2026 (1) TMI 340 - HC - Companies Law

Company bank account freeze tied to ROC 'management dispute' marking-defreezing upheld; former directors and bank lacked standing.

The dominant issue was whether continued freezing of the company's bank accounts could be sustained and whether former directors and the bank had locus to ... Oppression and MIsmanagement - Freezing of bank accounts of the appellant no.2-Company - material facts were suppressed by the writ petitioners while obtaining the order under recall or not - locus standi of Bank to seek any further clarification - removal/non-reappointment of respondent no.5 to 6 - HELD THAT:- It is found from the relevant annexure to the stay application in the present appeal that by a communication dated July 15, 2021, the ROC itself wrote to the appellant no. 2- Company intimating it about the decision of the MCA dated July 9, 2021, as intimated to the ROC, for unmarking of the management dispute in respect of the appellant no.2-Company, also directing all consequential steps to be taken to remove such marking as management dispute in respect of the appellant no.2-Company - the Bank, going beyond its charter as the banker to the appellant no.2-company, still persisted in retaining the freeze of the accounts. Since the marking of the company with “management dispute” has since been unmarked by the ROC on the specific directive of the MCA, there cannot be any further fetter in operation of the account. Even otherwise, the marking by the ROC as management dispute operates in an entirely different sphere of Company Law, having nothing to do with the banking business of the Axis Bank vis-à-vis appellant no.2-Company. At the worst, such marking of management dispute might have an impact of statutory compliances on the part of the company insofar as the ROC is concerned, which is entirely within the domain of Company Law and has nothing to do with the transactions of the company with its banker, the Axis Bank. Also, the challenge to the removal of respondent nos. 5 to 7 as Directors before the NCLT, in the garb of oppression and mismanagement disputes under Section 241 and 242 of the Companies Act, 2013, was dismissed by the NCLT. Although an appeal is pending before the NCLAT against such dismissal, in the absence of any stay order passed by the Appellate Authority, the order of the NCLT is still operative and binding on the parties. Thus, as on date, the removal/non-reappointment of respondent nos. 5 to 7 as Directors of the appellant no.2-Company subsists, thereby denuding them of any locus standi to raise any objection with regard to the affairs of the appellant no.2-company or the operation of its bank accounts. The other ground on which the said respondents seek to be impleaded in the writ petition as necessary parties is that on their complaint, the freezure of the accounts-in-question took place. However, such plea is ex-facie a sham, since the bank itself, in its communication dated June 9, 2021 cited a letter dated May 18, 2021 on the letter-head of VTL, a 100% shareholding company of the appellant no.2 August Agents Limited, as the trigger for freezing the accounts - the respondent nos. 5 to 7, prima facie, do not have any locus standi whatsoever to be impleaded in the original writ petition and/or to file a recall application of the original order passed by the writ court directing defreezing of the accounts, nor does the bank any subsisting justification not to comply with the parent order of the writ court and defreeze the accounts-in-dispute. No prima facie case having been made out for the order impugned before this Court being passed. The learned Single Judge, while passing the impugned order dated June 19, 2025, merely recorded that after hearing the submissions of the parties it appeared to the court that the matter was required to be heard, unfortunately, without recording any reason or adverting to any prima facie case made out for so observing. Thus, putting the parent order dated April 9, 2025 in suspension by directing the parties not to act upon the same for the time being, as well as keeping the contempt application in abeyance consequentially, are not substantiated by any reasoning and, accordingly, cannot be sustained. Appeal disposed off. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the order directing that the earlier defreezing direction 'shall not be acted upon' and keeping the connected contempt proceeding in abeyance could be sustained when it recorded no reasons or prima facie basis. (ii) Whether parties could be added as respondents to a writ petition already disposed of, without first allowing the pending recall application and reopening the disposed matter. (iii) Whether the applications seeking (a) 'clarification' from the bank and (b) 'recall simpliciter' by third parties were, on the Court's determination for purposes of the appeal, lacking maintainability so as to render the impugned directions unsustainable. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Sustainability of suspending operation of the earlier defreezing order and keeping contempt in abeyance without reasons Interpretation and reasoning: The Court found that the impugned order effectively suspended the earlier direction to defreeze accounts and consequentially kept the contempt application in abeyance. However, the Single Judge's order merely stated that, upon hearing submissions, the matter 'was required to be heard', without recording any reasons, without indicating any prima facie case, and without adverting to a discernible basis for restraining implementation of the earlier order. Conclusions: Such suspension of the operative direction and keeping contempt in abeyance, in the absence of recorded reasoning, was held unsustainable and could not stand. Issue (ii): Permissibility of impleading/addition of parties in a disposed writ petition Interpretation and reasoning: The Court held that once a writ petition is disposed of, the writ court is no longer in seisin of the matter. Therefore, there is no scope to implead or add parties in a 'dead' (disposed) writ petition. Such relief could be considered only after, and contingent upon, allowing a recall application (if maintainable) and reopening the disposed proceeding. The impugned order granted, at a premature stage, one of the final reliefs sought in the recall application by directing formal addition of parties, even though the recall application itself was not allowed and was deferred for hearing. Conclusions: The direction adding parties to a disposed writ petition was contrary to basic procedural tenets and was set aside. Issue (iii): Effect of the Court's findings on maintainability of the pending recall and clarification applications in assessing validity of the impugned order Interpretation and reasoning: For purposes of deciding whether the impugned directions could stand, the Court concluded that the recall request, framed as a recall simpliciter of an order passed on merits in a disposed writ petition, did not disclose a case of review and did not furnish any other legal justification warranting recall. The Court further treated the bank's clarification request as lacking substance in the context presented. On that footing, the Court found that no prima facie case was made out to justify the impugned suspension of the earlier order and the consequential directions. Conclusions: The impugned order, founded on an unreasoned assumption that the matter required hearing and granting consequential restraints and impleadment, was held not sustainable; the appeals were allowed and the impugned order was set aside. The Single Judge was requested to take up the pending applications together by first deciding the recall and clarification applications and thereafter the contempt application, depending on the outcome of the recall application.