2022 (10) TMI 208 - AT - Companies Law

Oppression and Mismanagement - Attempt to illegally and unjustly sideline Appellant No.1 from his role as Head of the Digital Division - Illegal transfer of 20% shares by the Respondent No.10 to the Respondent No.2 without offering the same to the Appellants - failure to afford an opportunity to Appellant to file counter or reply - suppression of material facts. Whether failure to afford an opportunity to Appellant to file counter or reply to IA No. 86/KB/2022 is an legality which vitiates the impugned order? - HELD THAT - The grievance of the appellant is that no opportunity was given to Appellant to file counter/reply to rebut those allegations. Admittedly the Application was filed heard and reserved for order the same day without affording any opportunity to file the counter. Failure of settlement talks is not disputed on the other hand informed to the Tribunal by supplementary affidavit filed in the month of Feb, 2021, but so far as other allegations of misuse of undertaking by 1st Appellant and prejudice caused to the Respondent No. 1 by the acts of the appellant No. 1 are subsequent events which form part of grounds to vacate or modify the order dated 28th June 2019 but no opportunity was given to deny or admit any of the allegations; such denial of opportunity to file counter, is violation of principal of natural justice. Denial of an opportunity to file counter to vacate stay petition amount to depriving the Appellant of their valuable right to file counter to rebut the allegation of serious in nature and it is also amount to violation of principle of natural justice. Whether the order impugned in the Appeal is in consonance with the requirements of an order? if not whether the order be sustained, legally? - HELD THAT - Though, the Tribunal is under obligation to decide the petition on merits without leaving any stone unturned, the Tribunal specifically held that the order was not passed on merits. This itself sufficient to conclude that the order was passed by the Tribunal not on merits - The counsel for the Respondents contended that the order cannot be reversed unless the order is totally against the law are perversed, merely because the Tribunal did not record reason, the order cannot be set aside. Therefore, the order under challenge is unreasoned and without focused consideration of various contentions raised by both Appellants and Respondents before the Tribunal. Consequently, the order is bad and liable to be set aside. Accordingly, the point is answered against the Respondents and in favour of the Appellants - there are no substance in the contention, the same is hereby rejected. Whether the Appellant No.1 acted prejudicial to the interest of the Company? - HELD THAT - When the Tribunal did not record any finding on this alleged prejudiced or if any finding is recorded without affording an opportunity, such finding is illegal and violates of principle of natural justice. Since, the Appellant was deprived of valuable right to file his pleadings and thereby denuded to raise any plea with regard to the grounds urged in the application - such findings even if recorded, cannot be sustained in law. Accordingly, the point is answered. Whether the Appellants suppressed any material and whether this Tribunal while exercising Appellate jurisdiction is entitled to interfere with interim order of NCLT? - HELD THAT - In the instant order, the Tribunal did not record any prima facie finding as to allegation of oppression or mismanagement of the company that apart the Tribunal did not record any findings as to prerequisite for grant of an interim order. The Tribunal did not advert to the basic principles, passed the order in nonchalant manner which will not stand to the legal scrutiny by this Appellate Tribunal. Therefore, the findings recorded by the Tribunal for vacating the interim order on the ground that the settlement was failed, without deciding the claim of the appellant for interim relief is an erroneous approach. Where the Tribunal did not record such findings, this Appellate Tribunal cannot undertake the exercise of recording any reason or findings as to the oppression of minority shareholders or mismanagement of the Company which are mandatory to claim relief under Section 241 242 of the Act - the contention of the Respondent No.4 needs no further consideration by this Appellate Tribunal and such contentions has to be considered by the Tribunal itself. There are no merit in the contention of learned counsel of the Respondents. Consequently, the point is held in favour of the Appellant and against the Respondents - appeal allowed.

Summary

Issues Involved:
1. Whether failure to afford an opportunity to Appellant to file a counter or reply to IA No. 86/KB/2022 is a legality that vitiates the impugned order?
2. Whether the impugned order is in consonance with the requirements of an order and whether it can be sustained legally?
3. Whether the Appellant No.1 acted prejudicial to the interest of the Company?
4. Whether the Appellants suppressed any material and whether the Appellate Tribunal is entitled to interfere with the interim order of NCLT?

Detailed Analysis:

Point No. 1:
The first contention of the Appellant is the lack of opportunity to file a counter or reply to IA No. 86/KB/2022, which violates principles of natural justice. The Tribunal reserved the order on the same day without allowing the Appellant to rebut the allegations. The application was filed, heard, and reserved for order on the same day, which is a violation of the principles of natural justice. The Tribunal's failure to allow the Appellant to file a counter to rebut allegations of serious nature amounts to depriving the Appellant of their valuable right to file a counter. The Tribunal's action is deemed a violation of the principle of natural justice, making the order under challenge liable to be set aside on this ground alone.

Point No. 2:
The Appellants contended that the order is bereft of any reasons and was not decided on merits. According to Rule 147 of the NCLT rules, all orders or directions of the Bench shall be stated in clear and precise terms. The order must be reasoned, as the strength of a judgment lies in its reasoning. The impugned order was passed without focused consideration of various contentions raised by both parties, making it unreasoned and nonchalant. The Tribunal failed to record reasons for its conclusions, rendering the order bad and liable to be set aside.

Point No. 3:
The Respondents argued that the acts of Appellant No.1 were prejudicial to the interest of the company. However, the Tribunal did not record any findings on this alleged prejudice, and the Appellant was not afforded an opportunity to file a counter to rebut the allegations. Any finding recorded without affording an opportunity to the Appellant would be illegal and a violation of the principle of natural justice. Thus, the point is answered against the Respondents.

Point No. 4:
The Respondents contended that the Appellant suppressed certain facts and that the Appellate Tribunal should not interfere with the discretionary order passed by the Tribunal. The Tribunal did not decide the interim prayer claimed by the Appellants in the main Company Petition but decided the interlocutory application independently, which is an erroneous approach. The Tribunal's findings for vacating the interim order on the ground of failed settlement talks, without deciding the claim of the Appellant for interim relief, is erroneous. The Appellate Tribunal cannot undertake the exercise of recording any reason or findings as to the oppression of minority shareholders or mismanagement of the Company, which are mandatory to claim relief under Sections 241 & 242 of the Act. Therefore, the contention of the Respondents needs no further consideration by this Appellate Tribunal.

Conclusion:
The Appeal is allowed, setting aside the order dated September 20, 2022, passed by NCLT, Kolkata Bench in IA No. 86/KB/2022 in CP No. 895 of 2019. The application is remanded to the NCLT with a direction to restore it to its original number, afford an opportunity to the Appellants to file a counter, and decide the interim relief claimed by the Appellant along with petition IA No. 86/KB/2022, in accordance with law.