[Breaking]: NCLT allows MCA to appoint nominee directors at Unitech

The Principal Bench of the National Company Law Tribunal (NCLT) today allowed the Ministry of Corporate Affairs (MCA) to appoint ten nominee directors to take over the management of Unitech Ltd. However, the appointment of nominee directors will be subject to the directions of the Tribunal.

The Bench has further barred current Unitech directors from alienating or mortgaging their personal assets.

The Central Government, through the MCA, has applied to the Principal Bench of NCLT under provisions of the Companies Act, 2013 for taking over the management of Unitech Ltd, in ‘public interest’.

Today was the first hearing. Prima facie, the Bench was convinced that the affairs of Unitech are ‘not being carried out honestly’.

Alleging mismanagement and diversion of funds, the application has been moved under Sections 241-242 of the Companies Act, which deal with oppression and mismanagement.

Section 241(2) of the Companies Act allows the Central Government, “if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest”, to apply to the NCLT.

This is a case similar to Jaypee Infratech, which is currently facing insolvency proceedings under the Insolvency and Bankruptcy Code 2016. Unitech too, is indebted in excess of Rs. 1000 crore with over 19000 homebuyers waiting for possession of their flats.

Further, Unitech’s Managing Director Sanjay Chandra was arrested in April this year following a complaint by people who weren’t given possession of their flats. The Supreme Court denied Chandra bail until the company deposited funds with it to protect the interests of such buyers, according to a TOI report in November.

The Central Government appears to have made this move to invoke a sense of confidence among the investors particularly and general public at large.

The government had prayed before the Bench to take over the management of Unitech by allowing ten nominee directors on the board, restricting the directors of Unitech from alienating or dealing with personal properties, and to further order investigation into diversion and siphoning of funds.

Unitech has been given 4 weeks to respond.

ASG Sanjay Jain appeared for the MCA.

Update [4:00 pm]: Unitech has approached the NCLT seeking suspension of its order. ASG Ranjit Kumar mentioned the same.

(Image taken from here)