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Companies Law - Case Laws
Showing 121 to 140 of 15043 Records
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2024 (9) TMI 626
Oppression and mismanagement - Recall of an earlier order - appeal against order should have been filed, which was not done - HELD THAT:- In Budhia Swain and others Vs Gopinath Deb and Others [1999 (5) TMI 596 - SUPREME COURT] the Hon’ble Supreme Court held 'The power to recall a judgment will not be exercised when the ground for re-opening the proceedings or vacating the judgment was available to be pleaded in the original action but was not done or where a proper remedy in some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by waiver, estoppel or acquiescence.'
Admittedly the order dated 20th December, 2023 did not fall within the four conditions as enumerated in para 8 of Budhila Swain. Instead of filing an appeal against the order dated 20.12.2023, the appellant had preferred a recall application, not permissible under Rule 11 of NCLT Rules.
There are no illegality in the impugned order dated 05.04.2024 - there is no merit in this appeal and accordingly it is dismissed.
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2024 (9) TMI 570
Valid transfer of shares or not - Seeking rectification of the Register of Members of M/s. Lexus Technologies Pvt. Ltd., Vijayawada, Andhra Pradesh, respondent No.1, by entering their names therein under Sections 59 and 88 of the Act of 2013 - seeking to initiate action against Mantena Narasa Raju, Appa Rao Mukkamala and Suresh Anne, respondent Nos. 2,3 and 4, for oppression and mismanagement, apart from criminal proceedings under Sections 447 and 448 of the Act of 2013 for committing fraud.
HELD THAT:- In the present case, proper verification of the assertions made by the parties was a sine qua non. The Acting President of the NCLT, by failing to carry out the said exercise, failed to discharge the mandate of law. Exercise of power under Section 59 of the Act of 2013 is to be undertaken in right earnest by examining the material, evidence, and the facts on record. This has not been done. Rather, a narrow view was taken without calling upon respondent No. 2 to prove the veracity of the contrary story put forth by him, despite receiving monies from the appellants.
The facts, material, and evidence had to be examined in the context of the underlying facts, which would have included the receipt of monies, the signatures on the transfer deeds, etc. Needless to state, questions of fact must be decided on the principle of preponderance of probabilities, giving due weight to the specific facts, as found, so as to draw the conclusion that a reasonable person, acquainted with the relevant field, would draw on the basis of the same facts.
Neither the Acting President of the NCLT nor the NCLAT examined, with any seriousness, the issues raised before them to come to a cogent conclusion as to whether the disputes raised by the respondents were mere moonshine.
In Ammonia Supplies Corporation (P) Ltd. [1998 (9) TMI 427 - SUPREME COURT], this Court held to that effect in the context of Section 155 of the Companies Act, 1956. Thereafter, in Aadesh Kaur (supra) also, this Court affirmed that if, on facts, an open-and-shut case of fraud is made out in favour of the person seeking rectification, the National Company Law Tribunal would be entitled to exercise such power under Section 59 of the Act of 2013. Therefore, verification of this aspect was essential but the NCLT failed to discharge this mandate.
Another crucial fact that needs to be noted is that the interim order passed on 27.06.2019 by the Member (Judicial) of the NCLT had indicated, in clear terms, the issues that arose for consideration and the inquiry required to determine the same. However, ignoring the said interim order, the Acting President of the NCLT chose to summarily dismiss the petition, without considering the material already placed on record and without further evidence being adduced. The documents that were referred to and attached to the Company Petition and the appellants’ rejoinder were glossed over or were completely ignored - Neither the NCLT nor the NCLAT chose to labour over the actual issues for consideration by looking at the documentary evidence already placed on record or by calling for further evidence in that regard.
The judgment in Company Petition and the judgment in Company Appeal are set aside - Appeal allowed.
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2024 (9) TMI 467
Seeking interim stay of the LOC and for permission to travel abroad - HELD THAT:- The merits of the opening of the LOC against the petitioner, is a subject matter of challenge in the main Petition, which shall be considered thereunder. By way of the present Application, the permission has been sought to travel to New York and Dubai from 16.08.2024 to 05.09.2024, on the ground that the petitioner intends to meet his daughter in Dubai and also to facilitate the admission of his son in New York.
Insofar as meeting the son and daughter are concerned, there is no restriction on the children to travel to India, to meet the parents. For this purpose, there is no need for the petitioner, to travel to Dubai.
The learned Special Judge, has rightly observed that no cogent reasons have been given by the petitioner, for travelling abroad. The Judgments which have been relied upon by the petitioner, are of little assistance and need not be considered at this stage, for the simple reason that the purpose for travel itself has not been justified.
Application dismissed.
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2024 (9) TMI 252
Grant of extension of three months to hold 40th Annual General Meeting for the financial year ending 31.03.2024 - no “special reasons” were provided by respondent No. 1 for allowing a three-month extension to the respondent No. 2 - HELD THAT:- The impugned order dated 22.08.2024 does not spell out 'special reasons' and appears not to have been issued in accordance with the mandate of Section 96 of the Act. However, there is more to the content of the impugned order than initially apparent. The reasons for seeking an extension are outlined in the request letter dated 21.08.2024 submitted by respondent No. 2.
There is merit in the submissions made by the learned counsel for respondent No. 1 that the sufficiency or insufficiency of the reasons for an extension cannot be assessed by respondent No. 1. Such orders are routine unless and until tangible evidence is presented showing that the extension was sought for ulterior motives or to the detriment of stakeholders. The petitioners have not demonstrated any exception grounds, either publicly or otherwise, that could have warranted the rejection of the extension.
Evidently, the issues highlighted by the learned counsel for the petitioners regarding the management of respondent No. 2's affairs are not recent developments, but obviously have a history. Therefore, the petitioners could have sought remedies under Section 241 of the Act by approaching the Tribunal for mismanagement or oppression by directors or shareholders, or for removal of any director or person in charge of regulating the company's affairs.
This course of action would have been available in cases of mismanagement or oppression. It cannot be that the petitioners are suddenly caught unaware by the extension of time granted by respondent No. 1 to hold the AGM. The Act does not mandate that shareholders be heard before respondent No. 1 considers and decides on an application for an extension.
Petition dismissed.
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2024 (9) TMI 251
Restoration of the Company's name i.e. M/s. Era Financial Services (India) Limited in the Register of Companies maintained by Registrar of Companies, Uttar Pradesh - Section 252(1) of the Companies Act, 2013 - HELD THAT:- An appeal u/s 252(1) can be filed by any aggrieved person in case the company is dissolved by the ROC u/s 248 by initiating proceedings as provided u/s 248(1) but when a company gets its name struck off from the Register of Companies, certain aggrieved persons can only file application u/s 252(3). The provision for a company getting its name struck off is provided u/s 248(2). Therefore, filing of appeal by any aggrieved person against the action of the ROC dissolving the company u/s 248 is provided u/s 252(1) for which limitation period is 3 years. However, filing of application u/s 252(3) is provided only by certain persons on getting aggrieved against the company having its name struck off, which may happen when a company gets its name struck off as per the provisions of section 248(2) for which longer period of limitation of 20 years are provided.
Thus, when a Company is struck off by the ROC as per the provision of section 248(1) on violation of certain provisions of the Companies Act, provision for revival of the company is provided u/s 252(1) and when a Company is struck off u/s 248(2) on its application to ROC having discharged its liabilities and passing of special resolution by the shareholders, provision for revival of the company is provided u/s 252(3).
In the present case under appeal also, STK-1 dated 18.07.2022 was issued by the ROC after finding that the subscription which the company had undertaken to pay at the time of incorporation of the Company and a declaration to this effect, has not been filed within 180 days of its incorporation under sub-section (1) of section 10A, which is in violation of section 248(1)(d). Therefore, the ROC after giving notice u/s 248(5) vide STK-5 dated 30.08.2022, struck off the Company from the Register of the Companied by issuing notification in STK-7 dated 18.10.2022, from the date of publication of this notification in the Gazette of India and the said company was dissolved as mentioned at serial no 1750 of the list attached with STK-7 dated 18.10.2022.
The instant appeal allowed to the extent of directing the ROC, Uttar Pradesh, Kanpur to restore the name of the appellant Company on the Register of Companies in the same position as nearly as may be as if the name of the company had not been struck off from the Registrar Of Companies, changing the status of the appellant Company from "struck off" to "active" and take such further action against the Appellant Company with respect to late payment of subscription as provided under section 10A of the Companies act, 2013 and any other violations of statutory provisions if any detected after revival of the company.
Appeal disposed off.
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2024 (9) TMI 8
Deletion of the Appellant as party - Whether there is sufficient justification for deletion of the Appellant as party Respondent in C.P. 3638 of 2018 and for removal of restraints on him with respect to his moveable and immoveable property? - HELD THAT:- It is an undisputed fact that the SFIO Final Report had removed the Appellant from the list of persons who constituted the coterie governing IL&FS and its Group Companies. It is also undisputed that the Appellant is not named as an accused therein. Apart from there being no generic findings against the Appellant in the SFIO Final Report, there are no specific imputations either of wrong-doing or illegality on the part of the Appellant. There is also no dispute that in pursuance of the Final Report, charge-sheet was filed and prosecution proceedings commenced thereafter. However, no charge of fraud or any other wrongful act has been brought out against the Appellant. Clearly the Appellant had not been identified as an accused in the same charge-sheet.
The NCLT clearly committed an error in observing at para 23 of the impugned order dated 10.04.2024 that the Appellant “has not been discharged so far from the matter by the criminal court also.” Since it is a matter of fact and record that there are no criminal proceedings pending against the Appellant, there was no question arising of discharge from such non-existing proceedings.
It is the contention of the Ld. Sr. Counsel for the Appellant that the NCLT had erroneously denied discharge on ground that the Appellant had made withdrawal of lookout circular as the only basis of his discharge - Withdrawal of lookout circular was only one other additional demonstrable proof that the Appellant was no longer a material or relevant party for impleadment.
The mere ground of delay in conduct of any investigation by itself cannot constitute sufficient ground for any investigation to be brought to an abrupt end. The investigation process is nevertheless expected to proceed with reasonable and optimal dispatch and should not be inordinately stretched and prolonged at the cost of fair play in action. In the interest of justice and equity, it is imperative to ensure that the delay does not violate or infringe the right of any party to be treated fairly, justly and reasonably.
The latitude of time given to the Respondent to complete the investigations cannot continue endlessly, an observation which was made by the NCLT itself more than two years back. Further, prima-facie, there is force in the contention of the Appellant that such inordinately delayed investigation and consequential freeze of assets has prejudicially affected the rights and interests of the Appellant causing agony to a senior citizen, more so, when no adverse findings specifically against the Appellant has come on record so far.
This Bench is of the considered view that to meet the ends of justice, while the enquiry may continue, the name of the Appellant from the list of party Respondents in CP 3638 of 2018 could be removed and restraint/freeze of assets also be vacated - Appeal allowed.
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2024 (8) TMI 1515
Condonation of delay in instituting an appeal - sufficient cause for delay or not - Section 466 of the Companies Act, 1956 - HELD THAT:- The delay is not inordinate and is sufficiently explained. The applicants have pleaded that they were not a party to the Interim Application and on being aware of the order dated 09 October 2023, the applicants applied for certified copies and some time was spent in obtaining the same. The conduct of the applicants is not such as would stigmatise them as some irresponsible litigants. There was no malafide involved or at least presently alleged. No undue advantage is taken by the applicants of their delay in instituting the accompanying appeal.
Upon a cumulative consideration of all such circumstances, this is not a matter where the applicant should be denied an opportunity to have his appeal heard on merits.
The delay is condoned.
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2024 (8) TMI 1466
Preliminary objections with regard to the maintainability of the writ action not considered - after some preliminary observations, Single Judge has merely issued notice in the writ petition. No interim order has been passed.
HELD THAT:- The moment, the appeal is premature. Single Judge has not ruled one way or the other, i.e., either on the preliminary objections concerning maintainability of the writ action or on the merits of the matter.
It is our sense that the observations are exploratory at this stage and do not advert to the final decision on the issues concerning preliminary objections or qua the merits.
The appeal is, accordingly, closed. The parties will have their complete say before the learned Single Judge. As expected that RBI will submit its report uninfluenced by the observations made in the impugned judgment and order.
As far as this Court is concerned, clearly, we have not expressed any view on the merits of the case.
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2024 (8) TMI 1284
Seeking for the reduction of issued, subscribed and paid-up equity share capital of the Petitioner company - Section 66 of the Companies Act, 2013 - HELD THAT:- The necessary compliance of the requirements of Section 66(1) along with its proviso; Section 66(2) & Section 66(3) proviso has been made/satisfied by the Petitioner Company. In the circumstances, it is hereby ordered to confirm the reduction of share capital of the Petitioner Company by approving the Special Resolution dated 10.08.2023 read with the subsequent Circular Board Resolution dated 08.11.2023 where in it was resolved to reduce the issued, subscribed and paid-up equity share capital of the Petitioner Company from Rs.483,66,21,630/- consisting of 48,36,62,163/- equity shares of Rs. 10/- each to Rs. 483,65,81,190/- consisting of 48,36,58,119/- equity shares of Rs. 10/- each by cancelling and extinguishing the paid-up equity share capital of Rs. 40,440/- divided into 4,044 equity shares of Rs. 10/- each held by the non-promoter shareholders of the Petitioner Company representing in aggregate approximately 0.00083% (zero point zero zero zero eight three percent) of the total issued, subscribed and paid-up equity share capital of the Petitioner Company from the non-promoter equity shareholders being the Remaining Identified Shareholders more particularly set out herein below, for an aggregate consideration of Rs. 66,88,776/- being determined for 4,044 (Four Thousand Forty-Four) equity shares at 1,654/-per Equity share to be paid out of the free reserves of the Petitioner Company as per the latest audited financial statements.
The copy of the Minutes approved along with the order shall be delivered to the ROC by filing the e-Form INC 28, within 30 days of the receipt of the copy of the order. Accordingly, the Registry shall prepare an order in Form No. RSC-6 as per the National Company Law Tribunal (Procedure for Reduction of Share Capital of the Company) Rules, 2016 and issue to the Applicant/Petitioner Company. The Petitioner Company shall publish this order of confirmation in The Hindu", English daily, Bengaluru edition and 'Udayavani' Kannada daily, Bengaluru Edition, expeditiously, and not later than 30 days from the receipt of copy of the order, as required under Section 66(4) of the Companies Act, 2013.
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2024 (8) TMI 1218
Oppression and Mismanagement - lack of jurisdiction to adjudicate the issue of forgery of documents - whether the NCLT has the authority to examine documents allegedly to be forged and fabricated, which purportedly led to the changes in directorship of the company and the transfer of shares to the respondents? - HELD THAT:- In the case of CHANNEL FOODS PRIVATE LIMITED, MR. JALEEL HUSSAIN S/O. SHAMSUDHIN, A.K. MANSOOR, G. JOSEPH & ASSOCIATES VERSUS MR. A.K. NOWSHAD [2022 (11) TMI 1506 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI.], the appellate body, i.e. the NCLAT unequivocally held that the NCLT has very wide powers under the Companies Act and the NCLT Rules, 2016 to enquire into the allegation of oppression and mismanagement and sending disputed documents for forensic investigation is also part of this enquiry.
The learned CLB had denied the adjudication of the dispute on the ground that the contention of the appellant regarding the alleged forgery was out of its jurisdiction - the Rule 43 of the NCLT rules, 2016 as well as the judicial dicta provides for powers to the NLCT to adjudicate such claims and direct expert examination of the alleged forgery.
This Court is of the view that the NCLT is well empowered to adjudicate the issues and give its findings on the basis of the contentions advanced by the respective counsel as well as the forensic report.
Matter remanded back to the NCLT for adjudication - appeal disposed off by way of remand.
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2024 (8) TMI 1217
Prayer for rectification in the Register of Members - controversy pertaining to the transfer of shares - section 154 of the NCLT Rules - HELD THAT:- What is being observed here is that in the light of relief granted by NCLT in the Principal Company Petitions to the Respondents herein, the cause for Appeal against such reliefs itself was subsisting only during the time when the Appellant No.1 i.e. the Company, having legal status, being a juristic person, was contesting the matter, but, upon its withdrawal, the Appellant No. 2 individually, will have no cause, as such, which could at all flowing from the Appellant No. 1.
In the absence of there being any plausible answer extended by the Learned Counsel for the Appellant No. 2, on the objection raised by the Learned Counsel for the Respondent / Petitioner, this bunch of Company Appeals, would stand dismissed, without prejudicing the rights of the Appellant No. 2, to resort to the appropriate remedies, as available to him, under Section 59 of the Companies Act, the reason behind it being that the relief prayed against the order of rectification of Register of Members of the First Appellant, by re-entering the names and the configuration of the Shares, held by the Shareholders, under the respective Folio, could have had been possible only when the Company was contesting the proceedings and in the event of Company itself having chosen not to contest the Company Appeal, no such relief can be pressed for by Appellant No. 2 in the absence of an effective contest by Appellant No. 1.
It will be open for the Appellant No. 2, to resort to the appropriate proceedings, under Section 59 (2) of the Companies Act, 2013, which would be decided, exclusively, in accordance with Law - Appeal dismissed.
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2024 (8) TMI 1157
Validity of the sale of immovable property by the National Company Law Tribunal - transmission of shares under SARFAESI Act - Inability to sell its flats due to lack of permission from its lessor MHADA - crux of appellant is the shareholder of the appellant company does not have any title or ownership in the property of the appellant - HELD THAT:- Admittedly Respondent No.1 had acquired shares under share certificate No.23 and a flat viz. bearing No.101 situated at Satsang Building for valuable consideration pursuant to an enforcement proceedings initiated by the Bank under the SARFAESI Act. The said acquisition tantamounts to transmission of shares in favour of Respondent No.1 by operation of law and hence Respondent No.1 had acquired, shares and flat through valid SARFAESI proceedings.
In Dinesh Nagindas Shah & Ors Vs. Pankaj Aluminium Industries Pvt Ltd [2010 (7) TMI 288 - HIGH COURT OF BOMBAY] it was held an award passed by an Arbitrator would fall in the ambit of transmission by operation of law and such transfer would not be based upon volition of the parties but by operation of law.
Instead of effecting transmission of shares, the appellant No.1 vide letter dated 19th September, 2018 sought inspection of documents despite having complete details and all documents in its possession and with a view to frustrate the rights of Respondent No.1 had filed the petition before the NCLT Mumbai. There is no delay in filing the present company petition by Respondent No.1. The Ld. NCLT has held the protracted correspondence at the instance of the appellant constitutes sufficient reason to condone the delay in filing of this present company petition.
In Akal Spring Limited & Ors V Amrex Marketing Pvt Ltd, [2019 (11) TMI 1131 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI], it was held the Ld. NCLT has powers to condone the delay under Section 58 of the Companies Act, 2013. Further in Sesh Nath Singh & Anr V Baidyabati Sheoraphuli coop Bank Ltd and anr Civil Appeal No.9198 of 2019, it was held a delay can be condoned by Tribunal without a formal application as Section 5 of the Limitation Act does not envisage the requirement of formal application for condoning of delay.
There is no reason to interfere with the reasoned order of Ld. NCLT. There being no force in the appeal - Appeal dismissed.
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2024 (8) TMI 1111
Professional Misconduct by the Auditors - alleged diversion of funds - Lapses in the audit of fraudulent diversion of funds to MACEL, understatement of such diverted funds and evergreening of loans through circulation of funds - Fraudulent understatements of loans and advances given to MACEL and evergreening of loans and advances - Lapses in audit of suspected diversion of funds by CDGL to M/S Classic Coffee Curing Works - Lapse in performing risk assessment procedure in respect of Interest Income of TDL - Omission and Commission by the Audit Firm - Penalty & Sanctions.
HELD THAT:- The failure in this audit engagement was due to violations of SAS, failure in the implementation of Standards on Quality Control and relevant provisions of the Act. Hence the role of the Audit Firm, whose responsibilities are mandated by the Act, is equally important as that of EP and EQCR Partners, whose responsibilities are prescribed in the SAS and SQC -1. Given the fact that the Audit Firm is the appointed auditor under the Act and that the EP remains mandatorily responsible for the individual audits subject to firm-level supervision, both the Audit Firm and the EP have joint and several responsibilities for the Audit. Section 132 (4) that provides for sanctions against both the chartered accountants and the firm of chartered accountants emanates from this basic premise.
There is not adequate evidence of effective supervision and oversight of this audit by M/S BSR & Associates LLP. Had the Audit Firm discharged its supervisory responsibilities timely and effectively such major lapses in the audit as discussed in the foregoing paragraphs could have been avoided. Further, in this case, the Firm's policies and procedures with respect to audit documentation have also been found to be non-compliant with SQC I and SA 230.
Due to these fraudulent transactions the consolidated financial statements of CDEL were grossly misstated and, therefore, did not present a true and fair view of the company's affairs. As a result, the unmodified audit report issued by the Audit Firm was false and misleading for the users of these financial statements. Had the Auditors properly discussed the audit procedures with the component auditors in response to the identified risks, advised them accordingly, and exercised due professional skepticism throughout the audit, (as required by SA 200), they could have identified the material and pervasive misstatements in the CFS - The lack of professional skepticism in challenging both the management and the component auditors and the failure to address contradictory evidence was apparent in significant areas of the audit. Such omissions and commissions by an experienced audit firm cannot be taken lightly, as they are detrimental to the public interest.
The "Firm and Engagement Performance Metrics" published by PCAOB on October 12, 2022, provides a detailed study of engagement level and firm-level quality matrices. Engagement level metrics provide information about a particular engagement of the firm, and firm-level metrics address an audit firm's overall strategy in complementing the engagement-level matrices - The report lists key Audit Quality Indicators reported by 9 leading audit firms (refer to page 14 of the report). This Audit Quality Indicators make it clear that in, actual practice across the world, the Audit Firm has an equally important role as that of EP to ensure overall quality in any audit undertaken by the Firm.
Thus, it is proved that they had failed to report fraudulent diversion of funds to related parties and failed to exercise due diligence in performance of audit. Based on the foregoing discussion and analysis, it is concluded that they have committed Professional Misconduct as defined under Section 132 (4) of the Companies Act 2013 in terms of section 22 of the Chartered Accountants Act 1949.
The Firm and the EP committed professional misconduct as defined by clause 5 of Part I of the Second Schedule of the CA Act, which states that an auditor is guilty of professional misconduct when he "fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity" - This charge is proved as the Firm and the EP failed to disclose in their report the material non-compliances by the Company.
The Firm and the EP committed professional misconduct as defined by clause 6 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he "fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity" - This charge is proved as the Firm and the EP failed to disclose in the audit report the material misstatements made by the Company.
The Firm, the EP and the EQCR committed professional misconduct as defined by clause 7 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he "does not exercise due diligence or is grossly negligent in the conduct of his professional duties" - This charge is proved as the Firm, the EP and the EQCR failed to conduct the audit in accordance with the SAS and applicable regulations, failed to report the material misstatements in the financial statements arising from diversion of tilllds & circulation of funds and failed to report non-compliances made by the Company.
The Firm and the EP committed professional misconduct as defined by clause 8 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he “fails io obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion" - This charge is proved as the Firm and the EP failed to conduct the audit in accordance with the SAS and applicable regulations as well as due to his total failure to report the material misstatements and non-compliances made by the Company in the financial statements.
The Firm and the EP committed professional misconduct as defined by clause 9 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he "fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances” - This charge is proved since the Firm and the EP failed to conduct the audit in accordance with the SAS and related Quality Control Standards and Code of Ethics.
Penalties and Sanctions - 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 infraction of the law and non-adherence to the standards of Audit, Quality Control Standards and Code of Ethics by the Auditors of a listed company viz., CDEL. The Auditors did not report fraudulent diversion of funds despite having enough evidence that public money was moved to a promoters' entity which had no business connection with the listed company.
Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, we, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, hereby order imposition of monetary penalty of Rs ten crores upon M/S BSR & Associates LLP; Rs fifty lakhs upon CA Aravind Maiya; and Rs twenty five lakhs upon CA Amit Somani. In addition, CA Aravind Maiya is debarred for a period of ten years and CA Amit Somani 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.
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2024 (8) TMI 672
Maintainability of petition - Invocation of extraordinary jurisdiction of this Court under Article 226 of the Constitution of India, 1950 - oppression and mismanagement in the affairs of the company - HELD THAT:- On perusal of the record, a strong inference is invited that although respondent No.2 is an NBFC, its present management has lot to answer with regard to the manner in which it is conducting its affairs. Though Respondent (Mr. Raj Shekhar Rao, Sr. Adv.) has forcefully argued that several notices issued by respondent No.2 have been dutifully replied and they are engaging with them in right earnest, however, it is prima facie evident that respondent No.1/RBI is allowing themselves to be taken for a ride inasmuch as repeated notices sent by respondent No.1 are being circumvented in the sense that relevant documents are not being submitted and corrective steps have not been taken by respondent No.2.
Issue notice.
Respondent No.1 is directed to file an updated “Status Report” as to the outcome of the proceedings conducted so far and the specify action(s), if any, proposed to be taken to streamline the running of the affairs of respondent No.2. As requested by learned Counsel for respondent No.1, two weeks” time is granted to file an updated Status Report.
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2024 (8) TMI 478
Striking off the Appellant from the register of companies, which was purportedly taken under Section 248(1)(c) of Companies Act - HELD THAT:- It is a well settled that Ld. NCLT is empowered to restore the company where it thinks it to be just and equitable to restore it i.e. it is fair and prudent from the commercial point of view to restore the same.
Considering the assets and further that the appellant is inclined to shift its business from iron ore to crushing stone, it would be appropriate to restore the appellant and it is in the benefit to State Exchequer and would also aid employment generation.
It is just and equitable to restore the name of the appellant company to the record of ROC - the impugned order set aside - appeal allowed.
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2024 (8) TMI 408
Rejection of application of petitioners for processing the scheme of amalgamation between petitioner nos.2 to 5 with petitioner no.1 - rejection of application under Section 233 of the Companies Act, 2013 - HELD THAT:- The observation mentioned in paragraph 3 of the quoted portion of the impugned order amounts to forming an opinion, still respondent no.2 could not have rejected the application but instead should have filed an application before the NCLT on or before 27th November 2018 stating its objections and requesting that the Tribunal may consider the scheme under Section 232. This is a mandatory provision because respondent no.2 had to form an opinion that the scheme is not in public interest or in the interest of the creditors, notwithstanding no objections having come from the Registrar or the Official Liquidator or each of the companies involved in the merger of filing of declaration of solvency with the Registrar and the scheme having been approved by majority representing nine-tenths in value of the creditors or class of creditors of respective companies indicated in the meeting convened by the company.
On a conjoint reading of sub-sections (2), (3), (4) and (5), the phrase “may” used in sub-section (5) will have to be construed as mandatory. It is said so because if the Government is of the view that the scheme is not in the public interest or in the interest of the creditors then same is to be decided by the Tribunal. If the phrase “may” in sub-section (5) is used as optional then company involved in the amalgamation scheme would be at the mercy of the Central Government if the scheme is rejected without any adjudication. It is, therefore, mandatory for the Central Government to make an application before the Tribunal and get adjudication on said issue.
In the instant case, the declaration of solvency has been filed. The scheme has also been approved as required by sub-section (1) of Section 233. The said section does not empower respondent no.2 to reject the declaration filed but if at all respondent no.2 is of the opinion that any of the conditions is not satisfied then appropriate application has to be made to the Tribunal within the prescribed period objecting to the scheme.
Respondent no.2 not having followed the mandatory procedure prescribed, the impugned order dated 12th November 2018 is bad in law. The same is hereby quashed and set aside - Petition disposed off.
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2024 (8) TMI 191
Oppression and mismanagement committed by the Respondents - Section 241-242 of the Companies Act, 2013 read with the other provisions of the Companies Act, 2013 - Seeking injunction against offer letters, action pursuant to the offer letters and further issuance of shares - matter regarding first Rights Issue is pending before this Tribunal for consideration - HELD THAT:- After going through the prayers, in this application and also on the facts that when the matter regarding first Rights Issue is pending before this Tribunal for consideration; the subsequent Rights Issue during the pendency of the Company Petition i.e. CP No. 18/BB/2024 comes very much in the purview of this Tribunal for necessary orders.
In the present facts and circumstances of the matter, this Tribunal hereby restrains the Respondents from going ahead with the present rights issue which is in progress till the disposal of the main CP No. 18/BB/2024. The Respondents are further directed to keep the amounts collected so far since opening of the second rights issue in relation to this offer in a separate account which should not be utilised till the disposal of the main petition in CP No. 18/BB/2024. Further, status quo with regard to existing shareholders and their shareholding shall be maintained till the disposal of the main petition CP No. 18/BB/2024.
The Respondents are directed to comply with the directions given, regarding the details of allotment of shares on 02.03.2024 and the details of the Escrow banks accounts by filing a compliance affidavit with a memo within a period of 10 days; duly serving the copy on the otherside - List this matter before regular bench on 04.07.2024 along with main petition i.e. CP No. 18/BB/2024 for further consideration.
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2024 (8) TMI 103
Wilful violation / disobedience committed by the petitioners - Grant of injunction against the petitioners till disposal of the main proceedings - HELD THAT:- The triple test / requirement before granting interim injunction viz., prima facie case, balance of convenience and irreparable injury and loss / hardship has not even been adverted to, much less, considered or appreciated by the NCLT before passing the impugned order which is clearly a non-speaking, unreasoned, cryptic and laconic order without assigning any reasons as to why and how the respondents 1 to 5 would be entitled to an order of interim injunction against the petitioners and on this short ground alone, it is opined that the impugned order passed by the NCLT deserves to be set aside.
In the case of CENTRAL BOARD OF TRUSTEES VERSUS INDORE COMPOSITE PVT. LTD. [2018 (7) TMI 2206 - SUPREME COURT], the Apex Court held 'Time and again, this Court has emphasised on the courts the need to pass reasoned order in every case which must contain the narration of the bare facts of the case of the parties to the lis, the issues arising in the case, the submissions urged by the parties, the legal principles applicable to the issues involved and the reasons in support of the findings on all the issues arising in the case and urged by the learned counsel for the parties in support of its conclusion.'
A perusal of the remaining portion of the impugned order will clearly indicate that except for merely / summarily stating at paragraph-16, no other reasons, much less, valid or cogent reasons as required in law are forthcoming in the impugned order, which stands vitiated on this score alone.
A perusal of the impugned order will clearly indicate that as stated supra, the same is an unreasoned, cryptic, laconic and non-speaking order without application of mind, thereby being violative of principles of natural justice warranting interference by this Court under Articles 226 and 227 of the Constitution of India; under these circumstances, the contention urged by the respondents 1 to 5 that in view of availability of equally efficacious alternative remedy by way of an appeal under Section 421 of the Companies Act, 2013, the present petitions are not maintainable cannot be accepted in the facts and circumstances of the instant case which establish that there has been violation of principles of natural justice in the impugned order and consequently, availability of the remedy of appeal would not come in the way of this Court entertaining the present petitions.
The impugned order passed by the NCLT deserves to be set aside and the matter remitted back to the NCLT for reconsideration - Petition allowed by way of remand.
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2024 (8) TMI 28
Execution of decree passed in favour - Permission to Applicant to Execute the Decree against Respondent, M/s Apollo Tubes and Steel Industries Ltd currently under charge of the Official Liquidator - whether the petitioner can be allowed to execute the decree passed in his favour by the Madras High Court? - HELD THAT:- The perusal of Section 446 of the Companies Act, 1956 makes it crystal clear that in order to continue a suit against a company whose winding up proceedings are ongoing, the party seeking such continuance of suit should seek leave from the Court for the same - it is evident that the permission is required to be taken for the continuation of the suit and the provision is silent on the aspect of whether such permission is required for execution of the decree as well or not.
In BANSIDHAR SHANKARLAL VERSUS MOHD. IBRAHIM [1970 (9) TMI 62 - SUPREME COURT], the Hon’ble Supreme Court dealt with the objection raised with regard to obtaining of leave for execution - the judgment settles the position of law and therefore, it can be said that once the leave is granted to proceed with the suit, there is no need for the parties to file another application to seek execution of the decree awarded in their favor.
It is no doubt that the execution proceedings are considered as continuation of the suit itself and the party in whose favour a decree has been granted can only reap the benefits of the same after execution of the said decree.
On the aspect of whether the decree holder had obtained leave of the Court for continuance of the suit, it is evident that the Court did not comment on the same therefore, leading to the inference that the same was not obtained by the decree holder - it is also apparent that the decree was obtained from a foreign Court and therefore, the leave was sought to be taken at the time of its execution in India - Since the decree holder had filed for the leave of the Court for the first time, it is apparent that the Court had adjudicated the issue on the basis of the same.
The present application is allowed and the petitioner/applicant is granted leave to execute the decree passed by the Madras High Court vide order dated 24th November, 2023.
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2024 (8) TMI 27
Seeking directions against the Official Liquidator to handover vacant possession of the property - Seeking direction to the Official Liquidator to make payment of compensation of Rs. 5 lacs per month since the date of possession of the property in question - shell company - diversion of funds by the Ex-Management as also the fraud played upon the Canara Bank, being the secured creditor of the company (in liquidation).
HELD THAT:- It is manifest that there has been diversion of funds from the company (in liquidation) to the tune Rs. 78.45 crores, at the behest of the mastermind Mr. K.C. Palanisamy. Evidently, the lease/license deed dated 02.06.1999, entered into between DAIL and M/s. Jasai Exports Pvt. Ltd. was registered. A perusal of the record also shows that the applicant has not placed on the record the certified or attested copy of the registered sale deed dated 14.03.2005, by way of which it is stated to have purchased the property in question from the original owner. The copy of the License Deed whereby the property in question is alleged to have been leased out to the respondent company (in liquidation) dated 02.06.1999 reserving payment of license fee of Rs. 80,000/- for use and occupation of the premises with provision for increase etc. has not been placed by the applicant on the record and the same has been placed on the record by the respondent/Canara Bank. Evidently, it is not a registered document either.
Although, learned counsel for the applicant vehemently urged that an application has already been moved for revival of the company on 01.04.2024, the said fact was not disclosed while moving the present application. The authority of Mr. Piyush Kumar, who has filed the application as Authorized Representative of the Board has not been explained. No resolution of the Board of Directors has been placed on the record. Apparently, the sale deed dated 14.03.2005 has been executed after appointment of Provisional Liquidator by this Court vide order dated 26.10.2024.
The decision in the case of RAVINDRA ISHWARDAS SETHNA VERSUS OFFICIAL LIQUIDATOR, HIGH COURT, BOMBAY [1983 (8) TMI 187 - SUPREME COURT] cited by the learned Senior Counsel for the applicant to the effect that the Official Liquidator does not require the premises in question for beneficial winding up of the company (in liquidation) does not cut any ice.
This Court finds that there are sufficient grounds to raise an inference that the applicant company is a shell company of the company (in liquidation) and its mastermind Mr. K.C. Palanisamy. It is manifest that the applicant company has not come to the Court with clean hands, and therefore, the reliefs claimed cannot be granted.
The present applications moved by the applicant company, namely SMS Textiles Limited, are hereby dismissed.
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