.44/2025 would stand ‘allowed’.
As far as the impugned order of 25.03.2025 which is subject matter of challenge of Company Appeal (AT) (CH) No.43/2025, is concerned, it has been passed on a memorandum preferred by the Administrator of 20.03.2025, much after filing of the appeal by the Appellant on 14.03.2025 being Company Appeal (AT) (CH) No.39/2025 on 14.03.2025, before this Appellate Tribunal. Any application for rectification which is filed subsequent to the filing of an appeal would not be entertainable in the light of the embargo created by the first proviso to Section 420 (2). Accordingly, the impugned order dated 25.03.2025 too cannot be made sustainable. Thirdly and most importantly, once the principal docket order was brought into the public domain on 07.03.2025, through uploading, no subsequent amendment could have been permitted in that order, until and unless all the parties to the proceedings who are likely to be affected are noticed. In that view of the matter the order dated 25.03.2025 too cannot be sustained, and the Comp App (AT) (CH) Nos.43 & 44/2025 Page 19 of 20 same is quashed. The Company Appeal (AT) (CH) No.43/2025, would stand ‘allowed’.
The quashing of the impugned orders, as it had been put to challenge in the two connected appeals decided by this judgment, will not prevent the Respondents from filing a fresh application under Rule 154 of the NCLT Rules for seeking a rectification of the order which has to be decided exclusively on its merit taking into consideration the legal consequences flowing from Section 420 of the Companies Act, 2013, as dealt above.
As a consequence of, allowing of the above appeals, all Interlocutory Application would stand ‘closed’.