2021 (10) TMI 390 - AT - Companies Law

Appellate Tribunal: NCLT violated rules, denied fair opportunity.

Zee Entertainment Enterprises Limited Versus Invesco Developing Markets Fund & Ors

The Appellate Tribunal found that the National Company Law Tribunal (NCLT) violated Rule 37 of the NCLT Rules and the Principles of Natural Justice by not ... Principles of Natural Justice and fairness - Appellant's request for the grant of sufficient time to file its reply/counter to the Company Petition, rejected - grant of only short span of less than two days of filing reply, correct or not - HELD THAT:- It is pertinent to mention that Section 98 of the Companies Act, does not prescribe any time limit or limitation on the Learned NCLT to pass order within that time limit. Engrafting the provisions of Section 100(4) in Section 98 would be wholly misconceived and untenable. Undisputedly, the reliefs sought in the Company Petition are specifically under Section 98 of the Companies Act. Given that Section 98 does not prescribe any time limit, the Learned NCLT ought to have granted reasonable time to the Appellant to file a reply. It is clear that the Learned NCLT has committed an error in not granting reasonable and sufficient time for filing a reply, which is a complete violation of Rule 37 of NCLT Rules and Principles of Natural Justice - reasonable and sufficient opportunity should be given to the Appellants for filing a reply - Appeal disposed off. Issues Involved:1. Violation of Rule 37 of the NCLT Rules and Principles of Natural Justice.2. Failure to grant reasonable time to file a reply/counter to the Company Petition.3. Jurisdiction and maintainability of the Company Petition.4. Grant of ad-interim reliefs identical to final reliefs at the interim stage.Issue-wise Detailed Analysis:1. Violation of Rule 37 of the NCLT Rules and Principles of Natural Justice:The Appellant contended that the National Company Law Tribunal (NCLT) grossly violated Rule 37 of the NCLT Rules and the Principles of Natural Justice by denying sufficient time to file a reply/counter to the Company Petition. The NCLT listed the petition for hearing within six days of its filing and granted less than two days for the Appellant and Respondent Nos. 3 to 9 to file their replies, without issuing any notice until 5 October 2021. This short span effectively denied the Appellant an opportunity to present its case, thereby violating the principles of natural justice.2. Failure to Grant Reasonable Time to File a Reply/Counter to the Company Petition:The Appellant argued that the NCLT failed to provide a reasonable and fair opportunity to file their reply/counter to the Company Petition. Despite the statutory provision under Section 100 of the Companies Act, which allows a three-month period to call a meeting, the NCLT only granted time till 7 October 2021 to file replies. The NCLT's order dated 5 October 2021 emphasized that the respondents were aware of the case facts and circumstances, thus granting a short period was sufficient. However, the Appellant contended that this did not allow adequate time to prepare a comprehensive response.3. Jurisdiction and Maintainability of the Company Petition:The Appellant submitted that objections regarding the jurisdiction and maintainability of the Company Petition should be decided before any hearing. They argued that the final and ad-interim reliefs sought in the petition were identical, and granting interim reliefs would amount to granting final reliefs at the interim stage, which is impermissible.4. Grant of Ad-interim Reliefs Identical to Final Reliefs at the Interim Stage:The Appellant pointed out that the NCLT granted ad-interim reliefs that were identical to the final reliefs sought in the petition without providing a reasonable opportunity to file a reply. The NCLT directed the respondents to consider the requisition made by the petitioners under Section 100 of the Companies Act, 2013, positively and comply with it. The Appellant argued that such orders should not be passed without allowing them to file a counter.Discussion and Findings:The Appellate Tribunal noted that the Company Petition was filed on 29 September 2021, and listed for hearing on 30 September 2021, citing grave urgency. The NCLT heard the arguments of Respondent Nos. 1 and 2 at length and directed the respondents to consider the requisition made by the petitioners under Section 100 of the Companies Act, 2013. The NCLT observed that the timeline prescribed in the Act and the constraints on the Tribunal must be considered, and granted time till 7 October 2021 for the respondents to file their replies.The Appellate Tribunal highlighted that Section 98 of the Companies Act does not prescribe any time limit for the NCLT to pass orders and that Rule 37 of the NCLT Rules mandates issuing notice and allowing reasonable time to file a reply. The Tribunal concluded that the NCLT committed an error by not granting sufficient time, thereby violating Rule 37 and the Principles of Natural Justice.Conclusion:The Appellate Tribunal opined that reasonable and sufficient opportunity should be given to the Appellants to file a reply. After hearing both parties, the NCLT should proceed further. The appeal was disposed of accordingly, with no order as to costs.