2018 (7) TMI 397 - AT - Companies Law

Condonation of Delay Scheme, 2018 - question of getting the accounts audited and placing the same before AGM - Held that - It shows that after the present impugned order dated 19th January, 2018 was passed, the auditors appointed have submitted audit report and schedule of AGM had been given. The appellants appear to have taken up the issue relating to the auditor s report in the NCLT in view of which order dated 26th March, 2018 has now been passed by the Principle Bench of the NCLT. There is typing error in last Para of the order regarding activation. I need not enter into that part. Fact remains that in view of these subsequent developments in the litigation, when the auditors appointed have taken steps in terms of the impugned order dated 19th January, 2018 and the steps taken by them have further been questioned before the Principle Bench of NCLT, Delhi and the learned NCLT is seized with the further developments which have taken place in this prolonged litigation, I do not think it would be appropriate for me to interfere in the impugned order and deal with the question whether or not at all the independent auditor should or should not have been appointed. I do not find it just to interfere in the discretion exercised by NCLT.

Summary

Issues:
1. Urgency in taking up the application due to disqualification of directors under Companies Act, 2013.
2. Disputes raised regarding removal and appointment of auditors, constitution of board, and shareholding in the Company Petition.
3. Appointment of independent auditor by NCLT for auditing financial statements under the Condonation of Delay Scheme, 2018.
4. Subsequent developments in the litigation after the appointment of auditors and the stay order issued by the Principle Bench of NCLT.

Analysis:
1. The judgment addresses the urgency in taking up the application due to the disqualification of directors under Section 164(2) of the Companies Act, 2013. The NCLT decided to consider the application under the Condonation of Delay Scheme, 2018, allowing defaulting companies to rectify filing defaults and seek benefits. The NCLT appointed an independent auditor to audit financial statements to comply with the scheme's requirements and restore the DINs of disqualified directors temporarily until 31st March, 2018.

2. Disputes raised in the Company Petition included issues regarding the removal and appointment of auditors, constitution of the board, and shareholding. The appellant argued that the NCLT should have expedited the Company Petition instead of appointing an independent auditor. However, the NCLT found no reason to impede the respondents from availing the scheme and directed the audit to be conducted by an independent auditor to benefit from the scheme.

3. Subsequent developments in the litigation involved the auditors appointed submitting an audit report after the impugned order. The Principle Bench of NCLT issued a stay order regarding the adoption of accounts at the AGM, questioning the audited report's accuracy. The NCLT was seized with further developments in the prolonged litigation, and the judge declined to interfere with the discretion exercised by the NCLT, considering the subsequent challenges to the auditors' steps taken post-appointment.

4. The judgment concluded that due to the ongoing developments in the litigation after the appointment of auditors and the subsequent challenges faced by the auditors' actions, it was not appropriate to interfere with the NCLT's decision to appoint an independent auditor. The judge found no grounds for interference and disposed of the petition accordingly, considering the evolving nature of the case and the NCLT's ongoing involvement in the matter.