2023 (10) TMI 359 - AT - Companies Law

Violation of principles of natural justice - Petition for Oppression and Mismanagement dismissed as withdrawn without furnishing any reasons for denying liberty - HELD THAT - When a civil suit is filed all the provisions of the Civil Procedure Code 1908 will apply pertaining to the conduct of the proceedings before Court . However in respect of proceedings filed under the Companies Act 2013 the procedure to be followed shall be as specified in the Rules - As a matter of fact any order passed by the Tribunal / Appellate Tribunal shall be enforced as a Decree passed by the Court . The fetters of Civil Procedure Code are not binding on the Tribunal and the Appellate Tribunal but they are guided by the Principles of Natural Justice . The power to grant permission to withdraw a suit with Liberty to file a fresh suit is to be used very cautiously. Also that withdrawal of a suit as plaintiff wants to file fresh suit on a new cause of action Leave of the court is not required - A Court of Law cannot exercise its discretionary jurisdiction de-hors the Statutory Law and in fact its discretion must be exercised in terms of the existing statute . It cannot be brushed aside that the grant of such a relief in the light of express provisions of the statute to the contrary is not permissible . After all Equity must yield to Law as opined by this Tribunal . More importantly this Tribunal points out that a Civil Court does not Grant Leave to file another suit . If the Law permits the plaintiff may file another suit but not on the basis of observations made by a superior court . This Tribunal significantly points out that a Petitioner has no right to withdraw his Application / Petition filed before the Tribunal unless he is granted Leave to withdraw the Application/ Petition . Once he is granted the Leave the Withdrawal Application / Petition under sub-Rule (1) of Rule 82 of the NCLT Rules 2016 shall be filed in Form NCLT 9. Appeal dismissed.

Summary

Issues Involved:
1. Withdrawal of Company Petitions without Liberty.
2. Applicability of Civil Procedure Code to NCLT proceedings.
3. Discretion of Tribunal in granting or refusing Liberty to file fresh petitions.
4. Impact of prolonged litigation on stakeholders.

Summary:

Issue 1: Withdrawal of Company Petitions without Liberty
The appellants were aggrieved by the National Company Law Tribunal's (NCLT) impugned order dated 14.06.2023, which allowed the withdrawal of TCP/128/2016, TCP/129/2016, TCP/130/2016, and TCP/131/2016 without granting Liberty to file fresh petitions. The appellants argued that the respondents did not object to the withdrawal with Liberty and that the Tribunal failed to provide reasons for denying Liberty. The Tribunal noted that the petitions were withdrawn due to "subsequent developments," but no specific events were detailed.

Issue 2: Applicability of Civil Procedure Code to NCLT proceedings
The appellants contended that the NCLT Rules, 2016, were silent on whether petitions for Oppression and Mismanagement could be withdrawn with or without Liberty, invoking Order 23 Rule 3 of the Civil Procedure Code (CPC), 1908, which allows withdrawal with Liberty. The respondents argued that the NCLT Rules, 2016, differ from the CPC, and Rule 82 prohibits withdrawal without the Tribunal's Leave. The Tribunal emphasized that the NCLT and Appellate Tribunal are guided by the Principles of Natural Justice and not strictly bound by CPC provisions.

Issue 3: Discretion of Tribunal in granting or refusing Liberty to file fresh petitions
The Tribunal exercised its discretion, noting that prolonged litigation (over ten years) was an act of oppression against the respondents and against public interest. The Tribunal referenced multiple judgments, emphasizing that the power to grant permission to withdraw a suit with Liberty should be used cautiously and that the Tribunal's discretion must be exercised in terms of existing statutes. The Tribunal concluded that the impugned orders were free from legal flaws and upheld the decision to allow withdrawal without Liberty.

Issue 4: Impact of prolonged litigation on stakeholders
The respondents highlighted that the prolonged litigation adversely affected many stakeholders, including creditors, suppliers, employees, workmen, and distributors. The Tribunal acknowledged that the companies were entangled in legal proceedings for more than a decade, which justified the Tribunal's decision to refuse Liberty to avoid further vexation and multiplicity of proceedings.

Disposition:
The appeals were dismissed, and the Tribunal clarified that if the appellants are permitted by law to file fresh petitions based on subsequent developments, they may do so.