Name of the case: Orbit Electricals Private Limited Vs. Deepak Kishan Chhabria and Ors.

Case Number: Conmt. Pet. (C) No. 1195/2023 in C.A. No. 6108/2023

Name of Judges: D Y Chandrachud, J B Pardiwala, Manoj Misra

Order Date: 30.10.2023

Facts of the Case:

• Pralhad P. Chhabria held majority shareholding in Orbit Electricals Pvt. Ltd. and he, on account of old age and weak health, decided to create a trust by the name of Pralhad Chhabria Trust for the benefit of the beneficiaries.
• On this basis, a Trust Deed was executed on 12.03.2012 whereby Pralhad Chhabria settled his shareholding of Orbit Electricals Pvt. Ltd. in this trust which was to become effective after his death. With time, Pralhad Chhabri got afflicted with some serious disease and before his demise in May, 2016, he made an indenture of gift (Gift Deed) dated 28.03.2016 by which he made up 82% of the paid up share capital of Orbit Electricals Pvt. Ltd. in favour of his son Prakash Chhabria.
• The Gift Deed and the Securities Transfer Form (SH-4) were executed on 28.03.2016 by which the said 100,300 equity shares were transferred in the name of Prakash Chhabria.
• In addition, Pralhad Chhabri also resigned from the position of Chairman of Orbit Electricals Pvt. Ltd. during the Board Meeting held on 31.03.2016, and the Board of Directors in the same meeting approved a resolution regarding appointment of Prakash Chhabria as Chairman of Orbit Electricals Pvt. Ltd.
• The Gift Deed dated 28.03.2016 and the proceedings of the Board meeting held on 31.03.2016 were challenged by Deepak Chhabria and Vini Chhabria in CP No. 47/2016 with prayers for final relief of declaring the meeting of Board of Directors dated 31.03.2016 as illegal and the resolutions passed in the alleged Board Meeting as null and void.
• The NCLT dismissed the application filed by the Deepak Chhabria for the grant of interim relief by an order dated 31.12.2019.
• The Appellants Deepak Chhabria & Vini Chhabria have preferred the appeal assailing the NCLT order dated 31.12.2019. The appeal has been heard and orders were reserved by the NCLAT on 21.09.2023.
• However, while reserving orders, the NCLAT has directed the parties “to maintain status quo as was available prior to EOGM dated 03.05.2019” till the judgement is delivered.

The Hon’ble Supreme Court Observed and Held as Follows:

• On 26.09.2023, in Civil Appeal, Hon’ble Supreme Court has vacated the interim direction of the NCLAT dated 21.09.2023.
•  The Court has also directed that the Annual General Meeting (AGM) of the company, Finolex Cables Limited is to take place on 29.09.2023
• In the morning session on 13.10.2023, Hon’ble Supreme Court issued directions that the scrutinizer was under an obligation to declare the result of the AGM which was held on 29.09.2023 forthwith; and NCLAT was directed to proceed to the declaration of its judgment after it was duly apprised of the fact that the result of the AGM has been declared.
• In the second session on 13.10.2023, Hon’ble Supreme Court directed that an enquiry shall be conducted by the Chairperson of the NCLAT and a report shall be submitted before this Court.
• The Hon’ble Court in exercise of the jurisdiction under Article 142 of the Constitution, directed that the judgment of the NCLAT dated 13 October 2023 shall stand set aside without this Court expressing any opinion on the merits. 
• Further, consequently direct that the appeal shall be heard afresh by a Bench presided over by the Chairperson of NCLAT. We clarify that we have not entered any finding on the merits of the rival contentions of the parties in the pending appeal. 
• Court has been constrained to pass this order in extraordinary circumstances which we have referred to above.