Rang Sharda Hotels Private Limited & Ors vs Girish Prabhudas Lotia

IN THE MATTER OF: Rang Sharda Hotels Pvt. Ltd. & Ors. ...Appellants

Versus Girish Prabhudas Lotia ...Respondent Present: For Appellants: Mr. Shyam Kapadia and Mr. Ayush Rajani, Advocates. For Respondent: Mr. S. Santanam Swaminadhan and Mr. Kartik Malhotra, Advocates.

ORDER

16.08.2022: Heard Mr. Shyam Kapadia Ld. Counsel for the Appellant and Mr. S. Santanam Swaminadhan Ld. Counsel appearing on behalf of the Respondent, who is Applicant in CP No. 8 of 2011 in which on 28.06.2022 a Petition was filed vide CA No. 317 of 2022.

The Appeal has been preferred under Section 421, of the Companies Act, 2013 against the order dated 30.06.2022 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court -II). By the said order on CA No. 317 of 2022, the Adjudicating Authority, while granting two weeks time to the Appellant herein to file Reply, has passed an order directing to maintain the Status Quo till the next date of hearing and it was directed to be listed on 28.07.2022. The Present Appeal was filed vide Diary No. 58539 dated 04.07.2022.

Before proceeding further it would be appropriate to reproduce the impugned order dated 30.06.2022 as follows:

-2- "CA 317/2022 :- The matter is taken up through Virtual Hearing (VC). The present application filed by Original Petitioner of CP. 8/(MB)/2011. In the said application the applicant sought various prayers particularly prayer 'e' whereby there appears he has some apprehension that Respondent No.1 to file are in the process of to creating third party interest in respect of immovable properties of the Respondent No.1 Company more particularly the entire building along with the lease hold land i.e. Plot No. 791, KC Marg, Bandra Reclamation, Bandra (W), Mumbai 400050 allotted to the Rang Sharda Pratishthan Trust by MHADA. The Counsel appearing for the Respondents seeks time to file reply, let the reply be filed within a period of two week's time. Copy of the reply may also be given to the Counsel appearing for the Applicant. In the meantime, Respondents are directed to maintain the status-quo till the next date of hearing. List the matter on 28.07.2022".

Ld. Counsel for the Appellant assailing the impugned order has firstly argued that initially the CP No. 8 of 2011 was filed by the Respondent herein before the NCLT in respect of a dispute which arose in the year 1985. He submits that after about 11 years such Petition was filed and thereafter on 28.06.2022 the present CA was filed i.e. 317 of 2022 in which the Counsel for Appellant herein appeared and requested for granting time for filing Reply. However, without affording opportunity of hearing the Ld. NCLT has passed the blanket order of status quo. According to the Ld. Counsel for the Appellant the impugned order is directly in the teeth of an order passed by this Tribunal in a case i.e. Indus Motor Company Pvt. Ltd. & Ors. vs. T.P. Anilkumar & Ors. decided on 11.05.2022.

-3- Ld. Counsel for the Appellant has specifically referred to paragraph 32, 34, 35 & 41. He emphasized that the issue regarding passing absolute order of status quo has been set at rest. He submitted that in the present case the Appellant is running a hotel and granting a status quo order is contrary to the law laid down by this Tribunal in Indus Motor Company Pvt. Ltd. (supra). He has further referred to statement made in paragraph 2 of the Memo of Appeal wherein it has been indicated that the Applicant before the NCLT was having only 7% of the equity shares and he incorrectly claimed to hold 23.33%. It has been reiterated that the Applicant before the NCLT had not approached with clean hands and incorrect statement was made. As per Ld. Counsel for the Appellant the impugned order is liable to be set aside.

Ld. Counsel for the Respondent has opposed the prayer of the Appellant. He refers to the fact disclosed in paragraph 3 of the Memo of Appeal and submits that the Respondent herein had increased his shareholding as he is entitled for 50% and as such the Ld. Tribunal has not committed any error in passing the impugned order.

Before proceeding further we feel it appropriate to reproduce paragraph 32, 34, 35 and 41 of Indus Motor Company Pvt. Ltd. (supra) as follows:

"32. This Tribunal is of the view that the NCLT while passing the interim order of status quo on 17.01.2020 simply stated that the parties are directed to maintain status quo in all aspects as on today until further orders, has not specifically made out whether status quo to be maintained with respect to management, shareholding and immovable assets of the Company. This Tribunal is of the view that the status quo order is in wider amplitude. It is an admitted fact that the Appellant No.1 Company is into the business of automobile sector and there are 6000 workers in the Company. As per the MOA, the main objects are to carry on the business of motor dealers of cars, motor vehicles etc. and the company has to perform its functions as per its objectives. The NCLT ought to have specified the status quo order with regard to its either shareholding, management and immovable properties etc. Though the -4- Respondents herein have alleged the acts of oppression and mismanagement in the affairs of the company and sought various reliefs i.e. main and interim reliefs and the Company Petition is still pending for Adjudication. While so it is not out of place to mention that the Petitioners expresses their apprehension that the assets of the Company are being sold or the Petitioners/Applicants proposed to remove from the Board of Directors of the Company, in such cases to prevent such acts the Tribunals keeping in view of the interest of the Applicants grants interim order. Any orders either interim or final should invariable in the paramount interest of the Company.

34. This Tribunal is of the view that the Appellants have not violated the orders of the Tribunal dated 17.01.2020 by making it clear that the Company has to function through the Board of Directors and there is no stay with regard convening and holding of the Board meetings to take a timely decision on the basis of the business of the Company. It is made clear that the interest of the Company is paramount. It is also made clear that the Appellant No. 1 Company is a Board managed Company and the Company in variably takes its decisions in the Board and General Meetings which is to take business decisions and also to comply with the applicable provisions of the Companies Act, 2013.

35. It is an admitted fact that the Appellant No. 6 filed an affidavit dated 03.03.2021 before the NCLT Kochi Bench after the Board meeting held on 10.02.2021. However, the Respondents herein have filed CA 44 of 2021 subsequent to filing of Affidavit. The NCLT ought not to have interfered with tis business decisions which is in the interest of the company. Further, the NCLT ought to have clarified the status quo order dated 17.01.2020 more specifically, however in absence of clarification, the passing/granting of status quo in all respects leads to ambiguity. Even the Appellants have not questioned the status quo however, aggrieved by further imposing restrictions with regard to raising of additional debt, which according to the Appellants is a interference in the day-to-day affairs of the Company.

-5- 41. This Tribunal comes to a resultant conclusion that while passing of status quo order it should be specific with respect to subject matters more particularly in the matters of oppression and mismanagement, on the basis of the facts of each case and if such status quo is warranted to protect the interest of the Applicants/Petitioners therein. In such circumstances the Tribunals while passing of status quo order, should be more specific as held by the Hon'ble High Court of Karnataka in the matter of "N Ramaiah vs. Nagaraj" supra. However, by way of impugned order dated 18.06.2021 the NCLT while making interim order dated 17.01.2020 as absolute, however, with respect to passing of order viz; "raising of any additional debt shall be kept in abeyance", is in our considered view is interfering with the day-to-day affairs of the Company. Therefore, this Tribunal find that the impugned order dated 18.06.2021 para 11 third sentence onwards namely "making it clear that the approvals/resolutions etc. with respect to raising of any additional debt shall be kept in abeyance and the same will be subject to the outcome in the main Company Petition" is hereby quashed and set aside. Accordingly, the issue is answered".

Besides hearing Ld. Counsel for the parties we have also perused the materials available on record particularly the impugned order. On going through the impugned order, it is evident that Ld. Counsel for the Respondent herein who was the Appellant before the NCLT was having apprehension regarding possibility of creating a third party right and as such the Petition was filed for passing status quo order. The status quo order was not absolute but it was passed only till the next date of hearing and the Appellant herein was granted time to file Reply. Surprisingly, the Appellant instead of filing proper Reply before the NCLT, has directly approached to this Tribunal. So far the Judgment i.e. Indus Motors Pvt. Ltd. referred to by the Ld. Counsel for the Appellant is concerned, in the said case absolute status quo order was passed, whereas in the present case the status quo order was passed till the next date of hearing. Of course in the present memo of appeal the Appellant has taken a plea that the Respondent herein was having only 7% shares or the Respondent -6-

has not approached the NCLT with clean hand, but this court is of the opinion that all those points whatever was available to the Appellant was required to be addressed to the NCLT itself by filing proper Reply. Against such order there was no reason for filing the Appeal. The Appeal stands dismissed.

However, it will be open to the Ld. Counsel for the Appellant to raise all the points before the NCLT which may be decided by the NCLT at the appropriate stage.

[Justice Rakesh Kumar] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

sr/bm Company Appeal (AT) No. 139 of 2022