Bona fide board commercial decisions in oppression and mismanagement cases may be protected to avert insolvency risk.

In oppression and mismanagement proceedings under the Companies Act, 2013, the commentary states that the Tribunal may grant interim relief under Section 242(4) to regulate company affairs on just and equitable terms. It explains that where a closely held company faces repeated insolvency threats, a bona fide Board decision to sell non-core assets and deploy proceeds to meet liabilities and revive operations should not be displaced by the Tribunal's own commercial assessment. The stated rationale is that such interim measures may protect the company's functioning and prevent the relief sought from being frustrated by creditor-driven insolvency action.

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Issues: Whether, in proceedings under Sections 241 and 242 of the Companies Act, 2013, the company should be permitted to take a commercial decision to sell non-core assets and infuse funds for the Sonepat unit so as to meet liabilities and avoid the risk of Corporate Insolvency Resolution Process.

Analysis: Section 242(4) empowers the Tribunal to pass such interim orders as it thinks fit for regulating the conduct of the company's affairs on just and equitable terms. The dispute arose in the setting of a closely held company with multiple unit-wise liabilities and repeated threats of insolvency proceedings against the company. The Board had proposed sale of non-core assets and deployment of proceeds towards creditor liabilities and revival of operations. The Tribunal's role in such a petition is not to substitute its own commercial assessment for that of the Board where the proposed course is aimed at protecting the company from insolvency and preserving its functioning. The pendency of oppression and mismanagement proceedings would be frustrated if creditors were allowed to trigger insolvency in a manner that defeats the relief sought in the petition.

Conclusion: The company was entitled to be allowed to take its own decision regarding sale of non-core assets and infusion of funds for meeting liabilities and reviving the Sonepat unit.

Final Conclusion: The impugned order was set aside and the appeal succeeded, with liberty to the respondents to seek further orders if the funds are used for any impermissible purpose.

Ratio Decidendi: In a petition for oppression and mismanagement, the Tribunal may permit interim measures necessary to protect the company, and it should not interfere with a bona fide commercial decision of the Board to raise liquidity and avert insolvency where that course serves the company's interests.

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