2024 (6) TMI 1450 - AT - Companies Law

Procedural Consolidation Order Under Section 421 Does Not Impair Substantive Rights of Parties in Company Petitions

A. Vijayan & Ors. Versus M/s. Silver Line Retreat Hotels Private Limited & Ors.

NCLT procedural order for consolidating multiple company petitions was deemed non-appealable under section 421 of Companies Act. The SC determined that ... Scope of appealable order - whether the procedural order passed by the National Company Law Tribunal (NCLT), which directed the consolidation of multiple pending company petitions for adjudication by an appropriate bench, falls within the ambit of appealable orders under section 421 of the Companies Act? - HELD THAT:- In the instant case, when the proceedings were taken up on 09.05.2024, the bench of the Learned Tribunal, realized the fact that there are other Company Petitions which were pending, and hence the Tribunal thought it appropriate to refer the matter to the Hon’ble Chairperson for nomination of the appropriate bench, so that all the matters which are similar in nature, are decided together. This order itself will not amount to be an adjudication of any of the rights to the party to the proceedings. The observation thus made that the court is not inclined to grant any Interim Relief, “at this juncture”, has been misconstrued by the learned counsel for the Appellant, as if it amounts to denial of the Interim Order. That may not be the case and the correct interpretation of the order for the reason being that the court has expressed his inability to consider the Interim Relief Application at that stage owing to the reasons already given in the preceding paragraph of the Impugned Order as well as this Judgment too. On this simple count and arguments itself, the Learned Counsel for the Appellant has burdened the litigant to this appeal with the preparation of 7 volumes of documents running to 1312 pages, for no good purpose or valid reason. Conclusion - The appeal is not maintainable as the procedural order does not affect the appellant's rights. Appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment is whether the procedural order passed by the National Company Law Tribunal (NCLT), which directed the consolidation of multiple pending company petitions for adjudication by an appropriate bench, falls within the ambit of appealable orders under section 421 of the Companies Act. Specifically, the issue revolves around whether such a procedural order affects any substantive rights of the parties involved, thereby making it subject to appellate jurisdiction.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The legal framework primarily involves section 421 of the Companies Act, which provides for appeals against orders of the NCLT. The interpretation of what constitutes an 'order' under this section is central to the issue. The Tribunal emphasizes that an appealable order must materially affect or adjudicate the rights of a party to the proceedings.Court's interpretation and reasoning:The Tribunal interprets the term 'order' under section 421 as one that must have a direct impact on the rights of the parties involved. The procedural order in question, which merely consolidates pending petitions for efficient adjudication, does not meet this criterion as it does not decide any substantive rights. The Tribunal reasons that the consolidation aims to avoid contradictory judgments and ensure judicial efficiency, rather than adjudicating on the merits of any party's rights.Key evidence and findings:The Tribunal notes that the NCLT's order was procedural, intended to streamline the adjudication process of similar petitions. The appellant's argument that the denial of interim relief affects their rights is examined, but the Tribunal finds that the NCLT's decision to defer interim relief was due to the pending consolidation, not a denial on merits.Application of law to facts:Applying section 421, the Tribunal concludes that the procedural nature of the NCLT's order does not fall within the ambit of appealable orders. The Tribunal finds that no substantive rights were adjudicated or affected by the consolidation directive, thus the appeal lacks grounds under the specified legal framework.Treatment of competing arguments:The appellant argued that the refusal to grant interim relief constituted an appealable order. The Tribunal addressed this by clarifying that the interim relief was not denied but deferred pending consolidation. The Tribunal criticized the appellant's interpretation as a misreading of the NCLT's procedural stance, emphasizing that the consolidation was necessary for coherent adjudication.Conclusions:The Tribunal concludes that the appeal is not maintainable as the order in question does not affect any substantive rights. The procedural order for consolidation is not within the scope of section 421, and the appeal is dismissed. The Tribunal also reprimands the appellant for burdening the court with excessive documentation without substantive grounds.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:The Tribunal states, 'any order passed by the Learned Adjudicating Authority, which is not materially affecting or deciding any right of the party to the proceedings will not fall within the ambit of the Appellate Jurisdiction under section 421.'Core principles established:The judgment establishes that procedural orders, which do not adjudicate or affect substantive rights, are not appealable under section 421. The decision underscores the importance of judicial efficiency and coherence in handling multiple related petitions.Final determinations on each issue:The Tribunal determines that the appeal is not maintainable as the procedural order does not affect the appellant's rights. The dismissal of the appeal should not be construed as affecting the pending interim relief application, which remains to be adjudicated on its merits post-consolidation.