2022 (4) TMI 265 - AT - Companies Law

Tribunal orders expunging of harmful remarks to protect Appellant's interests

The Tribunal focused on expunging specific observations made by the NCLT in the Impugned Order to prevent potential harm to the Appellant in future ... Expunction of observations recorded without affording notice - right to be heard / audi alteram partem - restoration of company name to the Register of Companies subject to compliance - prejudice in collateral proceedings from untested factual imputationsExpunction of observations recorded without affording notice - right to be heard / audi alteram partem - prejudice in collateral proceedings from untested factual imputations - Whether the observations in the NCLT order recording that an amount of Rs. 5 crores was paid to respondent no. 6, that the land is in possession of the company and flats were to be delivered to homebuyers should be expunged because the appellant was not put to notice or heard on that point. - HELD THAT: - The Tribunal confined itself to the narrow question of whether the impugned observational statements should be expunged, and did not decide the merits of the underlying Joint Development Agreement, possession or payment disputes. It noted that the appellant had no objection to restoration of the company's name and that the Registrar of Companies did not prefer an appeal. The Tribunal found that the impugned statements were recorded on the early-hearing date without giving the appellant notice or an opportunity to be heard; such untested factual imputations could cause harm if used in collateral proceedings. In these circumstances the Tribunal held that the appropriate remedy was to delete the specific observational passage from the NCLT order while leaving the restoration order intact, since the appellant's grievance related solely to those observations and not to the restoration itself. [Paras 8, 9]The impugned observations concerning payment of Rs. 5 crores, possession of the land and delivery of flats are expunged from the NCLT order; the restoration of the company's name remains unaffected.Final Conclusion: Appeal allowed in part: the Tribunal expunged specific observational statements made by the NCLT that were recorded without putting the appellant to notice, while upholding the restoration of the company's name to the Register of Companies subject to compliance. Issues:1. Restoration of the name of the Company in the Register of Companies without notice to the Appellant.2. Observations made by the NCLT causing potential harm to the Appellant Company.3. Dispute over the Joint Development Agreement (JDA) and possession of land.4. Locus standi of the Appellant to file the Appeal.Issue 1: Restoration of the Company's NameThe Appellant challenged the Order passed by NCLT restoring the name of the Company in the Register of Companies without providing notice to the Appellant. The Appellant contended that the observations made in the Impugned Order against the Appellant Company, without notice, could cause irreparable harm.Issue 2: Observations Causing Potential HarmThe NCLT directed the Registrar of Companies to restore the name of the Company subject to certain conditions. The Appellant's main grievance was with specific observations regarding the payment of 5 crores to a respondent and the development of land for flat buyers. The Appellant argued that these statements could be detrimental in collateral proceedings.Issue 3: Dispute Over JDA and Land PossessionThe Appellant highlighted clauses from the JDA indicating the responsibilities of the Company in completing development and payment of security deposit. The Appellant asserted that legal and physical possession of the project land always remained with them, emphasizing the terms of the agreement.Issue 4: Locus Standi of the AppellantThe Respondents contended that the Appellant lacked the standing to file the Appeal, emphasizing the societal perspective and the need to support the revival of the Company. However, the Tribunal focused on the specific issue of expunging certain observations made by the NCLT to prevent potential harm to the Appellant in future proceedings.In the judgment, the Tribunal acknowledged the existence of the JDA between the parties but refrained from delving deep into the merits of the agreement. The decision primarily revolved around expunging specific observations to safeguard the Appellant's interests. The Tribunal emphasized the lack of notice to the Appellant during the proceedings and the potential harm that could arise from the observations. Ultimately, the Appeal was disposed of with a directive to modify the Impugned Order by expunging certain statements and uploading the Judgment on the Tribunal's website.