2017 (6) TMI 1368 - Tri - Companies Law

Tribunal grants interim relief, orders forensic audit, emphasizes corporate governance.

The Tribunal granted the Petitioner's request for interim relief, appointing auditors for a forensic audit of the company's affairs. Despite objections ... Oppression and mismanagement - provisional attachment orders of the shares of the Petitioner - Sec. 187 C (6) of the Companies Act 1956 and Sec.89(8) of the Companies Act, 2013 - HELD THAT:- It is on record that the Petition has been filed on 07.04.2017 and at that point of time, there was no legal bar as to filing of the Petition and the Petitioner fulfilled the requirements under section 244 of the Company's Act, 2013 as reflected from our order dated 13.04.2017. The order of attachment of shares of the petitioner and the issuance of notice to the Petitioner is dated, 19.05.2017 which is subsequent to the filing of the petition. It is also on record that the Competent Authority is yet to complete investigation to reach a final conclusion with regard to the status of the shares, i.e., whether or not the shares are falling within the purview of the benami property. Therefore, unless any final order is passed, to declare that the shares held by the Petitioner are falling within the purview of the benami property, the Petition cannot be thrown out on the ground that a provisional order for attachment of shares of the petitioner is passed by the Competent Authority. Considering the facts and circumstances involved in the case, as detailed in the petition, we are inclined to grant interim relief as prayed, and appoint Mr.S.Santhanakrishnan as Chartered Accountant and Mr.R.Sridharan as Company Secretary, whose names have been recommended by the Petitioner and direct them to undertake forensic audit of the state of affairs of the company including accounts-cum-banking and statutory compliance including Sales Tax, Excise, Customs, FEMA, Companies Act, GATT and other laws applicable and statutory records of RI company including the Income and Expenditure of Respondent No. 1. Application disposed off. Issues:1. Allegations of oppression and mismanagement of funds against Respondents under sections 241, 242, 243, 244, 230, and 408 of the Companies Act 2013.2. Grant of interim relief sought by the Petitioner under sub para (f) of Para II of the petition.3. Maintainability of the Petition under Section 244 of the Companies Act, 2013 due to attachment orders of shares held by the Petitioner.4. Consideration of interim relief and appointment of auditors for forensic audit.Analysis:1. The Petitioner filed a Company Petition alleging oppression and mismanagement of funds against the Respondents under various sections of the Companies Act 2013. The Petitioner sought reliefs under Para I and interim reliefs under sub para (f) of Para II, requesting cooperation with the internal auditor. The Respondents raised objections to the grant of interim relief during the hearings, leading to further arguments and directions for filing detailed counters.2. The Tribunal considered the grant of interim relief under sub para (f) of Para II of the Petition. Despite opposition from Respondents, the Tribunal decided to grant the interim relief. They appointed auditors for a forensic audit of the company's affairs, including financial and statutory compliance aspects. The auditors were directed to submit a detailed report to the Tribunal within four weeks, emphasizing corporate governance and compliance with contractual commitments.3. An issue arose regarding the maintainability of the Petition under Section 244 of the Companies Act, 2013 due to attachment orders of shares held by the Petitioner. The Respondents argued for the dismissal of the Petition based on this ground. However, the Tribunal noted that the attachment orders were issued after the filing of the Petition, and the final status of the shares was pending investigation. The Tribunal ruled that unless a final order declared the shares as benami property, the Petition could not be dismissed solely based on provisional attachment orders.4. In light of the above considerations, the Tribunal granted the interim relief as requested by the Petitioner. They appointed auditors for a forensic audit and directed cooperation from both parties for the audit process. The Tribunal also addressed the issue of remuneration for the auditors, stating that it would be borne equally by the Petitioner and Respondents. Additionally, an application filed by one of the Respondents was addressed, with further filings and arguments scheduled for a later date.