2025 (12) TMI 1620 - AT - Companies Law

Shareholder's oppression and mismanagement petition withdrawal authority u/r 82(2) challenged; withdrawal and delay dismissal upheld.

A shareholder challenged dismissal of an oppression and mismanagement petition as withdrawn, alleging non-compliance with Rule 82(2), NCLT Rules. The ... Oppression and mismanagement - seeking recall of the order - withdrawal of petition preferred u/s 241 of the Companies Act, 2013 with the leave of the Tribunal as contemplated under Rule 82 (2) of the NCLT Rules, 2016 - private disputes or not - withdrawal of proceedings u/s 397 of the Companies Act, 1956 without compliance of the provisions contained under Rule 82(2), NCLT Rules, 2016 - HELD THAT:- There is nothing on record, to show that the authorization, which was executed in favor of the Company Secretary, as per Section 432 of the Companies Act, 2013, to be read with Rule 119 of the NCLT Rules, 2016, was ever withdrawn. Since, the authority, which was being vested with the Company Secretary, was valid and subsisting, and was to carry out all acts and actions in the procedures of the company petition at the behest and on behalf of the Appellant, the Appellant at the stage of passing of the order dated 28.09.2017 cannot submit that, there was non-compliance of Rule 82 of the NCLT Rules, 2016, as argued by the Appellant, owing to the fact that, there was substantial compliance, because his rights and interests were being protected on the basis of the instructions, which was imparted by him to the Company Secretary, which included the instructions to withdraw the petition on his behalf and that too, after his active participation in nine hearings which was conducted by the Tribunal prior to the passing of the order dated 28.09.2017. The Tribunal has rightly observed in the impugned order, that when the Appellant got the knowledge, of withdrawal of the company petition upon issuance of the email communication by the Company Secretary on 08.10.2017, and he kept silent for about two years, prior to filing of the application for the recall of the said order, the delay was indeed inordinate and unexplained, and the Tribunal has rightly rejected the Condone Delay Application. The consequential effect of the rejection of the Condone Delay Application, would be that the application for recall would automatically stand dismissed. The Appellant has given a wrongful interpretation to the provisions contained under Rule 11 of NCLT Rules, 2016, pertaining to the exercise of the deeming provision, which is vested with the Tribunal, for the exercise of inherent powers of the Tribunal to make an order, which may be necessary to meet the ends of justice. The deeming clause for the exercise of inherent powers by the Tribunal, will not be open to be made applicable in those circumstances, where the order has been passed on an act conducted by the Company Secretary on behalf of the Appellant while representing the cause of the Appellant, by voluntarily seeking to get the company petition dismissed as withdrawn. Inherent power comes into play when there is a vacuum under law - If the order was a consenting order, it cannot be recalled even by way of filing of an application under Rule 11 of NCLT Rules, 2016, by invoking the inherent powers of the Tribunal, because exercise of inherent powers could have been where the order was passed without a positive act or knowledge being taken from the Appellant for getting the company petition dismissed as withdrawn. In that eventuality, the recall cannot be utilized as a weapon to virtually solicit a review of an order dated 28.09.2017, which the Appellant himself had sought for, that is, to get the company petition dismissed as withdrawn. Since, the law does not call for any review, which is not statutorily provided, of an order, which has been an order solicited by consent, invocation of the provisions contained under Rule 11 for exercise of inherent powers for filing of a recall application would be absolutely an abuse of process as provisions contained under Rule 11 cannot be utilized to overcome the embargo created by law, where a review is not permissible, and to utilize the recall application in the shape of a review of the order and that too, particularly, when the prior condition of explaining the delay was not satisfactorily done by the Appellant, and once the aspect of delay itself was not satisfactorily explained and when it was established to be based upon a hypothetical anticipation of the Appellant, believing upon the act of the Company Secretary, in that eventuality, the Appellant has to blame himself for his inaction, and that cannot be taken as to be a pretext for condonation of delay. And that too, a long delay of 594 days of filing a recall application, almost after a lapse of about two years. The Condone Delay Application, which has been rejected by the Tribunal by the impugned order, does not suffer from any apparent error, which would call for any interference by this Appellate Tribunal, in the exercise of its Appellate Jurisdiction under Section 421 of the Companies Act, 2013. Appeal dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the delay of 594 days in seeking recall of the order dismissing the company petition as withdrawn was satisfactorily explained so as to warrant condonation. (ii) Whether an order dismissing a company petition as withdrawn, passed on a withdrawal sought through an authorised representative whose authority was subsisting, could be recalled by invoking Rule 11 and Rule 32 of the NCLT Rules, 2016 (inherent powers/recall), particularly where the order operated as a consent/voluntary withdrawal order. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Condonation of delay of 594 days in moving the recall application Legal framework (as discussed by the Court): The Court proceeded on the basis that condonation under the applicable procedural regime requires a bona fide and satisfactory explanation for the entire period of delay, and evaluated the explanation offered in the condonation application supporting the recall request. Interpretation and reasoning: The Court treated the appellant as bound by the acts of the company secretary engaged to represent him, and found that the withdrawal order was passed in the presence of the appellant's representative who had subsisting authorisation. The Court further held that knowledge of the withdrawal order was admitted to have been received by email within about 10 days of the order. Despite such knowledge, the appellant took no timely steps and allegedly 'waited' for about one and a half years for the representative to act, which the Court found untenable and inconsistent with diligence expected where limitation runs. The Court emphasised that the forum is not meant for those who sleep over their rights, and that nothing prevented the appellant from moving the recall request himself if he genuinely believed his agent would not act. Conclusions: The delay was held to be inordinate and unexplained; the condonation request was rightly rejected. The Court affirmed that rejection and held that, consequentially, the recall application could not survive. Issue (ii): Maintainability/tenability of recalling a withdrawal order under Rule 11 and Rule 32; effect of authorised representation and 'consenting' nature of the order Legal framework (as discussed by the Court): The Court examined the invocation of Rule 11 (inherent powers) and Rule 32 of the NCLT Rules, 2016, and considered the effect of authorisation under the Companies Act/NCLT Rules enabling representation. It also assessed the appellant's contention about withdrawal requirements under Rule 82(2) (Form 9/leave). Interpretation and reasoning: The Court held that Rule 11 inherent powers operate to meet ends of justice where there is a 'vacuum under law,' and cannot be used to reopen what is, in substance, an impermissible review of an order that the party itself sought through its authorised representative. On the facts, the representative's authority was never shown to have been withdrawn and the withdrawal was solicited through that representative; hence the order was treated as a consent/voluntary withdrawal order. The Court reasoned that such an order cannot be recalled through inherent powers merely because the appellant later disputes the agent's conduct or instructions. As to Rule 82(2) compliance, the Court accepted the finding that, given the course of proceedings and participation through the representative, the appellant could not credibly assert lack of knowledge or invalidate the withdrawal on that basis, and treated there to be substantial compliance in the circumstances. Conclusions: The recall application, premised on Rule 11/Rule 32, was not tenable because it sought to undo a consent/voluntary withdrawal order through inherent powers in the nature of a review, which the Court regarded as an abuse of process. With delay not condoned, the recall application necessarily failed.