NCLT Hyderabad Directs Emaar Group To Compensate Govt. Of Telangana In The Case Share Transfer To Emmar MGF Land Ltd

The National Company Law Tribunal ("NCLT"), Hyderabad Bench, comprising of Shri Bhaskara Pantula Mohan (Judicial Member) and Dr. Binod Kumar Sinha (Technical Member), while adjudicating an application filed in Telangana State Industrial Infrastructure Corporation v M/s Emaar Hills Township Pvt. Ltd. & Ors., has allowed a petition filed under Section 241-242 of the Companies Act, 2013 by Telangana State Industrial Infrastructure Corporation (TSIIC) against Emaar Hill Township Pvt. Ltd. The Bench has further directed Emaar Properties (Dubai) and Emaar Holdings (Mauritius) to not to deal with the assets of Emaar Hill Township and also compensate the Government of Telangana for the losses incurred. The order was passed on 25.07.2022. Background The Petitioner, Telangana State Industrial Infrastructure Corporation (TSIIC), is a wholly owned company of Government of Telangana, formed with the objective of promoting industries in the State. TSIIC is the successor of Andhra Pradesh Industrial Corporation Ltd. ("APIIC"). In 2014 the State of Andhra Pradesh was sub divided and Telangana was formed by virtue of Andhra Pradesh Reorganization Act, 2014. In view of the division, TSIIC was formed to take over the activities of APIIC in so far it relates to State of Telangana, which meant that all assets including the land bank held by APIIC in Telangana automatically became the properties of TSIIC. Section 53 of the Andhra Pradesh Reorganisation Act, 2014 states that assets and liabilities relating to any commercial or industrial undertaking of the existing State of Andhra Pradesh shall pass to the State of Telangana in so far the assets that are located in Telangana are concerned. The proviso to Section 53 further states that every Government asset that is situated in State of Telangana shall, by operation of law, become asset of the State of Telangana. Also, in Section 68 of the Act, 2014 the name of APIIC appears in the list of entities owned by erstwhile State of Andhra Pradesh. Therefore, TSIIC became the successor of APIIC by operation of law. Brief Facts Emaar Properties PJSC Dubai ("Respondent No.2") is a company incorporated in U.A.E., engaged in real estate development. Emaar Holdings ("Respondent No. 3") is incorporated in Mauritius and is a 100% subsidiary of Respondent No.2. In early 2000s the Respondent No. 2 was awarded a tender by the Andhra Pradesh Government for construction of an integrated tourism project ("Project") in Manikonda Village, Andhra Pradesh and APIIC was the nodal agency to implement the Project. A Collaboration Agreement was entered between the Parties and Special Purpose Vehicles (SPVs) named Emaar Hills Township Pvt. Ltd. ("Respondent No. 1") was incorporated in which APIIC held 26% shares and Respondent No. 2 held 74% shares. During the life of the Project, Respondent No. 2 & 3 alleged to have connived and deceptively assigned the Project to Emaar MGF Land Ltd. ("Respondent No. 11") which was a third party, in violation of the Collaboration Agreement, thus making Respondent No. 1 a shell company. This diversion of business caused huge losses to APIIC and the lands designated for the Project were also sold by the Respondents at an undervalued price. Consequently, APIIC being a minority shareholder, had filed a petition under Section 397 and 398 of the Companies Act, 1956 before the Company Law Board, Chennai, bearing C.P. No. 108/2010, alleging oppression and mismanagement in Respondent No.1 and had prayed for an inquiry into the affairs of the same. While the Company Petition was pending adjudication, Andhra Pradesh was reorganized in 2014 and the Project Property situated in Manikonda Village formed part of Telangana and accordingly it passed from APIIC to TSIIC by operation of law. The Company Petition was transferred to NCLT Hyderabad and an order was passed in 2017, granting liberty to Petitioner to file a petition on earlier cause of action with additional material facts. Therefore, the Petitioner filed Company Petition No. 36/2021 alleging oppression and mismanagement in the affairs of Respondent No.1 company, leading to loss of revenue of the Petitioner and adversely impacting public at large. Also, M.A. No. 21/2021 was also filed by the Petitioner before the NCLT Hyderabad against the Respondents, seeking the following amongst other interim reliefs: To direct Respondent No. 2&3 to not to deal with, dispose off or encumber, alienate, transfer and /or create third party interest in the assets and properties of Respondent No. 1. To direct Respondent Companies to compensate the financial losses incurred by Government of Telangana/TSIIC till date, with regard to equity dilution and such other consequences. Contentions Of Respondent Respondent No. 1 challenged the M.A. No. 21/2021 on the issue of maintainability while contending that...

NCLT Hyderabad Directs Emaar Group To Compensate Govt. Of Telangana In The Case Share Transfer To Emmar MGF Land Ltd

Pallavi Mishra

Tags