Tribunal quashes NCLT order on status quo, allows company operations.

The tribunal found that the NCLT's order making the status quo absolute interfered with the company's operations. It quashed the part of the order related to raising additional debt, stating that such approvals should not be held in abeyance. The appeal was allowed, and no costs were awarded.

---

---

Issues Involved:
1. Whether the order dated 18.06.2021 passed by NCLT, Kochi Bench, requiring the parties to maintain status quo, needs interference.
2. Whether the appellants violated the status quo order dated 17.01.2020 by raising additional debt.

Detailed Analysis:

Issue 1: Whether the order dated 18.06.2021 passed by NCLT, Kochi Bench, requiring the parties to maintain status quo, needs interference.

The appellants contended that the NCLT erred in passing the impugned order by overlooking the fact that there was no violation of the status quo order dated 17.01.2020. The appellants argued that the status quo order was never intended to prevent the company from carrying on its day-to-day affairs as a going concern. They emphasized that the cumulative credit sanction limit as of 17.01.2020 was Rs. 427.11 Crores, and the availing of the Emergency Credit Line Guarantee Scheme (ECLGS) was within this limit and not an additional loan facility. The appellants submitted an affidavit on 03.03.2021 to the NCLT explaining the rationale behind availing the ECLGS.

The respondents argued that the NCLT had correctly made the interim order of status quo dated 17.01.2020 absolute, clarifying that it applied to approvals/resolutions with respect to raising additional debt. They contended that the appellants violated the status quo order by raising an additional debt of Rs. 62.67 Crores without seeking permission from the NCLT. The respondents also highlighted that the order under challenge was a consequence of the appellants' conduct, who failed to respect judicial orders.

The tribunal observed that the NCLT's status quo order dated 17.01.2020 was broad and lacked specificity regarding whether it pertained to management, shareholding, or immovable assets. The tribunal noted that the NCLT should have specified the status quo order more clearly, given the company's business nature and the need to perform its functions as per its objectives. The tribunal concluded that the NCLT's order interfered with the company's day-to-day affairs and was ambiguous.

Issue 2: Whether the appellants violated the status quo order dated 17.01.2020 by raising additional debt.

The respondents alleged that the appellants violated the status quo order by raising additional debt through the ECLGS during the 245th Board meeting on 10.02.2021. The appellants argued that the decision to avail the ECLGS was in the company's best interest and did not contravene the status quo order. They contended that the debt raised was not additional but a reorganization of the existing credit sanction limit.

The tribunal found that the appellants had not violated the status quo order, as the company needed to function through its Board of Directors, and there was no stay on convening and holding Board meetings. The tribunal emphasized that the company's interest was paramount and that business operations could not be halted. The tribunal also noted that the appellants had filed an affidavit on 03.03.2021, informing the NCLT about the decision to avail the ECLGS, which was a prudent step.

Conclusion:

The tribunal concluded that the NCLT's order dated 18.06.2021, making the interim order of status quo dated 17.01.2020 absolute, was interfering with the company's day-to-day affairs. The tribunal quashed and set aside the part of the impugned order that stated, "making it clear that the approvals/resolutions etc. with respect to raising of any additional debt shall be kept in abeyance and the same will be subject to the outcome in the main Company Petition." The appeal was allowed to this extent, and no order as to costs was made.

---