2025 (5) TMI 1846 - AT - Companies Law

Oppression and mismanagement - Section 241-242 of the Companies Act 2013 - seeking leave to amend the prayers in Company Petition - the procedure prescribed under Rule 155 of the NCLT Rules 2016 and the principles of natural justice were complied with in allowing the amendment of the petition without leave of the Tribunal or opportunity to the appellants to object or not - HELD THAT - Rule 155 of the NCLT Rules 2016 empowers the Tribunal to permit to amend necessary amendment for the purpose of determining the real question or issue raised in the proceeding. Section 424 of the Companies Act 2013 deals with procedure before Tribunal and Appellate Tribunal. Section 424 of the Companies Act 2013 makes it clear that the NCLT is not bound by the procedure laid down in the Code of Civil Procedure 1908 but shall be guided by the principles of natural justice. Even though provisions of the Code of Civil Procedure are not strictly applicable however the principles contained therein are always the guiding factor for the procedure for proceeding before the Tribunal. Statutory provision of Order VI Rule 17 of the Civil Procedure Code 1908 are not applicable to the proceedings before the NCLT. When the petition is filed under Companies Act 2013 under Section 241-242 pleadings which are submitted are record of the Court and no amendment or tinkering in pleadings filed by the parties can be allowed without leave of the Court. The first principle which is to be noticed is the fact that any amendment in the pleadings which is filed by a party under Section 241 and 242 of the Companies Act requires leave of the Court. The submission of Union of India that without filing application it was entitled to suo moto add prayers in the Company Petition has to be rejected. No party is entitled to add /amend its pleadings/ reliefs in a Company Petition filed under Section 241-242 without making an application. Present is a case where neither any application has been made nor any leave has been taken from the Court or the NCLT at any point of time permitted the Union of India to add further prayers in the original Company Petition as amended on 25.11.2019. Conclusion - i) The facts of the present case clearly indicate that neither there was any application filed for amendment nor any leave was granted by the NCLT for amendment. ii) The pleadings once filed form part of court record and cannot be amended without leave of the court ensuring procedural fairness and opportunity to the opposite party. The impuned order set aside - appeals allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in these appeals arising from the same set of facts are:

• Whether the Union of India was entitled to amend the prayers in Company Petition No.3638 of 2018 by adding prayer clause (e) without filing a fresh application or obtaining leave of the Tribunal after the amendment application MA No.2696 of 2019 was allowed on 25.11.2019;
• Whether the NCLT erred in rejecting the applications filed by the appellants challenging the inclusion of prayer clause (e) in the amended Company Petition;
• Whether the procedure prescribed under Rule 155 of the NCLT Rules, 2016 and the principles of natural justice were complied with in allowing the amendment of the petition without leave of the Tribunal or opportunity to the appellants to object;
• The scope and effect of the order dated 25.11.2019 allowing MA No.2696 of 2019, particularly the interpretation of prayers (C) and (D) therein, and whether these prayers empowered the Union of India to amend the reliefs without a fresh application;
• The applicability of principles governing amendment of pleadings under the Code of Civil Procedure, 1908, especially as elucidated in the Supreme Court judgment in Gurdial Singh & Ors. v. Raj Kumar Aneja, to proceedings before the NCLT;
• Whether the impugned order of the NCLT dated 22.07.2024 rejecting the appellants' applications was legally sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement of Union of India to amend prayers without fresh application or leave of the Tribunal

Relevant legal framework and precedents: Rule 155 of the NCLT Rules, 2016 grants the Tribunal power to amend any defect or error within 30 days from completion of pleadings, but such amendment requires leave of the Tribunal. Section 424 of the Companies Act, 2013 empowers the Tribunal to regulate its procedure guided by principles of natural justice. The Supreme Court judgment in Gurdial Singh & Ors. v. Raj Kumar Aneja (2002) 2 SCC 445 underscores that pleadings, once filed, form part of the court record and cannot be amended without leave of the court; the application for amendment must specify the proposed changes to enable the court to exercise its discretion properly.

Court's interpretation and reasoning: The Tribunal examined the original petition and the amendment application MA No.2696 of 2019, focusing on prayers (C) and (D) which allowed the petitioner to "further supplement/enlarge/amend/modify the scope of the reliefs sought and prayers" by filing additional documents or applications. The Tribunal held that this permission did not equate to a blanket authority to amend the petition without filing a fresh application or obtaining leave. The Tribunal emphasized that the Union of India added prayer (e) in the amended petition served on 21.02.2024 without filing any application or seeking leave, which was contrary to the procedural requirements and principles of natural justice.

Key evidence and findings: The original petition contained a prayer (c) seeking leave to file further applications for amendment. The order dated 25.11.2019 allowed the amendment application MA No.2696 of 2019, including prayers (C) and (D), but did not explicitly authorize unilateral amendment without leave. The Union of India's act of adding prayer (e) without application or leave was found to be procedurally improper. The order dated 20.02.2024 merely granted liberty to serve the amended petition but did not grant leave to amend the prayers.

Application of law to facts: The Tribunal applied Rule 155 and the principles from Gurdial Singh to conclude that leave of the Tribunal is mandatory for amendment of pleadings, including adding new prayers. The absence of an application or leave rendered the amendment invalid.

Treatment of competing arguments: The Union of India argued that prayers (C) and (D) granted a broad enabling power to amend reliefs without fresh application. The Tribunal rejected this interpretation, holding that the language contemplates filing further applications and does not dispense with the requirement of leave. The appellants' contention that unilateral amendment violates procedural norms and natural justice was accepted.

Conclusions: The Tribunal concluded that the Union of India was not entitled to amend the prayers in the petition without filing a fresh application and obtaining leave of the Tribunal. The addition of prayer (e) without such procedure was impermissible.

Issue 2: Whether the NCLT erred in rejecting the appellants' applications challenging the amendment

Relevant legal framework and precedents: The principles of amendment under Rule 155, the requirement of leave, and the Supreme Court's guidance in Gurdial Singh were relevant. The Tribunal also referred to its own precedent in Kochar Sung UP Acrylic Ltd. & Anr. v. Sunny Kochar & Ors., 2024 SCC Online NCLAT 1134, which held that substantial amendments require an application and opportunity to the opposite party to respond, failing which principles of natural justice are violated.

Court's interpretation and reasoning: The Tribunal found that the NCLT's impugned order erred in holding that prayer (e) fell within the scope of the earlier allowed amendment and in rejecting the applications filed by the appellants. The NCLT's interpretation effectively allowed unilateral amendment without leave or opportunity to object, contrary to settled law.

Key evidence and findings: The appellants had filed CA No.60 of 2024 and other applications seeking deletion of prayer (e) on the ground that it was added without leave. The NCLT rejected these applications. The Tribunal noted that the appellants were not served with the amended petition before 21.02.2024 and were denied opportunity to object to the new prayer.

Application of law to facts: The Tribunal applied the principle that pleadings cannot be amended without leave and that parties must be given notice and opportunity to respond. The NCLT's rejection of the applications was inconsistent with these principles.

Treatment of competing arguments: The Union of India's argument that the amendment was covered by the earlier order was rejected. The appellants' arguments emphasizing procedural fairness and statutory requirements were accepted.

Conclusions: The Tribunal held that the NCLT erred in rejecting the appellants' applications and that prayer (e) must be deleted from the amended petition.

Issue 3: Scope and effect of the order dated 25.11.2019 allowing MA No.2696 of 2019

Relevant legal framework and precedents: The language of prayers (C) and (D) in MA No.2696 of 2019 and the order allowing it, as well as Rule 155 and Gurdial Singh, were considered.

Court's interpretation and reasoning: The Tribunal noted that prayers (C) and (D) allowed the petitioner to file further applications to amend or enlarge reliefs but did not authorize unilateral amendment without leave or application. The order was permissive to the extent of enabling further applications but did not dispense with procedural safeguards.

Key evidence and findings: The order dated 25.11.2019 allowed amendment of cause title and certain prayers, and permitted further applications for amendment. The Tribunal found that the Union of India misconstrued this as a carte blanche to amend pleadings without application.

Application of law to facts: The Tribunal applied the principle that any amendment requires leave and a proper application. The order of 25.11.2019 was not an open-ended authorization.

Treatment of competing arguments: The Union of India argued that prayer (e) was covered under the scope of the earlier amendment. The Tribunal rejected this, holding that the scope was limited to filing further applications.

Conclusions: The Tribunal concluded that the order dated 25.11.2019 did not empower the Union of India to amend the petition without filing an application and obtaining leave.

Issue 4: Applicability of principles of amendment under CPC and natural justice

Relevant legal framework and precedents: Section 424 of the Companies Act, 2013, Rule 155 of NCLT Rules, 2016, and the Supreme Court judgment in Gurdial Singh were examined.

Court's interpretation and reasoning: The Tribunal observed that though the NCLT is not strictly bound by the Code of Civil Procedure, it is guided by the principles of natural justice and procedural fairness. The requirement of leave to amend pleadings is a fundamental procedural safeguard to prevent unfair surprise and ensure proper adjudication.

Key evidence and findings: The Tribunal noted that the Union of India failed to comply with these procedural safeguards by adding prayer (e) without application or notice.

Application of law to facts: The Tribunal applied the principles to hold that the amendment was invalid.

Treatment of competing arguments: The Union of India's reliance on the enabling language of earlier prayers was rejected as inconsistent with procedural fairness.

Conclusions: The Tribunal held that principles of natural justice and procedural rules require leave and notice for amendment of pleadings.

Issue 5: Whether the impugned order dated 22.07.2024 rejecting appellants' applications was sustainable

Relevant legal framework and precedents: Rule 155 of NCLT Rules, 2016, Section 424 of Companies Act, 2013, and relevant case law including Kochar Sung and Gurdial Singh.

Court's interpretation and reasoning: The Tribunal found that the NCLT's impugned order failed to appreciate the mandatory nature of leave for amendment and the procedural irregularity in allowing prayer (e) without application or notice. The rejection of appellants' applications was thus erroneous.

Key evidence and findings: The appellants' applications sought deletion of prayer (e) on grounds of procedural impropriety. The NCLT's rejection was based on misconstrued interpretation of earlier order.

Application of law to facts: The Tribunal applied the statutory provisions and precedents to set aside the impugned order.

Treatment of competing arguments: The Tribunal rejected the Union of India's arguments defending the impugned order.

Conclusions: The impugned order was set aside and prayer (e) was ordered to be deleted from the petition.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The submission of Union of India that without filing application it was entitled to suo moto add any relief in CP No.3638 of 2018 has to be rejected. No party is entitled to add/amend its pleadings/reliefs in a Company Petition filed under Section 241-242 without making an application."

"The order dated 20.02.2024 cannot be said to be any grant of leave by NCLT to the Union of India to add further prayers in the CP No.3638 of 2018."

"The NCLT committed error in rejecting CA No.60 of 2024 and other Company Applications filed by the Appellants."

"The inclusion of clause (e) in the prayers in CP No.3638 of 2018 is unsustainable. We direct the Union of India to delete clause (e) from the prayers of the Company Petition."

"This order shall not preclude the Union of India from filing fresh application for amendment of prayers in CP No.3638 of 2019 as it may deem fit and proper and it is for the NCLT to consider any such application, if filed, in accordance with law."

The Tribunal reaffirmed the core principle that pleadings, once filed, form part of court record and cannot be amended without leave of the court, ensuring procedural fairness and opportunity to the opposite party. The judgment clarifies the limits of enabling amendment prayers and underscores the necessity of formal applications and judicial leave for amendment of reliefs in Company Petitions under Sections 241-242 of the Companies Act, 2013.