2017 (11) TMI 423 - AT - Companies Law

NCLAT emphasizes fair evaluation in waiver decisions under Companies Act, sets aside orders for reconsideration.

S. Ahmed Meeran Versus Ronny George & Ors.

The National Company Law Appellate Tribunal allowed two appeals challenging orders granting waivers under Section 244 of the Companies Act, 2013, finding ... Grant of 'waiver' under proviso to sub-section (1) of Section 244 of the Companies Act, 2013 - Oppression and mismanagement - Held that:- Apart from the fact that both the impugned orders have been passed in a mechanical manner by the Tribunal without considering any exceptional circumstances to allow the application for 'waiver' under proviso to sub-section (1) of Section 244, the Tribunal has not applied its mind as to whether (proposed) application under section 241 merits consideration and whether it relates to 'oppression and mismanagement'. The question of grant of 'waiver' under proviso to sub-section (1) of Section 244 fell for consideration before this Appellate Tribunal in “Cyrus Investments Pvt. Ltd. & AJqR. Vs. Tata Sons Ltd. & Ors. - [2017 (9) TMI 1500 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] As the impugned order(s) are a nonspeaking order, we have no option but to set aside the impugned orders both are set aside. Issues:Appeal against orders granting waiver under Section 244 of the Companies Act, 2013 without proper consideration of exceptional circumstances and merits of the application under Section 241.Analysis:The National Company Law Appellate Tribunal heard two appeals together challenging orders passed by the National Company Law Tribunal granting waivers under Section 244 of the Companies Act, 2013. The Tribunal allowed the applications for waiver without adequately considering exceptional circumstances or the merits of the applications under Section 241 related to 'oppression and mismanagement'. The Appellate Tribunal noted that the orders were passed in a mechanical manner without proper evaluation. It referenced a previous judgment where it was clarified that the Tribunal must assess whether the application merits waiver based on objective criteria and evidence on record. The Tribunal should not decide the merit of the application under Section 241 but determine if there are exceptional grounds for waiving the requirements under Section 244. Factors to consider include membership status, relevance to oppression and mismanagement, previous similar allegations, and existence of exceptional circumstances.The Appellate Tribunal emphasized that the waiver decision must be judicial and reasoned, not arbitrary. It stated that the Tribunal should form an opinion based on the application under Section 241 and relevant evidence before granting waiver. The Tribunal must provide reasons for its decision and ensure that the applicants have presented an exceptional case warranting waiver. As the impugned orders were found to be non-speaking and lacking proper evaluation, the Appellate Tribunal set aside both orders dated July 14, 2017, and remitted the cases to the Tribunal for reconsideration after giving notice and hearing to the parties.Conclusively, both appeals were allowed, and the Appellate Tribunal made it clear that no costs were to be awarded. Since there was no waiver in favor of the respondents, the question of granting any interim relief did not arise. The Appellate Tribunal stressed the importance of a thorough and reasoned assessment before granting waivers under Section 244 to ensure fairness and justice in matters related to oppression and mismanagement in companies.