NCLAT Directs Revival Of Company Petition After Appellant Was Deprived Of Remedies Under Article 21 Of Constitution

The NCLAT Chennai bench of Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member), considering the peculiar situation where the civil suit was dismissed as withdrawn three days after the company petition under section 59 of the Companies Act was dismissed, directed the revival of company petition. The Tribunal observed that Article 21 of the Constitution of India safeguards the right to judicial remedies, which includes the right to pursue legal remedies before competent courts for the redressal of grievances. Background Facts: In 1987, the father of the Appellant, Late Shri. Iqbal Singh Bhathal is said to have purchased 100 equity shares of MRF limited, each with a face value of Rs.10/- in the name of the Appellant, Tejinder Singh Bhathal, and the Late Smt. Satwant Kaur Bhathal, mother of the Appellant. The appellant did not have knowledge of the said investment until 16.10.2018. Upon getting the information, the Appellant had written to the Respondent, MRF Limited, for issuing of Duplicate Share Certificates. Respondent mentioned vide reply that the original share certificates that were claimed to be lost by the Appellant, are available and they are with M/s. Fair Growth Investments Limited Mumbai, requiring for rectification of the deficiencies along with the transfer deed. The appellant filed an FIR with the Crime Branch of Pune, Maharashtra for loss/theft of the said 100 shares. Meanwhile, the Appellant requested the deletion of his deceased mother's name from the certificates, leading to an objection from Mr. K. Munivenkata Reddy (R-2) claiming ownership of the shares. R2 filed a civil suit O.S. No. 7586/2019 claiming a relief by way of a title over the 100 equity shares of MRF, which were owned by the Appellant jointly with his deceased mother. The said suit was not maintainable in terms of Section 430 of the Companies Act. The appellant also filed another civil suit in Civil Court Senior Division, Pune in RCS 123/2020 claiming ownership over the 100 equity shares. During the pendency of the said suit in Pune, the Appellant filed Company Petition No.106 (CHE)/3/2021 under Section 59 of the Companies Act. The NCLT rejected the company petition due to the simultaneous pursuit of remedies by the Appellant. The tribunal noted the Appellant was pursuing parallel remedies (company petition and civil suit) simultaneously, which was impermissible. During the pendency of the CP, the Appellant undertook that the civil suit before Civil Judge, Senior Division, Pune would be withdrawn, and thus, the proceedings under Section 59 should be decided on merits. The NCLT dismissed the company petition on 10.08.2022 as the Appellant was pursuing both the company petition and the civil suit simultaneously, despite having undertaken to withdraw the civil suit. Submissions: The Appellant submitted that though admittedly they undertook to withdraw the civil suit and they had also filed a memo in that regard before the Civil Court, no orders were passed on the same, and the said suit was, as per his submission, dismissed as withdrawn only on 13.08.2022, after passing of the Impugned Order dated 10.08.2022. Therefore, the embargo which was created by Section 430 of the Companies Act, now stood eradicated because of the subsequent dismissal of civil suit, and therefore the proceedings initiated by way of company petition under Section 59 of the Companies Act, ought to have been decided on its merits. The dismissal of CP on 10.08.2022 cannot be legally faulted, because admittedly on that date the Appellant was pursuing two simultaneous remedies. The peculiar situation arose that the civil suit RCS/123/2020 was dismissed as withdrawn on 13.08.2022, three days after the dismissal of the company petition on 10.08.2022. Even though the civil suit was dismissed later, the Appellant faced a situation where both remedies were lost due to procedural technicalities. The Appellant has been deprived of pursuing any of the remedies because of the dismissal of the company petition by the impugned order of 10.08.2022 and because of the civil suit being dismissed on 13.08.2022 as withdrawn. Observations: The NCLAT took note of Article 21 of the Constitution of India which safeguards the right to judicial remedies, which includes the right to pursue legal remedies before competent courts for grievance redressal, which in the case fell within the ambit of Section 59 of the Companies Act. The Tribunal observed that the Appellant ought to be permitted to resort to the process of redressal of his grievances permissible by way of a preferring of the company petition under Section 59 of the Companies Act. The Tribunal quashed the impugned order of 10.08.2022 dismissing the company petition, and the company petition proceedings are revived back to be decided on merits. The Appellant has...

NCLAT Directs Revival Of Company Petition After Appellant Was Deprived Of Remedies Under Article 21 Of Constitution

Tazeen Ahmed

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