2022 (6) TMI 14 - Tri - Companies Law

Seeking appointment of Petitioner as the Administrator of the 1st Respondent Company pending disposal of the instant proceedings - seeking in the alternative to appoint an Independent Administrator to manage the affairs of the company pending disposal of the instant proceedings - Section 241-242 of the Companies Act, 2013 - HELD THAT - It is to be seen whether this is a fit case to appoint an Administrator to manage the affairs of the 1st respondent Company. The petitioner has brought out strong grounds for this purpose which is supported by the R2 appeared. R1 3 did not appear. Hence, it is presumed to be taken that they have no objection in such an appointment. Various discussion clearly indicates that all is not well in the affairs of the 1st respondent Company. It appears that the respondents are violating the mandatory stipulations contained in the Companies Act. The affairs of the company are to be put on right track so that the object for which the company was incorporated could be saved. Therefore, it is proper and justifiable to appoint an Administrator to look into and manage the affairs of the Company. Since there is no opposition to the prayer for the alternative prayer in appointing an Independent Administrator to manage the affairs of the company, this Tribunal can pass an interim order to appoint an Independent Administrator as per Section 242(4) of the Companies Act, 2013. Application allowed.

Summary

Issues:
1. Appointment of Administrator for the 1st Respondent Company pending proceedings.
2. Allegations of mismanagement, diversion of funds, and establishment of a competing business by Respondents 2 & 3.
3. Financial disarray and non-compliance with statutory obligations by the 1st Respondent Company.
4. Request for investigation into affairs, recovery of undue gains, and appointment of Independent Administrator.

Issue 1: Appointment of Administrator
The petitioner filed an application seeking to be appointed as the Administrator of the 1st Respondent Company or, alternatively, requested the appointment of an Independent Administrator. The Company Petition No. CP/43/KOB/2021 was filed under Section 241-242 of the Companies Act, 2013, seeking to regulate the affairs of the company and restrain Respondents 2 & 3 from making appointments. The petitioner highlighted mismanagement, diversion of funds, and the establishment of a competing business by Respondents 2 & 3. The Tribunal, after considering the arguments and the absence of responses from Respondents 1 & 3, appointed an Independent Administrator, Advocate-Vijay V Paul, to manage the affairs of the 1st Respondent Company.

Issue 2: Allegations of Mismanagement and Diversion of Funds
The petitioner raised concerns about the mismanagement of the 1st Respondent Company by Respondents 2 & 3. It was alleged that the respondents established a competing business and diverted funds, impacting the company's liquidity. The petitioner also highlighted cancellations of projects, non-payment of EPF and GST contributions, and expired insurance policies. The Tribunal noted the serious allegations and appointed an Independent Administrator to investigate and recover any losses caused by the respondents' actions.

Issue 3: Financial Disarray and Non-Compliance
The financial position of the 1st Respondent Company was described as being in disarray, with allegations of funds being misappropriated for personal use by Respondent 2. The petitioner expressed concerns about pending GST payments, EPF contributions, and potential legal actions due to non-compliance. The Tribunal acknowledged the deteriorating financial capability of the company and appointed an Administrator to address these issues and ensure compliance with statutory obligations.

Issue 4: Request for Investigation and Recovery
The petitioner requested an investigation into the affairs of the company, recovery of undue gains made by directors, and appointment of an Administrator to manage the company. The Tribunal found merit in the petitioner's concerns and appointed an Independent Administrator to conduct a thorough investigation, recover any misappropriated funds, and ensure the company's operations are in line with legal requirements. The Administrator was directed to hold a Board Meeting, conduct elections, and file periodical reports to the Tribunal.

Overall, the Tribunal recognized the gravity of the situation at the 1st Respondent Company, with mismanagement, diversion of funds, and financial irregularities being key issues. The appointment of an Independent Administrator was deemed necessary to address these concerns, investigate the allegations, and safeguard the interests of the company and its stakeholders.