NCLAT Halts Implementation of EGM Resolutions, Citing Non-Compliance with Companies Act Section 5(4) Until Final Decision

The NCLAT set aside the impugned order, granting interim relief to the Appellants by restraining the implementation of the EGM resolutions dated 03.05.2019 until the final adjudication of CP No. 47/2016. The court found that the resolutions did not meet the requirements of Section 5(4) of the Companies Act, 2013, rendering the amendments to the Articles of Association prima facie illegal. The NCLAT emphasized the need for an early resolution of the main petition to address the disputed issues.

---

---

Issues Involved:
1. Legality of the Board of Directors Meeting dated 31.03.2016.
2. Validity of the Gift Deed and Securities Transfer Form dated 28.03.2016.
3. Approval and Implementation of Resolutions in the Extraordinary General Meeting (EGM) dated 03.05.2019.
4. Interim Relief sought in MA 1449/2019.

Summary:

1. Legality of the Board of Directors Meeting dated 31.03.2016:
The Appellants challenged the legality of the Board of Directors Meeting dated 31.03.2016, alleging that it did not actually take place. They contended that the meeting's minutes and resolutions, including the resignation of PPC and the transfer of shares to PC, were fabricated. Evidence such as telephone transcripts suggested PPC's inability to chair the meeting, raising doubts about its occurrence. The NCLT was to adjudicate on this issue in CP No. 47/2016.

2. Validity of the Gift Deed and Securities Transfer Form dated 28.03.2016:
The Appellants questioned the authenticity of the Gift Deed and Securities Transfer Form, citing discrepancies in the execution dates and stamp duty. The Gift Deed and Transfer Form were executed on 28.03.2016, but the stamp duty was purchased on 30.03.2016, indicating potential irregularities. The NCLT was to decide on the legality of these documents in CP No. 47/2016.

3. Approval and Implementation of Resolutions in the EGM dated 03.05.2019:
The EGM held on 03.05.2019 approved resolutions to amend and delete Articles 59 and 60 of the Articles of Association (AoA) of Orbit Electricals. The Appellants argued that these articles were "entrenched articles" and could not be amended without unanimous consent, which was not achieved as Deepak Chhabria dissented. The NCLAT found that the resolutions did not satisfy the requirements of Section 5(4) of the Companies Act, 2013, making the amendments/deletions prima facie illegal.

4. Interim Relief sought in MA 1449/2019:
The Appellants sought interim relief to restrain the implementation of resolutions passed in the EGM dated 03.05.2019 until the final disposal of CP No. 47/2016. The NCLAT held that the balance of convenience and potential irreparable loss favored the Appellants. It directed that the resolutions passed in the EGM should not be acted upon until CP No. 47/2016 was finally decided.

Conclusion:
The NCLAT set aside the impugned order, granting interim relief to the Appellants by restraining the implementation of the EGM resolutions dated 03.05.2019 until the final adjudication of CP No. 47/2016. The judgment emphasized the need for early adjudication of the main petition to settle the contentious issues.

---