Pankaj Khandelia & Anr vs Khandelia Oil And General Mills Pvt. ...

Pankaj Khandelia & Anr. .. Appellants

Versus

Khandelia Oil and General Mills Pvt. Ltd. & Ors. .. Respondents

Present:

For Appellants: Shri Shariq J. Reyaz Advocate.

For Respondents: Shri Rohit Sharma and Shri Anshul Chowdhary Advocates

ORDER

20.11.2017 The Appellants (hereinafter referred to as 'Petitioners')

preferred a petition under Sections 111, 397, 398, 402, 403 & 406 of the

Companies Act, 1956 r/w Section 59 of the Companies Act, 2013 alleging

wrongful transfer of Petitioners' shares in favour of the Respondents. The case

was originally filed and registered by the erstwhile Company Law Board ('CLB'

in Short) which was subsequently transferred to National Company Law

Tribunal (herein referred to as 'Tribunal') Chandigarh Bench, Chandigarh.

COMPANY APPEAL(AT)(INS) NO. 271 OF 2017 1

2. The case was heard by Division Bench consisting of Hon'ble

Member(Judicial) and Hon'ble Member (Technical) and on hearing, the

Judgment was reserved.

3. On 30th September, 2016, two Hon'ble Members passed separate

orders, disagreeing with each other. Hon'ble Member (Technical) held that the

transfer of shares executed beyond the period prescribed for two months are

not valid and declared transfer in favour of the Respondents are in violation

of Section 8 of the Companies Act, 1956. The Hon'ble Member(Judicial)

recorded his dissent and held that there is no merit in the petitions and

thereby disposed the petition with liberty to the Petitioners to avail alternative

remedy of suit.

4. Both the orders passed on 30th September, 2016 were not delivered in

the open Court and were recorded in the administrative side and on the same

date i.e., 30th September, 2016, the points of difference were recorded as

follows:

"(i) Whether the time provided in Section 108(1-A) of the Companies

Act, 1956 is mandatory or directory and what is the effect of delivery of

the instrument of transfer to the company beyond the period of two

months as prescribed thereunder:

(ii) Whether the transfer of the shares of HUF in CP No. 164 of 2013/RT

No. 47 of 2016 is illegal and invalid;

(iii) Whether the delay in filing the petition would not disentitle the

petition from the relief under Section 397, 398, 402, 403, 406, 111 of

COMPANY APPEAL(AT)(INS) NO. 271 OF 2017 2 the Companies Act 1956 and Section 59 of the Companies Act, 2013;

and

(iv) Whether the petition is liable to be partly allowed or dismissed in

toto except liberty to petitioners in CP No. 164 of 2013/RT No. 47 of 2016

to avail of the remedy, if so advised, by filing a civil suit to claim right in

shares of HUF. "

5. The points on difference of opinion for consideration by a third Member

was also not delivered in the open Court. In the administrative side, both the

Hon'ble Members recording their dissent and referring to the points of

difference, forwarded the matter in the administrative side to the Hon'ble

President of the National Company Law Tribunal, Principal Bench. The

Hon'ble President also did not list the matter nor pronounce any order(s) and

from its administrative side ordered to place the matter before a Third Hon'ble

Member(Judicial).

6. The Third Hon'ble Member(Judicial) heard the parties and passed a

detailed order on 2nd June, 2017 but curiously, the said order was also not

pronounced in the open Court, nor a copy of the same were made available to

the parties. In the Administrative side, Third Hon'ble Member (Judicial)

forwarded the file to the Tribunal, Chandigarh Bench, Chandigarh wherein

another Hon'ble Member(Judicial) of Tribunal, who earlier heard the matter,

passed the impugned order on 27th June, 2017 and referring the majority

decision, dismissed the Company Petition but allowing the Petitioners to seek

recourse of alternative remedy. The order dated 27th June, 2017 was, for the

first time, delivered in the open Court by Hon'ble Member(Judicial). The

COMPANY APPEAL(AT)(INS) NO. 271 OF 2017 3 Hon'ble Member(Technical) who earlier dissented was not present in the

Court.

7. The aforesaid facts as noticed above, has not been disputed by learned

Counsels appearing on behalf of the parties.

8. Learned Counsel appearing on behalf of the Petitioners submitted that

the impugned majority decision stands vitiated in view of the fact that the

difference of opinion expressed by two Hon'ble Members were not delivered in

the open Court, nor the copies of the same were supplied to the parties. It is

further submitted that the points of difference, which were framed and

referred to the Hon'ble President for placing the matter before the Third

Hon'ble Member, was also not supplied to the parties. It is also alleged that

the order passed by Third Hon'ble Member (Judicial) was also not passed in

the open Court, nor copy of the said order was supplied to the parties.

9. Learned Counsel appearing on behalf of the Respondents accepted that

the difference of opinion recorded by both the Hon'ble Members on 30th

September, 2016 were not pronounced in the open Court. It also accepted

that on 30th September, 2016, the case was not listed for pronouncement of

the Judgment/order. The parties could come to know from office that there is

difference of opinion. Learned Counsel for the Respondents has also admitted

that the order passed by the Third Hon'ble Member(Judicial) on 2nd June,

2017 was also not pronounced in the open Court. It was neither listed on the

said date, nor copies were supplied.

COMPANY APPEAL(AT)(INS) NO. 271 OF 2017 4

10. Section 419 of the Companies Act, 2013 deals with the 'Benches of the

Tribunal'. Sub-Section (5) therein stipulates the manner in which the case is

to be decided in case of difference of opinion on any point or points, as quoted

below:

"419. Benches of Tribunal -

(1) .....

(5) If the Members of a Bench differ in opinion on any point or points, it shall be decided according to the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President for hearing on such point or points by one or more of the other Members of the Tribunal and such point or points shall be decided according to the opinion of the majority of Members who have heard the case, including those who first heard it."

Though provision has been made to refer the matter to the Hon'ble

President and to send the matter to the Third Hon'ble Member, Section 419

is silent on the question as to whether the decision on difference of opinion is

to be pronounced in the open Court or not and whether the copy of the same

is to be forwarded to the parties. From a plain reading of sub Section (5) of

Section 419, however, makes it clear that in case of difference of opinion

where the matter to be referred to the Hon'ble President for hearing on the

point or points of one or more of the Hon'ble Members of the Tribunal, such

point or points required to be decided according to the opinion of the majority

of the Members, who have heard the case, including those who first heard the

matter.

COMPANY APPEAL(AT)(INS) NO. 271 OF 2017 5

11. The Tribunal is required to pass order after giving parties in a

proceeding before it, a reasonable opportunity being heard, in terms of Section

420 of the Companies Act, 2013. As per sub-Section (3) of Section 420, the

Tribunal is required to forward the copy of every order passed under Section

420 to the parties concerned as apparent from said provision and quoted

below:

"420. Orders of Tribunal. -

(1) The Tribunal may, after giving the parties to any proceeding

before it, a reasonable opportunity of being heard, pass such orders

thereon as it thinks fit.

(2) The Tribunal may, at any time within two years from the date of

the order, with a view to rectifying any mistake apparent from the

record, amend any order passed by it, and shall make such

amendment, if the mistake is brought to the notice by the parties:

Provided that no such amendment shall be made in respect of any

order against which an appeal has been preferred under this Act.

(3) The Tribunal shall send a copy of every order passed

under this section to all the parties concerned.

12. Section 424 relates to procedure to be followed by the Tribunal and the

Appellate Tribunal which reads as follows:

424. Procedure before Tribunal and Appellate Tribunal:

"(1) The Tribunal and the Appellate Tribunal shall not, while

disposing of any proceeding before it or, as the case may be, an

appeal before it, be bound by the procedure laid down in the Code of

COMPANY APPEAL(AT)(INS) NO. 271 OF 2017 6 Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles

of natural justice, and, subject to the other provisions of this Act [or of

the Insolvency and Bankruptcy Code, 2016] and of any rules made

thereunder, the Tribunal and the Appellate Tribunal shall have power

to regulate their own procedure." ....

13. The basic principle of Justice Delivery System is that a Court or a

Tribunal, while passing an order is not only required to give reasonable

opportunity of being heard to the parties but is also required to give good

reasons based on record/evidence. It is also required to show that the order

is passed after being satisfied itself on issues raised by the parties.

14. In Indian Judiciary, Justice Delivery System including provisions of

Companies Act, 2013, the Tribunal is required to give hearing in an open

Court. Once such hearing is given in the open Court, the Court or the

Tribunal, while passing an order is also required to pronounce order in the

open Court.

15. Under sub-Section (3) of Section 421, the Tribunal is required to send

the copy of every order passed under Section 420, which is also required to

be followed in a petition filed under Section 241 of the Companies Act, 2013

and other petitions. The Principle of Natural Justice is also require that the

parties should be informed of the order pronounced by the Court/Tribunal.

Such information can be given either by following prescribed procedure or by

informing the parties that the matter will be listed for judgment in the open

Court on a particular date. It is only after such pronouncement, the Hon'ble

Member(s) are supposed to frame the terms of difference of opinion which is

COMPANY APPEAL(AT)(INS) NO. 271 OF 2017 7 also required to be informed to the parties not only for the purpose of getting

good assistance, but also in terms of sub Section (3) of Section 420 of the

Companies Act, 2013, and in accordance with the Rules of Natural Justice.

16. For the reasons aforesaid, we hold as follows:

i) The Tribunal is required to pronounce its order or deliver its

judgment on hearing the parties in the open Court;

ii) If a judgment is reserved, Tribunal is required to pronounce it in

the open Court. If two or more Hon'ble Members have heard the case,

normally they should join together while delivering a judgment in the

open Court. In appropriate case, for the reasons to be recorded in

writing and with the permission of the Hon'ble President of Tribunal,

after obtaining signature of one or other absenting Hon'ble Member,

the other Hon'ble Member who has also heard the case, may

pronounce the judgement but it should be in the open Court;

iii) In case any terms of difference of opinion is recorded, either it is

to be recorded in the open Court and if the order is reserved, then it is

to be pronounced in the open Court and

iv) As per sub-section (3) of Section 420 copies of all such order(s)

are to be forwarded to the parties, to enable the aggrieved person, if so

required to move an appeal before the Appellate Tribunal under

Section 421 of the Companies Act, 2013.

17. Aforesaid provisions having not followed in the present case, we set

aside the impugned order dated 27th June, 2017 passed by National Company

Law Tribunal, Chandigarh Bench, Chandigarh in CP No. 163(ND)/2013, RT

COMPANY APPEAL(AT)(INS) NO. 271 OF 2017 8 No. 46/2016 and declare the decision(s) rendered by the Hon'ble Third

Member(Judicial) on 2nd June, 2017 illegal and void and set aside the said

order.

18. The case is remitted to the Hon'ble President, National Company Law

Tribunal, Principal Bench, New Delhi, who in his turn will direct the Registry

to provide free certified copies of the difference of opinion/order passed by two

Hon'ble Members comprising Hon'ble Member (Judicial) and Hon'ble

Member(Technical), both dated 30th September 2016, and the terms of

reference framed by one of the Hon'ble Member dated 30th September, 2016.

The Hon'ble President thereafter will refer the matter to a Third Hon'ble

Member, other than the Third Hon'ble Member(Judicial), to whom it was

earlier referred, who after notice to the parties will fix a date of hearing and

on hearing the parties, will pass appropriate order in accordance with law.

19. Both the appeals are allowed with aforesaid observations and

directions. However, in the facts and circumstances of the case, there shall

be no order to cost.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice A.I.S. Cheema] [Balvinder Singh] Member (Judicial) Member (Technical)

akc/

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