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NCLT - CLASS ACTION SUIT
A.M SRIDHARANPRACTICING COMPANY SECRETARY09940012655; sri2fine @gmail.com
NCLT
Sec.430 – bars jurisdiction of civil courtsNo civil court shall have any jurisdictionany suit or proceeding in respect of which the tribunal or appellate tribunal is empoweredUnder this Act or any other law for the time being in forceNo 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 jurisdictionIn respect of any matter in which the tribunal or appellate tribunal is empowered this chapterNo injunction shall be granted by any court or other authority
NCLT- Criminal Jurisdictionnot barred
1956 Act
First class magistrate or presidency magistrateSessions court (revision or appeal)High Court
2013 Act
Special court - judge should be immediately before appointment shall be holding office of a sessions judge or as an additional sessions judge – Sec.435 (3)High court (revision or appeal) Sec.437
NCLT
Impact of Sec.430Sec.96 (AGM), 97 (application to tribunal for AGM) and 98 ( application to tribunal for EGM)Sec.169 - Removal of directorsK.RadhakrishnanvsThirumaniAsphalts and Felts P. Ltd (1997) 13 SCL 169 Mad.
NCLT
IMPACT OF SEC.430Evidences have to be taken by NCLTRajinderKumarMalhotravsHarbhansLalMalhotra& Sons Ltd (1996) 87Comp.Cases146 (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 accountsApplication is made by the CG, Income tax authorities, SEBI, any other statutory regulatory body or authority orany personconcernedAn order is made by a court of competentjurisidictionor 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.424Shall not be bound by code of civil procedureShall be guided by principles of natural justiceOther provisions of this act or rules madethereunderShall have power regulate their own procedure
Application of Limitation Act
Sec.433 provisions of Limitation Act apply to proceedings before tribunal or appellate tribunalImpactIf period is given in the Act, then application/appeal has to be filed within time contemplatedif not filed within the time contemplated application forcondonationof 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 yearsIf not filed within 3 years then application forcondonationof delay has to be filedBank of Rajasthan LtdvsRajasthan Breweries Ltd (2007) 140 Com.cas 622 CLB
Appeal to NCLAT
Sec.421Consent orders cannot be appealedAppeal has to be filed within a period of 45 daysOn sufficient cause being shown can be filed within a further period not exceeding 45 days
Appeal to Supreme court
Sec.423Appeal within a period of sixty daysOn sufficient cause within a further period not exceeding sixty days.TeneccoMauritius LtdvsBangalore Union Services Ltd & others
Contempt Powers
Sec.425Tribunal and appellate tribunal both have contempt powers
Transitional provisions
Sec.434434(1)(b) On notification, all pending matters shall stand transferred to tribunal434(1) ( c) all proceedings under the Companies Act, 1956 including proceedings relating to arbitration, compromise andarrangmentsand reconstruction and winding up of companies, pending immediately before such date before any district court or High Court shall stand transferred to tribunal434(1)(d) any appeal before AAIFR and reference before BIFR shall stand abatedprovided the company may make a reference to the tribunal within 180 days from the date commencement of this Act
Time limit for disposal
Sec.422Sec.422(1) Everyendeavourshall be made to dispose every application or petition presented to NCLT and every appeal to NCLAT within 3 monthsSec.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.442442(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 proceedingsAny of the parties may at any time during the proceedings may apply and the CG, tribunal or appellate tribunal shall appoint one or more expertsMaysuo-moturefer the matterWithin 3 months forward its recommendationAny party aggrieved may file objection
Class action suit
The class action lawsuit filed against IT firm iGATE and its former CEO,PhaneeshMurthy, 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, 2013EarlierPhaneeshMurthy was sacked on 20/05/2013Shares were quoting at US $ 15.22
TCS faces class action suit
Two employeesGopiVedachalamandKanganaBerifile complaint that Tata Sons and its subsidiary TCS of breaching employment contracts and violation of CaliforniaLabourCode which resulted in unpaid wagesAllegeda) 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 takingunauthoriseddeductions 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’sunauthoriseddeductions from its employees wages prevented employees from receiving both their promised US Salary and Indian SalaryIn 2006 and 2007 TCS and others file a motion to dismiss the caseUS District Court grants class action statusSource:Businessstandard 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 positionsCourt classified as a class actionSource: The Business Standard Jan 26, 2013
Bhopal Gas Tragedy
Tragedyoccuredon Dec.2-3, 1984 in BhopalInMar.1985, the Govt. of Indiaenacted theBhopal Gas Leak Disaster Act enabling the GOI to act as the legal representative of the victims in claims arising of or related to the BhopalDisasterInJan 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 theappealIn 2006 second circuit court of Appeals (one of the thirteen United States Courts of Appeals) in Newyorkcity upheld the dismissal of remaining claims in the case ofBanoVs. Union Carbide Corporation.This has blocked the plaintiff motion for class certificationand claims for property damages and remediation
Class action
Also known as representative actionIs a civil actionA 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.91of Code of CivilProcedureOrderI, Rule 8 ofCPCSec.12(1) ( c) of Consumer Protection Act, 1986Publicinterest litigation in High Courts and SupremeCourtClassPetition 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 –JainaMuhammad Vs. Official Assignee, Madras AIR 1946 Mad 25
Advantages
Reduction in no. of lawsuitsReduces litigation costsAggregation increase the efficiency of legal processAvoids 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 actionAvoids different court rulings allowing thedefendentsto 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 resjudicatafor the members of the classHigh costs – huge amount is spent on attorney fees; sometimes cost benefit ratio is negligibleIf the claims arearbitrable, whether can be brought before the Tribunal
Class action/derivative action
In a representative/class action, the plaintiffs are the beneficiariesIn a derivative claim, the company is the principal beneficiary, though the plaintiffs may incidentally get benefittedThe action under these sections (397/398) is a derivative action for the benefit of all the shareholders, the company and in public interest (para31) - PIK securities Private Limited and othersvs.Unitedwestern Bank Limited and others
Class action under the Companies Act, 2013
Sec.37Sec.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 –Managementor conduct of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members ordepositors seek all or any of the ordersSec.245 (1) (a) to (f) various restraint ordersSec.245(1)(g) claim damages or compensation of demand any other suitable action from or against –the company or its directorsthe auditor or audit firmexpert or advisor or consultant or any other personSec.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 prescribedSec.245(3)(b) not having a share capital not less than one-fifth of total number of membersSec.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 procedureAfter service of complaint and filing of the complaint with the court anddefendentsmay file a motion challenging the lawsuit. In Indian context equal to maintainability or admissibilityAfter 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, thedefendentsmay file motion to challenge the legal sufficiency or underlying factual basis for the action. This is known as motions for summary judgementAfter 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 classTrial or settlement
Procedure contemplated by theCompanies Act, 2013
Sec.245(4) (c) whether the member or creditor could pursue in his ownrightSec.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
Cl245 (5)givesan 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 theclassAll similar applications pending in any jurisdiction should be consolidated into single applicationLead applicantThe 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 feesIt is by way of percentages of award or settlement which encourages parties to resort to class action suitsIn India fees cannot be paid as a percentage of award or settlement
Class action Suit
Costs shall be awarded not exceeding Rs.1lakhin case of frivolous or vexatious applicationWhether 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 -MohtaBros P Ltd. Vs. Calcutta Landing and Shipping Co (1970) 40 Comp.Cas. 119 Cal
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NCLT - CLASS ACTION SUIT - icsi.edu