Supreme Court Directs NCLAT Chairperson to Conduct Enquiry Over Allegation of Irregularities

New Delhi: The Supreme Court on Friday directed the National Company Law Appellate Tribunal (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 Chhabrias legal tussle over the management control of the company.

Background of the Case

A three-member apex court bench headed by Chief Justice DY Chandrachud had in the morning directed the NCLAT to proceed to its judgment and declare the results of the meeting only after getting the scrutinisers report. The Supreme Court order was uploaded at 1.55 pm and the counsel also informed the development to the 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 scrutinisers report was uploaded at 2:40 pm.

Supreme Court's Response

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.

The Supreme Court directed 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.

Further Directions

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 Supreme 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.

The case highlights the importance of following court orders and the consequences of defying them. The NCLAT chairperson's enquiry report will shed more light on the matter and the Supreme Court's final decision will be keenly watched by the corporate world.