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2023 (9) TMI 1104
Complaint against fraudulent and illegal siphoning of funds - running Ponzi Scheme in the name of illegal ‘Assured Return’ - Validity of second complaint / FIR on the same issue which was already pending - Maintainability of impugned FIR and the proceedings emanating therefrom - pendency of earlier SFIO proceedings initiated pursuant to first complaint to the Central Government(MCA) on 14.10.2021 under Section 212 of Companies Act, 2013 - allegation made in first complaint and second complaint are same or not - effects of the provisions contained in Section 212 of the Act.
HELD THAT:- In the opinion of this Court, it could not have been the intention of the legislature for allowing any parallel proceedings to be conducted by any other agency as it would not only be futile but also entail more confusion and trouble, particularly if there are diverse decisions/ outcome from two or more different sets of proceedings. The same would tantamount to sheer abuse of the process of law. Once an investigation has been initiated by the SFIO under Section 212 of the 2013 Act, a parallel investigation by a separate agency into the affairs of the Company, considering the bar under Section 212(2), is not permissible. As per the facts involved herein, admittedly, the SFIO had already filed numerous Interim Report(s) before this Court and before NCLT.
The only difference between the first complaint resulting in the SFIO proceedings made by respondent no. 2 and the second complaint resulting in the registration of the impugned FIR also made by the respondent no. 2 is that the said respondent in the end of the complaint has instead of using the words “cannot be done by any other agency except SFIO Department” in the initial complaint made to the MCA cleverly replaced it with the words “cannot be done by any other agency except EOW” with a view to include Section(s) 406/ 420/ 120B IPC, since the offence of ‘fraud’ per-se does not find mention in the IPC. The same, in the opinion of this Court, does not make an iota of difference as it seems to be a deliberate act. As such, the respondent no. 2 cannot be given any benefit of the same.
It is trite law that subsistence of two FIRs is not maintainable as they can neither be filed nor allowed to co-exist or continue at the same time, particularly, whence they are arising out of the same set of facts and allegations, more so, whence the complainant happens to be the same in both the FIRs. Thus, in such an event, in the opinion of this Court and as laid down by the Hon’ble Supreme Court, the subsequent FIR calls for quashing as the fundamental right of a citizen/ person as provided under Part III of The Constitution of India and the power of the Police under Cr.P.C. has to be balanced and a person cannot be subjected to fresh investigation(s) under the same set of allegations qua the same offence(s).
Taking into the account the aforesaid, more particularly Section 212(2) read with Section 212(17)(a) of the Act, this Court is of the opinion that it would be in the interest of justice and benefit of the general public and the money and resources involved and also all the parties involved herein, if the impugned FIR is transferred to the SFIO, which shall take over the same along with the already pending proceedings before it arising out of the complaint dated 14.06.2021. There is no doubt about the fact that the SFIO proceedings can proceed with respect to the offences under the 2013 Act and also under the IPC. In fact, it is not the other way around as the EOW cannot take over the investigation qua the offence(s) under the 2013 Act which is the specific domain of the SFIO, is a matter of fact which needs not be gone into by this Court as the same is not involved herein.
The second complaint dated 15.08.2021 to the EOW resulting in registration of the impugned FIR is not maintainable in the current form, moreover, whence the first complaint dated 14.06.2021 and the second complaint dated 15.08.2021 are verbatim and are involving the same set of facts and are against the very same individual(s) and are made by the same complainant i.e., respondent no. 2. Further, in view of Section 212(17)(a) read with Section 212(2) of the 2013 Act and based upon all the contentions raised by the learned (senior) counsels for the parties coupled with the documents on record, in the considered opinion of this Court, the impugned FIR is liable to be quashed and transferred to the SFIO as the proceedings thereunder are not maintainable in the eyes of law.
Petition disposed off.
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2023 (9) TMI 1072
Oppression and mismanagement - Seeking an injunction to restrain the defendants from enforcing an anti-suit permanent injunction order passed by the High Court of Singapore - NCLT is the only appropriate and competent forum to decide the disputes and grievances raised by the plaintiff, pertaining to oppression and mismanagement against the defendants or not - balance of convenience - HELD THAT:- This Court is conscious of the position of law and the principles laid down in the said judgment, in the case of MODI ENTERTAINMENT NETWORK & ANR. VERSUS W.S.G. CRICKET PTE. LTD. [2003 (1) TMI 734 - SUPREME COURT], particularly when parties have agreed to submit to a foreign Court or forum for resolution of disputes. In such circumstances, as in the present case, the plaintiff seeking to restrain proceedings before such chosen foreign Court or forum, has to make out an exceptional case to satisfy the test of a strong prima facie case being made out for grant of an antienforcement order. In such a case, the plaintiff is also required to satisfy a high threshold of the three-pronged test.
The Delhi High Court, in the case of Interdigital Technology Corporation Vs. Xiaomi Corporation and others [2021 (5) TMI 1072 - DELHI HIGH COURT] had an occasion to consider factors that would be relevant when a court is called upon to issue an anti-enforcement injunction, as in the present case. The Delhi High Court held that certain principles could be kept in mind while issuing or refusing anti-suit injunctions or anti-enforcement injunctions - The Delhi High Court, in the said judgment, before identifying the aforementioned general principles, has made an observation, with which this Court agrees, that when the ends of justice are predominant, there can never be any hard and fast rule or guidelines cast in iron. Hence, each individual case has to be dealt with on its own facts and circumstances, while applying principles that have been developed by Courts of law over a period of time, dealing with similar or identical situations.
It is settled law that if the plaintiff fails to make out a prima facie case, examination of questions pertaining to grave and irreparable loss, as also balance of convenience, are rendered meaningless - in such a situation, this Court is called upon to first determine as to what are the factors to be taken into consideration while answering the question as to whether the plaintiff has indeed made out a prima facie case in his favour for allowing the present application. In order to arrive at a conclusion on the said aspect of the matter, some of the established positions of law need to be adverted to.
Whether the NCLT has exclusive jurisdiction to decide disputes pertaining to oppression and mismanagement, has arisen before Courts and after much deliberation, it has been found that only the NCLT has exclusive jurisdiction to decide such disputes. No Court, including a Civil Court, can go into such disputes. In this regard, Sections 241, 242 and 430 of the Companies Act, 2013 are relevant.
It becomes abundantly clear that when the subject matter of dispute, as in this case pertaining to oppression and mismanagement, is incapable of settlement through arbitration under the law of India, the Court cannot have any discretion in such matters and enforcement of such a foreign award becomes an impossibility. Hence, there is substance in the contention raised on behalf of the plaintiff that in the light of the said public policy of Indian law, as recognized by the Courts in India pertaining to non-arbitrability of disputes concerning oppression and mismanagement, even if the said questions were gone into in the arbitral proceedings at Singapore, the award pursuant thereto would be incapable of enforcement in India under Section 48 of the Arbitration Act.
The fact that the plaintiff has been able to show that if the anti-suit permanent injunction order granted by the High Court of Singapore is enforced, he will be rendered remediless, is enough to make out a strong prima facie case in his favour.
The aspect of grave and irreparable loss to the plaintiff in the absence of such temporary injunction, becomes evident in the light of the finding given hereinabove that the plaintiff would be left remediless if the anti-suit permanent injunction order of the High Court of Singapore is allowed to operate. It cannot be countenanced that the plaintiff would stand restrained from pursuing the only remedy available to him before the NCLT, while the arbitration at Singapore would continue and the award that may be rendered therein would be unenforceable in India. Therefore, on the aspect of grave and irreparable loss also, the plaintiff has made out a case in his favour.
As regards balance of convenience, this Court finds that if the temporary injunction sought by the plaintiff is not granted, the plaintiff shall stand restrained from pursuing the only remedy available to him as regards the disputes of oppression and mismanagement, while if such temporary injunction is granted, the plaintiff would be able to pursue such a remedy - It is not as if the defendants would not be able to assert their claim before the NCLT that the petition filed by the plaintiff is a ‘dressed-up’ petition and that the disputes raised therein are not genuine oppression and mismanagement disputes, instead being disputes purely contractual in nature. Hence, the balance of convenience is also in favour of the plaintiff.
This Court finds that temporary injunction restraining enforcement of the anti-suit permanent injunction order needs to be granted in favour of the plaintiff - the interim application is disposed of.
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2023 (9) TMI 966
Refusal of Transmission of shares - Transfer of title in accordance of Will of the deceased, in favor of Daughter - full right to dispose of the shares in the open market, restricted by agreement - power of company to purchase its own shares - HELD THAT:- The present case is a case of ‘transmission’ of shares to the daughter of deceased Shri Gagan Parasher, as is clear and evident from the letter of intimation dated 27.1.2021 sent by Kaashvi Parasher to the Company. Clause (c) of sub-section (4) of section 56 stipulates that within one month from the date of receipt of intimation of transmission, the company shall deliver the certificates of the relevant securities to the concerned person - The reply of the Company is to refuse the request for transmission permission of shares on a specious and legally unsustainable plea and so the company asks Kaashvi Parasher to withdraw the intimation letter, as she is not entitled for transfer of shares as per the last ‘Will’ of Shri Gagan Parasher.
The Learned Counsel for Appellants had emphasised on the condition regarding sale of said shares back to the company which is included in the Last Will of Shri Gagan Parasher to claim that Kaashvi Parasher is not entitled to transmission or transfer of the said shares - there was no need for the Company to have interpreted or acted upon the provisions included in the Will of Shri Gagan Parasher, since the intimation under section 56 of the Companies Act was merely about transmission of said shares and not about execution of Shri Gagan Parasher’s Will. In such a situation, it was not only undesirable, but also unlawful for the Company to have refused ‘transmission’ of said shares when other Class-I legal heirs of Shri Gagan Parasher had given explicit ‘no objection’ for transmission of the said shares in favour of Kaashvi Parasher. These ‘no objections’ were submitted by Kaashvi Parasher along with letter of intimation to the Appellant Company.
The Company was wrong in sending the letter dated 22.2.2021 to Kaashvi Parasher - on the basis of the material available, and as required under law, the company should have transmitted the said shares in the name of Kaashvi Parasher without getting into the issue of execution of the ‘Will’ or examining any ‘settlement’. The point in the Last Will of Shri Gagan Parasher that interest of a third party has been created vis-à-vis Kaashvi Parasher, would be a matter to be decided by a court of appropriate jurisdiction and therefore, not an issue to be decided by NCLT when considering a case for transmission of shares.
Both the directors of the Company namely, Gunjan Sharma and Abhinav Goyal have preferred appeal in a matter that was quite clearly between the Company and Kaashvi Parasher. Why ‘third party’ like them should oppose the application of Kaaashvi Parasher is not explained in the appeal. In fact, both the Appellants have caused prejudice to the case/appeal of Kaashvi Parasher and dragged her into litigation for no ostensible or logical reason and to the detriment of the Kaashvi Parasher.
The NCLT has not committed any error in quashing the communication dated 22.2.2021, which is the reply to the intimation letter dated 27.1.2021. Further, the said shares should be transmitted in the name of Respondent Kaashvi Parasher within thirty days of this order - Appeal dismissed.
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2023 (9) TMI 932
Seeking restoration of the name of the Appellant Company in the register maintained by the Registrar of Companies, Mumbai - petitioner (Appellant herein) failed to provide necessary information and proper financial statement - HELD THAT:- The company was making efforts to start mining activity and that its mining licence was under consideration of the Government, which should have been considered by the NCLT. Hence, impugned order dated 18.11.2019 is set aside.
The appeal filed by the appellants before the NCLT is restored to the original file subject to condition that Appellant Company shall pay costs of Rs. 50,000/- to the Registrar of Companies, Mumbai within six (6) weeks from the passing of this judgment. The NCLT is requested to hear the parties after issuance of notice, and pass reasoned order in accordance with law at an early date.
Appeal disposed off.
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2023 (9) TMI 823
Professional Misconduct - Failure to report non-recognition of Interest Cost on Borrowings classified as Non-Performing Assets (NPAs) - Failure to report effect of Income Tax order in the Financial Statements of the company - Non-assessment of going concern assumption - Non-evaluation/ verification of Property, Plant and Equipment (PPE) - Non-assessment of risk of material misstatement in balances of Trade Receivables - Non-appointment of Engagement Quality Control Reviewer (EQCR) - Non-planning of Audit - penalty and sanctions.
Failure to report non-recognition of Interest Cost on Borrowings classified as Non-Performing Assets (NPAs) - HELD THAT:- In the Independent Auditor's Report on the financial statements of BCL for the FY 2017-18, the previous auditor had issued a qualified opinion on the basis, among others, of non-recognition of interest cost on the borrowings classified as NPAs. The Auditors, in complete disregard of the previous audit opinion, certified the true and fair view of the accounts, while the BCL continued to adopt the same policy on the basis of which the accounts for FY 2017-18 had been qualified by the previous auditor. The flawed accounting treatment by BCL resulted in understatement of liability and reported loss for the FY 2018-19 by t 15 .66 crores. The Auditors were required to report this material misstatement in their audit report, which they failed to do. Therefore, the charge against the Auditors of failing to report nonrecognition of interest cost on borrowings is established.
Failure to report effect of Income Tax order in the Financial Statements of the company - HELD THAT:- The Auditors were aware about the ITAO and, therefore, they were required to ensure that its impact was reflected as a provision for the liability or as disclosure of the contingent liability, which they failed to do. Accordingly, the Auditors responsible for the charge pertaining to their failure to report non-recognition of provision for liability or failure to report non-disclosure of contingent liability on account of additional income tax.
Non-assessment of going concern assumption - HELD THAT:- The Auditors incorporated an Emphasis of Matter on the going concern basis, however, we did not find any working paper in support of inclusion of such EoM. According to SA 706, an EoM can be included by an auditor if he has obtained sufficient appropriate audit evidence that the matter is not materially misstated in the financial statements. Therefore, it was incumbent on the Auditors to evaluate the matter accordingly, especially in view of the qualified opinion given by the previous auditor and several other factors (as mentioned in Para 29 above), that raised a question mark on the going concern assumption. The Auditors, based on their own independent evaluation, were required to determine if they needed to modify their opinion - the Auditors failed to do this and issued an unmodified opinion - Respondents did not have a reasonable basis for making these statements and issuing their audit report". For misconduct including this and others, PCAOB censured the firm by revoking its registration and imposed a civil monetary penalty of $ 10000 on the firm. Bravos was barred from being an associated person of a registered public accounting firm.
Non-evaluation/ verification of Property, Plant and Equipment (PPE) - HELD THAT:- The internal audit report was a part of the audit file and therefore, as per Para 11 of SA 50023 , any inconsistency in the findings of the internal audit report vis-a-vis the findings of the Auditors had to be resolved and the Auditors had to determine what modifications or additions to audit procedures were necessary to resolve the matter, and had to consider the effect of the matter, if any, on other aspects of the audit. However, we did not find any working paper that conclusively records that physical verification of PPE was carried out by the management and concluding that the internal audit report was not reliable - It is observed that the conditions that prevailed during FY 2018-19 at BCL were of consistent losses, erosion of the net worth and default in the payment of loans taken from financial institutions. Such conditions qualify for the stipulations of Para 12(f) of lnd AS 36 and, therefore, the Auditors were duty bound to evaluate if there was need for impairment of assets; however, no evaluation was carried out by the Auditors in this regard. Therefore, the Auditors responsible for not ensuring the testing of impairment of PPE, and the resultant non-reporting of misstatement in the financial statements, as the PPE accounted for 84% of the total assets.
Non-assessment of risk of material misstatement in balances of Trade Receivables - HELD THAT:- FY 2018-19 was the first audit year for the Auditors and accordingly, they were required to consider the most recent FS, i.e., of FY 2017-18 and the predecessor auditor's report thereon for information regarding opening balances - In the instant case, since the previous auditor had qualified the debtor balances, the Auditors in FY 2018-19 were required to perform additional audit procedures as required by SA 510 for evaluating the effect of debtors in the current year's FS. The audit file contains no such working - the Auditors failed in assessment of risk of material misstatement in balances of trade receivables.
Non-appointment of Engagement Quality Control Reviewer (EQCR) - HELD THAT:- The respondent failed to cooperate with a Board investigation by submitting audit documentation to the Division that they knew to contain false declarations. For this misconduct, including others, PCAOB censured the Firm and revoked its registration permanently. Further, Douglas A. Labrozzi, CPA, the Engagement Partner, was barred from associating with any registered public accounting firm.
Non-planning of audit - HELD THAT:- The Auditors stated that a detailed audit plan was prepared by CA Manjeet Kumar Verma, Managing Partner of the Firm, and implemented by the team; the Audit Plan was reportedly checked by CA Gaurav Vijay and Aayush Kejriwal; that both the audit team members had left the audit firm in July 2020, and some documents were left unreturned by CA Gaurav Vijay at that time. Such documents were enclosed by the auditor along with the reply to the SCN - The Auditors further submitted that all the requirements to check purchase, sales, bank accounts and stock etc. were fully met and there was no negligence in this regard; that they had reviewed the off-take agreement with Ultratech Cement Ltd. and that all the sales were made in accordance with off-take agreement; and that the audit papers were prepared regularly but a copy of the same had not been kept, since there was no requirement to keep and maintain every working paper.
It is concluded that all the charges of professional misconduct in the SCN stand proved based on the evidence in the Audit File, the Audit Reports issued by the EP on behalf of the Firm, the submissions made by the Auditors and the Financial Statements of BCL for the FY 2018-19.
Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed, is evident from the fact that a minimum punishment is laid down by the law - The substantial deficiencies in Audit, abdication of responsibility and inappropriate conclusions on the part of M/s K. Pandeya & Co. (Audit Firm) and CA Manjeet Kumar Verma (EP) establish their professional misconduct. The Auditors chose to place blind reliance on the assertions of the management without applying professional skepticism to the assessment of impact of IT AO, accounting of interest cost on borrowings classified as NP As and assumption of Going Concern basis for the preparation of Financial Statements and failed in discharging their statutory duty to protect public interest by exercising professional skepticism and questioning the management's decisions leading to material misstatement in the Financial Statements.
Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct in exercise of powers under Section l32(4)(c) of the Companies Act, 2013, it is ordered that:
i. Monetary penalty of Rupees Five Lakhs upon CA Manjeet Kumar;
ii. CA Manjeet Kumar Verma is debarred for Five Years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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2023 (9) TMI 822
Professional Misconduct - Failure to detect fraudulent diversion of funds and evergreening of loans through structured circular transactions of funds - Continuation of Audit engagement disregarding Independence requirements - Tampering of Audit File and related lapses (SA 230 'Audit Documentations) - Lapse in audit of sale of Global Village Undertaking - Failure to report non compliances with section 134(1) of the Act - Failure to comply with SA 315 - "Identifying and assessing the risk of material misstatement through understanding the entity and its environment", SA 330 "Auditors response to assessed risk" and SA 500 "Audit Evidence" - Failure to comply with SA 700 "Forming an Opinion and Reporting on Financial Statements" - penalty and sanctions.
Failure to detect fraudulent diversion of funds of Rs 2,448.23 crores and evergreening of loans through structured circular transactions of funds - HELD THAT:- The Auditors were charged with non-Compliances with SA 550 (Related Parties) & SA 505 (External Confirmations), as they failed to perform appropriate audit procedures to identify the risk of material misstatements associated with related party relationships and transactions. Further, the Auditors were charged with failure to obtain balance confirmations from related parties. The Auditors have denied the charge stating that they have disclaimed the Financial Statements of TDL as a whole. They stated that they had verified completeness of related party list; obtained management representation; mapped nature of relationships in first year of audit; tracked related party transactions (RPT); checked authorisation of RPT and reported the RPT outside the normal course of business in the audit report and obtained balance confirmations. They also attached copies of balance confirmations obtained from related parties. Having considered the reply, it is noted that the reply is not supported by the evidence in the Audit File except that the Auditors had verified the arithmetical accuracy of the related party transactions - In similar cases of diversion of funds and failures to perform audit procedures and exercise professional skepticism in related party transactions and internal control over financial reporting, PCAOB (Public Company Accounting Oversight Board- US Audit regulator) have penalised the auditors.
Continuation of Audit engagement disregarding Independence requirements - HELD THAT:- The Auditors were charged with non-compliance with requirements relating to independence of auditors as per SQC 1, SA 200 and SA 220. Before proceeding with the charge , a look at these provisions would be relevant. SQC 1 establishes standards and provides guidance regarding a firm's system of quality control for audit. SQC 1 requires an Audit Firm to establish policies and procedures designed to provide it with reasonable assurance that the firm and its personnel are subject to independence requirements (including experts contracted by the firm and network firm personnel), and maintain such independence where required by the Code of Ethics. SA 200 requires an auditor to comply with relevant ethical requirements, including those pertaining to independence, relating to audit engagements of financial statements. SA 220 requires the Auditor to form a conclusion on compliance with independence requirements that apply to the audit engagement.
Tampering of Audit File and related lapses - SA 230 'Audit Documentations' - HELD THAT:- Considering the provisions of the auditing standards and the affidavit filed by the Firm, the submission of the Auditors regarding the additional documents cannot be accepted and in light of the facts, circumstances and analysis above, we find these additional documents to be an afterthought to cover up the deficiencies in the Audit. Further, this also constitutes tampering of the Audit File. This is unbecoming behavior on the part of Professionals. Besides our Standards, the case laws quoted above show that internationally Regulators treat the integrity of the Audit file as sacrosanct and any kind of tampering is viewed seriously attracting significant sanctions - the Auditors have violated SQC 1, SA 200, SA 220 and SA 230.
Lapse in audit of sale of 'Global Village Undertaking" at a net consideration of Rs 721 crores - HELD THAT:- The Auditors were charged with failure to obtain and examine the valuation report of GVU. The transaction was arranged in such a fashion that the liabilities of Rs 1520.64 crores and assets of Rs 1051.25 crores were transferred to GVTPPL, which issued debentures of Rs 721 crores to TDL. Thereafter, the GVTPPL was taken over by the Sattva Group. Debentures worth Rs 286.72 crores were redeemed and debentures worth Rs 434.28 crores are held as investment in the balance sheet of TDL - There is no evidence in the Audit File that consent from the lenders was obtained before transfer of borrowings by TDL to GVTPPL. The Auditors did not verify whether TDL had complied with the requirement of lnd AS 109 before extinguishing financial liabilities.
Failure to report non compliances with section 134(1) of the Act - HELD THAT:- As per section 134(1) of the Act, approval of the Financial Statements by the Board and its signing by the persons authorized by the Board are prerequisites before an auditor makes a report on such approved & signed financial statements. Further, the reliance on the "Doctrine of Indoor Management" is misplaced as this Doctrine is applicable to third parties, not having access to the internal records of a company. The Auditors should have obtained a certified copy of the Board resolution approving the Financial Statements and authorizing the Directors to sign the Financial Statements and should have kept the same in the Audit File before its assembly. The Auditors did not do the same. Thus, the charge that the Auditors did not ensure compliance with section 134(1) of the Act by TDL, is proved.
Failure to comply with SA 315, "Identifying and assessing the risk of material misstatement through understanding the entity and its environment", SA 330 - "Auditors response to assessed risk" and SA 500, "Audit Evidence" - HELD THAT:- The risk assessment procedures are required to be performed every year by understanding the company and its environment. There is no evidence in the Audit File about performing any risk assessment procedure at planning stage of audit. No analysis of borrowings and loans/advances granted to related parties was done by the Auditors at planning stage to identify RoMM. Accordingly, we conclude that Auditors have failed to understand TDL and perform basic audit procedures for identification of RoMM, and thus violated SA 315, SA 330 and SA 500.
Failure to comply with SA 700, "Forming an Opinion and Reporting on Financial Statements" - HELD THAT:- With respect to non-consideration of Disclaimer of Opinions given by the Auditors in case of GVIL and by their related Audit Firm M/s ASRMP & Co. in case of TRRDPL, the Auditors stated that it was premature to disclaim the Financial Statements as far as advances given to GVIL and TRRDPL were concerned. The detailed analysis of the replies in support of each charge mentioned above has already been done at section C-I and found not satisfactory. We are of the view that such fraudulent transactions were required to be considered while drawing conclusions, which the Auditors failed to do. Accordingly, the Auditors were grossly negligent in drawing conclusions and forming audit opinion. We find that the Auditors did not comply with SA 700.
Failure to comply with SA 260, "Communication with Those Charged With Governance" (TCWG) & SA 265, "Communicating deficiencies in Internal Control to Those Charged With Governance and Management" - HELD THAT:- The communication with TCWG & its documentation in Audit File is a mandatory requirement, to be complied with by the auditors, which they did not comply. Further, deficiencies in internal control with reference to diversion of funds to promoter owned entities and evergreening of loans through structured circulation of funds have already been proved. The Auditors have failed to communicate such deficiencies in internal control with TCWG. Accordingly, it is found that this charge is proved - Auditors were also charged with non-compliance with SA 210- Agreeing the terms of audit engagements. Having considered the reply, this charge is dropped.
Penalty and Sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law.
Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered:
a) Imposition of a monetary penalty of Rs One Crore upon M/s Sundaresha & Associates. In addition, M/s Sundaresha & Associates is debarred for a period of four years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. This debarment period will run concurrently along with debarment ordered by the Order no. NF-23/14/2022 dated 26.04.2023 in case of TDL for FY 2018-19 and Order no. NF-23/14/2022 dated 30.05.2023 in case of GVIL for FY 2019-20.
b) Imposition of a monetary penalty of Rs Five Lakhs upon CA C. Ramesh. In addition, CA C. Ramesh is debarred for a period of five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. This debarment period will run concurrently along with debarment ordered by the Order no. NF- 23/14/2022 dated 26.04.2023 in case of TDL for FY 2018-19 and Order no. NF-23/14/2022 dated 30.05.2023 in case of GVIL for FY 2019-20.
c) Imposition of a monetary penalty of Rs Five Lakhs upon CA Chaitanya G. Deshpande. In addition, CA Chaitanya G. Deshpande is debarred for a period of five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. This debarment period will run concurrently along with debarment ordered by the Order no. NF-23/14/2022 dated 30.05.2023 in case of GVIL for FY 2019-20
d) Proceedings initiated against CA Megha Sundaresha Andani are hereby dropped.
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2023 (9) TMI 529
Imposition of stamp duty and registration fee - change of name of a company with the approval of Registrar of Companies, would amount to transfer of assets of the company or not - HELD THAT:- This Court find that the Division Bench has held that mere acquiring of equity share capital of ‘Company does not amount to transfer, assignment or parting with the possession or any other rights of the allottee Company, neither with the plot in question nor structure in existence thereon. Acquiring of equity share capital of the allottee Company by the petitioner also does not contravene the conditions contained in Clause 2(xi) of the conveyance deed.
Reliance placed in the case of JSTI Transformers [2022 (4) TMI 1480 - HIMACHAL PARDESH HIGH COURT] where reliance was placed in Reckitt Benckiser (India) Private Limited [2020 (9) TMI 80 - HIMACHAL PRADESH HIGH COURT], where it was held that Section 13(3) provides that as and when there is any change in the name of the company under sub-Section 3, the Registrar shall enter the new name in the Register of the Company and issue fresh certificate of registration with new name. Section 13(2) made it crystal clear that no new company was ever created as a result of the change of its name and it is the case of mere addition of word ‘private’ to its name. Relying upon aforesaid instructions/clarification dated 16.2.2012 issued by the respondent- State, this Court held that respondents erroneously concluded that there is transfer of assets and property by the Company.
Undisputedly, in the case at hand, change in the name with the approval of Registrar of Companies came to be effected by Department of Industries, as such, respondents Nos. 1 and 2 had no option but to change the name of petitioner No.1 in the revenue records. Approval for change of name by Registrar of Companies under Ss. 21 and 23 of the 1956 Act corresponding to S.13 of the 2013 Act does not mean transaction or sale as such no stamp duty is chargeable. In the instant case, respondents Nos. 1 and 2 have failed to appreciate that change in name with approval of Registrar of Companies and issuance of Certificate of Incorporation by Registrar of Companies under Companies Act, 2013 does not mean transfer of land under S.118 of the Act.
In the case at hand, change in the name of company from MWIL to MWIPL is mere change by addition of word “private”. Moreover, number of shareholding in MWIL and MWIPL remained the same and that cannot be said to attract stamp duty and registration fee.
Petition allowed.
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2023 (9) TMI 528
Petition for winding up of company - umbrella guarantee - Recovery against the Guarantor of the loan for default in payment by the company - whether the defence raised by the Respondent in the Company Petition was genuine and whether there was a serious dispute about the debt? - HELD THAT:- In the case of NEELKANTH DEVANSH DEVELOPERS PRIVATE LIMITED VERSUS URBAN INFRASTRUCTURE VENTURE CAPITAL LIMITED [2016 (5) TMI 884 - BOMBAY HIGH COURT], a Division Bench of this Court while dealing with Company Appeal wherein the order of learned Single Judge in Company petitions was challenged and it was held that This Court therefore while exercising its appellate jurisdiction under Clause 15 of the Letters Patent Act is not expected to interfere with the order passed by the learned Single Judge, unless it comes to the conclusion that the finding is perverse or is based on material which is not part of the record.
Future some relevant dates are material for the purpose of considering the dispute raised before this Court. The Respondent Company was incorporated under the Companies Act, 1956 somewhere in January 1998. There was some joint venture agreement executed between the Directors of the Respondent with that of the Appellant. The memorandum refers to a meeting dated 19.12.1997 concerning joint venture agreement. It thus shows that the Respondent Company was in existence prior to the joint venture agreement between its Directors and the Appellant somewhere in December, 1997 - It is a matter of record that the Appellant initially refused to produce the annexures on the precise ground that such enclosure is a confidential document and that same is not required for the purpose of deciding the petition.
The question remains as to how in the enclosure to the bank guarantee dated 20.12.2004 reference to advance/loan of ₹6 crores of the Respondent by the branch of the same bank at Mumbai appears. Admittedly, on 20.12.2004, there was no sanction letter issued by the Mumbai branch of the said bank offering loan of ₹6 crores to the Respondent. Thus, the annexure wherein reference to the Respondent appears as on 20.12.2004 and in connection with loan of ₹6 crores appears to be seriously doubtful. The same aspect has been considered by the learned Single Judge in the impugned judgment. We do not consider that such observations of the learned Single Judge are in any way arbitrary or perverse.
So-called admissions on the part of Respondent regarding the bank guarantee - HELD THAT:- Upon considering such documents as referred by Mr Rao containing admissions on the part of Respondent, it is also found that though there is some reference to the guarantee issued by the Appellant for the said loan, it does not specifically refer to the guarantee dated 20.12.2004. The Appellant approached the Court with a specific case that the loan issued in favour of Respondent was secured by a bank guarantee dated 20.12.2004 and therefore, it was incumbent upon them to satisfy this Court that such bank guarantee in fact refers to the loan issued in favour of Respondent on 10.01.2005.
Thus, the defence raised by the Respondent cannot be considered as moonshine defence and there appears to be substantial defence raised with regard to claim of the Appellant for recovery of the amount of more than ₹2 crores which the Mumbai branch allegedly recovered from the Appellant on the basis of bank guarantee dated 20.12.2004 - Though Respondent raised other aspects with regard to malicious attempt on the part of Appellant, collusion between the Appellant and the bank, such aspects were not raised before the learned Single Judge and further, such aspects were not considered and decided in the impugned order - such aspects raised on behalf of Respondent in this appeal cannot be considered.
The Appeal stands rejected.
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2023 (9) TMI 363
Deed of pledge of shares - voting right - whether the rights of a Pledgee limited to those prescribed in Section 176 of the Contract Act? - whether the Deed of Pledge can include terms governing the pledge over and above those contained in Sections 172 to 179 of the Contract Act?
Seeking injunction restraining the defendant from exercising rights including voting rights in respect of the suit shares - restraint from transferring, alienating, creating any third party rights in respect of the suit shares - injunction restraining from interfering and/or seeking to participate in the management and affairs of the Defendant/Respondent No. 3 by claiming rights under the suit shares.
HELD THAT:- It is the Plaintiff’s contention that the conferring of voting rights upon the Pledgee by the contract i.e. the Pledge Deeds would constitute contracting out of Section 176 which is prohibited - this contention is misplaced. This Court in Madhaolal Sindhu [1946 (8) TMI 19 - BOMBAY HIGH COURT] was not concerned with the issue which arises herein namely whether the conferring of voting rights upon the Pledgee constitutes contracting out of Section 176. It is a settled position that the Contract Act, including law of pledge is not exhaustive.
In the present case, the mandatory provision of Section 176 of the Contract Act which provides for giving a reasonable notice prior to sale has infact been complied with. The Pledge Deeds mandate reasonable notice to be given before the sale i.e. Clause 7.3 and 8 of the Pledge Deed. The Pledgee has in compliance with the clauses of the Pledge Deeds which are in terms of the mandatory provision of Section 176 of the Contract Act issued notice of sale to the Plaintiff and the Plaintiff’s right to redeem the Suit shares from JCF remains intact - the Pledge Deeds in the present case which confer voting rights on the Pledgee beyond what is specified and expressly provided for under Section 176 of the Contract Act cannot be voided as it is permissible for the parties to incorporate into the Pledge Deeds any incident which is not contrary to or inconsistent with the said provisions governing Pledges in the Contract Act.
In the present case the use of the pledged goods will include exercise of voting rights since the pledged goods are shares. Thus, the Pledge Deeds by including in its terms the exercise of voting rights of the Pledgee will neither be contrary to law nor lead to conversion nor would amount to mortgage of movables.
The express terms of the Deed of Pledge will prevail and where there are no express terms, the Pledgee may hold or assign the pledged goods, until the debt is discharged. This has also been held in the English case of Donald Vs. Suckling. The Pledgee has a right to protect the pledged goods and its interest therein during the subsistence of the pledge.
Having perused the relevant provisions of the Depositories Act, it is clear that the Depositories Act does not contemplate different kinds of beneficiary owners. There is no limitation on the Pledgee’s rights as beneficial owner and / or limitation as to the Pledgee having right to sell but having no other right. Thus, the contention on behalf of the Plaintiff and / or Dish TV to the effect that the only rights which the Pledgee has upon being transposed as beneficial owner, under the Depositories Act and the Depository Regulations is only for effecting the sale and does not contemplate the exercise of voting rights by the Pledgee upon invocation of the pledge does not merit acceptance - the contention of the Plaintiff, namely Section 5(3) of the SARFAESI Act is caveated by the words “unless otherwise expressly provided by this Act” and since Section 31(b) of the SARFAESI Act excludes the application of the Act to a contract for pledge, Section 5(3) of the SARFAESI Act is not applicable to Pledge Deeds cannot be accepted.
Having held that the transfer to JCF is lawful and the Pledgee can contractually exercise voting rights, the allegations of fraud are now dealt with. The Plaintiff has in the amended Plaint alleged that the Deeds of Pledge are vitiated by fraud - the Plaintiff had prior knowledge of the alleged fraud i.e. prior to the filing of the present Suit but despite which the Plaintiff did not avoid the Pledge Deeds. The alleged fraud does not in my prima facie view render the loan transaction void but at the highest would render the transaction voidable at the instance of the defrauded party.
The parties to the Pledge Deeds including the Plaintiff were fully aware of the character and nature of the documents namely the Deeds of Pledge that were executed. By the Deeds of Pledge, the Plaintiff was pledging certain shares held by it in favour of Catalyst for the benefit of Yes Bank as security for the Loans advanced by Yes Bank. Thus, no case has been made out of there being a fraud as to the character of the contract which would render the document void ab-initio - The Plaintiff has alleged illegality in respect of the use of the loans amount, which does not render the loans themselves illegal and / or unlawful. Prima facie, it is not found that a case of fraud as contemplated under Section 23 is made out.
The Pledge Deeds itself provide that the consideration for the Pledgor under the Pledge Deeds is the advancement of the loan to the Borrowers. The Borrowers having received and utilized the loans, it cannot be said that the Plaintiff has not received any benefit from the loan transaction and Pledge Deed. Further, the Plaintiff has not clarified why the Suit shares were Pledged by them in the first place if no consideration / benefit was received by the Plaintiff under the Pledge Deeds - there are no merit in the Plaintiff’s claim to be an innocent party.
Thus, JCF, presently registered as “beneficial owner”, is having all rights, benefits and liabilities attached to the securities held by the “depository” and including voting rights as well as the prima facie finding that no case of fraud having been established by the Plaintiff, the interim relief sought for in the present Interim Application cannot be granted.
The Interim Application is disposed of.
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2023 (9) TMI 362
Legality of Look Out Circular issued by the Bank of Baroda - permission to travel abroad - HELD THAT:- In the instant case most of the transactions have taken place post the Petitioner’s resignation and the Petitioner is being sought to be held as a hostage in the country only for the purpose of recovery of money which is payable by the Company-Lloyd Electric and Engineering Limited. The Petitioner’s movement has been severely impeded from June, 2022 i.e., for more than one year when the Petitioner is not even an accused in any FIR - A mere probability/possibility that a person might ultimately be made an accused cannot be the sole basis for opening a Look Out Circular which has the effect of impeding the movement of a citizen and which takes away its right to travel abroad which has been elevated as a fundamental right under Article 21 of the Constitution of India - It is well settled that legality of a valid Look Out Circular has to be considered keeping in view the circumstances prevailing on the date on which the request for issuance of the Look Out Circular was made.
In the present case, on the day when the Look Out Circular was issued, the Petitioner was not an accused in any case. In fact, material on record does not even show that the arrest of the Petitioner was even contemplated by the Enforcement Agencies and even today it is stated by learned Counsel for the CBI that the Petitioner is not an accused in the case.
There is nothing in the present case which can justify that the Enforcement Agency has received any input that the departure of the Petitioner herein is detrimental to the economic interest of India or that his departure from the country should not be permitted in the larger interest. Phrases like “detriment to the economic interest of India” cannot be permitted to be used without there being any substantial material before the Look Out Circular is opened and definitely the Banks cannot use Look Out Circulars only as a measure of recovering money because the remedy as available under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and Insolvency and Bankruptcy Code, 2016 (IBC) is not sufficient and that opening of Look Out Circular will result in a faster remedy to recover money from the creditors.
The Impugned Look Out Circular is, therefore, wholly unsustainable and deserves to be quashed and is hereby quashed - The writ petition is allowed.
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2023 (9) TMI 361
Striking off of the name of the company by the Respondent No. 1 from the Register of Companies - Section 248 of the Companies Act, 2013 - HELD THAT:- The Appellant Company is having property/land and due to change of circumstances the Appellant Company has failed to file its Financial Statements and Annual Returns - considering that the Appellant Company is having substantial movable as well as immovable assets, it cannot be said that the Appellant Company is not carrying on any business or operations. Hence, the order passed by the National Company Law Tribunal (New Delhi Bench-II) as well as Registrar of Companies, NCT of Delhi & Haryana is not sustainable in law.
The name of the Appellant Company be restored to the Register of Companies subject to the compliances imposed - appeal allowed.
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2023 (9) TMI 310
Removal of attachment in respect of secured property belonging to the 2nd respondent - attachment made for recovery of public dues - sale certificate issued with encumbrances - procedures followed by the Bank under the provisions of the SARFAESI Act and Rules are proper or otherwise - whether the claim of secured creditor will prevail over Crown's debts? - HELD THAT:- There is no proof on record filed by the petitioner to show that the sale certificate was properly sent by the Authorised Officer to the 3rd respondent for making entries as contemplated under Section 89(4) of the Registration Act. In the absence of any such proof, the relief as such sought for against the 3rd respondent is not entertainable and is pre-mature. The 1st respondent has further stated that the Writ of Mandamus is not maintainable since the entry in the Encumbrance certificate could be quashed but by merely seeking Writ of Mandamus, the petitioner is not entitled for the relief.
The Bank has not initiated any steps to resolve the issues through AMRD as per the Government of India memorandum. It is not as if the Bank's interests alone is to be protected by the Courts. The Courts are bound to consider the plight of Crown's debt equally. In the event of any procedural violations or violations of the provisions of the SARFAESI Act or Rules, then the Court may not be in a position to grant the relief in favour of the petitioner, as such sought for in the writ petition - mandatory procedures contemplated under the Rules, if violated or not complied with, then the secured creditor/ Bank is not entitled for the relief to lift the attachment without clearing the dues or to remove the attachment from the encumbrance certificate under the provisions of the Registration Act.
Whether the interest of the third party purchaser can be protected in such circumstances, when the sale certificate was issued with encumbrances? - HELD THAT:- By Applying the principles of Caveat emptor, the third party purchaser, who purchased the property through public auction was made aware of the encumbrances. Once the purchaser has the knowledge about the encumbrances and purchased the property through auction, then it is his obligation to discharge the encumbrances and convert the encumbered property free from encumbrances. The Bank cannot file a writ petition so as to protect the interest of the third party, who has purchased the property knowing the fact that there are other encumbrances. Once the Bank auctioned the property and issued a sale certificate under Sub Rule (6) to Rule 9 of Security Enforcement Rule 2002 by mentioning the list of other encumbrances, then such sale certificate cannot be registered by the registering authority.
In the event of non-compliance of the statutory rules issued under the SARFAESI Act, the Bank is not entitled for any relief from the hands of the Constitutional Courts. Unilateral actions of the secured creditors, at no circumstances be appreciated. They, being a public sector, is duty bound to protect the interest of the other statutory creditors as it is Crown's debt. The power conferred under the SARFAESI Act cannot be exercised, so as to deprive the other statutory creditors from realising their dues.
The compliance of the procedures contemplated in the rules are not only mandatory but the non-compliance would result in denial of an opportunity to the non-secured creditors to recover their dues - in the present case, the secured creditor is not in a position to recover their dues in entirety. In such circumstances, Sub Rule (10) of Rule 9 contemplates that the certificate of sale issued under Sub Rule (6) shall specifically mention whether the auction purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not. If the auction sale is made with encumbrances, then the registering authority under the Registration Act cannot remove the same.
In the present case, the petitioner / Indian Overseas Bank conducted public auction of the secured assets. They recovered their dues partly. The sale certificate was issued by the authorised officer notifying the known encumbrances. The petitioner Bank thereafter filed the present writ petition seeking a direction against the Sub-Registrar to register the sale certificate, but the sale certificate was issued by the Authorised Officer with known encumbrances. Thus, the sale certificate issued cannot be construed as free from encumbrances as contemplated under Rule 9 of the Security Interest Enforcement Rules - the sale certificate issued with encumbrances is non-registrable and the Registering Authority is not empowered to remove encumbrances at the request of the Bank.
This Court has to arrive at an inevitable conclusion that the writ petition filed by the petitioner Bank and the relief as such sought for are untenable - the writ petition stands dismissed.
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2023 (9) TMI 309
Criminal conspiracy - deceive the banks - committing a criminal breach of trust and faith - vicarious liability - It is submitted that Petitioner were never being the Director of the accused companies - Directors of associate companies are liable for punishment as per sub Section (9) of Section 212 of the Companies Act, 1956 or not - HELD THAT:- On perusal of the Investigation report, it is seen that there is no specific averment that the petitioners were in charge of and responsible to the Companies for the conduct of its business at the time of commission of the offence. In the instant case, except the fact that the petitioners are wife and brother of the Director, nothing has been produced by the complainant showing that the petitioners were controlling the day-to-day affairs of the Company.
With regard to the nature of charge against the petitioner/A5, as per the report of SFIO, that she, in connivance with other Promoter Directors, involved in misappropriation of fixed Assets of PAPL, siphoning off funds of PAPL to the tune of Rs. 12.03 Crore, by sale of aircraft spares and by receiving the sale proceeds in associate companies by sale of fixed assets and stocks of PAPL to aircraft spare dealers in US and Singapore and non-cooperation in investigation.
The case of the respondent-complainant is, the petitioners along with others acted in a criminal conspiracy to deceive the banks and committed a criminal breach of trust and faith, the banks reposed on them. Further, they connived with the promoters of PAPL, in the disposal of the assets belonging to the banks under hypothecation, with a motive to benefit them and the entities belonging to them. On perusal of the SFIO report, it is seen that the information is bereft of even the basic facts, which are absolutely necessary for making out the offence, as against the petitioners herein / A5 and A10.
The inherent powers of the High Court is not the one conferred by the Code, but the one which the High Court already has in it and which is preserved by the Court. Section 482 saves inherent power of the High Court postulating that “nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice” - Further, the High Court can quash an F.I.R. or a complaint in exercise of its powers under Article 226 of the Constitution or under Section 482 of the Criminal Procedure Code, if the allegations found in the F.I.R. or the complaint, taken at their face value and accepted in its entirety, does not prima facie disclose commission of a cognizable offence or make out a prima facie case against the accused or where manifestly the proceeding is actuated by malice.
On careful perusal of the report of SFIO, absolutely nothing would reveal that the petitioners were in overall control of the day-to-day affairs of business of the Company, controlling the day-to-day affairs of the Company and they, in connivance with other Promoter Directors, involved in misappropriation of fixed Assets of PAPL, siphoning off funds of PAPL to the tune of Rs. 12.03 Crore, by sale of aircraft pares and by receiving the sale proceeds in associate companies by sale of fixed assets and stocks of PAPL to aircraft spare dealers in US and Singapore. In order to constitute the offence, the intention to deceive should be in existence at the time when the inducement was made - on a perusal of the complaint and material, comes to a conclusion that the allegations levelled in the complaint on the face of it does not constitute any offence as against the petitioners.
The Criminal Original Petitions are allowed.
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2023 (9) TMI 308
Prosecution proceedings against the Directors of the company - Falsification of accounts of A1 Company for the financial year 2001 – 2002 to 2007 – 2008 - whether the Petitioners / Directors of the Companies during the relevant period, false statements made wilfully knowing them to be false? - HELD THAT:- On perusal of the records, it is seen that the falsification is alleged to have been done on 27.12.2010 and the same was submitted on 20.05.2011. In the complaint, date of resignation of the respective petitioners, and cessation of being directors given, which is not disputed by the complainant, which would clearly confirm that they resigned from the Directorship much before the alleged commission of offence and to that effect, the petitioners filed Form 32 with the Registrar of Companies - there is no specific averment of any irregularity committed by the petitioners during the relevant period. From the facts, it is clearly seen that, when the petitioners were not Directors of the Companies at the relevant period. Admittedly, the offence and the cause of action taken place during the years 2010 and 2011, but the present complaint is filed in the year 2014.
The admitted case of the respondent is that the offence of submission of falsification of accounts have been taken place during the year 2010-11. The cessation of Directors has been admitted and the same tabulated in the complaint. In view of such admitted position, the case against the petitioners to be considered along with the Balance sheet submitted by them - In the document submitted it was found that maximum data manipulation and falsification of accounts have been done by the Company and the Company Balance sheet do not project fair picture of the affairs of the Company.
As regards the persons, who have signed and submitted return, report, certificate, balance sheet, prospectus, statement or other documents with false material particulars knowing it to be false or omitted any material fact knowing it to be material, they can be prosecuted for offence under Sections 628 and 629 of the Companies Act. Since the Petitioners 7, 8 and 9, who are A8, A10 and A12 have signed the above documents with the other Director, the case against them has to be proved whether they had requisite mens rea or guilty mind only during trial.
Complaint against the persons where not the Directors during the relevant period, quashed - Proceedings against the persons who singed and verified the Balance Sheet shall continue.
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2023 (8) TMI 1432
Condonation of delay in refiling of the appeal - Sufficient reasons for delay or not - whether condonation has to be allowed only after assigning sufficient cause to the satisfaction of the Court? - HELD THAT:- The answer to the above question is no longer res integra in view of the Five Judge Bench decision of this Tribunal rendered in V.R.Ashok Rao [2022 (9) TMI 219 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] in which one of the question was "Whether the limitation prescribed for filing an appeal before this Appellate Tribunal under Section 61 of the Insolvency and Bankruptcy Code, 2016 or Section 421 of the Companies act, 2013 shall also govern the period under which a defect in the Appeal is to be cured and this Appellate Tribunal shall have no jurisdiction to condone the delay in refiling/re- presentation if it is beyond the limitation prescribed in Section 61 of the IBC or Section 421 of the Companies Act, 2013." - it was held by the Tribunal that The limitation prescribed in filing an appeal under Section 61 of the Code or Section 421 of the Companies Act, 2013 shall not govern the period taken in an appeal for removal of the defects in refiling/re-presentation. Even if, there is a delay in refiling/ re-presentation which is more than the period of limitation prescribed for filing an appeal under section 61 of the Code and Section 421 of the Companies Act, 2013, the same can be condoned on sufficient justification.
Thus, one thing is settled that in application for condonation of delay in refiling of appeal, the Applicant / Appellant has to give sufficient reason for not re-filing the appeal within the time prescribed - In the present case, the appellant has been totally casual in approaching this court time and again for the purpose of re-filing inasmuch as the defects have been shown for the first time on 01.02.2022 were not cured.
It is added that one of the objection was with regard to the cause title namely, Cause title is defective in whole appeal paper book write, "2022 instead of 2021". Even this was not corrected by the Appellant which speaks volumes about their act and conduct and disentitles them from seeking condonation of delay in the present application.
There is no sufficient cause assigned by the Appellant for the purpose of condonation of delay in re-filing of the appeal. Consequently, the application is hereby dismissed.
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2023 (8) TMI 1429
Restoration of name of applicant company which was struck off by the respondent - apparent mistake appeared in the dismissal order or not - HELD THAT:- The High court granted liberty to the applicant to file amendment application. The scope of amendment is to rectify the mistake if it is apparent on record. The applicant has not pointed out any apparent mistake appeared in the dismissal order of this Tribunal dated 21.08.2020 instead he prayed to receive additional documents on record and grant the relief prayed in dismissal C.P.No.70/CTB/2020. The prayer of the applicant is beyond the scope of amendment.
On the applicant side not brought to notice of this Tribunal any apparent mistake appeared in the dismissal order dated 21.08.2020. The High court granted permission to the applicant to file amendment petition. The applicant not filed an application for an amendment instead he filed the application to receive the additional documents, this prayer is beyond the scope of the permission granted by High court. The applicant cannot on its own expand the permission granted by High Court and labelled that this application is filed in pursuance of High Court order dated 14.10.2022. In the High Court order there is no whisper about production of additional documents and the revival of the company. In strict sense this application is not in consonance with the order of High court.
This application is DISMISSED.
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2023 (8) TMI 1326
Seeking stay on auction sale - right over the Disputed Land - Administrator contended that the alleged sales are void against the Company and the Official Liquidator because they were subsequent to the commencement of winding up and not bona fide - HELD THAT:- The Company asserts title through the MOU, the GPAs, the sale receipts, the deeds of undertaking, and on the basis of being in possession of parent documents. The MOU was executed by the Company and a local intermediary, namely, Mr.T.V.Pattan. The terms and conditions disclose that Mr.T.V.Pattan was responsible for procuring 200 acres of land and 20% of the total amount was agreed to be paid as advance. The agreed price was Rs.11,250 per acre. It is further provided in the MOU that Mr.T.V.Pattan agreed to hand over all the original documents relating to the respective lands at the time of registration of the GPAs.
The contention of learned Administrator that about 58 acres was conveyed to the customers of the Company through the GPA holder, Sankaran, is liable to be accepted. When the survey numbers specified therein are compared with the survey numbers mentioned in the sale deeds executed by the GPA holder in favour of the predecessors-in-interest of the applicants, it is also evident that the GPA holder had fraudulently sold/re- sold 86.86 acres of land, including the 58 acres sold earlier through such GPA holder to the Company's customers under registered sale deeds.
What is the effect of the injunction order on the sale deeds executed by the GPA holder subsequent thereto? - HELD THAT:- By taking into account the MOU, the GPAs, receipts and letters of undertaking, there is sufficient basis to conclude that the Disputed Land is an asset of the Company. Considering the fact that the MOU, GPAs and receipts were executed in 1995, whereas the sale deeds in favour of the applicants were in 2013, which is much after the commencement of winding up, the said dispositions are void in terms of Section 536(2) of CA 1956. Such sales were detrimental to the interest of the Company and, therefore, cannot be validated. Consequently, the sale deeds are declared void and the pattas issued on that basis are also void.
Application dismissed.
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2023 (8) TMI 1293
Oppression and Mismanagement - transfer of shares or not - forgery of documents and filing fraudulently false and fabricated returns with the RoC - HELD THAT:- The NCLT has rightly held that the petitioner (Appellant herein) has to first establish his right as a member of the Respondent Company before going into the issues concerning oppression and mismanagement of the Company.
There are no merit in the appeal - appeal dismissed.
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2023 (8) TMI 999
Validity of amended Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 vide notification dated 03.01.2020 - guidelines for enforcement of corporate governance and formation of a High Power Committee to look into lapses leading to closure of more than 6 lakh companies - HELD THAT:- At this stage, the petitioner - Suman Kumar, who appears in person and has been heard, raises a grievance regarding non-issue/non-compliance of E-FORM INC-22A (ACTIVE) on mismatch etc. - no comment made in this regard.
The petitioner – Suman Kumar, if advised, may make a representation or file appropriate proceedings, which proceedings, if filed, will be decided in accordance with law.
Petition dismissed.
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2023 (8) TMI 945
Right of customs authorities (first right) to sell the imported goods under the Customs Act, 1962 and adjust the sale proceeds towards payment of customs duty - Preferential right of secured creditors over hypothecated movable property - winding up order passed - resolution of conflict between the Companies Act and the Customs Act - HELD THAT:- The goods were not released on non-payment of customs duty etc. and, thereupon, show cause notices dated 17th February 2000 and 10th April 2000 were issued and two adjudication orders dated 15th September 2000 and 10th October 2000 were passed.
In a similar factual matrix, a three judges’ bench of this Court in Commissioner of Customs, Calcutta and Another v. Biecco Lawrie Ltd. [2008 (2) TMI 646 - SUPREME COURT] had examined the provisions of Section 15 of the Customs Act, as they then existed, and have opined that clause (b) to Section 15(1) of the Customs Act will cease to apply when the requirements under Section 68 of the Customs Act stand fulfilled and the imported goods are cleared for home consumption. In the context of the present case, we must hold that the debt had become ‘due’ in terms of the two adjudication orders dated 15th September 2000 and 10th October 2000 and ‘payable’ immediately. Thus, the customs duty became ‘due and payable’ prior to twelve months next to the ‘relevant date’; the ‘relevant date' being the date of winding up of the Company on 1st December 2003. The amount ‘due and payable’ in terms of the two adjudication orders dated 15th September 2000 and 10th October 2000 would, therefore, not fall in the category of preferential payments under clause (a) to Section 530(1) of the Companies Act.
The provisions of the land revenue enactment applicable in the present case have not been relied upon by the respondents, in which event, a legal issue relating to conflict of laws would have arisen and required an answer. The provisions in the Customs Act do not, in any manner, negate or override the statutory preference in terms of Section 529A of the Companies Act, which treats the secured creditors and the workmen’s dues As defined and payable in terms of Section 529(3)(b) of the Companies Act as overriding preferential creditors; and the government dues limited to debts ‘due and payable’ in the twelve months next before the relevant date, which are to be treated as preferential payments under Section 530 of the Companies Act, but are ranked below overriding preferential payments and have to be paid after the payment has been made in terms of Section 529 and 529A of the Companies Act. Therefore, the prior secured creditors are entitled to enforce their charge, notwithstanding the government dues payable under the Customs Act.
The provision of Section 142A of the Customs Act, insofar as it protects the rights of overriding preferential creditors governed and covered by Section 529A of the Companies Act, is clarificatory and declaratory in nature, and does not lay down a new dictum or confer any new right as far as the present case is concerned. However, the enactment of section 142A of the Customs Act does confer or create a first charge on the dues ‘payable’ under the Customs Act, notwithstanding provisions under any Central Act, but not in cases covered under Section 529A of the Companies Act, RDDBFI Act, SARFAESI Act and the IBC. Section 142A of the Customs Act, post its enactment, would dilute the impact of Section 530 of the Companies Act, which had restricted preferential treatment to government taxes ‘due and payable’ limited to twelve months prior to the ‘relevant date’, without preferential right for taxes that had become ‘due and payable’ in the earlier period.
On interpretation of Section 178 of the Income Tax Act, it was held that the provision is made applicable for any tax which is ‘then or is likely to become payable’, and specifically relates to cases where the company is in liquidation. Consequently, the amount specified and covered by Section 178 of the Income Tax Act is protected in view of the nonobstante clause in sub-section (6) to Section 178 and this amount has to be set aside. In terms of Section 178 of the Income Tax Act, the amount set aside will not form a part of the pool of dues to be distributed among ordinary or unsecured creditors or, for that matter, as indicated over the overriding or preferential creditors under Sections 529A and 530 of the Companies Act.
The sale proceeds deposited in this Court and converted into fixed deposit receipts, along with the interest accrued thereon, will be paid to the Official Liquidator to be distributed in accordance with the provisions of Sections 529A and 530 of the Companies Act - Appeal allowed.
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