NCLAT Orders Status Quo On Vadilal Enterprises And International Boards

NCLAT Orders Status Quo On Vadilal Enterprises And International Boards

The appeal on the final hearing will be heard on 26 September

The National Company Law Appellate Tribunal (NCLAT) has directed Vadilal Enterprises Ltd (VEL) and Vadilal International Ltd (VIL) to maintain the status quo of the structure of their boards until further orders.

Passing an interim order, a two-member NCLAT bench said it would hear the appeal on 26 September over a dispute of the Vadilal Gandhi family. Therefore, any change in the board structure would further complicate the issues.

The tribunal stated, "On 06 August 2024, we passed an order not to precipitate the matter, the removal of a director and a new appointment would further complicate the issues when we have set the appeal for a final hearing.”

The NCLAT order came over a petition filed by Rajesh Ramchandra Gandhi. He sought a direction to maintain the status quo of the position of the Board of Directors of VIL and VEL, prevailing before the judgment passed by the Ahmedabad bench of the National Company Law Tribunal (NCLT).

In July, the NCLT partly allowed the petition filed by Virendra Ramchandra Gandhi against Devanshu Laxmanbhai Gandhi, Rajesh Ramchandra Gandhi, VIL and others alleging oppression and mismanagement under Sections 241 and 242 of the Companies Act,s 2013.

The dispute between Virendra, Rajesh and Devanshu is over the control of the family business.

The NCLT had declared a board resolution authorizing the retirement of Virendra from the Board of VIL and VEL as "null and void". It directed that the Vadilal family businesses be divided amongst the three families by appointing a court commissioner.

However, this was challenged before the NCLAT.

Rajesh's counsel Abhishek Manu Singhvi argued that as per the 20 October 2020 agreement, the applicant was to remain on Board as the managing director till 2025, but the opposite parties were trying to remove him. He alleged that recently an agenda was circulated stating that the applicant was liable to retire by rotation.

On 06 September, the board meeting of VIL, viz the opposite group, unilaterally authorized Virender to vote on behalf of VIL.

Thus, while noting Singhvi’s submissions, the tribunal held, “On 09 September, Virender issued a notice for amending the agenda to include his appointment as managing director of the company. It is submitted that these litigations are a result of a fight between three groups, all of whom have equal stakes in all the companies, including the VIL.”

The counsel contended that if the agenda was approved and Virender was appointed as managing director, it would alter the substratum of the appeal. He added that the 06 August order of the NCLAT should be followed.