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NCLAT-Chennai-Judgment-Summary-Nagaraj-V-Mylandla-Ors-v-Financial-Software-and-Systems-Pvt-Ltd-Appellate-Proceedings-Under-Section-421-of-the-Companies-Act-2013
| Case Title | Nagaraj V. Mylandla & Ors. v. Financial Software and Systems Pvt. Ltd. and Ors. |
|---|---|
| Case No. | Comp App (AT) (CH) No.84/2024 |
| Coram | Justice Sharad Kumar Sharma (Member, Judicial), Jatindranatha Swain (Member, Technical) |
| Advocate for Appellant | Adv. P.H. Arvindh Pandian (Sr. Adv), Rajkumar Jhabakh |
| Advocate for Respondent | Adv. P.S. Raman (Sr. Adv), R. Parthasarathy (Sr. Adv), P. Giridharan, PSS Bhargava, Prabhav Sharoff, Mrudula Dixit, Suhrith Parthasarathy, Amritha Sathyajith, T.K. Bhaskar |
Introduction
This appeal was filed under Section 421 of the Companies Act, 2013, challenging the Impugned Order dated 11.12.2024 passed by the National Company Law Tribunal (NCLT), Chennai Bench, in IA(CA)/229(CHE)/2024 in CP(CA)/129(CHE)/2023. The Impugned Order permitted the holding of an Annual General Meeting (AGM) while keeping the outcome of Agenda No.1 subject to further orders of the Tribunal.
Facts of the Case
| S. No. | Fact |
| 1. | The Appellants collectively hold a 33.9% shareholding in Financial Software and Systems Pvt. Ltd. (Respondent No.1). |
| 2. | Appellant No.1 is the founder, chairman, and erstwhile managing director of Respondent No.1. |
| 3. | Respondent Nos.2 to 5 are investor-shareholders holding 51.78% shares, and Respondent Nos.6 to 8 are nominee directors of these investors. |
| 4. | The Appellants alleged acts of oppression and mismanagement, including irregular financial practices, such as the removal of advances worth ?52.33 crores, backdating of entries, and illegal board resolutions. |
| 5. | An Interlocutory Application (IA) was filed seeking to set aside resolutions passed during a Board meeting on 12.11.2024 and to restrain the Respondents from placing financial statements for approval at the AGM scheduled for 11.12.2024. |
Contentions of the Appellant
| S. No. | Contention |
| 1. | The resolutions passed during the Board meeting on 12.11.2024, including the approval of financial statements, were irregular and violated provisions of the Companies Act, 2013. |
| 2. | Financial irregularities included the removal of advances worth ?52.33 crores and backdating of financial entries. |
| 3. | The Appellants were denied access to the Company's financial records in contravention of Section 128 of the Companies Act, 2013. |
| 4. | The AGM should have been postponed to allow the Appellants to raise objections and participate effectively. |
Contentions of the Respondent
| S. No. | Contention |
| 1. | The resolutions and financial statements were approved in accordance with the Companies Act, 2013. |
| 2. | The AGM was scheduled as per statutory timelines and delaying it would adversely impact the operations of the Company. |
| 3. | The Appellants’ allegations of financial irregularities were unfounded and unsubstantiated. |
Observation of the Court
| S. No. | Observation |
| 1. | The Impugned Order allowed the AGM to proceed while keeping the outcome of Agenda No.1 subject to further orders. |
| 2. | The NCLT did not find sufficient grounds to restrain the Respondents from conducting the AGM. |
| 3. | The issues raised by the Appellants were procedural and could be addressed during the main hearing of the Company Petition. |
Decision of the Court
| S. No. | Decision |
| 1. | The appeal was dismissed as premature, being against an interlocutory order. |
| 2. | The Appellants’ rights were reserved to be agitated at an appropriate stage during the proceedings of CP(CA)/129(CHE)/2023. |
Conclusion
The Court emphasized that since no substantive rights were adjudicated in the Impugned Order, it did not qualify as an appealable order under Section 421 of the Companies Act, 2013. All objections raised by the Appellants could be addressed during the final hearing of the Company Petition.
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