2021 (8) TMI 1288 - Tri - Insolvency and Bankruptcy

Oppression and Mismanagement - Jurisdiction - power of this Bench is to appoint an independent Commissioner - appointment with the fact finding mission and to submit a report so that the information which is essentially required for the just adjudication of the list between the parties, is made available - HELD THAT - The legislation is very clear that when the affairs of the company are conducted in a manner prejudicial to public interest or in any manner prejudicial or oppressive to any member or members or in a manner prejudicial to the interest of company, the Tribunal under Section 242(2) clause (a) (m) and Section 242(4) vested with the power to pass any order in the best interest of public and in the best interest of company. The Tribunal is vested with the powers given under Companies Act and Insolvency Bankruptcy Code are absolutely conscious the repercussions, if at all, a petition under Section 7 is initiated by any financial creditors against this company, when all the independent directors of the company have resigned expressing their inability to continue on the board of the company for the reason that the financial position is very badly suffered and executive director i.e. the petitioner is not taking any steps to regulate the affairs of the company and the wife of Mr. Shushil Gupta is not taking cognizance of any facts. It appears the institutions are proceedings against them and the Hotels are closed and the situations is becoming bad to worse - Even after taking cognizance of these issues which are brought to our knowledge, in the course of hearing by both the parties, if this Bench does not make any efforts to get the real factual position in the best interest of the company or in the public interest for the reason that the public money involved and there are public shareholders, the purpose of adjudication by this Tribunal will not be served. It is directed that a commissioner be appointed on a fact finding mission with the power and responsibility as contained below. List the matter for submission of report by Commissioner on 02.09.2021.

Summary

Issues:
1. Allegations of mismanagement and financial irregularities in a company.
2. Dispute between two groups of shareholders.
3. Appointment of a Commissioner for fact-finding mission.

Analysis:
1. The petition involves allegations of mismanagement and financial irregularities in a company by one group of shareholders against another. The company has faced closure, with significant loans and employees. The Chairman & Managing Director of the company became incapacitated, leading to questions about the actual management of the company and the erosion of its financial position. Allegations of sharing confidential information and mismanagement are raised, necessitating a thorough investigation.

2. A dispute between two groups of shareholders is apparent, with one group holding a majority stake and the other group accused of mismanagement. The Tribunal notes the closure of the company's hotel and the financial strength of the promoters, raising questions about the responsibility for the company's current state. Both parties are directed to cooperate with the Commissioner appointed for a fact-finding mission to gather necessary information for just adjudication.

3. The Tribunal deliberates on its power to appoint a Commissioner for a fact-finding mission, citing provisions under Section 241 of the Companies Act. It emphasizes the need to protect public interest and the company's welfare in such cases. Considering the severity of the situation, the Tribunal appoints a Commissioner to investigate various aspects, including the company's financial position, debt servicing measures, and managerial affairs. The Commissioner is tasked with submitting a comprehensive report within two weeks, with both parties required to provide access to company records and share the Commissioner's fee equally. Additionally, both parties are directed not to share confidential information with any third party except the Commissioner.

In conclusion, the Tribunal acknowledges the complexity of the case involving mismanagement, financial distress, and shareholder disputes. The appointment of a Commissioner for a fact-finding mission is deemed necessary to gather essential information for a just adjudication. The directive aims to ensure transparency, protect public interest, and facilitate a thorough investigation into the affairs of the company.