Mr. G. Senthil Raj vs M/s. Indo Mikasa Green Lighting Pvt.Ltd. & Ors.

[Per: Justice Sharad Kumar Sharma, Member (Judicial)]

Since both these two company appeals are interconnected, are based upon a common question of fact, hence they are being taken up together, for consideration.

The facts, which would be common in both these company appeals are that the 1^st Respondent company, M/s. Indo Mikasa Green Lighting Private Limited stood incorporated in the said capacity on 09.08.2011, and since then was engaged in manufacturing selling, importing and exporting of LED lights, electric lights, other light fittings and electric appliances. In accordance with the Articles of Association of the 1^st Respondent Company at the stage of incorporation of the company, there were three Directors, namely Mr. G. Senthil Raj, (Appellant), Mr. Arun Prakash Sivagurunathan (Respondent No. 2), and Mr. Giridharan Chidambaram, (Respondent No. 3) herein. Subsequently, an Additional Director was also introduced, namely, Mr. Devaraj Siddiah Peranaidu, i.e., Respondent No. 4 herein.

There are various factual aspects, which are required to be referred to, but for the purposes of the instant company appeal, as it is limited to consideration of the aspect of limitation, in IA/1241/2019 and its applicability on the application in IA/1241/2019 to set aside the order of withdrawal of the company petition CP/69/2014 and to re-open it we are not intrinsically dealing with the factual aspects as engaged consideration, in the proceeding, which was held before the Ld. NCLT, Chennai, by way of CP No. 69/2014 in TCP/151/2016, Mr. G. Senthil Raj Vs. M/s. Indo Mikasa Green Lighting Private Limited and 4 Others.

The backdrop of the company petition CP No. 69/2014 is that on 11.04.2012, Respondent No. 1 Company availed a cash credit loan of Rs. 75 Lakhs from Tamil Nadu Mercantile Bank for which the Appellant herein mortgaged his ancestral agricultural property at Olaipatti Village, Salem District, by reporting title deeds other Directors gave personal guarantee. The cash credit facility, was increased to Rs. 1 crore with effect from 28.03.2014, for which the mortgage was extended. The Appellant herein was said to have involved in other business activities, and the affairs of Respondent No. 1 being managed by Respondent No. 2 & 3. In 2014, on receipt of complaints of mismanagement by Respondent No. 2 & 3, the Appellant got an internal audit of the company done and when Respondent No. 2 & 3 did not cooperate, he filed a company petition CP/69/2014 for Oppression and mismanagement against Respondent No. 2 & 3.

Later in 2015, intending to settle the matter amicably, he filed CA No. 1/2015 in the said company petition on 12.10.2015, proposing that either he takes over the company or, Respondent No. 2 & 3 take over the company by buying out rival shares. Initially, Respondent No. 2 & 3 were not agreeable to the compromise proposal, extended by the Petitioner/Appellant herein in CA No. 1/2015. During the pendency of the said application, the accounts of the company was declared NPA by Tamil Nadu Mercantile Bank and proceedings were initiated under Section 13(2) of SARFAESI Act, 2002, and auction notice was issued on the property of the Appellant on 15.04.2017. Subsequently, during the proceedings on 28.09.2017, Respondent No. 2 & 3 intimated their willingness for a settlement by submitting signed SH 4 Forms & the documentation containing resignation of Respondent No. 2 & 3 which led to withdrawal of CP/69/2014 and to passing of the order of Ld. Tribunal dated 28.09.2017 that “the prayer is allowed and the petition is dismissed as withdrawn”.

The Appellant contends that, when the proceedings of the company petition were being carried on 28.09.2017, he could not make himself available personally before the Tribunal even though he used to be present during earlier hearing dates and accordingly he has instructed his Company Secretary to participate in the proceedings on his behalf and to carry on the same as his representing agent, and that he had instructed the Company Secretary not to agree with the proposal of settlement as it has been submitted in the company petition, before the Ld. NCLT.

The Appellant contends that, despite there being, specific instructions imparted by him, to the Company Secretary for not to accept the terms of the compromise which was taken as to be the basis for withdrawal of the company petition, the Company Secretary acceded to the terms of settlement and misled the Tribunal, resulting into passing of an order on 28.09.2017, leading to dismissal of the company petition CP/69/2014. The gist of the said order is extracted hereunder: -

The present controversy, emerges from this stage, which is that when the company petition was dismissed as withdrawn on 28.09.2017, it was much thereafter, on expiry of 594 days, that an application being IA/1242/2019 was filed under Rule 11 to be read with Rule 32 of the NCLT Rules of 2016, seeking recall of the order of dismissal of the company petition as having been dismissed as withdrawn by an order of 28.09.2017, along with an application being IA/1241/2019 praying for condonation of delay of 594 days in the filing the said application.

Primarily, the ground which has been taken by the Appellant in the application thus preferred, by him for seeking recall of the order dated 28.09.2017, was that he did not impart any such instructions for acceding to the terms of settlement, which has been taken as to be the basis for withdrawing of the company petition, and further that the withdrawal of the company petition was as an outcome of a malicious act on part of the Company Secretary as the dismissal of the company petition as withdrawn on 28.09.2017, was a fact, that was never informed to the Appellant, nor he was informed as to what was the outcome of the proceedings, that was held on 28.09.2017. It is contended by the Appellant that, he did receive the information about the dismissal of the company petition as withdrawn by virtue of an email communication given by the Company Secretary on 08.10.2017, which was accompanied by the copy of the final order. From this, it is clear that the Appellant admits the fact that he did get the knowledge of the order dated 28.09.2017, by the email communication of 08.10.2017, about the company petition being withdrawn, but no immediate action appears to have been taken by him thereafter at his behest even after the knowledge on 08.10.2017.

He submits that, since there was already standing instructions to the Company Secretary for not to withdraw the company petition, based upon the terms of any settlement, when the Appellant received the information of the company petition being dismissed as withdrawn on 08.10.2017, he asked the Company Secretary to file an application for recall of the order dated 28.09.2017 and to file an application for reopening of the proceedings of the company petition. It is contended by the Appellant that, the Company Secretary, who was then acting as an agent on his behalf, refused to move any such application for recall of the order dated 28.09.2017, by virtue of his communication, which was alleged to have been made on 03.05.2019.

It is the gap between 08.10.2017 until 03.05.2019, when there was an actual refusal of the Company Secretary to file a recall application as alleged by the Appellant, which is sought to be condoned by the Appellant while filing the application for recall that is, IA No. 1242/2019, which was supported with a Condone Delay Application that is, IA No. 1241/2019. He submits that, he made several phone calls to the Company Secretary and issued a letter on 13.06.2018 to him requesting to re-open the company petition, but there was an express reluctance and tacit denial shown on the part of the Company Secretary for filing of any application for reopening the company petition, that after several follow up messages and issue of detailed letters on 30.01.2019 and 30.04.2019, the Company Secretary finally gave in writing on 03.05.2019, his refusal to file an application for recall supported with Condone Delay Application, and that, this contributed to the delay in filing the recall application IA/1242/2019.

It may be kept in mind that, the Company Secretary who was admittedly engaged by the Appellant to represent his cause in the proceedings of the Company Petition No. 69/2014, at that time, he was acting as his agent on behalf of the Appellant, and in that case, as per settled principles of law the Appellant herein, would be bound by all acts and actions taken by his agent, the Company Secretary on his behalf, when he was representing his cause in judicial proceedings as a professional in the Company Petition No. 69/2014 and at a later stage it will not be left open for the Appellant to contend that, he would be not bound by the act of an agent, whom he has engaged, to represent his cause in the company petition.

Besides this, the theory which has been developed and argued by the Appellant, that after he had received the email communication on 08.10.2017, he kept on waiting for a positive reaction from the Company Secretary, to accede to his request to file an application for recall, is absolutely an untenable proposition, which cannot be accepted by this Tribunal, because it is unbelievable that ever since 08.10.2017 till 03.05.2019, that is, for a period of approximately one and a half years the Appellant will continue to wait for the response of the Company Secretary to file a recall application knowing fully well the fact that, the aspect of limitation will always run against him, if he intended to seek recall of the order dated 28.09.2017. Thus, knowledge of the order and inaction on his parts is apparent from the facts on record. The courts / tribunal is not meant for those who sleep over their rights.

The records, which have been placed before this Tribunal, (except for the application for Condonation of Delay, that is IA No. 1241/2019 and the recall application that is IA No. 1242/2019), which would have been the relevant document to be placed on record so as to enable this Tribunal to determine the reasons, which has been assigned by the appellant in filing of the application. The Ld. Tribunal, while considering the propriety of the Condone Delay Application has observed that, though the order of withdrawal of the company petition was of 28.09.2017, and was passed in the presence of the Petitioner/Appellant’s representative, who according to him was admittedly an authorized person as per Section 432 of the Companies Act to be read with Rule 119 of the NCLT Rules, 2016, the recall application has been filed with 594 days of delay and the only explanation which has been offered by the Appellant is that he was not informed by the Company Secretary of the fact of withdrawal the petition, is contrary to the records.

In support of his contention, qua the application for recall, the Appellant has argued it from two perspectives, that is, as follows:

In order to meet out the said parameters, as attempted to be argued by the Appellant, the Ld. Tribunal took into consideration the previous proceedings, in CP/69/2014 which had been drawn at the behest of the Appellant himself and observed that, for the purposes of concluding the final hearing of the matter, ever since 16.12.2016 till 28.09.2017, there were as many as nine hearings that were held, and during this process, the mode of transfer of shares and release of the Personal Guarantees was considered where the petitioner/and his Company Secretary, were present and in that eventuality, it was no more open for the Petitioner, to allege that, the final order was passed without his knowledge, or without any instructions to his Company Secretary, and that too, without compliance of the provisions contained under Rule 82 (2) of the NCLT Rules, 2016.

There is nothing on record, to show that the authorization, which was executed in favor of the Company Secretary, as per Section 432 of the Companies Act, 2013, to be read with Rule 119 of the NCLT Rules, 2016, was ever withdrawn. Since, the authority, which was being vested with the Company Secretary, was valid and subsisting, and was to carry out all acts and actions in the procedures of the company petition at the behest and on behalf of the Appellant, the Appellant at the stage of passing of the order dated 28.09.2017 cannot submit that, there was non-compliance of Rule 82 of the NCLT Rules, 2016, as argued by the Appellant, owing to the fact that, there was substantial compliance, because his rights and interests were being protected on the basis of the instructions, which was imparted by him to the Company Secretary, which included the instructions to withdraw the petition on his behalf and that too, after his active participation in nine hearings which was conducted by the Tribunal prior to the passing of the order dated 28.09.2017.

The Tribunal, while considering the Condone Delay Application has observed that, in fact, the logic, which has been given in the application, IA No. 1241/2019, seeking Condonation of Delay, was not justifiable, because, knowledge of the order 28.09.2017, is a fact which stands admitted, and imparting of the authority to represent under Section 432 of the Companies Act, 2013, to the Company Secretary, is yet again a fact admitted. It is not the case of the Appellant that on the date of passing of the order of withdrawing the company petition, i.e., on 28.09.2017, the authority of the Company Secretary was withdrawn. It is also not the case of the Appellant that after passing of the order dated 28.09.2017, the information of passing of the order was not intimated by the Company Secretary which is apparent by issuance of the email that was sent by the Company Secretary on 08.10.2017, that is, within 10 days of the passing of the order.

In these eventualities, the Tribunal has rightly observed in the impugned order, that when the Appellant got the knowledge, of withdrawal of the company petition upon issuance of the email communication by the Company Secretary on 08.10.2017, and he kept silent for about two years, prior to filing of the application for the recall of the said order, the delay was indeed inordinate and unexplained, and the Tribunal has rightly rejected the Condone Delay Application. The consequential effect of the rejection of the Condone Delay Application, would be that the application for recall would automatically stand dismissed.

The controversy could be looked into from yet another perspective, that the application for Condonation of Delay, and recall is said to have been preferred under Rule 11 and Rule 32 of the NCLT Rules, 2016. If the language of the aforesaid two provisions are taken into consideration, it does not specifically contemplate filing of an application for recall of an order which is in the shape of a review, which has been solicited by the Appellant himself through his representative, because that will be treated as to be an order that was passed on merits in the presence of the Appellant, though he might have been represented by the representative whose authority was still persisting and was not withdrawn on the date when the order was passed.

The Appellant has given a wrongful interpretation to the provisions contained under Rule 11 of NCLT Rules, 2016, pertaining to the exercise of the deeming provision, which is vested with the Tribunal, for the exercise of inherent powers of the Tribunal to make an order, which may be necessary to meet the ends of justice. The deeming clause for the exercise of inherent powers by the Tribunal, will not be open to be made applicable in those circumstances, where the order has been passed on an act conducted by the Company Secretary on behalf of the Appellant while representing the cause of the Appellant, by voluntarily seeking to get the company petition dismissed as withdrawn. Inherent power comes into play when there is a vacuum under law. But under the given set of circumstances, there did not persist any vacuum as such, for the reason that it was an admitted action which was solicited and performed by the Appellant himself by filing an application for seeking the company petition be dismissed as withdrawn. These circumstances are not the circumstances under which a direction could have been issued for recalling of the order or for condonation of delay as contemplated under Rule 32 and that too, when the condonation of delay, in the instant circumstances is an aspect which does not bona fide satisfy the condition, that the delay was unintentional, because the fact reveals that the knowledge of the order sought to be recalled was attributed to the Appellant, as back as on 08.10.2017. And after that, he sat over for about two years, allegedly awaiting the action to be taken by the Company Secretary for filing the recall application. If the Appellant was so keen on filing the Recall application, nothing in law precluded the Appellant himself from filing an application for recall of the order dated 28.09.2017, in face of alleged inaction on part of his agent, the Company Secretary subject to the condition that it was tenable in accordance with law.

There could be yet another aspect, which could be taken into consideration, while testing the impugned order on the parameters, which has been argued by the Appellant, admittedly from the contents of the order dated 28.09.2017. It apparently seems to be an order, which has been solicited by the Appellant himself through his authorised representative and therefore it will amount to be a consenting order. If the order was a consenting order, it cannot be recalled even by way of filing of an application under Rule 11 of NCLT Rules, 2016, by invoking the inherent powers of the Tribunal, because exercise of inherent powers could have been where the order was passed without a positive act or knowledge being taken from the Appellant for getting the company petition dismissed as withdrawn. In that eventuality, the recall cannot be utilized as a weapon to virtually solicit a review of an order dated 28.09.2017, which the Appellant himself had sought for, that is, to get the company petition dismissed as withdrawn.

Since, the law does not call for any review, which is not statutorily provided, of an order, which has been an order solicited by consent, invocation of the provisions contained under Rule 11 for exercise of inherent powers for filing of a recall application would be absolutely an abuse of process as provisions contained under Rule 11 cannot be utilized to overcome the embargo created by law, where a review is not permissible, and to utilize the recall application in the shape of a review of the order and that too, particularly, when the prior condition of explaining the delay was not satisfactorily done by the Appellant, and once the aspect of delay itself was not satisfactorily explained and when it was established to be based upon a hypothetical anticipation of the Appellant, believing upon the act of the Company Secretary, in that eventuality, the Appellant has to blame himself for his inaction, and that cannot be taken as to be a pretext for condonation of delay. And that too, a long delay of 594 days of filing a recall application, almost after a lapse of about two years.

Besides this there is nothing on record nor the case of the Appellant too that he has drawn any proceedings on disciplinary side for misconduct of the Company Secretary, to be taken by the registering body of the Company Secretary, representing him in the company petition.

Thus, the Condone Delay Application, which has been rejected by the Tribunal by the impugned order, does not suffer from any apparent error, which would call for any interference by this Appellate Tribunal, in the exercise of its Appellate Jurisdiction under Section 421 of the Companies Act, 2013.

Having said so, since the application for Condonation of Delay has been rejected owing to the reasons which has been assigned in the above paragraphs, Company Appeal (AT) (CH) No. 84/2025 would stand ‘dismissed’, its consequential effect would be, that with the rejection of the Condone Delay Application, the recall application too would automatically stand dismissed. Accordingly, the connected company appeal, the Company Appeal (AT) (CH) No. 50/2025 would too stand ‘rejected’.