2025 (11) TMI 13 - AT - Companies Law

Appeal allowed; order quashed and remitted for de novo hearing after natural justice breach under Secs 241,242,213,119 and Rules 11,23,43

Mr. Malakondaiah Pavuluri, Mr. Marri Jagannadham, Mr. Madhav Pavuluri Versus M/s. Aarush Building Materials Private Limited, Dr. Srinivas Sunkavally, Marri Venugopal, Aashrith Windows And Doors Private Limited and Marri Venugopal Versus M/s. Aarush Building Materials Private Limited, Dr. Srinivas Sunkavally, Mr. Malakondaiah Pavuluri, Mr. Marri Jagannadham, Mr. Madhav Pavuluri and Aashrith Windows And Doors Private Limited, Srikakulam

NCLAT allowed the company appeal, quashed the impugned NCLT order and remitted the petition to the Ld. NCLT Hyderabad Bench for de novo consideration on ... Oppression and mismanagement - effective opportunity of hearing was not accorded to the Appellant to enable him to establish his case - Violation of principles of natural justice - Proceedings carried under Section 241 and 242, 213, and 119 of the Companies Act, 2013, to be read with Rules 11, 23, and 43 of the NCLT Rules of 2016 - HELD THAT:- Owing to the argument extended by the Ld. Counsel for the Appellant of not having been provided with an effective opportunity of hearing, which is accepted by the Respondents, exclusively for the aforesaid reason, the impugned order is hereby quashed. The matter is remitted back to the Ld. NCLT Hyderabad Bench to re-decide the petition on its own merits, based on material already on record. Proceedings carried under Section 241 and 242, 213, and 119 of the Companies Act, 2013, to be read with Rules 11, 23, and 43 of the NCLT Rules of 2016 - opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- Owing to the argument extended by the Ld. Counsel for the Appellant of not having been provided with an effective opportunity of hearing which is accepted by the Respondents, exclusively for the aforesaid reason, the impugned order is hereby quashed. The matter is remitted back to the Ld. NCLT Hyderabad Bench to re-decide the petition exclusively on its own merits, based on material already on record. The company appeal is allowed. The impugned order would stand quashed. ISSUES PRESENTED AND CONSIDERED 1. Whether the impugned order passed under Sections 241, 242, 213 and 119 of the Companies Act, 2013 (read with Rules 11, 23 and 43 of the NCLT Rules, 2016) is vitiated for violation of the principles of natural justice by denying an effective opportunity of hearing to an affected party. 2. Whether, in light of the parties' admissions regarding denial of effective hearing, the appropriate remedy is to quash the impugned order and remit the matter to the Tribunal for fresh adjudication on merits based on material on record. 3. Whether any other raised issues (including limitation) should be decided by the Appellate Tribunal at this stage or left open for the Tribunal on remand. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Violation of principles of natural justice (effective opportunity of hearing) Legal framework: Proceedings were conducted under Sections 241, 242, 213 and 119 of the Companies Act, 2013, read with Rules 11, 23 and 43 of the NCLT Rules, 2016. The fundamental requirement that adjudicatory proceedings afford affected parties an effective opportunity to present their case is a core tenet of natural justice applicable to the Tribunal's exercise of jurisdiction. Precedent treatment: No specific precedents were cited or applied by the Court in the impugned order; the Appellate Tribunal relied on the parties' submissions acknowledging denial of effective hearing. No prior decisions were expressly followed, distinguished or overruled in the present order. Interpretation and reasoning: The Appellate Tribunal accepted the Appellant's contention that an effective opportunity of hearing was not afforded by the Tribunal. This conclusion was reinforced by the Respondents' counsel expressly agreeing that the Appellant was not provided an effective hearing and consenting to quash and remit the order. Given the admitted procedural defect, the Tribunal found the impugned adjudication could not be treated as an effective determination of the rights of the affected party. Ratio vs. Obiter: Ratio - Where an adjudicatory body renders an order without affording an affected party an effective opportunity to be heard, the order is vitiated for breach of natural justice and is amenable to being quashed and remitted for fresh decision. This constitutes the operative principle applied by the Court in disposing of the appeals. Conclusions: The impugned order was quashed on the ground that the Appellant was not given an effective opportunity of hearing; the defect warranted setting aside the order irrespective of the merits of the underlying allegations of oppression and mismanagement. Issue 2 - Remedy: quash and remittal; scope of rehearing Legal framework: The Tribunal's remedial powers permit quashing of a vitiated order and remittal for de novo consideration, subject to preserving fairness and processing proceedings consistent with statutory scheme and procedural rules. Precedent treatment: No prior authorities were invoked. The Court acted on established remedial principles pertaining to breach of natural justice and remand practice. Interpretation and reasoning: Given the admitted denial of effective hearing and the Respondents' concurrence with quashing and remittal, the Appellate Tribunal exercised its supervisory jurisdiction to set aside the impugned order and remit the matter to the Tribunal to re-decide the petition on its merits based on material already on record. The Court expressly refrained from expressing any opinion on the merits, leaving all substantive issues open for fresh consideration by the Tribunal. Ratio vs. Obiter: Ratio - Where procedural infirmity is admitted or established, the appropriate remedy is to quash the order and remit the matter for fresh adjudication on merits; the appellate forum should not decide merits where the adjudication below is vitiated by denial of hearing and the factual matrix can be addressed afresh by the original tribunal. Conclusions: The impugned order was quashed and the matter remitted to the Tribunal for fresh decision on merits based on material on record. The Appellate Tribunal made no observations on merits; all issues are left open for determination by the Tribunal upon hearing the parties. Issue 3 - Other issues raised (including limitation) Legal framework: Questions such as limitation and other substantive defences arise under the Companies Act and the Rules applicable to company petitions; ordinarily these may be decided on merits by the Tribunal when properly raised and argued. Precedent treatment: None discussed or applied in the present judgment. Interpretation and reasoning: The Appellate Tribunal noted that besides breach of natural justice, other grounds including limitation were raised by the Appellant, but because the impugned order was quashed solely on procedural fairness grounds (and with respondents' concurrence), the Tribunal refrained from adjudicating those issues. The Court directed that all issues, including limitation, be considered afresh by the Tribunal on remand based upon the record and parties' contentions. Ratio vs. Obiter: Obiter (procedural): The direction to leave other issues undecided and for the Tribunal to consider them on merits is consequential to the remand and not a definitive ruling on those matters. Conclusions: Other substantive issues raised in the appeals, including limitation, remain open and are to be decided by the Tribunal upon re-hearing; no appellate determination was made on these points. Additional Observations - The Court's decision was founded on the admitted procedural defect (lack of effective hearing) and the Respondents' consent to quash and remit; the Court therefore did not examine or rule upon the substantive findings of oppression and mismanagement contained in the impugned order. - The remand is limited to determination on merits based on material already on record; the Appellate Tribunal explicitly disclaimed any observation on substantive merits.