2020 (8) TMI 651 - AT - Companies Law

Maintainability of application - whether an employee of the Respondent No. 1 - a Public Sector Undertakings is eligible to file application under Section 213 (b) (ii) of the Companies Act? - HELD THAT - Perusal of the relevant portions of Section 213 show that what is material is the satisfaction of the NCLT that there are circumstances suggesting that the persons concerned in the management of the affairs of the company are guilty of misfeasance or other misconducts towards the company which Appellant claims is fraudulent mismanagement. In the context of the present matter this is the only relevant aspect. Thus important is the satisfaction of the Learned NCLT. We find that NCLT has given reasons for its non-satisfaction, which cannot be said to be baseless. Going through the material, it appears to us also that the Appellant has grudge against the Respondent No. 2 employee regarding overtime and other benefits Respondent No. 2 received in performing his job over number of years. The allegations made by the Appellant are quite sweeping in nature. The case put up by the respondents before Learned NCLT shows that the Appellant was also part of maintenance team on several occasions and although he is only 8th standard pass and was appointed as an unskilled worker he had also received similar benefits. The respondents put up the case before the Learned NCTL that the teams deployed for carrying out the maintenance jobs were under the direct supervision of AME/Engineer-in-chief who alone was incharge and responsible for the job. For such maintenance and inspection the team used to include even non-technical employees for assistance. The Appellant failed to bring material which could invoke satisfaction of existence of circumstances to initiate action under Section 213 of the Act. The Learned NCLT rightly dismissed the Application with costs.

Summary

Issues:
1. Appellant's claim of mismanagement and irregularities in the company.
2. Invocation of powers under Section 213 (b) (ii) of the Companies Act 2013.
3. Dismissal of the petition by the National Company Law Tribunal (NCLT).
4. Appeal against the NCLT's decision.
5. Eligibility of a Public Sector Undertaking employee to file under Section 213 (b) (ii).

Issue 1: Appellant's Claim of Mismanagement and Irregularities:
The Appellant, an employee of the company, alleged mismanagement and irregularities, claiming that certain officers were involved in siphoning off funds. He highlighted the deployment of an unqualified foreman in technical roles, leading to risks for clients. Despite reporting the issue to senior officials and the Minister of Civil Aviation, no action was taken. The Appellant sought an investigation into the company's affairs for misfeasance, misappropriation, and mismanagement of funds.

Issue 2: Invocation of Powers under Section 213 (b) (ii):
The Appellant sought to invoke the powers of the NCLT under Section 213 (b) (ii) of the Companies Act 2013, which allows for an investigation if there are circumstances suggesting fraud, misfeasance, or misconduct by persons involved in the management of a company. The Appellant presented evidence of overtime payments to the foreman, alleging fraudulent practices.

Issue 3: Dismissal of the Petition by NCLT:
The NCLT dismissed the petition, labeling it as mala fide and an abuse of the legal process. The NCLT found the petition to be motivated by vendetta, with no substantial grounds for investigation. It concluded that the inclusion of the foreman in the maintenance team did not amount to fraud or mismanagement, and the Appellant's allegations were baseless.

Issue 4: Appeal Against NCLT's Decision:
The Appellant appealed the NCLT's decision, arguing that any person can file an application under Section 213, and the NCLT should have considered the evidence presented. However, the Appellate Tribunal upheld the NCLT's decision, stating that the Appellant failed to establish grounds for an investigation and that the petition was frivolous.

Issue 5: Eligibility of PSU Employee to File under Section 213 (b) (ii):
The Appellate Tribunal questioned whether an employee of a Public Sector Undertaking (PSU) could file under Section 213 (b) (ii). The Tribunal examined the relevant provisions and found that the satisfaction of the NCLT regarding circumstances suggesting misconduct by management was crucial. It determined that the Appellant's grievances did not warrant an investigation, as the foreman's inclusion in the maintenance team was justified.

This judgment highlights the importance of establishing substantial grounds and satisfying legal criteria when seeking investigations into company affairs. It underscores the need for evidence-based claims and the risk of facing costs for filing frivolous petitions. The decision emphasizes that administrative decisions within a company's management structure are not subject to judicial interference based solely on employee grievances.