SC directs NCLAT chairperson to conduct enquiry over tribunal allegedly not following top court direction

The Supreme Court on Friday directed the NCLAT chairperson to conduct an enquiry and submit a report by Monday over an allegation that one of its benches proceeded and delivered an order without following the top court’s directions.

The order is related to the annual general meeting (AGM) of Finolex Cables and Prakash Chhabria and Deepak Chhabria’s legal tussle over the management control of the company.

A three-member apex court bench headed by Chief Justice DY Chandrachud had in the morning directed the National Company Law Appellate Tribunal (NCLAT) to proceed to its judgment and declare the results of the meeting only after getting the scrutiniser’s report.

The Supreme Court order was uploaded at 1.55 pm and the counsel also informed the development to the National Company Law Appellate Tribunal (NCLAT) bench, which was scheduled to deliver the judgment at 2 pm.

However, a two-member bench of the NCLAT comprising Justice Rakesh Kumar, Member Judicial, and Alok Srivastava, Member Technical, went ahead and pronounced the order, while the scrutiniser’s report was uploaded at 2:40 pm.

The apex court was apprised about the development through an urgent mentioning by lawyers and the bench led by the chief justice said,”If what is stated is correct, this will clearly constitute the defiance of the order of this court by the NCLAT.”

However, it also said that at this stage it is not commenting on the merits of the submissions which have been made.

“We direct that an enquiry shall be conducted on the above allegations by the Chairperson of the NCLAT. A report shall be submitted before this court by 5 pm on 16 October 2023 after specifically verifying the facts from the judges who constituted the bench of the NCLAT,” the Supreme Court said.

The apex court said that in its report, the NCLAT chairperson shall specifically verify “that the order of this court dated 13 October 2023 passed in the morning session was drawn to the attention of the two judges”. “If that is so, the circumstances in which the judges proceeded to pronounce the judgment despite the clear mandate of the order of this court which was passed in the morning session,” it said.

Directing to list the matter on October 17, the Supreme Court said, “We are passing this order in extraordinary circumstances, upon an urgent mentioning being made in that regard.”

The court’s order came over a petition filed by Prakash Chhabria led Orbit Electricals which is a promoter entity in Finolex Cables.

He had sought disclosure of the outcome of voting in the annual general meeting (AGM) of the company on the agenda item pertaining to the reappointment of Deepak Chhabria as executive chairman.

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He challenged the non-disclosure of the outcome of voting by shareholders pertaining to the resolution related to the reappointment of Deepak Chhabria as a “Whole-Time Director” designated as an “Executive Chairman” in its AGM held on September 29.

Earlier in this matter, the NCLAT had on September 21, passed an order directing the status quo on the conduct of the AGM, till they adjudicate on the dispute between cousins Prakash Chhabria and Deepak Chhabria.

On this an appeal was referred to the Supreme Court, which had on September 26 vacated this status quo order and said all action which may be taken would abide by the final result of the proceedings before NCLAT.

“The NCLAT shall proceed to declare its judgment in the pending appeal after it is duly apprised of the fact that the result of the annual general meeting has been declared,” the apex court had said.

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