2019 (6) TMI 641 - AT - Companies Law

Oppression and mismanagement - removal from Board of Directorship of respondent no.1 company - mandatory permanent injunction has been passed without affording any opportunity to the Appellants - principles of natural justice - HELD THAT - In the present matter NCLT has noted that the Petitioner moved NCLT for Ad Interim Orders but the Orders as have been passed do not purport to say that they are Interim Orders and the original Respondents (Appellants) are to be heard. When the Hon ble High Court itself in its wisdom had on 21.09.2018 preferred to issue Notice and in the meanwhile directed that the meeting may go on but the outcome therein shall not be given effect till next date the NCLT could have itself adopted similar recourse and the Order could have stated that the Resolution as may have been adopted would remain stayed till the next date. Instead of that NCLT simply pronounced magic words that there was a prima facie case in favour of the Petitioner and balance of convenience is also in favour of Petitioner and that if Interim Orders are not passed Petitioner will suffer irreparable loss on the basis that if the Company which runs the hospital suffers bad name the Petitioner will bear the negative image apart from losing valuable investments. The question of Company suffering bad name appeared to be based on de-empanelment of the hospital. Record shows (Annexure P8 of the company Petition Diary No.8869 Page 118) that the hospital had already been de-empanelled from the Mahatma Jyotiba Phule Jan Arogya Yojna on 28th February 2018 itself. Thus whatever harm had to take place on that count had already taken place. NCLT not only restrained the Respondents Appellants from altering shareholding and from giving effect to the Resolution removing the Respondent Petitioner as Director until further Orders but also went ahead to pass Orders which are in the nature of mandatory Orders to cancel DIR 12 etc. which were not necessary. The Impugned Order is modified accordingly and the Order passed by NCLT shall be treated as Ad-Interim Order.

Summary

Issues Involved:
1. Oppression and mismanagement claims.
2. Jurisdiction and concurrent hearings.
3. Interim orders and principles of natural justice.
4. Mandatory orders and their necessity.

Issue-wise Detailed Analysis:

1. Oppression and Mismanagement Claims:
The Respondent filed a Company Petition before the NCLT alleging oppression and mismanagement against the Appellants. The Respondent claimed that the Appellant No. 2 had issued a notice for the removal of the Respondent as a Director, without providing any tenable reasons in the explanatory statement. The Respondent also alleged financial misconduct by the Appellants, which led to the de-empanelment of the hospital from a government scheme, causing financial loss and reputational damage to the company. The Appellants, on the other hand, accused the Respondent of financial mismanagement, including charging unauthorized interest on unsecured loans and advancing interest-free loans to relatives, which led to financial losses for the company.

2. Jurisdiction and Concurrent Hearings:
The Respondent initially approached the High Court of Judicature at Bombay, Nagpur Bench, due to the unavailability of the NCLT bench. The High Court, on 21.09.2018, issued a notice and directed that the outcome of the General Meeting scheduled for 22.09.2018 should not be given effect until the next hearing date. The matter was subsequently taken up by the NCLT on 26.09.2018, where it was adjourned to 03.10.2018. However, after the High Court dismissed the Writ Petition on 26.09.2018, the Respondent moved the NCLT again, which took up the matter at 4.30 p.m. and passed the Impugned Order.

3. Interim Orders and Principles of Natural Justice:
The NCLT passed an order at 4.30 p.m. on 26.09.2018, directing the Respondents not to alter the shareholding pattern and not to give effect to the resolution removing the Respondent as a Director until further orders. The Appellants argued that the NCLT passed the order without serving notice to them, violating the principles of natural justice. The NCLT's order did not specify that it was an interim order subject to confirmation after hearing the other side. The Appellate Tribunal noted that the NCLT could have adopted a similar approach as the High Court by issuing an interim order and giving the Respondents an opportunity to be heard.

4. Mandatory Orders and Their Necessity:
The NCLT's order included mandatory directions to cancel the DIR-12 form and remove the resolution from the MCA portal, which the Appellate Tribunal found unnecessary. The Appellate Tribunal emphasized that such mandatory orders should not have been passed without hearing both sides and that the NCLT should have limited its order to interim relief, maintaining the status quo until the Respondents were given an opportunity to present their case.

Conclusion:
The Appellate Tribunal set aside the portions of the NCLT's order that directed the removal of the resolution from the MCA portal and the cancellation of DIR-12. The remaining directions were modified to be treated as ad-interim orders, effective until the Appellants were heard. The Appellants were directed to file their replies, and the NCLT was instructed to hear both parties and decide on the interim relief expeditiously. The order passed by NCLT was thus modified to ensure adherence to the principles of natural justice and proper judicial procedure.