In a recent ruling, the Delhi bench of the National Company Law Appellate Tribunal (NCLAT) monetary relief on fraud committed by oppression and mismanagement can only be granted by National Company Law Tribunal (NCLT) under section 242 of the Companies Act, 2013.
Through a bunch of appeals, the appellants challenged the Impugned Order by NCLT which dismissed the Application filed by the Applicant/Appellant/`M/s. Indus Motor Company Private Limited, for referring the matter to an Arbitral Tribunal, the Appellants preferred this Appeal under Section 421 of the Companies Act, 2013 (The Act).
It was submitted that the Respondents/the minority Shareholders of the first Appellant Company filed a Company Petition bearing C.P.02/KOB/2020 before the NCLT seeking various reliefs. In the said Company Petition, the Appellants have filed an Application bearing I.A.44/2020 under Section 8 of the Arbitration and Conciliation Act, 1996, seeking a direction to refer all disputes inter se the Appellants and Respondents to Arbitration in terms of the Arbitration Clause as contained in Clause 18 of the Memorandum of Understanding (`MoU’) dated 31.03.2007 and accordingly dismiss the Company Petition as the Impugned Order was passed without taking into consideration that this MoU covers all the issues raised in the Company Petition.
The disputes raised by the Respondents in the Company Petition are concerning alleged acts of `Oppression and Mismanagement’. Without delving deep into the merits of the matter and also the technical objections raised regarding signatory to the Arbitration Agreement etc
It was vehemently argued that mere allegations of fraud will not make a dispute fall outside the ambit of an Arbitration Clause and that all disputes arising out of the breach of Clauses of the 2007 MoU should be referred to and decided by Arbitration and that there should not be any bifurcation.
NCLT observed that there were substantial allegations of fraud and has dismissed the Petition seeking to refer the matter to Arbitration, holding that the relief sought cannot be bifurcated and that the case involves complex questions of law and facts which require a deeper examination of the matter.
It was evident that the reliefs prayed for in the Company Petition could only be adjudicated by a Court/Tribunal of competent jurisdiction, which in the present case is the NCLT/NCLAT under Sections 241 & 242 of the Act.
A single-member bench of Justice Anant Bijay Singh, Member (Judicial) observed that since an Application was moved under Section 8 of the Arbitration and Conciliation Act, 1990, NCLT ought to have directed the party to get their disputes resolved through Arbitration as per MoU dated 31.03.2007.
The Tribunal viewed that NCLT was justified in granting the interim reliefs keeping in view the Report of the Advocate Commissioner and the fact that the Petition was filed under Sections 241 & 242 of the Act.
It was evident that the Appellants had filed an interim Counter to the Company Petition dated 03.06.2020; though Orders were reserved by NCLT as the Appellant has prayed for some more time to file the Counter to the Company Petition, an opportunity was given to the Appellants herein to file it before 05.06.2020, the Appellant filed their interim Counter and also moved an Application dated 13.05.2020 under Rule 11 of the NCLT Rules, 2016, requesting the Tribunal to conduct a virtual hearing.
The Tribunal viewed that sufficient opportunity was given by the NCLT to the Appellants, specifically having regard to the fact that there was a direction to file a Counter to the Company Petition in the Interim Orders dated 17.01.2020 and 17.02.2020. While dismissing the appeal, the Tribunal upheld it. the NCLT Order
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