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Landmark order on interpretation of Section 184 covering related party transactions under the Companies Act, 2013

AnantLaw represented Kailashchandra Nuwal Group (minority shareholders) of Solar Industries India Ltd., (a public listed company having market cap of 608.55 billion INR) in oppression and mismanagement cases

Vibrant graphic used as a badge to depict oppression and mismanagement cases

Solar Industries was founded by brothers Mr. Satya Narayan Nuwal and Mr. Kailashchandra Nuwal (KC Nuwal) in 1985. However, in 2021, KC Nuwal highlighted several issues of mismanagement and illegalities within the company and sought the same to be raised in the board meeting of the company. However, hours before the board meeting, KC Nuwal was stated to have violated Section 184 (related party transaction) of the Companies Act by (allegedly) not disclosing his interest in another company at one of the earlier board meetings. Consequently, it was stated that he has automatically vacated his office as a director. 

This is one of the largest disputes involving promoter shareholders – wherein the minority shareholders were illegally ousted from the company – only to prevent disclosure of mismanagement, irregularities and illegalities in the board meeting. 

KC Nuwal group decided to highlight all the issues of mismanagement and illegalities and his alleged vacation of office to prevent him from raising all the issues before the board, under Sec. 241 r/w 242 of the Companies Act, 2013 by filing a petition of oppression and mismanagement before the NCLT. NCLT vide its interim order confirmed that KC Nuwal has not violated Section 184 of the Companies Act and his removal was part of the oppression and mismanagement. While deciding the appeal filed by Solar Industries, the NCLAT upheld the order of NCLT. NCLAT stated that Section 184(1) is distinct from Section 184(2) and both cannot be read together. It stated that 184(1) is with respect to filing of MBP-1 with the company and Section 184(2) is with respect to disclosure of interest in agreement before the board. 

Client: Mr. Kailashchandra Nuwal
Kailashchandra Nuwal and Ors. v. Solar Industries India Ltd. and Ors.

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