NCLT - CLASS ACTION SUIT

A.M SRIDHARAN
PRACTICING COMPANY SECRETARY
09940012655; sri2fine @gmail.com
 NCLT
• Sec.430 – bars jurisdiction of civil courts
• No civil court shall have any jurisdiction
• any suit or proceeding in respect of which the
tribunal or appellate tribunal is empowered
• Under this Act or any other law for the time
being in force
• No injunction shall be granted by any court or
other authority
 NCLT
• Sec.268 – No appeal shall lie in any court or
authority and no civil court shall have any
jurisdiction
• In respect of any matter in which the tribunal
or appellate tribunal is empowered this
chapter
• No injunction shall be granted by any court or
other authority
 NCLT- Criminal Jurisdiction
not barred
1956 Act 2013 Act
• First class magistrate or • Special court - judge should
presidency magistrate be immediately before
• Sessions court (revision or appointment shall be
appeal) holding office of a sessions
• High Court judge or as an additional
sessions judge – Sec.435 (3)
• High court (revision or
appeal) Sec.437
 NCLT
• Impact of Sec.430
• Sec.96 (AGM), 97 (application to tribunal for
AGM) and 98 ( application to tribunal for
EGM)
• Sec.169 - Removal of directors
• K. Radhakrishnan vs Thirumani Asphalts and
Felts P. Ltd (1997) 13 SCL 169 Mad.
 NCLT
• IMPACT OF SEC.430
• Evidences have to be taken by NCLT
• Rajinder Kumar Malhotra vs Harbhans Lal
Malhotra & Sons Ltd (1996) 87 Comp.Cases
146 (CLB)
 Whether High Court Jurisdiction is
completely ousted in civil matters
• Sec.2(29) court means-
(i) High court having jurisdiction in relation to the place at
which the registered office of the company concerned is
situate, except to the extent to which jurisdiction has been
conferred on any district court or district courts
subordinate to that High Court under Sub-clause (ii)
(ii) district court
(iii) court of sessions having jurisdiction to try any offence
under this or previous companies law
(iv) the special court established under sec.435
(v) any metropolitan magistrate or a judicial magistrate of
the first class having jurisdiction to try any offence under
this Act or any previous company law
 Whether High Court Jurisdiction is
completely ousted in civil matters
• Sec. 130 re-opening of accounts
• Application is made by the CG, Income tax
authorities, SEBI, any other statutory
regulatory body or authority or any person
concerned
• An order is made by a court of competent
jurisidiction or Tribunal
 Whether High Court Jurisdiction is
completely ousted in civil matters
• Sec.210 (2) where an order is passed by a
court or tribunal in any proceeding before it
that the affairs of the company ought to be
investigated, the central government shall
order investigation into the affairs of that
company
 Whether High Court Jurisdiction is
completely ousted
• Sec.463 (1)
• Relief from prosecution
 Procedure before NCLT and NCLAT
• Sec.424
• Shall not be bound by code of civil procedure
• Shall be guided by principles of natural justice
• Other provisions of this act or rules made
thereunder
• Shall have power regulate their own
procedure
 Application of Limitation Act
• Sec.433 provisions of Limitation Act apply to
proceedings before tribunal or appellate tribunal
• Impact
• If period is given in the Act, then
application/appeal has to be filed within time
contemplated
• if not filed within the time contemplated
application for condonation of delay under sec.5
has to be filed
 Application of Limitation Act
• If no period is given in the Act, then Art.137 of
Limitation would apply.
• Art.137 prescribes a maximum of period of
three years
• If not filed within 3 years then application for
condonation of delay has to be filed
• Bank of Rajasthan Ltd vs Rajasthan Breweries
Ltd (2007) 140 Com.cas 622 CLB
 Appeal to NCLAT
• Sec.421
• Consent orders cannot be appealed
• Appeal has to be filed within a period of 45
days
• On sufficient cause being shown can be filed
within a further period not exceeding 45 days
 Appeal to Supreme court
• Sec.423
• Appeal within a period of sixty days
• On sufficient cause within a further period not
exceeding sixty days.
• Tenecco Mauritius Ltd vs Bangalore Union
Services Ltd & others
 Contempt Powers
• Sec.425
• Tribunal and appellate tribunal both have
contempt powers
 Transitional provisions
• Sec.434
• 434(1)(b) On notification, all pending matters shall stand
transferred to tribunal
• 434(1) ( c) all proceedings under the Companies Act, 1956 including
proceedings relating to arbitration, compromise and arrangments
and reconstruction and winding up of companies, pending
immediately before such date before any district court or High
Court shall stand transferred to tribunal
• 434(1)(d) any appeal before AAIFR and reference before BIFR shall
stand abated
provided the company may make a reference to the tribunal within
180 days from the date commencement of this Act
 Time limit for disposal
• Sec.422
• Sec.422(1) Every endeavour shall be made to
dispose every application or petition presented to
NCLT and every appeal to NCLAT within 3 months
• Sec.422(2) record the reason and the president or
chairperson by taking into account the reason so
recorded extend the period by such period not
exceeding ninety days as he may consider
necessary.
 Mediation and conciliation
• Sec.442
• 442(1) CG shall maintain a panel of experts to be called
as the Mediation and conciliation panel for mediation
between the parties during the pendency of any
proceedings
• Any of the parties may at any time during the
proceedings may apply and the CG, tribunal or
appellate tribunal shall appoint one or more experts
• May suo-motu refer the matter
• Within 3 months forward its recommendation
• Any party aggrieved may file objection
 Class action suit
• The class action lawsuit filed against IT firm iGATE and
its former CEO, Phaneesh Murthy, was voluntarily
dismissed by the shareholder plaintiff in a United
States District Court.
• iGATE was slapped with the suit, by people who had
purchased securities of the company between March
14, 2012 and May 21, 2013, for allegedly failing to
disclose Mr. Murthy’s relationship with a subordinate
employee.
• Source The Hindu online dated Aug 23, 2013
• Earlier Phaneesh Murthy was sacked on 20/05/2013
• Shares were quoting at US $ 15.22
 TCS faces class action suit
• Two employees Gopi Vedachalam and Kangana Beri file
complaint that Tata Sons and its subsidiary TCS of
breaching employment contracts and violation of
California Labour Code which resulted in unpaid wages
• Alleged
• a) Tata unjustly enriched itself by requiring all of
its non-US Citizen employees to endorse and sign over
their federal and state tax refund checks to Tata and by
taking unauthorised deductions from its employee’s
paychecks.
 TCS faces class action suit
b) TCS promised to pay a gross US salary and a separate
Indian salary.
c) Company’s unauthorised deductions from its
employees wages prevented employees from receiving
both their promised US Salary and Indian Salary
In 2006 and 2007 TCS and others file a motion to
dismiss the case
US District Court grants class action status
Source:Business standard Jan 26, 2013
 Infosys faces class action suit
• Jack Palmer, an employee filed a case that
Infosys misused B1 business visa to send lower
level and unskilled foreigners to the US to
work in full time positions
• Court classified as a class action
• Source: The Business Standard Jan 26,
2013
 Bhopal Gas Tragedy
• Tragedy occured on Dec.2-3, 1984 in Bhopal
• In Mar.1985, the Govt. of India enacted the Bhopal Gas Leak
Disaster Act enabling the GOI to act as the legal representative of
the victims in claims arising of or related to the Bhopal Disaster
• In Jan 1987 US Court of Appeals confirm the transfer of litigation to
India and rules that UCIL is a separate legal entity, owned,
managed and operated exclusively by Indian Citizens in India.
• In October 1993, US Supreme Court refuses to hear the appeal
• In 2006 second circuit court of Appeals (one of the thirteen United
States Courts of Appeals) in New york city upheld the dismissal of
remaining claims in the case of Bano Vs. Union Carbide Corporation.
This has blocked the plaintiff motion for class certification and
claims for property damages and remediation
 Class action
• Also known as representative action
• Is a civil action
• A class action is brought by one or more
people for themselves and other people, for
the benefit, of all persons so interested
Class action – whether a new concept
and remedy
• Sec.91 of Code of Civil Procedure
• Order I, Rule 8 of CPC
• Sec.12(1) ( c) of Consumer Protection Act,
1986
• Public interest litigation in High Courts and
Supreme Court
• Class Petition for human rights violations
 Class action suits
• Permission of the Court or at the direction of
the court one or more persons may sue or
defend (order I, Rule 8 ( 1 ) of CPC)
• When all the persons jointly interested are
made parties, order I, Rule 8 does not apply
and there is no need to apply for leave – Jaina
Muhammad Vs. Official Assignee, Madras AIR
1946 Mad 25
 Advantages
• Reduction in no. of lawsuits
• Reduces litigation costs
• Aggregation increase the efficiency of legal
process
• Avoids repetition of same witnesses,
documents and trial time and again
 Advantages
• Overcomes the disincentive - a small recovery
that an individual may get by pursuing his
single action
• Avoids different court rulings allowing the
defendents to follow the rulings easily.
• Ensures all the interested persons receive
relief and the early bird alone do not get the
relief
 Disadvantages
• Ruling by the court operates as res judicata for
the members of the class
• High costs – huge amount is spent on attorney
fees; sometimes cost benefit ratio is negligible
• If the claims are arbitrable, whether can be
brought before the Tribunal
 Class action/derivative action
• In a representative/class action, the plaintiffs are
the beneficiaries
• In a derivative claim, the company is the principal
beneficiary, though the plaintiffs may incidentally
get benefitted
• The action under these sections (397/398) is a
derivative action for the benefit of all the
shareholders, the company and in public interest
(para 31) - PIK securities Private Limited and
others vs.United western Bank Limited and
others
Class action under the Companies Act,
2013
• Sec. 37
• Sec. 245
 Misleading statements in prospectus
• A suit may be filed or any other action may be
taken u/s.34 or 35 or 36 any person, group of
persons or any association of persons may file
a suit or any other action or any association of
persons for misleading statement or inclusion
or omission of any matter in the prospectus
 Class action
• Sec.245(1) – such number of member or members, depositor
or depositors or any class of them – Management or conduct
of the affairs of the company are being conducted in a
manner prejudicial to the interests of the company or its
members or depositors seek all or any of the orders
• Sec.245 (1) (a) to (f) various restraint orders
• Sec.245(1)(g) claim damages or compensation of demand any
other suitable action from or against –
the company or its directors
the auditor or audit firm
expert or advisor or consultant or any other person
• Sec.245(1)(h) to seek any other remedy
 Class action
• Sec.245 (3) (i) (a) not less than one hundred members
of the company or not less than such percentage of
total number of its members as may be prescribed or
any member or members holding such percentage of
the issued share capital of the company as may be
prescribed
• Sec.245(3)(b) not having a share capital not less than
one-fifth of total number of members
• Sec.245(3)(ii) Not less than one hundred depositors or
not less than such percentage of the total number of
depositors as may be prescribed whichever is less
Class action Suit – procedure in US
• Rule 23 of federal rules of procedure
• After service of complaint and filing of the
complaint with the court and defendents may
file a motion challenging the lawsuit. In Indian
context equal to maintainability or
admissibility
• After Ruling on motion, period of preliminary
discovery would take place. Lawyers may
demand documents, depositions
Class action Suit – procedure in US
• During the discovery phase, the defendents
may file motion to challenge the legal
sufficiency or underlying factual basis for the
action. This is known as motions for summary
judgement
• After preliminary discovery is completed, the
plaintiffs will file motion to certify a class
action.
Class action Suit – procedure in US
• If the complaint is money the court will order
notice to the class
• Trial or settlement
 Procedure contemplated by the
Companies Act, 2013
• Sec. 245(4) (c) whether the member or
creditor could pursue in his own right
• Sec.245(4)(d) – any evidence as to the views
of the members or depositors who have no
personal interest, direct or indirect, in the
matter being proceeded under this section
 Procedure contemplated by the
Companies Act, 2013
• Cl 245 (5)
• gives an inference that the application shall have to be
admitted by the tribunal before it proceeds on it.
• Notice of admission by public notice shall be served on
the members or depositors of the class
• All similar applications pending in any jurisdiction
should be consolidated into single application
• Lead applicant
• The costs or expenses incurred shall be defrayed by the
company or person responsible for oppressive act.
 Class action Suit - fees
• The fees paid to advocates in US in Class
action is known as contingency fees
• It is by way of percentages of award or
settlement which encourages parties to resort
to class action suits
• In India fees cannot be paid as a percentage of
award or settlement
 Class action Suit
• Costs shall be awarded not exceeding Rs.1
lakh in case of frivolous or vexatious
application
• Whether costs can awarded after admitting
the application
 Class action Suit
• Evidences - exchange of documents permitted
under US laws.
• Under Oppression and mismanagement, the
Petitioner cannot ask for documents from the
Company - Mohta Bros P Ltd. Vs. Calcutta
Landing and Shipping Co (1970) 40 Comp.
Cas. 119 Cal
THANK YOU