Et Infra Developers Pvt. Ltd vs Electrotherm (India) Limited

(Arising out of Order dated 07.12.2022 passed by the Adjudicating Authority, in CP (IB) No. 157/73(4)/ND/2020.)

IN THE MATTER OF: ET Infra Developers Pvt. Ltd. ...Appellant Versus Electrotherm (India) Ltd. ...Respondent

Present: For Appellant : Mr. Sunil Fernandes, Sr. Advocates with Ms. Shankari Mishra and Ms. Aprajita, Advocates.

For Respondent : Mr. Chandra Shekhar Yadav and Mr. Manan Shishodia, Advocates.

JUDGMENT

Per Justice Sharad Kumar Sharma Member (Judicial) The Appellant is an opposite party to the proceedings of CP NO.

157/73(4)/ND/2020.) ET INFRA DEVELOPERS PVT. LTD Vs. M/S

ELECTROTHERM (INDIA) LIMITED. Those proceedings were initiated under

Section 241, to be read with Section 242 and 244 of the Companies Act, 2013. In those proceedings, the Respondent to the Company Appeal, the

petitioners therein, had filed I.A. No. 19/2022 praying for grant of certain

interim reliefs as extracted herein:

"a) "Permit the Petitioner through its authorized representative(s) to inspect the register of members and other records including Financial records, bank statements etc. of Respondent No. 1 and take copies thereof in accordance with the provisions of Companies Act, 2013;

b) Direct the Respondent Nos. I to 3 to give notice of meeting of Shareholders/Annual General Meeting to the Petitioner which may be scheduled to be held in accordance with the Companies Act, 2013 and to permit the Petitioner to participate in the said meetings;

c) Restrain Respondent Nos. 1 to 3 from selling, transferring, mortgaging or in any manner alienating or creating any third-party interest on the moveable and immoveable assets of Respondent No.1 Company.

d) Restrain the Respondent Nos. I to 3 from changing the capital structure of the Respondent No. 1 and from allotting any new Shares etc.;

e) Direct the Respondent Nos. 1 to 3 to place on record the complete list of all meetings of members/shareholders of the Respondent No. along with the respective resolutions, attendance register, notices of meetings along with proof of service on the respective members/shareholders and restrain the Respondents from giving effect to the Resolutions passed in all illegal meetings of members/shareholders

Page 2 of 11 inter alia where notices were not served to the Petitioner in accordance with law;

f) Direct the Respondent Nos. 1 to 3 to place on record the complete list of all meetings of Board of Directors along with the respective Resolutions, attendance register, notices of meetings along with proof of service on the respective Directors and restrain the Respondents from giving effect to the Resolutions passed in the Board meetings of all illegal meetings of Board of Directors;

g) Direct the Respondent No. 1 to 3 to furnish the complete list of allottees and the unsold inventory in the World Trade Tower developed and constructed by the Respondent No. 1 and the charges created over there;

and/or"

2. The Ld. Tribunal, by virtue of the Impugned Order, had allowed the

interim prayers, and hence the Appellant is before us contending:

(i) Its argued that when the principal proceedings under Section 241

and Section 242 of the Companies Act are not maintainable at the

behest of the Respondent, in the absence of there being any waiver

sought by them under Section 244 of the Companies Act, in that

eventuality an interlocutory application for the grant of relief in the

shape of I.A. No. 19/2022 would not be maintainable.

(ii) When the Respondent was not competent to, even pursue the main

proceedings, the interlocutory proceedings would not lie at their

behest.

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3. In relation thereto, the Ld. Counsel for the Appellant had referred to the

pleadings raised in the application, that was preferred on 08.09.2021,

wherein the Respondent had sought the interim prayers as extracted in the

preceding paragraph. The argument of the Learned Counsel for the

Appellant is that according to the Respondent's own case, as pleaded in the

application and particularly in Paragraph 6, the applicant has described its

shareholding pattern in the following manner:

"Share Holding after fraudulent transfer of shares by the Petitioner to Respondent Nos. 2 and 3 on 30.04.2017:-

Sr Name of Shareholder No. of Share % Share No. 1. Sushant Agarwal 2,53,000 66.61% 2. Vaibhav Aggarwal 1,27,050 33.39% 3. Electrotherm (India) Ltd. 0 0% Total 3,80,050 100%

4. In accordance with the above shareholding pattern, which was even

the case of the Respondent in I.A. No. 19 of 2021, the number of shares

shown to be held by the Respondent, was shown to be zero. In that

eventuality, it is argued by the Learned Counsel for the Appellant that, if it

is the own case of the Respondent that they were holding 0 per cent of

shares, in that eventuality, their Interlocutory Application, being I.A. No.

19/2021, would not be maintainable. That being, so particularly, when in

the proceedings under the Company Petition under Sections 241 and 242,

the Respondent had not sought any waiver under Section 244 of the

Page 4 of 11 Companies Act, 2013 and when the Company Petition itself is not

maintainable, in that eventuality, the application for the grant of interim

relief in a proceeding of the Company Petition, which is otherwise not

maintainable under law at the behest of the Respondent, the interim prayer

too would not be maintainable. It is argued by the Ld. Counsel for the

Appellant that though the impugned order is of an interlocutory nature, but

yet it is flawed under law for the reason that the Tribunal has proceeded to

pass an interlocutory order granting the interim relief that, was prayed for in

I.A. No. 19/21 without even recording any reasons or recording any prima

facie case to justify for the grant of the interim relief. If we scrutinise the

order itself, what could be seen is that the Ld. Tribunal observes that,

despite the time being granted to the Appellants herein in the proceedings of

the Company Petition, the Appellants are accused of having not filed the

counter or a Reply to the main Company Petition and no reply was filed even

to the Interlocutory Application that was preferred by the Respondent for the

grant of the interim relief. The Ld. Counsel for the Appellant submits that

the finding recorded that, the Appellant was not able to file a Reply, as

observed in the impugned order, has to be read in the context of the Reply

which was directed to be filed by the Appellants in the proceedings of

Company Appeal No. 157/73(4)/ND/2020. Hence, he submits that even

non-filing of the Reply in a Company Petition, in itself, cannot be taken to be

a justifiable reason to grant an interim order, and that too without recording

any finding on the merits of the matter or assigning reasons for the same.

Thirdly, the Ld. Counsel for the Appellant had submitted that it was

procedurally incumbent upon the Tribunal that, even when the Interlocutory

Page 5 of 11 Application was being considered, and particularly in the context of and in

relation to the nature of relief that was sought in the application, because of

the fact that it was touching upon various vital intricacies affecting the

rights of the parties to the proceedings of the Company Petition. Hence, it is

argued by the Ld. Counsel for the Appellant that even if any interim order

was required to be granted, then it was incumbent upon the Tribunal:-

(i) To have granted an opportunity to the Appellant to controvert the

contents of the pleading of Interlocutory Application No. 19/2021, and it

is then only after considering the Reply, to be submitted that any interim

application, the interim relief application could have been considered and

granted by the impugned order. It is argued by the Counsel for the

Appellant that, apart from the fact that no opportunity was granted, the

impugned order has proceeded primarily on the premise that, since the

Appellant has not filed the counter to the main Company Petition, the

interim order deserves to be granted. The Ld. Counsel for the Appellant

argues that this reasoning assigned by the Tribunal for grant of the

interim order, which may be even because of non-filing of the Reply in the

Company Petition, that itself may not be an exclusive ground to grant

interim relief by a non reasoned order.

(ii) Grant of an interim relief, and that too particularly when it affects the

material rights of the parties to the proceedings, even if at all there was

any justification to pass any interim order, then the Tribunal, being an

adjudicatory body, even at the interim stage, ought to have assigned

Page 6 of 11 reasons after considering the pleadings raised in the application, even if

taken for granted that there was no Reply submitted by the Appellant.

5. Heard Learned Counsel for the parties. Upon considering the

pleadings raised in Para 6 of I.A. No. 19/2021, where it is an admitted case

of the Respondent itself that they were holding zero per cent of shares and,

as such, if that is the situation, then in the light of the provisions contained

under Sections 244 of the Companies Act, the application at the behest of

the Respondent would not be maintainable particularly when the principal

proceeding under Section 241 and 242 of Companies Act itself was not

maintainable at their behest, since the respondents were not satisfying the

cut-off threshold of holding a minimum 1/5th of the shares to maintain a

petition. Even otherwise also, once it is an admitted case of the Respondent

that they are not holding the required shares, in that eventuality, the

application in itself, being I.A. No. 19/2021, would not be maintainable, and

that too more importantly when the Company Application that, was

preferred by the Respondent was not accompanied with any application for

the grant of waiver under Section 244 of the Companies Act.

6. Even let us presume for the time being, that this question about the

impact of Section 244 is left to be considered by the Ld. Tribunal when the

Company Petition itself would have been considered for admission on

merits. But so far as the impugned order is concerned, the sole rationale for

passing an interim order had been merely on the basis that the Appellant

has not filed a reply. That by itself may not be justified to grant an interim

order, for the reason that there is nothing on record to show that there was

Page 7 of 11 sufficient opportunity granted to the Appellant to controvert the contents of

I.A. No. 19/2021, which widely affected the rights of the parties. In the

absence of any effective opportunity, being granted to the Appellant to

controvert the pleadings of I.A. No. 19/2021, without granting even an

opportunity to file a reply to IA, passing of the impugned order granting the

interim relief by the impugned order07.12.2022 would be in under

derogation of principles of natural justice and would be in violation to the

spirit and purpose of Section 424 of the Companies Act, 2013.

7. We are of the view that, even if it is presumed that the Appellant has

not filed Reply to the proceedings, either of the Company Petition or even to

the application, I.A. No. 19/2021, even then the Ld. Tribunal was required

to record its reasoning and the basis on which the Tribunal thought it apt to

grant an interim relief. Non-consideration of the reasons or non-assigning of

the reasons to justify for the grant of the interim relief, particularly if it is

read in the context of the nature of vital interim reliefs, those were sought,

will have an adverse bearing on the merits of the matter. In that eventuality,

mere non-filing of reply to IA, still required determination on merits, because

that cannot be an exclusive ground to grant an interim relief without

adopting a rational view of calling for a Reply from the Appellant and then

only to consider and to pass an appropriate order on I.A. No. 19/2021.

Having not done so, that would vitiate the order in itself.

8. There could be yet an another facet which is required to be considered

that the basic governing principle of adjudication of justice is that any order,

Page 8 of 11 which is passed by the Tribunal on its judicial side has had to be attached

with reasons for accepting or rejecting the stand taken by the parties to the

proceedings before it. Even it is presumed that the Appellant has not filed

any reply before the Appellate Tribunal, then too it was procedurally

incumbent in the process of justice dispensation system that, any order

which is passed by the Tribunal affecting rights of the parties on merits of

the application that is I.A. No. 19/2021, then it was mandatory on part of

the Learned Tribunal that it ought to have assigned reasons to justify

passing of the interim order and particularly to the nature of the interim

order as prayed for in I.A. No. 19/2021, it should have been only after

assigning reasons. In the absence of there being any reason assigned in it,

it may be inferred that it must be actuated by bias, Because of the

following;-

I. The main company petition suffered from the restriction contained

under Section 244 of Companies Act, and it was not maintainable

until and unless the issue was decided on an application to be

preferred by Respondent/Petitioner.

II. If the main proceedings of the Company Petition were barred by

Section 244, then obviously the Interlocutory Applications preferred in

it would to be not be decided until and unless the waiver had been

sought.

III. Passing of interim order is an non maintainable proceedings, need

more justifiable reasons to grant interim order.

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9. The previous act of the Appellant of not filing a Reply in the Company

Petition, that itself cannot be exclusively relied upon by the Tribunal to

grant an interim relief by taking into consideration the past conduct of the

Appellant in carrying out future proceedings. Lastly, even if it is presumed

that there was no Reply filed by the Appellant, then too it was incumbent

upon the Tribunal that, before recording any orders on merits, while

allowing the application for the grant of interim relief, the Tribunal was

bound to assign reasons. The order does not show that any reasons have

been assigned by the Ld. Tribunal justifying to grant of the interim order,

vide its impugned order dated 07.12.2022. In that eventuality itself, the

order dated 07.12.2022 would stand vitiated. Thus, considering the

aforesaid backdrop, the impugned order cannot be sustained since having

been passed in an ex-parte manner and without consideration of the entire

facts in totality and based upon the consideration of the previous conduct, it

cannot be sustained.

10. Hence, the impugned order dated 07.12.2022 is hereby quashed. The

I.A. No. 19/2021 is remitted back to be considered by the Ld. NCLT, New

Delhi Bench afresh. Subject to the aforesaid, the Interlocutory Application,

I.A. No. 5944/2026, preferred by the Respondent seeking clarification of the

interim order dated 17.01.2023, does not call for any answer to it. Hence,

I.A. No. 5944/2026 would stand closed.

11. The Company Appeal would stand allowed. The matter is remitted

back to the Ld. NCLT, Delhi, to reconsider I.A. No. 19/2021 afresh and to

decide the same after providing an effective opportunity of hearing to the

Page 10 of 11 Appellant, after considering the grounds taken in the Memorandum of

Appeal, as being grounds in opposition to I.A. No. 19/2021.If the Appellant

furnishes the copy of the order to the Tribunal within 2 weeks from the date

of uploading of the order, I.A. No. 19/2021 is expected to be decided on its

own merits, within two weeks thereafter.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Indevar Pandey] Member (Technical)

MT

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