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IN THE HIGH COURT OF KARNATAKA
S.R. Krishna Kumar, J.
Mr Byju Raveendran & Ors. – Appellants
Versus
Think And Learn Private Limited & Ors. – Respondents
Writ Petition No. 15788 of 2024 (GM-RES) c/w Writ Petition No. 15801 of 2024(GM-RES)
Decided On : 02-07-2024
COMPANY LAW - NCLT INJUNCTION - Companies Act, 2013 - Sections 241-242, 242(4) - The court found that the NCLT's order granting an injunction was cryptic and lacked reasoning, failing to meet the legal standards for issuing such orders. The court emphasized the necessity for a reasoned order, highlighting that the NCLT did not apply the triple test of prima facie case, balance of convenience, and irreparable injury, which are essential for granting interim relief. The lack of a reasoned order was deemed a violation of principles of natural justice, leading to the decision to set aside the NCLT's order and remand the matter for reconsideration.
Fact of the Case:
The case involves two petitions challenging an order from the NCLT that granted an injunction against the petitioners, preventing them from proceeding with a second rights issue until the main company petition was resolved. The petitioners argued that the NCLT's order was cryptic and unreasoned, while the respondents claimed the petitioners had violated prior undertakings.
Finding of the Court:
The court found that the NCLT's order was non-speaking and lacked the necessary reasoning to justify the injunction. It emphasized that the NCLT failed to consider the required legal standards for issuing such an order, which warranted intervention.
Issues: Whether the NCLT's order granting an injunction was justified and whether it adhered to the legal requirements for such orders, including the necessity for a reasoned decision.
Ratio Decidendi: The court held that a judicial order must be reasoned and articulate the application of legal principles to the facts of the case. The absence of such reasoning in the NCLT's order constituted a failure to comply with the principles of natural justice.
Final Decision: The court allowed the petitions, set aside the NCLT's order, and remitted the matter back to the NCLT for reconsideration with directions to issue a reasoned order within a specified timeframe.
ORDER
S.R. Krishna Kumar, J. -
Both these petitions arise out of the impugned order dated 12.06.2024 passed on C.A.No.71/2024 in C.P.No.18/BB/2024 on the file of the National Company Law Tribunal, Special Bench, Bengaluru (for short 'the NCLT'). The said company petition was filed by the respondents 1 to 5 under Sections 241-242 of the Companies Act, 2013 (for short 'the said Act of 2013').
2. The petitioners in W.P.No.15788/2024 are arrayed as respondents 2 to 4 in the said company petition, while the petitioner in W.P.No.15801/2024 is arrayed as respondent No.1 in the said company petition, which is pending adjudication before the NCLT.
3. During the pendency of the said proceedings before the NCLT, the respondents 1 to 5 filed an application C.A.No.71/2024 under Section 242(4) of the said Act of 2013 r/w Rules 11 and 32 of the NCLT Rules, 2016. The said application having been opposed by the petitioners herein, who filed their statement of objections, the NCLT proceeded to pass the impugned order dated 12.06.2024 allowing the said application C.A.No.71/2024 in favour of respondents 1 to 5, thereby granting injunction in their favour against the petitioners till disposal of the main proceedings in C.P.No.18/BB/2024. Aggrieved by the said impugned order, the petitioners are before this Court by way of the present petitions.
4. Heard Sri.K.G.Raghavan and Sri.Dhyan Chinnappa, learned Senior counsel appearing for the petitioners and Sri.Udaya Holla and Sri.Satish Parasaran, learned Senior counsel appearing for the respondents 1 to 5 and perused the material on record.
5. In addition to reiterating the various contentions urged in the petitions and referring to the material on record, learned Senior counsel for the petitioners invited my attention to the impugned order in order to point out that the same was cryptic and nonspeaking order, whereby the NCLT granted injunction in favour of respondents 1 to 5 against the petitioners without assigning any reasons as to why the said order was being passed by the NCLT. It was submitted that the matter was posted on 12.06.2024 for consideration of not only the instant C.A.No.71/2024 but also another application in C.A.No.72/2024 filed by respondents 1 to 5 as well as C.A.No.76/2024 also filed by respondents 1 to 5. However, while the NCLT adjourned the matter for consideration of C.A.No.76/2024, the NCLT specifically directed C.A.No.72/2024 filed by the respondents 1 to 5 to be considered along with the contempt petition also filed by the respondents 1 to 5 alleging violation by the petitioners who had seriously disputed and denied the said allegations and claim made by the respondents 1 to 5.
5.1 It was therefore submitted that having deferred the consideration of C.A.No.72/2024 and C.A.No.76/2024, the NCLT clearly erred in passing the impugned non-speaking and unreasoned order allowing C.A.No.71/2024 which deserves to be set aside. It was submitted that no reliance can be placed upon either the order dated 27.02.2024 passed by the NCLT or the allegations made by the respondents 1 to 5 against the petitioners as regards alleged violation by the petitioners for the purpose of upholding the impugned order especially when the said issue is pending consideration in the contempt petition as well as C.A.No.72/2024 filed by the respondents 1 to 5 against the petitioners which is seriously contested and disputed by the petitioners. It was therefore submitted that the impugned order passed by the NCLT deserves to be set aside.
5.2 In support of their contentions, learned Senior counsel for the petitioners placed reliance upon the following judgments:-
(ii) Ploomberg Television Production Services India Pvt. Ltd., vs. Zee Entertainment Enterprises Ltd., - 2024 SCC OnLine SC 426;
6. Per contra, learned Senior counsel for the respondents 1 to 5 would reiterate the various contentions urged in the statement of objections and submit that the petitioners ar
Judicial orders, particularly those granting injunctions, must be reasoned and demonstrate the application of legal standards to the facts; failure to do so violates principles of natural justice.
The court reiterated that interim orders protecting rights pending final adjudication are crucial, and only appealable orders determining rights of parties fall under the Companies Act, 2013.
The court affirmed the importance of procedural compliance under Rule 89 of the National Company Law Tribunal Rules, 2016, highlighting that failure to adhere to such rules affects litigants' rights ....
Condition precedent for invocation of Section 241(2) of the Act, which requires the Central Government to come to an opinion that the affairs of the company “are being conducted in a manner prejudici....
A writ petition pursuing parallel remedies under the Insolvency and Bankruptcy Code is impermissible and affects parties' rights; interim orders must determine substantial issues.
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