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2021 (11) TMI 734 - AT - Insolvency and BankruptcyRemoval of directorship of the Petitioner - CONSISTENCY with the restriction provided under the Articles of Association or not - grant of interim stay of resolution passed in EOGM - implementation of the Resolutions passed in the board meetings - HELD THAT - The instant Appeal is against the interim order dated 19.07.2021 passed by the National Company Law Tribunal, Mumbai Bench, Court-IV in CA-201/2021 in CP-193(MB)/2021 and the main petition is still to be heard on merit. We are restraining from expressing our views and while passing the impugned order has considered the provisions of Articles 25 and 26 of the Articles of Association and have committed no illegality. The plea raised by the Appellant in the memo of Appeal that the Article of Association of company cannot supersede the provisions of Companies Law and this Article was itself subject to the provisions of the Companies Act, 2013 is concerned, only can be decided while hearing the main petition i.e. CP-193(MB)/2021 is still pending before the Ld. National Company Law Tribunal, Mumbai Bench, Court-IV for hearing and adjudication. There is no illegality in the impugned order - Appeal dismissed.
Issues Involved:
1. Interim order validity and compliance with principles of natural justice. 2. Legitimacy of the Respondent's removal as director. 3. Applicability and interpretation of Articles of Association versus Companies Act, 2013. 4. Allegations of mismanagement and oppression by the Respondent. Detailed Analysis: 1. Interim Order Validity and Compliance with Principles of Natural Justice: The appellants argued that the National Company Law Tribunal (NCLT) erred in passing the interim order dated 19.07.2021 without serving the application to the appellants, thus violating the principles of natural justice. They contended that the NCLT granted interim relief during an urgent hearing application, which was not sought in the early hearing application. The tribunal, however, found no illegality in the interim order, stating that the main petition is still pending, and thus, the interim order stands affirmed. 2. Legitimacy of the Respondent's Removal as Director: The appellants claimed that the removal of the respondent as a director was conducted properly through an Extraordinary General Meeting (EOGM) and complied with the statutory requirements under Sections 100, 115, and 169 of the Companies Act, 2013. The respondent argued that he was a founder director and shareholder with 40% shareholding and that his removal was against the Articles of Association, which state that founder directors are not liable to retire unless they resign, die, or become disqualified. The tribunal upheld the interim order, noting that the Articles of Association were considered, and no illegality was found in the interim order. 3. Applicability and Interpretation of Articles of Association versus Companies Act, 2013: The appellants argued that the Articles of Association cannot supersede the provisions of the Companies Act, 2013. They claimed that Article 26, which provides that founder directors are not liable to retire, is subject to the provisions of the Companies Act, 2013. The tribunal deferred the decision on this issue to the main petition, which is still pending before the NCLT for a detailed hearing and adjudication. 4. Allegations of Mismanagement and Oppression by the Respondent: The respondent filed a company petition alleging mismanagement and oppression by the appellants. The respondent claimed that the company had been running on a quasi-partnership basis and that the appellants acted against his interests. The tribunal noted that the interim stay was granted by the NCLT considering the balance of convenience and irreparable loss to the respondent. The appellants were advised to file an objection against the interim stay order if aggrieved. Conclusion: The tribunal affirmed the interim order dated 19.07.2021 passed by the NCLT, Mumbai Bench, stating that there was no illegality in the order. The main petition is still pending, and the issues raised by the appellants, including the interpretation of the Articles of Association vis-à-vis the Companies Act, 2013, will be decided during the hearing of the main petition. The appeal was dismissed, and the NCLT, Mumbai Bench, was requested to expedite the matter.
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