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2019 (5) TMI 823 - AT - Companies LawCreation of the encumbrance over the assets of the Respondent Company - Section 8 of the Arbitration and Conciliation Act, 1996 - Company Petition has been filed claiming right to be on the Board and also to restrain the Respondents from entering into transactions without express consent of the Investor’s Nominee Director, violating Articles of Association - HELD THAT:- When the NCLT had itself said that the disputes being raised were arbitral and the matter was before Hon’ble Supreme Court and refrained passing further Orders, in our view, it was inappropriate for the NCLT to have modified the Order dated 16th August, 2017. The Impugned Order did not consider the case, which was put up by the Appellant – Petitioner, and how in the face of Articles of Association as they existed, Respondents could be allowed to unilaterally proceed creating huge liabilities without a shred of protection to the cause of Appellant – Petitioner who had brought in substantial amounts. We are aware that interest of Company is matter of priority, but parties in management cannot be heard taking adamant stand in the name of interest of Company and expect Orders which prima facie do not appear to be in line with its Articles of Association. The case of the Petitioner is not merely based on the Agreements, but it is also based on the Articles of Association which binds both sides. Prima facie, we find that the Petitioner has made out a good case in its favour based on the Articles of Association. Admittedly, now on the Board, there is no nominee of the Investor. We find that, looking to the prima facie case as appearing in favour of the Petitioner, if the Respondents want to block out Petitioner, hiding behind the Arbitration clause, in equity, they cannot claim discretionary relief to create such a huge liability of ₹ 1250 Lakhs, riding on the back of NCLT Order which, prima facie, is against the Articles of Association. The Impugned Order is quashed and set aside. Earlier Order dated 16.08.2017 passed by NCLT is restored - appeal allowed.
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