The Supreme Court has clarified that in an appeal arising from an interlocutory order in a pending oppression and mismanagement petition, the paramount consideration for the court is to preserve the subject matter of the dispute until the competent forum adjudicates the main petition. Accordingly, the Court ruled that an interim arrangement directing the parties to maintain status quo, thereby preventing any alteration to the nature of the principal asset or the creation of further third-party interests, should be continued until the final disposal of the underlying Company Petition by the NCLT.
A Two-Judge Bench comprising Justice Dipankar Datta and Justice Augustine George Masih observed that the proceedings were at an interlocutory stage, and the paramount consideration was to ensure that the subject matter of the proceedings, i.e., the project land, which is the principal asset, is preserved until the competent forum (NCLT) adjudicates the dispute on allegations of oppression and mismanagement.
The Bench took note of the sequence of its own interim orders passed during the pendency of the appeals. This included the initial order restraining ‘perceptive steps’, a subsequent order directing no construction on the property after a third-party developer entered insolvency, and a later clarification permitting limited protective works to ensure structural safety without creating any equity for any party.
Further, the Bench noted that the interim arrangement which had been operating pursuant to its earlier orders ought to continue until the NCLT finally adjudicates the underlying controversy. The Bench also observed that the allegations in the contempt petitions required factual determination and did not find it necessary to enter into their merits at this stage.
Accordingly, the Bench directed the NCLT, Mumbai Bench, to proceed with the pending matters and decide Company Petition No.159(MB) of 2021 expeditiously, preferably within two months from the date of the parties’ appearance. All contentions on merits were left open for the NCLT to consider.
Briefly, the dispute involves Appellant No. 1, Moniveda Consultants LLP, which claims to be a 40% shareholder in Respondent No. 1, Shajas Developers Private Limited. Respondent No. 1 is the holding company of Respondent No. 2, JLS Realty Private Limited, which is engaged in a slum redevelopment project on land in Mumbai valued at approximately Rs. 1000 crores. In May 2016, after an Israeli joint venture partner exited Respondent No. 2, Appellant No. 1 entered into arrangements to acquire the entire shareholding of Respondent No. 1. Consequently, 4,000 equity shares of Respondent No. 1 were handed over to Appellant No. 1 with signed transfer forms, and Appellant No. 2 was appointed as a director of Respondent No. 2.
The appellants allege that between 2016 and 2019, under the management of Appellant No. 2, the project was revived, and a loan from IIFL was fully repaid. Further, between December 2019 and January 2021, associate entities of the Appellants infused approximately Rs. 55 crores into Respondent No. 2. The dispute arose when Appellant No. 2 discovered that a revised Form MGT-7 had been filed for Respondent No. 1, removing Appellant No. 1’s entire 40% shareholding and showing Respondent Nos. 4 and 5 as the sole shareholders. This was followed by the appointment of new directors to Respondent No. 2 and an attempt to remove Appellant No. 2 as a director.
The Appellants filed a Company Petition before the NCLT, Mumbai, under Sections 241, 242, 244, and 59 of the Companies Act, 2013, alleging oppression and mismanagement, however, the NCLT declined to grant interim relief. On appeal, the NCLAT set aside the NCLT’s order but confined interim protection to a direction restraining ‘perceptive steps’ for one month and remanded the matter. During the pendency of the appeal before NCLAT, a conveyance deed for the project land was executed in favour of Spenta Suncity Private Limited, which later entered corporate insolvency. Hence, appeals came to be filed before the Supreme Court against the NCLAT’s order.
Appearances:
Senior Advocates Jaideep Gupta and Siddharth Bhatnagar, AOR Tulika Mukherjee, along with Advocates Kumar Anurag Singh, Kunal Chatterjee, Zain A. Khan, Dev Aaryan, Sanat Garg, Md. Abran Khan, Sameer Dawar, and Vishwam Mishra, for the Appellant
ASG Aishwarya Bhati, Senior Advocates Gopal Sankaranarayanan, Amar Dave, Ranjit Kumar, and Dhruv Mehta, AORs M/s. D.S.K. Legal, M/s. Expletus Legal, Shashwat Dubey, Vikrant Pachnanda, Amrish Kumar, Raj Bahadur Yadav, Sudarshan Lamba, Amol Nirmalkumar Suryawanshi, P. S. Sudheer, and Aman Raj Gandhi, along with Advocates Samir Malik, Ryan D’souza, Yash Momaya, Jash Shah, Varun Kalra, Pranav Khanna, Chandra Prakash, Kunal Mimani, Shubhang Tandon, Madhav Gupta, Abhishek Baid, Mohit Kumar Bafna, Praneet Das, Ravinder Kumar, Anup Jain, Ashok Kumar Jain, Nishtha Goel, P.V. Yogeswaran, Sanjay Kumar Tyagi, Rajan Kumar Chourasia, Ishaan Sharma, Shreya Jain, Abhishek Singh, Dr. Arun Kumar Yadav, Rishi Maheshwari, Anne Mathew, Bharat Sood, Jashan Vir Singh, Bindi Dave, Vardaan Bajaj, Dhruvi Mehta, Ojasvi Sharma, Kartikey, and Dhairyah, for the Respondents
