The 'Rights Issue' can be examined by the 'Tribunal' in a petition u/s 241 of the Companies Act, 2013: NCLAT

The 'Rights Issue' can be examined by the 'Tribunal' in a petition u/s 241 of the Companies Act, 2013: NCLAT

The Company Appeal filed by the Appellants (Brookefield Technologies Pvt Ltd & Ors.) against the order passed by the National Company Law Tribunal, Bengaluru Bench, which had allowed the application waiving the requisite conditions, as mentioned in Section 244(1) of the Companies Act, 2013 to maintain the main Company petition, has now been dismissed by the National Company Law Appellate Tribunal (NCLAT).

The Appellant contended that the resignation of the First Respondent / Applicant / Petitioner from her post as 'Director' was completely voluntary as held by the Civil Court and that the dilution of the First Respondent's shareholding in the Appellant Company was a consequence of her unequivocable refusal to avail of the rights offer made by the Appellant Company. Therefore, the impugned events are the result of First Respondent's own actions and hence, there was no allegation of oppression and mismanagement of the affairs of the Appellant Company made out by the First Respondent / Applicant / Petitioner in the petition.

It was also stated that there was no scope for invoking a 'waiver' enabling the First Respondent to proceed with the petition when she herself had refused to subscribe to the 'Rights Issue' and that the civil court had already held that the Board meeting at which such 'Rights Offer' was decided to be made was legally convened.

The Appellate Tribunal observed that to determine whether the petition filed under section 241 and 242 of the Companies Act, 2013, the Tribunal has to examine only the averments mentioned in the petition.

As per the Appellate Tribunal, the burden is on the petitioner to prove oppression or mismanagement and the 'Tribunal' is to consider the entire material on record and to arrive at a final conclusion. There is no impediment for the Tribunal to consider the preliminary objections raised by a party at a later stage of the main proceedings. If maintainability is a triable issue, the acceptance of a petition or rejection of the same has to be decided along with the issues raised, to be heard with the merits of the case in the considered opinion of this Tribunal.

The NCLAT stated that although for filing a petition no time limit is specified under Section 241 of the Companies Act relating to 'oppression and mismanagement', the residuary Article 113 of the Limitation Act, 1963 concerning 'when the right to sue accrues' is to be borne in mind.

In so far as the jurisdiction of the civil court is concerned, it was pointed out that section 9 of the Civil Procedure Code confers jurisdiction upon the civil courts to decide all disputes of civil nature unless the same is prohibited under a statute either expressly or by necessary implication. In short, one cannot infer the bar of civil courts' jurisdiction and in this regard a strict interpretation is required in regard to a provision seeking to bar the jurisdiction of a civil code.

According to the NCLAT, the interest of an applicant in a company whether it is substantial or significant, the issues raised in the petition u/s 241 of the Companies Act, 2013 is the appropriate / competent jurisdiction to deal with them by the Tribunal, and whether the cause / case projected in the petition is of primordial importance to an 'applicant' or to the 'company' or to 'any class of members' etc. are some of the pertinent factors to be taken note of for projecting an application for waiver of the requirements under section 244 of the Companies Act, 2013.

The Appellate Tribunal opined that even though the Tribunal in the impugned had observed that the contention of the Respondent that Civil Court had already decided the issues and thus the present application and main company petition were not maintainable, were baseless on facts and law etc.; these were in the considered opinion of this Tribunal only rendered at an interlocutory stage.

The NCLAT held, "Suffice it for this Tribunal to point out that a petition at the initial stage cannot be thrown out if the averments contained therein require detailed / elaborate / an in-depth examination / inquiry based on relevant materials / evidence, if any, to be let in by parties in a given case."

The First Respondent / Petitioner had 9% of the total share capital even after a shareholding was reduced from 45%, by means of 'Rights Issue' which was a subject matter of the main company petition. The Tribunal had opined that a meritorious litigation cannot be thrown at threshold without examining the merits of the case and further observed that the First Respondent / Petitioner had made out a prima facie case to entertain the main company petition for its final adjudication and resultantly allowed the waiver application which in the considered opinion of the Tribunal required no interference.