IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF JULY 2019 BEFORE THE HON’BLE MR. JUSTICE ALOK ARADHE WRIT PETITION NOS.29754-756 OF 2019 (GM-RES) BETWEEN:
M/S SHANTHALA SPHEROCAST PRIVATE LIMITED 32A & 32B SHIMOGA BHADRAVATHI INDUSTRIAL AREA MACCHENAHALLI MAGADI POST SHIMOGA 57222 REPRESENTED BY ITS MANAGING DIRECTOR MR D S CHANDRASEKHAR (BY MR. S M CHANDRASHEKAR, SR. COUNSEL FOR MR. NAGARAJA R C, ADV.) AND:
1. MRS. RAJNI SATISH WIFE OF MR D S SATISH, R/O 703 GERANIUM SANKALP CENTRAL PARK, YADAGIRI JAWA MAIN ROAD, MYSORE 570020.
2. MR. S RUDREGOWDA SHARDA NILAYAM, VENKATESH NAGAR, 5TH CROSS MLC, SHIMOGA 577201.
3. MRS SHANTAMMA RESIDING AT SANTAYASHARDAMMA LAYOUT, 2ND CROSS, 1ST MAIN, BEHIND MISTRY HOSTEL, VINOBA NAGAR, SHIMOGA 577201.
… PETITIONER 4. MR D.G. BASAVARAJ BENAKA 1ST CROSS, 1ST MAIN MISSION COMPOUND, BEHIND DHANA PUBLICATION, SHIMOGA 577201.
5. MR N.G.BASAVALINGAPPA SHARDA NILAYAM 270, 1ST MAIN, 1ST CROSS, LBS NAGAR, SHIMOGA 577201.
6. MR C S YOGESH KUMAR 32A 32B SHIMOGA BHADRAVATHI INDUSTRIAL AREA, MACHENHALLI NIGADI POST, SHIMOGA 577222.
7. MRS. D B MALVIKA BENAKA 1ST CROSS, 1ST MAIN MISSION COMPOUND, BEHIND DHANA PUBLICATIONS, SHIMOGA 577201 8. MR D B ASHOK BENAKA 1ST CROSS, 1ST MAIN MISSION COMPOUND, BEHIND DHANA PUBLICATIONS, SHIMOGA 577201.
9. MRS Y P SHAKUNTHALA SHARDA NILAYAM, VENKATESH NAGAR, 5TH CROSS, MLC, SHIMOGA 577201.
10. MRS K V SUVAMMA BENAKA 1ST CROSS, 1ST MAIN MISSION COMPOUND, BEHIND DHANA PUBLICATION, SHIMOGA 577201.
11. MR SHEELA CHANDRASHEKHAR SANTAYA, SHARDAMMA LAYOUT, 2ND CROSS, 1ST MAIN, BEHIND MITRE HOSTEL, VINOBA NAGAR, SHIMOGA 577201.
12. MR S R HARSHA SHARDA NILAYAM, VENKATESH NAGAR, 5TH CROSS MLC, SHIMOGA 577201 13. MRS S R CHAITRA SHARDA NILAYAM, VENKATESH NAGAR, 5TH CROSS MLC, SHIMOGA 577201.
(BY MR. VIVEK HOLLA, ADV. FOR … RESPONDENTS MR. BASAVARAJ SAPPANNAVAR, ADV. FOR C/R1) THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE PROCEEDINGS IN COP.100/2019 AND COP. 101/2019 FILED BEFORE THE NATIONAL COMPANY LAW TRIBUNAL FILED U/S 241, 242 OF THE COMPANIES ACT, 2013 FOR BEING VIOLATIVE OF ARTICLE 14 OF CONSTITUTION OF INDIA AND SEC.241 COMPANIES ACT, 2013 PRODUCED AT ANNX-B IN ORDER DTD.7.6.2019.
THESE WRIT PETITIONS COMING ON FOR ORDERS GROUP THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER Mr.S.N.Chandrasehkar, learned senior counsel for mr.Nagaraja R.C., learned counsel for the petitioner.
Mr.Vivek Holla, learned counsel for Mr.Basavaraj Sappannavar, learned counsel for caveator/respondent No.1.
The writ petitions are admitted for hearing. With consent of the learned counsel for the parties, the same are heard finally.
2. In these petition under Article 226 of the Constitution of India, the petitioner inter alia seeks quashment of proceedings initiated by the National Company Law Tribunal (hereinafter referred to as ‘the Tribunal’ for short) under Sections 241 and 242 of the Companies Act, 2013 (hereinafter referred to as ‘the Act’ for short). The petitioner also assails the validity of the interim order dated 24.06.2019 passed by the Tribunal, Bengaluru.
3. Facts leading to filing of these writ petitions in nut shell briefly stated are that respondent No.1 filed a petition under Sections 241 & 242 of the Act.
Admittedly, respondent No.1 did not have 10% share holding. The respondent No.1 therefore, filed an application under Proviso to Section 244(1)(b) of the Act seeking waiver. However, the aforesaid application was kept pending by the Tribunal and an interim order was passed on 24.06.2019 on I.A.304/2019 filed by respondent No.1. In the aforesaid factual background, the petitioner has approached this Court seeking the reliefs as stated supra.
4. Learned Senior counsel for the petitioner submitted that initiation of the proceeding under Section 241 of the Act, at the instance of respondent No.1 without compliance with the mandate contained under Proviso to Section 244(1)(b) of the Act is not maintainable and the initiation of the proceeding before the Tribunal is per se without jurisdiction and the Tribunal had no jurisdiction to pass an interim order 25.06.2019. In support of the aforesaid submissions, reliance has been placed on a decision dated 21.09.2017 of NCLAT in ’CYRUS INVESTMENTS PVT. LTD., & ANR. VS. TATA SONS LTD., & ORS.,’, 2017 SCC ONLINE NCLAT 261. On the other hand, learned counsel for respondent No.1 submitted that company cannot be termed as aggrieved person and the petitioner has an alternative remedy of filing an appeal under Section 421 of the Act before the National Company Law Appellate Tribunal. It is also submitted that under Section 420 of the Act, the Tribunal has powers to pass an order granting interim relief and the interim order dated 24.06.2019 has been passed in exercise of inherent powers. In support of the aforesaid submissions, reliance has been placed on decision dated 02.11.2018 of NCLAT in ‘S.AHAMED MEERAN VS. RONNY GEORGE AND OTHERS’ (2018) SCC ONLINE NCLAT 757.
5. I have considered the submissions made by learned counsel on both the sides and have perused the record. Admittedly, the respondent No.1 does not have 10% share holding of respondent No.1-Company. It is also not in dispute that respondent No.1 has filed an application seeking waiver under Proviso to Section 244(1)(b) of the Act, which is pending consideration before the tribunal. Section 244(1)(b) reads as under:
241. Right to apply under Section 241: (1) The following members of a company shall have the right to apply under Section 241, namely:-
(a) xxxxxxxx (b) in the case of a company not having a share capital, not less than one fifth of the total number of its members.
Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (B) so as to enable the members to apply under Section 241.
6. From careful scrutiny of Proviso to Section 244(1)(b) of the Act, it is axiomatic that only when the Tribunal waives all or any of the requirements contained in Clause (a) or Clause (b), the members who do not have 10% share holding are entitled to apply under Section 241 of the Act. In other words, the waiver of the conditions prescribed under Clauses (a) and (b) is a sine qua non for the tribunal to assume jurisdiction under Section 241 of the Act. It is well settled in law that when the statute specifies the conditions in which the power is to be exercised then on fulfillment of such conditions alone, the power conferred becomes annexed with a duty to exercise the power in that manner. [SEE: ‘THE OFFICIAL LIQUIDATOR VS. DHARTI DHAN (P) LTD.,’, AIR 1977 SC 740]. It is equally well settled legal proposition that when the statute prescribes a power to do a certain thing in a certain way, that thing has to be done in that way or not at all. In this connection, reference may be made to the decisions of the Supreme Court in ‘RAMACHANDRA KESHAV ADKE V/S GOVIND JOTI CHAVARE AND OTHERS’, (1975) 1 SCC 559, ‘COMMISSIONER OF INCOME TAX, MUMBAI V/S ANJUM M.H GHASWALA AND OTHERS’ (2002) 1 SCC 633, ‘GUJARAT URLA VIKAS NIGAM LTD V/S ESSAR POWER LTD’, (2008) 4 SCC 755.
7. In the backdrop of aforesaid legal position it is evident that the tribunal can entertain a petition under Section 241 of the Act on the fulfillment of the conditions mentioned in proviso to Section 244(1)(b) of the Act. The usurpation of jurisdiction by the Tribunal without fulfillment of the condition precedent for exercise of powers under Section 241 of the Act is per se without jurisdiction and is ab initio void. The Tribunal has no jurisdiction to deal with the prayer for interim relief until and unless the application submitted by the respondent No.1 under Provisio to Section 244(1)(b) of the Act is decided.
8. It is trite law that where the action complained of is per se without jurisdiction, the doctrine of ‘availability of alternative remedy’ does not apply. [SEE:‘WHIRLPOOL CORPORATION V/S REGISTRAR OR TRADE MARKS, MUMBAI’, (1998) 8 SCC 1 and ‘HARBANSLAL SAHNIA & ANOTHER V/S INDIAN OIL CORPORATION LTD AND OTHERS’, (2003) 2 SCC 107]. Therefore, the contention of respondent No.1 that the petitioner should be relegated to the alternative remedy of appeal does not deserve acceptance. It is also pertinent to note that the respondent No.1 itself had impleaded the company as a party and an interim order has been passed against the company, therefore, it cannot be said that at the instance of the company, the writ petition is not maintainable. It is trite law that inherent powers cannot be exercised in contravention of a statute, which has been done in the instant case. Thus, no sanctity in the eye of law can be attached to the interim order passed by the tribunal.
In the preceding analysis, the impugned order dated 24.06.2019 is hereby quashed and set aside. The tribunal is directed to first decide the application field by respondent No.1 under Proviso to Section 244(1)(b) of the act before proceeding further with the matter. Depending upon the outcome of the application preferred by the petitioner under proviso to Section 244(1)(b) of the Act, the tribunal shall deal with the matter in accordance with law expeditiously.
With the aforesaid directions, the petition is disposed of.
Sd/- JUDGE SS