Minor Shareholder Entitled to ERP Access despite Engagement with Rival Company Accused of Poaching Employees: NCLAT [Read Order]
The Tribunal upheld the minority shareholder’s ERP noting that directors cannot be denied access without any proof of misuse
NCLAT, Shareholder, NCLAT New Delhi
NCLAT, Shareholder, NCLAT New Delhi
The Principal Bench of the National Company Law Appellate Tribunal (NCLAT) at New Delhi recently upheld a direction granting Enterprise Resource Planning (ERP) access to a minority shareholder and director group of an iron and steel company, despite allegations that the minority shareholder had links with a rival company that was accused of poaching employees and misusing confidential information of the iron and steel.
Two appeals were instituted before the NCLAT on the basis of a long-running dispute between the shareholders of Arya Iron & Steel Co. Pvt. Ltd. (Arya Iron) The shareholders, namely - the Pawan Arya Group (Pawan Arya) and Ravi Arya Group (Ravi Arya) each held 25.5% of shares with the rest of the 49% held by Palm View Overseas Ltd. (PVOL).
Earlier, the Ravi Arya Group had filed a petition before the Mumbai Bench of the National Company Law Tribunal (NCLT) alleging oppression and mismanagement. The NCLT directed Arya Iron to provide ERP access to the directors of Ravi Arya if similar access was available to others.
In the present appeal, Arya Iron, represented by Arun Kathpalia, opposed the direction to grant ERP access, arguing that the rival group had links with competing company Nachiketa Power & Steel Pvt. Ltd. which had poached key employees of Arya Iron. He contended that granting ERP access would compromise confidential business data, pricing information and client details.
The Bench of Justice Yogesh Khanna (Judicial Member) and Ajai Das Mehrotra (Technical Member) noted that Section 128(3) of the Companies Act, 2013 grants every director the right to inspect the concerned company’s books of accounts.
The Tribunal held that such access could not be denied merely on suspicion of misuse unless there was tangible evidence that the director had acted to the detriment of the company.
The NCLAT upheld paragraph 41 of the impugned NCLT order which observed that confidentiality concerns should be managed through appropriate internal policies rather than denying access altogether.
In light of the findings, The NCLAT upheld the directions of the NCLT requiring the company to either grant remote ERP access to all directors, including those from the Ravi Arya Group or to revoke it for everyone equally.
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