2020 (8) TMI 650 - AT - Companies Law

Oppression and Mismanagement - dilution of stake of company - original equity in the Respondent Company was 20%, was brought down to 6.85% in the year 2003 - basic allegation being made by the Appellant (Petitioner) while praying for amendment is that there have been various holes in the Auditing System which has given rise to a massive and systematic fraud of at least ₹ 1500 crores, if not ₹ 8700 crores, in the form of siphoning off the funds based on fraudulent transactions, which could not have gone unnoticed by the auditors. HELD THAT - In the present case, the Appellant having failed to show the ground to implead the other Auditor as party Respondent No.12 and the reasons to amend the name of Respondent No.11, they having knowledge of all the facts, Company Petition filed in the year 2015 merely because SFIO is investigating into the matter under Section 212 of the Companies Act, 2013, cannot be a ground to amend the name of the Auditor as Respondent No.11 nor can be a ground to implead another Auditor as Respondent No.12. Appeal dismissed.

Summary

Issues:
1. Amendment of original petition before National Company Law Tribunal.
2. Refusal to amend the name of a respondent and implead a proposed respondent.
3. Allegations of oppression and mismanagement against company directors.
4. Role of auditors in financial irregularities and fraud.
5. SFIO investigation report and appointment of independent auditor.
6. Opposition to the amendment application by respondents.
7. Averment of oppression and mismanagement against statutory auditor.
8. Comparison with a previous judgment regarding statutory auditors.

Analysis:
1. The Appellant filed a petition under various sections of the Companies Act, 1956, later transferred to the National Company Law Tribunal for amendment. The amendment sought to elucidate facts against the Statutory Auditors and implead a proposed respondent.

2. The Tribunal refused to amend the name of a respondent and implead a proposed respondent based on the Appellant's allegations of oppression and mismanagement, financial irregularities, and fraud by the company directors. The Appellant aimed to define the auditors' role in the alleged fraud.

3. The Appellant alleged siphoning of funds and fraud, implicating the auditors in perpetuating fraud and mismanagement. The SFIO investigation report highlighted financial irregularities, leading to the request for the appointment of an independent auditor.

4. Respondents opposed the amendment application, claiming it aimed to cause delays and that oppression and mismanagement allegations cannot be made against the Statutory Auditor. They cited a previous judgment regarding the deletion of auditors as parties in a similar case.

5. The Tribunal found no merit in the appeal and dismissed it without costs, considering the Appellant's failure to provide sufficient grounds for amending the petition and impleading additional auditors. The knowledge of facts and ongoing investigation were not deemed valid reasons for the requested amendments.