Liberty Shoes Shareholders Take Legal Battle to Supreme Court

Legal FlashPOINT: Adesh Kumar Gupta, erstwhile CEO of Liberty Shoes Ltd, and some of its shareholders have approached the Supreme Court of India after the National Company Law Appellate Tribunal (NCLAT) dismissed their appeal and upheld an earlier order of the National Company Law Tribunal (NCLT).

Case Background:

The dispute is emerging out of a petition under Sections 241, 242, and 244 of the Companies Act, 2013, on the basis of oppression and mismanagement of the company by the current management.

The 5.83% equity holders of the company, who were the petitioners, had sought waiver of the minimum shareholding requirement to file the case.

NCLT denied the waiver application in November 2023 based on the absence of extraordinary reasons.

The NCLAT also confirmed this order in September 2024, holding that the appeal lacked merit and did not cross the threshold to be exempted.

Escalation to Apex Court:

The shareholders have now approached the Supreme Court challenging the interpretation by the NCLAT regarding the waiver provisions under Section 244.

They argue that their issue presents serious matters of governance and deserves review by the courts at the highest level.

The petition also questions the procedural fairness and openness of the company's internal decisions, including the removal of Gupta from executive ranks.

Implications to Watch

A hearing by the Supreme Court would set a precedent regarding shareholder rights and waiver provision drafting in the law of corporations.

The result might determine what minority shareholders can ask for in situations of claimed mismanagement.

Liberty Shoes has claimed that all the operations were as per legal and governance standards.

Sources: Business Standard, Indian Kanoon, Liberty Shoes Investor Disclosures, NCLAT Order Dated 20 Sept 2024