The National Company Law Tribunal (NCLT) on Friday declined to provide an interim stay on a recent shareholder resolution passed by Religare Enterprises (REL) to give Rs 500 crore to Religare Capital to repay a loan by Axis Bank that is falling due. The tribunal’s decision to refuse interim relief was on the grounds that with a stake of 5.59% in REL, the petitioner, India Horizon Fund, did not have the locus standi to approach the tribunal on the grounds of oppression of minority shareholders.
According to Section 244 of the Companies Act, only shareholders having a minimum stake of 10% can approach the NCLT on such grounds.
However, the tribunal issued notices to the REL promoters Malvinder Singh and Shivinder Singh, giving them four weeks’ time to reply and fixed November 8 as the next date of hearing.
The petition for an interim stay was filed by institutional investor India Horizon Fund, which had claimed the support of IDBI Trusteeship Services, along with which the combined stake was going up to 11%, making them eligible to approach the NCLT.
However, the tribunal, while concurring with the objection raised by REL’s counsel that showing IDBI Trusteeship’s support amounted to suppression of facts and forum shopping, stated, “No interim relief could be granted at this stage because firstly there is active and deliberate suppression of facts from this court by the consenting IDBI Trusteeship Services as no disclosure of the suit has been made.”
REL’s counsel had highlighted that IDBI Trusteeship, which had accorded consent for filing the petition, had actually filed a commercial suit in the Bombay High Court and this fact was not disclosed to the NCLT. The tribunal observed that the Bombay High Court had also not granted any interim relief to it.
If the consent of IDBI Trusteeship is not taken into account due to such grounds, then the locus standi of India Horizon’s petition is in doubt, hence there can be no interim relief.
In its petition, India Horizon Fund had sought immediate dissolution of the board and the management of REL. It had asked for the appointment of an administrator until a new board can be set up, a forensic audit and reversal of alleged fraudulent transactions by the majority shareholders.