2020 (5) TMI 541 - HC - Companies Law

Court dismisses appeal seeking transfer of Reliance Industries shares, citing lack of merit and history of re-litigation.

The Court dismissed the appellant's appeal under Section 483 of the Companies Act, 1956, challenging the order of the Company Judge. The appellant sought ... Principles of Natural Justice - refusal to transfer the shares - principal grievance of the appellant in this appeal as well as as argued by the counsel for the appellant is, that the Company Judge has erred in disposing of the application of the appellant, without considering the merits thereof and in terms of the order dated 13th May, 2020 in applications of others and to which the appellant was not a party - HELD THAT:- The appellant, after the alleged purchase of shares in 1997 and refusal of transfer thereof to its name soon thereafter, remained quiet for nearly 14 years, till about October, 2011 when CA No.2436/2011 was filed for directions for transfer of the shares to its name and which application was opposed by the counsel for OL and probably owing to which opposition, the then counsel for the appellant deemed it appropriate to withdraw the relief claimed of transfer of shares from the name of CRB to the name of the appellant with liberty to pursue the claim before the OL. The appellant conveniently concealed the said facts, while filing CA No.491/2019 as well as while filing CA No.242/2020 order of dismissal whereof is impugned in this appeal. Even in this appeal, no reference whatsoever is made to the claim made as far back as in 2011 for transfer of shares to own name and failure therein. Such conduct of the appellant alone is sufficient for dismissal of this appeal. The appellant having preferred this appeal instead of approaching the Company Judge for preponement of hearing of CA No.491/2019 and having taken up the time of this Court and especially after having indulged in concealment of the history of its claim as aforesaid, is not entitled to any indulgence. The present is clearly a case of re-litigation by the appellant of its claim as made in CA No.2436/2011 and which itself was barred by time and belated and was withdrawn. While considering the question of grant of any interim relief to the appellant by way of CA No.242/2020, during the pendency of CA No.491/2019, the merits of CA No.491/2019 definitely have to be considered and once no merit is found in CA No.491/2019, the question of granting any interim relief to the appellant does not arise. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Company Judge erred in disposing of an application for interim relief by reference to an earlier order in respect of other similarly situated applicants to which the applicant was not a party. 2. Whether an applicant who previously pursued and thereafter withdrew substantially identical relief long after the event (with liberty to file claim before the Official Liquidator) is entitled to interim relief or reconsideration without disclosing that earlier history. 3. Whether laches, delay and prior withdrawal of a claim (and related objections raised by the Official Liquidator) preclude grant of interim relief pending determination of a fresh claim asserting the same entitlement. 4. Whether merits of the pending substantive claim must be examined when considering grant of interlocutory relief based on substantially the same facts and claims earlier pursued and abandoned. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Disposition of interim application by reference to an earlier order in proceedings to which the applicant was not a party Legal framework: A court may adjudicate interim relief applications in the context of existing orders affecting the same assets or rights, including appointment of commissioners and directions for sale or preservation, to ensure coherent administration of assets vested in the court. Precedent treatment: The judgment applies general principles of court administration and consistency in orders affecting court-vested assets; no reliance on a new or conflicting precedent was necessary. Interpretation and reasoning: The Court accepted that an order appointing a commissioner to sell entitlements of the company under liquidation to maximize value (an earlier order addressing similarly situated applicants) legitimately affected the relief sought by the applicant. Disposal of the interim application by reference to that earlier operative order was therefore appropriate where the relief sought was inconsistent with or rendered otiose by the earlier order. Ratio vs. Obiter: Ratio - Where a prior operative order establishes a mechanism (e.g., appointment of a commissioner to sell rights entitlements) that supersedes the specific interim relief sought, a later identical interim prayer can be disposed of by reference to that operative order. Conclusion: No error in disposing of the interim application by reference to the earlier order; the Company Judge's reliance on the operative earlier order was justified. Issue 2 - Effect of prior pursuit and withdrawal (with liberty to file claim before the Official Liquidator) on entitlement to interim relief and on need for disclosure Legal framework: Parties must not suppress material procedural history; prior applications and their dispositions bear directly on claims for interim relief. Withdrawal with liberty to pursue statutory remedies (e.g., before the Official Liquidator) affects subsequent litigation strategy and limitation considerations. Precedent treatment: The Court treated the prior withdrawal and the reasons/opposition raised by the Official Liquidator as legitimately relevant to later proceedings, without needing to cite or rely on external case law. Interpretation and reasoning: The Court found that the applicant had earlier filed a substantially identical application, faced opposition (including on limitation and merits), and then withdrew with liberty to file claims before the Official Liquidator. The applicant failed to disclose this history in subsequent filings and in the present appeal. Such concealment and non-disclosure are material and justify denial of indulgence; recurrence of the same claim after withdrawal is treated as re-litigation and is subject to scrutiny for delay and abuse. Ratio vs. Obiter: Ratio - Concealment of prior substantially identical proceedings and withdrawal relevant to the claim is a legitimate ground to refuse indulgence and to treat subsequent applications as re-litigation; non-disclosure can lead to dismissal. Conclusion: The applicant's failure to disclose prior proceedings and withdrawal disentitled it to indulgence; the conduct justified dismissal of the appeal and rejection of interim relief. Issue 3 - Laches, delay, statutory remedies and the applicability of limitation/Order XXIII principles to the renewed claim Legal framework: Delay and laches are relevant in equitable and interlocutory relief; parties who slept over rights for long periods may forfeit equitable protection. Order XXIII Rule 1 CPC and principles against re-litigation limit revival of claims after withdrawal without adequate explanation. Precedent treatment: The Court treated established procedural and limitation principles as applicable to bar belated repeat claims; specific case law was not necessary to decide the point. Interpretation and reasoning: The applicant remained inactive for nearly 14 years after the alleged purchase and initial refusal of transfer, filed a claim in 2011 which was withdrawn after opposition including limitation objections, and later sought the same relief afresh. The Court held that such delay, coupled with the earlier withdrawal and the lack of explanation for the prolonged inaction, rendered the claim barred by waiver/laches and susceptible to dismissal. The Court also noted that merely changing counsel or passage of time does not revive a claim or permit circumvention of Order XXIII principles. Ratio vs. Obiter: Ratio - Prolonged inaction and prior withdrawal of an identical claim, particularly when opposed on limitation, justify dismissal of a later claim as barred by delay/laches and procedural principles (including Order XXIII consequences), absent satisfactory explanation. Conclusion: The claim was vulnerable to being barred by delay and procedural rules; this justified refusal of interim relief and dismissal of the appeal. Issue 4 - Need to examine merits of pending substantive claim before granting interlocutory relief Legal framework: Interim relief is discretionary and is commonly conditioned on prima facie merits, balance of convenience and absence of irreparable injury. A court may assess the likely merits of the substantive claim when deciding interim measures. Precedent treatment: The Court applied standard interlocutory principles requiring consideration of the merits of the substantive application before granting interim relief, particularly where there is re-litigation and prior adverse procedural history. Interpretation and reasoning: The Court observed that the merits of the pending substantive petition (seeking transfer of shares) had to be considered in deciding the interim application seeking entitlement to participate in a rights issue. Given the prior withdrawal, the Official Liquidator's objections (including alleged fraudulent preference, prohibition orders preceding the alleged purchase, and delay), and the absence of satisfactory explanation, the Court found no merit in the substantive claim such as would support interim relief. Therefore, the interlocutory application could not succeed. Ratio vs. Obiter: Ratio - Where a substantive claim appears meritless on available materials and is tainted by delay/concealment, interim relief premised on that claim should be refused. Conclusion: The lack of prima facie merit in the substantive claim, combined with delay and concealment, precluded grant of interim relief pending determination of the substantive petition. Final Disposition Given the operative earlier order affecting the same entitlements, the applicant's failure to disclose prior identical proceedings and withdrawal, the prolonged inaction and attendant limitation/laches objections, and the absence of prima facie merit in the substantive claim, the appeal lacked merit and was dismissed.