NCLT orders probe into Indus Motors; Justice S Siri Jagan appointed administrator

The National Company Law Tribunal (NCLT)'s Kochi Bench on Wednesday appointed former Kerala High Court Justice S Siri Jagan as administrator of Indus Motors Company Pvt Ltd. which is facing allegations of large-scale oppression and mismanagement [TV Anil Kumar Vs Indus Motor Company].

Indus is the leading dealer of Maruti Suzuki cars in Kerala.

A Bench of Member (Judicial) Vinay Goel and Member (Technical) Madhu Sinha granted Justice Jagan authority over major corporate decisions of Indus, ability to engage professional services, and immunity from legal proceedings for acts performed in good faith during the tenure.

"The Administrator shall exercise control, supervision, and oversight over the working of Respondent No. 1 Company (Indus Motors) and the Board of Directors of Respondent No. 1 Company and shall take all necessary steps to ensure the proper governance, transparency, and effective functioning of the Company during the pendency of the investigation," the order stated.

The NCLT also ordered an independent probe under the Companies Act 2013 into the allegations against the company of fund diversion, related party transactions and governance failures under the Companies Act, 2013.

"Upon careful consideration of the facts and circumstances on record, it is evident that acts of oppression and mismanagement have occurred within Respondent No. 1 Company. Considering the seriousness of the allegations, the additional reliefs sought by the Petitioners shall be considered following the outcome of a comprehensive investigation to be conducted by the Central Government under the relevant provisions of the Companies Act, 2013," the tribunal stated in its order dated September 3.

The NCLT also made it clear that merely claiming to be a market leader cannot shield a company from accountability and fiduciary duty.

"It is true that Respondent No.1 Company has grown to be a market leader. Yet growth by itself cannot be a shield against accountability, nor can profitability wash away breaches of fiduciary duty,” it said.

The order was passed on a plea filed by TT Anilkumar, TP Ajithkumar, TP Sarada and Anju Madhav, who together hold 20 percent of Indus Motors’ equity. They accused Managing Director PV Abdul Wahab, who holds 59.08 percent, and some of his family members of systematically misusing company resources to the detriment of minority shareholders.

The petitioners made the submissions to highlight the alleged mismanagement:

• In 2018, Indus Motors invested nearly ₹10 crore in the IPO of Aster DM Healthcare Ltd, despite conflicts of interest and red flags about overvaluation. The shares were later sold at a loss of over ₹2.37 crore. Wahab and his family were themselves major subscribers in the IPO, and a close associate of Aster’s promoter, leading to what the petitioners called a “clear conflict of interest.”

• Between 2013 and 2015, the company advanced over ₹52 crore in interest-free loans to Wahab and his relatives without board approval, in violation of Section 185 of the Companies Act.

• Over ₹82 crore in related party transactions were carried out in seven years, including inflated rental payments for properties owned by Wahab’s family, salaries to relatives, and purchases from connected entities.

• Properties purchased with company funds were allegedly registered in the names of Wahab’s relatives and leased back to the company at above-market rents.

• The “Indus Motor” trademark was unilaterally licensed to related entities without approval or royalty.

• Minority directors were excluded from more than 78% of board meetings, and annual general meeting notices and minutes were allegedly suppressed or fabricated.

The petitioners, therefore, sought forensic audit, restitution of losses, removal of the Wahab family from management and a declaration that the company was being falsely portrayed as part of the Bridgeway/Peeves Group.

The respondents, Indus Motors and its directors including Wahab family members, denied all allegations. They argued that the petition was time-barred, with many claims dating back more than a decade. They also contended that the petitioners themselves had been directors. Having approved financial statements for years, the petitioners cannot not now claim oppression, they argued.

The tribunal considered allegations that Indus Motors was represented as part of the Bridgeway/ Peeves Group without authorization from all shareholders, and that the company's trademark was used by other entities without consent or royalty payments.

On the Aster DM Healthcare investment, the NCLT noted that the investment in a healthcare company's IPO fell outside Indus Motors' automotive business objectives as defined in its Memorandum of Association.

"Therefore, this Tribunal is inclined to view the investment as a clear ultra vires act, and not merely a business decision," the order stated.

The NCLT also declared two of the directors of the company as disqualified from being re-appointed or continuing as directors in any company, other than Indus Motors, for five years.

The tribunal ordered financial restitution for the Aster DM Healthcare investment, ordering the then directors to pay Indus Motors ₹2,37,66,000 along with interest at the rate of 12% per annum, with monthly rest from the date of investment till payment, within a period of three months.

The NCLT also ordered refund of remuneration and benefits paid to disqualified directors and the Managing Director who had continued serving beyond the statutory age limit, with 6% annual interest.

Non-compliance of the same within the timeframe set by NCLT may result in share redemption to recover amounts owed.

The petitioners were represented by Senior Advocate Aravind Pandian briefed by a team from Shardul Amarchand Mangaldas led by partners Shruti Khanijow and Amee Rana and comprising principal associate Riya Basu, senior associate Simran Malhotra and associates Darshit Siddhabarthi and Parisidhi Agarwal along with advocates P Binod, Sudeep Aravindh Panicker and Medha S Paliwal.

The respondents were represented by Senior Advocates UK Chaudhary, and Santhosh Mathew with advocates Alishan Naqvi, Rupal Bhatia, Saurav Chaudhary, Akhil Suresh, Priya Singh and Mansuymer Singh.

[Read Order]