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Judgment
This appeal filed under Section 10-F of the Companies Act, 1956, challenges the order dated 16.08.2012, passed by Company Law Board, allowing an application filed by respondents herein for condonation of delay in filing the rejoinder, taking recourse to Regulations 43 and 44 of the Company Law Board Regulations, 1991.
The respondent herein filed a Company Petition No.58/397-398/CLB/MB/2009, under Sections 397 and 398 of the Companies Act, 1956, against various respondents including the present appellants in the month of June 2009. After issuance of notice, the matter was posted for further hearing on 20.08.2009. On that day, apart from hearing on the question of interim relief numbers (d), (e) and (k), vide order dated 24.08.2009, the appellants were directed to file a reply by 29.09.2009 and the respondent to file the rejoinder by 23.10.2009. The matter was thereafter posted for hearing on 11.11.2009.
The appellants filed their reply, however, instead of filing rejoinder, the respondents issued a notice dated 11.06.2010 to the appellants seeking inspection of the original documents referred to and relied upon by the appellants in their affidavit in reply.
By order dated 10.08.2010, the said application was allowed and the appellants were directed to produce the original documents as mentioned in letter dated 11.06.2010 from Sl. No. 1 to 6 and audit report of the Company from year the 2000 upto the latest before the Bench Officer on or before 31.08.2010 with liberty to the respondents or their nominee to inspect the original in the presence of the Bench Officer from 11 A.M. onwards on 01.09.2010.
Appellants by letter dated 01.10.2010, informed the Company Law Board that as directed by order dated 10.08.2010, inspection of the documents has been provided to the respondents, however, one of the respondent namely, Shravan Kumar Patel, refused to inspect some of the documents available for inspection.
After inspection of the original documents, vide application, CA No.205/2010, the respondents requested for furnishing of the true copies of the documents inspected by them, which was allowed by order dated 08.07.2011 and the matter was thereafter posted on 18.10.2011.
Order dated 18.10.2011 reveals that in the presence of Advocate Mr. Rajarathnam Baddan, a last opportunity of two weeks for filing rejoinder was granted to the respondent. It was made clear that if no rejoinder is filed, the filing of rejoinder will be forfeited. The matter was thereafter posted for 08.02.2012. However, on 08.02.2012, counsel for respondent made an oral prayer for grant of further time to file rejoinder on the ground that the appellants have not given the inspection of the documents. The said prayer was rejected, pointing out that it is on record that the respondent had taken inspection of the documents and keeping that in mind, the Bench had passed the order affording two more weeks for filing of rejoinder. It was specifically mentioned that in failure to do so, filing of rejoinder will stand forfeited. The Board has observed that respondent has not sought any extension of time, therefore, the order dated 18.10.2011 has attained finality.
The Board was of the view that the respondent has least respect towards the Board as despite granting last opportunity to file rejoinder on 18.10.2011, the same has not been filed. The Board also observed that though the respondent has sought expeditious hearing of the matter vide letter dated 30.11.2011, however, the counsel insisted for grant time to file rejoinder and refused to commence his arguments. The matter was, therefore, adjourned for final hearing on 18.04.2012.
It is seen that respondents herein thereafter filed an application, CA No.55/2010 dated 06.04.2012 for condonation of delay in filing his rejoinder to the reply of the appellants. It was prayed that the order dated 18.10.2011 be modified and time be extended to permit the respondents herein to file rejoinder, on the ground that inspection of only part of the document was granted, also certified copy of all the documents as requested by him and directed by the Bench on 18.10.2011 was not provided. It was further stated that copy of order dated 18.10.2011 was never received by the respondent or his counsel, though there is a practice by the Board to send the copy of the order to the parties to the petition and their advocates by post. It was further stated that Advocate Mr. Baddan, who appeared on that date was not aware of any such order passed by the Board and for the first time respondent had occasioned to see the order dated 18.10.2011.
This application was allowed by the Board by order dated 16.08.2012, on the ground that Company Law Board's order dated 18.10.2011 and 08.02.2012 were based on misleading statements of the appellants. The Board has further observed that the Company Law Board would have power to review its own order in case the finding and relief granted are based on fabricated and forged documents or the order is obtained through fraud of such dimension as would affect the very basis of the claim.
It is against the said order that the appellants have come with the above appeal raising the following question of law :-
(i) Whether power of review not specifically conferred upon the Company Law Board by the Rules/Regulations statutorily framed, could still be exercised by the Board by restoring to the inherent powers conferred upon it under Regulations 44 of the Company Law Board Regulations, 1991 ?
It is contented by Shri Kishore Shrivastava, learned Senior Counsel appearing for the appellants that there is a conscious decision on the part of government, while framing regulations 1992 to omit Regulation 27. Therefore, invoking of the inherent power under regulation 44 to produce the same result that could have been produced by invoking Regulation 27 (omitted) would go against the intent of law maker. It is stated that the Board has no power to review or recall its own order, once the order has been attained finality, the same is not open for change or for variation. It is further submitted that without any basis or pleading the Board has jumped to the conclusion that the order dated 18.10.2011 and 08.02.2012 are based on forged and fabricated documents.
Per contra, Shri Siddharth Gulatee, learned counsel appearing for the respondents contended that that the respondents have not been provided with the inspection of all the documents and all photocopies of the documents inspected were not given till date. It is stated that non-providing of complete inspection and all the copies of the documents inspected, despite the order of Company Law Board is the reason for delay in filing the rejoinder and regulations 43 of the Company Law Board Regulations, 1991 gives wide power to the Board to extend the time in the interest of justice. It is further argued that on 18.10.2011, when the parties were heard, only a junior counsel has attended the hearing, but the copy was not received by the respondents. It is only on 08.02.2012, the respondents came to know about the said order and applied for certified copies and filed the application, CA No.55/2012.
As already noted, the respondent sought recall/review of the order dated 18.11.2011, by way of application for condonation of delay, alleging that delay occasioned for the reason that inspection of all the documents was not provided and copy of order dated 18.10.2011 was not served on the respondent. Said application was allowed by the order dated 16.08.2012 and the Board exercised its inherent power under Regulation 44 to review its own order on the ground that Board's earlier orders dated 18.10.2011 and 08.02.2012 were based on misleading statements of appellants and the finding and relief granted are based on fabricated and forged documents or the order is obtained through fraud of such dimension as would affect the very basis of the claim.
As far as the contention of respondent that the order dated 18.10.2011 was not received, it could only be an irregularity and would not prejudice the respondent as their counsel Rajarathnam Baddan appeared before the Company Law Board on that day. Hence, it cannot be said that respondent was not aware of the said order.
As regards the second aspect which led the Board to exercise its inherent power, it is necessary to take note of the prayer made in the application CA 205/2010 and the two orders dated 18.10.2011 and 08.02.2012.
A careful perusal of the aforesaid application and orders, show that initially vide order dated 20.08.2009, time till 23.10.2009 was granted to the respondents to file rejoinder. Instead of filing rejoinder, the respondents asked for inspection of the original documents, 12 in number, by their application/letter dated 11.06.2010. The board by order dated 10.08.2010, directed the appellants herein to produce the original documents mentioned in the letter dated 11.06.2010 from Sl. No. 1 to 6 only and the audit report of the Company from the year 2000 upto the latest before the Bench Officer on or before 31.08.2010. Liberty was given to the respondents to inspect the documents in presence of the Bench Officer. It appears that respondents thereafter filed an application seeking certified copy of the said documents and the Board by order dated 08.07.2011, directed the appellants herein to furnish certified copy of the original documents inspected by the respondents.
As reflected from the said order dated 08.07.2011 that Mr. Ajay Panickar, Advocate appeared on behalf of the respondents. Similarly, on 18.10.2011, Advocate Rajarathnam Baddan appeared for respondents. However, on both the aforesaid dates, no objections or allegations were raised that inspection of all the documents as directed has not been provided or the certified copy of the documents were not furnished. Even on 08.02.2012, there was no application in this regard nor there was any application for condonation of delay or extension of time before the Bench. Only an oral prayer was made seeking time for filing rejoinder on the ground that inspection was not provided and the Board after considering the conduct of respondents and all its previous orders rejected the the prayer of respondents holding and affirming that the order dated 18.10.2011 has attained finality.
One cannot lose sight of the fact that during the period from 10.08.2010, when the inspection of the document was allowed to 18.10.2011, when the last opportunity of two weeks was granted to file rejoinder, forfeiting the right if order is not complied with, and for that matter even on 08.02.2012, no allegation that "inspection of all the documents was not provided" or "certified copy of the documents not supplied" was made by the respondent nor there were any allegations that appellants had made false or misleading statements or used forged and fabricated documents.
Under the circumstances, the reasoning and the observations made by the Bench, which led the Board to exercise its inherent powers to recall/review its earlier orders are against the record and not sustainable.
The Company Law Board Regulations 1991, as it appears, seems to be a complete code in so far as the procedure to be followed by the Board is concerned. The regulations cover many matter in exhaustive manner including; (i) Jurisdiction of the Bench; (ii) The method of presentation of the petitions; (iii) The right of the parties to appear and seek remedies; (iv) The method of service of notice and process issued by the Bench; (v) The manner of filing reply and documents by respondent and filing of counter by the petitioner; (vi) Power to Board to set aside the ex-parte orders; (vii) Supply of certified copies; (viii) Enrichment of time; (ix) inherent power of Board etc;
Some of the relevant provisions of the regulations are required to be noted. The regulations which came into force with effect from 31.05.1991, originally contained a provision under the Regulation 27 conferring power on the Company Law Board to review its own order. However, Regulations 27 was specifically omitted by the Amendment Regulations of 1992.
Regulation 43 confers power upon the Board to enlarge the time fixed for the performance of any Act or the filing of any document or representation. Regulation 44 confers inherent powers to the Bench to make such orders as may be necessary for the ends of justice to prevent abuse of process of the Bench. Regulation 45 empowers the Board to correct its orders either suo motu or an application by a party, if there are clerical or arithmetical mistake, or any error arising from any accidental slip or omission.
In Patel Narshi Thakershi and others Vs. Shri Pradyumansinghji Arjunsinghji (1971) 3 SCC 844, the Supreme Court has held that it is well settled that power to review is not an inherent power. It must be conferred by law either specifically or by necessary implications. Similar view is held in the case of Commissioner of Central Excise Vadodara Vs. Steelco Gujrat Ltd. (2003) 12 SCC 732.
In Budhia Swain and others Vs. Gopinath Deb and others (1999) 4 SCC 396 the Supreme Court has held :-
In our opinion a tribunal or a court may recall an order earlier made by it if
(i) the proceedings culminating into an order suffer from the inherent lack of jurisdiction and such lack of jurisdiction is patent,
(ii) there exists fraud or collusion in obtaining the judgment,
(iii) there has been a mistake of the court prejudicing a party or
(iv) a judgment was rendered in ignorance of the fact that a necessary party had not been served at all or had died and the estate was not represented.
The power to recall a judgment will not be exercised when the ground for re-opening the proceedings or vacating the judgment was available to be pleaded in the original action but was not done or where a proper remedy in some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by waiver, estoppel or acquiescence.
A distinction has to be drawn between lack of jurisdiction and a mere error in exercise of jurisdiction. The former strikes at the very root of the exercise and want of jurisdiction may vitiate the proceedings rendering them and the orders passed therein a nullity. A mere error in exercise of jurisdiction does not vitiate the legality and validity of the proceedings and the order passed thereon unless set aside in the manner known to law by laying a challenge subject to the law of limitation."
As noted above, the power of review was in fact contained in the Company Law Board Regulations, 1975 as Rule 45 and was incorporated in the Company Law Board Regulations, 1991, as Regulation 27. However, in 1992, this regulation was specifically omitted. No provision has been brought to my notice from which it could be gathered that the Board had power to review its own order. If the power of review has been specifically omitted. It is not possible to import the provision of review by taking shelter under Regulation 44.
The inherent powers are inherent by virtue of the Court/Tribunal with the duty to render justice. The inherent jurisdiction can be restored to only when there is no other remedy available to the party.
Hence, the Company Law Board, acting quasi-judicially under a statute cannot exercise a power unless conferred specifically by the statute. Once a finality is reached with regard to any matter or order, the only recourse open to the aggrieved party is to approach the appellate Court for relief.
In view of the above, the question of law is decided in favour of the appellants. Resultantly, the appeal is allowed and the impugned order of the Company Law Board is set aside.