Home Legal News High Court Interference Under Article 226 Against NCLT Order Not Maintainable: Kerala High Court

High Court Interference Under Article 226 Against NCLT Order Not Maintainable: Kerala High Court

by Shreya
Kerala HC on fee waiver in NUALS

The Kerala High Court while ruling on the issue of jurisdiction of High courts in the case of Sulochana Gupta and another v. RBG Enterprises Pvt Ltd and others held, that under the provisions of the Companies Act, 2013 against any order of NCLT, an appeal lies to National Companies Appellate Tribunal and that a party cannot approach a High Court via its writ jurisdiction under Article 226.

Accordingly, in the instant case, where a single judge bench had previously entertained the petition via 226, it was held by a division bench of the High Court that the single Judge bench ought not to have entertained the writ petition nor passed the interim order. The company petitions nine in number were pending before the NCLT. In the impugned order itself, the NCLT refers to the prayers in the company petitions and post the matter for hearing of the IA.

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The division bench, in the instant case stated on the basis of numerous precedents that an order of a Tribunal cannot be challenged under Article 226.

The Court also noted that the dispute was essentially in the nature of a civil dispute, with no State or its instrumentalities or any public authority being involved. Also, there was an alternate remedy available in the form of appeal to the National Company Law Appellate Tribunal.

Case Background

The issue arose out of an order passed by the NCLT on July 9, restraining the Managing Director of the company from convening any meeting or carrying out financial transactions. The order was passed in a complaint filed by a few shareholders alleging oppression and mismanagement.

Challenging the order, the MD and the company filed a writ petition under 226. A single bench, observing that filing appeal before the NCLAT was practically impossible in view of the pandemic situation, permitted the petitioners to carry out financial transactions necessary for the day-to-day functioning of the company. This permission was made subject to any future order which the NCLT or NCLAT may pass.

Observations by the Division Bench

The division bench found fault with the single bench granting relief to the petitioners in a writ petition which was not maintainable at the first place.

“…in the case on hand, when none of the parties, State or authority or instrumentality of the State, or any private body, discharging public functions, have been arrayed as respondents, when the writ petition has been filed under Article 226 of the Constitution of India, having regard to the roster followed in listing the cases, writ court ought to have directed the respondents/writ petitioners to make necessary amendments, to the provisions under which the writ petition ought to have been filed, or in the alternative, directed that the writ petition be placed before the concerned court, dealing with the challenges made to the orders passed by Courts, or Tribunals, as the case may be. Admittedly, the order impugned in the writ petition (Exhibit-P1) is not an administrative order, passed by the National Company Law Tribunal.

Writ court, without drawing a distinction between a writ petition filed under Articles 226 and 227 of the Constitutions of India, has erroneously proceeded to entertain the writ petition under Article 226 against an interim order passed by the NCLT, Kochi Bench, in I.A. No.83/2020 in C.P.No.114/KOB/2019 dated 9.7.2020″, the DB observed.

“Writ petition filed under Article 226 of the Constitution of India, can be for the enforcement of fundamental rights or for any other purpose, as envisaged under Article 226 of the Constitution. There is no pleadings or materials to substantiate that the appellants are discharging public duties or public functions, and thus, amenable to writ jurisdiction under Article 226 of the Constitution of India”, the division bench added.

Accordingly, in the instant case, where a single judge bench had previously entertained the petition via 226, it was held by a division bench of the High Court that the single Judge bench ought not to have entertained the writ petition nor passed the interim order. The company petitions nine in number were pending before the NCLT. In the impugned order itself, the NCLT refers to the prayers in the company petitions and post the matter for hearing of the IA.

The division bench, in the instant case stated on the basis of numerous precedents that an order of a Tribunal cannot be challenged under Article 226.

The Court also noted that the dispute was essentially in the nature of a civil dispute, with no State or its instrumentalities or any public authority being involved. Also, there was an alternate remedy available in the form of appeal to the National Company Law Appellate Tribunal.

Case Background

The issue arose out of an order passed by the NCLT on July 9, restraining the Managing Director of the company from convening any meeting or carrying out financial transactions. The order was passed in a complaint filed by a few shareholders alleging oppression and mismanagement.

Challenging the order, the MD and the company filed a writ petition under 226. A single bench, observing that filing appeal before the NCLAT was practically impossible in view of the pandemic situation, permitted the petitioners to carry out financial transactions necessary for the day-to-day functioning of the company. This permission was made subject to any future order which the NCLT or NCLAT may pass.

Observations by the Division Bench

The division bench found fault with the single bench granting relief to the petitioners in a writ petition which was not maintainable at the first place.

“…in the case on hand, when none of the parties, State or authority or instrumentality of the State, or any private body, discharging public functions, have been arrayed as respondents, when the writ petition has been filed under Article 226 of the Constitution of India, having regard to the roster followed in listing the cases, writ court ought to have directed the respondents/writ petitioners to make necessary amendments, to the provisions under which the writ petition ought to have been filed, or in the alternative, directed that the writ petition be placed before the concerned court, dealing with the challenges made to the orders passed by Courts, or Tribunals, as the case may be. Admittedly, the order impugned in the writ petition (Exhibit-P1) is not an administrative order, passed by the National Company Law Tribunal.

Writ court, without drawing a distinction between a writ petition filed under Articles 226 and 227 of the Constitutions of India, has erroneously proceeded to entertain the writ petition under Article 226 against an interim order passed by the NCLT, Kochi Bench, in I.A. No.83/2020 in C.P.No.114/KOB/2019 dated 9.7.2020″, the DB observed.

“Writ petition filed under Article 226 of the Constitution of India, can be for the enforcement of fundamental rights or for any other purpose, as envisaged under Article 226 of the Constitution. There is no pleadings or materials to substantiate that the appellants are discharging public duties or public functions, and thus, amenable to writ jurisdiction under Article 226 of the Constitution of India”, the division bench added.

The court said that the writ court ought not to have entertained the writ petition for the reason that it would be amounting to allowing the writ petitioners/respondents to prosecute their challenge to the interim order passed in two different forums; one before NCLAT, New Delhi and by way of filing a writ petition under Article 226 of the Constitution of India.


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