2009 (3) TMI 584 - HC - Companies Law

Trade union petition dismissed for lack of standing; court emphasizes adherence to Companies Act rules

Airport Authority Employees Union, Bangalore Versus Union of India

Airport Authority Employees Union, Bangalore Versus Union of India - [2010] 101 SCL 250 (KAR.) Issues:1. Petitioner seeking investigation into the affairs of a company.2. Jurisdiction of the High Court to entertain a public interest litigation.3. Allegations of fraudulent and unlawful activities by the company.Analysis:Issue 1: Petitioner seeking investigation into the affairs of a companyThe petitioner, a registered trade union, filed a public interest litigation alleging that the company in question had not utilized the land as per the acquisition purpose and had made false statements regarding expenses incurred. The petitioner sought mandamus to direct an investigation by the Serious Fraud Investigation Office. The court noted that the petitioner was not a party directly involved in the company's affairs and lacked standing to invoke section 234 of the Companies Act. It emphasized that a stranger cannot trigger an investigation into a company's activities under the Act. The court highlighted that the Registrar's report to the Central Government must be based on factual information from the company's records. As the petitioner's grievance fell outside the scope of the Act, the court found it impermissible in law to entertain the petition.Issue 2: Jurisdiction of the High Court to entertain a public interest litigationThe court further held that the petitioner's claim under company law did not entitle them to approach the High Court. It emphasized that the petition did not allege fraudulent use of public funds and that the proper course of action for the petitioner was to address their concerns through legal channels. The court stressed that the High Court should not overstep the jurisdiction established under the Companies Act, as doing so would constitute a serious error in exercising judicial review powers conferred by the Constitution.Issue 3: Allegations of fraudulent and unlawful activities by the companyThe court concluded that the petitioner's assertions regarding the company's expenses did not provide a basis for the High Court to intervene. It highlighted that the company's actions should be addressed through the mechanisms set out in the Companies Act rather than through a public interest litigation. The court dismissed the petition, emphasizing that the petitioner should pursue their rights through appropriate legal avenues and imposed a cost of Rs. 5,000 on the petitioner.In summary, the High Court dismissed the petition filed by the trade union, emphasizing that the petitioner lacked standing to seek an investigation into the company's affairs and that the allegations did not warrant High Court intervention. The judgment underscored the importance of following legal procedures established under the Companies Act and refraining from overreaching the court's jurisdiction in matters concerning company affairs.