(Prayer: Petition filed Under Article 226 of the Constitution of India praying to issue a Writ of Mandamus, directing the Registrar of companies, 1st respondent and respondents 3 to 6 to permit the petitioner to induct four more directors in the Board of Directors of the 2nd respondent company Cetex Petro Chemical, in the Board to have representation in proportionate to the equity share holding of the petitioner holding 47.68% to the respondents holding 47.82% as per the Mandatory provisions of Section 160 and 161 (1) of the Indian Companies Act, 2013 and the rules framed thereunder till then forbearing the respondents 3 to 6 from in any manner conducting and the annual general meeting on 31.12.2019.)
1. The above WP.SR.No.162309 of 2019 has been filed praying to issue a Writ of Mandamus, directing the Registrar of Company’s 1st respondent and respondents 3 to 6 to permit the petitioner herein to induct 4 more directors in the Board of Directors of the 2nd respondent Company Cetex Petro Chemical, in the Board to have representation in proportionate to the equity share holding of the Petitioner holding 47.68% to the Respondents holding 47.82% as per the Mandatory provisions of Section 160 and 161(1) of the Indian Companies Act 2013 and the rules framed thereunder till then forbearing the Respondents 3 to 6 from in any manner conducting and the Annual General Meeting on 31.12.2019.
2. After scrutinizing the case papers, the Registry returned the same to the Counsel for the Petitioner for the following clarification among others:
“The subject matter and relief sought therein relates to Companies Act also seeking relief against the Private Concerns - Respondents 3 to 6 and therefore it may be clarified as to how this Writ Petition is maintainable under Article 226 Constitution of India since there is a remedy available before the Honourable NCLT”.
3. The counsel for the petitioner has re-presented the case papers with the following endorsement:
“Objection raised by the Registry as per the Civil Appeal No.9176/19 in SLP.No.22596/2019 filed before the Supreme Court of India, the Writ Petition is maintainable.”
4. The matter was listed before this Court on the ground of Maintainability.
5. Heard the learned counsel for the petitioner.
6. The learned counsel for the petitioner placed reliance on the Judgment of the Hon’ble Supreme Court in Civil Appeal No.9170 of 2019 @ SLP (C) No.22596 of 2019, M/s.Embassy Property Developments Pvt. Ltd., Vs. State of Karnataka and Ors. The facts in that case are totally different and distinguishable. In the said case, two issues have been examined by the Hon’ble Supreme Court, (i) Whether the High Court ought to interfere, under Article 226/227 of the Constitution, with an order passed by the National Company Law Tribunal in a proceeding under the Insolvency and Bankruptcy Code, 2016, ignoring the availability of a statutory remedy of appeal to the National Company Law Appellate Tribunal and if so, under what circumstances; and (ii) Whether question of fraud can be inquired into by the NCLT/NCLAT in the proceedings initiated under the Insolvency and Bankruptcy Code, 2016, arise for our consideration in these appeals.
7. The back ground facts have been given in the paragraph 4 of the said judgment which are as follows:
i) A company by name M/s. Udhyaman Investments Pvt. Ltd. which is the twelfth Respondent in the first of these three appeals, claiming to be a Financial Creditor, moved an application before the NCLT Chennai, under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the IBC, 2016), against M/s. Tiffins Barytes Asbestos & Paints Ltd., the Corporate Debtor (which is the fourth Respondent in the first of these three appeals and which is also the appellant in the next appeal).
ii) By an Order dated 12.03.2018, NCLT Chennai admitted the application, ordered the commencement of the Corporate Insolvency Resolution Process and appointed an Interim Resolution Professional. Consequently, a Moratorium was also declared in terms of Section 14 of the IBC, 2016.
iii) At that time, the Corporate Debtor held a mining lease granted by the Government of Karnataka, which was to expire by 25.05.2018. Though a notice for premature termination of the lease had already been issued on 09.08.2017, on the allegation of violation of statutory rules and the terms and conditions of the lease deed, no order of termination had been passed till the date of initiation of the Corporate Insolvency Resolution Process (hereinafter referred to as CIRP).
iv) Therefore, the Interim Resolution Professional appointed by NCLT addressed a letter dated 14.03.2018 to the Chairman of the Monitoring Committee as well as the Director of Mines & Geology informing them of the commencement of CIRP. He also wrote a letter dated 21.04.2018 to the Director of Mines & Geology, seeking the benefit of deemed extension of the lease beyond 25.05.2018 upto 31.3.2020 in terms of Section 8A (6) of the Mines & Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as MMDR Act, 1957).
v) Finding that there was no response, the Interim Resolution Professional filed a writ petition in WP No. 23075 of 2018 on the file of the High Court of Karnataka, seeking a declaration that the mining lease should be deemed to be valid upto 31.03.2020 in terms of Section 8A(6) of the MMDR Act, 1957.
vi) During the pendency of the writ petition, the Government of Karnataka passed an Order dated 26.09.2018, rejecting the proposal for deemed extension, on the ground that the Corporate Debtor had contravened not only the terms and conditions of the Lease Deed but also the provisions of Rule 37 of the Mineral Concession Rules, 1960 and Rule 24 of the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Rules, 2016.
vii) In view of the Order of rejection passed by the Government of Karnataka, the Corporate Debtor, represented by the Interim Resolution Professional, withdrew the Writ Petition No.23075 of 2018, on 28.09.2018, with liberty to file a fresh writ petition.
viii) However, instead of filing a fresh writ petition (in accordance with the liberty sought), the Resolution Professional moved a Miscellaneous Application No.632 of 2018, before the NCLT, Chennai praying for setting aside the Order of the Government of Karnataka, and seeking a declaration that the lease should be deemed to be valid upto 31.03.2020 and also a consequential direction to the Government of Karnataka to execute Supplement Lease Deeds for the period upto 31.03.2020.
ix) By an Order dated 11.12.2018, NCLT, Chennai allowed the Miscellaneous Application setting aside the Order of the Government of Karnataka on the ground that the same was in violation of the moratorium declared on 12.03.2018 in terms of Section 14(1) of IBC, 2016. Consequently the Tribunal directed the Government of Karnataka to execute Supplement Lease Deeds in favour of the Corporate Debtor for the period upto 31.03.2020.
x) Aggrieved by the order of the NCLT, Chennai, the Government of Karnataka moved a writ petition in WP No.5002 of 2019, before the High Court of Karnataka. When the writ petition came up for hearing, it was conceded by the Resolution Professional before the High Court of Karnataka that the order of the NCLT could be set aside and the matter relegated to the Tribunal, for a decision on merits, after giving an opportunity to the State to respond to the reliefs sought in the Miscellaneous Application. It is relevant to note here that the Order of the NCLT dated 11.12.2018, was passed exparte, on the ground that the State did not choose to appear despite service of notice.
xi) Therefore, by an Order dated 22.03.2019, the High Court of Karnataka set aside the Order of the NCLT and remanded the matter back to NCLT for a fresh consideration of the Miscellaneous Application No.632 of 2018.
xii) Thereafter, the State of Karnataka filed a Statement of Objections before the NCLT, primarily raising two objections, one relating to the jurisdiction of the NCLT to adjudicate upon disputes arising out of the grant of mining leases under the MMDR Act, 1957, between the State Lessor and the Lessee and another relating to the fraudulent and collusive manner in which the entire resolution process was initiated by the related parties of the Corporate Debtor themselves, solely with a view to corner the benefits of the mining lease.
xiii) Overruling the objections of the State, the NCLT Chennai passed an Order dated 03.05.2019 allowing the Miscellaneous Application, setting aside the order of rejection and directing the Government of Karnataka to execute Supplemental Lease Deeds.
xiv) Challenging the Order of the NCLT, Chennai, the Government of Karnataka moved a writ petition in WP No.41029 of 2019 before the High Court of Karnataka. When the writ petition came up for orders as to admission, the Corporate Debtor represented by the Resolution Professional appeared through counsel and took notice and sought time to get instructions. Therefore, the High Court, by an Order dated 12.09.2019 adjourned the matter to 23.09.2019 and granted a stay of operation of the direction contained in the impugned Order of the Tribunal. Interim Stay was necessitated in view of a Contempt Application moved by the Resolution Professional before the NCLT against the Government of Karnataka for their failure to execute Supplement Lease deeds.
xv) It is against the said ad Interim Order granted by the High Court that the Resolution Applicant, the Resolution Professional and the Committee of Creditors have come up with the present appeals.
8. Finally the Hon’ble Supreme Court held as follows with respect to the 1st issue:
45. Therefore, in fine, our answer to the first question would be that NCLT did not have jurisdiction to entertain an application against the Government of Karnataka for a direction to execute Supplemental Lease Deeds for the extension of the mining lease. Since NCLT chose to exercise a jurisdiction not vested in it in law, the High Court of Karnataka was justified in entertaining the writ petition, on the basis that NCLT was coram non judice.
9. With respect to the second issue, the Hon’ble Supreme Court had held as follows:
52. The upshot of the above discussion is that though NCLT and NCLAT would have jurisdiction to enquire into questions of fraud, they would not have jurisdiction to adjudicate upon disputes such as those arising under MMDR Act, 1957 and the rules issued thereunder, especially when the disputes revolve around decisions of statutory or quasi judicial authorities, which can be corrected only by way of judicial review of administrative action. Hence, the High Court was justified in entertaining the writ petition and we see no reason to interfere with the decision of the High Court. Therefore, the appeals are dismissed. There will be no order as to costs.
10. In the present case, the petitioner has alleged that the respondent Nos.3 to 6, who are private parties have usurped the controlling interest of the 2nd respondent by getting 4.5% of the shares transferred to the 3rd respondent without adhering to the conditions of the agreement between the parties to relieve the personal guarantee. It had been stated that the 3rd respondent did not adhere to the conditions of the agreement with the 1st petitioner to release the personal guarantee given by T.G.S.Mahesh, which was a pre-condition for the transfer of 4.5% shares in dispute. It was therefore stated that the transfer was illegal and unlawful. It had also been stated that the respondent Nos.3 to 6 have been trying to undermine the interests of the petitioners to dispossess the controlling stake held by the petitioners.
11. As a matter of fact, in this connection, a Company Petition No.20 of 2018 is pending before the NCLT at Chennai. It is also seen that in said Tribunal, the petitioners had also filed I.A.No.421 of 2019 and a comparison of the petition therein and the affidavit filed in the present Writ Petition shows that the affidavit is practically a cut and paste of the said petition. The said petition had been filed seeking the following reliefs:
i. to set aside the induction of the two Additional Director pursuant to the resolution passed by the Board of Directors on 01.11.2019 in violation of the order passed by this Honourable Tribunal.
ii. to pass a direction that the Board of Directors shall have representation in proportion to the equity shareholding of the Petitioners with 47.68% and the respondents with 47.82%.
iii. to extend the time for subscription to the rights issue dated 01.11.2019 by a period of 30 days for infusion of entire shortfall of funds Rs.6.5 Cr.
iv. or any other order or orders as this Honourable Tribunal deems fit in the circumstances of the case and thus render justice.
12. As a matter of fact, relief No.2 above, namely, to have representation in proportion to the equity shareholding, is the same relief as sought in the present Writ Petition which has been filed for a direction to permit the petitioner to induct four more Directors in the Board of Directors. It is thus seen that the relief sought in the I.A.No.421 of 2019 is the very same relief sought in the present Writ Petition with words being interchangeably used. But the intention and the relief are the same. In the reliefs’ sought in the Writ Petition and in the relief sought in the application filed before the NCLT, the petitioners have sought representation in proportion to the equity shareholding of the petitioners with 47.68% and the respondents with 47.82%. It is thus seen that it is a re-agitation of the issue which had been raised before the NCLT and which is pending before the said Tribunal.
13. This practice of re-agitation and re-litigating the same issue before two different forums has been very strongly commented by the Honourable Supreme Court reported in 1998-3-SCC-573, K.K.Modi Vs. K.N.Modi. The Honourable Supreme Court had stated as follows:-
“44. One of the examples cited as an abuse of the process of the court is re litigation. It is an abuse of the process of the court and contrary to justice and public policy for a party to re litigate the same issue which has already been tried and decided earlier against him. The re agitation may or may not be barred as res judicata. But if the same issue is sought to be re-agitated, it also amounts to an abuse of the process of the court. A proceeding being filed for a collateral purpose, or a spurious claim being made in litigation may also in a given set of facts amount to an abuse of the process of the court. Frivolous or vexatious proceedings may also amount to an abuse of the process of the court especially where the proceedings are absolutely groundless. The court then has the power to stop such proceedings summarily and prevent the time of the public and the court from being wasted. Undoubtedly, it is a matter of the court’s discretion whether such proceedings should be stopped or not; and this discretion has to be exercised
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with circumspection. It is a jurisdiction which should be sparingly exercised, and exercised only in special cases. The court should also be satisfied that there is no chance of the suit succeeding.” 14. The learned counsel for the petitioner stated that a fraud had been conducted by holding the Annual General Meeting on 14.10.2019. It had been stated that the fact that the decision had been kept in abeyance and has not been disclosed in the audit report. If fraud is alleged then the petitioner may very well agitate the same before the Tribunal, which as held by the Hon’ble Supreme Court can examine allegation of fraud. 15. The actual grievance of the petitioners for filing the Writ Petition is that the Presiding Officer is on leave and a mention was made before the Co-ordinate Bench of the NCLT, Chennai. The said Presiding Officer had adjourned the case to February 2020. That will not be a ground for the writ petitioner to file this writ petition with the very same relief before this Court. 16. In these circumstances, I hold that the Writ jurisdiction cannot be exercised to grant the relief sought by the petitioners, particularly since the Company Petition No.20 of 2018 is already pending before the NCLT with respect to the very same parties and with respect to the very same issue and I.A. No.421 of 2019 has been filed for the very same relief, namely seeking representation in proportion with respect to the equity shareholding and re-agitation of the same issue is not permissible under law. 17. In view of all these reasons, the Writ Petition is not maintainable and accordingly, the Writ Petition is rejected at the stage of SR. No costs.