2020 (2) TMI 1462 - Tri - Companies Law

Company Petition Jurisdiction Transfer, Auditors Appointment Disputes, Compliance Relief Sought, Board Meetings Participation

The Company Petition was transferred from the Company Law Board (CLB) to the National Company Law Tribunal (NCLT) due to jurisdictional changes. NCLT ... Appointment of independent auditor - valuation of shares as on 07.12.2017 - compliance with orders of NCLT and NCLAT - duty to file statutory forms to effect change in directorship - direction to cooperate and participate in board meetingsAppointment of independent auditor - valuation of shares as on 07.12.2017 - Appointment of two independent auditors to undertake separate valuations and the timeframe for submission of valuation reports. - HELD THAT: - Pursuant to earlier orders of the NCLT and confirmation by NCLAT, the Tribunal appointed one auditor from the panel suggested by the applicants and one from the panel suggested by the respondents to undertake independent valuations of the company. The auditors were directed to determine the true and fair value of the shares as on 07.12.2017 and to submit their valuation reports within 45 days from the date of this Order. The Tribunal further directed that, after submission of the valuation reports, the entire process delineated in the NCLT, Chennai order dated 07.12.2017 shall be complied with by the parties within 12 weeks. The appointment and the timelines were made to implement the prior adjudicatory directions where parties had failed to reach a consensus on an auditor.Two independent auditors were appointed to value shares as on 07.12.2017, to submit reports within 45 days, and the subsequent processes under the earlier NCLT order are to be completed within 12 weeks.Compliance with orders of NCLT and NCLAT - Responsibility for bearing the fee for valuation and requirement to comply with prior NCLT/NCLAT directions. - HELD THAT: - The Tribunal directed that the fee for the valuation will be borne by the respondent company itself, thereby allocating the immediate financial burden of the valuation to the company. This direction is part of enforcing and operationalising the earlier orders of the NCLT (dated 07.12.2017) and the NCLAT which confirmed the substantive directions and adjusted the date of valuation to 2017. By specifying the party responsible for fees, the Tribunal sought to remove an impediment to carrying out the valuation mandated by the earlier orders.The respondent company shall bear the fee for the valuation and shall comply with the earlier orders as implemented by this appointment.Duty to file statutory forms to effect change in directorship - direction to cooperate and participate in board meetings - Direction to the erstwhile Managing Director to file requisite statutory forms to give effect to changes in directorship and to cooperate in future board proceedings. - HELD THAT: - Noting non-cooperation by the former Managing Director and absence of filings on the MCA portal, the Tribunal directed Shri K.J. Paul (Respondent No.1 in the IA) to immediately file all requisite statutory forms, including those for appointment of the 1st applicant as Managing Director, change of designation of Respondent No.1 from 'Managing Director' to 'Director', and removal of Respondents No.2 and No.3 from directorship of the company. The Tribunal also ordered him to participate in future board meetings and to extend cooperation for the smooth conduct of the company's business. These directions were issued to give effect to the NCLT/NCLAT orders and to enable the practical implementation of the management changes ordered earlier.Respondent No.1 is directed to file the requisite statutory forms immediately and to participate and cooperate in future board meetings so as to give effect to the Tribunal's and appellate directions.Final Conclusion: The Tribunal implemented the earlier NCLT/NCLAT directives by appointing two independent auditors to value shares as on 07.12.2017 (reports due in 45 days), directing the respondent company to bear valuation fees, ordering immediate filing of statutory forms to effect changes in directorship, and requiring the former Managing Director to cooperate and participate in board meetings; the listed applications are disposed of and the main matter is posted for further hearing. Issues:1. Transfer of Company Petition from CLB to NCLT.2. Appointment of an independent auditor as per NCLT Order.3. Interim stay by High Court on Board Meeting proceedings.4. Appeal before NCLAT and change in valuation date.5. Stay of NCLT Order by High Court and subsequent disposal.6. Defective nature of an Interlocutory Application.7. Reliefs sought in IA/36/KOB/2020.8. Non-cooperation of the 1st respondent in complying with NCLT orders.9. Appointment of independent auditors and compliance with NCLT directions.Transfer of Company Petition from CLB to NCLT:The case involved the transfer of a Company Petition (C.P) from the Company Law Board (CLB) to the National Company Law Tribunal (NCLT) due to jurisdictional changes. The petition was initially filed before the CLB in Chennai, then transferred to NCLT Chennai Bench, and subsequently to NCLT Kochi Bench. The main petition was filed under Sections 397 and 398 of the Companies Act, 1956.Appointment of an Independent Auditor:The NCLT Chennai Bench had ordered the appointment of an independent auditor to determine the true and fair value of shares of the respondent company. However, due to lack of consensus among the parties, the NCLT Kochi Bench appointed two independent auditors to individually undertake the valuation of the respondent company's shares as of a specific date. The auditors were directed to submit the valuation report within 45 days.Interim Stay by High Court and Appeal before NCLAT:The proceedings related to the appointment of an independent auditor were temporarily stayed by the Hon'ble High Court of Kerala following an appeal filed before the Hon'ble NCLAT, New Delhi. The NCLAT confirmed most findings and orders of the NCLT Chennai Bench but changed the valuation date of shares.Compliance with NCLT Orders and Non-cooperation of Respondent:The 1st respondent, despite being removed as Managing Director and designated as Director, did not cooperate in filing necessary statutory forms with the Registrar of Companies. This non-cooperation hindered the effective functioning of the newly appointed Managing Director. The applicant sought relief to compel the 1st respondent to comply with the NCLT orders and participate in board meetings for the smooth conduct of business.Appointment of Independent Auditors and Compliance with NCLT Directions:The NCLT Kochi Bench appointed two independent auditors to value the respondent company's shares and directed the 1st respondent to file requisite statutory forms promptly. The auditors were tasked with submitting the valuation report within 45 days, and the parties were given 12 weeks to comply with the NCLT Chennai Bench's orders. The respondent company was to bear the valuation fee, and the 1st respondent was directed to participate in future board meetings and cooperate for the company's business operations.This comprehensive analysis covers the various issues addressed in the judgment, detailing the legal proceedings and outcomes related to the Company Petition and subsequent orders issued by the NCLT Kochi Bench.