Appeal against interim status quo order is premature without first seeking its vacation before the Tribunal.

Inlays India Private Limited (“Appellant”) challenged the order dated 4 February 2026 passed by the NCLT, Mumbai Bench, in CP/197(MB)/2025, by which the parties were directed to maintain status quo in proceedings concerning the Appellant under Sections 271 and 273 of the Companies Act, 2013.

The dispute arose against the background of allegations concerning the Appellant’s shareholding, management, transfer of shares, outstanding export receivables, alleged diversion of funds, and competing claims regarding the Company’s management and registered premises.

The Registrar of Companies reported disputes between two groups of directors, pending Enforcement Directorate proceedings, financial irregularities, and the reflection of approximately ₹12,14,86,800 in the Company’s books as cash or cash-equivalent assets.

The NCLT noted that the Company had apparently not carried on business for approximately seven to eight years and accordingly directed maintenance of status quo.

During the appeal, the NCLAT passed an interim order dated 29 May 2026 directing that the amount of ₹12,14,86,800 be placed in a fixed deposit so that it could earn interest, with the FDR to remain with the Registrar of the Tribunal.

Whether an appeal under Section 421 of the Companies Act, 2013 was maintainable against an interim status quo order when the Appellant had not first sought vacation or modification of that order before the NCLT?

Whether the NCLT was justified in directing the parties to maintain status quo in order to preserve the subject matter of proceedings under Sections 271 and 273 of the Companies Act, 2013?

Whether the NCLAT’s interim direction to place ₹12,14,86,800 in a fixed deposit should continue during the pendency of the company petition?

The appeal was considered under Section 421 of the Companies Act, 2013, read with Rule 22 of the NCLAT Rules, 2016.

The substantive proceedings arose under Sections 271 and 273 of the Companies Act, 2013, concerning winding up and interim measures in winding-up proceedings.

The Tribunal applied the principle that an interim order passed in the exercise of discretionary powers to preserve the subject matter should ordinarily be challenged first before the forum that granted it, through an application for vacation or modification, before appellate jurisdiction is invoked.

It further applied the principle that status quo may be directed where necessary to protect disputed assets, prevent multiplication of disputes, and preserve the effectiveness of the final adjudication, particularly where the factual record discloses serious and unresolved disputes.

The NCLAT held that the Appellant had approached the appellate forum prematurely because it had not first sought vacation or modification of the NCLT’s status quo order.

The order was discretionary and intended to preserve the subject matter while the NCLT examined the competing claims relating to shareholding, management, financial transactions, and the Company’s alleged inactivity.

The NCLAT found that the ROC’s report and the record prima facie indicated that the Company had not conducted business for seven to eight years and that no reliable evidence of current business operations had been produced.

Therefore, the Appellant’s contention that status quo paralysed an operational business could not be accepted at the interim stage.

In view of the unresolved factual disputes and the substantial amount reflected in the Company’s books, preservation of the status quo was considered necessary to prevent further complications and protect the parties’ interests.

The direction to place the funds in an interest-bearing fixed deposit was likewise regarded as protective, since it preserved the capital while ensuring that it did not remain dormant.

It held that the Appellant should have first approached the NCLT for vacation or modification of the interim order and that the status quo direction was justified to preserve the subject matter of the pending company petition.

The NCLAT directed that its interim order dated 29 May 2026, requiring ₹12,14,86,800 to remain secured in a fixed deposit, would continue until the company petition was decided on merits.

The NCLT was requested to dispose of CP/197(MB)/2025 expeditiously and, preferably, within six months from production of the certified copy of the NCLAT’s order.