2020 (8) TMI 583 - AT - Companies Law

Maintainability of petition - Oppression and Mismanagement - failure to make a declaration under section 89 (1) and (2) of the Companies Act, 2013 read with Rule 9 of Companies (Management and Administration) Rules, 2014 - HELD THAT - The section mandates that a declaration is to be filed by the registered owner and by the beneficial owner with the company in Form MGT 4 and MGT 5 respectively and the Company in turn will have to file MGT 6 with ROC along with the prescribed fees. Further under Section 89(8) of the Act, the beneficial owner and any person claiming through him cannot exercise any rights in respect of the shares held. We are not satisfied with the allegations of the Appellant as the Shareholder Agreement was entered between the Appellant, R-1 and R-2 Company. The shares were held by R-1 in its own name, even if R-1 is a nominee of Kohli ventures as per the Shareholding Agreement, but having a separate legal entity R-1 can hold shares in its own name. There is nothing on record that any action was initiated or any competent authority have decided the question of beneficial interest in the company. Thus no such rights could be taken away from R-1 in respect of such shares - As R-1 is registered as a shareholder as on the date of petition and no competent court has passed any order affecting its rights as on the date of petition eligibility of R-1 to file a petition is to be reckoned on the date of the petition. Therefore, the petition is maintainable per se on the date of petition. Direction for Forensic Audit before deciding the issue of maintainability - Status Quo Ante - HELD THAT - The question of maintainability need not to be decided as preliminary issue which can be decided along with main petition. Thus the NCLT under Rule 11 of National Company Law Tribunal Rules, 2016 has the inherent powers to pass such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal. Therefore, the orders passed by NCLT are not questionable on the grounds contended by the Appellant - maintainability is a mixed question of facts and law and conducting a forensic audit could produce the important facts that may be required by the NCLT in order to decide the preliminary issue. Whether the impugned interim order dated 14th June 2017 passed by the Tribunal is in consonance with sub-section (4) of Section 242 of the Companies Act, 2013? - HELD THAT - The imposition of forensic audit and calling for the report of Forensic Audit before the Tribunal is a measure to help the Tribunal to appreciate the issue on the basis of an independent report so as to ensure that the case is processed with due regard to rights and obligations of contesting parties would be in the interest of justice. Similarly the status quo as made is only with a view to regulate the conduct of the company s affairs during the pendency of the case so that no contesting party takes an advantage during the period detrimental to the other party. The status quo restored as on 27.4.2017 (date of petition) as directed by the NCLT Chennai till the matter is under consideration cannot be found faulted with. Impugned order upheld - appeal disposed off.

Issues Involved:
1. Maintainability of the Company Petition under Section 241/242 of the Companies Act, 2013.
2. Legality of NCLT's interim orders directing forensic audit and maintaining status quo.
3. Compliance with Section 89 of the Companies Act, 2013.
4. Allegations of oppression, mismanagement, and siphoning of funds.

Detailed Analysis:

1. Maintainability of the Company Petition:
The appellant contended that the NCLT should have decided the maintainability of the petition before passing any interim orders. The NCLAT held that the question of maintainability need not be decided as a preliminary issue and can be decided along with the main petition. The Tribunal has inherent powers under Rule 11 of the National Company Law Tribunal Rules, 2016 to pass such orders as necessary for meeting the ends of justice. The NCLAT emphasized that maintainability is a mixed question of facts and law, and conducting a forensic audit could produce important facts required by the NCLT to decide the preliminary issue.

2. Legality of NCLT's Interim Orders:
The appellant challenged the interim orders dated 14.06.2017 and 18.07.2017 directing a forensic audit and maintaining the status quo. The NCLAT upheld these orders, stating that the Tribunal has the power to make interim orders for regulating the conduct of the company’s affairs under Section 242(4) of the Companies Act, 2013. The Tribunal found it necessary to conduct a forensic audit due to allegations of siphoning of funds, breach of agreements, and failure to maintain proper books of accounts. The status quo order was aimed at preventing any party from taking advantage during the pendency of the case.

3. Compliance with Section 89 of the Companies Act, 2013:
The appellant argued that R-1 failed to make a declaration under Section 89(1) and (2) of the Companies Act, 2013, which mandates filing declarations in Form MGT 4 and MGT 5. Under Section 89(8), the beneficial owner cannot exercise any rights in respect of the shares held. The NCLAT rejected this argument, stating that R-1 held shares in its own name and was registered as a shareholder as of the date of the petition. As no competent authority had decided the question of beneficial interest, R-1's rights could not be taken away. Therefore, the petition was maintainable on the date of filing.

4. Allegations of Oppression, Mismanagement, and Siphoning of Funds:
The appellant alleged that R-1 and its promoter, Kohli, were involved in criminal activities and had misrepresented facts, leading to significant economic and reputational loss. The NCLAT noted that the allegations included misfeasance, siphoning of funds, breach of trust, and failure to maintain proper books of accounts. The Tribunal found it necessary to order a forensic audit to determine the status of the company's affairs before progressing with the matter. The NCLAT upheld the NCLT's orders, stating that they were essential to meet the ends of justice.

Conclusion:
The NCLAT found no merit in the appellant's arguments and upheld the NCLT's interim orders directing a forensic audit and maintaining the status quo. The appeals were disposed of with the observation that the Tribunal has the inherent power to pass such orders to ensure justice and prevent abuse of the process. The NCLAT emphasized that the maintainability of the petition could be decided along with the main petition, and the forensic audit would provide crucial facts for this determination.

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