No Impleadment Of Company Secretary In O&M Case Merely For Filing Statutory Forms: NCLT Guwahati

On 1 June, the Guwahati Bench of the National Company Law Tribunal (NCLT) held that a practising Company Secretary cannot be made a party in oppression and mismanagement proceedings under Sections 241 and 242 of the Companies Act, 2013 merely for certifying or filing statutory forms in the course of professional work, unless there are specific allegations of collusion or direct involvement in the company's affairs.

Judicial Member Rammurti Kushawaha and Technical Member Yogendra Kumar Singh allowed an application filed by practising Company Secretary Biman Debnath and directed deletion of his name from the oppression and mismanagement petition concerning Goenka Woolen Mills Limited. The Tribunal held:

“…this Tribunal is of the considered view that a distinction must be maintained between persons against whom substantive allegations and reliefs are sought in proceedings under Sections 241 and 242 of the Companies Act, 2013 and professionals rendering services in their professional capacity based on records and documents made available to them.”

Debnath sought deletion of his name from the proceedings, stating that the company engaged him only to file statutory forms and returns before the Registrar of Companies and that he did not participate in the company's management, control, or day-to-day affairs.

The petitioners opposed the application and alleged that Debnath certified and filed statutory documents that facilitated acts forming the basis of the oppression and mismanagement claims. They submitted that his certifications validated an allegedly illegal rights issue, filings made by an improperly constituted board, and other statutory non-compliances affecting minority shareholders.

They further contended that his presence remained necessary for adjudication since he possessed relevant records and could explain the circumstances surrounding the impugned filings.

The Tribunal noted that proceedings under Sections 241 and 242 of the Companies Act, 2013 ordinarily proceed against the company and persons who manage, control, or directly participate in the alleged acts of oppression and mismanagement.

It found that Debnath did not serve as a director, key managerial personnel, shareholder, officer in default, or person exercising control over the company's affairs. It also recorded that the allegations against him arose only from his professional role in certifying statutory filings based on records provided by the company. The Bench further noted that the petitioners did not seek any substantive relief against him.

The Tribunal emphasised that professionals acting on the basis of documents supplied by a company must remain distinct from persons against whom specific allegations of oppression and mismanagement arise. It stated:

“…this Tribunal holds that it must maintain a distinction between persons against whom substantive allegations and reliefs arise in proceedings under Sections 241 and 242 of the Companies Act, 2013 and professionals rendering services in their professional capacity based on records and documents made available to them.”

The Bench held that certification of statutory filings by a professional, by itself, does not establish oppression, mismanagement, or suppression of minority shareholder rights. It observed:

“In the absence of any material indicating collusion, connivance, fraudulent intent, personal gain, or direct participation in the alleged acts, such allegations cannot, by themselves, justify impleadment of a practicing professional in proceedings under Sections 241 and 242 of the Companies Act, 2013, lest every professional including Company Secretaries, Chartered Accountants, or Advocates be unnecessarily dragged into shareholder disputes for rendering professional services in the ordinary course of engagement.”

The Tribunal clarified that allegations of professional negligence or improper certification fall within the jurisdiction of the competent statutory or regulatory authorities. It further held that it retains the power to summon Debnath or call for documents if his evidence becomes necessary during adjudication.

Accordingly, concluding that his continued impleadment was neither necessary nor proper for effective adjudication, the NCLT directed deletion of his name from the array of parties.

For Petitioner: Advocates R Wadhwa and A Goel

For Respondents: Advocates P.P Bishwal, M Dkhar, A.K Dubey, K.B Bagadia, CS, B Debnath, CS and A.K Seth, ROC