TMI Blog1993 (2) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, 1956, is engaged in the business of running courier service both within and outside India. The second and third respondents are the directors of the respondent-company. The company has floated a public issue offering 4,50,000 equity shares of Rs. 10 each for premium of Rs. 30 per share aggregating to Rs. 5,80,00,000 opening on 15-2-1993. 3. Shri K.G. Arora, claiming to be a prospective shareholder, submitted a complaint before this Commission under section 36A of the Act assailing the above public issues, inter alia, on the ground that the public issue is vitiated by wilful misrepresentations and suppression of material facts designed to deceive the unsuspecting and innocent prospective shareholders. In short the charge is that the false, misleading and deceptive representations made by the respondents in launching the public issue clearly amount to unfair trade practice as defined under section 36A calculated to cause loss and injury to the consumers. 4. The complaint and injunction application therein were placed before us on 15-2-1993. The complainant states that the respondent-company is an affiliate of the worldwide TNT Skypak network under an agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted time by us to file their reply by the next date. The reply was filed by the respondents yesterday (16-2-1993). 8. In their reply respondents raised a preliminary objection challenging the bona fides of the complainant. It is alleged that K.G. Arora aforesaid is a front man for TNT Skypak and that the present complaint is yet another salvo fired by the TNT Skypak against the respondent following series of litigations already launched by it against the respondent- company. It is, further, submitted that the draft prospectus was prepared in September 1992 and filed with the SEBI on 12-11-1992 whereas the notices and summons of the aforesaid winding up petition and the suit of the TNT Skypak were served on them on 17th November and 26th November. It is asserted that on receipt of the notice the respondent-company obtained legal advice and were informed that neither the winding up petition nor the suit could affect the operations and finances of the respondent-company and that, therefore, it was not necessary to mention these litigations in the prospectus. The prospectus was filed before the Registrar of Companies on 1-1-1993, and the allegation is that as part of the corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no doubt that the omission to mention the fact of the litigations in the prospectus issued by the respondents does prima facie seem to attract section 36A as we will presently demonstrate. 12. We think that in all fairness the fact that a winding up petition was pending before the Bombay High Court against the respondent-com- pany should have been mentioned among the risk factors in the prospec- tus submitted by the respondents before the SEBI as well as before the Registrar of Companies. The winding up petition threatens the very existence of the company. The threat may be real or remote, but a threat undoubtedly it is. Whether the winding up petition ultimately fails or succeeds is another matter. The respondents had, on their showing, already been served with the notice thereof in November 1992. They had even sought legal opinion on the question whether or not the litigation launched against it should be mentioned in the prospectus. The respondents have and indeed could not plead ignorance of the same. Yet they, deliberately omitted to mention the same in the prospectus. It must be borne in mind the prospectus was submitted before the Regis- trar of Companies on 1-1-199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prospectus was of no legal consequence. The further submission that the public notice issued subsequently by the respon- dents on 13-2-1993 and 14-2-1993 disclosing the facts of litigations pending against the company removed the possibility of any mischief being caused by the initial omission to mention these facts in the prospectus is also not acceptable to us for the simple reason that the public notice came at a belated stage. The issue was opening on 15-2-1993. Any public notice issued on that date or a day earlier could not wipe out the charge that the respondents had attempted to keep back from the public an important fact having a direct bearing on the issue at the initial stage. To sum, we are prima facie of the view that the failure to mention the winding up petition and the suit pending before the Bombay High Court in the prospectus amounts to adoption of unfair method or unfair or deceptive practice within the meaning of section 36A. The representa- tions made by the respondents that there are no matters which are likely to affect the operation and finances of the company or that no material development has taken place after the date of the latest balance sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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