Finolex Cables case: NCLAT suspends order following SC intervention

New Delhi: The National Company Law Appellate Tribunal (NCLAT) on Monday suspended its order regarding the annual general meeting (AGM) of Finolex Cables after a directive from the Supreme Court, which had launched a probe against the NCLAT bench for not adhering to its instructions.

On 21 September, the NCLAT had called for a status quo on the AGM due to a dispute between cousins Prakash Chhabria and Deepak Chhabria. Seeking respite, Prakash Chhabria approached the Supreme Court, leading to a ruling on 13 October that NCLAT should refrain from making any decisions in the case until the scrutineer had published the results.

However, despite the apex court's directive, the NCLAT announced its decision in the case on Friday, ahead of the scrutineer's result, leading the apex court to order an inquiry into the tribunal's actions, with the probe deadline set for 16 October.

In its Friday order, the NCLAT had directed Finolex Cables to disclose shareholder voting results on the reappointment of its executive chairman from a 29 September meeting, drawing from a prior Supreme Court order.

The tribunal also allowed the current CEO of Finolex Cables to retain his role until a final judgment. 

The backdrop of this conflict is a legal battle in the Finolex promoter group after patriarch Prahlad Chhabria's 2016 passing.

The current appeal was filed by Prakash Chhabria led Orbit Electricals which is a promoter entity in Finolex Cables. The appeal sought disclosure of outcome of voting by shareholders on the agenda item pertaining to reappointment of Deepak Chhabria as executive chairman.

Following Orbit's plea, the Supreme Court had granted permission for the disclosure but noted the results will be subject to the outcome of the succession battle, currently pending before the NCLAT.

Prahlad Chhabria had drafted a succession plan in 2012, designating his daughter Aruna Katara, son Prakash Chhabria, and nephew Deepak Chhabria as successive trust chairpersons. The deed also envisaged a structure ensuring each trust beneficiary chaired a company within the Finolex Group.

However, before his death, Prahlad transferred over 80% of his share portion to son Prakash and also nominated him to the board, bypassing the 2012 trust deed. These changes were carried out through a board meeting of the company in 2016. Deepak and Vinni Chhabria had moved then moved the company tribunal challenging the legality of the 2016 board meeting.