2020 (8) TMI 698 - AT - Companies Law

NCLT upholds Special Officer appointment in family company dispute

Amit Kumar Gupta Versus LGW Ltd, Sanjay Kumar Gupta, Anurag Gupta, Lucia Gupta, Jinesh Shah

The NCLT upheld the appointment of a Special Officer to oversee an EOGM in a family company dispute under Sections 241 and 242 of the Companies Act, 2013, ... Oppression and mismanagement - Validity of notice issued - company petition is pending since 2017 - removal of appellant/petitioner as a director of the Respondent Company - appellant/petitioner has been pointed out that the notice dated 6.2.2017 is a defective as in the notice no explanatory statement is given - HELD THAT:- After passing of this order more than two years has been lapsed but the company petition cannot be decided. It is pointed out on behalf of the Respondents that taking advantage of the interim order passed on 14.3.2017 the appellant representing himself as a director of the company has taken various steps which are detrimental and prejudicial to the interest of the Respondent NO.1 company as well as shareholder members. The Respondents are not being allowed to enter into a new project due to appellant/petitioner activities. The grievance is that impugned order is in contradiction of the earlier order dated 14.3.2017. Earlier order dated 14.3.2017 was passed as the notice for removal of appellant was not in conformity with the Section 169 read with Section 115 of the Companies Act 2013 as in the notice no explanatory statement was given. Now the Respondents are ready to serve fresh notice in conformity with the Companies Act, 2013. Section 242(4) of the Companies Act, 2013 empowers the NCLT to pass any interim order which it thinks fit for regulating the conduct of the company’s affairs. Hence the NCLT considering the change circumstances in the matter has modified its own ex parte order dated 14.3.2017, nothing wrong in it. It is not argued that the impugned order is detrimental and prejudicial to the interest of the Respondent Company. It is apparent that both the parties agreed to hold EOGM by the Board of Directors under the Chairmanship of Special Officer to be appointed by the Tribunal. Hence the impugned order is well reasoned order - Appeal dismissed. Issues Involved:- Application of Section 241 and 242 of the Companies Act, 2013 for oppression and mismanagement in a family company.- Validity of ex parte interim order directing EOGM and subsequent actions.- Application for appointment of a Special Officer for EOGM.- Maintainability of the application and reliefs sought.- Legality and consistency of NCLT's orders.- Appointment of Special Officer and conduct of EOGM.- Challenge to the impugned order and its impact on minority shareholder rights.- Jurisdiction of NCLT under Section 242(4) of the Companies Act, 2013.Analysis:1. The case involves a dispute within a family company, where the appellant filed a petition under Sections 241 and 242 of the Companies Act, 2013, alleging oppression and mismanagement due to differences with majority shareholders.2. The NCLT initially passed an ex parte interim order directing an EOGM, which was challenged by the respondents leading to the application for a Special Officer to conduct the EOGM.3. The NCLT allowed the application, appointing a Special Officer to oversee the EOGM, based on changed circumstances and the need to regulate the company's affairs in the interest of justice and shareholders.4. The appellant contested the application's maintainability and the subsequent order's impact on their rights as a minority shareholder and director in the family company.5. The NCLT, in its judgment, considered the powers under Section 242(4) of the Companies Act, 2013, to make interim orders for regulating company affairs, and found no illegality in the impugned order.6. The NCLT upheld the impugned order, noting that both parties agreed to the EOGM under the Chairmanship of a Special Officer, dismissing the appeal and emphasizing the applicability of Section 169 of the Companies Act, 2013 to the company.7. The judgment highlights the importance of regulating company affairs, resolving disputes, and ensuring fair conduct in family-owned businesses under the legal framework provided by the Companies Act, 2013.