2017 (8) TMI 1673 - SC - Companies Law

NCLT has not ascribed reasons whether it is just and equitable in the controversy involved to pass an interim order for conduct of company affairs - HELD THAT - On a perusal of the order passed by the NCLT, it is found that certain reasons have been given. In such a case, it is opined that the NCLAT should not have cryptically set aside the order and remanded the matter with a direction that the main petition shall be decided along with the prayer for interim relief. Whether circumstances exist to arrive at a reasonable conclusion for regulating the conduct of the company affairs to pass an interim order on such terms and conditions as appeared to be just and equitable are to be appositely appreciated. Needless to say the words 'just and equitable' are associated with the terms and conditions but not with the reasons for passing an interim order. A case has to be made out by the applicant for getting an interim order. When the matter is remanded to the NCLAT, the main proceeding before the NCLT shall remain stayed till the NCLAT decides with regard to the justifiability of the interim order. The NCLAT may be well advised to deal with the issue of maintainability of the original proceedings or that comes within the sweep of prima facie case for entertaining the prayer for interim relief. Appeal allowed.

Summary

Issues:
- Interpretation of reasons for passing an interim order by National Company Law Tribunal (NCLT)
- Review of National Company Law Appellate Tribunal's (NCLAT) decision
- Consideration of circumstances for regulating company affairs through an interim order

Interpretation of Reasons for Passing an Interim Order by NCLT:
The Supreme Court analyzed the case where the NCLAT set aside an order by the NCLT regarding the reasons for passing an interim order to regulate company affairs. The appellant argued that the NCLAT failed to appreciate the reasons given by the NCLT and erred in its decision. The Supreme Court emphasized that the NCLAT should not have cryptically set aside the order without proper consideration. It clarified that the NCLT's reasons for passing an interim order should be adjudicated by the NCLAT to determine if they are erroneous. The appellant must establish a case for obtaining an interim order, and the NCLAT should assess if such an order is warranted based on the evidence presented.

Review of NCLAT's Decision:
The Supreme Court found that the NCLAT did not address crucial aspects of the case, leading to the appeal being allowed. The Court set aside the NCLAT's order and directed it to decide the appeal within four weeks. Parties were permitted to present their arguments based on the materials submitted before the NCLT. The main proceedings before the NCLT were stayed pending the NCLAT's decision on the interim order's justifiability. The NCLAT was advised to examine the maintainability of the original proceedings and whether they met the threshold for granting interim relief.

Consideration of Circumstances for Regulating Company Affairs Through an Interim Order:
The Supreme Court emphasized the importance of assessing circumstances to determine if an interim order for regulating company affairs is just and equitable. It clarified that the terms "just and equitable" are linked to the conditions of the order, not the reasons for granting it. The NCLAT was instructed to consider if the interim order was necessary based on the evidence presented. The Court allowed the appeal, with no costs imposed, and provided directions for the NCLAT to reconsider the case comprehensively.