2026 (2) TMI 37 - AT - Companies Law

Director disqualification and interim restraint on creation of third-party interests in company assets - interim orders upheld, appeals disposed

Director disqualification under company law was addressed alongside the validity of interim directions restraining payments to directors and preventing ... Director's disqualification u/s 167(1)(b) - interim restraint on creation of third-party interests in company assets - Validity of interim directions restraining payments to directors and preventing creation of third-party interests in company assets - status quo on payments/remuneration/repayments to directors - HELD THAT:- Once the appeal was e-filed on 08.01.2026 the incident of dated 09.01.2026 ought not to have been added in the hard copy of the appeal filed on 13.01.2026 and we take strong objection to this practice. We find nothing wrong in passing such order since prayers have already been sought in the company petition. Now though the Appellant objects to the status quo on assets on the ground the assets are required for collateral securities but had failed to disclose of such collateral securities or if are required to be furnished during the period from 09.01.2026 till the order is pronounced. There is no pleadings to this effect as of now. Thus, in case such collateral securities are required to be renewed, the Appellants shall be at liberty to approach the Ld. NCLT by filing an application in this regard. Thus, the fact that final hearing has since been concluded in the company petition and the matter was reserved on 09.01.2026 for judgment, we see no reason why to set aside or even modify the interim orders passed by the Ld. NCLT and we dispose of these appeals with a request to the Ld. NCLT to pronounce the judgment reserved by it on 09.01.2026, as expeditiously as possible. Issues: (i) Whether the NCLT's interim directions dated 28.11.2025 prohibiting payments to certain persons and restraining creation of third-party interest in immovable property were beyond jurisdiction or unsustainable; (ii) Whether the NCLT erred in directing that certain persons (Respondents No.2 and 3 / Respondent No.4 and Petitioner) be retained on the Board despite challenges under Section 167(1)(b) of the Companies Act, 2013.Issue (i): Whether the interim directions dated 28.11.2025 (no payments to specified persons and no creation of third-party interest) exceeded the NCLT's jurisdiction or were unwarranted.Analysis: The reliefs sought in the company petition included prayers restraining alienation of shareholding and creation of third-party rights in company assets, and an interim prayer restraining creation of third-party rights in company assets. The NCLT recorded information about withdrawals and undertakings given by parties and made prima facie directions to preserve company assets and prevent payments/transactions that could affect the company's interest pending adjudication. The appellants' contention that the NCLT corrected an earlier order on 'remuneration' did not negate the existence of interim prayers seeking restraint on disposal or encumbrance of assets.Conclusion: In favour of Respondent. The interim directions dated 28.11.2025 were within the NCLT's jurisdiction and were not set aside.Issue (ii): Whether the NCLT erred in directing that certain persons remain on the Board and act as directors despite alleged disqualification under Section 167(1)(b) of the Companies Act, 2013.Analysis: The record did not contain evidence proving service of notices of board meetings to establish continuous absence required for disqualification under Section 167(1)(b). MCA records continued to show the individuals as directors. Parties gave undertakings that no board meeting would be called pending final disposal. Given the absence of evidence of service or formalization of disqualification, continuation on the Board as an interim measure pending final adjudication was supported by the material on record.Conclusion: In favour of Respondent. The NCLT's direction to retain the specified persons on the Board pending final disposal was justified.Final Conclusion: The appeals are disposed of by refusing to disturb the impugned interim orders; the NCLT's interim directions concerning preservation of company assets and board composition remain in force and the NCLT is requested to pronounce its reserved judgment expeditiously.Ratio Decidendi: Where interim reliefs seeking preservation of company assets and status quo on board composition are pleaded and there is prima facie material (including undertakings, record of withdrawals, or absence of evidence of service of notices), the tribunal may grant provisional directions preventing payments and creation of third-party interests and retain directors on the board pending final adjudication under the Companies Act, 2013.