Nagaraj V. Mylandla vs Financial Software And Systems Private ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL CHENNAI (APPELLATE JURISDICTION) Comp App (AT) (CH) No.84/2024 (Arising out of the `Impugned Order' dated 11.12.2024 in IA(CA)/229(CHE)/2024 IN CP(CA)/129(CHE)/2023), passed by the (`National Company Law Tribunal', Chennai Bench)

In the matter of: 1. Mr. Nagaraj V. Mylandla, A/1/5, Chitra Apartments, 23rd Cross Street, Besant Nagar, Chennai - 600 090. 2. Mrs. Sharada Mylandla, A/1/5, Chitra Apartments, 23rd Cross Street, Besant Nagar, Chennai - 600 090. 3. Mr. Archit Mylandla, A/1/5, Chitra Apartments, 23rd Cross Street, Besant Nagar, Chennai - 600 090. .... Appellants v. 1. Financial Software and Systems Pvt. Ltd. and Ors. Represented by its authorized representative "Saradha", Ground Floor, No. 42, Third Main Road, Gandhi Nagar, Adayar, Chennai - 600 020.

2. PI OPPORTUNITIES FUND - I #134, Doddakannelli, Next to Wipro corporate office, Sarjapur Road, Bangalore, Karnataka - 560 035.

3. NYLIM JACOB BALLAS INDIA (FVCI) III LLC, 4th Floor, Ebene Heights, 34 Cybercity, Ebene 72201, Republic of Mauritius.

Comp App (AT) (CH) No.84/2024 Page 1 of 8 4. NYLIM JACOB BALLAS INDIA FUND III LLC 4th Floor, Ebene Heights, 34 Cybercity, Ebene 72201, Republic of Mauritius.

5. MILLENNA FVCI LTD. Sanne House, Bank Street, Twenty Eight, Cybercity, Ebene 72201, Mauritius.

6. Mr. Vijendar Dwarakanath, Nominee Director of Financial Software and Systems Private Limited, Representative of PI Opportunities Fund - I, Having office at #134, Doddakannelli, Next to Wipro Corporate Office Sarjapur Road, Bangalore, Karnataka - 560 035.

7. Mr. Srinivas Chidambaram, Nominee Director of Financial Software and Systems Private Limited, Representative of Nylim Jacob Ballas FVCI India III and Nylim Jacob Ballas Fund India, Having office at 4th Floor, Ebene Heights, 34 Cybercity, Ebene 72201, Republic of Mauritius.

8. Ms. Bala Deshpande, Nominee Director of Financial Software and Systems Private Limited, Representative of Millena FVCI LLC (formerly known as NEA FVCI LLC), Having office at Sanne House, Bank Street, Twenty Eight, Cybercity, Ebene 72201, Mauritius.

9. Mr. Rudhraapathy J, No.9, Sarvam Pranavam Apartments, Luz Church Road, 1st Street Mylapore, Chennai - 600 004.

Comp App (AT) (CH) No.84/2024 Page 2 of 8 10. Mr. Anand Mitkari, Senior Vice President - Finance Financial Software and Systems Private Limited, "Saradha", Ground Floor, No. 42, Third Main Road, Gandhi Nagar, Adayar, Chennai - 600 020

11. V. Balasubramanian, Chief Executive Officer - Cashtech Division, Financial Software and Systems Private Limited, "Saradha", Ground Floor, No. 42, Third Main Road, Gandhi Nagar, Adayar, Chennai - 600 020

12. Mr. Gautam Rohidekar, Senior Vice President - Legal Financial Software and Systems Private Limited, "Saradha", Ground Floor, No. 42, Third Main Road, Gandhi Nagar, Adayar, Chennai - 600 020.

13. Mr. Rakesh Singh, Company Secretary Financial Software and Systems Private Limited "Saradha", Ground Floor, No. 42, Third Main Road, Gandhi Nagar, Adayar, Chennai - 600 020. ....Respondents

Present:

For Appellants : Mr. P.H. Arvindh Pandian, Senior Advocate For Mr. Rajkumar Jhabakh, Advocate For Respondents : Mr. P.S. Raman, Senior Advocate Mr. R. Parthasarathy, Senior Advocate For Mr. P. Giridharan, Mr. H. Siddarth & Mr. PSS Bhargava, Advocates for R2 Mr. Prabhav Sharoff, Advocate for R3 Ms. Mrudula Dixit, Advocate for R4 Mr. Suhrith Parthasarathy, Advocate for R5 Ms. Amritha Sathyajith, Advocate for R8 Mr. T.K. Bhaskar, Advocate for R9 to R13

Comp App (AT) (CH) No.84/2024 Page 3 of 8 JUDGMENT

(Hybrid Mode)

[Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial)]

This is a Company Appeal which has been preferred under Section 421 of

the Companies Act, 2013, where the Appellant/Petitioner puts a challenge to the

Impugned Order dated 11.12.2024, as it has been rendered by the Learned

Adjudicating Authority in IA(CA)/220(CHE)/2024 in CP(CA)/129(CHE)/2023.

As a consequence of the Impugned Order, which has been passed, the Learned

Adjudicating Authority had only granted time to the Respondents to file a reply

and had permitted the AGM to be carried and further directed that the outcome of

the AGM particularly in so far it related to Agenda No.1 be kept in abeyance,

subject to the orders of the Tribunal.

The brief facts as pleaded by the Learned Counsel for the Applicant, while

pressing upon the relief in relation to the Impugned Order are that he had initiated

the proceedings under Sections 241, 242, and 128 of the Companies Act, 2013,

wherein he had contended that the Appellants collectively hold 33.9%

shareholding in the Respondent No.1 Company, that Appellant No.1 is the

founder; chairman, and a erstwhile managing director on the Board of Directors

of the Respondent No.1 Company, that Respondent Nos.2 to 5 are investor-

shareholders in the company holding 51.78% of the shares of the company, that

Respondent Nos.6 to 8 are nominee directors of the investors in the Board &

Respondent No.9 is a promoter and whole-time Director, that the Board of the

Comp App (AT) (CH) No.84/2024 Page 4 of 8 company consists of 6 Directors, the Appellant Nos.1 & 2 and Respondent Nos.6

to 9 and that all the Respondents have conspired together and engages in acts of

oppression and mismanagement against the interest of the Appellants and the

Respondent No.1 Company.

During the pendency of the Company Petition, the Appellant had filed the

aforesaid Interlocutory Application in IA(CA)/229(CHE)/2024 on which the

Learned Adjudicating Authority has passed orders which is being challenged here.

By virtue of the said Order, the Learned Adjudicating Authority had refused to

entertain the pleadings extended by the Learned Counsel for the Appellant

regarding the action of Respondents being violative of Section 134 of the

Companies Act, 2013, based on which, the Appellant had opposed holding of the

AGM. The Appellant had contended that though the Application before the

NCLT was filed with sufficient justifications and grounds, the NCLT decided not

to interfere in the course of action of the Respondents and the Respondents were

allowed to continue operating in absolute disregard to the specific mandate of the

Companies Act, 2013.

In the main Company Petition, CP(CA)/129(CHE)/2023, the Appellant had

raised a dispute pertaining to the management of the Company and oppression of

his rights, more particularly, the concerns regarding the financial affairs and

accounting practices followed by the Company, such as removal of advances

worth Rs.52.33 crores, from the books of accounts of the Company, reversal of

Comp App (AT) (CH) No.84/2024 Page 5 of 8 entries and backdating of entries, regarding illegal manner in which the Board

meetings are being conducted and financial statements are being signed and

regarding denial to inspect Company's financial records in contravention of

Section 128 of Companies Act. While the said petition was in hearing stage, the

Respondents conducted Board meeting on 12.11.2024 with Respondent No.9 as

the Chairman of the meeting and passed certain resolutions such as approval of

financial statements for financial year 2023-24, fixing date for AGM, appointment

of directors and adoption of financial statements and Director's Report in the

AGM. Since these actions were highly irregular, he moved an Interlocutory

Application IA(CA)/229(CHE)/2024 before Learned NCLT, challenging the

aforesaid actions and praying to restrain the Respondents from placing financial

year 2024 financials for shareholder approval in the AGM to be held on

11.12.2024.

In the Application thus preferred by the Appellant, being

IA(CA)/229(CHE)/2024, the precise prayer of the Appellant was to set aside

Resolutions, which were passed by the Board of Respondent No.1 Company in

its meeting on 12.11.2024, to approve the financial statements for the financial

year ended on 31.03.2024, to approve the director's report of the Company for the

financial year ended on 31.03.2024, and to convene the 33rd Annual General

Meeting of the Company on 11.12.2024. As the AGM was scheduled to be held

on 11.12.2024, as the Learned Counsel for the Appellant has submitted, the

Comp App (AT) (CH) No.84/2024 Page 6 of 8 Appellants also requested that since they want to place their objections qua the

Agenda No.1, to adopt the financial statement of the Company for the Financial

Year ending on 31.03.2024 and since they will not be able to attend the meeting

on the proposed date, the AGM may be postponed to 18.12.2024 to enable him to

attend it. The request for the postponement of the meeting was denied by Learned

NCLT and it was instead directed that the AGM is to be held as scheduled, but

the outcome of the same will be subject to the orders to be passed by the Tribunal.

The relevant observation made by the Learned Adjudicating Authority in the

Impugned Order is extracted hereunder: -

"Having heard the Ld. Counsels for the parties and that Ld. Counsel for the Respondents seek and are granted time to file reply, we directed that let the AGM be held, however, the outcome of the AGM on Agenda No.1 shall be subjected to the order of this Tribunal".

In fact, looking at the nature of the order, which has been subjected to

challenge by invoking Section 421 of the Companies Act, 2013, it takes the shape

of an Interlocutory Order, where the right of the Appellant in the context of

provisions contained under Section 134 of the Companies Act, 2013, which

though being procedural in nature and it's not being a substantive provision, has

been left open to be considered and thus the Impugned Order permitting holding

of the AGM as scheduled would be an Interlocutory Order.

Since no material right of the Appellant has been addressed or effected on

the merits and all objections of the Appellant have been left open to be considered

Comp App (AT) (CH) No.84/2024 Page 7 of 8 at the stage of the AGM, it will not fall to be an appealable order under Section

421 of the Companies Act, 2013, as it has been left open for him to agitate all his

grievances, when the Company Petition itself is taken up on merits qua the

decision taken on the AGM as directed to be held in pursuance to the Impugned

Order. Thus, the appeal since being premature as it arises out of an Interlocutory

order, it will not amount to be an adjudication of a right to sustain the appeal.

Thus, the appeal lacks merits and the same is accordingly dismissed, reserving all

the rights of the Appellant to be agitated at an appropriate stage in the proceedings

of the Company Petition being CP(CA)/129(CHE)/2023.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Jatindranatha Swain] Member (Technical) 24.12.2024 VG/TM/MS

Comp App (AT) (CH) No.84/2024 Page 8 of 8