NCLAT directs NCLT to decide over SREI's plea against rights issue of Trinity Alternative Investment

The National Company Law Appellate Tribunal (NCLAT) has asked the Kolkata bench of NCLT to decide over the plea of

against the rights issue of its subsidiary

Alternative Investment Managers.

SREI Infrastructure Finance Ltd (SIFL), which owns 51 per cent equity in the fund management firm Trinity Alternative Investment Managers Ltd, is anticipating dilution of its shareholding in the subsidiary after its right issue.

The remaining 49 per cent shareholding is owned by Payaash Capital Singapore Pte Ltd.

A two-member NCLAT bench, while disposing of SREI Infrastructure Finance Ltd (SIFL) petition observed that the National Company Law Tribunal (NCLT) has ordered a status quo and is yet to pass any order over the plea filed by the non-banking financial company.

The appellate tribunal has directed NCLT to take up the matter on February 18, 2022, as scheduled, without any further adjournments and deal with all issues.

SIFL is presently going through the Insolvency Resolution process after the NCLT had admitted a plea by the Reserve Bank of India.

An administrator has been appointed in October last year and SIFL is presently under moratorium as per the provisions of the Insolvency & Bankruptcy Code (IBC).

SIFL had approached NCLT on November 18, 2021 against the right issue process alleging oppression and mismanagement under sections 241 and 242 of the Companies Act. It had also initiated the process of removal of directors from the board of Trinity.

In this matter, passing an interim order, the Kolkata bench had on December 6, 2021, directed to maintain a status quo until the hearing of the petition.

However, the said order to maintain the status quo was challenged by SIFL before NCLAT contending that NCLT has restrained it from using its statutory rights under Section 100 (calling extraordinary general meeting) and Section 169 (removal of directors) of the Companies Act.

“The impugned order effectively restrained the appellant (SIFL), the 51 per cent shareholder from exercising its statutory rights and following a prescribed procedure to remove an appointed director, despite there being no request or prayer wheresoever. The impugned order is passed in respect of issue which is not even remotely connected with the pending matter before NCLT i.e., the right issue,” submitted Solicitor General Tushar Mehta representing SIFL before NCLAT.

The NCLT order also interferes with the functioning of the administrator of SIFL and has the effect of derailing the timelines under IBC.

However, counsel representing Trinity said NCLT has not expressed any opinion on the merits of the matter and when a Petition is filed under Sections 241 and 242, NCLT has the power to pass any Interim order which it thinks fit.

Consenting with it, NCLAT said ”aforenoted Section empowers the tribunal to pass any Interim Order on an Application made by any party to the proceeding, which it thinks fit for regulating the conduct of the companies affairs” upon such terms and conditions as appear to it to be just and equitable.

“On a careful consideration of the contentions projected by both sides, and the pleadings put forward, this Tribunal, keeping in mind the ingredients of Section 241 and 242 of the Act, arrives at the resultant conclusion, without expressing any opinion on the merits of the matter, also not delving deep into the case, as allegations of ‘oppression and mismanagement’ consist of mixed questions of fact and law, which cannot be decided at this interim stage, directs the NCLT Kolkata Bench to take up the matter on February 18, 2022,” said the NCLAT.