2020 (2) TMI 820 - AT - Companies Law

Oppression and Mismanagement - siphoning of funds - alteration of shareholder's composition - HELD THAT - The interim order having already passed, no further order is required to be passed and the impugned order dated 23rd August, 2019 passed by the Tribunal stands substituted by the interim order already passed by this Appellate Tribunal. The said interim order shall continue till the pendency of the petition under Sections 241-242 of the Companies Act, 2013 - So far as the impugned order dated 27th September, 2019 is concerned, the Tribunal has merely issued notice under Section 45 of the Arbitration Conciliation Act, 1996. The impugned order dated 27th September, 2019 need not be interfered with - Tribunal is required to decide the Interlocutory Applications filed under Section 45 after hearing the parties without being influenced by the order passed by the Tribunal or this Appellate Tribunal. The question does not arise at this stage and may be raised and decided by the Tribunal at appropriate stage - appeal disposed off.

Issues Involved:
1. Allegations of prejudicial action and oppression under Sections 241-242 of the Companies Act, 2013.
2. Jurisdiction of the Tribunal over foreign entities.
3. Application of Section 45 of the Arbitration & Conciliation Act, 1996.
4. Interim orders and their vacation.
5. Request for investigation and audit of company affairs.
6. Compliance with interim orders and provision of necessary data.
7. Applicability of arbitration clauses in joint venture agreements.

Detailed Analysis:

1. Allegations of Prejudicial Action and Oppression:
The appellant filed an application under Sections 241-242 of the Companies Act, 2013, alleging prejudicial action and oppression by the respondents. The National Company Law Tribunal (NCLT), Bengaluru Bench, initially passed an interim order on June 12, 2019. However, this order was vacated on August 23, 2019, upon the respondents' application.

2. Jurisdiction of the Tribunal Over Foreign Entities:
The Tribunal vacated the interim order on the grounds that it lacked jurisdiction over the 4th and 5th respondents, who were foreign companies. The appellant argued that the respondents had submitted to the Tribunal's jurisdiction by filing an affidavit of undertaking. The Tribunal's decision was challenged, asserting that the Companies Act, 2013, does not provide the NCLT with powers to pass orders having extraterritorial effect.

3. Application of Section 45 of the Arbitration & Conciliation Act, 1996:
During the proceedings, the 2nd and 3rd respondents filed an application under Section 45 of the Arbitration & Conciliation Act, 1996, seeking to refer the matter to arbitration. The Tribunal issued a notice on this application without deciding the pending interlocutory applications filed by the appellant. The appellant contended that the disputes were subject to arbitration clauses in the joint venture agreements and ancillary agreements.

4. Interim Orders and Their Vacation:
The Tribunal's interim order restrained the 5th respondent from altering the shareholding composition of the 4th respondent and directed access to all company data. The respondents approached the High Court of Karnataka, which directed them to seek vacation of the interim order before the Tribunal. The Tribunal vacated the interim order, citing lack of jurisdiction over the foreign respondents.

5. Request for Investigation and Audit of Company Affairs:
The appellant sought an investigation or third-party audit to determine the true ownership and to address allegations of fraud, oppression, and collusion. The appellant argued that an investigation was necessary to regulate the company's affairs and to ensure compliance with fiduciary duties.

6. Compliance with Interim Orders and Provision of Necessary Data:
The appellant claimed that the respondents failed to comply with the interim order and did not provide necessary data for running the business. The appellant alleged that data for a crucial period was missing, which was vital for addressing concerns of fraud and oppression.

7. Applicability of Arbitration Clauses in Joint Venture Agreements:
The respondents argued that the disputes arose out of the joint venture agreements and ancillary agreements, which contained arbitration clauses. They contended that the disputes were arbitrable and should be referred to arbitration as per the agreed dispute resolution mechanism.

Conclusion:
The Appellate Tribunal substituted the Tribunal's interim order with its own order dated August 27, 2019, which allowed the transfer of shares without affecting the business or agreements between the parties. The Tribunal was directed to decide the applications under Section 45 of the Arbitration & Conciliation Act, 1996, without being influenced by previous orders. The Tribunal was expected to pass an order on the petition under Section 45 after hearing the parties within two months. The appeals were disposed of with no further orders required.

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