2023 (4) TMI 782 - AT - Companies Law

Oppression and Mismanagement - maintenance of status quo relating to remaining 227 units by not creating any third party interest and not to carry on work construction beyond 302 units till disposal of main CP - HELD THAT - The learned counsel for the both the parties oblivitious of the fact that the present appeal was confined to an interim order, i.e. status quo order, even then learned senior counsel of both the sides had taken precious time of the Court on the issue which is secondary in the present context. In any event while we are examining correctness of the interim order, we are not expected to record any finding, which may affect either of the party in a proceeding which is pending before NCLT. Admittedly the company petition filed under Section 241 and 242 of the Companies Act is pending before NCLT. Accordingly, we are of the opinion that we may not record any finding either in favour of the sale deed executed in question or against the said transaction. If we record such finding it will amount to usurping the jurisdiction of the NCLT. From the order impugned it is reflected that NCLT at least at the time of passing interim impugned order has not accepted the valuation report of the private valuer and recorded that the land was sold to the price fixed as per ready reckner rates fixed by the Govt of Gujarat properties situated in that area. Meaning thereby that the contention of the applicant before the NCLT regarding undervalued sale was not accepted by the NCLT for passing ad interim order. It is also not reflected as to any question was raised that the appellant had not purchased the land in good faith, rather the transaction appears to have been done in good faith by the appellant. It is also not disputed that the (i) sale deed was registered on 13.7.2020; (ii) the pleading that after registration permission was obtained from competent authority for construction of the building; (iii) approval of the plan and mortgaging of the land for obtaining loan; (iv) thereafter almost completion of the project by way of construction of above 302 units;(v) creation of third party right since 61 persons had already purchased the unit; and (vi) NOC for another 14 purchasers from the Bank was received. In such a situation it was not permissible for the NCLT to pass an order affecting the right of the appellant as well as affecting right of those persons who were neither arrayed as party in the petition before NCLT nor they were noticed. On perusal of the language of the interim relief it is evident that the applicant was under impression as if some construction on land was going to be done by the appellant herein whereas facts noticed hereinabove makes it clear that construction over the land was almost complete and some of third party right was also created - learned NCLT by the impugned order i.e. direction to respondents particularly the appellant herein for maintaining status quo relating to remaining 227 units by not creating any third party interest or no construction beyond 302 units till disposal of the main CP has to go and as such the impugned order is hereby set aside. Appeal allowed.

Summary

Issues Involved:
1. Jurisdiction of NCLT to examine the sale deed.
2. Validity of the interim order directing status quo.
3. Balance of convenience and potential irreparable loss.

Summary:

Jurisdiction of NCLT to Examine the Sale Deed:
The appellant argued that the NCLT lacked jurisdiction to interfere with the sale deed executed on 13.07.2020, as the application was filed in January 2023, beyond the three-month limit stipulated under Section 242(2)(g) of the Companies Act, 2013. The appellant contended that the sale was in good faith, without any connection to the vendor company, and was protected under Section 180(1)(a) of the Companies Act. The respondent countered that the NCLT has the authority to examine and declare the sale deed void under Sections 241 and 242, citing several judgments to support this claim. However, the tribunal clarified that it would not record any findings on the validity of the sale deed, as the main petition was still pending before the NCLT.

Validity of the Interim Order Directing Status Quo:
The appellant challenged the interim order passed by the NCLT, which directed maintaining the status quo on the remaining 227 units and halting further construction beyond 302 units. The appellant argued that the status quo order was unnecessary and adversely affected their rights and those of third-party purchasers. The tribunal noted that the NCLT had not accepted the valuation report alleging undervaluation and had acknowledged that the sale was conducted at government-fixed rates. The tribunal found no evidence suggesting that the appellant did not act in good faith.

Balance of Convenience and Potential Irreparable Loss:
The tribunal emphasized that the balance of convenience was against the applicant, as the construction was nearly complete, and third-party rights had already been created. Continuing the status quo order would cause irreparable loss to the appellant and the purchasers who had entered into agreements and made payments. The tribunal highlighted the potential financial burden on purchasers who might have taken loans and would be paying EMIs without enjoying possession of the units. Consequently, the tribunal set aside the NCLT's interim order, allowing the appellant to proceed with creating third-party interests and continuing construction.

Conclusion:
The tribunal concluded that the NCLT's interim order directing status quo was erroneous and set it aside, allowing the appellant to proceed with their activities. The observations made were not to influence the NCLT's final decision in the main case. The appeal was allowed without costs.