Supreme Court's Ruling on Corporate Disputes and Companies Act Interpretation

The Supreme Court referred corporate disputes to the National Company Law Tribunal, emphasizing independent handling without influence from the High Court. The Section 397/398 Petition was deemed maintainable for the appellant holding 10% share capital in the holding company. Specific subsidiaries were directed to be added as parties, with the holding and subsidiary companies treated as one entity if the corporate veil is lifted. The Court upheld the High Court's decision on the interpretation of the Companies Act, 1956, and disposed of the appeals accordingly.

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Issues:
1. Jurisdiction of National Company Law Tribunal in corporate disputes.
2. Maintainability of Section 397/398 Petition.
3. Treatment of subsidiary companies in the Petition.
4. Correct interpretation of the Companies Act, 1956.

Jurisdiction of National Company Law Tribunal:
The Supreme Court, comprising Hon'ble Mr. Justice Pinaki Chandra Ghose and Hon'ble Mr. Justice Rohinton Fali Nariman, granted leave and decided to refer the disputes to the National Company Law Tribunal. The Court emphasized that the Tribunal should handle the case independently and in accordance with the law, without being influenced by any observations made by the High Court.

Maintainability of Section 397/398 Petition:
The appellant was granted the right to raise all points, including the tearing of the corporate veil, in the Section 397/398 Petition. The Court held that the Petition was maintainable as the appellant held 10% of the share capital in the holding company. It was clarified that the High Court's decision to treat the Company Petition under Section 397/398 and not Section 235 of the Companies Act, 1956, was upheld.

Treatment of subsidiary companies:
The Court ruled that the subsidiary companies against whom no allegations were made in the Petition need not be added as parties. However, specific subsidiary companies and certain respondents were directed to be added as parties. The Court highlighted that if the corporate veil is lifted, the holding and subsidiary companies would be considered as one entity for the purpose of granting relief in the Petition.

Correct interpretation of the Companies Act, 1956:
The Supreme Court clarified that the High Court's decision regarding the treatment of the Company Petition under Section 397/398 and not Section 235 of the Companies Act, 1956, was correct. The judgment upheld the view that the subsidiary companies should not be struck from the array of parties, as they would be regarded as one entity if the corporate veil is lifted. The Appeals were disposed of with these terms.

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