2019 (5) TMI 1355 - AT - Companies Law

Oppression and mismanagement - Appellant is aggrieved by the fact that NCLT passed protection Order in favour of the original Petitioners directing Respondents not to encumber shares of Omaxe (Respondent No.14) held by Respondent No.1 Company only limited to 1,48,59,726 and not 4,11,81,726 shares which should have been treated as unencumbered as on 19th December, 2018 - HELD THAT - The learned NCLT while dealing with the defence of the Respondent Company, did not consider that the Company under the Regulations was filing information with the Bombay Stock Exchange and also National Stock Exchange which did not match with the defence which was being taken. If there were any committed shares, nothing stopped the Company from disclosing the same on the given date in the format which has been prescribed as annexed to letter dated 19th December, 2018 (Page 696 to 698 of the paper book). What was being informed to the Authorities could not be simply ignored. The Regulations have bene made in exercise of powers conferred under Section 30 read with Section 11(2)(h) of Securities and Exchange Board of India Act, 1992 with the object of regulating acquisition of shares. Incomplete information submitted would be matter of concern. The figure 1,48,59,726 used by NCLT in the Impugned Order paragraph 35 and Paragraph 38 is deleted and the Impugned Order dated 15th March, 2019 stands modified accordingly - appeal disposed off.

Summary

Issues:
Challenge to an Order of National Company Law Tribunal regarding oppression and mismanagement in a company, interpretation of encumbrance on shares, discrepancy in disclosed shareholding, regulatory compliance, and modification of an interim order.

Analysis:
The Appellant challenged an Order passed by the National Company Law Tribunal (NCLT) regarding allegations of oppression and mismanagement in a company. The Appellant contested the protection Order issued by NCLT, limiting encumbrance on shares of Omaxe held by the company. The grievance centered around the interpretation of the extent of encumbrance on the shares, specifically 1,48,59,726 shares versus 4,11,81,726 shares, which should have been considered unencumbered. The NCLT's order restrained encumbrance on a specific number of shares and denied other prayers for interim relief. The Appellant filed an Appeal challenging this interim Order.

The Appellant argued that the Respondent company's defense regarding the shares' encumbrance was unacceptable. They highlighted discrepancies between the information provided to regulatory authorities and the arguments presented before NCLT. The Respondent company claimed that certain shares were committed for the company's functioning and should not be considered pledged. The Respondent's argument was supported by examples of shares committed for specific purposes but not formally pledged. The Respondent's interpretation of encumbrance on shares differed from the Appellant's understanding.

Upon reviewing the submissions and evidence, the Appellate Tribunal found that the NCLT did not adequately consider the discrepancies in the disclosed shareholding and the regulatory compliance requirements. The Tribunal emphasized the importance of accurate and complete information disclosure to regulatory authorities, especially concerning share encumbrance. Consequently, the Tribunal modified the NCLT's Order, deleting the specific shareholding figure and adjusting the interim Order accordingly. The Appeal was disposed of without costs.

In conclusion, the judgment addressed issues related to the interpretation of encumbrance on shares, discrepancies in disclosed shareholding, regulatory compliance obligations, and the modification of an interim Order based on the Appellate Tribunal's findings.