A major blow to Unitech Ltd. as NCLT suspends its 8 directors

A two-member bench of the National Company Law Tribunal headed by Justice M M Kumar on Friday suspended all the eight directors of Unitech Ltd. and directed the Centre to submit the names of its 10 nominees to be appointed on the board of the firm. The order of the tribunal came after the government filed a petition stating that the company has been involved in mismanagement and siphoning of the funds. The petition was filed under Section 241 of the Companies Act, 2013, that empowers the Centre to take control of the firm if it has a reason to believe that the company is discharging its function in a way that is detrimental to the public interest. The Centre also argued that keeping in consideration the interest of thousands of home buyers it is not willing to dissolve the company. Unitech Ltd. has a debt of more than Rs 6,000 crores and almost 16,000 undelivered units for 70 projects. Recently in April, Unitech's Managing Director Sanjay Chandra and his brother Ajay Chandra were arrested by the Economic Offences Wing on the ground of not delivering the projects despite taking funds from the investors. The Supreme Court asked a bail bond of Rs 750 crores to be submitted for release from the arrest. The tribunal passed the order under Section 241 of the Companies Act as prima facie it appeared that the affairs of the company were conducted against the public interest. And in order to avoid any further acts of fraud, negligence, breach of trust and failure to act according to the obligation, the Tribunal authorized the centre to nominate 10 directors on board who shall be acting subject to the orders of the Supreme Court. The tribunal further added that until the new directors are not appointed, the suspended directors shall have no right to sell, mortgage or create a charge on their property or company's property. The next date of hearing of the case in on December 20. This decision of the tribunal gives us a quick glimpse of the incident when the government took control over the affairs of the Satyam Computer Services Ltd. as its founder was found guilty for the mismanagement of the company's funds. Unitech Ltd. has become the first company, whose entire board of directors have been suspended and the control is taken up by the government under Section 241 of the Companies Act.