2017 (10) TMI 1552 - HC - Companies Law

High Court Upholds NCLT's Order, Emphasizes Direct Appeals

The High Court dismissed the writ petition challenging the NCLT's interim order, emphasizing that grievances should be addressed before the NCLT. It ... Seeking restraint on directors from transferring any immovable property of the company to respondent - also seeking directors from expelling the appellants from the membership of the company - HELD THAT:- The writ petitioners, who also claim to be directors of the company, but not made parties before the NCLT, being aware of the proceedings as before the NCLT, filed the writ petition and challenged the interim order as passed by the NCLT and based thereon the learned single Judge has granted interim relief as noted above. We have heard the appellants as well as the respondents and have considered the matter. In our view, as the proceedings before the NCLT are pending and as the NCLT has assumed jurisdiction in the matter, to avoid multiplicity of proceedings, it would only be just and proper that respondents 1 to 9 herein who were the nine writ petitioners, approach the NCLT and raise their grievance. They are at liberty to raise the issue of jurisdiction as well, if they are so advised. But surely the orders of the NCLT cannot be assailed in this indirect manner. Let it be noted that under the provisions of the Companies Act, 2013 against any order of NCLT, an appeal lies to National Companies Appellate Tribunal. In such situation, the learned single Judge ought not to have entertained the writ petition nor passed the interim order - the writ petition is dismissed with liberty to the parties to move the NCLT in the matter for whatever relief they may seek. Issues:1. Maintainability of the application before the National Company Law Tribunal (NCLT).2. Allegations of oppression and mismanagement by the appellants.3. Interim order passed by the NCLT and subsequent expulsion of petitioners.4. Challenge to the interim order by writ petitioners before the High Court.5. Jurisdiction of the NCLT and the High Court in the matter.6. Applicability of provisions of the Companies Act, 2013.7. Decision on the writ petition and the interim order.1. Maintainability of the application before the NCLT:The three appellants filed applications before the NCLT, Chennai Bench, alleging oppression and mismanagement in a Public Company limited by guarantee. They sought orders to restrain directors from transferring property and expelling them from membership. The NCLT passed an interim order in favor of the appellants, which was later challenged.2. Allegations of oppression and mismanagement by the appellants:The appellants complained of oppression and mismanagement within the company, leading to their applications before the NCLT. Despite the interim order, they were expelled from company membership, resulting in contempt proceedings before the NCLT.3. Interim order passed by the NCLT and subsequent expulsion of petitioners:The NCLT issued an interim order restraining property transfer and membership expulsion. However, the petitioners were still expelled, prompting them to challenge the NCLT's decision through a writ petition before the High Court.4. Challenge to the interim order by writ petitioners before the High Court:The writ petitioners, who were also directors of the company but not party to the NCLT proceedings, filed a petition against the NCLT's interim order. The High Court granted interim relief, leading to the appeal against this decision.5. Jurisdiction of the NCLT and the High Court in the matter:The High Court emphasized the pending proceedings before the NCLT and the jurisdiction assumed by the NCLT in the case. It suggested that the writ petitioners should address their grievances before the NCLT to avoid multiple proceedings and stated that the NCLT's orders should not be challenged indirectly through a writ petition.6. Applicability of provisions of the Companies Act, 2013:The High Court highlighted the appeal process under the Companies Act, 2013, stating that appeals against NCLT orders should be directed to the National Companies Appellate Tribunal. It emphasized that the writ petition should not have been entertained, and the interim order was vacated.7. Decision on the writ petition and the interim order:The High Court dismissed the writ petition, allowing the parties to seek relief from the NCLT directly. It concluded that the writ petition should not have been entertained, and the appeal was allowed, vacating the interim order.