2022 (12) TMI 98 - AT - Companies Law

Termination of commercial sub-contracts - It has been alleged that the Impugned Order was in violation of the principles of natural justice and was passed in the course of daily proceedings, without hearing the State of Kerala , who is the owner of the project - HELD THAT - This Appellate Tribunal do hold that prima-facie the Tribunal had sufficient powers to appoint the Inspector and therefore we do not find any error on this aspect. Incidentally, it is noted that opportunity was given to both Appellants and Respondents to give the memo of names to appoint inspector. However, due to non-response from the Appellants , the Tribunal appointed on request of the Respondents herein Shri Ravish Kumar as an Inspector . As regard the contention of the Appellants that no opportunity was given to them of being heard and they were denied two weeks period to file objection to report of Shri Ravish Kumar- Inspector appointed by the Tribunal , this Appellate Tribunal note form the Impugned Order that the Respondents therein/ Appellants herein have availed many adjournments in the matter under one pretext or other - this Appellate Tribunal do not find any error in the Impugned Order with reference to this aspect especially keeping in view that this is only interim measure subject to final CP which is yet to be disposed by the Tribunal along with I.A filed by the Appellant on maintainability issue. As regards the plea that the existence of the Company will be at Stake since the Tribunal by the Impugned Order , has prohibited from withdrawal of any money from revenue collection. This Appellate Tribunal will like to take this fact in to consideration that without regular cash flow available, it would be difficult for the concerned Company to pay Salary and other Operational Expenses. However, looking to various averments made and keeping in mind the Report of independent Inspector appointed by the Tribunal as per Companies Act, 2013 who has pointed out several irregularities by the Appellants , it may not be advisable to intervene at this stage. Appeal disposed off.

Summary

Issues Involved:
1. Appointment of an Inspector by the Tribunal under Section 426 of the Companies Act, 2013.
2. Alleged violation of principles of natural justice.
3. Maintainability of the Company Petition.
4. Applicability of Sections 241 and 244 of the Companies Act, 2013.
5. Interim relief granted by the Tribunal.
6. Alleged fund siphoning and mismanagement.
7. Impact of the Tribunal's order on the project's operations.

Issue-wise Detailed Analysis:

1. Appointment of an Inspector by the Tribunal under Section 426 of the Companies Act, 2013:
The Appellants challenged the Tribunal's jurisdiction to appoint an Inspector under Section 426. The Tribunal appointed Mr. Ravish Kumar as the Inspector on 12.12.2021, due to non-cooperation from the Appellants. The Appellate Tribunal held that the Tribunal had sufficient powers to appoint the Inspector under Section 426, as the Appellants failed to respond to the request for a memo of names for the Inspector.

2. Alleged violation of principles of natural justice:
The Appellants argued that the Impugned Order was passed without giving them an opportunity to be heard and without considering their request for a two-week period to file objections to the Inspector's report. The Tribunal noted that the Appellants had availed many adjournments and were collecting revenue in cash, which remained unaccounted for. The Appellate Tribunal found no error in the Impugned Order, as it was an interim measure subject to the final decision of the main Company Petition.

3. Maintainability of the Company Petition:
The Appellants argued that the maintainability of the Company Petition was yet to be decided by the Tribunal. The Tribunal clubbed the maintainability issue with the main Company Petition. The Appellants filed a writ petition before the High Court of Kerala, which directed the Tribunal to consider the maintainability issue on priority. The Appellate Tribunal noted that the maintainability issue was still pending before the Tribunal.

4. Applicability of Sections 241 and 244 of the Companies Act, 2013:
The Appellants contended that the Respondents were not members of Appellant Companies 5 to 8 and hence were not entitled to claim any relief under Sections 241 and 242. The Appellate Tribunal observed that the Tribunal has the power to waive the requirements specified in Section 244 to enable members to apply under Section 241.

5. Interim relief granted by the Tribunal:
The Appellants challenged the interim relief granted by the Tribunal, which directed them to deposit daily collections in a separate Bank Account/Escrow Account. The Appellate Tribunal noted that the Tribunal's order was an interim measure to prevent fund siphoning before the final decision on the Company Petition. The Tribunal had directed the Appellants to deposit the daily collections in a separate account to protect the assets of the 9th Respondent Company.

6. Alleged fund siphoning and mismanagement:
The Respondents alleged that the Appellants were involved in fund siphoning and mismanagement in the 9th Respondent Company. The Inspector's report revealed several oppressive acts and fund siphoning by the Appellants. The Tribunal passed the Impugned Order based on the Inspector's report to prevent further diversion of funds. The Appellate Tribunal found no error in the Tribunal's order as it was based on the Inspector's report and aimed to protect the assets of the 9th Respondent Company.

7. Impact of the Tribunal's order on the project's operations:
The Appellants argued that the Tribunal's order jeopardized the survival of the project as it restricted the utilization of daily collections for operational expenses, including payment of salaries. The Appellate Tribunal acknowledged the difficulty in managing the project without regular cash flow but emphasized the need to prevent fund siphoning. The Tribunal was advised to expedite the decision on the original Company Petition and any other interlocutory applications within four weeks.

Conclusion:
The Appellate Tribunal disposed of the appeal, finding no error in the Tribunal's orders and emphasizing the need for the Tribunal to decide the original Company Petition expeditiously. The connected pending interlocutory applications were also closed.