2022 (2) TMI 149 - Tri - Companies Law

Oppression and Mismanagement - Seeking stay on any transfer, alienation or creation of any encumbrance by the respondents on the shareholding and assets of respondent No. 1 and its subsidiaries - allegations of the applicant is that respondent Nos. 2 and 3 have certain understanding with the buyers of the land in question for gaining monetary benefit out of the transaction - HELD THAT - We are not going into the entire jurisprudence on the powers of this Tribunal to give relief in a case of whether or not a case of oppression or mismanagement is made out. There is a judicial view that this Tribunal can give substantial relief in such cases. In our view, by expanding the scope the powers of Tribunal under Section 242(2) and also rewording the Section 241 in the new Act, this judicial view has been recognized. We are also conscious of the various judicial decisions that it is necessary for this Tribunal to first consider the interest of the company, irrespective of what the parties plead. Therefore, the Authorities relied upon by respondent Nos. 1, 2 3 are relevant only at the stage of interim relief to the extent that the interest of Respondent No. 1 is paramount. Any transfer, alienation or creation of any encumbrance by the respondents on the shareholding and assets of respondent No. 1, can be effected only after consideration of these issues at the level of the Board of Directors and after passing a suitable resolution to that effect - respondents including Respondent No. 2 3 are required to be temporarily restrained from changing the share holding pattern and assets of Respondent No. 1 including land the land in question except with the prior approval of the Board of Directors or till the final disposal of the main petition. The applicant has prayed that the present authority may pass an order directing that the scheme sanctioned by this Tribunal by way of order dated 30.09.2021 passed in CP(CAA) No. 12/Chd/Hry/2021 be implemented and that the order dated 10.12.2021 passed in IA(CA) No. 10 of 2021 in CP No. 81/Chd/Hry/2021 shall not in any manner imply to impede the implementation of the Scheme - In this background, the records were perused and it is noticed that the two companies i.e. Orient Craft Fashion Private Limited and Orient Craft Exchange Limited are not parties to IA (CA) No. 10/2021 in CP No. 81/Chd/Hry/2021. In the interest of the principles of natural justice, by following the principle of audi alteram partem, no person should be judged or criticized without a fair hearing in which each party is given an opportunity to respond to the evidence against them - Thus, when any party is not impleaded in IA No. 10 of 2021 no adverse order could be passed against it. Thus, the directions passed against the subsidiaries, i.e. Orient Craft Fashion Private Limited and Orient Craft Exchange Limited in the order dated 10.12.2021 are hereby required to be modified. The status quo order dated 10.12.2021 passed in IA(CA) No. 10/2021 is modified to the effect that respondent Nos. 2 and 3 are hereby temporarily restrained from changing the shareholding pattern and assets of respondent No. 1-company including land in question except with the prior approval of its Board of Directors or till the final disposal of the main CP No. 81/Chd/Hry/2021 - application disposed off.

Issues Involved:
1. Request for stay on transfer, alienation, or creation of any encumbrance on the shareholding and assets of Orient Craft Limited and its subsidiaries.
2. Allegations of oppression and mismanagement against specific respondents.
3. Implementation of a Resolution Plan under RBI guidelines.
4. Approval and execution of a Binding Term Sheet Agreement.
5. Sale of land at a price lower than market value.
6. Interim relief against changing the shareholding pattern and assets.
7. Implementation of a Scheme of Arrangement demerging Orient Craft Infrastructure Ltd.

Issue-wise Detailed Analysis:

1. Request for Stay on Transfer, Alienation, or Creation of Encumbrance:
The applicant sought a stay on any transfer, alienation, or creation of encumbrance by the respondents on the shareholding and assets of Orient Craft Limited and its subsidiaries, citing coercion and unlawful demands related to the sale of land.

2. Allegations of Oppression and Mismanagement:
The applicant accused respondents of acts of oppression and mismanagement, including coercing the applicant to sell land at throwaway prices for personal gain. The main petition under Sections 241-242 of the Companies Act, 2013, is pending, seeking to hold specific respondents liable.

3. Implementation of a Resolution Plan:
The Resolution Plan, approved by the Joint Lenders Forum with 94.20% voting share, aimed to monetize non-core assets to reduce debt. The applicant alleged that the respondents breached the Resolution Plan by unilaterally executing Binding Term Sheets without Board approval or adherence to the Asset Monetization Committee's guidelines.

4. Approval and Execution of Binding Term Sheet Agreement:
The applicant contended that the Binding Term Sheets executed by respondent No. 2 were oppressive and breached the Resolution Plan. The respondents argued that the sale was necessary to reduce debt and was approved by the banks.

5. Sale of Land at a Price Lower Than Market Value:
The applicant alleged that the land was being sold at a price significantly lower than the market value, indicating mala fide intentions. The respondents countered that the sale price was higher than the rate approved by IndusInd Bank and that the applicant was aware of the sale discussions.

6. Interim Relief Against Changing Shareholding Pattern and Assets:
The Tribunal restrained respondents from changing the shareholding pattern and assets of Orient Craft Limited without Board approval or until the final disposal of the main petition. The Tribunal emphasized the need to consider the company's interest first.

7. Implementation of Scheme of Arrangement Demerging Orient Craft Infrastructure Ltd.:
The applicant sought directions for implementing a Scheme of Arrangement demerging Orient Craft Infrastructure Ltd., sanctioned by the Tribunal. The Tribunal modified the status quo order to ensure that the interim order would not impede the implementation of the demerger scheme.

Conclusion:
The Tribunal, considering the interests of Orient Craft Limited and all stakeholders, temporarily restrained respondents from altering the shareholding pattern and assets without Board approval. The directions against subsidiaries were withdrawn, and the interim order was clarified to not impede the demerger scheme's implementation. Both applications were disposed of accordingly.

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