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Tribunal has the power to make Interim Orders which it thinks fit for regulation of the conduct of the affairs of the Company: National Company Law Appellate Tribunal, Principal Bench, New Delhi

Whether the National Company Law Tribunal, has the power to regulate the conduct of affairs of a company through interim orders, independent of any observation upon the merits of a case, was a question considered by the NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI, before a bench consisting of Justice Anant Bijay Singh, Member (Judicial); Ms. Shreesha Merla, Member (Technical), in the matter of Srei Infrastructure Finance Limited vs. Trinity Alternative Investment Managers Limited [COMPANY APPEAL (AT) No. 13 of 2022], on 19.01.22.

The facts of the case are that challenge in the present appeal filed under Section 421 of the Companies Act, 2013, is to the Impugned Order dated 06.12.2021, passed by the NCLT (National Company Law Tribunal, Kolkata Bench, Kolkata).

The Learned Counsel for the Appellants, herein submitted that NCLT admitted the Application filed by Reserve Bank of India (RBI) vide Order dated 08.10.2021 and initiated Corporate Insolvency Resolution Process against the appellant/M/s. SREI Infrastructure Finance Limited (SIFL), with the effect that moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, commenced. An Administrator was appointed by the Company. It was asserted that SIFl was a Non-Banking Financial Company, of whom the respondent was a subsidiary. It was stated that a company petition under Sections 241/242 of the Companies Act, 2013, was filed by the appellant on 18.11.2021, before the NCLT seeking inter alia injunction against the respondent from proceeding with the Rights Issue as it was being issued with a motive to dilute the shareholding of the appellant in the respondent Company. It was thus argued that the Status Quo ordered by NCLT with respect to the exercise of their Statutory Rights under Sections 100 and 169 of the Companies Act, 2013, that is, matters entirely unconnected with the proposed Rights Issue in the absence of any pleadings or Affidavits by the parties, is unjustified. It was further asserted that the Impugned Order effectively restrained the appellant, the 51% Shareholder from exercising its Statutory Rights and following a prescribed procedure to remove an appointed Director, despite there being no request or prayer wheresoever. The Impugned Order is passed in respect of issue which is not even remotely connected with the lis pending before NCLT that is., the Right Issue. It was contended that the Impugned Order interferes with the functioning of the statutorily appointed Administrator and has the effect of derailing the timelines. Further, it was submitted that under Section 159 of the Companies Act, 2013, read with Regulation 168 of the Articles of Association, ‘SIFL’ undertook to remove the Directors, for which procedure, 21 days’ time is a prerequisite to issue Notice for a Meeting. On account of the Status Quo Order by the NCLT, ‘SIFL’ will lose time and the Administrator will lose control. Several precedents were invoked in support of the contentions.

The Learned Counsel for the Respondents, contended that ‘SIFL’ challenged the Rights Issue in a Petition filed before the NCLT, but latter initiated the process of removal of Directors. It was further argued that the requisition Notice is only a pressure tactic by SREI. Light was shed on Orders dated 06.12.2021 & 04.01.2022, and it was submitted that the matter is listed again on 18.02.2022 within four weeks from today. It was argued that there was no case of collusion made out in the Notice and that the NCLT has not expressed any opinion on the merits of the matter. It was further submitted that when a Petition is filed under Sections 241 and 242, the powers of Tribunal under Section 242(4) provides that the Tribunal may on an Application of any party to the proceeding, make any Interim Order which it thinks fit for regulating the conduct of the Companies affairs upon such terms and conditions as appear to it to be just and equitable.

The National Company Law Appellate Tribunal, Principal Bench, New Delhi, in light of the facts, submissions, and consideration of precedents and legal provisions, noted that though there is an Order of Status Quo in a Petition filed by the appellant in the absence of any Prayer to that effect/issue, it is pertinent to observe that NCLT has not passed any Order on the merits of the case on hand. From the bare perusal of the Impugned Order, the Tribunal expressed the view that the Tribunal has the power to make Interim Orders which it thinks fit for regulation of the conduct of the affairs of the Company. On a careful consideration of the contentions projected by both sides, and the pleadings put forward, the Tribunal, keeping in mind the ingredients of Section 241 and 242 of the Act, arrived at the resultant conclusion, without expressing any opinion on the merits of the matter, also not delving deep into the case, as allegations of ‘oppression and mismanagement’ consist of mixed questions of fact and law, which cannot be decided at this interim stage, directed the NCLT Kolkata Bench to take up the matter on 18.02.2022, without any further adjournments, dealing with all issues raised, in accordance with law. Thus, the appeal was disposed of.

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Judgement reviewed by Bhargavi

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