Fresh Cause of Action Cannot Be Introduced Through Amendment To Company Petition: NCLT Kochi

The National Company Law Tribunal at Kochi has held that a fresh and independent cause of action cannot ordinarily be introduced through an amendment to an existing company petition.

It observed that permitting such an amendment would defeat the objective of summary proceedings under the Companies Act, 2013 and run contrary to the legislative intent underlying Rule 155 of the National Company Law Tribunal Rules, 2016.

A bench of Judicial Member Vinay Goel and Technical Member Ravichandran Ramasamy made the observation while dismissing an application filed by Biju Scaria and Tessy Scaria.

They had sought to amend their pending oppression and mismanagement petition against Media Solutions (I) Private Limited to incorporate subsequent events.

The tribunal held, "However, a completely new cause of action cannot be permitted to be introduced by way of amendment, particularly when such an exercise would run contrary to the legislative intent underlying Rule 155 of the NCLT Rules, 2016."

The applicants contended that they had been excluded from the company's management. They alleged that their access to the company's digital platforms, financial records and email systems had been restricted.

They also challenged the redesignation of one applicant from Whole-Time Director to Non-Executive Director, the removal of the other from the Board, and the alleged diversion of business opportunities and confidential information to a competing entity. According to them, these developments formed part of a continuing course of oppression and mismanagement and needed to be brought on record for effective adjudication.

Media Solutions and the other respondents opposed the application. They argued that it was not maintainable and had been filed only to delay the proceedings. They also denied the allegations on their merits.

Examining Rule 155 of the National Company Law Tribunal Rules, 2016, the tribunal noted that the Companies Act requires company law matters to be decided expeditiously and that NCLT proceedings are guided by the principles of natural justice.

The tribunal observed, "If Rule 155 of the NCLT Rules, 2016 is read in conjunction with Sections 422 and 424 of the Companies Act, 2013, it becomes evident that the legislature has consciously prescribed a specific time limit within which amendments may be entertained."

It held that Rule 155 has a narrower scope than Order VI Rule 17 of the Code of Civil Procedure.

The provision permits amendments only to rectify defects or errors in proceedings and to determine the real question or issue arising in the proceeding.

The tribunal also noted that the applicants moved the amendment application more than six months after filing their rejoinder. The proposed amendments sought to introduce events that had allegedly occurred both before and after the company petition was instituted.

The tribunal further observed, "If a subsequent event gives rise to a fresh and independent cause of action, the same cannot ordinarily be introduced by way of amendment to the existing pleadings. Such an approach would defeat the objective of summary proceedings under the Companies Act, 2013."

It further held that Rule 155 marks a conscious departure from Order VI Rule 17 of the Code of Civil Procedure, under which amendments may be permitted at any stage of the proceedings. The tribunal clarified that parties are not left without a remedy. If subsequent events give rise to a fresh cause of action, they remain free to institute a fresh company petition.

The tribunal accordingly dismissed the application

For Applicants: K.S Ravichandran, PCS

For Respondents: Sreepriya Kalarikkal, PCS