Madras High Court
Shree Mahabaleswara Auto Industries ... vs Union Of India on 5 October, 2012
Author: Elipe Dharma Rao
Bench: Elipe Dharma Rao, M.Venugopal
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 5.10.2012
CORAM:
THE HONOURABLE MR.JUSTICE ELIPE DHARMA RAO
AND
THE HONOURABLE MR.JUSTICE M.VENUGOPAL
Writ Petition No.28392 of 2010
and M.P.No.2 of 2010
Shree Mahabaleswara Auto Industries (P) Ltd.,
A Registered Company in Karnataka,
Office at 'Pranav', No.18, First Cross,
9th Main Road, Sadashivanagar,
Bangalore-560080,
represented by the
Managing Director
Mr.Sudhir Sirsi .. Petitioner
Vs.
1.Union of India,
represented by Secretary to
Ministry of Corporate Affairs,
Shastry Bhavan,
New Delhi-110001.
2.Principal Bench,
Company Law Board,
rep.by the Chairman,
Having office/Court at
Shastry Bhavan,
New Delhi-110001.
3.Additional Principal Bench,
Company Law Board,
UTI Building,
Rajaji Salai,
Madras-600001.
4. Members Bench (presided over by Judicial Member)
Company Law Board,
UTI Building, Rajaji Salai,
Madras-600001.
5. St.Lizamma Augustine,
Judicial Member,
Company Law Board,
UTI Building, Rajaji Salai,
Madras-600001.
6. S.Shridhar
7. Mrs.Sunanda
8. Anant Albal
9. Mrs.Kamala Albal
10.M/s.Arsal Packaging (P) Ltd.,
Regd.Office at No.305,
7th 'B' Main Road, 4th Block,
Koramangala,
Bangalore-560038,
represented by its Managing Director
Mr.Rashid Mulla .. Respondents
* * *
Writ Petition filed under Article 226 of the Constitution of India, praying to issue a Writ of Certiorari, to call for the records on the file of the 1st respondent relating to all clauses (a) to (d) of sub-Rule 1 of Rule 3 of the Company Law Board (Qualifications, Experience and other Conditions of Service of Members) Rules, 1993, notified by Notification dated 28.4.1993 and to quash the same.
* * *
For petitioner : Mr.J.Harikrishna
For R.1 to R.5 : Mr.M.Ravindran,
Addl.Solicitor General assisted by
Mr.Velayutham Pichaiya, CGSC
For R.6 : Mr.P.H.Arvind Pandian
For R.7 & R.9 : M/s.C.K.Lavanya Rathi
For R.10 : Mr.T.V.Sekar
R.8 : Party-in-person
* * *
O R D E R
ELIPE DHARMA RAO, J.
The present litigation is at the height of misuse of the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India.
2. This case would show how the heat of the personal enmity between the clients is being turned towards the Judicial Officers by a clever and cunning litigant, ignoring all the legal dicta and the judicial conventions, thus indulging in threatening measures against the Judicial Officers. The following reasons would justify our observations.
3. The petitioner is a company, engaged in manufacture of automobile parts. In 1999, the sixth respondent/Mr.S.Shridhar, a retired RBI official joined as a partner of the company and was allotted 35 shares out of 500 equity shares for Rs.35,000/= and he paid Rs.5 lakhs for joining the company as the asset to company as the prospect was bright and he acted as a Director till 14.1.2000. Thereafter, trouble started between the petitioner company and the 6th respondent as the petitioner company was alleging that the sixth respondent misappropriated the funds of the company and the sixth respondent alleging that the petitioner company cheated him, which resulted in the sixth respondent initiating criminal proceedings against the petitioner company, besides filing O.S.No.870 of 2003 on the file of the City Civil Court, Bangalore for recovery of money.
4. While so, the sixth respondent has also filed Company petition No.57 of 2007 before the Company Law Board, Chennai, invoking Sections 111, 235, 397, 398 and 402 of the Companies Act, arraying the petitioner company as Respondent No.1 and its Directors/respondents 7 to 9 and Mr.Sudhir Sirsi (the Managing Director) and also the tenth respondent, who is a subsequent purchaser of the factory with land as party respondents to the litigation. In the said Company Petition, the sixth respondent has prayed to direct the company and its Directors to rectify the register of shareholders by entering his name in the shareholder's register and issue shares as agreed by them in the agreement dated 5.7.1999; appoint an independent Chartered Accountant to audit the books of accounts and affairs of the company at its cost; appoint an administrator to take charge of the affairs of the company and carry on its business; declare the deed of sale executed between the company and its directors with the subsequent purchaser (the tenth respondent herein) as null and void and restitution of the assets and property into the company's fold; declare the general meetings, if any, held without the knowledge of the petitioner/6th respondent and resolutions passed thereat as illegal and void and compensate him for the damage sustained by him because of the wrongful acts of the company and its Directors.
5. In the said Company Petition, preliminary objections with regard to the jurisdiction were raised by the company and its Directors along with the subsequent purchaser/the tenth respondent. Since the matter was pending before the Company Law Board (CLB) without any decision with regard to the preliminary objections raised by the parties and further alleging that the very Company Petition is not maintainable, the tenth respondent herein/the subsequent purchaser had filed W.P.No.22269 of 2007 before this Court praying to issue a Writ of Certiorari to call for the records of the Company Petition No.57 of 2007 and to quash the same.
6. After hearing all the parties, a learned single Judge of this Court has disposed of the said writ petition, by the order dated 25.3.2010, directing the CLB to consider the maintainability of the Company Petition No.57 of 2007 and decide the preliminary issue and render a finding before adjudicating on the merits of the company petition.
7. According to the petitioner, pursuant to the order of the learned single Judge, arguments were commenced on 1.7.2010, which concluded on 19.7.2010 and alleging that till date (i.e. till the date of filing of the present writ petition on 22.11.2010) no orders are passed by the CLB, headed by the 5th respondent, the petitioner has come forward to file this writ petition.
8. A careful reading of the long affidavit filed in support of the writ petition, would show that the petitioner wants to insist that since the Judicial Member/the 5th respondent did not dismiss the Company Petition and that since the 5th respondent did not comply with the time limit fixed by a learned single Judge of this Court, the entire system of selection of Judicial Members to the CLB is faulty. He would press into service the qualifications fixed for the appointment of the Member of the National Company Law Tribunal (NCLT) and would argue through his counsel on record that the qualifications of a Member of CLB, as prescribed by Notification dated 28.4.1993, falls short of the requirements prescribed for eligibility of a Judicial Member of NCLT in that the mandatory qualification is of 15 years.
9. The tenor of the affidavit would show that the petitioner wants to impress upon this Court that since the qualification prescribed for a Member of the CLB is short of requirements prescribed for eligibility of a Member of NCLT, it has paved way for the selection of a candidate like the 5th respondent and therefore, the impugned Rules should be quashed.
10. All the contentions of the petitioner were pooh-poohed by the respondents. The 5th respondent has filed a counter affidavit denying all the averments of the affidavit and further stating that since there are no sufficient members in the CLB, the matter could not be disposed of in the time frame fixed by the High Court, for which necessary extension has been obtained by them from the High Court. During the course of arguments, the learned Additional Solicitor General appearing for the fifth respondent would also produce before us a copy of the order passed by the 5th respondent in C.P.No.57 of 2007, dated 6.1.2011, further stating that the directive of the High Court has already been complied with.
11. Further, the learned Additional Solicitor General would argue that the very writ petition filed by the petitioner is misconceived, inasmuch as it challenges the appointment of a Judicial Member of the CLB on untenable grounds. He would further argue that just for the reason that the dispute pending before the 5th respondent could not be disposed of within the time fixed by the High court, for which necessary extension was obtained by the 5th respondent, it cannot be said that the very appointment of the 5th respondent to the post is illegal.
12. There is no doubt that the petitioner is a litigant before the 5th respondent and alleging that the 5th respondent ought to have rejected the claim of the sixth respondent in C.P.No.57 of 2007 and further alleging that the very process of appointment of the 5th respondent to the exalted position is faulty, the petitioner has come forward to file this writ petition challenging the provisions governing the appointment of Members to the CLB.
13. The appointment of Members of the CLB are governed by the Company Law Board (Qualifications, Experience and Other Conditions of Service of Members) Rules, 1993. Rule 3 deals with qualification and age limit for appointment of members. Since Rule 3(1) is under challenge in this writ petition, we extract hereunder the said Rule, for ready reference:
"3. Qualification and age limit for appointment of Members:
(1) A person shall not be qualified for appointment as Judicial Member unless he -
(a) has, for at least ten years, held a judicial office in the territory of India; or
(b) has, for at least ten years, been an Advocate of High Court, or has partly held judicial office and has been partly in practice as an Advocate for a total period of ten years; or
(c) is, or has been, a Member of the Central Company Law Service (Legal Branch)/Indian Company Law Service (Legal Branch) and is holding or has held a post in Senior Administrative Grade in that service for at least three years; or
(d) is, or has been a Member of the Indian Legal Service and is holding, or has held a post in Grade-I of that service for at least three years."
14. The Method of recruitment has been dealt with in Rule 4, whereunder it has been mentioned that 'the selection of Members shall be made by the Government of India in consultation with the Chief Justice of India or his nominee'. The circumstances under which a member can be removed are dealt with under Rule 7.
15. In the case on hand, The Honourable The Chief Justice of India has nominated The Honourable Mr.Justice Markandey Katju, Judge, Supreme Court of India (as His Lordship then was) as the Chairman of the Selection Committee, in terms of Rule 3.
16. The 5th respondent was a Judicial Officer for about 25 years in various positions, including that of District Judge for a period of eight years at the time of her selection to the Company Law Board. Besides, she also worked as Chairperson of Kerala Sales Tax and Agricultural Income-tax Appellate Tribunal, Motor Accident Claims Tribunal and Joint Secretary in the Government of Kerala and thus since she had complied with all the qualifications stipulated in the Rules, after complying with all the principles of law, the Selection Committee, headed by The Honourable Mr.Justice Markandey Katju, has selected the 5th respondent as the Judicial Member, to which no mala fides can be attributed.
17. It is the argument of the petitioner that the qualifications prescribed for the appointment of Members to the NCLT are higher than the qualifications prescribed for the member of the CLB and hence, the very appointment of the 5th respondent to the CLB is illegal. Let us now dissect the position.
18. The Government constituted a Committee under the Chairmanship of His Lordship The Honourable Mr.Justice V.Balakrishna Eradi, a retired Supreme Court Judge, to review the law relating to insolvency and Winding Up of Companies and other laws like The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) etc. The Committee made various recommendations with the main objective of expediting the revival/rehabilitation of a Sick Company and protection of workers interest, which were incorporated in the Companies (Amendment) Bill, 2001. The said Bill was subsequently passed by both the Houses of the Parliament and finally got the assent of the President of India on 13th January, 2002 and became the Companies (Amendment) Act, 2002.
19. This Bill provides for setting up of the National Company Law Tribunal (NCLT) and on setting up of the said Tribunal, all the matters relating to companies which were earlier handled by various High Courts, Company Law Board, Board for Industrial and Financial Reconstruction (BIFR) and Appellate Authority for Industrial and Financial Reconstruction (AAIFR) will be transferred to the National Company Law Tribunal. The further recommendations are that the Central Government shall constitute the NCLT on the basis of recommendations of the Selection Committee, which will be consisting of the Chief Justice of India or his nominee as Chairman of the Committee and Secretaries of the Ministry of Finance and Company Affairs, Labour Law and Justice as members of the Committee. The NCLT to be headed by its President who has been a Judge of the High Court or is eligible to be appointed as a Judge of the High Court. The qualifications for the Judicial Member of NCLT are, one, who:
a) has held judicial office for at least 15 years in an Indian territory, or
b) has 10 years experience of practising as an Advocate of The High Court or one who has held partly the judicial office and partly practised in High Court, then taking together both should be 15 years experience or
c) 15 years service with the Central/State Government on Group 'A' post (including at least 3 years of service as a Member of the Indian Company Law Service (Legal Branch) in a senior administrative grade)
d) has held for at least fifteen years a Group 'A' post or an equivalent post under the Central Government (including 3 years of service as a member of the Indian Legal Service in grade-I of that service).
Since in the qualifications for Judicial Member of NCLT 15 years experience is insisted, the petitioner would argue that the qualification prescribed for the Judicial Member of Company Law Board being only ten years, it is below the standard and hence the same need to be quashed.
20. It is to be pointed out that the Companies (Second Amendment) Act, 2002, which was to take effect from 1.4.2003 with reference to the National Company Law Tribunal had not been given effect to at all and therefore, the provisions contemplated therein have not come into existence and hence, as has been rightly pointed out on the part of the official respondents, the qualifications prescribed for NCLT cannot be taken as a bench mark.
21. The impugned Rule, prescribing qualifications for the Judicial Member is in tune with the qualifications prescribed for a High Court Judge, under Article 217 (2) of the Constitution of India and the said Rule is in successful operation from 1993.
22. We must remember the fact that the petitioner, a litigant before the 5th respondent, is challenging her appointment, ex facie, on the ground that she has not passed favourable orders in C.P.No.57 of 2007, as if she is unfit to hold the post, quoting the qualifications prescribed for NCLT, which have not at all come into force. This sort of threatening petitions against the judicial officers at the instance of the cunning litigants like the petitioner, if encouraged, will prove fatal to the entire justice delivery system besides injecting most unwanted fear element into the minds of the judicial officers. By this we do not mean to say that the judiciary claims and enjoys total immunity, but what we insist is that unscrupulous litigants like the petitioner in the case on hand should not be encouraged. It would have been a different case, had the impugned Rules or for that matter, the appointment of the 5th respondent were challenged by a person interested, not being a litigant like the petitioner, in the manner known to law. It is not the case of the petitioner that the case of the 5th respondent falls within the ambit of Rule 7 and hence she need to be removed.
23. When the appointment of the 5th respondent was made by a Selection Committee headed by a Honourable Judge of the Supreme Court of India, since she has satisfied all the criteria and when the the qualification Rules pertaining to NCLT are not at all given effect to, more particularly since the petitioner, a litigant before the 5th respondent has indulged in threatening measures like filing the petition, in a way challenging the appointment of the 5th respondent, ex facie on the ground that she has not passed favourable orders in C.P.No.57 of 2007, which was later on dismissed by her, and since the impugned Rules are successfully in operation from the year 1993, we do not see any reason to entertain this writ petition.
Accordingly, we dismiss this writ petition. To serve as an eye-opener for cunning litigants like the petitioner, we impose a cost of Rs.25,000/= (Rupees Twenty Five Thousand Only) on the petitioner to be paid to the Tamil Nadu State Legal Services Authority, High Court campus, Chennai-104 within two weeks from the date of receipt of a copy of this order. In the event of failure, the Member Secretary, Tamil Nadu State Legal Services Authority, to take all necessary steps to recover the said amount. Consequently, M.P.No.2 of 2010 is also dismissed.
Rao To 1The Secretary to Government of India, Ministry of Corporate Affairs, Shastry Bhavan, New Delhi-110001.
2.The Chairman, Principal Bench, Company Law Board, rep.by the Chairman, Having office/Court at Shastry Bhavan, New Delhi-110001.
3.Additional Principal Bench, Company Law Board, UTI Building, Rajaji Salai, Madras-600001.
4. Members Bench (presided over by Judicial Member) Company Law Board, UTI Building, Rajaji Salai, Madras 600001