2021 (9) TMI 1366 - Tri - Insolvency and Bankruptcy

Seeking maintenance of status quo by both petitioners and respondents - Deadlock as regards management of company - whether any interim order can be passed against the company or against the other respondents? - HELD THAT - This is the third petition with regard to the very same respondent company - Now, the apprehension of the petitioners is that, if at all, banks loan are not serviced and any petition under Section 7 of the Insolvency Bankruptcy Code is initiated against the company, the entire shareholding of the shareholders will get wiped-out and the prospect of the company will come to zero. As the situation is very fragile and all the petitioners, including the promoters, are involved in the dispute under Section 242, filing petitions against each other, there is no clarity as to who is there to look after the interest of the company. The powers available to this Bench, under Section 241-242, are so extensive that the main intension of the Tribunal, while dealing with such petitions, is to protect the interest of the company first and then the shareholders next - When the shareholders, including the respondents, are involved in the disputes against each other and there is practically nobody there in the company to service the debts of the company, if at all the respondents indulge in any activity to sell away the assets of the company or indulge in any activity that will go against the interest of other shareholders, the very purpose of these petitions would get defeated. It is an admitted fact that the petitioner has about 15% shareholding in the company and not minding the said shareholding whether it is minor or major, as it could be seen from the other petitions also, there is particularly a kind of deadlock as regards the management of the company. Deadlock means the management is not in a position to take any decision, either this side or that side, and if at all they take any decision, the same may definitely go against the interest of the company. Taking utmost care as regards the interest of the company and the shareholders, the status-quo is ordered to be maintained by both petitioners and also the respondents, with regards to the respondent company and the shareholding of the company. List the matter for further consideration on 16.09.2021.

Summary

Issues:
- Petition for interim order against the company or other respondents
- Appointment of a Commissioner for fact-finding mission
- Protection of company's interest and shareholders
- Deadlock in management

Analysis:
The Tribunal addressed a petition filed by the petitioners, who hold a 15% stake in the respondent company, against the backdrop of ongoing disputes and financial challenges faced by the company. The Tribunal noted that all independent directors of the company had resigned, and the managing director was incapacitated due to a serious health issue, leading to a power struggle between the brothers who are part of the promoters group. Additionally, the banks that had provided loans to the company had initiated SARFESI proceedings due to significant defaults. In light of these circumstances, the Tribunal had previously appointed a Commissioner for a fact-finding mission to investigate the situation. The petitioners sought clarity on whether an interim order could be issued against the company or other respondents to prevent potential loss of shareholding value in case of insolvency proceedings. The Tribunal emphasized its role in safeguarding the company's interests and the shareholders' rights under Sections 241-242 of the law. It expressed concerns about the lack of clarity regarding the management of the company and the potential adverse impact on shareholders if actions detrimental to the company's interests were taken.

The Tribunal, considering the fragile situation and the ongoing disputes among the shareholders, including the promoters, decided to maintain status quo to protect the company and shareholders' interests. The order required all parties to maintain the current state of affairs until the next hearing date, when the Commissioner's report would be presented. The Tribunal highlighted the need for all concerned parties to comply with the status quo order and instructed the respondents to submit their replies before the next hearing. The matter was scheduled for further consideration on 16.09.2021 to assess the situation based on the Commissioner's findings and ensure the preservation of the company's operations and shareholders' rights amidst the existing challenges and management deadlock.