2018 (8) TMI 1960 - AT - Companies Law

Oppression and mismanagement - refusal of interim orders - siphoning off of funds - during the pendency of this Appeal, the Hon ble High Court of Delhi at New Delhi has pronounced Judgement in OMP 382/2016 and OMP 396/2016 filed by Respondents 2 to 4 vide which they had raised objections under Section 34 of the Arbitration Act - HELD THAT - The Hon ble High Court, in the context of the Award is dealing with not merely the present Respondent Company but also other entities of the parties and is, inter alia, seized with questions of division of assets, movable and immovable. The Appellant himself has in the IA 13/2017 in OMP 326/2016 sought appointment of Receiver to take charge of the assets including factory premises, books of accounts, operations of the Bank Accounts, plant and machinery, etc. He has also sought forensic audit of the books of accounts of Respondent Company and other companies to identify siphoning of funds. It can be seen from the observations of the Orders of the Hon ble High Court referred to in above para 16D that it has called upon the parties to place on record various steps required to be taken to implement the complete separation between the parties in terms of the MOU and DOA. It can also be seen that the Hon ble High Court has observed that the Court is still seized of the matters and several orders have been passed towards effectuating the division of the units among the parties. There is no dispute that in a petition like the present one, the question of oppression and mismanagement would be matters which are required to be exclusively dealt with and decided by the NCLT. For Interim Orders, it would be necessary in the application to spell out a prima facie case which requires interference of the Tribunal without which interference, it has to be shown that the Applicant/Petitioner would suffer irreparable injury and that balance of convenience lies in the fact that Interim Orders should be passed. If the present matter is perused and the reliefs as sought by the Appellants Petitioners are seen, when it appears from the record that on the basis of documents executed between the parties an Arbitration Award has been passed and the Hon ble High Court has while dealing with the OMPs filed by the parties passed different orders, it does not appear that the Appellants are able to show prima facie case, as regards the counts on which prayers were made before NCLT. The parties when they would be acting in response and in compliance to the directions and orders of the Hon ble High Court in the proceedings pending before the Hon ble High Court and take steps to comply with the provisions of the Companies Act, would naturally not be required to worry. As the Company Petition is pending, any steps taken by the parties, which are not in consonance with or not by way of compliance of directions of the Hon ble High Court, which do not comply with the provisions of the Companies Act and Rules, would naturally attract the principles of lis pendens. Appeal dismissed.

Issues Involved:
1. Oppression and Mismanagement
2. Interim Orders of Protection
3. Jurisdiction of NCLT vs. High Court
4. Status Quo on Assets, Management, and Shareholding
5. Inspection of Books of Accounts and Statutory Records

Issue-Wise Detailed Analysis:

1. Oppression and Mismanagement:
The Appellants filed Company Petition No. 219(ND)/2017 before the NCLT, New Delhi, alleging oppression and mismanagement in Respondent No.1 Company by Respondents 2 to 4. The disputes arose in 2014 regarding business, assets, and family properties. Various agreements, including a Memorandum of Understanding (MOU) and a Deed of Arrangement, were executed to resolve these disputes. An Arbitrator's Award was passed on 2nd August 2016, directing the division of business and assets. The Appellants claimed that Respondents engaged in acts of under-invoicing, illegal removal of assets, and other acts of mismanagement, prompting the filing of the Company Petition.

2. Interim Orders of Protection:
The Appellants sought interim protection from the NCLT, requesting status quo on assets, management, and shareholding, and inspection of books of accounts and statutory records. The NCLT admitted the petition but declined to grant interim orders, reasoning that the affairs of the Company were under the jurisdiction of the High Court due to ongoing Section 9 and Section 34 proceedings under the Arbitration Act. The NCLT feared conflicting orders if it intervened.

3. Jurisdiction of NCLT vs. High Court:
The NCLT refrained from passing interim orders because the High Court was already dealing with related matters, including the division of assets and the implementation of the Arbitrator's Award. The High Court had appointed a Court Commissioner and Chartered Accountant to inspect the premises and records of the Company and other family entities. The Appellants argued that the NCLT had exclusive jurisdiction over matters of oppression and mismanagement under the Companies Act, but the NCLT maintained that the High Court's involvement necessitated caution to avoid conflicting orders.

4. Status Quo on Assets, Management, and Shareholding:
The Appellants requested the NCLT to restrain the Respondents from altering the shareholding pattern, appointing new directors, and changing the status of fixed assets and properties. The NCLT declined these requests, noting that the High Court was already overseeing the division of assets and the management of the Company. The High Court had issued orders to maintain the status quo and appointed a Court Commissioner to oversee compliance with the MOU and Deed of Arrangement.

5. Inspection of Books of Accounts and Statutory Records:
The Appellants sought access to the Company's books of accounts and statutory records. The NCLT denied this request, citing the ongoing inspections and audits ordered by the High Court. The High Court had directed the Court Commissioner and Chartered Accountant to prepare inventories and inspect the records, ensuring transparency and compliance with the division of assets.

Conclusion:
The NCLT's refusal to grant interim orders was upheld by the Appellate Tribunal, which found that the High Court's involvement in the division of assets and management of the Company justified the NCLT's caution. The Tribunal emphasized that the High Court's orders and the ongoing arbitration proceedings took precedence, and the NCLT's intervention could lead to conflicting orders. The appeal was rejected, affirming the NCLT's decision to defer to the High Court's jurisdiction in the matter.

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