National Company Law Appellate Tribunal
Veena Ramanathapura Sreenivasarangan vs Amruthamgamaya Nature Care And Leisure ... on 20 February, 2024
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
Company Appeal (AT) (CH) No. 101/2022
&
I.A. Nos. 854 of 2022 & 146, 1326 of 2023
(Arising out of the Impugned Order dated 08/06/2022 in
CP/127(KOB)/2019, passed by the National Company Law Tribunal, Kochi
Bench, Kochi)
In the matter of:
1. Veena Ramanathapura Sreenivasarangan
Apt. No. 2083, Oak Block 2,
Sobha Forest View Apts., 100 Ft. Vaajrahali Road,
Off Kanakpura Main Road,
Bangalore - 560 109. ...Appellant No. 1
2. Iyer Sudhakar Jayaram
Apt. No. 2083, Oak Block 2,
Sobha Forest View Apts., 100 Ft. Vaajrahali Road,
Off Kanakpura Main Road,
Bangalore - 560 109. ...Appellant No. 2
Versus
1. Amruthamgamaya Nature Care and Leisure Private Limited
VPR/VIII/1325, Amruthamgamaya
RKN Road, Panangode, Venganoor P.O
Thiruvanthapuram - 695523, Kerala. ...Respondent No.1
2. Ajith Nagappan Nair Radhamony
Manackal, VRP 8/1736, RKN Road,
RKN Road, Panangode, Venganoor P.O
Thiruvanthapuram - 695523, Kerala. ...Respondent No. 2
3. Gayatri Padmakumari Sukumaran
Manackal, VRP 8/1736, RKN Road,
RKN Road, Panangode, Venganoor P.O
Thiruvanthapuram - 695523, Kerala. ...Respondent No. 3
4. Ramakrishnan V
RRV Associates, Company Secretaries,
A-41, Shyam, First Floor, Elamkom Gardens,
Vellayambalam, Trivandrum - 695 010. ...Respondent No. 4
5. Sreehari G
Swathi Sree, T C 28/1879,
Padmavilasam East Street,
Fort, Trivandrum - 695 023. ...Respondent No. 5
6. Ms. Sarah Judith Tamara Cohen
UK Passport No. 099109527
Residing at 34, Estele Road,
London, NW 32J, United Kingdom. ...Respondent No. 6
7. Mr. M. Komala Kumaran
Ms. M K K Associates, Chartered Accountants,
FRN 0119805, 158, AKG Nagar,
Peroorkada, Trivandrum - 695 005. ...Respondent No. 7
Present :
For Appellant : Mr. R. Murari, Sr. Advocate
Mr. S. Eshwar & Ms. Aanchal Nichani,
Advocates.
For Respondents No. 2 & 3 : Mr. Bijoy P. Pulipra, Advocates.
For Respondent No.6 : Mr. Kiran Gopi, Advocate.
For Respondent No. 7 : Mr. Sankar P. Panicker, Advocate.
JUDGMENT
(Hybrid Mode) [Per: Ajai Das Mehrotra, Member (Technical)]
1. The present Appeal has been filed by Veena Ramanathapura Sreenivasarangan (hereinafter called Appellant No. 1) and Iyer Sudhakar Jayaram Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 2 of 11 (hereinafter called Appellant No. 2) against the Impugned Order dated 08.06.2022, passed by National Company Law Tribunal, Kochi Bench, in CP/127/(KOB)/2019 filed under Sections 241 & 242 of the Companies Act, 2013.
2. Shorn of unnecessary details, the brief facts of the case are that the Respondent No. 1 Company Amruthamgamaya Nature Care and Leisure Private Limited was founded in the Year 2006 by Ajith Nagappan Nair Radhamony (Respondent No. 2) and Ms. Sarah Judith Tamara Cohen (Respondent No. 6). R- 6 was a foreign national and had brought in the required capital in the form of FDI in various tranches. R-6 had transferred her shares to the Appellant. A Petition under Section 241 & 242 of the Companies Act, 2013, was filed by Ajith Nagappan Nair Radhamony (Respondent No. 2 herein) and Gayatri Padmakumari Sukumaran (Respondent No. 3 herein) alleging acts of `Oppression and Mismanagement' and, inter alia, claiming following reliefs:
"A. Issue appropriate order for the revision of the Audited Financial Statements for the Financial Year 2015-16, 2016-17 and 2017-18 in view of the violation of the provisions of Section 129 and Section 134 of the Act.
B. Direct the 2nd and 3rd Respondents to conduct and convene the Annual General meetings for the financial year 2016-17, 2017-18, and 2018-19 with proper disclosures.
C. To appoint an Independent Chartered Accountant to conduct an investigate audit and draw up the accounts of the Company for the year ended on 31st March, 2016, 31st March, 2017, and 31st March, 2018 to identify the Accounting Fraud in the Financial Statements of the Company.
Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 3 of 11 D. To properly repay the loan amount of Rs.23,71,236/- (Rupees Twenty-Three Lakh Seventy-One Thousand Two Hundred and Thirty-Six Only) to the Petitioner based on the findings of the Independent Chartered Accountant."
3. The NCLT Kochi vide impugned order dated 08.06.2022 first held that the Petition is maintainable as the Applicants are holding 19.18% equity shares of the Company and are eligible to file the Petition under Section 241 of the Companies Act, 2013. In the said interim order, NCLT Kochi also ordered investigation of accounts of the Company by appointing an Independent Chartered Accountant to investigate and audit accounts of the Company for the financial years ending on 31.03.2016, 31.03.2017 and 31.03.2018.
4. The operative part of the Impugned Order of the `Tribunal'/NCLT Kochi, being para 46 to 49 is reproduced below for ready reference:
"46. The above-mentioned situation of treating the amount as `Loan from Directors', which was stated to be an error occurred in the notes to the Balance Sheet that have been signed inadvertently by the Respondent, cannot be considered as a genuine plea as seen from the annexed documents. Therefore, before going to the merits of the contentions raised by both parties, we are of the considered opinion that the prayer (c) to appoint an Independent Chartered Accountant to conduct an investigative audit and draw up the accounts of the Company for the years ended on 31st March, 2016, 31st March, 2017, and 31st March, 2018 may be allowed. After getting the report of the Chartered Accountant, further contention of the parties will be considered and appropriate orders passed.
47. Taking into consideration of the facts and circumstances of the case, this Tribunal appoints Shri, Rajmohan R (IBBI/IPA-001/IP-P-02331/2020- Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 4 of 11 21/13517), having office at Rajbhavan, HS 175A & 514/12-1, ST No. 6, Krishnapuram, Ollukkara, Thrissur
- 680655, (Mob No. 9946823989), (Email:
carajmohangmail.com) as an Independent Auditor in this matter. The Independent Auditor is directed to conduct an investigate audit and draw up the accounts of the Company for the financial years ended on 31st March, 2016, 31st March, 2017 and 31st March, 2018 and identify any accounting fraud occurred in the Financial Statements of the Company M/s. Amruthamgamaya Nature Care and Leisure Private Limited, taking into consideration of the averments made by both parties in this Company Petition. The Independent Auditor shall submit his report to this Tribunal within four weeks from the date of receipt of this order. The fee of the Independent Auditor is fixed as Rs. 1,00,000 (Rupees One Lakh Only), which shall be paid by the petitioners (Rs. 50,000) and respondents (Rs. 50,000) on completion of the Audit and submit a report before this Tribunal.
47. List the CP/127/KOB/2019 on 15.07.2022 for report of the Independent Auditor/hearing.
49. Registry shall issue a copy of this order to the Independent Auditor immediately."
5. Learned Sr. Counsel Mr. R. Murari, appearing for the Appellant stated that the Tribunal has erred in directing for Audit of the accounts of the Company through an independent Chartered Accountant without giving a finding of `Oppression and Mismanagement' and without giving a finding of any fraud committed. It was submitted that appointment of independent Auditor to investigate the books and records of the Company amounts to fishing and roving expedition despite the fact that the allegations made in the Petition were general and vague. In their Written Submissions, Respondents No. 2 & 3 (the original Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 5 of 11 Petitioners under Sections 241 & 242 of the Companies Act, 2013, before NCLT) supported the action of NCLT in ordering investigation/audit of accounts by an independent Chartered Accountant. Learned Counsel Mr. Sankar P Panicker, appearing for Respondent No. 7 stated that Respondent No. 7 is the old Auditor and is not concerned with the subject matter under consideration.
6. We have considered the submissions made by the Appellants and the Respondents and have perused the record. The matter before NCLT was regarding complaint of `Oppression and Mismanagement' of Respondent No. 1 Company Amruthamgamaya Nature Care and Leisure Private Limited. The Petitioners before NCLT (Respondent No. 2 & Respondent No. 3 herein) had raised the issue of fabrication of accounts and siphoning off of funds by Respondents No. 2 & 3 in the Petition before NCLT, who are the present Appellants. The impugned order dated 08.06.2022 is in the nature of an interim order and NCLT had not given any categorical finding to influence the investigation and audit of accounts of the relevant period. The issue for decision before us is whether NCLT is empowered to direct audit and is it required to give a finding of fraud before ordering the audit by independent Auditor.
7. As per Rule 11 of the National Company Law Tribunal Rules, 2016, Tribunal may make such Order as may be necessary for meeting the ends of justice or to prevent, abuse of the process of Tribunal. For ready reference, Rule 11 of the NCLT, Rules, 2016 is reproduced as follows:
Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 6 of 11 "11. Inherent Powers.- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal."
8. It is seen that no pre-conditions are given in the said Rules for exercising of these inherent powers by the Tribunal. The Tribunal has directed conduct of audit through independent Auditor to ascertain the correct facts in the light of allegations and counter allegations by the parties to the dispute in Company Petition filed under Section 241 & 242 of the Companies Act, 2013, which was being adjudicated upon by them.
9. The issues raised in this appeal were considered by Three Member Bench of this Tribunal in the case of `Archer Power System P. Ltd.' Vs. `Cascade Energy P. Ltd. & Ors.', reported in 2020 SCC OnLine NCLAT 1241, the relevant portion of the Order of NCLAT in `Archer Power System P. Ltd.' (supra) is reproduced below for benevolent reference:
"The other issue raised by the appellant is that the National Company Law Tribunal, Chennai has erroneously passed the impugned order dated July 18, 2017 directing the status quo ante and the impugned order dated June 14, 2017 directing forensic audit before deciding the issue of maintainability. We heard the contentions of the parties and we are of the view that the question of maintainability need not to be decided as preliminary issue which can be decided along with main petition. Thus the National Company Law Tribunal under rule 11 of the National Company Law Tribunal Rules, 2016 has the inherent powers to pass such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal. Therefore, Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 7 of 11 the orders passed by the National Company Law Tribunal are not questionable on the grounds contended by the appellant. Also, we are of the opinion that maintainability is a mixed question of facts and law and conducting a forensic audit could produce the important facts that may be required by the National Company Law Tribunal in order to decide the preliminary issue. The other issue raised by the appellant that whether the impugned interim order dated June 14, 2017 passed by the Tribunal is in consonance with sub-section (4) of section 242 of the Companies Act, 2013, as quoted below:
"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 fit. (2) Without prejudice to the generality of the powers under subsection (1), an order under that sub-section may provide for--
(a) the regulation of conduct of affairs of the company in future;
(b) the purchase of shares or interests of any members of the company by other members thereof or by the company;
(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital;
Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 8 of 11
(d) restrictions on the transfer or allotment of the shares of the company;
(e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case;
(f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e):
Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned;
(g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;
(h) removal of the managing director, manager or any of the directors or the company;
(i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims;
(j) the manner in which the managing director or manager of the company may be appointed subsequent to an order removing the existing managing director or manager of the company made under clause (h);
(k) appointment of such number of persons as directors, who may be required by the Tribunal to report to the Tribunal on such matters as the Tribunal may direct;
(l) imposition of costs as may be deemed fit by the Tribunal;
Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 9 of 11
(m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made.
(3) A certified copy of the order of the Tribunal under sub-section (1) shall be filed by the company with the Registrar within thirty days of the order of the Tribunal. (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 company's affairs upon such terms and conditions as appear to it to be just and equitable."
From the bare perusal of the impugned order we are of the view that the Tribunal have the power to make interim orders which it think fit for regulating the conduct of the company's affairs. There are allegations of siphoning of funds, breach of agreements and failure to maintain proper books of account thus it was required on the part of the Tribunal to conduct a forensic audit by an independent auditor in order to proceed further with the petition. We are of the opinion that imposition of forensic audit and calling for the report of forensic audit before the Tribunal is a measure to help the Tribunal to appreciate the issue on the basis of an independent report so as to ensure that the case is processed with due regard to rights and obligations of contesting parties would be in the interest of justice. Similarly the status quo as made is only with a view to regulate the conduct of the company's affairs during the pendency of the case so that no contesting party takes an advantage during the period detrimental to the other party. The status quo restored as on April 27, 2017 (date of petition) as directed by the National Company Law Tribunal, Chennai till the matter is under consideration cannot be found faulted with.
We find no merit to interfere in the impugned orders dated June 14, 2017 and July 18, 2017 passed by National Company Law Tribunal, Chennai in C.P. No. 19 of 2017.
The appeals stand disposed of with aforesaid observation and directions. No costs."
Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 10 of 11
10. In view of the facts of this case, and the decision of this Tribunal cited supra we hold that the Tribunal under Rule 11 of NCLT Rules, 2016 has the inherent powers to cause audit of accounts or to make such orders as may be necessary for meeting the ends of justice and we find no fault in the impugned order on this account. As a consequence, the present Appeal fails and is accordingly dismissed. No order as to costs. The connected pending Interlocutory Applications, if any, are closed.
[Justice M. Venugopal] Member (Judicial) [Ajai Das Mehrotra] Member (Technical) 20/02/2024 HA/TM Comp App (AT) (CH) No. 101/2022 & I.A. Nos. 854 of 2022 & 146, 1326 of 2023 Page 11 of 11