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TMI Blog2021 (11) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... .2018 alleging Oppression and Mismanagement of the affairs of R-1 Company and further that the main Company Petition is listed for hearing before NCLT in less than 4 weeks time from today, we are of the considered view that in the interest of justice, NCLT shall dispose of the matter as expeditiously as practicable beginning the hearing on 28.10.2021 uninfluenced by the observations made in para 10 (ii) and (iii) of the Impugned Order dated 11.06.2021. Appeal disposed off. - Company Appeal (AT) No. 76 of 2021 And COMPANY APPEAL (AT) No. 76 of 2021 - - - Dated:- 29-9-2021 - Justice Anant Bijay Singh Member (Judicial) And Ms. Shreesha Merla Member (Technical) For the Appellants : Dr. Abhishek Manu Singhvi, Sr. Advocate alongwith Mr. Abhishek Sharma, Mr. Bindi Dave, Mr. Pranaya Goyal, Mr. Aman Raj Gandhi, Mr. Aayesh Gandhi, Mr. Chirag Kamdar, Mr. KM Sanghvi Mr. L. Nidhiram Sharam, Advocates. For the Respondents : Mr. Ravi Kadam Mr. Sudipto Sarkar, Sr. Advocates alongwith Mr. Rajendra Barot, Mr. Dhiraj Kumar Totala, Ms. Sonali Jain, Ms. Liz Mathew, Mr. Ashish Kamat, Mr. Shaym Kapadia, Ms. Trisha Sarakar, Ms. Janhavi Patankar, Ms. Kirti Balasubramaniam, Ms. Vasudha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent No. 1 to operate under the day to day management and administration of the Sanghvi Group and the Kamdar Group respectively and to oversee their respective administration and management thereof; and (v) inventorize all the assets and properties (movable, immovable, tangible, intangible) of Respondent No. 1 and then to have the same valued through an independent firm of Chartered Accountants. b) Pending the hearing and final disposal of the petition, this Hon ble Tribunal be pleased to order and direct the Board of Directors of Respondent No. 1 to:- (i) forthwith disburse from Respondent No. 1 s funds, accounts and/or monies an amount of ₹ 113.51 (subject to reconciliation, if any, with the bank) crores (as per the Statement annexed at Exhibit GG hereto), being the amount required by the Gujarat Division of Respondent No. 1 so as to pay off and discharge its financial creditors and lenders and trade creditors and as necessary for its working capital requirements; (ii) order and direct the Board of Directors of Respondent No. 1 (more particularly, the Sanghvi directors, viz. Respondent Nos. 2 to 5 to forthwith disclose on oath the amounts invested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he profitability or otherwise of each division and the Board has taken conscious decision then and there in the interest of the company. As far as the Gujarat Division is concerned, since it is not performing well, it cannot be solely attributable to the group which is managing the Gujarat Division. We have noticed that the Board is in full and effective control of all the divisions. However, the management of the Gujarat Division is not getting the required funds and hence, they have to go for high cost external borrowings and that has consistently contributed to the business losses. Already the division has not been doing well and the high cost of borrowing aggravated the situation. It is evident that the Board has asked for revival plan of the Gujarat Division. Apparently, the plans submitted by the Gujarat Division (meaning Kamdars) did not find favour with the Board. The Board was conscious that the division was in financial straits and was badly in need of revival. Downward spiral of one limb of the company is bound to affect the health of the company as a whole. The other limbs thus could not escape the effect. Therefore, it was incumbent upon the company to find ways and me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvene in matter and shall take over control of AMPL Gujarat cannot be a ground for giving relief to these Applicants. A third party like the AL does not have any right to comment on the management in the R1 Company and suggest replacement of persons in management of Gujarat Division. Besides such comment would hardly have any influence on the order the Tribunal would make. vi. The only allegation is persons in charge of Gujarat Division are incompetent to run the business as a profitable venture. Assuming without admitting this contention, when the proposal for taking agencies of KIA, Hyundai, Maruti and Morris Garages etc. had not been fully analysed by the Board and was simply rejected, the allegation that the Petitioners have not come with the proper revival plan cannot be accepted. vii. We are making it clear that the Board is empowered to take all decisions for setting things right in the Gujarat Division but without disturbing the present management pattern/directorship/shareholding of R1, as observed in the order dated 06.04.2018. viii. We don t find any merit in CA No. 1064 of 2020 for the reason the Board is competent to take all tactical business decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Gujarat Division, without disturbing the present management pattern and shareholding. The Learned Counsel further contended this direction had prevented the Board from taking decisions to avert the damage caused by the Gujarat Group; that the Order dated 11.06.2021 prevents the Board from making any structural changes that unless the Board was allowed to intervene in its affairs, the losses suffered by the Gujarat Division cannot be arrested; and that the Gujarat Division has suffered a loss of ₹ 13 Crores and is not in a position today to pay salaries or GST. The Counsel drew our attention to the correspondence addressed by M/s. Ashok Leyland and submitted that the Gujarat Division has lost a 72 year old dealership of Ashok Leyland on 25.05.2021, despite Ashok Leyland having given the said Division several opportunities to rectify the situation. The Learned Sr. Counsel brought to our notice that the Gujarat Division resigned from the dealership of Kobelco Construction Equipment Limited and Mahindra Mahindra. Further, Bajaj Auto also terminated their dealership only due to the gross mismanagement of the affairs of the Gujarat Group. The Appellant division has exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the conscious effort made by the Gujarat Group to run the business to the ground, NCLT has passed scathing remarks against the Board of the R-1 Company and has virtually decided the dispute against the Appellants in the interim stage itself, by rejecting the prayers in CA No. 1008 of 2020. The Learned Counsel drew our attention to paras 10 (ii) and (iii) of the Impugned Order and submitted that the observations made in the said paras would perpetuate injustice and prejudice their rights during the final adjudication of the Company Petition. 6. Submissions of the Learned Counsel appearing on behalf of the Appellants in Company Appeal (AT) No. 78 of 2021: The Learned Sr. Counsel Mr. Arun Kathpalia appearing for the Appellants in this Appeal strenuously argued that in 2018, the second Respondent Mr. Ratilal D. Kamdar was 95 years old and the Joint Managing Director and since the Gujarat Division was notching losses each year for more than one decade, the Board wanted to induce fresh and young blood to stop the bleed, but the second Respondent filed the Company Petition seeking to continue as the Joint Managing Director. The Learned Counsel drew our attention to the Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent 1 Company since 1975 and drew our attention to Annexure B-6 dated 21.07.1975 in support of his submissions. The Learned Sr. Counsel contended that the Second Respondent is 98 years old, the main Petition is listed for hearing on 28.10.2021, this fact was also considered by the Hon ble Supreme Court while directing expeditious hearing of an earlier Interlocutory Application and also the Appeal as is evident from the Orders dated 07.12.2020 and 19.08.2021; any modification in the Interim Order will require a hearing of all the substantial disputed issues in the Petitions; the Petition itself is ripe for final hearing and listed for the said purpose; that the crux of the present dispute is the Kamdar Group s resistance to the Appellant s scheme to buy out their stake at an unreasonable valuation or force demerger of the Gujarat Division at a depressed value; the Impugned Order cannot be faulted for preserving the Status Quo so as not to give any party any undue advantage; that the Gujarat Division has been left to rely entirely on high cost external financing; R-1 is presently valued at ₹ 501 Crores; the seventh Respondent has a net positive working capital of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aging Director, Mr. Pradip R. Kamdar as Managing Director of R-1 Company for a period of three years apart from other issues. In paras 11 and 16 of the Order dated 06.04.2018, NCLT has made the following observations:- 11. However, this Bench prima facie having noticed this company has been running for the last several years as three separate units, one at Gujarat, one at Maharashtra and another at Telangana exclusively managed by respective groups, R1 company is not expected to make any structural changes to the existing arrangement at least until this Company Petition is disposed of. 16 , this application is hereby dismissed giving liberty to the Petitioner to come before this Bench, if at all the Petitioners are deprived of running their business in Gujarat or their rights are in anyway infringed by the Respondents . 9. On 31.08.2020, when the matter was listed for arguments, there was a suggestion that some efforts be made to explore a possible settlement between the parties. The matter was adjourned to 10.09.2020 to allow the parties to explore any possible settlement. As the settlement did not fructify, the matter was scheduled to be listed on 25.09.2020. Whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order on 27 August 2021, while the proceedings before the NCLT are listed for final hearing on 28 October 2021. Hence, counsel urged that the apprehension of the appellant stands answered. 6. All that needs to be observed is that the NCLAT should dispose of the appeal against the interlocutory proceedings before the date which has been fixed for the hearing of the main proceedings before the NCLT. 7. The appeals are accordingly disposed of. 8. Pending applications, if any, stand disposed of. 11. It is strenuously contended by both the Maharashtra and Telangana/Andhra Pradesh Group Counsels that NCLT while passing the Status Quo Order directing the Company not to make any structural changes to the existing arrangement till the disposal of the Company Petition has virtually tied their hands in taking any remedial steps for setting things right in the Gujarat Division. In the Impugned Order, NCLAT has observed in para 10 (vii) as follows:- vii. We are making it clear that the Board is empowered to take all decisions for setting things right in the Gujarat Division but without disturbing the present management pattern /directorship /shareholding of R1, as obse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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