NCLAT Orders Vadilal Enterprises and International to Maintain Board Structure Amid Family Dispute

The National Company Law Appellate Tribunal (NCLAT) has instructed Vadilal Enterprises and Vadilal International to keep their board structures unchanged until further notice. This interim decision was made by a two-member NCLAT bench, which has scheduled a final hearing on September 26, 2024, regarding a dispute within the Vadilal Gandhi family. Any alterations in the board structure could complicate matters further.

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Family Dispute and Legal Proceedings

The dispute involves members of the Gandhi family: Virendra Ramchandra Gandhi (VRG), Rajesh Ramchandra Gandhi (RRG), and Devanshu Laxmanbhai Gandhi (DLG). The National Company Law Tribunal (NCLT) had previously declared a board resolution that retired Virendra R Gandhi from the boards of Vadilal Enterprises and Vadilal International as null and void. It also directed that the family businesses be divided among the three families.

Rajesh R Gandhi filed a petition with NCLAT seeking to maintain the status quo of the board positions as they were before an NCLT judgement. The NCLT had partly allowed a petition by Virendra R Gandhi against VIL, Rajesh R Gandhi, Devanshu Gandhi, and others, alleging oppression and mismanagement under sections 241 and 242 of the Companies Act 2013.

Arguments Presented

Rajesh R Gandhi's counsel, Abhishek Manu Singhvi, argued that according to an agreement dated October 20, 2020, his client should remain on the board as Managing Director until 2025. He claimed that opposing parties are attempting to remove him from his position. Singhvi noted that on August 6, 2024, an agenda was circulated suggesting his client was due for retirement by rotation.

Singhvi also highlighted that on September 6, 2024, a board meeting authorised Virender Gandhi to vote on behalf of VIPL at VIL's AGM. Subsequently, on September 9, 2024, Virender Gandhi issued a notice to amend the agenda to include his appointment as Managing Director. Singhvi argued that these actions could alter the foundation of the appeal if approved.

Maintaining Status Quo

The NCLAT order emphasised maintaining the current directorships until further orders. It noted Singhvi's submission that these legal battles stem from conflicts among three groups with equal stakes in all companies involved. The tribunal acknowledged that voting on the agenda would commence soon and that any changes could impact the ongoing appeal.

In light of these circumstances, NCLAT reiterated its earlier order from August 6, 2024, urging adherence to it in its true spirit. The tribunal's decision aims to prevent further complications while awaiting the final hearing scheduled for late September next year.