The High Court permits M/s Gramox Paper & Boards to appeal NCLT's Rs. 1,00,000 daily penalty for non-compliance, questioning the tribunal's power to impose such sanctions.
In a significant development, the Kerala High Court has allowed M/s Gramox Paper & Boards (P) Ltd. to challenge a consent order issued by the National Company Law Tribunal (NCLT), which imposed a hefty penalty of Rs. 1,00,000 per day for non-compliance with its directives. The judgment, passed by Justice Harisankar V. Menon, raises questions about the NCLT's authority to levy such penalties under the Companies Act, 2013.
The case originated when the NCLT directed M/s Gramox Paper & Boards to execute a property transfer and cover legal expenses, following which the company faced challenges due to legal issues in Karnataka. The NCLT's subsequent consent order stipulated a daily penalty for non-compliance, prompting the company to seek redress from the High Court.
The court acknowledged the complexity of the situation, noting that while Section 421(2) of the Companies Act restricts appeals from consent orders, the petitioner might not have agreed to the punitive daily penalty. Consequently, the court permitted the company to file an appeal under Section 421(1) of the Act, challenging the penalty aspect of the consent order.
Justice Menon extended interim protection for the petitioner, allowing them five weeks to file the appeal, and instructed the appellate tribunal to consider the appeal as filed within the limitation period. This judgment underscores the judiciary's balanced approach in ensuring procedural fairness while respecting statutory constraints on appeals.
The decision has significant implications for companies facing similar penalties imposed by the NCLT and highlights the importance of judicial oversight in consent orders.
Bottom line:-
National Company Law Tribunal (NCLT) - Consent order imposing penalty of Rs. 1,00,000/- per day for non-compliance with earlier directions - Power of NCLT to impose such a penalty doubted - Petitioner allowed to challenge the consent order before the appellate Tribunal under Section 421 of the Companies Act, 2013, despite restrictions on appeal from consent orders.
Statutory provision(s): Companies Act, 2013 Section 421
