National Company Law Appellate Tribunal
Mr Siddarth Bhandari & Ors vs Electrotherm (India) Limited & Ors on 29 November, 2022
1
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH
NEW DELHI
COMAPNAY APPEAL (AT) No.199/2022
(Arising out of judgement and order dated 24.08.2022 passed
by the National Company Law Tribunal, Ahmedabad, Division
Bench, Court No.1 in IA/55(AHM)2022 in CP/5(AHM)2022)
In the matter of:
Siddharth Bhandari & Ors Appellant
Vs
Electrotherm (India) Ltd & Ors Respondent:
For Appellant: Mr. Rudreshwar Singh, Mr. Saurabh Jain, Ms Isha
Singh and Mr. Prayag Jain, Advocates.
For Respondent: Ms Geetika Sharma, Mr. Rohan Talwar and Mr.
Shashwat Singh, Advocates.
JUDGEMENT
(29 November, 2022) th JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL) The present appeal under Section 421 of the Companies Act, 2013 has been preferred against an order dated 24.08.2022 passed in IA No.55/2022 which was filed in Company Petition No.5/2022 by the appellant herein before the National Company Law Tribunal, Ahmedabad Bench (hereinafter referred to as NCLT). Company Appeal (AT) NO.199/2022 2 By the said order Learned NCLT rejected the IA No.55/2022 wherein a prayer was made to restrain Respondent No.1 i.e. M/s Electrotherm (India) Ltd (hereinafter referred to as the 'company') from holding a Board Meeting of its Directors. Before proceeding further it would be appropriate to reproduce the impugned order:
1. This application has been filed by the Petitioner in CP No.5 of 2022 purportedly under Section 242(4) of the Companies Act, 2013.
The original Company Petition has been filed under Section 241- 242 of the Companies Act, 2013. By this application, the applicant requested us to restrain the Respondent no.1 company from holding a meeting of the Board of Directors as per order dated 24.05.2021 passed by Hon'ble NCLAT in Company Appeal No.57 of 2021.
2. The Respondents were called upon to make submissions on this point. Accordingly, we heard the Learned Counsel Mr. Pavan Godiawala for the applicant, Learned Senior Counsel Mr. Navin Pahwa for the Respondent No.-1, Learned Senior Counsel Mr. Saurabh Soparkar for the Respondent No.-2. We have gone through the various orders passed by this Tribunal, orders passed by Hon'ble NCLAT and the order passed by Hon'ble Supreme Court.
3. Company Appeal No.57 of 2021 before Hon'ble NCLAT arose out of the order dated 04.05.2021 passed by this Tribunal. The order sought to be challenge before Hon'ble NCLAT reads as under:
Company Appeal (AT) NO.199/2022 3 "... tribunal directed to appoint Mr. Siddharth Bhandari as joint signatory of all bank accounts of Respondent no.1 company with immediate effect. The accounts shall be operated under joint signatory of Mr. Shailesh Bhandari and Mr. Siddharth Bhandari." 4. Mr. Shailesh Bhandari - M.D. of the Respondent No.1 Company assailed above order before Hon'ble NCLAT (Company Appeal No.57 of 2021). It was the contention of Mr. Shailesh Bhandari that as per the order of NCLT (referred above), the meeting of Board of Directors dated 27.05.2021 was called to consider the order. He requested the appellate tribunal to stay that meeting. While considering his prayer, Hon'ble NCLAT passed an order dated 24.05.2021 as follows:
"12. List these Appeals on 07.06.2021 till then no further meeting of Board of Directors of the Appellant company shall be convened and held."
5. Learned Counsel Mr. Pavan Godiawala, appearing for the applicant, submitted that the order dated 24.05.2021 passed by Hon'ble NCLAT was continued till disposal of that appeal. Hon'ble NCLAT pleased to dismiss the appeal confirming the order of this tribunal whereby and where under, it was directed that all bank accounts of the company shall be operated under the joint signatures of Mr. Shailesh Bhandari and Mr. Siddharth Bhandari. Hon'ble NCLAT had also stayed the meeting of the Board of Directors. Mr. Siddharth Bhandari filed a second appeal in Hon'ble Company Appeal (AT) NO.199/2022 4 Supreme Court bearing Civil Appeal No. 2329- 2330 of 2022. On 25.02.2022, Hon'ble Supreme Court passed order as under:
"until further orders, the interim order, granted by the National Company Law Appellate Tribunal, Principal Bench, New Delhi (in short 'the NCLAT') in Company Appeal (AT) Nos. 54 of 2021 etc. on 17.06.2021 is continued."
6. Learned Counsel Mr. Pavan Godiawala submitted that since the interim order not to hold board meetings is still continuing, the Respondents cannot hold meetings of the Board of Directors. They may be restrained from holding such meetings.
7. Learned Senior Counsel Mr. Navin Pahwa for the Respondent No.-1 brought to our notice that the meeting of the Board of Directors is arranged to nominate some persons as additional directors, as the tenure of some directors is getting over. As per Section 161(1) of the Companies Act, 2013, such persons shall be director to only up to the AGM. In the Annual General Meeting, shareholders may approve such appointment. He further submitted that the issue was pending before the Hon'ble NCLAT and now before the Hon'ble Supreme Court is, not to implement order of this tribunal dated 04.05.2021 whereby this tribunal directed to appoint Mr. Siddharth Bhandari as joint signatory to operate all bank accounts of the R-1 Company. He would further submit that there was no stay to hold the meetings of the board of directors. The stay was related to the consideration of the order of this tribunal in the meeting. According to him, if the company is not Company Appeal (AT) NO.199/2022 5 allowed to hold a meeting of the Board of Directors, then it would be difficult to run the company itself.
8. Learned Senior Counsel, Mr. Soparkar for the Respondent No.-2 submitted that there is no stay to hold meeting of Board of Directors. Moreover, if at all, such a meeting is held, then the applicant will not suffer any irreparable loss. The facts as stand today would show that the prima-facie case is not in the favor of applicants. According to Learned Senior Counsel, this application is not maintainable on above broad principles also. 9. We perused the order dated 25.02.2022, passed by Hon'ble Supreme Court. Hon'ble Supreme Court directed that the interim order dated 17.06.2021 passed by NCLAT to continue. But order reads as follows:
"the direction contained in the Interim Order of NCLT Ahmedabad Bench, Court-I in MA 08 of 2021 in CP No.93 of 2018 & Comp. App. 27 of 2021 in CP 38 of 2019 dated 04.05.2021 as it contains in Para 2 sub-clause (i) which reads as under:
"Respondent No.1 Company as well as Respondent No.5 in MA 08 of 2021 are directed to appoint Mr. Siddharth Bhandari as joint Signatory of all bank accounts of the Respondent No.1 Company with immediate effect. The accounts shall be operated under joint signature of Mr. Shailesh Bhandari and Mr. Siddharth Bhandari." Shall remain stayed till next date of hearing of the appeal."
Company Appeal (AT) NO.199/2022 6
10. By perusal of above order, it is crystal clear that firstly Hon'ble NCLAT and now Hon'ble Supreme Court has stayed the order passed by this Tribunal, whereby, this Tribunal directed to operate bank accounts of R1 Company under joint signatory of Mr. Siddharth Bhandari and Mr. Shailesh Bhandari and nothing else.
11. There is no order in existence as on today, restraining the Respondent No.1 company from holding a meeting of the Board of Directors. This application appears misconceived and hence is not maintainable, it stands rejected.
12. When we reserved this application for order on 02.08.2022, we have observed that any resolution passed in the meeting dated 03.08.2022 shall be subjected to the order passed on this application. Since, we reject this application by this order, the above observation becomes infructuous and hence, set aside.
13. Accordingly, the I.A. No.55 of 2022 stands dispose of." On perusal of the impugned order we are of the considered opinion that there was no reason for filing the appeal against such order. However, the appellants to the reasons best known to them has filed the present appeal.
Mr. Rudreshwar Singh, learned counsel appearing on behalf of the appellants tried to persuade this Appellate Tribunal that the proposal of company for holding a Board Meeting of its Directors Company Appeal (AT) NO.199/2022 7 was in the teeth of an interim order passed by the Hon'ble Supreme Court dated 25.02.2022 passed in Civil Appeals No.1329- 1330/2022. A plea was taken that earlier against an order dated 4th May, 2021 passed by the NCLT the appeals were preferred before this Appellate Tribunal vide Company Appeal (AT) No.54 of 2021 and other three connected appeals. The relevant portion of the order dated 4th May, 2021 passed by NCLT is quoted hereinbelow:
"2.In the back ground of these submissions and considering the fact that main applications need detailed arguments, however, due to impending summer vacations and pandemic situation prevailing in the country, we consider it appropriate to pass interim order so that the functioning of the company is not affected adversely till the final disposal of all matters. In this regard, we express our displeasure as to how both groups are acting because in such matter involvement of police as such is not desirable things and both groups should act responsibly so that interests of the shareholders at large as well as of the company are not adversely affected. Be that as it may, We need to provide some interim solutions. Accordingly, we order as under:
i) Respondent No.1 company as well as Respondent No.5 in MA 08 of 2021 are directed to appoint Mr. Siddarth Bhandari as joint signatory of all bank accounts of the Respondent No.1 Company Appeal (AT) NO.199/2022 8 company with immediate effect. The accounts shall be operated under joint signature of Mr. Shailesh Bhandari and Mr. Siddarth Bhandari.
ii) Mr. Siddarth Bhandari shall also be a special invitee to all board meetings of the company which are held henceforth.
iii) All policy decisions which may affect smooth running of the Respondent No.1 company as a going concern or otherwise to protect interests of other stake holders such as financial lenders shall be taken with consent of Mr. Mukesh Bhandari and Siddarth Bhandari. Without expression of any opinion on merits of their appointment, all independent directors would exercise their rights in terms of the provisions of Companies Act, 2013 r.w. Schedule IV thereto.
iv) The Petitioner in Comp. Appl.27 of 29018 shall have unfettered right to run day to day affairs as Managing Director of Respondent No.1 company and he shall not be restricted/prevented from access to the company premises or in properties owned by the Respondent No.1 company so as to run business affairs subject to directions given hereinabove.
v) Interim order given earlier also to continue till further orders." After filing of the appeal against order of NCLT firstly on 24.05.2021 this Appellate Tribunal while granting liberty to the Respondents to file reply passed an interim orders as follows:-
Company Appeal (AT) NO.199/2022 9 "List these Appeals on 07.06.2021 till then no further meeting of Board of Directors of the Appellant company shall be convened and held."
This Tribunal while passing interim order directed to list appeals on 07.06.2021. Subsequently on 07.06.2021 again this Tribunal directed to continue interim order till the next date of hearing and date was fixed to 17.06.2021. On date fixed i.e. 17.06.2021 this Tribunal modified earlier order i.e. 24.5.2021 and 07.06.2021 in following manner:-
("Respondent No.1 company as well as Respondent No.5 in MA 08 of 2021 are directed to appoint Mr. Siddarth Bhandari as joint signatory of all bank accounts of the Respondent No.1 company with immediate effect. The accounts shall be operated under joint signature of Mr. Shailesh Bhandari and Mr. Siddarth Bhandari." Shall remain stayed till next date of hearing of the Appeal.) Finally those appeals were disposed off by a detailed judgement passed by this Tribunal dated 28.1.2022. The relevant portion of the judgement mentioned in paras 23, 24 and 26 are quoted hereinhelow:-
23. Be that as it may, having regard to the multiple Applications filed; the factual matrix of the family dispute read together with the reliefs sought for in I.A. 08 of 2021, the direction to appoint Mr. Company Appeal (AT) NO.199/2022 10 Siddarth Bhandari as a joint signatory of all the Bank Accounts of the Company was given by NCLT in the interest of justice and to ensure that no prejudice shall be caused to the Company during the pendency of the main Company Petitions. Having regard to the fact that NCLT has taken into consideration the involvement of both parties/both sides in the operation and function of the Company, we are of the view that no prejudice would be caused to the Appellants by such a direction of NCLT. 24. We are of the view that as long as the power is present, non-quoting or misquoting of the Section is not fatal. A harmonious construction thus requires that the direction should cover two different situations. If a particular action is valid under one Section, it cannot be rendered invalid, or that the Tribunal is not empowered to pass such a direction, if the wrong Section is quoted. The statute empowers the Tribunal from passing any Interim Order, it deems fit and in such a situation, keeping the affairs of the Company in mind, the Tribunal has rightly moulded the reliefs.
Cases are known in which Courts have moulded the reliefs to meet a situation such as this. Quoting a wrong Section/sub-Section does not estop a Court from taking note of events, circumstances which happen during that time frame. Hence, the intent of the law maker and the nature and scope of the Legislation is to be kept in mind, as any departure from the same could result in fatal consequences.
26. All the Appeals and IAs are disposed of with the aforenoted directions."
Company Appeal (AT) NO.199/2022 11 In the present Memo of Appeal the appellant has also brought on record an interim order passed by Hon'ble the Supreme Court in Civil Appeal No.1329-1330 of 2022. The interim order passed by the Hon'ble Supreme Court dated 25.02.2022 is quoted hereinbelow:-
"Issue Notice.
Until further orders, the Interim order, granted by the National Company Law Appellate Tribunal Principal Bench, New Delhi (in short 'the NCLAT') in Company Appeal (AT) No.54 of 2021 etc on 17.6.2021 is continued."
Finally the appeal which was preferred before the Hon'ble Supreme Court was dismissed on 11.10.2022. The said order has been brought on record through additional affidavit filed by the appellant which was filed on the date of hearing of this appeal i.e. on 18.11.2022. The order dated 18.11.2022 passed by Hon'ble Supreme Court is reproduced below:-
"Upon hearing the counsel the Court made the following ORDER The appeals are dismissed in terms of the signed order. Pending applications, if any, also stand disposed of."
Company Appeal (AT) NO.199/2022 12 Despite appeals in which interim order was passed was finally disposed off by this Appellate Tribunal by detailed judgemnt dated 28.01.2022, the appellants herein before NCLT in CP No.5/AHM/2022 filed an I.A. No.55/2022 requesting the NCLT to restrain the Respondent No.1 company from holding a Meeting of their Board of Directors as per interim order dated 24.5.2021 passed by this Appellate Tribunal in Company Appeal (AT) No.57/2021. It is clarified that Company Appeal (AT) No.57 of 2021 was heard alongwith Company Appeal No.54/2021, 55/2021 and 56/2021 and interim order dated 24.05.2021 was common order in all the four appeals. It is settled that in a case if final order is passed without reintroducing an interim order passed therein the said interim order may not be taken note of after final disposal of the case. Moreover, while passing detailed judgement this Tribunal has already disposed off the appeals with certain directions and also a direction to the NCLT to expeditiously dispose off Company Petitions No.93, 94 of 2018. Mr. Rudreshwar Singh, learned counsel repeatedly argued that once in Appeal filed before the Hon'ble Supreme Court, Hon'ble Supreme Court has passed interim order to the effect that order dated 17.6.2021 passed in Company Appeal (AT) No.54/2021 by the NCLAT shall continue, Company Appeal (AT) NO.199/2022 13 the learned NCLT ignoring the interim order permitted the Respondent Company to proceed with the holding of a Meeting of the Board of Directors. He tried to persuade this Tribunal that the interim order dated 24.5.2021 passed by this Appellate Tribunal in Company Appeal (AT) No.57 of 2021 in the light of interim order passed by Hon'ble Supreme Court shall continue, the NCLT was not having any authority to permit the company to proceed with the holding of Meeting of Board of Directors. According to him the impugned order is liable to be set aside on the ground that it is in violation of earlier interim order dated 24.5.2021 passed by this Appellate Tribunal in Company Appeal (AT) No.57/2021 and also approved by Hon'ble Supreme Court in its interim order dated 25.2.2022.
Ms Geetika Shrama, learned counsel for the Respondent No.1 to 3 opposing the appeals has argued that the present appeal appears to be frivolous appeal due to the reason that order dated 24.5.2021 passed by this Appellate Tribunal in Company Appeal (AT) No.57/2021 and other connected appeals was already modified by this Appellate Tribunal by its order dated 17.6.2021. According to the learned counsel for the Respondent on 17.6.2021 this Appellate Tribunal while modifying earlier order clarified that Company Appeal (AT) NO.199/2022 14 order of the NCLT to the extent that "Respondent No.1 company as well as Respondent No.5 in MA No.8/2021 are directed to appoint Mr. Siddarth Bhandari as joint signatory of all banks accounts of Respondent No.1 company with immediate effect. The accounts shall be operated under joint signature of Mr Shailesh Bhandari and Mr. Siddarth Bhandari" was directed to be stayed till next date of hearing. She submits that after modification of the order there was no reason for the appellant to contend that earlier order regarding stay of further meeting of Board of Directors of the appellant company was still in continuance and as such objections raised by the appellant is not sustainable and appeal is fit to be rejected.
Besides hearing learned counsel for the parties we have minutely examined materials available on record. For deciding the appeal there is no reason to delve into the merit of the case. It is only interpretation of the order passed by this Appellate Tribunal and also by the Hon'ble Supreme Court. In view of final disposal of the appeals by this Appellate Tribunal by its judgement dated 20.01.2022 in which there was no indication for restraining holding of the Boards Meeting, such point was not required to be raised before the NCLT for restraining board Meeting of the Company Appeal (AT) NO.199/2022 15 Company. Besides this even for the time being if it is considered that this Appellate Tribunal by its order dated 24.5.2021 had directed not to hold further meetings of Board of Directors, the said interim order was only to the next date of hearing i.e. 7.6.2021. Again by order dated 7.6.2021 the interim order was directed to continue till next date but on the next date i.e. on 17.6.2021 this Appellate Tribunal modified the earlier order and only stayed the order in respect of appointment of Siddarth Bhandari as joint signatory of bank account with Shailesh Bhandari. The order dated 17.6.2021 is a specific and unambiguous. Of course, even after final judgment passed by this Appellate Tribunal on 28.1.2022 the appeals were filed before the Hon'ble Supreme Court and Hon'ble Supreme Court on 25.2.2022 passed an interim order to continue with the order dated 17.6.2021 in Company Appeal (AT) No.54 of 21 and other connected case by the Appellate Tribunal, by no stretch of imagination it can be considered that there was any order of stay of holding Boards Meeting of the Company. In such view of the matter we are of the opinion that the present appeal is nothing but simply an abuse of process of Court. In normal course had we recorded this judgement in open court we would have imposed exemplary cost on the appellant but Company Appeal (AT) NO.199/2022 16 after hearing and due to paucity of time we did not deliver the judgement on 18.11.2022. Accordingly, it would not be appropriate to impose cost.
The appeal stands dismissed without cost.
(Justice Rakesh Kumar) Member (Judicial) (Dr. Ashok Kumar Mishra) Member (Techncial) bm Company Appeal (AT) NO.199/2022