N. Lakshmanan & Ors vs N Palaniappan & Ors

5. T. NARAYANAN S/o. Late N. Thiagarajan No. 14, Vallabai Road, Chokkikulam, Madurai - 625002. ... RESPONDENTS Present : For Appellants : Mr. R. Murari, Senior Advocate For Ms. Hem Srinivasan & Ms. S. Manjulaa Devi, Advocates For Respondents : Mr. TK. Bhaskar, Advocate For Mr. Chandramouli Prabhakar, Ms. R. Vandhana Prabhu & Mr. Aakash Athimoolam, Advocates for R1

Mr. PH. Arvindh Pandian, Senior Advocate For Mr. Ramaswamy Meyyappan, Advocate for R2, R3, R4 & R5

ORDER

(Hybrid Mode)

16.09.2026:

[Per: Justice N. Seshasayee, Member (Judicial)]

1. This appeal is preferred challenging an order passed under Section 241 of

the Companies Act, 2013.

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2. The broad facts which may be relevant are that the 4th appellant company

is a family-controlled company in which late Mr. Narayana Chettiar and his four

sons, namely, the 1st appellant, 1st respondent, late Mr. Thiagarajan and one Mr.

Shanmuga Sundaram, all his sons are the shareholders. According to the

appellant, the 1st respondent, Mr. N. Palaniappan and late Mr. Thiagarajan were

in the helm of affairs of the family-controlled businesses and ruined them.

However, we are concerned here only with the 4th appellant company in which

late Narayana Chettiar had 19.425% shareholding, while Palaniappan (1st

respondent), late Thiagarajan (whose heirs are R-2 to R-5), Lakshmanan (1st

appellant) and Shanmuga Sundaram (who is not a party to this appeal) have held

9.90%, 9.33%, 6.48% and 9.90%, respectively.

3. This apart, 1st appellant's children also have some shareholding in the

company. Except Shanmuga Sundaram, the other three brothers plus the two sons

of Lakshmanan (all of who are appellants 1 to 3) have been directors of the

company. According to the appellant, since Palaniappan and late Thiagarajan did

not attend the board meeting for a period of two years, they invited upon

themselves the disqualification to stay in the board under Section 167(1)(b) of

the Companies Act and have vacated the office by force of law. Accordingly, on

30.09.2017, in the AGM it was resolved that both Palaniappan and late

Thiagarajan ceased to be the directors of the company.

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4. Subsequently, on 17.05.2018, the board met and it decided to go for rights

issue. Offer letter was issued to all the shareholders including Palaniappan and

late Thiagarajan, and the offer was kept open between 11.06.2018 and

02.07.2018. Both Palaniappan and late Thiagarajan apparently had received the

offer letter of the right issue but they did not subscribe to it. Their core

contentions are that:

a) they have been excluded from the management unlawfully,

b) there is no bona fide need for going for right issue,

c) the resolution for right issue in that sense was passed by an illegally

constituted board without the participation of Palaniappan and late

Thiagarajan.

5. Eventually, Palaniappan moved the NCLT with a petition under Section

241 and 242, seeking the following reliefs:

"In view of the facts mentioned hereinabove, the petitioner prays for the following reliefs: -

a) To declare the removal of the Petitioner from Directorship of the Board of the 1st Respondent company as null and void and thereby set aside the appointment of 4th and 5th respondents;

b) For permanent injunction restraining the Respondents 2, 4 & 5, their men, agents, servants or any person or persons, claiming or acting through or under them for and on their behalf, from in any manner, whatsoever, alienating, encumbering or

Company Appeal (AT) (CH) No.81/2026 Page 4 of 8 otherwise dealing with the property of the 1st Respondent.

c) To declare and hold that the 2, 4 & 5 Respondents have mismanaged the affairs of the 1st respondent company and thereby direct the removal from their post of Director of the 1st respondent company for having played fraud and fabricating documents and declare them unfit to be appointed as a Director in any company;

d) To direct the Respondents 2, 4 & 5 to furnish the entire books of account in respect of transaction carried on by them and thereby make them liable for payment of the profit earned therewith;

e) To direct the 2, 4 & 5 Respondents to reimburse and compensate the 1st Respondent Company for the pecuniary loss incurred or suffered on account of diversion of business of 1st respondent at 18% interest per annum till the date of payment; and

f) Seeking a mandatory direction to the respondents to transfer or transmit the proportionate shares of my deceased parents to the extent of 3.57% (497) to and in my favour forthwith in pursuance of my representation dated 06.03.2019.

g) Seeking a mandatory direction to the respondents to disburse the admissible dividend payable to me as from 1987 to as on date.

h) Seeking a mandatory relief of cancelling the notice for the right issue as made to the eligible equity share holders of the 1st respondent company by the 2nd respondent in the ratio of face value of Rs.100/- each at the issue price of Rs.100/ each totaling Rs.27,86,000/- and declare the same as null and void. (The reliefs

Company Appeal (AT) (CH) No.81/2026 Page 5 of 8 f, g, h were incorporated additionally in the original application more particularly in column in VIII as sough for earlier. As per directions of this Hon'ble Tribunal dated 13.12.2019 in I.A.No.269/2019 in C.P.No.30 of 2018.)

i) To pass such further or other orders as this Representation 'ble Bench may deem fit and proper in the facts and circumstances of the case in the interest of the 1st respondent company and thus render justice."

6. Heard Mr. R. Murari for the appellant. Mr. T.K. Bhaskar takes notice for 1st

respondent, Mr. N. Palaniappan. Mr. PH. Arvindh Pandian takes notice for R-2 to

R-5, who are the legal heirs of late Mr. Thiagarajan. When we dissect the

submission of both the sides, the core issues are:

a) What are the meetings which according to the appellant, both Palaniappan

and late Thiagarajan have missed and whether they have invited upon

themselves the operation of Section 167(1)(b) of the Companies Act?

b) Whether there is a bona fide need for the 4th appellant company to go for

right issue?

c) Whether the board meeting, dated 17.05.2018 in which resolution to go

for right issue was taken, was validly and legally constituted?

d) Are there any specific acts of mismanagement?

e) If all or any of the facts as alleged are proved, given the scope of Section

241, what is the nature of relief which should be granted or in other words,

Company Appeal (AT) (CH) No.81/2026 Page 6 of 8 the most specific and appropriate relief that should be passed?

7. We do not find any specific finding to any one of these aspects. The

findings, if at all any, are general in nature. Indeed, the NCLT has merely said

that CP(CA)30/(CHE)/2018 is allowed, without specifying even the nature of

relief required to be granted. Indeed, one of the reliefs sought concerns

mismanagement and we do not see any specific finding as to the nature of

mismanagement alleged and proved.

8. We are therefore, constrained to set aside the order of the learned NCLT

in CP(CA)30/(CHE)/2018 and the matter is remanded back for a de novo hearing.

Since, the NCLT has already heard the matter once, we merely stipulate

maximum of one afternoon for each of the sides to present their case. However,

we underscore that eventually it is up to the tribunal to decide on the quantum of

time that they need to give the parties. Both sides are also required to facilitate

the proceeding before the learned Tribunal. Both sides are required to present a

very pointed notes on the issues involved.

9. It is underscored if at all there are any adverse observations made

anywhere in this order, they will not influence the NCLT. We will also appreciate

if the learned Tribunal can expedite the hearing and dispose of the matter

preferably within a period of two months.

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10. The appeal is accordingly disposed of. No costs.

[Justice N. Seshasayee] Member (Judicial)

[Jatindranath Swain] Member (Technical)

AR/MS/AK

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