2020 (3) TMI 526 - AT - Companies Law

Oppression and Mismanagement - purchase of mortgaged property at a higher rate - HELD THAT - It is not necessary for the NCLT to give a finding whether as per agreement of mortgaged, the Respondent No.5- J.M. Financial Services can sell the mortgaged property or not. Such finding can be given only after examining the allegations and counter allegations of the oppression and mismanagement levelled against the Respondent Nos. 2 to 4. The impugned order is not in any manner detrimental to the Respondent No.1 Company as well as the Appellants interest. Sub-section (4) of Section 242 of the Companies Act, 2013 provides that the Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company s affairs upon such terms and conditions as appear to it to be just and equitable - the NCLT has a vast power to pass interim order for regulating the conduct of the company s affairs and it should be just and equitable. Appeal dismissed - decided against appellant.

Summary

Issues:
- Appeal against order passed by NCLT under Sections 241, 242 & 245 of the Companies Act, 2013.
- Allegations of ousting Appellants from company management.
- Unilateral disposal of assets by Respondents.
- Request for interim reliefs against Respondents.
- Dispute regarding authority of 'J.M. Financial Services' to sell mortgaged properties.
- Allegations of collusion between Respondents and 'J.M. Financial Services'.
- Compliance with regulations under the Companies Act, 2013.

Analysis:

1. The appeal was filed against the NCLT's order passed under Sections 241, 242 & 245 of the Companies Act, 2013. The Appellants alleged that Respondents had forcibly ousted them from managing the company and were conducting affairs arbitrarily, leading to the filing of a Company Petition.

2. The Respondent Company, engaged in real estate development, had taken a loan from 'J.M. Financial Services,' with properties mortgaged. Allegations were made that Respondent Nos. 2 to 4 were disposing of assets at undervalued prices, prompting the Appellants to seek interim reliefs through a Miscellaneous Application.

3. The NCLT passed an interim order directing both parties to maintain the status quo for 14 days, allowing 'J.M. Financial Services' to proceed as a secured creditor after the specified period, with a caution against collusive sales. The Appellants challenged this order in the appeal.

4. The crux of the dispute revolved around the authority of 'J.M. Financial Services' to sell mortgaged properties without the Company's consent. The Appellants argued that such sales were unauthorized and undervalued, while the Respondents contended that it was within their rights as a secured creditor due to default by the Company.

5. The NCLT's order was upheld on the grounds that the relief sought by the Appellants had been granted, and the issue of 'J.M. Financial Services' authority to sell properties could only be determined after examining allegations of oppression and mismanagement. The order was deemed just and equitable under Section 242 of the Companies Act, 2013.

6. The appeal was dismissed, with no costs imposed, as the impugned order was found to be in line with the regulatory provisions and the interests of both the Company and the Appellants were adequately protected.

By considering the submissions and relevant legal provisions, the Appellate Tribunal concluded that there were no grounds to interfere with the NCLT's order, thereby dismissing the appeal.