2024 (3) TMI 1243 - AT - Companies Law

Oppression and Mismanagement - denial of inspection of the books of accounts - EOGM not called for - purchase of loan without consent - failure to comply with statutory compliances - Validity of direction for independent forensic audit - HELD THAT - The appellant was directed to file reply affidavit. Admittedly the appellant neither filed its reply affidavit nor documents as are now filed before us. It is in these circumstances it is needed to examine if the impugned order was wrong. Admittedly if the reply affidavit and documents were not filed before the Ld. NCLT then there was nothing before the Ld. Tribunal except to proceed on submissions made in the petition or in an application for interim relief. Such submissions have been duly noted in the impugned order. Para 9 of the impugned order rather says it is only in view of the averments made by the petitioner in its petition the interim order is passed. There are no infirmity in the impugned order before us specially in view of the fact only oral submissions were made before the Ld. NCLT as alleged without support of any documents or reply. Even otherwise conduct of forensic audit does not determine the rights and liabilities of the parties but merely would enable the Ld. Tribunal to appreciate the issues involved. The issues raised in the petition before Ld. NCLT are allegations of siphoning of funds grave lapses in the appointment of statutory auditors lack of approval of petition on reserved matter non-maintenance of proper books of accounts and hence this conduct of forensic audit will only come to the aid of the Tribunal to adjudicate the petition. Thus in view of the allegations of serious lapses and non-compliance in the financial statements no proper disclosure of related party transactions non-reporting non-disclosure and non-compliance of statutory compliances as alleged in the petition before Ld. NCLT the interim order passed by the Ld. NCLT is justified and there are no reason to interfere in the impugned order. Appeal dismissed.

Summary

Issues Involved:
1. Alleged breach of shareholders' agreement and exclusivity agreement.
2. Denial of inspection of books of accounts and statutory compliance failures.
3. Necessity and reasoning behind the direction for forensic audit.

Summary:

1. Alleged Breach of Shareholders' Agreement and Exclusivity Agreement:
The appellant argued that Respondent No.1 breached the shareholders' agreement and exclusivity agreement by engaging in rival competitive business, which harmed the Joint Venture's interests. The appellant claimed that despite giving Respondent No.1 access to their books of accounts, an interim order was passed without proper reasoning, directing an independent forensic audit into the appellant company's affairs.

2. Denial of Inspection of Books of Accounts and Statutory Compliance Failures:
Respondent No.1 filed a company petition for Oppression and Mismanagement, alleging that the appellant denied inspection of books of accounts, failed to call for an EOGM, purchased a loan without consent, and did not comply with statutory requirements. The appellant contended that disputes arose regarding the exclusivity agreement and insufficient investment by Respondent No.1, leading to communications highlighting the violations.

3. Necessity and Reasoning Behind the Direction for Forensic Audit:
The appellant argued that the impugned order lacked proper reasoning and cited precedents emphasizing the need for judicial orders to be supported by reasons. The Tribunal noted that the appellant did not file a reply affidavit or supporting documents before the NCLT, which led to the interim order based on the petitioner's averments. The Tribunal held that forensic audit was necessary given the allegations of siphoning funds, statutory violations, and non-compliance in financial statements. The Tribunal found no infirmity in the NCLT's order and dismissed the appeal, stating that the forensic audit would aid in adjudicating the petition without determining the parties' rights and liabilities.

Conclusion:
The appeal was dismissed, and the interim order for a forensic audit was upheld to ensure proper adjudication of the issues raised in the petition. The Tribunal emphasized the importance of forensic audit in cases involving serious financial and statutory compliance allegations.