2021 (12) TMI 682 - AT - Companies Law

Tribunal: Nuwal Complied with Companies Act, Interim Injunction Granted, Appeal Dismissed

SOLAR INDUSTRIES INDIA LTD. Versus KAILASH’ CHANDRA NUWAL, INDRA KAILASHCHANDRA NUWAL, RAHUL NUWAL, ECONOMIC EXPLOSIVES LIMITED, SATYANARAYAN NANDLALJI NUWAL, MANISH SATYANARAYAN NUWAL, SEEMA MANISH NUWAL, LEELA DEVI SATYANARAYAN NUWAL, SURESH MENON, ANIL KUMAR JAIN, SUNIL SRIVASTAV, DILIP PATEL, AJAI NIGAM, AMRENDRA VERMA, MADHU VIJ, KHUSHBOO PASARI

SOLAR INDUSTRIES INDIA LTD. Versus KAILASH’ CHANDRA NUWAL, INDRA KAILASHCHANDRA NUWAL, RAHUL NUWAL, ECONOMIC EXPLOSIVES LIMITED, SATYANARAYAN NANDLALJI ... Issues Involved:1. Compliance with Section 184(1) of the Companies Act, 2013.2. Compliance with Section 184(2) of the Companies Act, 2013.3. Reinstatement of K C Nuwal as Director under Section 242(4) of the Companies Act, 2013.4. Granting interim relief without deciding the issue of quasi-partnership.Detailed Analysis:Issue No. (i): Compliance with Section 184(1) of the Companies Act, 2013The core issue revolves around whether K C Nuwal contravened Section 184(1) of the Act. The controversy began when the Company Secretary (CS) sent an email on 31.07.2020 stating that K C Nuwal failed to disclose his interest in AG Technologies Pvt. Ltd. (AGT) in the requisite format (Form MBP-1) after acquiring shares on 02.05.2019. However, evidence shows that K C Nuwal informed the CS via email on 03.05.2019 about his directorship in AGT and later about his shareholding on 28.06.2019. The Tribunal found that the CS should have assisted K C Nuwal in filing the proper form. Thus, while K C Nuwal did not use the prescribed form, he substantially complied with the disclosure requirements. Non-compliance with Section 184(1) does not lead to automatic vacation of office under Section 167 of the Act but may result in penalties under Section 184(4).Issue No. (ii): Compliance with Section 184(2) of the Companies Act, 2013Section 184(2) mandates that a director must disclose their interest in a contract or arrangement at the board meeting where it is discussed. The board meeting on 07.11.2019 involved a decision to rent premises from AGT, where K C Nuwal held an interest. Although K C Nuwal was not present at this meeting, other directors, including S N Nuwal and Manish Nuwal, were aware of his interest and did not object. Therefore, the Tribunal concluded that K C Nuwal did not contravene Section 184(2) and is not subject to the consequences under Section 167(1)(c) and (d).Issue No. (iii): Reinstatement of K C Nuwal as Director under Section 242(4) of the Companies Act, 2013The Tribunal issued an injunction against the implementation of the notice dated 30.07.2020, which claimed that K C Nuwal had vacated his office as director. The Tribunal did not order reinstatement but rather prevented the enforcement of the notice. Under Section 242(4), the Tribunal can make interim orders to regulate company affairs if deemed just and equitable. The Tribunal found the interim order appropriate in this context.Issue No. (iv): Granting interim relief without deciding the issue of quasi-partnershipThe Appellant argued that interim relief should not be granted without first determining whether the company is a quasi-partnership. The Tribunal, however, focused on the legality of the notice dated 30.07.2020 and granted relief accordingly. The Tribunal will examine the main petition independently, without being influenced by this interim order.ConclusionThe Tribunal found that K C Nuwal had substantially complied with Section 184(1) and did not contravene Section 184(2). The interim relief granted was deemed just and equitable, focusing on the legality of the notice rather than the quasi-partnership issue. The appeal was dismissed, and the interim order vacated.