Appellate Tribunal Upholds Appointment of Inspector under Companies Act 2013

The Appellate Tribunal upheld the Tribunal's decision to appoint an Inspector under Section 426 of the Companies Act, 2013, due to non-cooperation from the Appellants. It found no violation of natural justice in the interim order and allowed the Tribunal to proceed with the maintainability issue. The Appellants' challenge to the interim relief directing deposit of daily collections was rejected, as it aimed to prevent fund siphoning. The Appellate Tribunal emphasized expeditious resolution of the main Company Petition to protect the assets of the 9th Respondent Company.

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Issues Involved:
1. Appointment of an Inspector by the Tribunal under Section 426 of the Companies Act, 2013.
2. Alleged violation of principles of natural justice.
3. Maintainability of the Company Petition.
4. Applicability of Sections 241 and 244 of the Companies Act, 2013.
5. Interim relief granted by the Tribunal.
6. Alleged fund siphoning and mismanagement.
7. Impact of the Tribunal's order on the project's operations.

Issue-wise Detailed Analysis:

1. Appointment of an Inspector by the Tribunal under Section 426 of the Companies Act, 2013:
The Appellants challenged the Tribunal's jurisdiction to appoint an Inspector under Section 426. The Tribunal appointed Mr. Ravish Kumar as the Inspector on 12.12.2021, due to non-cooperation from the Appellants. The Appellate Tribunal held that the Tribunal had sufficient powers to appoint the Inspector under Section 426, as the Appellants failed to respond to the request for a memo of names for the Inspector.

2. Alleged violation of principles of natural justice:
The Appellants argued that the Impugned Order was passed without giving them an opportunity to be heard and without considering their request for a two-week period to file objections to the Inspector's report. The Tribunal noted that the Appellants had availed many adjournments and were collecting revenue in cash, which remained unaccounted for. The Appellate Tribunal found no error in the Impugned Order, as it was an interim measure subject to the final decision of the main Company Petition.

3. Maintainability of the Company Petition:
The Appellants argued that the maintainability of the Company Petition was yet to be decided by the Tribunal. The Tribunal clubbed the maintainability issue with the main Company Petition. The Appellants filed a writ petition before the High Court of Kerala, which directed the Tribunal to consider the maintainability issue on priority. The Appellate Tribunal noted that the maintainability issue was still pending before the Tribunal.

4. Applicability of Sections 241 and 244 of the Companies Act, 2013:
The Appellants contended that the Respondents were not members of Appellant Companies 5 to 8 and hence were not entitled to claim any relief under Sections 241 and 242. The Appellate Tribunal observed that the Tribunal has the power to waive the requirements specified in Section 244 to enable members to apply under Section 241.

5. Interim relief granted by the Tribunal:
The Appellants challenged the interim relief granted by the Tribunal, which directed them to deposit daily collections in a separate Bank Account/Escrow Account. The Appellate Tribunal noted that the Tribunal's order was an interim measure to prevent fund siphoning before the final decision on the Company Petition. The Tribunal had directed the Appellants to deposit the daily collections in a separate account to protect the assets of the 9th Respondent Company.

6. Alleged fund siphoning and mismanagement:
The Respondents alleged that the Appellants were involved in fund siphoning and mismanagement in the 9th Respondent Company. The Inspector's report revealed several oppressive acts and fund siphoning by the Appellants. The Tribunal passed the Impugned Order based on the Inspector's report to prevent further diversion of funds. The Appellate Tribunal found no error in the Tribunal's order as it was based on the Inspector's report and aimed to protect the assets of the 9th Respondent Company.

7. Impact of the Tribunal's order on the project's operations:
The Appellants argued that the Tribunal's order jeopardized the survival of the project as it restricted the utilization of daily collections for operational expenses, including payment of salaries. The Appellate Tribunal acknowledged the difficulty in managing the project without regular cash flow but emphasized the need to prevent fund siphoning. The Tribunal was advised to expedite the decision on the original Company Petition and any other interlocutory applications within four weeks.

Conclusion:
The Appellate Tribunal disposed of the appeal, finding no error in the Tribunal's orders and emphasizing the need for the Tribunal to decide the original Company Petition expeditiously. The connected pending interlocutory applications were also closed.

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