9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (4) TMI 1143 - AT - Companies LawOppression and Mismanagement - seeking declaration of Board meetings dated 6.9.2014 and 20.9.2014 to be invalid in law and all resolutions passed therein to be null and void - seeking direction for investigation to be carried out in the affairs of the Company including misconduct by Shri Venkata Rami Reddy - seeking declaration of appointment of R-5 as Additional Director to be made null and void - HELD THAT - The order for appointment of Independent Auditor to look into the accounts of R-1 Company and furnish draft audit report to the petitioners and Respondents was given with consent of the rival parties and it was also directed that the Final Audit Report, after taking into account the comments of both the parties, shall be submitted to the Bench within a period of thirty days, and furthermore, there was direction to the Company to pay the remuneration and other incidental expenses to the Independent Auditor as claimed by him. In the instant case allegations had been made about wrongdoings and mismanagement in the affairs of the Company and the CLB directed for preparation of the Independent Auditor s Report which was to be submitted to it by the Independent Auditor. The NCLT (as the successor tribunal of CLB) ought to have taken note of, and examined and considered the contents of the report and provided adjudication. To have kept the Auditor s Report in sealed cover on the ground that Auditor s fees was not paid does not appear to be the correct course of action, as there was no necessity to link the two issues, moreso when the CLB had itself ordered for conduct of independent audit and submission of the final report to the CLB. As is noted in the pleadings in the original company petition and also in this appeal, the reason for undertaking investigation in the company was spelt out and a prayer was made for such investigation. Once the prayer was accepted by the CLB, and an investigation was carried out by the Independent Auditor, and the CLB had fixed the case for further consideration, the NCLT (to whom the Audit Report had been submitted) ought to have looked at the report and passed necessary and appropriate orders. Since the NCLT did not do so, the prayer on the appeal for quashing of the Impugned Order implies that the Appellants are aggrieved by the Impugned Order and remand of the case remains an option that is available to this tribunal - the plea for remand in the arguments before us is sufficient in the facts of this case. The NCLT did not carry the judicial process to its logical conclusion when it continued to keep the Final Audit Report submitted by M/s. Brahmayya and Company on 13.11.2017 in a sealed cover and did not open it for due consideration, but the matter was in a confusing manner entangled with the issue of payment of the Independent Auditor s fees. The issue of payment of Auditor s fees was also finally set to rest by the order dated 29.10.2018 of NCLAT in CA No. 77 of 2018 which settled to the amount of the fees to be paid to the Independent Auditor by holding that since fees is on the basis of ICAI norms, it is not proper to interfere in the quantum of fees. Once the Final Audit Report was submitted to NCLT by the Independent Auditor and the quantum of their fees was not interfered by NCLT, it was incumbent on NCLT to open the Final Audit Report from the sealed cover and consider its findings, as the consideration of the investigation into the affairs of the Company would have given justice to the parties in a fair manner - the interest of the parties and requirement of justice would be met, if the matter is remanded to NCLT with the direction that the Final Audit Report submitted by M/s. Brahmayya and Company, Chartered Accountant be made available to the parties by NCLT and after due consideration of the Final Audit Report, which should include opportunity to the parties to be heard, necessary appropriate orders should be passed. NCLT should ensure that the requisite payments by the parties as has been decided earlier, be made to the Independent Auditor. Appeal disposed off.
Issues Involved:
1. Validity of Board Meetings and Resolutions 2. Investigation into Company Affairs and Misconduct 3. Appointment of Additional Director 4. Injunction on Dealing with Company Assets 5. Payment of Share Premium 6. Consideration of Final Audit Report Summary: 1. Validity of Board Meetings and Resolutions: The appellants, minority shareholders and directors of Respondent No. 1 Company (R-1), challenged the validity of Board meetings dated 6.9.2014 and 20.9.2014, seeking declarations that these meetings and resolutions passed therein be declared null and void. The Company Law Board (CLB) initially granted this relief based on mutual consent but the National Company Law Tribunal (NCLT) later dismissed the petition without considering the Final Audit Report. 2. Investigation into Company Affairs and Misconduct: The appellants alleged various acts of mismanagement and misconduct by Respondents No. 2 to 5, particularly by Mr. Venkata Rami Reddy, and sought an investigation. The CLB appointed M/s. H.C. Kincha & Company, later replaced by M/s. Brahmayya and Company, to audit the company's accounts. The audit revealed gross mismanagement and fraud, but the NCLT did not release the Final Audit Report due to non-payment of the auditor's fees and dismissed the petition, granting liberty to file a fresh case based on the audit findings. 3. Appointment of Additional Director: The appellants sought to declare the appointment of Respondent No. 5 as Additional Director null and void. The CLB initially granted this relief, but the NCLT dismissed the petition without considering the Final Audit Report. 4. Injunction on Dealing with Company Assets: The appellants requested a permanent injunction to restrain Respondents No. 2 to 5 from dealing with the company's assets. This relief was not specifically addressed by the NCLT in the final judgment. 5. Payment of Share Premium: The appellants contended that shares allotted to Respondents No. 3 and 4 were not paid for at a premium as required. The NCLT held that there was no evidence of such a requirement and dismissed this claim, noting that the appellants, who were in control of the company at the time, could not now claim that the decisions were faulty. 6. Consideration of Final Audit Report: The NCLT dismissed the petition without considering the Final Audit Report, which was kept in a sealed cover due to non-payment of the auditor's fees. The Appellate Tribunal found that the NCLT erred in not considering the audit report and remanded the case to the NCLT with directions to release the audit report to the parties, ensure payment of the auditor's fees, and adjudicate the matter after considering the audit findings. Conclusion: The Appellate Tribunal remanded the case to the NCLT, directing it to release the Final Audit Report, ensure payment of the auditor's fees, and consider the findings of the audit report, providing an opportunity for all parties to be heard. The NCLT was instructed to pass appropriate orders based on the audit findings and allow necessary additional pleadings and joinder of parties if required.
|
