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The Power of Writs: Protecting Rights under the Indian Constitution and Companies Act 2013 - MMJC
Introduction.
India is the largest democracy of the world, and at the foundation of this largest democracy, lies the world’s longest written Constitution. Along with the federal democratic system, the Constitution of India also lies at the bedrock of Indian judiciary. All the laws formed and implemented in the jurisdiction of India, gain their basis and powers from the Constitution of India.
The Constitution of India provides for multiple fundamental and legal rights to its citizens and makes provisions for the protection of such rights by the judiciary. In this article we shall explore the protection offered to the fundamental and legal rights through Writ petitions. Also, we shall try to deliberate, with the help of judicial pronouncements, upon some situations in the context of Companies Act 2013 where in the companies or their directors can take shelter of Writ petitions to protect their legal rights.
Meaning of Writs.
Despite using the term ‘Writ,’ the Constitution of India (Constitution) does not define the same. In ancient times, Writs referred to the letters in the name of king or states issued by the court of justice which ordered the receiver to do or abstain from doing something. Even today, the basic concept of Writ remains the same. The Cambridge dictionary defines a Writ as, “a legal document from a court which orders someone to do something or to not do something:” whereas, the blacks law dictionary defines Writ as, “court’s written order, in the name of a state or other competent legal authority, commanding the addressee to do or refrain from doing some specified act.” and Law lexicon defines Writ as, “written command, precept, or formal order issued by a court, directing or enjoining the person or persons to whom it is addressed to do or refrain from doing some act specified therein.”
From these definitions, it is adequately clear that a Writ is a court order asking the receiver of the order to do or abstain from doing something. As per the Honorable Haryana High Court judgment in the matter of Satwati Deswal v. State, the application for issuing a Writ can be made and court can issue a writ only when there is no alternate remedy available for ensuring justice. One more point worth noting in case of Writs is that Writs can be issued only for preservation of fundamental or legal rights.
Legal provisions relating to Writs.
As mentioned earlier, the concept of Writs originates from the Constitution. There are two articles in the constitution which provide for the issue of Writs. They are article 32 under part III of the Constitution and Article 226 under part VI of the Constitution. Part III of the Constitution provides for fundamental rights of citizens and at some places, of all persons. The Article 32 of part III of Constitution protects these fundamental rights by allowing the Supreme Court of India to issue five types of Writs to protect the fundamental rights. In fact, clause three of the Article 32 grants power to the Parliament of India to allow any other court to issue Writs in the interest of justice.
Further, Part VI of the Constitution contains provisions for the functioning of the State governments. It establishes a parliamentary system of government, and the judicial system at the state level. Article 226 of part VI empowers the high courts, that is, state level judiciary to issue writs for protection of rights conferred by parts III and IV of the constitution. The high courts are even empowered to issue appropriate writs against the governments under its jurisdiction to ensure justice. Also, the clause three of the article provides that the High Court must listen to the Writ petition within 15 days if it says that any order has been passed against the petitioner without giving him an opportunity of being heard.
Types of Writs and Meaning.
As per Article 32 and Article 226, both Supreme Court and High Court have power to issue Writs. Supreme Court has power to issue writ against infringement of fundamental rights under Constitution, whereas High Courts can issue writs to avoid violation of other legal rights granted by the constitution. both the Courts are authorized by the constitution to issue following five types of writs depending upon the complaint received by the Court.
- Writ of Habeas Corpus
- Writ of Mandamus
- Writ of Prohibition
- Writ of Certiorari and
- Writ of Quo-Warranto
Let us understand all of them one by one.
Writ of Habeas Corpus:
Habeas Corpus means, ‘to have the body of’. This Writ is issued to protect the fundamental right to individual liberty. If any person is detained illegally or without following proper process, then such detained person himself or through his family member can file a petition before court praying for writ of habeas corpus. Even a stranger can file this Writ in public interest. Issuance of writ of habeas corpus by court means that, the authority who has arrested the person has to present that arrested person before the court. The two most important conditions that must be kept in mind while applying for Writ of Habeas Corpus are that the applicant should be in the custody in some other person or authority, and the authority must not have followed the proper process while arresting the applicant. For example, if in case, police arrest any individual without filing a FIR, then such person is unlawfully arrested and hence he can file application for issue of writ of habeas corpus.
Writ of Mandamus:
The literal meaning of Mandamus is ‘we command.’ This Writ is applied for when any public official or public body or corporation or lower court or tribunal or even the government failed to perform its duty or has refused to perform the same. As a result of the issue of Writ of Mandamus by the court, the authority in question must perform the said duty.
The important points about which the petitioner should be mindful while applying for Writ of mandamus are that, there must be an infringement of legally recognized right of the petitioner, the petitioner must be able to prove that a mandatory duty was owed to him and the authority did not perform the same, and most importantly that there must be no alternate remedy available. For example, Writ of Mandamus can be applied for if, the police officer refuses to register a valid FIR or any government official refuses to provide any service which he was supposed to provide.
Writ of Prohibition:
The literal meaning of Prohibition is ‘to forbid.’ This Writ is issued by the High Court or the Supreme Court when the lower court exceeds its jurisdiction or un pursue a jurisdiction which is not possessed by it. This Writ can be issued against a judicial or a quasi-judicial body only. The points worth noting while applying for writ of prohibition are that this Writ can be applied for only when the lower court has overstepped its jurisdiction or has violated any law. If in the case the lower Court has issued an order which is partly in its jurisdiction and is partly outside the jurisdiction, then the writ will be issued only against that part of order which is outside the jurisdiction. For example, this Writ can be applied for if, National Company Law Tribunal (NCLT) admits any petition regarding the determination of legal title of shares which is a Civil matter and is outside the jurisdiction of NCLT.
Writ of Certiorari:
The literal meaning of Certiorari is ‘to be certified’ or ‘to be informed.’ This type of Writ is issued by the Court when it intends to quash the transfer of case or order passed by the subordinate Court. This Writ is issued, when the court observes excess of jurisdiction or lack of jurisdiction or error of law. In such a situation, this Writ is issued as a corrective action.
This Writ can be applied for by the applicant in case of overstepping, abuse or absence of jurisdiction, or violation of principles of natural justice or any error of law. For example, this Writ can be applied where any case regarding which the district Court does not have jurisdiction is heard by it and order is passed. In such a case, the High Court can quash such an order by passing the Writ of Certiorari.
Writ of Quo-Warranto:
Literal meaning of Quo-Warranto is ‘by what authority or warrant.’ This Writ is applied for if an incompetent person wrongfully occupies any public office. If this Writ is issued by the Court, then the legality of any person’s claim to any office is enquired. However, the pre-condition for making application for issue of Writ of Quo-Warranto is that this Writ can be filed against usurpation of public office only. Further, some more conditions for filing Writ petition for this Writ are that, the office in question should be created by constitution or any other law in force, the duties expected to be performed by such office should be classified as public duties, and most importantly the petition against any person can be filed only when he is in the possession of the office and uses it. For example, the Writ of Quo-Warranto can be filed against the Registrar of Companies if he holds such office of ROC without possessing the required qualification to hold the same.
Writ petitions under Companies Act 2013.
As mentioned in the beginning of the article all the laws in force in the country gain their powers from the Constitution and the rights granted by such laws are also protected by the constitution. The same rule is applicable to the Companies act 2013 (the Act) as well. Therefore, in case of violation of any right provided under the Act and absence of any other remedy in that regard, Writ petitions can be filed before Honorable High Court or Supreme Court by the aggrieved parties including the directors of the companies, shareholders, workers, creditors, and other stake holders. We shall hereinafter see some situations wherein Writs can be filed with respect to provisions of the Act.
Challenging the constitutional validity of sections of the Act.
If at any point in time, it is observed that, any section of the Act is violating any fundamental right granted by the Constitution of any specific individual, then the aggrieved party can file a writ petition before supreme court challenging the constitutional validity of that section. In such a case, applicant prays that since the section of the Act infringes a right granted by the constitution, it is not constitutionally valid. However, a point worth noting in this case is that, since the fundamental rights are protected by the supreme court, the writ petition challenging the constitutional validity of any section can be filed before supreme court only, under article 32 of the constitution.
An example of this situation can be seen in a Supreme Court order in the matter of Moser Baer Karamchari Union through President MaheshChand Sharma …Appellant(s) Versus Union of India andOrs. …Respondent(s). in this case the constitutional validity of section 327(7) of the Act was challenged and an application was made for issuing a writ of mandamus exempting the workers from waterfall mechanism under section 53 of Insolvency and Bankruptcy Code. The honorable Supreme Court admitted the writ petition and considered the case based on facts and merits. However, after hearing the arguments the Court held that the sections in question are not in violation of article 21 of the constitution and hence are constitutionally valid.
Removal of disqualification of directors under section 164 of the Act.
As per section 164 of the Act, the directors of the company can be disqualified from Acting as directors for certain non-compliances by the companies, like non-filing of annual returns or non-repayment of deposits etc. The directors’ ones disqualified, generally remain disqualified for 5 years and cannot function as director of any company other then defaulting company in this period. In year 2020 ministry of corporate affairs had come up with one time settlement scheme under which the directors could make good the default and remove their disqualification, but it was a one-time scheme and was closed after the end of specified period. Apart from this, there is no other remedy under the Act. the directors may file a writ petition before high court for ordering the quashing of their disqualification.
This situation was seen in a Madras High Court order dated 9th October 2020 in the matter of Meethelaveetil Kaitheri … vs Union of India. In this case a writ petition asking for removal of disqualification was filed stating that the disqualification was given effect without giving a proper show cause notice and that deactivation of DIN was not required under section 164 and still it was done. The honorable Madras High Court admitted the petition and heard the parties. After considering all submissions and documents, the Court agreed that disqualification cannot take place without giving show cause notice and deactivation of DIN was not as per section 164 and hence disqualification was removed, and DINs of the directors were activated.
Writ due to absence of remedy.
If any person is aggrieved due to any provision of the Act and he has no remedy under the Act, then in such a case the aggrieved person can file a writ petition before high court and the court after ensuring that there is no other remedy available, shall admit his petition. One such situation was seen in a Bombay High Court judgment dated 9th February 2024 in the matter of Rajiv Sharma verses Registrar of Companies Mumbai. In this case, the director Rajiv Sharma had resigned from the company and the company had also accepted the resignation. However, form for intimating the resignation could not be filed and as a result ROC records were not updated. The director himself filed form DIR-11 to intimate ROC about resignation, but ROC did not accept the same due to non-compliances on the part of company. Therefore, in absence of any remedy, the director filed a writ petition praying for writ of mandamus ordering the ROC to accept his resignation. The honorable Bombay High Court after analyzing all the facts and circumstances, agreed with the director and ordered the ROC to take the resignation on record and take separate action against company for non-compliances.
Appeal against order of regional director.
Under the sections of the Act the Regional Director (RD) has powers to issue orders, for example, approval for removal of auditor, appeal against adjudication order passed by ROC etc. however, there is no provision for filing appeal against order passed by RD. Therefore, in such a situation, the company may file a Writ petition praying for quashing of RD order. One such situation wherein RD order was challenged was seen in Madhya Pradesh High Court order dated 17th August 2022 in the matter of MPCG MOBILE PRIVATE LIMITED verses Union of India. In this case, company had made application to RD for removal of statutory auditor of the company. But the RD passed order refusing the removal without considering the facts of the case. Hence the writ petition was filed before Madhya Pradesh High Court. The Honorable High Court, after considering all the facts and circumstances held that, order was passed without considering all the relevant facts and was also without proper reasoning. Hence the matter was remitted back to RD for fresh herring. In the second case of similar nature, in the matter of M/s. Technova Tapes private limited v/s Regional Director, (‘RD’) had ordered the company to change its name as per section 22 of Companies Act 1956. The company filed a Writ petition before Karnataka High Court stating that the order is passed by RD without properly interpreting section 22 and prayed for reversal of RD’s order. The Honorable High Court, after hearing the arguments, reversed the RD’s order.
Conclusion:
In conclusion, considering the complex legal environment, it is highly essential for all the citizens to know about our constitution and the rights and duties bestowed by it on us. The right to file Writ petition is one such right granted by Constitution to the Citizens of India to ensure justice and protection of other rights granted by Constitution. Companies incorporated in India can file Writ through its directors and the directors and other stakeholders can also file the writs in their own name in the best interest of the company. In this way, justice is ensured to artificial persons as well.
This article is published in Taxmann. The link to the same is as follows: –
This article is written by Ms Rutuja Umadikar – Research Associate – RND Team rutujaumadikar@admin
https://indiankanoon.org/doc/94292477/
https://indiankanoon.org/doc/174783821/
https://indiankanoon.org/doc/14153601/
https://indiankanoon.org/doc/129778377/