Jaynarayan Pusaram Karwa vs Mukund Subhash Karwa

Company Appeal (AT) No.361 of 2017 [Arising out of order dated 12th September, 2017 passed by National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in I.A. 4/2016, TP62-A/2016 to TP 62-E/2016 with TP No. 62/397-398/NCLT/AHM/2016 (New) CA No. 67/2015, 77/2015, 195/2015, 1/2016, 54/2016 CP No. 17/397- 398/CLB/MB.2014 (Old)]

IN THE MATTER OF:

1. Jaynarayan Pusaram Karwa ...Appellant No.1 Residing at : (Original Respondent No.2) Jay Building, Karwa Nagar, Jalna - 431203.

2. Sushil Jaynarayan Karwa, ...Appellant No.2 Residing at : (Original Respondent No.3) B-7, Kapil Malhar Bungalow, Baner Road, Saner, Pune - 411045

3. Vishnu Jaynarayan Karwa, ...Appellant No.3 Residing at : (Original Respondent No.4) Jay Building, Karwa Nagar, Jalna - 431203.

- Versus -

1. Mukund Subhash Karwa ...Respondent No.1 Residing at : (Original Appellant No.1) R.P. Road, Opp. Ram Mandir, Jalna - 431203.

2. Anup Subhash Karwa. ...Respondent No.2 Residing at : (Original Appellant No.2) R.P. Road, Opp. Ram Mandir, Jalna - 431203.

3. Ashish Subhash Karwa, ...Respondent No.3 Residing at : (Original Appellant No.3) R.P. Road, Opp. Ram Mandir, Jalna - 431203.

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4. Shweta Mukund Karwa, Respondent No.4 Residing at : (Original Appellant No.4) R.P. Road, Opp. Ram Mandir, Jalna - 431203.

5. Kaushalyadevi Subhash Karwa, Respondent No.5 Residing at : (Original Appellant No.5) R.P. Road, Opp. Ram Mandir, Jalna - 431203.

6. Arati Ashish Karwa, Respondent No.6 Residing at : (Original Appellant No.6) R.P. Road, Opp. Ram Mandir, Jalna - 431203.

7. Shridevi Anup Karwa, Respondent No.7 Residing at : (Original Appellant No.7) R.P. Road, Opp. Ram Mandir, Jalna - 431203.

8. Subhash P. Karwa HUF Respondent No.8 Through its Karta (Original Appellant No.8) Ashish Subhash Karwa, Residing at : R.P. Road, Opp. Ram Mandir, Jalna - 431203.

9. Ashish Subhash Karwa HUF Respondent No.9 Through its Karta (Original Appellant No.9) Ashish Subhash Karwa, Residing at : R.P. Road, Opp. Ram Mandir, Jalna - 431203.

10. Krishnidhan Seeds Private Limited, Respondent No.10 Company incorporated under the (Original Respondent No.1) Provisions of the Companies Act, 1956 Having its registered office at 302, Royal House, 11/3, Usha Ganj, Indore - 452 001. Madhya Pradesh.

11. Madhav Ambadasji Dhande, Respondent No.11 Residing at : (Original Respondent No.6) A-3, Kapil Malhar Bungalow, Saner Road, Baner Pune - 411045.

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12. Omprakash Attal, ...Respondent No.12 Residing at : (Original Respondent No.7) Flat No. 903, Building No. 1, Laburnum Park, Magarpatta City Hadapsar, Pune - 411013.

13. Girish S. Sharma ...Respondent No.13 Residing at : (Original Respondent No.8) H. No. 1-7-23 Opposite Radhika Cloth Stores Dr. R.P.Road, Jalna -431203.

14. Sanjay Khare, ...Respondent No.14 Residing at : (Original Respondent No.9) Flat No. 101, Building No. - 0, Laburnum Park, Magarpatta City Hadapsar, Pune - 411013.

15. Hasmukh Raithatha, ...Respondent No.15 Residing at : (Original Respondent No.10) Behind Hotel Bagadia International, Manish Nagar, Nava Mondha Road, Jalna - 431203.

16. Mukund Katwe, ...Respondent No.16 Residing at : (Original Respondent No.11) Plot No. E-39, N-4, CIDCO Aurangabad -431003.

17. Summit Partners India ...Respondent No.17 Private Investments, (Original Respondent No.12) Suite 25, 3 North Avenue Maker Maxity, Bandra-Kurla Complex Bandra (East), Mumbai - 400051.

18. Krifin Pvt. Ltd. ...REspondentNo.18 C/o Mr. Omprakash Attal, (Original Respondent No.13) Flat No. 903, Building No. -I, Laburnum Park, Magarpatta City Hadapsar, Pune - 411013.

Company Appeal (AT) No.361 of 2017 4

19. Ernst & Young ...Respondent No.19 Ernst & Young India P. Ltd., (Original Respondent No.14) C-401, Panchshil Tech Park, IBM Complex, Next to Don Bosco School, Yerwada, Pune - 411006.

20. Manish Jaynarayan Karwa, ...Respondent No.20 Residing at : (Original Respondent No.5) 9-B, Janki Nagar Annexe, Indore - 452001.

Present: Shri Sudipto Sarkar, Sr. Advocate with Shri Aditya Aggarwal and Shri Kunal Vaishnav, Advocates for the Appellants

Shri Vikas Mehta and Shri B. Mithun Rao, Advocates for Respondent Nos.1 to 9 Shri Ritin Rai and Shri Aabhas Kshetarpal, Advocates for Respondent No.10

JUDGEMENT

A.I.S. Cheema, J. :

This appeal has been filed by original Respondents 2 to 4 against the

impugned order dated 12.09.2017 passed by learned National Company Law

Appellate Tribunal, Ahmedabad (NCLT) Company Petition (details as

mentioned before cause title) which has been filed by Respondents 1 to 9 who

are original petitioners in the company petition. The NCLT finally heard the

parties but passed interim orders which according to the appellants effectively

granted final prayers A and B of the company petition. NCLT has appointed

interim administrator, Independent Directors and statutory auditors for

Respondent No.10 company (Original Respondent No.1), giving various

directions.

Company Appeal (AT) No.361 of 2017 5

2. The appellants claim, and it is argued for them that NCLT did not record

any finding of oppression and mismanagement. NCLT considered the

Memorandum of Understanding dated 13.02.2013 and also found that

arbitral award dated 31.07.2014 passed between the rival groups, allotted the

respondent company to the appellants and there was no challenge to that part

of the arbitral award and as such NCLT held that there would be no need to

give findings of alleged acts of oppression and mismanagement. The

appellants claim that in view of this the company petition should have been

dismissed and the reliefs as granted at interim stage could not have been

granted. Appellants claim that the appointment of the interim administrator

and Independent Directors is prejudicial to the reputation of the company and

will cause business difficulties. It will affect trust and faith of creditors. The

appellants express apprehensions that business would be affected. According

to them in board meetings, trade secrets and confidential information may

have to be shared with Independent Directors. The entire shareholding of the

company is held by two groups of Karva family. The appellants (original

Respondents 2 to 5) represent "JPK Group". Respondents 1 to 7 (original

petitioners) represent SPK Group. The arbitration agreement was subsequent

to the filing of the company petition which petition was filed by SPK Group

who wanted to wriggle out of family arrangement/MOU. As per MOU dated

13.02.2013, the appellants were managing the respondent company and

Respondents 1 to 9 were looking after companies allotted to them. According

to the appellants, the Respondents - SPK Group were indulging in competing

Company Appeal (AT) No.361 of 2017 6

business. The appellants state that they do not object to the appointment of

independent Chartered Accountant firm to assess the fair market value of the

shares of Respondent No.10 company as on date of filing of the company

petition by Respondents 1 to 9.

3. It has been argued by the learned counsel for the appellants that the

Company Petition - TP 62/2016 earlier filed before the Company Law Board

(CLB) as CP 17/2014 was finally heard by the NCLT. Still when ultimately the

judgement was passed, interim orders have been passed regarding the

managing of affairs on the basis that arbitral award has not yet reached

finality and not yet implemented. It has been argued that the award concerned

has been challenged under Section 34 of the Arbitration Act. The learned

counsel submitted that although parties went in arbitration, the disputes

between the parties have been going on. The appellants have 60%

shareholding while Respondents 1 to 9 have 40% shareholding. According to

the learned counsel, there was no reason why the NCLT should have passed

interim order and not final orders. The directions regarding appointing

interim administrator without finding acts of oppression and mismanagement

is unjustified. The learned counsel submitted that in the interim order passed

by NCLT, one of the directions is to appoint independent Chartered

Accountant to assess fair market value of the shares of the respondent

company. It has been submitted that if this is done, disputes between the

parties would settle down. It is stated that the company petition was filed

before CLB on 18.02.2014 and disputes were referred to arbitration in July,

2014 and award was passed on 31.07.2014. Learned counsel for the

Company Appeal (AT) No.361 of 2017 7

appellants submitted that the appeal should be allowed and the impugned

order should be quashed and set aside except to the extent where NCLT has

directed appointment of independent Chartered Accountant firm to assess fair

market value of the shares of respondent company.

4. We have heard contesting respondents also. The learned counsel for

Respondents 1 to 9 submitted that the impugned order passed is just and

appropriate and the NCLT has struck balance between the parties. According

to the counsel, if the orders passed by NCLT are seen, it has retained Board

of Directors and only added the Interim Administrator without superseding

the existing Board. The Interim Administrator has been empowered to propose

names of two Independent Directors having experience in the field of seeds

business which is the business of the company so as to administer the

company till position regarding arbitration award becomes clear. It is argued

that Independent Directors would rather be impartial. There are directions

with regard to sale of Akola property of the company under supervision of

interim administrator, to discharge the liabilities of the company and as such

the present interim arrangement made by NCLT is necessary in the interest

of both sides and the company. The counsel submitted that the record shows

that there are several recovery proceedings against the company which

company is managed by the appellants and even cheques issued have been

dishonoured. Loans are outstanding and there are also SARFESI proceedings.

It has been argued that CBI has registered FIR against the appellants and the

Court allowed search on 29.09.2016 and such factors were in record before

Company Appeal (AT) No.361 of 2017 8

NCLT. The counsel referred to para 79 of the impugned order to state that

NCLT was aware of the allegations regarding financial irregularities. It is

stated that the company has liability of hundreds of crores because of which

some property was required to be sold, and in such situation, interim

administrator should be there. A reference has been made to the reports filed

by Hon'ble Shri Justice K.K. Lahoti, former Judge, High Court of Madhya

Pradesh who was earlier appointed as observer as per CLB order and who has

now been appointed as Interim Administrator. The counsel referred to the

reports dated 28.03.2016 and the report dated 04.04.2016 filed with reply by

these respondents to point out how there were grave issues regarding the

management of the company and when CLB appointed the observer, the

appellants came up with a procedure of circular resolutions to bypass the

observer. The learned counsel referred to the report of the observer dated

28.03.2016 which in para 10 refers to raising of objections by Respondent

No.1 with reference to amounts where under the head of "Other Expenses",

amount of Rs.7,96,007,625/- had been shown as "Doubtful Advances"

written off. Thus according to the learned counsel huge amounts were being

siphoned and thus the impugned order does not require any interference.

5. Learned counsel for Respondent No.10 - company has submitted that

NCLT did not consider reply of the company. It is argued that Company Law

Board (CLB) had on 25.04.2014 permitted sale of Akola property. Earlier CLB

had declined to appoint administrator and although there was no change of

circumstance, present impugned order has been passed appointing Interim

Company Appeal (AT) No.361 of 2017 9

Administrator. Learned counsel submitted that the observer has now stopped

going ahead with the sale of the property at Akola due to the present

impugned order which is stayed by this Tribunal during pendency of this

appeal. It is stated that the said steps should not be stayed in the interest of

the company.

6. We have heard the counsel for the parties and gone through the record

as well as the impugned order. It would be appropriate to refer to certain facts

and developments which have occurred in the present matter. The impugned

order has referred to those facts in much details in 3 different parts. First is

with reference to the events leading to family arrangement or MOU dated

13.02.2013; Second is with regard to events from 13.02.2013 till petition was

filed on 18.02.2014 and the Third part is with reference to developments after

filing of the petition.

7. It will be appropriate to refer to the parties as they have been arrayed

in the NCLT. Thus we will refer to the appellants as - "Respondents 2 to 5" or

"JPK Group" and the Respondents 1 to 9 here as "original Petitioners 1 to 9"

or "SPK Group". Original Petitioners 8 and 9 are actually HUF.

8. The respondent company was incorporated on 05.02.1996 by original

P3, P5 and R2 to 5 as "Krishidhan Seeds Limited" (KSL), 5 subsidiary

companies were floated by KSL and one related company - Mariegold

Infrastructure Private Limited was also incorporated. Around March, 2010

Company Appeal (AT) No.361 of 2017 10

when Respondent No.12 - Summit Partners decided to invest Rs.132.24

crores to acquire 24.79% equity, a subscription agreement was entered into

on 18.03.2010. EOGM dated 22.11.2010 was called to facilitate the

investment when it was resolved to convert the company into private limited

company and thus it became ""Krishidhan Seeds Private Limited" (KSPL) -

(R1).

9. It appears that disputes arose between the parties leading to MOU

dated 13.02.2013 between original Petitioners 1 to 3, 5 and Respondent No.2

and Respondent No.5 representing rival groups. The MOU intended to divide

all the properties and liabilities including HUFs, flagship company Krishidhan

Seeds Private Limited and business interest in the various firms etc. Although

the MOU was executed, it came to be challenged before the District Court,

Pune. The original petitioner claimed that the MOU is sub-judice. Original

Respondents 2 to 5 claimed that the MOU became necessary due to acts of

oppression and mismanagement by original petitioners. The allegations of

siphoning of money and forgery and other allegations were made. Original

Respondent No.3 claimed that the MOU was entered to resolve several

disputes between the two groups. Respondents claim that after infusion of

funds by Summit Partners, original Petitioner No.1 became over ambitious

and started taking arbitrary and hasty decisions. The original respondents

claim that MOU dated 13.02.2013 was required to be adhered to.

10. Case put up by original petitioners before NCLT is that original

Respondent 3 denied to share information regarding documents pertaining to

Company Appeal (AT) No.361 of 2017 11

repayment of Respondent No.12 on 06.04.2013 and original petitioners were

required to send legal notice dated 07.10.2013 to revoke power of attorney.

They searched Sub-Registrar's office at Akola in September 2013 and came to

know about dealings with regards to property at Akola. After issuing legal

notice to respondents, petitioners filed the company petition on 18.02.2014.

11. After filing of the company petition, it appears that on 03.03.2014,

Company Law Board passed the orders granting ad interim prayers and

directing original respondents to maintain status quo in respect of immovable

assets of the company. It also observed that mere entering into family

settlement would not mean that the rights of petitioners available under

Section 397/398 of the Companies Act, 1956 could not be availed of. Against

this order, original respondents filed the Company Appeal 09/2014 before

High Court of Bombay which was disposed by reverting back the parties to

Company Law Board. Before the Company Law Board, original petitioners

sought appointment of administrator/Special Officer or independent

committee but the CLB in order dated 25.04.2014 to balance equities and

urgent liabilities of the company permitted sale of properties of the company

at Akola and to supervise the same appointed Hon'ble Justice K.K. Lahoti,

former Judge, High Court of Madhya Pradesh as observer-cum-facilitator.

Certain further directions were also given which included that the observer-

cum-facilitator would be entitled to attend and supervise Board meetings and

AGM/EOGM. To this extent the earlier order dated 03.03.2014 of CLB was

modified.

Company Appeal (AT) No.361 of 2017 12

12. Even this order of the CLB was challenged in Miscellaneous Company

Appeal 03/2014 before High Court of Madhya Pradesh but parties were again

sent back to CLB. Then same applications were filed by the parties before

CLB. It appears that in Board meeting dated 07.07.2014, SPK and JPK

Groups agreed to refer the disputes to arbitration. The disputes were

accordingly referred and award came to be passed on 31.07.2014. The original

respondents were not satisfied with the award and filed petition under Section

34 of the Arbitration and Conciliation Act challenging the award. CLB passed

common orders on 05.09.2014 in CA 225/2014, 226/2014 and 231/2014.

The learned NCLT in the impugned order (para 48) has referred to the

directions which were passed by CLB and its observation relating to award

passed and which has been challenged by the respondents observed that

when the respondents have themselves challenged the award they were

estopped from relying on part of the same award that stipulates that the

respondent company has been given to their share.

13. Against the order of the CLB dated 05.09.2014, it appears that again

appeal was taken to the High Court of Madhya Pradesh in MCA 49/2014 and

the same came to be disposed on 14.01.2015 leaving it to the CLB to consider

effect of arbitral award at the time of final disposal of the matter.

14. The parties filed various applications before the NCLT. CA 67/2015 was

filed by contesting respondents to appoint independent valuer; CA 77/2015

was filed by the respondents to restrain original petitioners from competing

with business of the company; CA 195/2015 was filed by original petitioners

Company Appeal (AT) No.361 of 2017 13

to maintain status quo regarding shareholding and to direct respondents to

discharge urgent liabilities of the company; CA 01/2016 was filed by

petitioners for appointment of Interim Administrator and Independent

Directors and CA 54/2016 was filed by petitioners to extend role of the

observer by appointing him as Independent Director. IA 04/2016 was filed by

petitioners to get forensic audit done. In the applications filed, further reliefs

were also claimed. These IAs have also been disposed by the NCLT in the

impugned orders.

15. It appears from the impugned order that the learned NCLT kept in view

the developments in this litigation. The impugned order records these aspects

and submissions in details which we need not reproduce.

16. Learned NCLT (in para 58) in the impugned order considered as to how

the parties happened to refer their disputes to arbitration and the award

which was passed which inter alia deals with award of business interest;

companies and branch bifurcation with future scope as well as procedure to

free group liabilities and implementation of the award. NCLT considered that

the award was under challenge before the District Judge at Pune. NCLT has

then referred to the orders passed by the Hon'ble High Court of Madhya

Pradesh in Company Appeal 49/2014 and the observations of the High Court

to hold that in view of the orders of the High Court, it has the powers to grant

relief in case of oppression and mismanagement of the affairs of the company

because distribution of assets in terms of the award has yet not taken place.

In the impugned order NCLT then considered that it was necessary for it at

Company Appeal (AT) No.361 of 2017 14

the final hearing stage to decide the effect of the arbitral award on the petition,

in view of the judgement which was passed by the Madhya Pradesh High

Court. Observations in para 63 of the impugned order are as under:

"63. Peculiar facts in this case is that after filing of this petition

and after appointment of Hon'ble Observer cum Facilitator Mr.

Justice K.K. Lahoti, right in the presence of the observer cum

facilitator in the Board Meeting held on 07.07.2014 it was resolved

by representatives of both the families i.e. SPK group and JPK

group to refer all the disputes to the Arbitrators and accordingly all

the disputes were referred to the Arbitrators and Arbitrators

passed the award. After passing of the award, respondents no. 2

to 5 filed Company Appeal No. 231 of 2013 questioning the

maintainability of the petition on the ground that Arbitral Award

has been passed. The same respondents filed petition before

District Judge to set aside the award under Section 34 of the

Arbitration and Conciliation Act, 1996."

Discussing rulings in this context, NCLT observed in para 68 as under:

"68. In the case on hand during the pendency of the Company

Petition both the families entered into Arbitration Agreement and

accordingly disputes were referred to Arbitrator. Arbitral Award

was passed but the award has not reached finality. Respondents

No.2 to 5 already filed petition to stay for Arbitration. The issues

raised in this petition relate to alleged acts of oppression and

Company Appeal (AT) No.361 of 2017 15

mismanagement. A perusal of the submissions in the petition is not

a dressed up one to overcome the arbitration. In fact, there was no

Arbitration Agreement prior to filing of this petition. Therefore,

issues relating to the acts of oppression and mismanagement are

not at all referable to Arbitrator and it is the exclusive domain of

this Tribunal to decide one way or the other basing on the material

available on record, since the Arbitral Award is yet to reach finality

and yet to be implemented."

The observations in para 70 were as follows:

"70. Before exercising such jurisdiction, it has to be borne in mind

that KSPL and its management has been allotted to JPK group in

the MOU as well as in the Arbitral Award. It is a fact that, Arbitral

Award has not reached finality. Arbitration and Conciliation Act,

1996 do not contemplate the award to become the Rule of Law.

Section 34 of Arbitration and Conciliation Act, 1996 lays down

certain grounds on which Arbitral Award can be set aside.

Petitioner has stated that, Arbitral Award is under challenge before

learned District Judge. Till the Arbitral Award is set aside it cannot

be treated as a waste paper which is emerged out of the agreement

between the parties, during the pendency of this petition."

17. As to what weight and consideration should be given to the arbitral

award, the NCLT discussed judgements as mentioned in the impugned order

and observed in para 76 as under:

Company Appeal (AT) No.361 of 2017 16

"76. In case if this Tribunal came to a conclusion that there are

acts of oppression and mismanagement in the conduct of affairs of

the first respondent company (KSPL), it is necessary for this

Tribunal to pass certain orders regarding the management and

conduct of the affairs of the first respondent company (KSPL) which

has already been allotted to SPK group in order to remove the

oppression and to compensate mismanagement. In case the award

become final and implemented, then the orders passed by this

Tribunal in respect of management of the first respondent company

would be directly and sometimes impliedly take away the rights

conferred on the SPK group by virtue of the award. It may be said

that respondents 2 to 5 themselves asked for setting aside the

award. Both the parties are bound by the award till it is set aside

and it is not material who asked for setting aside the Arbitral

Award. It is strange that respondents No.2 to 5 who challenged the

award is pleading before the Court that in view of the Arbitral

award this Company Petition is not maintainable. Such type of

diametrically opposite inconsistent pleas taken in different forums

show that JPK group is somehow trying to manage the KSPL as

they wish as long as possible."

18. The learned NCLT then took note of the reports which had been

submitted by the observer-cum-facilitator and in para - 77 of the Impugned

Order considered how SPK Group had gone to the extent of passing circular

resolutions. The reference to "SPK Group" is apparently a typing mistake.

Company Appeal (AT) No.361 of 2017 17

Reference actually is to "JPK Group" which relates to Respondents 2 to 5 who

are managing the affairs of the company. NCLT taking note of factual

situations which were appearing from record and the fact that there is an

arbitral award existing which cannot be treated as some waste paper, it found

that although it can rule regarding oppression and mismanagement but

pending finalization of the arbitral award it observed that it is not necessary

to give a conclusive finding on the alleged acts of oppression and

mismanagement.

19. From the impugned order, it is apparent that the learned NCLT took

into consideration all the necessary facts and the factual situations as well as

the orders which had been passed in the matter by CLB as well as High Courts

and taking overall conspectus it came to reasoned decision that pending

finalization of the arbitral award, it was not necessary to record "conclusive

finding" on the alleged acts of oppression and mismanagement. In such

background, the NCLT observed :

"79. However, considering long standing disputes between the

petitioners and respondents No. 2 to 5, considering the non-

implementation of MOU, considering the challenge made to the

Arbitral award passed by the Arbitrator, considering the manner

in which the proceedings in the Board Meetings have been taken

place, and taking into consideration the interest of KSPL and

subsidiary companies, there need to be certain directions in the

conduct of the affairs of the first respondent company. In this

Company Appeal (AT) No.361 of 2017 18

regard it is necessary to state certain facts. Respondent got circular

resolutions passed which are not contemplated in the order of

Company Law Board dated 25.04.2014. Certain financial

irregularities were alleged by the petitioners, even after the

appointment of Observer cum Facilitator. There is also averment to

the effect that salaries are also stopped. Moreover, respondents

have filed an application to boycott the shareholding of the

petitioners. Respondents have also alleged that the petitioners are

competing the business of KSPL group through SFPL Crop Life

Sciences Pvt. Ltd. and KVSIPL. Respondents alleged that

petitioners have created an environment to damage the reputation

of Respondent No.1 by way of anti-campaign in the business circle

and by giving false advertisements, by writing letters to Bankers,

by giving public notice not to deal with property of MIPL and

contacted dealers etc. of KSPL."

NCLT has concluded (in para 81) that in the interest of shareholders of KSPL

and in the interest of SPK Group as well as JPK Group, as arbitral award has

not yet reached finality, it was passing orders, as it has done.

20. From the final orders which have been passed by way of interim

arrangement, what can be seen is that the NCLT appointed the observer as

interim administrator without superseding the existing Board of Directors of

KSPL and the observer has been empowered to propose names of two

Independent Directors. It has been directed that after appointment of two

Company Appeal (AT) No.361 of 2017 19

Independent Directors a meeting of the Board would be conducted. Directions

have been given regarding appointment of Independent Chartered Accountant

and Special Auditors. The interim orders direct that the agenda of all kinds of

meetings of KSPL shall be approved by interim administrator before notice of

meeting is given; the meetings shall be in accordance with interim orders in

force and directions given in the impugned order; that shareholding pattern

should not be changed; that sale of Akola property shall be as per Company

Law Board orders and under supervision of interim administrator;

Respondent No.3 shall not exercise authority which he has under Section 113

of Companies Act in the meetings. There are further directions with regard to

various incidental and ancillary aspects. The TP 62/2016 has been kept

pending till arbitral award reaches finality for the purpose of passing orders

on aspects of alleged acts of oppression and mismanagement taking into

consideration the special audit report and share evaluation report of KSPL.

With such and further directions as can be seen in the impugned order, the

TP has been kept pending.

21. From the judgement /order which has been passed by the NCLT, we

find that in the given set of facts of the present matter, the recourse adopted

by NCLT cannot be found fault with. After such excessive hearing and detailed

order which the learned NCLT painstakingly recorded, it could have recorded

whether or not oppression and management was made out but it did not do

so. NCLT appears to have tried to avoid complications which may arise by

recording findings on this count when arbitral award is yet to become final

and as matter is pending in the District Court. Looking to the materials which

Company Appeal (AT) No.361 of 2017 20

NCLT had in front of it, which it has also referred to in the impugned order

and materials which are part of records, the NCLT has exercised discretion

vested in it to safeguard the interest of the company and when the exercise of

the jurisdiction appears to be judicious and not casual or unfounded, we do

not think it appropriate on our part to interfere with the impugned order. We

find the observations and reasons recorded by the NCLT to proceed to pass

orders which are in the nature of interim orders till arbitral award reaches

finality to be justified in the facts and circumstances as appearing from the

record. There is no substance in this appeal.

The appeal is dismissed with costs quantified at Rs.1 lac to be paid

jointly or severally by the three appellants to the respondents 1 to 7.

[Justice A.I.S. Cheema] Member (Judicial)

[Balvinder Singh] Member (Technical)

New Delhi

21st December, 2017

/rs/nn

Company Appeal (AT) No.361 of 2017