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2022 (5) TMI 719 - AT - Companies LawOppression and Mismanagement - Violation of the Status quo order - seeking direction to the Respondents therein (Appellants herein) to pass a direction to the Respondents therein to maintain status quo in all aspects while managing the affairs of the Company, and revoke all Approvals, Resolutions etc. with respect to raising of any additional debt - HELD THAT - The Respondents 1 to 4 herein have filed the Company Petition bearing No. CP 02 of 2020 before the National Company Law Tribunal, Kochi Bench under various provisions of the Companies Act, 2013 including alleging oppression and mismanagement in the affairs of the Appellant No.1 Company and sought various main and interim reliefs in the CP. It is contended that relief viii of the interim reliefs in the main CP, inter alia the Respondents herein have sought a direction restraining the Appellants 2 to 8 herein from in any manner alienating, mortgaging, selling or encumbering any of the movable or immovable properties of the company. It is seen that the NCLT made absolute the status quo order dated 17.01.2020, further by making it clear that the approvals/resolutions with respect to raising of any additional debt shall be kept in abeyance and the same will be subject to the outcome in the main Company Petition - This Tribunal is of the view that the NCLT while passing the interim order of status quo on 17.01.2020 simply stated that the parties are directed to maintain status quo in all aspects as on today until further orders, has not specifically made out whether status quo to be maintained with respect to management, shareholding and immovable assets of the Company. This Tribunal is of the view that the status quo order is in wider amplitude. It is an admitted fact that the Appellant No.1 Company is into the business of automobile sector and there are 6000 workers in the Company. As per the MOA, the main objects are to carry on the business of motor dealers of cars, motor vehicles etc. and the company has to perform its functions as per its objectives. The NCLT ought to have specified the status quo order with regard to its either shareholding, management and immovable properties etc. In the present case the Respondents herein have alleged that the Appellants have violated the orders of the status quo dated 17.01.2020 by availing ECLGS i.e. Emergency Credit Line Guarantee Scheme offered by the Govt. of India and the Appellant Company in it 245th Board meeting dated 10.02.2021 taken a decision by majority of Board of Directors to avail ECLGS during subsistence of status quo order dated 17.01.2020 - This Tribunal is of the view that the Appellants have not violated the orders of the Tribunal dated 17.01.2020 by making it clear that the Company has to function through the Board of Directors and there is no stay with regard convening and holding of the Board meetings to take a timely decision on the basis of the business of the Company. It is made clear that the interest of the Company is paramount. This Tribunal comes to a resultant conclusion that while passing of status quo order it should be specific with respect to subject matters more particularly in the matters of Oppression and mismanagement, on the basis of the facts of each case and if such status quo is warranted to protect the interest of the Applicants/ Petitioners therein - this Tribunal find that the impugned order dated 18.06.2021 para 11 third sentence onwards namely making it clear that the approvals/resolutions etc. with respect to raising of any additional debt shall be kept in abeyance and the same will be subject to the outcome in the main Company Petition. is hereby quashed and set aside. Accordingly, the issue is answered.
Issues Involved:
1. Whether the order dated 18.06.2021 passed by NCLT, Kochi Bench, requiring the parties to maintain status quo, needs interference. 2. Whether the appellants violated the status quo order dated 17.01.2020 by raising additional debt. Detailed Analysis: Issue 1: Whether the order dated 18.06.2021 passed by NCLT, Kochi Bench, requiring the parties to maintain status quo, needs interference. The appellants contended that the NCLT erred in passing the impugned order by overlooking the fact that there was no violation of the status quo order dated 17.01.2020. The appellants argued that the status quo order was never intended to prevent the company from carrying on its day-to-day affairs as a going concern. They emphasized that the cumulative credit sanction limit as of 17.01.2020 was Rs. 427.11 Crores, and the availing of the Emergency Credit Line Guarantee Scheme (ECLGS) was within this limit and not an additional loan facility. The appellants submitted an affidavit on 03.03.2021 to the NCLT explaining the rationale behind availing the ECLGS. The respondents argued that the NCLT had correctly made the interim order of status quo dated 17.01.2020 absolute, clarifying that it applied to approvals/resolutions with respect to raising additional debt. They contended that the appellants violated the status quo order by raising an additional debt of Rs. 62.67 Crores without seeking permission from the NCLT. The respondents also highlighted that the order under challenge was a consequence of the appellants' conduct, who failed to respect judicial orders. The tribunal observed that the NCLT's status quo order dated 17.01.2020 was broad and lacked specificity regarding whether it pertained to management, shareholding, or immovable assets. The tribunal noted that the NCLT should have specified the status quo order more clearly, given the company's business nature and the need to perform its functions as per its objectives. The tribunal concluded that the NCLT's order interfered with the company's day-to-day affairs and was ambiguous. Issue 2: Whether the appellants violated the status quo order dated 17.01.2020 by raising additional debt. The respondents alleged that the appellants violated the status quo order by raising additional debt through the ECLGS during the 245th Board meeting on 10.02.2021. The appellants argued that the decision to avail the ECLGS was in the company's best interest and did not contravene the status quo order. They contended that the debt raised was not additional but a reorganization of the existing credit sanction limit. The tribunal found that the appellants had not violated the status quo order, as the company needed to function through its Board of Directors, and there was no stay on convening and holding Board meetings. The tribunal emphasized that the company's interest was paramount and that business operations could not be halted. The tribunal also noted that the appellants had filed an affidavit on 03.03.2021, informing the NCLT about the decision to avail the ECLGS, which was a prudent step. Conclusion: The tribunal concluded that the NCLT's order dated 18.06.2021, making the interim order of status quo dated 17.01.2020 absolute, was interfering with the company's day-to-day affairs. The tribunal quashed and set aside the part of the impugned order that stated, "making it clear that the approvals/resolutions etc. with respect to raising of any additional debt shall be kept in abeyance and the same will be subject to the outcome in the main Company Petition." The appeal was allowed to this extent, and no order as to costs was made.
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