Pawan Kumar Arya vs Arya Iron And Steel Co. Pvt. Ltd

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI COMPANY APPEAL (AT) NO.210 OF 2025 (Arising out of judgement and order dated 01.07.2025 passed by the National Company Law Tribunal, Mumbai in CP No.149/2017 alongwith CA No.328 of 2022 and CA No.30 of 2024) In the matter of: Arya Iron and Steel Co Pvt Ltd Appellant Vs Ravikumar Arya Respondent For Appellant:Mr Arun Kathpalia, Sr Advocate, Mr Lzafeer Ahmad BF, Mr Aditya Dhupar, Ms Diksha Gupta, Advocates. For Respondent:Mr. Krishnendu Dutta, Sr Advocate, Mr Anuj Tiwari, Mr Vaibhav Vats Ms Shalini Basu, Ms Kanchi Ahuja, Advocates for R6 and R8. Mr Saurabh Kirpal, Sr Advocate, Mr Kumar Anurag Singh, Mr Zain A Khan, Mohd Abrar Khan, Mr Junaid Aamin, Advocates for R2. Mr Vijay K Siongh, Advocate for R11 to R13. Ms Apurva Manwani, Mr Udit Gupta, Ms Shaily Gupta, Advocates for R1 and R2. With Company Appeal (AT) No.211 of 2025 In the matter of: Pawan Kumar Arya Appellant Vs Arya Iron & Steel Co Pvt Ltd Respondent For Appellant: Mr Abhijeet Sinha, Sr Advocate, Mr Anuj Tiwari, Mr Vaibhav Vats Ms Shalini Basu, Ms Alya Khan, Ms Kanchi Ahuja, Advocates for R6 and R8. For Respondent: Mr Saurabh Kirpal, Sr Advocate, Mr Kumar Anurag Singh, Mr Zain A Khan, Mohd Abrar Khan, Mr Junaid Aamin, Advocates for R2. Mr Vijay K Siongh, Advocate for R11 to R13. Ms Apurva Manwani, Mr Udit Gupta, Ms Shaily Gupta, Advocates for R1 and R2. JUDGEMENT

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

1. By the present Appeals, the Appellants are interalia seeking to set aside the

Impugned Order dated July 1, 2025, passed in Company Petition No. 149 of 2

2017, filed by "Ravi Arya Group" i.e., Respondent Nos. 1 to 5. It is alleged the

impugned order, amongst other things, a) wrongly directs ERP access to Ravi

Arya Group; (b) treats the company as quasi partnership despite absence of any

such agreement; and (c) orders a forensic audit of the company based on selective

appreciation of facts.

2. Admittedly the company is a private limited entity with a largest

shareholder being Palm View Overseas Ltd (PVOL), which holds 49% of the

shares and whereas Ravi Arya Group and Pawan Arya group, both rivals, each

hold 25.5% shares. It is argued despite knowing the RespondentNo.2 has floated

a rival company namely M/s Nachiketa Power & Steel Pvt Ltd and having

poached several key employees of the appellant company, the Ld. NCLT has

granted the Respondent an ERP access, including confidential business data,

pricing, ventures and client details, as are stored in the company's ERP system.

It is alleged Ravi Arya group no longer holds any board position having been

disqualified under the Companies Act and there being no ERP access available

to any of the directors.

3. It is also argued the directions given in para 41 and 42 of the impugned

order so far as it relates to the appointment of forensic auditor be set aside on

the grounds (a) the company petition for oppression and mismanagement has

since been dismissed by the Ld. NCLT vide its impugned order; (b) there exist a

finding that there is no lack of probity; (c) the Ld. NCLT held there is no

syphoning of funds (d) Ld. NCLT notes there is no denial of information; (e) no 3

prayer in the Company Petition is made for appointment of forensic auditor.

Thus in this light it is argued by the learned senior counsel for appellant the Ld.

NCLT has wrongly ordered of forensic audit on the strength of certain invoices

dating back to year 2015, which invoices were never even annexed with the

original petition and were allegedly discovered in the year 2022.

4. Thus it is argued by the learned senior counsel for the appellant such

direction, as are given in paras 41 and 42 of the impugned order, be set aside.

5. We have also heard the learned senior counsel for the Respondent who

has argued the forensic audit is directed only for the benefit of the company as

there being allegations of misappropriation made against the appellant/Pawan

Arya Group. It is alleged the appellant group has been misusing the revenue of

the appellant company to pay of their legal bills in fighting with the Respondents

and was also making payments from company's account for their joyous

journeys and for reasons unrelated to the affairs of the company. It is argued

such allegation have been noted in para 7.12.1 of the impugned order and it was

only because of this reason, the directions contained in para 41 and 42 of the

impugned order were given.

6. It was further argued by the learned senior counsel for the respondents

that the company is in the nature of a quasi-partnership, wherein 49% shares

of the company are held by PVOL, with Ravi Arya Group and Pawan Arya Group

at 25.5% each.

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7. The learned senior counsel for the Respondent have also referred to some

history between the rival parties stating interalia an attempt was made to settle

their disputes and Consent Terms were entered into between the two groups in

a civil suit pending between them, wherein a property at Bombay was to be given

to Pawan Arya Group by the Ravi Arya group (Respondents) and in return there

was to be an inter-se bidding of shares in the appellant company, of shares held

by the appellants, the Respondent and the shares of PVOL company. However,

it did not happen and ultimately the Hon'ble Supreme Court in an appeal had

given directions to implement such Consent Terms, but yet again the

respondents have filed a civil suit alleging interalia such settlement is not

workable and the suit is still pending. The Respondents viz Ravi Arya Group

than moved the Ld NCLT with a company petition No.149/2017 alleging

Oppression and Mismanagement against Pawan Arya Group viz appellants

herein. Admittedly the said Company Petition has since been dismissed vide the

impugned order but certain directions were given in para 41 and 42 of the said

order.

8. The learned senior counsel for the Respondent argued such directions can

be given even at the time of dismissal of a petition for Oppression and

Mismanagement to do complete/substantial justice. He referred to various

judgements in support of his argument viz Needle Industries (India) Pvt Ltd Vs

Needle Industries Newly (India) Holding Ltd and Others, (1981) 3 Supreme Court

Cases 333; Sangramsinh P Gaekwad Vs Shantadevi P Gaekwad, 2005 (11 SCC)

314; MSDC Radharamanan Vs MSD Chandrasekara Raja and Another, (2008) 6 5

Supreme Court Cases 750; Atlas Equifin P Ltd Vs Jackie Kakubhai Shroff and

Others, (2025) 254 Comp Case 525 wherein it was observed in given cases, the

Court despite holding that there is no case of Oppression and Mismanagement

made out, yet may grant such relief(s) to do complete justice between the parties.

Thus it is argued by the learned senior counsel for the Respondents the

directions given are only to do substantial justice and thus while dismissing the

company petition, the Ld. NCLT, in view of allegations of syphoning of funds, has

given such directions per paras 41 and 42 of the impugned order and no flaw

can be found in such directions.

9. We have heard the learned senior counsel for both the sides. Before

proceeding further let us examine the law on the subject. Section 242(1) and (4)

of the Companies Act, 2013 notes as under:-

242. Powers of Tribunal.--(1) If, on any application made under section 241, the Tribunal is of the opinion--

(a) that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and

(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks it. (2) xxx (3) xxx

(4) The Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the 6

company's affairs upon such terms and conditions as appear to it to be just and equitable.

10. The above section does say the Ld. NCLT under Section 242(4) has power

to pass interim orders as it thinks fit for regulating the conduct of the company's

affairs upon such terms and conditions which are just and equitable, but

admittedly such an order is in the nature of an interim order, passed during the

pendency of the Company Petition so as to enable the Ld. NCLT to pass a final

order. However, here the Ld. NCLT has though dismissed the Company Petition

No. 149/2017 on the ground no case is made out for Oppression and

Mismanagement, yet has given the following directions as are in paras 41 and

42 of the impugned order:

41.RA Group has alleged denial of Financial Information by PA Group and Manish Agarwal when sought by Nakul Arya specifically, however, we are of considered view that no prejudice is caused to RA Group as such information were available in terms of audited financial statements made available to all the directors. As regards access to books of account of the Respondent Company, Section 128(3) of the Companies Act, 2013 clearly mandates that "The books of account and other books and papers maintained by the company within India shall be open for inspection at the registered office of the company or at such other place in India by any director during business hours". We note that dispute has arisen from insistence to make available virtual access to the ERP platform as is available to other directors. PA group has contended that such access cannot be made available in view of past instance of theft by one of employee, who is now employed with RA Group, and RA Group being engaged in competing business under the name and style of Nachiketa Power & Steels Private Limited. RA Group has submitted that no manufacturing facility has been set thereunder. We are of considered view that a director, who is otherwise entitled to have access to books of account, cannot be denied access on this ground, unless there is tangible evidence of misuse of company information by such director to the detriment of 7

company or for his personal gain. No such evidence has been placed on record by PA Group. The aspect of confidentiality and theft are to be dealt with by framing a suitable policy in this respect and ensure adherence to such policy by all, whosoever seeks access to company information. In view of this, we direct the Respondent Company to allow the remote access to ERP to directors from RA Group, in case such access is available to other directors as well, or stop such remote access of all directors to ERP. Needless to say, the director of a company, whosoever group he/she belongs to, shall have a right to access to books of account of Respondent Company at a place where such books of account are kept during the business hours of Respondent Company and CFO of the Company shall ensure that such access is not denied.

42. As regards allegations of misappropriation of funds, the Respondent Company shall engage a forensic audit firm to look into following aspects for last six years and the Report of such Auditor shall be placed before the Board within six months from the date of this Order-

a. Personal Expenses of Directors, not forming part of their emoluments as approved by Board as director, booked in the Respondent Company;

b. Any Expenses, booked in the Respondent Company, incurred for purpose other than business of the Respondent Company, or appearing to be fictitious;

c. Payments made to Promoters/Directors/their related parties; authorizations in relation thereto; whether any of such expenses not disclosed as Related Party Transaction in audited financial statements; whether any authority has held such payment to be excessive or not related to the business of the company;

d. Any statutory violations or infraction of any law; and the reasons therefor.

11. Admittedly in paras 41 and 42 above, the Ld. NCLT has tried to carve out

an exception to the normal rule as is given in sub-clauses (a) and (b) of Clause

(1) of Section 242, hence it was incumbent upon the Ld. NCLT to note the cogent

circumstances exist to pass such directions to do substantial justice. In the

cases cited above on behalf of the Respondents, admittedly the directions were 8

given either in cases of buy back of shares to give an exit to member(s) and/or

in a complete dead lock in the company. It was only in such situations, the

powers were exercised while dismissing the petition. Needle Industries (India)

Ltd (supra) was a case of buy out of shares; Sangramsinh P Gaekwad (supra) was

a case of absolute dead lock; MSDC Radharamanan (supra) was yet another case

of dead lock and Atlas Equifin (supra) admittedly was a case of buy out to give

an exit to a member. None of these circumstances exist in the present case so

as to empower the court to pass directions as are contained, specifically in para

42 of the impugned order as above. Neither the present case is a case of buy-

out/exit from the company nor is a case of complete dead lock. Admittedly the

Ld. NCLT has observed the Articles of Association of appellant No.1 captures the

actual structure of the company and hence it cannot even be said the company

is a quasi-partnership. Para 44 of the impugned order needs to be referred to in

this regard as under: -

44. As regards allegation of sidelining of RA Group from the management of the Respondent Company, it is noted that there exists a Shareholder Agreement amongst the parties after induction of PVIL as shareholders and relevant part of such shareholders agreement after having been incorporated in the Articles has a statutory force. No verbal understanding survives thereafter. PA Group shall ensure that business of the Respondent Company is carried strictly in accordance with terms of such shareholder agreement and provisions of Companies Act, 2013. In our considered view, no director or group of shareholder can assert that business of the Company should be carried with his positive vote only, so long as such business is carried by majority vote or such vote as is otherwise agreed between the parties.

9 12. Thus we find none of the judgements referred to above by the learned

senior counsel for Respondents are applicable upon facts of this case. The Ld.

NCLT admittedly had not only rejected the allegations on Oppression and

Mismanagement, but have also held there is no lack of probity, no dead lock, and

hence the directions given are in the teeth of its earlier order dated 16.12.2022

passed by the Ld. NCLT in this company petition itself in IA No.328/2022, where

while allowing three prayers in the said IA it did not allow forensic audit.

Admittedly three appeals viz Company Appeal (AT) No. 1, 2 and 3 of 2023 were

filed and the order dated 16.12.2022 passed by the Ld. NCLT was set aside by

this Tribunal.

13. Though we find the Respondents have filed certain invoices which do

reveal the legal/travel expenses of the appellants being met from the revenue of

the company but admittedly Respondent No.2 was also a director during such

period. Moreso though respondents have filed document of 2015 in the year 2022

yet did not give any such documents of later years. The Ld. NCLT rightly did not

direct examination of the documents of the year 2015, being beyond limitation

yet had directed appointment of forensic auditor to examine the allegations of

misappropriation to look into such expenses for the last six years, without their

being such cogent evidence filed by the Respondents after 2015. Admittedly even

today Respondent No.2 is on the Board of Directors and yet submits he has no

access to any of the financial statements, which submission appears to be

frivolous.

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14. Further we may say such a direction could have been passed only under

sub Clause (b) of Clause (1) of Section 242 of Companies Act, 2013 when the

circumstances were just and equitable for winding up of appellant No.1 and

where instead of ordering the winding up of the company, the Ld. NCLT could

have passed further directions, maybe, to investigate into its affairs. Admittedly

no case was brought before the Ld. NCLT such circumstances ever exist for

winding up of the appellant No.1, hence passing a direction to investigate into

the affairs of the company upon a complaint of a disgruntled Director and that

too without any cogent reasoning, cannot be said to bring an end to the matter.

15. In Shanti Prasad Jain Vs Kalinga Tubes Ltd (1965) 35 COMP CAS 351 the

Court held as under:-

In Harmer's case, it was held that " the word ' oppressive ' meant burdensome, harsh and wrongful". It was also held that " the section does not purport to apply to every case in which the facts would justify the making of a winding up order under the ' just and equitable' rule, but only to those cases of that character which have in them the requisite element of oppression." It was also held that " the result of applications under Section 210 in different cases must depend on the particular facts of each case, the circumstances in which oppression may arise being so infinitely various that it is impossible to define them with precision." The circumstances must be such as to warrant the inference that " there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy". The phrase "oppressive to some part of the members"

suggests that the conduct complained of " should at the lowest involve a visible departure from the standards of fair dealing, and a violation of the conditions of fairplay on which every share holder who entrusts his money to a company is entitled to rely . . .

11 16. Further in Hanuman Prasad Bagri and others Vs Bagress Cereals Pvtr Ltd

& Other (2001)4 Supreme Court Cases 420, it was held by the Hon'ble Supreme

Court that directorial complaints can not be a ground for winding up of the

company on just and equitable grounds, hence directions as made cannot be

passed.

17. Thus while upholding the direction given in para 41 (supra) as such

directions are innocuous and give equal treatment of all directors, we set aside

the direction given in para 42 of the impugned order as no cogent evidence has

been placed before us, after the year 2015, despite Respondent No.2 being a

director in the company. Hence we set aside the direction given in para 42 above,

of the impugned order. Of course this shall not refrain the Respondents to

further their cause in case they find any element of fraud, lack of probity etc.

after having been given access to ERP.

18. With these observations these appeals stand disposed of.

19. Pending applications, if any, are also closed.

(Justice Yogesh Khanna) Member (Judicial)

(Mr Ajai Das Mehrotra) Member (Technical)

Dated:22-9-2025