2025 (10) TMI 13 - AT - Companies Law

Restoration petition dismissed where appellants had withdrawn, accepted settlement, and revival would be futile and raise new issues

Ramandeep Singh Ahluwalia & Anr. Versus Sun Time Energy Ltd. & Ors., Delhi

NCLAT (PB) dismissed the restoration petition by appellants no.1 and no.2 seeking revival as petitioners in the company petition. The Tribunal held they ... Dismissal of restoration petition - appellants sought restoration of their status as petitioners no. 1 and 2 in the Company Petition - HELD THAT:- Admittedly, per order dated 18.11.2014, the Ld. Company Law Board had noted the appellants no. 1 and 2 does not wish to participate and prosecute the proceedings before the Company Law Board and it was only upon objections raised by someone else, their withdrawal applications were dismissed, as not pressed. In any case the stand of appellants no. 1 and 2 was absolutely clear; both never wished to participate in the proceedings and rather did not participate in it from 2014 till I.A. No. 321/2023 was filed. Admittedly in its order dated 19.01.2016, the Ld. Company Law Board had observed the company petition survive only qua petitioners no. 3, yet the appellants failed to file any appeal or clarification against the said order dated 19.01.2016, till 2023. Admittedly none of the appellants had challenged the settlement agreement between the parties and in fact the appellants had moved an application viz IA No.122/C-1/2014 praying for withdrawal of the company petition on the basis the appellants have compromised the matter with Respondent No. 3, but since the appellants require the Ld. Company Law Board to withdraw the entire company petition, hence, per order dated 29.08.2014 it was not allowed, since Petitioner No.3 was still holding his field. It shall be a futile exercise to allow the appellants no. 1 and 2 to continue with Company Petition No. 40(PB) of 2012; as agitating their rights in the company affairs would merely be an academic exercise and would rather open new issues, not agitated since 2014. So far other issues viz inheritance, etc., the appellants shall be at liberty to take recourse to the appropriate provisions of law, if available. Appeal disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the petitioners (original petitioners no.1 and no.2) were effectively deleted from the array of parties in the company petition such that they must seek restoration of their names before their counsel could represent them. 2. Whether statements made in court by petitioners' counsel and subsequent non-appearance constitute estoppel and justify refusal to restore their status in the company petition. 3. Whether a settlement agreement entered into between parties and (allegedly) partially performed can be treated as null and void so as to permit restoration of petitioners to prosecute the company petition. 4. Whether sale/transfer of entire shareholding by petitioners during the pendency of the company petition divests them of locus to obtain substantive relief under the statutory remedy for oppression and mismanagement, rendering continuation of the petition academic. 5. Whether inordinate delay (seven years) in seeking restoration, without having challenged earlier orders, negates the right to be restored. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Effectiveness of deletion from array of parties / requirement to seek restoration Legal framework: The Court examined whether an order or chronological record established that petitioners had been removed from the memo of parties and whether that removal required an application for restoration before counsel could represent them. Precedent treatment: The judgment considered authorities recognizing that validity of a petition must be judged at the time of presentation and that substitution may be permissible; however, those authorities were held to be on different facts where petitioners continued to be members. Interpretation and reasoning: The Tribunal relied on contemporaneous orders and order-sheet entries recording that petitioners stated they did not wish to prosecute the petition, did not appear thereafter, and that the petition 'survives only qua Petitioner No.3' with other petitioners deleted from the memo of parties. The Tribunal treated those recorded manifestations and subsequent non-appearance as establishing deletion and as a basis to require formal restoration before representation. Ratio vs. Obiter: Ratio - a party's consent to stand out of proceedings, when recorded and followed by non-appearance, is a sufficient basis for deletion from the array and for requiring formal restoration; Obiter - ancillary observations on procedural niceties of how amended memos could have been filed (not decisive). Conclusion: The Court concluded that the petitioners were effectively treated as deleted for practical purposes and that the NCLT's direction requiring restoration before reappearance was not a misreading of earlier orders. Issue 2 - Estoppel by counsel's statement and non-appearance Legal framework: The judgment applies principles of representation and binding effect of statements made in court by counsel, together with conduct-based estoppel, as relevant to party status and entitlement to relief. Precedent treatment: Authorities were discussed insofar as they address locus at time of institution versus subsequent conduct; the Tribunal distinguished those authorities because they did not deal with deliberate withdrawal of participation and long acquiescence. Interpretation and reasoning: The Tribunal found that the counsel's recorded statement that petitioners did not wish to participate, combined with continued non-appearance and failure to challenge the order that the petition survived only qua the remaining petitioner, produced estoppel. The Court emphasized that the statement of counsel is binding and was not refuted, and that petitioners had chosen not to prosecute the action. Ratio vs. Obiter: Ratio - recorded statements and prolonged non-participation can estop a party from later seeking restoration; Obiter - comments on alternative remedies outside the company petition (e.g., other legal avenues) are illustrative. Conclusion: Petitioners were estopped from denying deletion or from claiming an entitlement to restoration without acceptable explanation for their conduct. Issue 3 - Effect of settlement agreement and its alleged breach on entitlement to restoration Legal framework: The Tribunal considered contractual principles (performance and repudiation) in relation to a family settlement that included transfer/resignation and mutual withdrawal from civil/criminal proceedings, and whether breach of that settlement revived petitioners' rights in the company petition. Precedent treatment: The Court noted that petitioners did not challenge the settlement itself earlier and had, by acts such as share transfers and resignation, performed obligations under it. Precedents cited by petitioners about validity at time of filing were held distinguishable because they did not address post-filing sale/resignation pursuant to a settlement. Interpretation and reasoning: The Tribunal analyzed the settlement's clauses and found that, as to the corporate shares and resignations, the settlement was implemented and the petitioners had transferred their shares for consideration and resigned as directors. Clause providing that total non-performance by either side would nullify the agreement did not justify reopening corporate relief where transfer/resignation had occurred and registry entries were made. The Tribunal held that alleged non-performance of other clauses (relating to third parties or different entities) could not be a ground to restore petitioners to pursue relief in the company petition concerning the company whose shareholding was sold. Ratio vs. Obiter: Ratio - partial breach of a multi-clause settlement does not automatically revive a litigant's right to pursue company-law remedies once the litigant has sold shares and resigned pursuant to the settlement; Obiter - remarks on availability of alternative remedies for other grievances (inheritance, etc.). Conclusion: The settlement, insofar as it effected share transfers and resignations, was treated as implemented; alleged breach of other clauses did not entitle petitioners to restoration in the company petition. Issue 4 - Effect of sale/transfer of entire shareholding on maintainability and relief under statutory oppression/mismanagement remedy Legal framework: The Tribunal applied the principle that a petitioner under statutory remedies for oppression/mismanagement must be a member to obtain relief; while maintainability may be judged at the time of filing, relief cannot normally be granted if the petitioner ceases to be a member and thus would render any order nugatory or academic. Precedent treatment: The Tribunal relied upon authority holding that although a petition valid at filing remains a shown valid institution, subsequent cessation of membership ordinarily precludes grant of substantive relief because relief under the section requires continuing membership; the earlier cases relied upon by petitioners were distinguished on facts. Interpretation and reasoning: The Tribunal found petitioners sold their entire shareholdings for consideration in 2014, filed transfers with the Registrar, and ceased to be members thereafter. Therefore, even if the petition was maintainable as filed, no effective relief under the statutory provisions could be granted to them now; proceeding further would be an academic exercise and likely to generate fresh issues not previously agitated. Ratio vs. Obiter: Ratio - a petitioner who has ceased to be a member by transfer of all shares during pendency cannot obtain substantive relief under the statutory oppression/mismanagement provision because any order would be academic; Obiter - specifics about auctions or tax-driven transfers (distinguished factual scenarios). Conclusion: Sale and transfer of all shares during the pendency divested petitioners of locus to obtain relief; continuation would be futile and the restoration was rightly refused on that ground. Issue 5 - Inordinate delay in seeking restoration and failure to challenge prior orders Legal framework: The Tribunal considered principles of laches, delay, and the obligation to timely litigate or promptly appeal/seek clarification where adverse orders are recorded. Precedent treatment: Authorities emphasizing that prolonged acquiescence and unexplained delay militate against relief were applied; cases cited by petitioners concerning validity at filing were held inapplicable to a petitioner who stayed away for years without challenge. Interpretation and reasoning: The Tribunal observed a seven-year delay between the Company Law Board's 2016 observation and the 2023 application for restoration, with no appeal or clarification sought in the interim. The unexplained delay, coupled with the petitioners' prior election not to participate, was a substantive reason to refuse restoration. Ratio vs. Obiter: Ratio - inordinate unexplained delay and failure to challenge adverse recordings of non-participation justify refusal to restore party status; Obiter - comments on potential costs or equities were not decisive. Conclusion: Delay and acquiescence provided an independent ground for refusal of restoration in addition to estoppel and loss of locus. Overall Disposition The Court concluded that (a) recorded statements and prolonged non-appearance established that petitioners had elected not to prosecute and were effectively deleted from the memo; (b) petitioners were estopped from seeking restoration absent acceptable explanation; (c) the settlement insofar as it effected share transfers and resignations was performed and cannot be reopened to obtain corporate relief; (d) the sale and transfer of all shareholdings during pendency removed petitioners' locus to obtain relief, making further proceedings academic; and (e) inordinate delay reinforced refusal to restore. The application for restoration was therefore dismissed as lacking legal merit.