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2021 (6) TMI 788 - Tri - Companies LawAppointment of an independent auditor/professional - conducting an audit/investigation into the affairs of the Respondent No. 1 company - Rule 11 r/w Rule 32 of NCLT, Rules 2016 - HELD THAT - Since pleadings in the main CP are already in progress, ordering investigation as prayed for in these CAs would render the main CPs infructuous, at least to the extent of the allegations of misappropriation are concerned. This would not be in order. The issues raised in the present CAs cannot be ignored once having been brought to our notice. They are accompanied by specific details and evidences that need to be examined after giving due and fair opportunity to the Respondents - Also, since it seems to be a family dispute and about exercising influence/control over the business, and there are allegations and counter allegations, we are deprived of an objective view of the goings on in the company's day to day affairs. For example, allegations regarding issue of self cheques, unwarranted payments without any explanation for the same, delay in issue of cheques due to the Petitioner's interference etc are allegations that have to be checked on a real time basis, as resultant losses, if any, would be difficult to recover on a subsequent date. Interest of the company is paramount and if the company suffers, all Directors and stakeholders suffer. This cannot be permitted. Mr. K. Dushyantha Kumar, practicing Company Secretary is appointed - petition disposed off.
Issues Involved:
1. Appointment of an independent auditor/professional for conducting an audit/investigation into the affairs of multiple respondent companies for the period 2019-20 to 2020-21. 2. Allegations of misappropriation, manipulation of funds, and malfeasance by the respondents. 3. Opposition to the relief sought in the applications by the respondents. 4. Consideration of the submissions from both sides and the decision of the tribunal regarding the appointment of an observer. 5. Ensuring the protection of the company's assets, preventing diminution, and maintaining the business's financial integrity. Detailed Analysis: Issue 1: Appointment of Independent Auditor/Professional The petitioner filed multiple applications seeking the appointment of an independent auditor to investigate the financial affairs of the respondent companies for the specified period. Allegations included large-scale manipulations, misappropriation of funds, and fictitious transactions, prompting the need for an external audit. Issue 2: Allegations of Misappropriation and Malfeasance The petitioner detailed various instances of financial irregularities, such as siphoning of funds through self-cheques, fictitious transactions, and manipulation of records. The tribunal noted the seriousness of these allegations and the potential impact on the company's financial health and stakeholders. Issue 3: Opposition to Relief Sought The respondents vehemently opposed the relief sought in the applications, arguing that no prima facie case of oppression and mismanagement had been established. They contended that the appointment of an auditor or observer would disrupt the company's operations, especially as it was a family-run business with a long history. Issue 4: Tribunal's Decision and Appointment of Observer After considering both parties' submissions, the tribunal acknowledged the gravity of the allegations and the need for a thorough investigation. However, it recognized that ordering an investigation at that stage could affect the main company petitions already in progress. As a compromise, the tribunal appointed an observer to monitor the company's transactions and report back regularly to ensure financial integrity. Issue 5: Protection of Company's Assets The tribunal emphasized the importance of safeguarding the company's assets and ensuring that its income and funds were utilized for legitimate business purposes. By appointing the observer, the tribunal aimed to prevent any further harm to the company's financial stability and stakeholder interests. In conclusion, the tribunal disposed of the applications by appointing an observer to monitor the company's affairs, emphasizing the need to maintain financial transparency and integrity while the main company petitions proceeded.
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