An application was filed in the National Company Law Tribunal (NCLT) under oppression and mismanagement against the Managing Director of Jhalak Industries Private Ltd (JIPL). In the application, it was alleged that Jayna

The facts of the GIVEN case are similar to the appeal filed by Vijay Sai Poultries PVT. Ltd. against order of NCLT dated 16th September, 2019. The appeal was filed against the order of National Company Law Tribunal, Amaravati Bench, the Adjudicating Authority, which allowed the application filed by Petitioners (Respondents in the appeal before NCLAT) and directed that forensic audit be conducted of the Appellant company since 31.03.2004. In passing the order, NCLAT referred to the principles laid down by the Hon'ble Supreme Court in the Case of Kranti Associates. NCLAT held that "There is nothing in the order to justify the directions for conducting forensic audit of accounts of the Company that too for more than 15 years. The Adjudicating Authority must record reasons in support of conclusions. However, in the Impugned Order no reasons are mentioned for the said directions. The order is cryptic and non-speaking; therefore, it cannot be sustained. With the aforesaid discussions, we have no option but to set aside the Impugned Order." In the case presented to us for evaluation, whether NCLT's order is tenable or not will depend on the facts presented in the petition filed. If the petition is well supported by evidences for the claims made and if the NCLT is satisfied on the perusal of same and if in the NCLT order the reasons for directing forensic audit are specified, then the order may be deemed tenable. Also, in the given case, the forensic audit period is not as long as in the case of Vijay Sai Poultries. The Company may succeed in the appeal if the NCLT order directing the forensic audit is similar to that of Vijay Sai Poultries - i.e., the order is order is cryptic and non-speaking. It has been held that adequate and intelligent reasons must be given for judicial decisions and if the NCLT order does not satisfy this, it may be set aside on appeal filed. The Appellant 'Vijaya Sai Poultries Pvt. Ltd.' has filed this Appeal against the order dated September 16, 2019 passed by the NCLT, Amaravati Bench, whereby the Adjudicating Authority allowed the application filed by Petitioners (Respondents herein) and directed that forensic audit be conducted of the Appellant company since March 31, 2004. Petitioners (Respondents herein) have filed Petition under Sections 59, 241 and 242 of the Companies Act, 2013 alleging oppression and mismanagement against the Managing Director of the Company. It was alleged that he has been operating the finances of the Appellant Company in an arbitrary and whimsical manner and has siphoned off Crores of Rupees belonging to the Appellant Company without accounting for the same. The Appellant submitted that there is no prima facie finding of oppression or mismanagement as required under Section 242(4) and 241/242 of the Companies Act, 2013. The Impugned Order is without reasoning or finding of fact and in fact, contains a one-line order directing that forensic audit be conducted. It is settled law that there must be a recording of reasons in the order in support of conclusion arrived at. The giving of reasons in support of their conclusions by the judicial or quasi-judicial authority is essential to prevent unfairness or arbitrariness in reaching the conclusions. For this proposition, Appellant relied on the judgments rendered by the Hon'ble Supreme Court in the matters of Karanti Associates Pvt. Ltd. & Ors. Vs. Masood Ahmad Khan & ORS. It was further submitted that the application has been filed under Rule 131 of NCLT Rules 2016 which relates to production of documents and form of summons. An order of directing that a forensic audit to be conducted could not have been passed in such an application.