2019 (1) TMI 1576 - Tri - Companies Law

Oppression and Mismanagement - recasting and re-opening the accounts of a company - HELD THAT - The Appellant former Vice-President and Director has challenged the said order dated 1st January 2019 on the ground that the impugned order was passed ex-parte though notice was served to the Appellant and sought for time but the Tribunal proceeded with the impugned order. According to him the provision of Section 230 is Draconian Section introduced in Companies Act 2013. However such submission cannot be accepted till any person challenges the provisions before the Court of Competent Jurisdiction such as the Hon ble High Court and the Hon ble Supreme Court. Even if it is accepted that the Appellant on receipt of notice wanted to file reply-affidavit but as no ground is made out to hold the impugned order dated 1st January 2019 as illegal we are not inclined to remit the matter to the Tribunal on the ground of violations of rules of natural justice. Appeal dismissed.

Summary

Issues: Mismanagement of companies leading to petition under Section 133 of Companies Act, 2013 before NCLT, Mumbai Bench; Order for recasting and re-opening accounts of companies under Section 130 of Companies Act, 2013; Challenge to the order dated 1st January, 2019 on grounds of being ex-parte and invoking Section 230 of Companies Act, 2013.

The judgment by the National Company Law Tribunal, New Delhi, involved a petition filed by the Union of India, Ministry of Corporate Affairs under Section 133 of the Companies Act, 2013 before the Tribunal due to mismanagement of 'Infrastructure Leasing & Financial Services Limited', 'IL&FS Financial Services Limited', and 'IL&FS Transportation Networks Limited'. The Tribunal, in its order dated 1st January, 2019, observed that for passing an order for recasting and re-opening the accounts of a company, the conditions under Section 130(i) & (ii) must be met, which include fraudulent preparation of earlier accounts or mismanagement of the company's affairs casting doubt on the financial statements' reliability. The Tribunal noted that the alleged accounts were not proven to be fraudulent yet, but mismanagement was evident. Therefore, the petition was allowed for re-opening the books of accounts and recasting financial statements for the past five financial years of the mentioned companies.

Furthermore, the Tribunal directed the Central Government to appoint Chartered Accountants to recast the accounts of the companies and specified that the order would not affect proceedings before the Institute of Chartered Accountants of India (ICAI). It was clarified that the order for recasting accounts would not impact the main company petition pending under Section 241-242 of the Companies Act, 2013. The former Vice-President and Director challenged the order on the grounds of being ex-parte and invoking Section 230 of the Companies Act, 2013, claiming it to be draconian. However, the Tribunal dismissed the appeal, stating that no violation of rules of natural justice was found, and no merit was seen in the challenge. The appeal was accordingly dismissed without costs.