Anita Roy vs Aquafil Polymers Company Private ...

(Arising against the impugned order dated 15.03.2023 passed by the Ld. National Company Law Tribunal, Ahmedabad Bench (Division Bench), Court-I, in Company Petition No. CP/5(AHM)/2023)

IN THE MATTER OF:

Dr. Anita Roy ...Appellant

Versus

Aquafil Polymers Company Private Limited ...Respondent No.1

Mr. Hitesh Shah ...Respondent No.2

Mr. Poojan Hiten Shah ...Respondent No.3

Registrar of Companies, Gujarat, Dadra & Nagar ...Respondent No.4 Haveli Mr. Akshay Gupta ...Respondent No.5

Mr. Yogesh Gupta ...Respondent No.6

Mr. Adarshpal Singh ...Respondent No.7

Luri Watersystems India Private Limited ...Respondent No.8

Present: For Appellant: Mr. Sajeve Deora, Advocate. For Respondents: Mr. Aashish Mohan, Sr. Adv. with Mr. Vibhor Verdhan, Mr. Pulkit Chawla & Mr. Auritra Mukherjee, Advocates.

Cont'd..../ -2-

J U D G M EN T (19th February, 2026)

INDEVAR PANDEY, MEMBER (T)

The present appeal has been filed by Dr. Anita Roy, the Appellant

herein, under Section 421 of the Companies Act, 2013, challenging the

interim order dated 15.03.2023 passed by the Ld. National Company Law

Tribunal, Ahmedabad Bench (Division Bench), Court-I, in Company Petition

No. CP/5(AHM)/2023 under Section 241 of the Companies Act, 2013, titled

Hitesh Shah & Anr. vs. Aquafil Polymers Company Private Limited & Ors. By

the said impugned order, the Ld. NCLT has permitted Mr. Hiten Shah,

(Respondent Nos. 2) and Mr. Poojan Hiten Shah (Respondent No. 3) who are

former promoters; Directors; and Minority shareholders of Aquafil Polymers

Company Private Limited (Respondent No. 1) to appear and represent

Respondent No. 1 Company before all judicial, quasi-judicial and arbitral

proceedings pending against the Company.

2. The Appellant is seriously aggrieved as the said interim relief virtually

grants final relief at a preliminary stage, nullifies duly passed Board

resolutions, undermines statutory corporate governance, and enables

persons accused of serious misrepresentation, suppression of liabilities and

misuse of authorisation to continue exercising control over the Company.

The appeal, therefore, arises from grave prejudice caused to the Appellant,

the Company and its stakeholders by the impugned interim directions.

Company Appeal (AT) No. 81 of 2023 -3-

Brief facts of the case

3. The brief facts of the case are as given below:

i. M/s Aquafil Polymers Company Private Limited (Respondent No. 1

Company) was engaged in the business of engineering, procurement,

design, supply, installation, construction, EPC and Operations &

Maintenance (O&M) in the water and wastewater treatment segment.

ii. The Respondent No. 2 has been the Managing Director of the company

since 22.01.1997 and Respondent No. 3 became the Director of the

company on 01.10.2012 and ever since they form a part of the Board

of Directors and all the operational, managerial, and financial

decisions have been taken by them. The Respondent No.2 is the father

of the Respondent No.3.

iii. The Appellant Company was unable to service its borrowings, owing to

severe funding constraints, as a result of which its loan account was

classified as a "Non-Performing Asset (NPA)" by State Bank of India,

Ahmedabad. At the time of classification as NPA, the accumulated

outstanding debt of the Company stood at Rs. 52 Crores (Rupees Fifty-

Two Crores Only).

iv. The Company thereafter entered into negotiations with State Bank of

India for settlement of its dues, and pursuant to various

correspondences, the Bank, vide its letter dated 28.02.2019, accepted

the Company's offer for settlement of dues upon payment of Rs. 18

Crores (Rupees Eighteen Crores Only) as against the total outstanding

of Rs. 52 Crores. The said settlement was to be completed within a

Company Appeal (AT) No. 81 of 2023 -4-

period of one year in terms of the conditions detailed in the Bank's

communication dated 17.06.2019, bearing reference no.

SAMB/AHM/20120/US/338.

v. In consideration of the aforesaid settlement between the Bank, the

Company and the Promoters, the Bank agreed that upon realization of

the entire settlement amount within the agreed timeframe, it would

release the assets of the existing promoters which had been mortgaged

as collateral security against the debt.

vi. In order to arrange funds for compliance with the One Time Settlement

(OTS), the Promoters resolved to reduce their shareholding in the

Company and accordingly approached the Appellant for infusion of

funds and entered into commercial negotiations.

vii. The Appellant, acting upon disclosures, representations and

warranties extended by the Promoters, agreed to invest in the

Company, assist in negotiations with the Bank, secure the One Time

Settlement and infuse funds both by way of Share Subscription and

by arranging further funds required for repayment of bank dues and

for business operations. A Share Purchase and Subscription

Agreement (SPA) dated 25th September 2019 was signed between the

Subscriber/Appellant; Promoters/ Respondent no.2 and 3 and the

Company/ Respondent No. 1 herein.

viii. On the basis of an independent valuation of the Company and

negotiations between the parties, it was agreed that the Appellant

would subscribe to 75% of the share capital of the Company for a total

Company Appeal (AT) No. 81 of 2023 -5-

consideration of Rs.1,94,31,510.00 (Rupees One Crore, Ninety-Four

Lakhs, Thirty-One Thousand, Five Hundred Ten Only).

ix. The Share Subscription was to be initiated upon completion of the

procedural steps listed under the clause titled "Share Subscription"

and/or share purchase provisions under the Agreement.

x. In the interim period, the Appellant undertook to make necessary

arrangements and repayments to ensure strict compliance with the

timelines stipulated under the approved One Time Settlement by State

Bank of India, and it was specifically agreed that adherence to the OTS

repayment schedule would constitute the essence of the Agreement.

xi. As on the date of execution of the Agreement, the shares of the

Company were not listed on any stock exchange. The Agreement

recorded that the Company was a going concern and had filed all

statutory compliances and paid taxes as due.

xii. It was agreed in the agreement that the Promoters would be entitled to

receive disputed receivable amounts arising from pending arbitrations,

arbitral awards or litigations in favour of the Company, subject to first

paying outstanding unsecured creditors as per the books of account

as on 31.03.2019, and such amounts received by the Promoters would

be set off against short-term borrowings from them, including loans

aggregating to Rs. 4.22 Crores.

xiii. Acting in furtherance of the agreement, the Appellant paid the One

Time Settlement amount with State Bank of India, and on December

2020, the bank account of Respondent No. 1 Company stood settled,

Company Appeal (AT) No. 81 of 2023 -6-

leading to release of assets and withdrawal of recovery proceedings

against the Company and its promoters.

xiv. Thereafter, in January 2021, when the Appellant approached the bank

for issuance of No Dues Certificate and updation of the Company's

financial status to enable participation in fresh projects, she

discovered that several statutory, financial and commercial liabilities

had been concealed from her at the time of investment.

xv. In March 2021, while attempting to operationalise the Share Purchase

Agreement, the Appellant discovered that the collateral documents,

which were claimed to be worth more than Rs. 40 crores, had already

been released to Respondent Nos. 2 and 3, and upon verification of

title and valuation documents, the actual value of the properties was

found to be drastically lower, with serious doubts regarding ownership

and even existence of certain properties.

xvi. During the period from December 2021 to August 2022, the Appellant

uncovered a series of undisclosed liabilities and adverse claims against

Respondent No. 1 Company, including unpaid Karnataka VAT dues,

claims and bounced cheques issued to Jain Infraprojects Private

Limited, questionable forfeiture of performance bank guarantees

relating to Bundi and Umaria projects, and an arbitration claim of

approximately Rs. 3.2 crores filed by Hitachi India Limited.

xvii. On 14.07.2022, the Appellant received an official letter from the Office

of the Guwahati Metropolitan Development Authority highlighting

serious discrepancies in construction work and fraudulent billing in a

project executed by Respondent No. 1 Company, a fact which had

Company Appeal (AT) No. 81 of 2023 -7-

never been disclosed to the Board or reflected in the Company's

records.

xviii. Faced with these issues the Appellant convened a Board Meeting on

03.12.2022, which Respondent Nos. 2 and 3 did not attend. In the

aforesaid meeting, the Board passed a resolution revoking all previous

authorisations granted for representing the Company and established

a fresh authorisation framework to protect the Company's interests.

xix. On 15.12.2022 the Respondent No. 2 issued an email on seeking to

convene a Board Meeting on 22.12.2022, in which the date of Annual

General Meeting was fixed. The Chairman of the meeting Mr. Hitesh

Shah refused to confirm the minutes of the board meeting held on

22.12.2022 as it suffered from technical lapse.

xx. On 10.01.2023, a Circular Resolution was passed by the Board

authorising Appellant, as majority shareholder and Director, to

represent Respondent No. 1 Company before all judicial, quasi-judicial

and arbitral forums.

xxi. On 15.01.2023, after discovering continued unauthorised actions by

Respondent No. 2 in his capacity as Managing Director, a notice under

Section 115 of the Companies Act, 2013 was issued calling for an

Extraordinary General Meeting to initiate steps for removal of

Respondent Nos. 2 and 3 from executive positions and to realign

governance in accordance with law.

xxii. The Respondent Nos. 2 and 3 filed a petition under Sections 241-242

of the Companies Act, 2013 before the Ld. NCLT, Ahmedabad, alleging

oppression and mismanagement on 16-01-2023.

Company Appeal (AT) No. 81 of 2023 -8-

xxiii. On 15.03.2023, the Ld. NCLT pronounced the impugned interim order

permitting Respondent Nos. 2 and 3 to represent Respondent No. 1

Company in all pending judicial, quasi-judicial and arbitral

proceedings.

xxiv. Subsequently on 13.04.2023, the Registrar of Companies, Gujarat,

Dadra & Nagar Haveli issued a communication directing maintenance

of status quo and restraining the Company from taking decisions

allegedly against the interest of Respondent Nos. 2 and 3.

xxv. Being aggrieved by the impugned order dated 15.03.2023, Dr. Anita

Roy/Appellant has preferred the present appeal.

Submissions of the appellant

4. Ld. Counsel for the Appellant submits that the present appeal

specifically challenges the interim order dated 15.03.2023 passed in CP No.

5 of 2023. During the pendency of the appeal, the Ld. NCLT passed a

"common order" dated 18.07.2025 in CP/5(AHM)/2023. The Respondents

have contended that the interim order has merged into the subsequent order.

Ld. Counsel submits that such contention is legally untenable.

5. Ld. Counsel submits that the doctrine of merger applies only when a

superior court finally adjudicates upon the same issue. In the present case,

the order dated 18.07.2025 does not adjudicate or affirm the interim order

under challenge. It merely continues supervision and keeps the petition

pending. Therefore, no merger arises.

Company Appeal (AT) No. 81 of 2023 -9-

6. He relies upon the judgment of the Hon'ble Supreme Court in

'Kunhayammed & Ors. v. State of Kerala & Anr.' [(2000) 6 SCC 359],

particularly Paragraph 44, which clarifies that merger applies only when a

superior court finally adjudicates; interlocutory orders do not merge.

7. Ld. Counsel further submits that the subsequent order itself makes it

clear that further directions would be issued once the Tribunal reaches a

fuller understanding of the facts. The order directs a forensic audit and

continues status quo "until further orders," thereby clearly indicating that

there has been no final adjudication. Since the Petition remains pending, the

interim order survives and is amenable to appellate scrutiny.

8. On the merits of the case, Ld. Counsel submits that Section 241 of the

Companies Act provides remedies to members qua shareholders and not to

directors in their capacity as directors. In the present case, the Petitioners

approached the Ld. NCLT seeking relief in their capacity as directors. The

impugned order itself proceeds on the reasoning "because they are still

directors," thereby clearly misapplying Section 241.

9. Ld. Counsel relies upon 'Needle Industries (India) Ltd. v. Needle

Industries Newey (India) Holding Ltd.' [(1981) 3 SCC 333], Paragraphs 48-53,

which clearly holds that Section 241 jurisdiction is confined to shareholder

rights and does not extend to director powers. Ld. Counsel submits that the

right to represent the Company in litigation is not an inherent right of a

shareholder but flows only from Board authorisation. Therefore, the

impugned order is based on an erroneous jurisdictional premise.

Company Appeal (AT) No. 81 of 2023 -10-

10. Ld. Counsel submits that representation in litigation constitutes the

legal voice of the Company. Once such representation is imposed by judicial

order, its consequences are binding and irreversible. There is no scope for

later disowning such representation.

11. Ld. Counsel relies upon 'Shah Babulal Khimji v. Jayaben D. Kania'

[(1981) 4 SCC 8], Paragraphs 113-115, to submit that orders having final

civil consequences require higher judicial scrutiny.

12. Ld. Counsel further submits that the impugned order does not record

any satisfaction regarding prima facie case, balance of convenience, or

irreparable injury. Reliance is placed on 'Shiv Kumar Chadha v. MCD' [(1993)

3 SCC 161], Paragraphs 31-32, which mandates such findings for grant of

interim relief.

13. Ld. Counsel submits that the interim relief sought was narrowly

confined to continuation of arbitration against JITF with existing powers of

the Petitioners. However, the impugned order conferred sweeping litigation

authority without any qualifying cut-off date. He invites our attention to the

prayers made in the application for interim relief in particular para 9A and

9F which are extracted below:

"9. INTERIM ORDER, IF ANY, PRAYED FOR.

Pending final decision on the petition, the petitioner seeks issue of the following interim order:

A. Pending hearing and final disposal of the petition, the Hon'ble Tribunal would be pleased to suspend the resolution, decision taken by erring respondents through illegal circular resolution meeting or through any such purported illegal meeting taking

Company Appeal (AT) No. 81 of 2023 -11-

away the rights of the petitioners from pursuing the arbitration proceedings on behalf of the R-1 Company and further would be pleased to restrain the erring respondents from taking any decision prejudicial to the rights and interest of the Petitioner.

. F. Pending hearing and final disposal of the petition the Hon'ble Tribunal would be pleased to direct for continuation of the arbitration proceedings before the Arbitral Tribunal against JITF with the existing powers of the Petitioners as officers / directors of the R-1 Company in the interest of the R-1 Company. .

L. Such other and further orders as this Hon'ble Tribunal deems fit and proper in the interest of justice."

14. Ld. Counsel submits that the order refers generally to "pending

litigations" without reference to the contractual framework under Clause 6

of the SPA. This has the inevitable effect of altering the contractual reference

point and retrospectively legitimising non-disclosure at the time of execution

of the SPA. In this regard, he invites our attention to Para 11 and 12 of the

impugned order dated 15.03.2023 which contain the findings and the

interim orders of the Tribunal. The same are extracted below:

"11. We have gone through the record and proceedings. We took into consideration the submissions of both learned counsels as above. It is an admitted position that the Share Purchase Agreement which was executed in between the petitioners, R-2 and R-1 is not in dispute, till today as neither party to that agreement challenged any term or any clause in the agreement till this date. It is admitted that as per terms of the Share Purchase Agreement, the petitioners are at obligation to pay the past liabilities of creditors of R-1 company

Company Appeal (AT) No. 81 of 2023 -12-

as per the audited books of 31.03.2019. The petitioners are entitled to receive the disputed receivables. Clause 6.3 of the Share Purchase Agreement gives the rights to the petitioners to receive and recover disputed receivables. Cause 6.5 of the Share Purchase Agreement states that any liability arising out of the disputes shall be borne by the petitioners. Clause 6.6 of the Share Purchase Agreement clearly mentions that new management i.e., R-2 cannot take any benefit of past receivables and so also the R-2 is not responsible for any litigation arising out of past transactions. It is settled law that criminal liability is the strict liability and the R-2 cannot be held responsible for any act allegedly if at all done by the petitioners in the past. Clauses 6.2 to 6.6 very clearly state that the petitioners are solely responsible for past liabilities till 31.03.2019 and, at the same time, the petitioners are entitled to receive the disputed receivables. The R-2 is the new management, is not entitled to receive disputed receivables. It is also not in dispute that prior to the execution of the Share Purchase Agreement, the petitioners were representing R-1 company in all proceedings before Arbitrator/ Conciliator/Tribunal/Courts. It is submitted on behalf of the R-2 that the petitioners' powers to represent cannot be considered because R-2 has been apprehending that due to the petitioners presence before Arbitrator, she may land in trouble. However, we hold that the Share Purchase Agreement protects her rights. Since the petitioners are entitled to have disputed receivables, but at this stage, without going into that aspect as to what they are entitled to receive and what they are required to pay towards past liabilities, we allow the petitioners to appear and represent R-1 company in all pending proceedings because they are still directors.

12. Keeping contention open in respect of other allegations and counter-allegations, we direct the parties to complete the pleadings in the main proceeding within two weeks by

Company Appeal (AT) No. 81 of 2023 -13-

exchanging inter-se. Accordingly, we pass the following orders: ORDER

I. Pending the main petition for hearing, the petitioners are allowed to appear and represent the R-1 company before all judicial/quasi-judicial/arbitral proceedings pending against the R-1 company."

15. Ld. Counsel submits that the Tribunal could not have recast the

contractual framework between the parties as interim relief. Reliance is

placed upon 'Bachhaj Nahar v. Nilima Mandal & Ors.' [AIR 2009 SC 1103],

Paragraphs 10-12, which holds that relief cannot travel beyond pleadings.

He submits that in this case the prayers of Respondent No. 2 & 3 were limited

to their participation in arbitration proceedings in JITF matter as Officers of

the Respondent No.1 Company in the interest of the company.

16. Ld. Counsel submits that the Petitioners suppressed material facts

and filed a false Articles of Association in CP No. 5 of 2023. The Ld. NCLT

itself recorded in its order dated 18.07.2025 (Paragraph 30, Pages 64-67)

that the Petitioners did not come with clean hands and sought personal gains

through the judicial system.

17. Ld. Counsel submits that suppression of material facts and fraud

disentitle a party to equitable relief. He relies upon the following cases

decided by Hon'ble Supreme Court:

 Dalip Singh v. State of U.P. (2010) 2 SCC 114, Paragraphs 1-5;

 S.P. Chengalvaraya Naidu v. Jagannath (1994) 1 SCC 1, Paragraph

5;

Company Appeal (AT) No. 81 of 2023 -14-

 K.D. Sharma v. Steel Authority of India Ltd. (2008) 12 SCC,

Paragraphs 34-36;

 A.V. Papayya Sastry v. Govt. of A.P. (2007) 4 SCC 221, Paragraphs

19-26;

18. Ld. Counsel submits that the impugned order effectively enables the

Respondents to benefit from their own wrongdoing, which is impermissible

in law.

19. Ld. Counsel submits that the Petitioners are in continuing breach of

Clause 6 of the SPA, having suppressed litigations and liabilities and

withheld information from the Board. Clause 6.5 mandates promoters to

keep the Company informed to safeguard its interests.

20. Ld. Counsel submits that even in the JITF matter, the Respondents

did not disclose the Company as a party in arbitration nor disclose

receivables in the SPA. Since Clause 6 applies only to disclosed litigations

and receivables, the Respondents cannot rely upon it after having concealed

material disputes.

21. Ld. Counsel submits that the Petitioners never sought fresh Board

authorisation after it was rescinded in the Board Meeting dated 03.12.2022.

The Tribunal displaced a functioning corporate organ without recording

incapacity or affording opportunity for internal authorisation. In this regard

he relies upon 'Nibro Ltd. v. National Insurance Co.' [(1991) 1 Comp LJ 336

(Del)], which holds that a company acts only through Board authorisation.

Company Appeal (AT) No. 81 of 2023 -15-

22. Ld. Counsel submits that while the Appellant acknowledges the

Tribunal's endeavour to protect the Company pending adjudication, the

continuation of interim arrangements on an erroneous legal premise makes

appellate correction necessary to preserve neutrality and prevent interim

directions from acquiring the character of substantive rights.

23. In light of the above, Ld. Counsel for the Appellant respectfully prays

that this Hon'ble Tribunal may be pleased to:

i. Set aside the impugned interim order dated 15.03.2023;

OR IN THE ALTERNATIVE

ii. Clarify that interim orders dated 15.03.2023 and 18.07.2025 neither

amend nor override the Share Purchase Agreement dated 25.09.2019,

nor authorise Respondents to represent or bind the Company in

litigations undisclosed in the SPA;

iii. Direct that any representation or action by Respondents in litigations

not disclosed in the Share Purchase Agreement shall require prior

shareholder approval and shall not bind the Company without such

approval.

Submission of the Respondent No. 2 and 3:

24. Ld. Counsel for Respondent No. 2 and Respondent No. 3 most

respectfully submit that save and except what is expressly admitted or is a

matter of record, all averments, allegations and submissions made by the

Appellant in the present Appeal are false, misconceived, baseless and are

Company Appeal (AT) No. 81 of 2023 -16-

therefore denied. Ld. Counsel submits that the present Appeal is directed

against a limited interim order passed by the Ld. NCLT, Ahmedabad, which

has merely permitted Respondent Nos. 2 and 3 to appear and represent

Respondent No. 1 Company in pending judicial, quasi-judicial and arbitral

proceedings. It is submitted that the said order neither adjudicates the final

issues raised in the petition under Sections 241-242 of the Companies Act,

2013 nor causes any prejudice to the Appellant. On the contrary, the

impugned order expressly records that the Share Purchase Agreement dated

25.09.2019 remains unchallenged and that the Appellant is not liable for

past liabilities of the Company, thereby protecting her interests.

25. Ld. Counsel submits that the Appeal has been filed with oblique

motives and is an attempt to derail ongoing arbitral proceedings between

Respondent No. 1 Company and JITF Water Infrastructure Ltd. It is

submitted that the Appellant had earlier sought to intervene before the Ld.

Sole Arbitrator and prayed for stoppage of proceedings and conciliation,

which application was decided vide order dated 11.01.2023. Having failed

before the arbitral forum, the Appellant has now chosen to challenge the

interim protection granted by the Ld. NCLT. Such conduct clearly

demonstrates mala fide intent. It is further submitted that during pendency

of proceedings, the Appellant has taken unilateral actions including transfer

of shares in favour of JITF Water Infrastructure Ltd., thereby attempting to

arm-twist the Respondents and influence parallel proceedings.

26. Ld. Counsel further submits that the impugned interim order was

passed after due consideration of pleadings, documents and detailed

Company Appeal (AT) No. 81 of 2023 -17-

submissions of all parties. The Ld. NCLT specifically recorded that under

Clauses 6.2 to 6.6 of the Share Purchase Agreement, Respondent Nos. 2 and

3 are responsible for past liabilities up to 31.03.2019 and are entitled to

disputed receivables, while the new management is not responsible for such

liabilities. The Ld. NCLT further held that criminal liability, being strict in

nature, cannot be fastened upon Respondent No. 2 in respect of past acts.

Despite such clear findings safeguarding the Appellant's position, the

present Appeal has been filed on wholly misconceived grounds.

27. Ld. Counsel categorically denies allegations that Respondent Nos. 2

and 3 concealed liabilities allegedly amounting to Rs. 30 crores or

suppressed information relating to Karnataka VAT, Jain Infra Projects, R&B

Department of Gujarat, Standard Chartered Bank, ICICI Bank, Nagarjuna

Construction Company, Hitachi India Limited, Wintech Engineering or

collateral valuations. It is submitted that these are disputed factual matters

requiring evidence and final adjudication and cannot form the basis for

setting aside an interim order that merely preserves continuity of

representation. The Appellant is attempting to convert contested factual

disputes into grounds for appellate interference at an interlocutory stage.

28. Ld. Counsel further denies allegations relating to financial statements

for FY 2021-22, alleged coercion in signing, refusal to appoint internal

auditors, or misuse of authorizations. The Board Resolution dated

03.12.2022 and Circular Resolution dated 10.01.2023, which the Appellant

relies upon to claim exclusive authorization, are themselves under challenge

in the pending company petition and cannot be treated as conclusively valid

Company Appeal (AT) No. 81 of 2023 -18-

at this stage. It is submitted that Respondent Nos. 2 and 3 were directors of

the Company and had historically represented the Company in all judicial

and arbitral proceedings even prior to execution of the SPA, which position

has been acknowledged in the impugned order.

29. Ld. Counsel submits that the Appellant's objection regarding existence

of an arbitration clause in the SPA is legally untenable. The statutory remedy

under Sections 241-242 of the Companies Act, 2013 operates independently

of contractual arbitration mechanisms. Allegations of oppression and

mismanagement are statutory in character and fall squarely within the

jurisdiction of the Ld. NCLT. The existence of Clause 16 in the SPA does not

oust such jurisdiction. Therefore, the contention that the Ld. NCLT ought to

have referred parties to arbitration is wholly misconceived.

30. Ld. Counsel submits that the interim relief granted by the Ld. NCLT

does not amount to grant of final relief. The order does not determine rights

conclusively, nor does it prejudice corporate governance. It merely ensures

that the Company continues to be represented by its directors in pending

proceedings so that no vacuum is created to the detriment of the Company.

The apprehension expressed by the Appellant that such representation

would have irreversible consequences is speculative and unfounded. The

main petition remains pending, and all issues relating to authorization,

management and alleged misconduct will be decided after full trial.

31. Ld. Counsel further submits that the Appellant's prayer seeking

directions against the Registrar of Companies is beyond the scope of Section

421 of the Companies Act, 2013 and is not maintainable in the present

Company Appeal (AT) No. 81 of 2023 -19-

Appeal. The Appeal is premature, as it challenges an interim protective order

while the substantive petition remains pending adjudication.

32. Ld. Counsel submits that CP No. 5 of 2023 the main petition in which

the impugned order has been passed has already been finally disposed of

vide the order of Ld. NCLT on 18.07.2025. He submitted a certified copy of

the same for perusal of the bench. He further submitted that in the operative

portion of the aforesaid order in para 40 (XVIII) the Ld. Tribunal has finally

disposed of the impugned order. He therefore submits that the present

appeal has become infructuous in view of final disposal of the CP No. 5 of

2023.

33. Even otherwise the Ld. Counsel submits that the impugned order is

reasoned, balanced and within jurisdiction. It protects the rights of all parties

and does not suffer from perversity or illegality warranting interference under

appellate jurisdiction. The present Appeal is therefore liable to be dismissed

with costs.

Analysis and findings

34. We have heard the parties in detail and gone through the voluminous

records and written submissions. The Respondent No. 2 and 3 who were the

Petitioners in CP No. 5 (AHM) of 2023 are the only contesting respondents.

35. The present Appeal challenges the interim order dated 15.03.2023

passed in CP No. 5 (AHM) of 2023, whereby the Petitioners were permitted to

represent Respondent No. 1 Company in all judicial, quasi-judicial and

arbitral proceedings. The main grievance of the Appellant is that such

Company Appeal (AT) No. 81 of 2023 -20-

permission allegedly interferes with and dilutes the contractual framework

of the Share Purchase Agreement dated 25.09.2019, particularly Clause 6

dealing with management of the Company prior to completion and the

handling of "Disputed Receivables." The Petitioners in CP No. 5 (AHM) of

2023 who are arrayed as Respondent No. 2 and 3 in this appeal on the

contrary argue that the impugned order is a reasoned one and is based on

the Share Purchase Agreement (SPA) between the parties.

36. The basis dispute between the parties has arisen from the clauses

relating to Share Purchase Agreement relating to management of the

company in Clause 6, particularly relating to past liability and recovery of

"Disputed Receivables" for the period prior to 31.03.2019. The relevant

extracts of the SPA including Clause (j) in recital; definition of Receivables;

Disputed Receivables; and relevant portion of Para 6 are extracted below:

"(j) Promoters will be entitled to receive the disputed receivable amount from the pending arbitration/arbitral award/litigations announced or may be announced in favour of the company, after paying the amount to the outstanding unsecured creditors as per books of accounts standing as on 31 march 2019. The amount so received by the existing promoters shall be set off against the short-term borrowings from the existing promoters and which also which include loans of 4.22 Crores from the existing promoters."

"Receivables" shall mean amount due to the company form its debtors.

"Disputed Receivable" shall mean the amount claimed by the company in the pending arbitration proceedings/arbitral awards/litigations and realization of which will be received by existing promoters."

Company Appeal (AT) No. 81 of 2023 -21-

"6. MANGEMENT OF THE COMPANY

6.2 The promoters will be liable to pay off the past liability of unsecured creditors as on audited books of 31st march 2019, if any, and for which the promoters will also use the amount received under the disputed receivables.

6.3 Further, the existing promoters shall have legal right to receive and recover all the disputed receivables or incomes emanating from law suits, arbitration proceedings, arbitral award, litigation or any other recovery proceedings. If any such amount is credited to the account of the company due to order of court or any other reason whatsoever, the company shall be obligatory to make such payment to the existing promoters forthwith. This condition shall survive the termination/revocation or completion of this agreement.

6.4 The company shall credit the amount so received under the head of disputed receivables in the existing current accounts in operations at YES BANK AND BANK OF INDIA and existing promoters only shall have rights of operating said accounts.

6.5 Any liability arising out of the disputes and litigations where promoters are a party or get arraigned as a party due to past activities of the company shall be paid/responded to /settled by the promoters only. Promotes shall, however keep the company informed of such developments so as to safeguard the interest of the company.

6.6 The Clauses 6.3/6.4/6.5 are read and interpreted together and clearly convey that the new management neither claims any benefit out of the past disputes not holds any responsibility for the claims arising out of the past litigations/disputes of the old management. Stated for the purpose of clarity, the benefits and the liabilities of past disputes and claims shall rest with Promoters only and new management shall be kept indemnified by the promoters completely and unconditionally."

Company Appeal (AT) No. 81 of 2023 -22-

37. The Term Promoters in the Share Purchase Agreement refers to

Respondent No.2 & 3 and the Term Subscriber refer to the Appellant. The

Term company refers to Aquafil Polymers Co. Pvt. Ltd./ Respondent No.1.

38. It can be seen from the definition of the Disputed Receivable that the

same refers to amount claimed by the company in the pending arbitration

proceedings/ arbitral awards/ litigations and the receipts from such

realization would be received by the Promoters. The Clause (j) of the recital

further clarifies that promoters will receive the Disputed Receivable for the

period prior to 31.03.2019 and for which a list of such proceedings is also

attached to the SPA.

39. Clause 6.2 of the SPA makes the promoters to liable to pay of the past

liability of un-secured creditors reflecting on the accounts of the company

dated 31.03.2019. Promoters are entitled to pay the same from the amount

received under Disputed Receivables.

40. Clause 6.3 of the SPA gives the promoters legal right to receive and

recover all the Disputed Receivables or incomes arising from law suits,

arbitration proceedings, arbitral award, litigations or any other recovery

proceedings. Clause 6.4 further provided that such amounts, if credited to

the Company's accounts, were to be paid to the existing promoters, who

alone would have operational control over specified bank accounts.

41. Clause 6.5 clarified that any liability arising from disputes where

promoters were arraigned due to past activities would be borne by the

promoters, though they were required to keep the Company informed. Clause

Company Appeal (AT) No. 81 of 2023 -23-

6.6 made it clear that benefits and liabilities arising out of past disputes

would rest exclusively with the promoters and that the new management

would be fully indemnified.

42. It comes out very clearly from the aforesaid clauses of SPA that for the

period prior to 31.03.2019 all the dues received would go to the promoters

at the same time any claims which have to be paid for past liabilities would

be the liability of the promoters. In other words, the benefits and liabilities

of past disputes and claims shall rest with the promoters only and new

management shall be indemnified by the promoters completely and

unconditionally.

43. It has been the submission of the appellant that he relies completely

on the SPA. We have seen from the extracted Para 11 & 12 of the impugned

order extracted in para 14 above, that the Ld. NCLT has passed its interim

orders strictly in accordance with SPA. The contention of the appellant is

that Ld. NCLT has allowed the Petitioners (Respondent No. 2 and 3) relief

much beyond what they have prayed for in para 9A and 9F of their prayer

for interim orders.

44. We note that apart from specific prayers for interim relief in CP No. 5

of 2023 in paras 9A and 9F, the Petitioners (Respondent No.2 & 3 herein) in

para 9L had also sought omnibus prayer that such other and further orders

as Ld. Tribunal deems fit and proper in the interest of justice. In the balance

of convenience Ld. NCLT has gone by the principle that the authority and

responsibility should go together. If the promoters are liable for claims on

account of Disputes Receivables before 31.03.2019 and also benefit from

Company Appeal (AT) No. 81 of 2023 -24-

receipts arising out of Disputes Receivables. At the same time the new

management is indemnified on account of past liabilities, it would be proper

that the promoters, who are also the Directors of the company, represent the

company in such proceedings. On this ground, we find that the interim order

is a reasoned one and does not suffer from any infirmity.

45. Another contention of the appellant is that the original company

petition is not maintainable as it has been filed by the Directors of the

company and not in their capacity as members of the company and

accordingly, they do not have locus to maintain the CP No. 5 of 2023.

46. We are of the view that the issue relating to maintainability had to be

agitated before the Ld. NCLT which was the right forum. The appellant is

before us only with regard to interim order passed by Ld. NCLT in the CP No.

5 of 2023. This appeal is not against the final orders of the Ld. NCLT in which

case such plea could be taken by the appellant. Be that it may be, it is also

an admitted fact that the Respondent No. 2 & 3 hold 25% of the share capital

of the company and in accordance with Section 244 (1) (a) of the Companies

Act, 2013 any member or members holding more than 1/10th of the issue

share capital of the company can apply under Section 241.

47. We further note that the Company Petition under Sections 241-242

continued to be heard along with IA No. 8 of 2023, IA No. 9 of 2023, Comp.

Application No. 3 of 2023 and Comp. Application No. 13 of 2023. On

18.07.2025, the Adjudicating Authority passed a comprehensive Common

Order in CP No. 5 (AHM) of 2023 along with all connected petitions,

applications and interlocutory applications. This common order restructures

Company Appeal (AT) No. 81 of 2023 -25-

the management and control of the Company; orders forensic audit of the

company; and gives other directions in exercise of statutory powers under

Section 242.

48. The submission of the appellant in this context is that the aforesaid

order dated 18.07.2025 in CP No. 5 (AHM)/ 2023 is a subsequent interim

order in which the original order dated 15.03.2023 has merged and this

Appellate Tribunal should adjudicate the appeal on merits.

49. We now have a look at the order passed by Ld. NCLT on 18.07.2025.

The first para of the order is extracted below:

" Common order (Per. Bench)

1. This common order is being passed in the Company Petition bearing number CP No. 5 of 2023 which was filed before this Tribunal on 17.01.2023. Upon the course of the proceedings several IAs and Company Applications came to be filed in this Company Petition by both the Petitioners as well as Original Respondents, all arising out of or relating to the same set of facts and underlying disputes forming the subject matter of the main petition. In order to avoid multiplicity of orders and in view of the common issues involved, this common order is being passed to dispose of the Transfer Petition along with all pending IAs and Company Applications."

(emphasis supplied)

50. We note from the para 1 of the order, that it's a comprehensive order

disposing the main petition and all company applications and interlocutory

applications pending in the company petition. We are of the view that this

Company Appeal (AT) No. 81 of 2023 -26-

order is the final order in the aforesaid Company Petition. This position will

be further clear in subsequent paragraphs.

51. The operative part of the order is given in para 40. The relevant

portions of which are extracted below:

"Para 40.

Accordingly, this Tribunal hereby orders as under:

I. An Independent Forensic Auditor, being a certified forensic accountant or a reputed firm with no prior association with the parties, is appointed to conduct a detailed audit of the affairs of Respondent No. 1 Company from the date of share purchase agreement till the date of this order.

II. The audit shall cover, inter alia, financial transactions, related- party dealings, compliance with the Share Purchase Agreement dated 25.09.2019, undisclosed liabilitics, and the status of ongoing projects and litigations, and to specifically identify any misuse or diversion of funds for non-business or personal purposes, or for purposes not in the best interest of the company, starting from the date of execution of the Share Purchase Agreement till date.

V. The current Managing Director shall stand removed with immediate effect, in terms of Section 242(2)(h) and in exercise of powers under Section 242(2)(k), this Tribunal appoints as an Independent Administrator, to function as a Director on the Board of Respondent No.1 Company, who shall assume charge forthwith upon appointment.

VI. The Independent Administrator shall have authority to manage day-to-day operations, ensure statutory compliance, and oversee the forensic audit, but shall not make policy decisions or alter the company's strategic direction without prior Tribunal approval. Existing directors shall cooperate with the

Company Appeal (AT) No. 81 of 2023 -27-

Administrator but retain their statutory rights and duties unless otherwise directed.

VIII. The Independent Administrator shall take all necessary steps to secure, preserve and oversee the operations, assets, and records of the Company, and shall also ensure compliance with the forensic audit process

XVIII. The interim order dated 15.03.2023, permitting the petitioners to represent Respondent No. 1 in all judicial, quasi- judicial, or arbitral proceedings, shall continue until further orders, subject to oversight by the Independent Administrator."

52. By this order, Ld. Tribunal appointed an Independent Forensic Auditor

to conduct a detailed audit of the Company's affairs from the date of

execution of the SPA till the date of the order. Importantly, the scope of the

audit expressly includes examination of compliance with the Share Purchase

Agreement dated 25.09.2019, financial transactions, related-party dealings,

undisclosed liabilities, ongoing litigations and any misuse or diversion of

funds. This necessarily includes scrutiny of the treatment, receipt,

accounting and application of disputed receivables arising from arbitration

proceedings. Thus, the very issue which forms the foundation of the present

Appeal, namely, the contractual handling of disputed receivables, is now

subject to forensic examination under judicial supervision.

53. Further, Ld. Tribunal removed the existing Managing Director and

appointed an Independent Administrator to function as Director on the

Board. The Administrator has authority to manage day-to-day operations,

secure and preserve assets and records, oversee the forensic audit, ensure

Company Appeal (AT) No. 81 of 2023 -28-

statutory compliance, and supervise bank operations. The Company's bank

accounts are to be operated only with the approval of the Administrator,

except for arbitration-related transactions. This directly impacts the

operational aspects of Clause 6.4 concerning operation of accounts for

disputed receivables.

54. Additionally, Ld. Tribunal restored the shareholding pattern as on

01.07.2023, set aside certain Board resolutions; directed appointment of

independent valuers; ordered exploration of a buyout; mandated

maintenance of status quo in shareholding and directorial structure; and

required fortnightly reporting to the Tribunal.

55. Most importantly in Para 40 (XVIII) of the operative directions,

regarding the interim order dated 15.03.2023 Ld. Tribunal permitted the

petitioners to represent Respondent No. 1 in all judicial, quasi-judicial, or

arbitral proceedings, until further orders, but subject to express oversight by

the Independent Administrator.

56. The legal consequence of these directions is significant. The interim

order dated 15.03.2023 no longer operates in isolation, based merely on

interpretation of Clause 6 of the SPA. Representation in arbitration

proceedings is now subject to supervision by the Independent Administrator

and ultimately by the Tribunal. The receipt, accounting and application of

disputed receivables are under forensic audit. Bank operations require

oversight. Compliance with the SPA itself is under scrutiny.

Company Appeal (AT) No. 81 of 2023 -29-

57. When statutory powers under Section 242 are invoked to regulate the

affairs of a company, such directions override and control internal

management arrangements and contractual understandings to the extent

necessary to bring an end to oppression or mismanagement. The order dated

18.07.2025 has created a comprehensive supervisory framework within

which all issues, including disputed receivables, are to be examined and

regulated.

58. In this regard, we further take note of last three paragraphs 48 to 50

of the common order which are extracted below:

"48. The CP No. 5 (AHM) of 2023 be listed for compliance on

31.07.2025. Parties shall file affidavits confirming

compliance with the above directions by 28.07.2025.

49. The company shall file a certified copy of this order with

the Registrar of Companies, Ahmedabad, within 30 days, as

per Section 242(3) of the Companies Act, 2013.

50. A certified copy of this order may be issued, if applied

for, upon compliance with all requisite formalities"

59. We note from the above, that CP No. 5 of 2023 was only listed for

compliance thereafter and Registrar of Companies was also informed about

the order. In effect it clearly means that the CP No. 5 of 2023 has been finally

disposed of by the Ld. NCLT.

Company Appeal (AT) No. 81 of 2023 -30-

60. In appellate jurisdiction, the relevant consideration is whether any

effective relief can now be granted. Even if we were to examine the

correctness of the interim order dated 15.03.2023 independently, such

examination would not alter the present position. The management of the

Company is under the control of an Independent Administrator. The SPA

compliance is under forensic audit. Arbitration proceedings are under

oversight. Disputed receivables are subject to scrutiny. Status quo directions

are in force.

61. An appeal becomes infructuous when subsequent judicial

developments render adjudication of the earlier interim order unnecessary

or incapable of producing practical relief. In the present case, the

comprehensive order dated 18.07.2025 has overtaken and absorbed the

interim order dated 15.03.2023. The interim direction survives only as part

of, and subject to, the larger supervisory regime.

62. Therefore, the substratum of the present Appeal no longer survives

independently. Any grievance concerning interpretation of Clause 6.3 to 6.6

of the SPA, or the handling of disputed receivables, must now be addressed

within the framework of the Common Order dated 18.07.2025 or upon

submission of the forensic audit report.

63. We further note that no appeal has been filed by the appellant against

the aforesaid common order dated 18.07.2025 passed by Ld. NCLT. The

order has therefore become absolute. We have also been informed that both

the parties are extending full cooperation to the Administrator.

Company Appeal (AT) No. 81 of 2023 -31-

64. Accordingly, we hold that the present Appeal has become infructuous

in view of the comprehensive directions issued under Section 242 in CP No.

5 (AHM) of 2023 along with IA No. 8 of 2023, IA No. 9 of 2023, Comp.

Application No. 3 of 2023 and Comp. Application No. 13 of 2023. The Appeal

is dismissed as having become infructuous. There shall be no order as to

costs.

[Justice Mohd. Faiz Alam Khan] Member (Judicial)

[Mr. Indevar Pandey] Member (Technical)

SA/Pragya (LRA)

Company Appeal (AT) No. 81 of 2023