Mr. Gaurav Singh vs Saroj Tyagi

1

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI COMPANY APPEAL (AT) NO.209 OF 2025 In the matter of Gaurav Singh Appellant Vs Mrs Saroj Tyagi & Ors Respondent For Appellant:Mr Sahil Sethi, Mr Samriddh Bindal, Mr Vikash Kumar, Advocates. For Respondent: Mr Kunal Tondon, Sr Advocatge, Mr Utsav Trivedi, Ms Manini Roy, Ms Nandini Acharya, Ms Natasha Singh, Advocates. ORDER

HYBRID MODE 25.09.2025:This appeal is filed against an impugned order dated 10.06.2025

passed by Ld. National Company Law Tribunal, New Delhi in IA No.29/2022 in

Company Petition No.51 of 2021.

2. Vide the impugned order, while exercising its powers under Rule 11 of the

NCLT Rules, 2016 the Ld. NCLT had appointed a Forensic Auditor to conduct an

investigative audit and draw up the accounts of Respondent No.2 company

herein of the last three years, preceding the date of filing of petition under Section

241-242 of the Companies Act, 2013.

3. The Forensic Auditor has also been directed to identify any

misappropriation or irregularity in the financial statements of the Company,

taking into account the averments of both parties in the said Petition.

Furthermore, the Impugned Order directs a forensic audit of the books of

accounts, bank accounts, and financial transactions of Respondent No. 1

Company, particularly with respect to its dealings with group companies, 2

associate entities, partnerships, and other related individuals, including

partners, directors, and promoters.

4. It is argued the impugned order is in teeth of a MOU dated 21.12.2020

wherein Respondent No. 1 had consented to a special audit in terms of a

mutually negotiated Understanding dated 21.12.2020, entered into with an

objective of resolving internal disputes, including disagreements over finances

and audit. It is alleged the said MoU constitute a binding contractual framework

wherein the parties agreed to an alternate audit mechanism and the Appellant

fully complied by handing over all relevant company documents.

5. It is argued despite the consensual audit being commenced in terms of the

MoU, Respondent No. 1 unilaterally withdrew from the agreed terms and, after

a delay of 14 months, filed an Application seeking a forensic audit. Such conduct,

in itself, renders the Application malafide, being in teeth of the agreed dispute

resolution mechanism, and amounts to approbation and reprobation, which has

been consistently frowned upon by the Courts/ Tribunals.

6. It is argued the main Petition filed under Sections 241-242 of the

Companies Act, 2013 contains no specific plea or relief seeking a forensic audit.

Therefore, the interim direction for such audit is outside the scope of the

pleadings and per Mohta Bros. (P) Ltd. v. Calcutta Landing and Shipping Co.

Ltd., [1969 SCC OnLine Cal 22], the courts should not grant interim relief to

enable fishing expeditions for evidence in the hope of building a case. Heard 3

7. Before proceeding further it would be appropriate for us to look into the

impugned order which read as under:-

19.The main company petition was filed before this Tribunal by the Petitioner seeking directions against the Respondents for alleged oppression and mismanagement. The present interim application has been filed alleging financial irregularities by Respondents Nos.2 to 5 in running of Respondent no. l company, and misappropriation of funds of the Respondent No.1 Company and seeking direction for appointment of 'Forensic Auditor for audit into the affairs of the Company.

20. After analyzing the documents and hearing the arguments of Ld. Counsels of parties of both sides, we find that the factual scenario of this case depicts that after the signing of the MoU dated 2 1. I2.2020, two Member of the Tyagi Family, Mr. ·Atul Tyagi and Mr. Smrat Tyagi resigned from the position Directors on 25.02.2021. Prior to the resignation of the aforesaid directors, the Respondent No. I Company took financial facility from PNB of Rs. 2,50,00,000 which was sanctioned vide letter dated 31.7.20I9. This loan was taken to execute the project of CCSHAU. Later on, this project couldn't be completed. CCSHAU terminated the said project and awarded this project to third party. CCSHAU filed a criminal complaint against the Respondent No.2 which is pending adjudication before the Ld. Magistrate First Class. The Petitioner/ Applicant are 50% shareholder in the Respondent No. I Company and has contended that alleged misappropriate of funds and financial bungling occurred during the tenure of 'Singh Family'. On the other side, the Respondents have averred that all these aforesaid misappropriate of funds and management in the Respondent No. I occurred when 'Tyagi Family' had majority controlled in the Company.

21. There are various allegations and counter allegations of siphoning of funds, contract executed with CCSHAU, undocumented loan and irregularity in payment of interest and tampering maintain proper books of accounts, issuance of bogus vouchers and payments. These allegations and counter allegations by petitioner and respondents respectively can be ascertained only by conducting a forensic audit by an independent auditor to bring out the truth with regard to running of the operation of the Respondent No.1 Company in order to proceed further with the main company petition filed u/s 241-242. We are of the opinion that allowing the instant 4

application for conducting of forensic audit of the Respondent No. l Company and calling for the report of forensic auditor will enable this Tribunal to appreciate the issue on the basis of an independent report so as to ensure the fair and just adjudication of the petition filed u/s 241-242 with due regard to rights and obligations of contesting parties.

8. The main grievance of the appellant is without forming an opinion as to if

there were any acts of oppression and mismanagement on the part of the

appellants herein, such an order appointing Forensic Auditor ought not to have

been passed. However, what we find from the impugned order is while keeping

the main CP under Section 241-242 of the Companies Act, 2013 pending; in

view of the hostile attitude between the two groups of shareholders and also in

view of allegations and counter allegations, the Ld. NCLT had passed the order

to find out the truth with regard to the running of the operations of Respondent

No.2 company, in order to proceed further with the main Company Petition as

the said Report would enable the Ld. NCLT to appreciate the issues necessary

for fair and just adjudication of the Company Petition.

9. Thus we need to look into the allegations set out in the Company Petition

to find out as to if there existed allegations, sufficient to exercise discretion, as

is given under Section 242(4) of the Companies Act, 2013.

10. Now, we find in the Company Petition there exist allegations against the

appellants of mismanagement and siphoning of funds from the Respondent No.2

company. The facts and instances of Oppression and Mismanagement are duly

given in para I of the Company Petition, more specifically from Paras 7.1 to 7.20. 5

11. It is in the midst of these allegations and counter allegations a discretion

was exercised by the Ld.NCLT so as to appoint a Forensic Auditor, to enable it

to pass judgement.

12. The question is such discretion of the Ld NCLT can be toppled with by the

Appellate Court if two views are possible.

13. In Wander Ltd and Another Vs Antox India P Ltd, 1990 (Supp) Supreme

Court Cases 727 the Court held as follows:

13. On a consideration of the matter, we are afraid, the Appellate Bench fell into error on own important propositions.

The first is a misdirection in regard to the very scope and nature of the appeals before it and the limitations on the powers of the Appellate Court to substitute its own discretion in an appeal preferred against a discretionary order. The second pertains to the infirmities in the ratiocinations as to the quality of Antox's alleged user of the Trade-Mark on which the passing-off action is founded. We shall deal with these two separately.

14. The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the Appellate Court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate Court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by the court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the Trial Court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with 6

the trial court's exercise of discretion. After referring to these principles Gajendragadkar, J. in Printers (Mysore) Private Ltd. v. Pothan Joseph :

... These principles are well established, but as has been observed by Viscount Simon in Charles Osention & Co. v. Johnston the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case.

The appellate judgment does not seem to defer to this principle.

14. Further in LAS Goldair Handling (Bagdogra) Pvt Ltd Vs Goldair Handling

SA and Another 2024 SCC OnLine NCLAT 1868 this Tribunal held as under:-

12. In view of the above we find no infirmity in the impugned order before us, specially in view of the fact only oral submissions were made before the Ld. NCLT as alleged, without support of any documents or reply. Even otherwise conduct of forensic audit does not determine the rights and liabilities of the parties but merely would enable the Ld. Tribunal to appreciate the issues involved. The issues raised in the petition before Ld. NCLT are allegations of siphoning of funds, grave lapses in the appointment of statutory auditors, lack of approval of petition on reserved matter, non-

maintenance of proper books of accounts and hence this conduct of forensic audit will only come to the aid of the Tribunal to adjudicate the petition. There is further an allegation the appellants had taken loan without the approval of the Respondent No.1 despite it being a reserved item and admitting its fault the appellant hurriedly paid off the said loan vide DD dated 10.11.2023 after filing of the petition. Further the credentials of Mahesh Choksi and Co viz the auditor is also questioned by Respondent No.1 in view of Mukesh Maneklal Choksi Vs Union of India 2020 SCC Online NCLAT 93, decided on 17.02.2020.

15. Though learned counsel for the appellant argued the impugned order

could not have been passed in view of vague/uncertain allegations of oppression

and mismanagement and though such allegations may constitute a ground for 7

suspicion but it would certainly not envisage an investigation into the affairs of

the company, as is held in Mohta Bros (P) Ltd & Others Vs Calcutta Landing and

Shipping Co Ltd and others, (1970) 40 Comp Cas 119.

16. There is no dispute to the law laid down but what is important to note is

the cited judgement is a case where the company was still doing operations but

whereas in the present case admittedly the company's operations are nil and

though allegedly the Respondents have resigned from the Management of the

Company, yet for paying the debts of the company, taken during the tenure when

the management of the company was in the hands of appellant, the Respondent

had to dispose of their assets to clear of such debts of the Bank

17. Thus in the circumstances when the company is not in operations and there being allegations and counter allegations, hence no fault can be found in the impugned order directing forensic audit, only to enable it to know the truth into the allegations to pass a judgement. More so when a discretion u/s 242(4) is exercised during the pendency of company petition, on facts of the case in hand, then it would not be appropriate to set aside such discretion, only if it could have been exercised in some other manner. Hence the appeal has no merit and it is accordingly dismissed.

18. Pending applications, if any, are closed.

(Justice Yogesh Khanna) Member (Judicial)

(Mr. Ajai Das Mehrotra) Member (Technical) Bm