w w w . L a w y e r S e r v i c e s . i n

Shree Hari Agro Industries Ltd. v/s Deepak Vegpro Private Limited

    APO No. 374 of 2015, ACO No. 163 of 2015 & CP No. 2 of 2015
    Decided On, 14 September 2015
    At, High Court of Judicature at Calcutta
    For the Petitioners: S.N. Mookerji, Ratnanko Banerji, Sr. Advocates, Manju Bhuteria, P.K. Jewrajka, Urmila Chakraborty, A. Banerjee, Advocates. For the Respondent: S.K. Kapoor, Sr. Advocate, Naren Sharma, D.N. Misra, Shaunak Mitra, Abhishkh Haldar, Arunima Lala, Advocates.

Judgment Text
1. The only ground on which the unreasoned order of the Company Law Board is sought to be sustained is of Regulation 44 of the Company Law Board Regulations, 1991. The argument has to be rejected out of hand since a tribunal, as opposed to the representative of the sovereign as a Court, cannot confer jurisdiction on itself that the statute that brings the tribunal into existence has not afforded it.

2. The appeal is directed against a one - page order of the principal bench of the CLB passed on August 10, 2015 on proceedings under Sections 237, 247 and 250 of the Companies Act, 1956. The first paragraph of the order directs, rather unusually, that the balance sheets, profit and loss accounts, directors’ reports and annual reports of the company be made over by the company to the petitioners before the CLB by the adjourned date. The second paragraph covers, in essence, a finding that the petitioner before the CLB was a creditor of the company and it enjoyed a charge over the assets of the company. The CLB also noticed in such paragraph that subsequent to the charge being created in favour of the petitioners before the CLB by the company, the company had sought to enter into an arrangement with a company associated with those in control of the company, by which a further charge in respect of the assets of the company were created and a sizable amount was being paid by way of lease rent.

3. The third paragraph of the order impugned records the contention as to the lack of authority of the CLB in making the order as asserted by the appellants herein. It also attributes a submission to the petitioner before the CLB that the bar cited on behalf of the appellants herein "does not apply for the purposes of Sections 237, 247 and 250 of the Companies Act." The operative part of the order, which follows immediately thereafter, is quoted:

"In the facts and circumstances Respondent no.1 is restrained from making any payment to Respondent no.1 till the next date of hearing."

4. The appellants say that apart from the order being unsupported by any reasons, it is evident on a plain reading of the provisions quoted in the petition before the CLB, that the CLB did not have had the authority to pass either the direction for furnishing the old reports of the company or the substantive order of injunction restraining the company from making payment to another creditor of the company. The petitioners have relied on a judgment reported at (2007) 4 CHN 712, which was followed in an unreported order of October 24, 2008 passed in T No.108 of 2008 (Birla Corporation Limited v. Rameshwara Jute Mill Company Limited). A Division Bench judgement reported at (1998) 4 Comp.LJ 299 (Cal) (Shaw Wallance and Co. Ltd. v. Union of India) and a Supreme Court judgment reported at (1994) 4 SCC 225 (Morgan Stanley Mutual Fund v. Kartick Das)have been placed for the proposition that the relevant provision must confer authority on a tribunal to pass an ad interim order for such an order to be sustained. In the relevant discussion at paragraphs 39 to 42 of the report in the Division Bench judgment, the Court noticed Regulation 44 of the said Regulations of 1991 and observed that the inherent power thereunder could be used in connection with any enabling provision, but not de hors the same.

5. Though judicial work is being increasingly outsourced to tribunals or other quasi judicial bodies outside the sovereign system of the judiciary, and such bodies are often recognised as discharging essential judicial functions, it must be remembered that a tribunal or like body created by a statute has only such authority as is granted by the statute or as may be necessarily inferred for it to discharge the duties assigned to it by the statute.

6. The respondents herein have not been able cite anything in Sections 237(b) or 247 or 250 for the CLB to have the authority to pass a substantive order by which a company can be restrained from making payment to a creditor. The appellants have relied on the discussion in the judgment reported at 175 Comp. Cases 418 on the scope and ambit of the authority exercised by the CLB under Sections 237 and 247 of the Act and the related provisions.

7. The grievance of the petitioners before the CLB was that the company was fraudulently siphoning off funds in favour of an entity controlled by those in control of the company and to the prejudice of its genuine creditors, particularly the petitioners before the CLB in whose favour of the assets of the company remained charged. Such factual position was necessary to be pleaded and demonstrated for the purpose of obtaining an order of investigation. But it would be evident from, in particular, Section 247 of the Act that the ultimate purpose of the exercise is to obtain an order of investigation.

8. It cannot be said that an adjudication of the company’s alleged liability to the petitioners before the CLB or the company’s alleged liability to another creditor could have been undertaken by the CLB in course of the proceedings before it. If such is the case, the CLB did not have any authority to pass the order impugned, particularly to restrain the company from making any payment to a creditor.

9. The constitutional scheme of things requires Courts or quasi judicial authorities to operate within the bounds of their authority. Merely because there is a complaint or some wrong-doing is alleged, is not enough for a Court or a quasi judicial authority to be excited to correct the perceived wrong, however evil such wrong may be. It is incumbent on a Court or a quasi judicial authority to first discover the extent of its authority before embarking on an exercise of remedying the wrong complained of. If the system of Courts and quasi judicial authorities are to maintain order in society, they have to guard against their own indiscipline to tread beyond the limits of their jurisdiction. The nature of the proceedings before the CLB did not permit it to issue the direction as to production of records or the substantive injunction. Neither was in aid of the ultimate reliefs that could be sought under Sections 237, 247 and 250 of the Act.

10. The order impugned cannot stand both because it does not give reasons

Please Login To View The Full Judgment!
in support thereof and since it appears, ex facie, to be in excess of the authority available to the CLB in the context of the petition before it. 11. ACO No.163 of 2015 and APO No.374 of 2015 are allowed by setting aside the order impugned dated August 10, 2015 and by requesting the CLB to take up the matter afresh at the ad interim stage upon notice to the parties and pass such order as may be warranted and within the bounds of the CLB’s authority under the relevant provisions. 12. There will be no order as to costs. 13. Urgent certified website copies of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.