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TMI Blog2022 (1) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... Harpalani, Mr. Varun Chopra & Ms. Simran Kumari, Advocates. Respondent: Mr. R.J. Goswami, Mr. S.R. Keshkani, Mr. Rahul Sahasrabudde (CS), Mr. Shailesh Bhandari, Mr. Mukesh Bhandari, Mr. Ashok R Bhandari, Advocates. Respondent No. 1 to 3: Mr. Rudreshwar Singh, Mr. LCN Shahdeo, Mr. Saurabh Jain, Advocates for R-1 to R-3 & Shailesh B Bhandari, Advocate for R-1 Respondent No. 18: Mr. Abhishek Baid, for R-18/SEBI. JUDGMENT [Per; Shreesha Merla, Member (T)] 1. Aggrieved by the Impugned Order dated 04.05.2021 passed by the National Company Law Tribunal, Ahmedabad Bench ('NCLT') in Company Application No. 27 of 2021 in Company Petition No. 38 of 2019 and MA No. 08 of 2021 in CP No. 93 of 2018 & CP No. 94 of 2018, 'M/s. Electrotherm (India) Ltd.'/the Appellant preferred Company Appeal (AT) No. 54 of 2021 & Company Appeal (AT) No. 55 of 2021 respectively, under provisions of Section 421 of the Companies Act, 2013, (hereinafter referred to as the 'Act'). 2. The Common Impugned Order dated 04.05.2021, has also been challenged by Mr. Sailash B Bhandari/the Appellant in Company Appeal (AT) No. 56 of 2021 & Company Appeal (AT) No. 57 of 2021 aggrieved by the Common Order passed in CA 27 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent directors and submitted that independent directors were appointed in 2017 and the application challenging the validity of their appointment had been filed in 2018 after one year. Hence, this fact could not be ignored and such independent directors should be allowed to function as such in terms of the provisions of law. Learned Senior Counsel Mr. Navin Pahwa appeared on behalf of Respondent no.1 company and submitted that there were 6000 shareholders of the company and the interests of the company had to be protected. 2. In the back ground of these submissions and considering the fact that main applications need detailed arguments, however, due to impending summer vacations and pandemic situation prevailing in the country, we consider it appropriate to pass interim order so that the functioning of the company is not affected adversely till the final disposal of all matters. In this regard, we express our displeasure as to how both groups are acting because in such matter involvement of police as such is not desirable thing and both groups should act responsibly so that interests of the shareholders at large as well as of the company are not adversely affected. Be that as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NA 6. Anurag Bhandari NA 0.60% NA 7. Suraj Bhandari NA 0.64% Whole Time Director w.e.f. 13.11.2019 Mr. Mukesh Bhandari, Mr. Rakesh Bhandari, Mr. Shailesh B. Bhandari & Mr. Nagesh Bhandari are brothers. Mr. Siddarth Bhandari and Mr. Anurag Bhandari are sons of Mr. Mukesh Bhandari. Mr. Suraj Bhandari is the son of Mr. Shailesh B. Bhandari. * It is submitted that Mr. Siddharth Bhandari/R-2 filed CP No. 93 of 2018 under Sections 149, 150, 152, 159 and 176 of the Act challenging the appointment of the Independent Directors appointed on the Board of the Appellant Company. * Learned Counsel drew our attention to the reliefs sought for in Company Petition No. 93 of 2018 which are detailed as hereunder: * Learned Counsel contended that the NCLT does not have jurisdiction to grant declaratory reliefs sought for in this Petition. * The third Respondent/Mr. Rakesh Bhandari filed identical CP No. 94 of 2018 under the same provisions seeking the same reliefs. * Respondents 1 to 3 Mr. Siddarth Bhandari, Mr. Rakesh Bhandari & Mr. Mukesh Bhandari filed CP No. 38 of 2019 under Sections 241 and 242 of the Act alleging Oppression and Mismanagement. The Appellant herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interim Order was passed in the IA and the same stood adjourned. The Board Meeting was held on 05.04.2021 wherein a Resolution was passed for operations of the Bank Accounts by joint signatories of Mr. Shailesh Bhandari (MD) or Suraj Bhandari (whole time director along with the other authorise signatory). Another Resolution was passed for 05.04.2021 Board Meeting, debarring the entry of Mr. Mukesh Bhandari, Mr. Siddarth Bhandari and Mr. Anurag Bhandari into the premises of Company and information of the same was sent to BSE and NSE on 05.04.2021 itself, Respondents 1 & 2 filed I.A. 21 of 2021 in CP No. 38 of 2019 seeking a direction to stay the Board Resolution dated 05.04.2021 and also to nullify the effect of the letter dated 10.03.2021. No urgent hearing was granted and the IA was adjourned. * It was strenuously contended by the Learned Senior Counsel that NCLT dismissed IA 49 of 2019 filed under Section 244 vide Order dated 08.04.2021 on the ground that the first Respondent himself was a Chairman and the Managing Director of the Appellant Company and being a party to all the decisions in the Company, it is not open to him to allege 'Oppression and Mismanagement' and CP 38 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 242(4) is available only in the proceedings under Section 241 and not for the proceedings under Sections 149, 150, 152, 159 & 176 of the Act. Moreover, even the Company Petition 38/2019 was held to be not maintainable by NCLT vide order dated 08.04.2021 passed in IA No. 499/2019 by which, the NCLT has dismissed the Application under Section 244 of the Act seeking waiver of eligibility criteria to file the Petition under Section 241/242 of the Act and held that the Petitioners in that Petition constitute only 5.61% of the total shareholding of the Company and are not entitled for waiver under Section 244 of the Act. * The Learned Senior Counsel submitted that a plain reading of Section 242(1) amply clarifies that the powers of Tribunal are available only for proceedings under Section 241. Further Section 242(4) states that Tribunal may pass any Interim Order for regulating conduct of Affairs of the Company on the Application of any party to the proceedings. It is contended that 'Proceedings' essentially mean proceedings under Section 241 and not otherwise. * There was no prayer in IA/8/2021 for making Mr. Siddharth Bhandari as a signatory in the bank accounts. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to 3: * It is contended that without giving any opportunity of being heard, with a malafide intention to control the Board of the Appellant Company, Mr. Shailesh Bhandari wrongly utilised the power of simple majority in the Board Meeting dated 04.07.2018 and removed Mr. Mukesh Bhandari from the post of Managing Director of the Appellant Company. Further, the Board has wrongly accounted the name of Mr. Siddharth Bhandari for retirement instead of Mr. Shailesh Bhandari as both had the same tenure in the office. Mr. Siddharth Bhandari has been removed from the post of Director in the AGM dated 30.09.2019 and simultaneously Mr. Shailesh Bhandari has started appointing Independent Directors without the approval of the Board. None of the Independent Directors are acting independently and working towards the interest of the Company. * It is submitted that numerous FIRs have been filed against Mr. Shailesh Bhandari, the Managing Director of the Appellant Company under various criminal non-bailable and bailable offences namely forged signatures, wrongful confinement etc. The Managing Director of the Appellant Company is responsible for running the day-to-day affairs and Mr. Shailesh B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal No. 54 & 55 are not supported by any authority letter or Board Resolutions as directed in Rule 30 of NCLAT Rules 2016. Despite direction by this Tribunal vide Order dated 26.05.2021, the Applicant Company did not comply with the same and therefore all the I.As and Appeals are not maintainable. * The Learned Senior Counsel highlighted the portion of the Order dated 04.05.2021, whereby NCLT has directed 'both Respondent-1 Company as well as Respondent-5 Mr. Shailesh Bhandari to appoint Mr. Siddharth Bhandari as joint signatory of all Bank Accounts of the Company with immediate effect'. And with consent, Mr. Shailesh obeyed the said Order by writing the letter dated 06.05.2021 to the Banks. Therefore, no question can be raised regarding Board Resolution or requirement of internal process followed by the Board on Company, as Board Meeting is not required to implement the Court Order and hence there is no scope for interference in this Appeal. Assessment: 8. One of the main issues apart from other issues raised in this Appeal is that I.A. 499 of 2019 filed by Respondents 1 to 3 seeking waiver of the eligibility criteria laid down under Section 244 of the Act was dismissed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shailesh Bhandari on the following grounds: 12. It is the case of Mr. Shailesh Bhandari, the Appellant in Company Appeal (AT) No. 56 and 57 of 2021, that he holds 8,48,275 equity shares of M/s. Electrotherm (India) Ltd. and preferred Company Application No. 27 of 2021, filed on 16.04.2021 in CP 38 of 2019 stating that this Company Petition was pending adjudication before the NCLT. It is submitted by the Learned Counsel appearing for the Appellant/Mr. Shailesh Bhandari that pending the adjudication of CP 93 & 94 of 2018 unwarranted circumstances arose and the Appellant was not in a position to attend to the office of the first Respondent Company. Under such circumstances on 23.02.2021, the non-executive Independent Chairman addressed an email to all the Board Members to appoint one Mr. Sanjay Bhandari as whole time Director as the Appellant was implicated in some criminal cases and awaiting outcome of the anticipatory bails from the Hon'ble High Court. The non-executive Chairman vide email dated 27.02.2021 instructed the Company Secretary to circulate a detailed agenda for a Board Meeting scheduled to be held on 02.03.2021, wherein the names of both Mr. Sanjay Bhandari and Mr. Muk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 14. The Counsel for the Respondents 2 to 4 relied on the letter dated 06.08.2021 addressed by Mr. Shailesh B. Bhandari to the Bank to include the name of Mr. Siddharth Bhandari as joint signatory of all Bank Accounts of the Company. A similar letter dated 10.05.2021 addressed to the Branch Manager Axis Bank and signed by Mr. Shailesh Bhandari is reproduced as hereunder: The aforenoted letter shows that Mr. Shailesh Bhandari has informed the concerned Banks regarding the direction by the Tribunal to appoint Mr. Siddharth Bhandari as a joint signatory of all Bank Accounts. 15. Both parties have raised allegations against one another with respect to illegal transactions and siphoning of funds. The second and third Respondents filed Company Application No. 21 of 2021 in CP No. 38 of 2021 and sought for Prayer for nullifying the effect of letter dated 10.03.2021 issued by the Appellant. The second and third Respondents also filed MA 07 of 2021 in CP 38 of 2019 on 06.04.2021 challenging the Resolution passed in Board Meeting dated 05.04.2021. NCLT did not pass any Interim Order in these Applications as the maintainability of the main Petition 38 of 2019 itself was under consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the ends of justice or to prevent abuse of the process of the Tribunal." 19. Even in the absence of Rule 11 this Appellate Tribunal, being essentially a judicial forum determining and deciding rights of parties concerned and granting appropriate relief, can, in exercise of its powers to meet ends of justice, or prevent abuse of its process, pass any such Interim Directions. Such Powers being inherent in the constitution of the Appellate Tribunal, Rule 11 can merely be said to be declaring the same to avoid ambiguity. 20. NCLT is empowered under Section 420(1) read with Rule 11of the NCLT Rules, 2016 to grant in the interest of justice, an Interim Direction and therefore we are of the view that the ratio of the Hon'ble Supreme Court in 'Kiran Devi' Vs. 'The Bihar State Sunni Wakf Board & Ors.' Civil Appeal No. 6149 of 2015 wherein the Hon'ble Apex Court has discussed the aforementioned Judgements in para 16, is applicable to this case. 21. The Judgements relied upon by the Learned Sr. Counsel for the Appellant i.e., 'St. Aleysius Angle India Higher Secondary School' (Supra) and 'Tata Consultancy Services Limited' (Supra) are not applicable to the facts of the attendant case as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, if the wrong Section is quoted. The statute empowers the Tribunal from passing any Interim Order, it deems fit and in such a situation, keeping the affairs of the Company in mind, the Tribunal has rightly moulded the reliefs. Cases are known in which Courts have moulded the reliefs to meet a situation such as this. Quoting a wrong Section/sub-Section does not estop a Court from taking note of events, circumstances which happen during that time frame. Hence, the intent of the law maker and the nature and scope of the Legislation is to be kept in mind, as any departure from the same could result in fatal consequences. 25. Having regard to the fact that the Order impugned is an Interim Order passed by NCLT; the balance of equities and the factual matrix on hand; this Tribunal arrives at a resultant conclusion, without delving deep into the merits of the case, as the reliefs prayed for in the main Company Petition are yet to be decided by NCLT, without expressing any opinion on the merits of the matter, we are of the considered view that both the Company Petitions 93 & 94 of 2018 be decided by NCLT as expeditiously as practicable, but not later than three months from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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