2020 (7) TMI 749 - HC - Companies Law

Seeking directions to restrain the 2nd petitioner from exercising powers of Managing Director of the company and to change the signatories of the bank accounts of the companies - seeking to appoint an Advocate Commissioner to act as an interim Managing Director - Challenge on the ground that the running company is brought to a standstill by the action of the NCLT interdicting financial transactions till 7.8.2020 without any justification and without hearing the counsel appearing for the company and the Managing Director - HELD THAT - It is an admitted fact that the company petitions nine in number were pending before the NCLT. In the impugned order itself the NCLT refers to the prayers in the company petitions and post the matter for hearing of the I.A. to 7.8.2020. The learned counsel for the petitioners has submitted that the proper course of action is to file an appeal before the NCLAT. It is submitted that such a course of action is presently rendered impossible due to the prevailing pandemic situation in the country and the petitioners are disabled from travelling to Delhi to prefer the appeal in view of the restrictions and the rising number of cases in the country. Though it is contended by the learned counsel appearing for the respondents that the writ petitions are not maintainable without the NCLT on the party array in the facts and circumstances of the instant cases especially in view of Ext.P6 request for adjournment made by the counsel for the petitioners before the NCLT the passing of an order interdicting all financial transactions by running companies would create serious prejudice to the company. The technical objection raised that the NCLT is not made a party to these proceedings according to me should not stand in the way of the consideration of these writ petitions in the peculiar circumstances prevalent at present. The petitioners should be permitted to carry out the dayto- day financial transactions as are necessary for the conduct of the companies - Petition ordered.

Summary

Issues:
Challenging ex parte interim order by NCLT, Cochin; Restraining Managing Director's powers; Financial transactions interdicted; Maintainability of writ petitions without NCLT as a party; Accessibility issues for appeal filing before NCLAT; Allegations of abuse of court process.

Analysis:
The writ petitions were filed challenging an ex parte interim order by the NCLT, Cochin, which restrained the Managing Director from exercising powers and interdicted financial transactions until a specified date. The petitioners, running companies with ongoing disputes among family shareholders, argued that the NCLT's actions brought the company to a standstill without justification or proper hearing. The petitioners faced difficulties in filing an appeal before the NCLAT due to restrictions and the pandemic situation, rendering it practically impossible.

The respondents raised a preliminary objection, contending that the writ petitions were not maintainable without the NCLT being a party and citing precedents emphasizing the necessity of including both the tribunal and parties in such cases. They argued that an appeal to the NCLAT was an efficacious alternate remedy, making the writ petitions inappropriate. The respondents also claimed that the Managing Director had been removed as per a resolution, and the current petition was an abuse of court process.

After hearing both sides, the Court acknowledged the pending company petitions before the NCLT and the practical challenges faced by the petitioners in filing an appeal before the NCLAT. Despite objections regarding the absence of NCLT as a party, the Court found that the peculiar circumstances warranted consideration of the writ petitions. The Court decided that, due to the prevailing situation and the inability to practically file an appeal, the petitioners should be allowed to conduct essential day-to-day financial transactions for company operations. However, restrictions were imposed on conducting general body meetings and withdrawing amounts from company accounts, with further financial transactions subject to future orders from either the NCLT or the NCLAT.

In conclusion, the Court allowed the writ petitions, permitting the petitioners to carry out necessary financial transactions until further orders are passed by the NCLT or the NCLAT, considering the practical challenges faced in filing an appeal and the impact of the NCLT's order on the company's operations.