The appeal was filed against the Order dated January 05, 2021, passed by the National Company Law Tribunal, Hyderabad Bench, Hyderabad in IA No.989 of 2020.
The National Company Law Tribunal, Hyderabad Bench in IA No.989 of 2020 in Company Petition No.203/241/HDB/2021, passed an order whereby NCLT directed that the Bank Account of the Respondent No. 1 Company could be operated jointly by one representative of Appellants and one representative of Respondent No. 2 to 4. The Registrar of Companies was directed to investigate the affairs of the Respondent No. 1 Company.
The Appellant contended that Respondent No.2 was one of the Directors of Respondent No. 1 Company, who was also the only Authorised Signatory of the bank accounts maintained with Punjab National Bank, Wardha, where more than 95% of the receivable of the Respondent No.1 Company were received. It was further contended that Respondent No. 2 failed in making the payments to statutory dues, including GST. Instead of making the payments, Respondent No. 2 had diverted funds of the Respondent No. 1 Company to himself and its associates. The Appellant also contended that the Learned NCLT had intervened with the Company’s internal management through the impugned Order, which Respondent No.1 Company was exercising by the Board Resolution dated November 19, 2019, impermissible in law.
The respondents contended that the Respondent No. 1 Company was a closely held family Company between the Appellant Group and the Respondent Group. Respondent No. 2 was a whole-time Director, appointed as a Director and the single largest shareholder, holding 39.70% of the Company’s paid-up share capital. It was stated that the Appellants started committing certain acts of oppression to oust Respondent No. 2 from the BOD of the Respondent No. 1 Company and had committed acts of mismanagement, siphoning and diverting the Company’s funds to their accounts and related entities. This compelled Respondent No. 2 and his Group to file the Company Petition for mismanagement and oppression. The Appellants called the Board meeting of the Company whereby the Resolution was passed for changing the designation of Respondent No. 2 to a non-executive Director from a whole-time Director. The Respondents contended that the Board Resolution dated November 19, 2020, could not give the Appellants any right to derogate their fiduciary duty to the Respondent No. 1 Company and its Members, including the Respondents.
It was observed that the primary challenge of Respondent No. 2 to 4 was against the Board Resolution of Respondent No. 1 Company that was passed on November 19, 2019. The NCLT provided for the Bank Accounts of Respondent No. 1 Company to be jointly operated with Respondent No. 2 as a necessary signatory and other three Directors of the said Company as a Co-signatory. The Appellant contended that by the impugned Order, the NCLT superseded the Board Resolution of the Company. It was found that despite Orders of the NCLT, the Appellants had passed Board Resolution to create new bank accounts of Respondent No. 1 without the signature of Respondent No. 2. Fearing an adverse Order, the appellants diverted ₹ 80,25,000/- from the Bank Account of the Respondent No. 1 Company to their personal accounts. The Appellant later passed the Resolution in its Board meeting later to wind up and shift the factory from Wardha.
It was clear that the NCLT may direct the Central Government to investigate under Section 210 (2) of the Companies Act 2013. After a reference from the National Company Law Tribunal, the Central Government under Section 210(2) of the Companies Act, 2013 has to compulsorily designate an Inspector. Therefore, the direction issued by the NCLT in appointing the Registrar of Companies to investigate the matters of Respondent No. 1 Company violated the provisions of the statute, in as much as in terms of Section 210 (2) of the Companies Act 2013, such a direction can be only given to the Central Government and not to the Registrar. The tribunal was in the view that the NCLT erred in directing the Registrar of Companies to investigate into affairs of Respondent No. 1 Company, as the said Directions violated the statutory provision of Section 213 and Section 210 (2) of the Companies Act 2013. The Court decided that the appeal deserves to be allowed. However, an impugned Order regarding the investigation into the affairs of the Respondent No. 1 Company by the Registrar of Companies deserved to be set aside.
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