TaxTMI 
TaxTMI 
2021 (11) TMI 905
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....cates for R-2 & R-3. Mr. Arun Kathpalia, Sr. Advocate alongwith Mr. Dhruv Malik, Mr. Hafeez Patanwala, Ms. Sharmistha Ghosh, Ms. Jinal Shah, Ms. Juris & Ms. Mannat Sabharwal, Advocates for R-7 to R-9., Dr. Abhishek Manu Singhvi, Sr. Advocate alongwith Mr. Pranaya Goyal, Mr. Abhishek Sharma, Mr. Bindi Dave, Mr. Aman Raj Gandhi, Mr. Aayesh Gandhi, Mr. Chirag Kamdar & Mr. L. Nidhiram Sharam, for R-6 to R-16. JUDGEMENT [PER; SHREESHA MERLA, MEMBER (T)] 1. Aggrieved by the Common Impugned Order dated 11.06.2021, passed by the NCLT (National Company Law Tribunal, Mumbai Bench, Court No.-1) in C.A. Nos. 1008 of 2020 & 1064 of 2020 in C.P.(IB) No.- 428 of 2018, Company Appeal (AT) No. 76 of 2021 and Company Appeal (AT) No. 78 of 2021, have been preferred by the Appellants under Section 421 of the Companies Act, 2013 (hereinafter referred to as the 'Act'). Since, both these Appeals are arising out of a Common Impugned Order, they are being disposed of by this Common Order. 2. The Tribunal while dismissing the Application has observed as follows:- "...........q. In the above circumstances, the Petitioners/Applicants are seeking the following reliefs: a) Pendi....
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..../or made available by Respondent No. 1 to its Andhra and Maharashtra Divisions for the purposes of working capital, capital expenditure and/or towards acquisition of assets (movable and/or immovable) and additional dealerships and also the number of new businesses and/or outlets which were opened and/or closed by Respondent No. 1 in areas outside the State of Gujarat from the year 2015 onwards till date; c) Pending the hearing and final disposal of the petition, this Hon'ble Tribunal be pleased to restrain and prohibit Respondent Nos. 2 to 17, their servants and/or agents from in any manner (directly or indirectly): (i) dealing with, alienating, encumbering and/or parting with possession of Respondent No.1's assets and properties and/or otherwise taking any lending and/or financial obligations or encumbering the assets and properties of Respondent No. 1, other than in the ordinary course of business and for the purpose of funding the immediate fund requirement of the Gujarat Division; (ii) prejudicing, obstructing and/or interfering with Petitioner No. 1 and 2's control of Respondent No. 1's Gujarat Division and its business and operations and/or to in any manner ....
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....find ways and means to manage the downslide. Whether or not the company did take remedial measures or otherwise contributed to the dismal financial position of the Gujarat Division or that it resulted from the mishandling of the micro-management, can only be gone into after a thorough enquiry while hearing the Company Petition taking into consideration the rival pleadings of the parties. It is prima facie probable that the Board did not give adequate attention to the revival of the resuscitation of the Gujarat Division. We are of the view that nothing prevented the Board to formulate a revival plan for the Gujarat Division and give directions to the Gujarat Management to put things in order. The problem which we perceive is that the divisions were treated as companies within a company and while the Board took credit for profitable units, it blamed the local management for losses, without initiating proper remedial measures though empowered to do so. iii. Whether the company is a quasi-partnership or not, cannot be decided at the interim stage. The prayers made in CA No. 1008 of 2020 are based on facts relating to the averments made in the Company Petition alleging oppressi....
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....to take all tactical business decisions for revival of the Gujarat Division. No separate directions are necessary, more so, when a comprehensive appraisal of the contentions of both the sides in the Company Petition is pending consideration. In the result, both the Applications do not merit any consideration and are dismissed on contest. The order of this Bench dated 06.04.2018 needs no intercession by this Bench with clarifications given supra. No costs." 3. At the outset, the shareholding pattern of the parties concerned is detailed below:- • Automotive Manufacturers Pvt. Ltd. (hereinafter referred to as the 'Respondent No. 1 Company') has three Divisions:- a. The Gujarat Division, operated and managed by Pradip R. Kamdar, Ratilal D. Kamdar. b. The Andhra Pradesh/Telangana Division operated and managed by Rajeev Sanghvi and Kokila M. Sanghvi, the Appellants in Company Appeal (AT) No. 76 of 2021. c. The Maharashtra Division operated and managed by namely Bharat M. Sanghvi, Sachin Sanghvi & Aditya Sanghvi, the Appellants in Company Appeal (AT) No. 78 of 2021. 4. Groups Shareholding at the time of filing of the Company Petition ....
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.... R-1 Company; a sum of Rs. 1.5 Crore was paid on 05.12.2020 towards employees' salary from the cashflows of Maharashtra and the Andhra Pradesh Divisions; the provident fund contribution and the gratuity fund of the employees of the Gujarat Division was also being met from the cashflows of these Divisions. • The Learned Sr. Counsel strenuously contended that the conclusion by NCLT that 'we are of the view that nothing prevented the Board to formulate the revival plan for the Gujarat Division and give directions to the Gujarat Management to put things in order. The problem which we perceive is that the Divisions were treated as Company within the Company and while the Board to took credit for profitable units, it blames the legal manager for losses, without initiating proper measures though empowered to do so would seriously prejudice their rights in the main Company Petition', is erroneous. • It was further contended that between 2008 and 2020 the Gujarat Group suffered losses of about Rs. 73.52 Crores; was on the verge of default with ICICI Bank, IndusInd Bank and Hinduja Leyland Finance. The Learned Counsel concluded that NCLT vide Order dated 06.04.2018 ....
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.... actions and hence proposed restructuring. M.A. 229 of 2018 was filed by the Petitioners/Gujarat Group seeking extension of the term of the Joint Managing director who was already 95 years old, which was dismissed by NCLT as misconceived but observed that the 'R-1 Company is not accepted to make any structural changes to the existing arrangement at least until this Company Petition is disposed of'. This Order was not challenged only because the Respondents had initiated settlement talks. Subsequently the settlement failed and the losses continued to mount, the GST, liabilities were not met, the employees were not paid and the Company had to invest > Rs. 60 Crores to keep the Gujarat Division floating. In this background, IA 1008 was filed. • The Learned Sr. Counsel contended that presently the Gujarat Division has no dealership and only has overhead expenses and therefore the Company should be allowed to restructure for the overall benefit of all the shareholders. The Learned Sr. Counsel also drew our attention to paras 10 (ii) and (iii) of the Impugned Order and submitted that these two paras need to be expunged as the observations made in both these paras would cause....
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....es, of which, less than 4% has been invested in the Gujarat Division and therefore NCLT has rightly observed that 'the management of the Gujarat Division is not getting the required funds and hence, they have to go for - cost external borrowings and that has consistently contributed to the business losses' and these issues can be gone into at the stage of final hearing and therefore no prejudice will be caused to the Appellants. • Learned Sr. Counsel further submitted that no case is made out for expunging the marks in the Impugned Order as they are only of a prima facie in nature and are tentative. They are issued with the intent to preserve the Status Quo till the matter is finally decided and NCLT has rightly observed that these issues form the crux of the disputes between the parties and it would be in the fitness of things to ensure that the Petition is heard expeditiously in a time bound manner. • The three divisions were micro managed by the respective Groups and the Board of Directors of the Respondent Company is in full and effective control of all the divisions, yet the Gujarat Division was not getting the required funds as the Board did not give....
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....ssions before NCLT while not interfering with the said Order. Thereafter the Gujarat Group approached the Hon'ble Supreme Court in Civil Appeal no. 3799 of 2020, in which the Hon'ble Supreme Court vide Order dated 07.12.2020 directed NCLT to dispose of the Petitions and the Interim Applications preferably within a period of 8 weeks. NCLT heard the parties between 08.12.2020 and 04.02.2021 and then passed the Impugned Order on 11.06.2021. 10. Aggrieved by this Order, both the Maharashtra and Andhra Pradesh Groups preferred these Appeals Company Appeal (AT) No. 76 & 78 of 2021 before this Tribunal. The Appeals were admitted vide Order dated 20.07.2021 and posted to 27.08.2021 for completion of pleadings. While so, the Gujarat Group preferred CA 4588 of 2021 & 4542 of 2021 before the Hon'ble Supreme Court. For ready reference, the Order of the Hon'ble Supreme Court dated 19.08.2021 is reproduced as hereunder:- "1. The appeal before the NCLAT arises from interlocutory proceedings. Notice has been issued in the appeal. Hence, there is no reason for this court to intervene at this stage when proceedings are still pending before the NCLAT. 2. The submission which has ....