NCLAT stays NCLT order directing RattanIndia Finance to appoint JV nominee as CFO

LSF 10 Rose Investments, a subsidiary of US-based private equity firm Lone Star Funds (LSF), holds 50 per cent shareholding in RattanIndia Finance (RF), a non-banking finance company.

National Company Law Appellate Tribunal
The tribunal had also consented to the private equity firm's submission that its partners do not have the right to contest the "validity of petitioner's (LSF 10 Rose) nomination".

The National Company Law Appellate Tribunal (NCLAT) has stayed the NCLT order directing RattanIndia Finance to appoint Bipin Kabra, nominee of its JV partner, as its CFO, till July 6 — the next date of hearing.

Earlier, on March 29, the New Delhi-based bench of the National Company Law Tribunal (NCLT), had directed to appoint Kabra as its chief financial officer (CFO), over the plea filed by RattanIndia Finance’s JV partner — LSF 10 Rose Investments.
LSF 10 Rose Investments, a subsidiary of US-based private equity firm Lone Star Funds (LSF), holds 50 per cent shareholding in RattanIndia Finance (RF), a non-banking finance company.

The said order was challenged by Rajiv Rattan, Anjali Nashier and the Hamlin Trust before the appellate tribunal NCLAT.

A three-member NCLAT bench issued notice to LSF 10 Rose Investments within two weeks. It also granted a week thereafter to the petitioner to file a rejoinder, if any, and directed to list the matter on July 6 for hearing.

“Till next date of hearing, operation of the impugned order dated March 29, 2022 shall remain stayed,” NCLAT said.

Earlier, LSF 10 Rose Investments had filed an interim application to appoint an independent professional and full-time CFO for RattanIndia Finance in terms of the Articles of Association (AoA) of the company.

This was allowed by NCLT after observing that as per the articles of association of the JV Company RattanIndia Finance, it (LSF) has the right to nominate the CFO of the company.

The tribunal had also consented to the private equity firm’s submission that its partners do not have the right to contest the “validity of petitioner’s (LSF 10 Rose) nomination”.

As per section 140 of AoA of RattanIndia Finance, LSF has the right to nominate a person as CFO and if the JV partner rejects the appointment of the first nominee, then LSF would nominate the second nominee.

And if the JV partner rejects the appointment of the second nominee, then LSF 10 Rose Investments shall have the right to nominate any person as CFO and the JV partner would support it.

The private equity firm had submitted that the JV partner had already rejected the name of the second person Venkataraman Subramanian and thereafter it had proposed Bipin Kabra as the third name.

However, this was also not agreed upon by the JV partner, following which LSF 10 Rose Investments approached NCLT.

The 12-page NCLT order had said “Bipin Kabra shall file an undertaking by way of an affidavit before this tribunal within 2 weeks that he shall abide by fulfilling the requirements mentioned” in the provision of the Companies Act, 2013.

LSF 10 Rose Investments has already filed a petition before the NCLT alleging mismanagement and oppression against the minority shareholders under sections 241 and 242 of the Companies Act, 2013.

This matter is presently pending adjudication before the NCLT.

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