High Court dismisses Civil Revision Petition, directs addressing fraud allegations before NCLT

The High Court dismissed the Civil Revision Petition at the admission stage, advising the petitioner to address allegations of fraud and illegality before the National Company Law Tribunal (NCLT) due to ongoing related proceedings. The Court emphasized the importance of utilizing statutory remedies, particularly in cases involving fraud, and highlighted the need to respect the statutory framework before seeking judicial intervention under Article 227.

---

---

Issues:
1. Petition seeking reliefs under Sections 241 and 242 of the Companies Act, 2013 before the National Company Law Tribunal (NCLT).
2. Application for interim relief regarding disputed shareholding and Board of Directors' representation.
3. Allegations of fraud, cheating, and breach of trust in transferring shares in violation of NCLT orders.
4. Invocation of Article 227 of the Constitution of India for intervention.
5. Jurisdiction and powers of the High Court under Section 227 vis-a-vis statutory alternative remedies.

Issue 1:
The petitioners filed Company Petition No.20/2018 before the NCLT under Sections 241 and 242 of the Companies Act, 2013 seeking various reliefs, including a declaration of oppressive acts by respondents 2 to 5, alteration of the Register of Members, and payment of costs. The NCLT had issued interim orders to maintain disputed shareholding and directed parties to advance arguments. Subsequently, the petitioner filed I.A.No.421/2018 seeking to set aside the induction of additional Directors and extend the time for a rights issue. The NCLT granted liberty for fundraising subject to conditions and recorded consensus between parties.

Issue 2:
The petitioner alleged that despite NCLT directions, the 2nd respondent misused share transfer forms, committed fraud, and transferred shares in violation of orders. The petitioner sought to set aside the induction of Directors and representation based on equity shareholding percentages. The matter was pending, and the petitioner approached the High Court invoking Article 227, citing irregularities in conducting meetings and transferring shares.

Issue 3:
The High Court considered the petitioner's contentions and reviewed relevant legal precedents on the scope of Article 227 jurisdiction. Referring to Supreme Court decisions, the Court emphasized the need for caution in exercising wide powers under Article 227, especially in cases of grave dereliction of duty or abuse of law. The Court highlighted the availability of alternative remedies under the Insolvency and Bankruptcy Code, 2016, and the distinction between lack of jurisdiction and wrongful exercise of available jurisdiction.

Issue 4:
The Court found that the allegations of fraud and illegality raised by the petitioner were intertwined with pending matters before the NCLT, emphasizing that such issues should be addressed within the appropriate legal forums. The Court concluded that it could not adjudicate on the alleged violations of undertakings or consensus orders while related proceedings were ongoing. Consequently, the Civil Revision Petition was dismissed at the admission stage, with the petitioner advised to pursue their grievances before the NCLT as per the law.

Issue 5:
The judgment underscored the limitations of the High Court's intervention under Article 227 in matters where statutory alternative remedies exist. The Court highlighted the importance of respecting the statutory framework, particularly in cases involving alleged fraud or illegality, and reiterated the need for parties to utilize available legal avenues for redressal. The dismissal of the Civil Revision Petition at the admission stage underscored the Court's adherence to legal procedures and the principle of exhausting statutory remedies before seeking extraordinary judicial intervention.

---