First Appellant retains 42 crore CCPS as second tranche unpaid, shares cannot transfer without payment and lender approval

The NCLAT Chennai held that appellants had locus to maintain the appeal as they were aggrieved parties with legal rights affected. The First Appellant company still held 42,00,00,000 CCPS in its name as the second tranche consideration remained unpaid, and the Second Appellant acquired the company as a going concern. The tribunal found that shares could not be transferred without payment and lender approvals. The adjudicating authority's order was set aside for violating natural justice principles by not hearing appellants, and any actions taken during appeal pendency were rendered otiose. Appeal allowed.

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Issues Involved:
1. Locus Standi of the Appellant to File the Appeal.
2. Justification of the Adjudicating Authority's Directions Regarding Transfer of Shares.
3. Compliance with Principles of Natural Justice.

Summary:

1. Locus Standi of the Appellant to File the Appeal:
The Appellants argued that they are necessary parties being substantially interested in the subject matter of IA No. 816/2023. The Adjudicating Authority, in gross violation of the Principles of Natural Justice, passed the Impugned Directions without issuing notice to the Appellant, which had undergone a change in management. The Appellants are "persons aggrieved" as defined by the Supreme Court, having suffered a legal grievance due to the decision affecting their title to the shares.

2. Justification of the Adjudicating Authority's Directions Regarding Transfer of Shares:
The Adjudicating Authority directed the Liquidator to assist in the transfer of 42,00,00,000 CCPS shares. The Appellants contended that the second tranche of consideration for the transfer of shares remained unpaid, and the conditions stipulated in the SPA were never satisfied. The SPA and its amendments made it clear that until the full consideration is paid, LITL will have a charge on the unpaid amount. The Monitoring Committee had sought a legal opinion on this issue, which was pending, but IDBI filed IA No. 816/2023 without issuing notice to the Appellants. The Tribunal found that the Appellants' legal rights were affected, and the directions given without hearing the Appellants violated the Principles of Natural Justice.

3. Compliance with Principles of Natural Justice:
The Tribunal observed that the Appellants were not heard before the Impugned Directions were given, which constitutes a violation of the Principles of Natural Justice. The Tribunal emphasized that the Appellants have locus to file the Appeal, and the directions given to the Liquidator in IA No. 816/2023 were unjustified, especially when the transfer of shares was disputed and the Monitoring Committee had sought a legal opinion.

Conclusion:
The Tribunal allowed the Appeal, set aside the Impugned Order passed by the Adjudicating Authority, and rendered any actions taken by the Respondents during the pendency of the Appeal otiose. All pending IAs were closed.

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