2019 (8) TMI 1584 - Tri - Companies Law

Tribunal grants status quo order on immovable property pending arbitration decision. Protecting company and shareholders' interests.

The Tribunal granted a status quo order regarding the immovable property covered under Sale Deed No. 3543 dated 12.05.2006 until the Arbitral Tribunal's ... Oppression and Mismanagement - Fraud - cancellation of MOU - non-compliance with the provisions of Section 173 of the Companies Act, 2013 read with Section 118 of the said Act read along with the Secretarial Standard on Meetings of the Board of Directors (SS-1) as prescribed by the Council of the Institute of Company Secretaries of India and as approved by the Central Government - Section 241 and 242 of the Companies Act, 2013 - HELD THAT:- From the facts as can be discerned from the petition and the accompanying documents as well as the compilation of orders and judgements as filed by the 1st and 2nd respondents as well as by the 7th and 8th respondents, despite efforts made by the petitioners before the Hon'ble High Court of Delhi as well as before the Arbitral Tribunal which is seized of the dispute, inter alia, in relation to immovable properties as well, the petitioners have not been able to convince the judicial forum first under Section 9 of the Arbitration and Conciliation Act, 1996 and subsequently against the order passed by the Learned Arbitral Tribunal in relation to an application filed under Section 17 of the said Act and as well as before the Hon'ble High Court, all of which clearly disclose the petitioners have not been able to satisfy the said judicial or arbitral forums about the existence of a prima facie case. Thus it is clearly evident that an endeavor seems to be made by both the parties to pre-empt the decision of the Arbitral Tribunal, i.e., by the petitioners in filing the petition without waiting for the outcome of its application under Section 17 of the Arbitration and Conciliation Act, 1996 and on the part of the respondents 2, 3, 7 and 8 by trying to dispose of the 7 acres covered under the Sale Deed No. 3543 dated 12.05.2006 without awaiting for the decision of the Arbitral Tribunal which clearly shows that when the matter is sub judice parties are trying to act to the prejudice of each other. This Tribunal has consistently held that its predominant focus is to safeguard the interest of the company while exercising jurisdiction under Section 241 and 242 of the Companies Act, 2013 as held by the Appellate Tribunal in AMRITSAR SWADESHI WOOLEN MILLS PRIVATE LIMITED Vs. Shri VINOD KRISHAN KHANNA & Ors. [2019 (5) TMI 606 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI]. Application disposed off. Issues Involved:1. Validity of the Board Resolutions dated 13.04.2019.2. Appointment of an independent agency and statutory auditor.3. Interim relief regarding the immovable property covered under Sale Deed No. 3543 dated 12.05.2006.4. Allegations of fraud and mismanagement.5. Jurisdictional issues concerning the Arbitration and Conciliation Act, 1996.Issue-wise Detailed Analysis:1. Validity of the Board Resolutions dated 13.04.2019:The petitioners challenged the validity of three Board Resolutions dated 13.04.2019, which authorized certain respondents to deal with 7 acres of land. The petitioners argued that these resolutions were invalid due to non-compliance with Section 173 and Section 118 of the Companies Act, 2013, and the Secretarial Standard on Meetings of the Board of Directors (SS-1). The Tribunal acknowledged the petitioners' concerns about the potential transfer of properties based on these resolutions and noted that the respondents failed to provide formal minutes of the Board meeting, raising doubts about the validity of the resolutions.2. Appointment of an Independent Agency and Statutory Auditor:The petitioners sought the appointment of an independent agency as an external coordinator and the appointment of a statutory auditor for the 1st respondent company, which required convening an Extraordinary General Meeting (EOGM) at shorter notice. The Tribunal did not provide a specific ruling on this issue but deferred it to await the decision of the Arbitral Tribunal and the application under Section 8 of the Arbitration and Conciliation Act, 1996.3. Interim Relief Regarding the Immovable Property Covered Under Sale Deed No. 3543 Dated 12.05.2006:The petitioners requested interim protection to prevent the transfer of the immovable property covered under Sale Deed No. 3543 dated 12.05.2006. The Tribunal noted that the petitioners had previously sought similar reliefs before the Hon'ble High Court of Delhi and the Arbitral Tribunal but were unsuccessful. However, given the pending decision of the Arbitral Tribunal on the same issue and the need to protect the interests of the 1st respondent company, the Tribunal granted a status quo order regarding the immovable property until the Arbitral Tribunal's decision or the Tribunal's decision on the jurisdictional application under Section 8 of the Arbitration and Conciliation Act, 1996.4. Allegations of Fraud and Mismanagement:The petitioners alleged that respondent No. 2 committed fraud by projecting an additional 17.956 acres of land as a contribution to the project, even though it was paid for by the 1st respondent company. The Tribunal acknowledged the petitioners' allegations and noted the ongoing arbitration proceedings related to these disputes. The Tribunal emphasized that the primary focus should be on safeguarding the interests of the 1st respondent company and its shareholders.5. Jurisdictional Issues Concerning the Arbitration and Conciliation Act, 1996:The respondents argued that the petitioners were engaging in forum shopping by seeking interim relief from multiple judicial forums, including the Hon'ble High Court of Delhi, the Arbitral Tribunal, and the Civil Court. The Tribunal recognized the principle of the Doctrine of Comity and the need to avoid inconsistent orders from different judicial forums. The Tribunal deferred the decision on other interim reliefs until the application under Section 8 of the Arbitration and Conciliation Act, 1996, was resolved.Conclusion:The Tribunal granted a status quo order regarding the immovable property covered under Sale Deed No. 3543 dated 12.05.2006 until the Arbitral Tribunal's decision or the Tribunal's decision on the jurisdictional application under Section 8 of the Arbitration and Conciliation Act, 1996. The Tribunal deferred the decision on other interim reliefs and emphasized the need to protect the interests of the 1st respondent company and its shareholders.