Tribunal orders re-opening accounts of IL&FS entities due to mismanagement. The National Company Law Tribunal, New Delhi, allowed a petition by the Union of India, Ministry of Corporate Affairs under Section 133 of the Companies ...
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Tribunal orders re-opening accounts of IL&FS entities due to mismanagement.
The National Company Law Tribunal, New Delhi, allowed a petition by the Union of India, Ministry of Corporate Affairs under Section 133 of the Companies Act, 2013, for re-opening and recasting the accounts of 'Infrastructure Leasing & Financial Services Limited', 'IL&FS Financial Services Limited', and 'IL&FS Transportation Networks Limited' due to mismanagement. The Tribunal found no fraudulent preparation of accounts but evident mismanagement, ordering the accounts to be re-opened and recast for the past five financial years. The challenge to the order invoking Section 230 of the Companies Act, 2013 was dismissed for lack of merit, with the appeal being dismissed without costs.
Issues: Mismanagement of companies leading to petition under Section 133 of Companies Act, 2013 before NCLT, Mumbai Bench; Order for recasting and re-opening accounts of companies under Section 130 of Companies Act, 2013; Challenge to the order dated 1st January, 2019 on grounds of being ex-parte and invoking Section 230 of Companies Act, 2013.
The judgment by the National Company Law Tribunal, New Delhi, involved a petition filed by the Union of India, Ministry of Corporate Affairs under Section 133 of the Companies Act, 2013 before the Tribunal due to mismanagement of 'Infrastructure Leasing & Financial Services Limited', 'IL&FS Financial Services Limited', and 'IL&FS Transportation Networks Limited'. The Tribunal, in its order dated 1st January, 2019, observed that for passing an order for recasting and re-opening the accounts of a company, the conditions under Section 130(i) & (ii) must be met, which include fraudulent preparation of earlier accounts or mismanagement of the company's affairs casting doubt on the financial statements' reliability. The Tribunal noted that the alleged accounts were not proven to be fraudulent yet, but mismanagement was evident. Therefore, the petition was allowed for re-opening the books of accounts and recasting financial statements for the past five financial years of the mentioned companies.
Furthermore, the Tribunal directed the Central Government to appoint Chartered Accountants to recast the accounts of the companies and specified that the order would not affect proceedings before the Institute of Chartered Accountants of India (ICAI). It was clarified that the order for recasting accounts would not impact the main company petition pending under Section 241-242 of the Companies Act, 2013. The former Vice-President and Director challenged the order on the grounds of being ex-parte and invoking Section 230 of the Companies Act, 2013, claiming it to be draconian. However, the Tribunal dismissed the appeal, stating that no violation of rules of natural justice was found, and no merit was seen in the challenge. The appeal was accordingly dismissed without costs.
Full Summary is available for active users!
Note: It is a system-generated summary and is for quick reference only.
TaxTMI 
of 
TaxTMI 
