Ajay Somani Vs Sparsh Multispeciality Hospital Private Limited (NCLT Cuttack)
NCLT Appoints Administrator in Minority Shareholders Oppression and Mismanagement Dispute
The National Company Law Tribunal (NCLT), Cuttack Bench, decided Company Petition No. 61/CB/2022, along with IA (Companies Act) No. 34/CB/2025 and CA No. 11/CB/2025, filed under Sections 210(2), 213, 221, 241 and 242 of the Companies Act, 2013 read with Rule 11 of the NCLT Rules, 2016. The petition was filed by Ajay Somani and Pradeep Pal alleging oppression and mismanagement in the affairs of Sparsh Multispeciality Hospital Private Limited by Respondent Nos. 2 and 3, who were stated to be majority shareholders and in effective control of the management.
The petitioners alleged that Respondent Nos. 2 and 3 managed the hospital and company in a fraudulent, arbitrary, non-compliant and unethical manner. According to them, there was no proper billing mechanism or standard schedule of charges, resulting in arbitrary billing of patients and financial loss to the company. They relied upon audit observations presented during the Annual General Meeting held on 27.09.2022. They further alleged irregularities in relation to beneficiaries under the Ayushman Bharat Scheme, including collection of cash from beneficiaries, leading to action by the District Administration and Health Authorities, including an order dated 06.11.2021 directing refund of ₹1,81,462, which was stated to have been refunded. They also referred to notices issued by the Chief Medical Officer regarding cash collections beyond the Ayushman limits.
The petition further alleged siphoning of company funds through receipt of cash outside the books of account, payment of referral commissions to outside doctors contrary to the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002, unauthorized withdrawals in the names of third-party doctors, and diversion of company funds. The petitioners also alleged mistreatment of employees, consultants and doctors, resulting in resignations of several medical professionals and consultants. They additionally alleged attempts to coerce Dr. Ashish Jain into making false statements against them, issuance of a Board Meeting notice dated 06.11.2022 at short notice in alleged violation of Section 173(3) of the Companies Act, 2013, and a proposed appointment of Dr. Adarsh Trivedi as Executive Director contrary to the Articles of Association and the statutory provisions governing appointment of Managing Directors and Whole-time Directors. The petitioners also stated that despite legal notices raising these concerns, the respondents continued the impugned conduct and, considering that approximately ₹2.99 crore was lying in the company’s bank accounts and cash book as on 11.11.2022, sought protection of the company’s assets during the proceedings.
Respondent Nos. 2 to 4 opposed the petition and challenged its maintainability. They submitted that the company operated a multi-speciality hospital established by medical professionals and that Respondent Nos. 2 and 3 had invested in and substantially expanded the hospital. They explained that Petitioner No. 1, a Chartered Accountant, had initially rendered professional services to the company and that, under a CEO Agreement dated 15.09.2016, the petitioners’ partnership firm, M/s PSAC & Associates, was entrusted with management of human resources, marketing and branding for a monthly professional fee of ₹2,10,000. Petitioner No. 1 was later inducted as a director with effect from 01.10.2017. Subsequently, under a CFO Agreement dated 01.04.2019, Proethic Consultants Private Limited, in which the petitioners were directors and majority shareholders, was entrusted with finance, accounting, treasury, banking, statutory compliance and related functions for a five-year period for a monthly remuneration of ₹1,40,000, and Petitioner No. 2 became a director on 08.09.2021. The respondents contended that, by virtue of these agreements, the petitioners exercised complete control over the financial and administrative affairs of the company.
The respondents asserted that the company had suffered losses of approximately ₹1.93 crore during FY 2016-17 and that Respondent Nos. 2 and 3 had foregone their salaries for substantial periods, including during the COVID-19 pandemic, contributing significantly to the company’s financial turnaround. They alleged numerous acts of misconduct by the petitioners, including raising duplicate invoices, receiving remuneration under both CEO and CFO arrangements for overlapping work, exercising complete control over finance, billing, human resources and compliance, arranging unnecessary employee training programmes for financial benefit, misreporting financial information, granting excessive billing discounts to relatives, delaying banking and tender-related processes, writing off recoverable dues, delaying provident fund and GST compliance, failing to provide financial statements, maintaining improper accounting records, delaying consultant payments, manipulating salary-related bank details, continuing to bill under expired agreements, failing to convene statutory Board Meetings, creating records of Board Meetings that allegedly never took place, circulating draft minutes and financial statements, withholding financial information from shareholders, attempting to secure signatures on financial statements, obstructing Board Meetings, disclosing confidential Board communications, resisting transfer of financial records after termination of the CFO Agreement, and obstructing the company’s functioning. Respondent Nos. 5, 6, 9, 10, 12 and 15 supported the stand of Respondent Nos. 2 to 4, while Respondent No. 13 supported the petitioners. Various interlocutory applications were also filed during the proceedings for bringing additional documents on record and filing rebuttals and rejoinders.
After considering the pleadings, documentary material and rival submissions, the Tribunal examined the circumstances relating to the petitioners’ absence from Board Meetings and the respondents’ contention that the petitioners had vacated office by operation of Section 167(1)(b) of the Companies Act, 2013. The Tribunal observed that the petitioners had filed the present petition alleging oppression and mismanagement and had referred to incidents involving threats to their safety, including criminal proceedings and complaints. It noted that the petitioners had even sought police protection to attend the Annual General Meeting, which, according to the Tribunal, reflected the conflict between the directors and supported the petitioners’ allegations regarding the management of the company. The Tribunal also referred to another petition filed by other directors under Sections 241-242 of the Companies Act against the same respondents, observing that it was pending before the Tribunal.
The Tribunal observed that the respondents themselves had contended that the petitioners had not been removed by the Board but had ceased to hold office only by operation of Section 167(1)(b). It held that the reasons for the petitioners’ absence from Board Meetings had to be examined in the context of the surrounding circumstances. According to the Tribunal, the petitioners’ absence followed the filing of the present oppression and mismanagement petition, and the circumstances suggested that the respondents did not intend to allow the petitioners to participate in the affairs of the company after initiation of the proceedings. The Tribunal concluded that, in the peculiar facts and circumstances of the case, the vacation of office could not be treated as having occurred either by operation of law or by lawful removal through the Board. It therefore held that the petitioners continued to be directors of Respondent No. 1 company.
Invoking Section 242(4) of the Companies Act, 2013, the Tribunal appointed Shri Deep Chandra Joshi, Former Acting President, NCLT, Delhi, as Administrator of the company for an initial period of five months from the date of acceptance of the appointment. The Administrator was directed to chair all meetings of the company, reconstitute the Board in accordance with law, manage the company’s bank accounts, appoint a forensic auditor, investigate allegations relating to oppression and mismanagement, fraud, collusion, concealment of books of account, siphoning of funds and related matters, and ensure compliance with the Tribunal’s directions. The Administrator was directed to discharge administrative and operational functions to ensure that the company continued as a going concern, with all employees reporting through the existing hierarchy to the Administrator. In case of any difference between the Administrator and the Board, the Administrator’s decision was to prevail.
The Tribunal fixed the Administrator’s remuneration at ₹2,50,000 per month plus applicable taxes, payable by the company, and authorised the Administrator to engage assistants, consultants or employees as required. However, the Administrator was restrained from dismissing employees, borrowing funds, disposing of or encumbering company assets, or creating charges over company property without prior permission of the Tribunal. The company was directed to make full disclosure of its books of account, financial statements, contracts, agreements and other records to the Administrator. The Administrator was also prohibited, except in the ordinary course of business, from selling assets, incurring liabilities, distributing funds, entering into contracts, altering the nature of business, changing the paid-up share capital, entering related-party transactions or making investments in other bodies corporate without the Tribunal’s permission.
The Tribunal further directed the Administrator to investigate allegations relating to oppression and mismanagement, fraud, collusion, concealment of books of account, diversion and siphoning of funds, unauthorized sale of land or properties and other allegations made against the company and its management, and to file a composite report within three months. The Administrator was granted immunity from civil and criminal proceedings in respect of acts performed in discharge of the functions entrusted under the order. The Board Meetings and General Meetings were directed to be convened under the Administrator’s supervision, and the petitioners were specifically permitted to participate in the affairs of the company, including Board Meetings, with restoration of their directorship in continuity. The company was also directed to ensure all statutory compliances under the Companies Act, 2013 and before other statutory authorities under the Administrator’s supervision. Liberty was granted to the Administrator and the parties to seek further directions from the Tribunal whenever necessary. Consequently, Company Petition No. 61/CB/2022, IA No. 34/CB/2025 and CA No. 11/CB/2025 were allowed and disposed of.
