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Companies Law - Case Laws

Showing 221 to 240 of 15082 Records

• 2024 (5) TMI 1403
  

  Modification of terms of the Demerger Scheme by altering the Appointed Date to the date of pronouncement of the Impugned Order - Section 421 of the Companies Act, 2013 - wrong interpretation of law and no reasoning - HELD THAT:- It is seen from the case of Accelyst Solutions Pvt Ltd Vs Freecharge Payment Technologies Pvt Ltd [2021 (3) TMI 1009 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI] that while sanctioning the scheme of arrangement if the Court comes to a conclusion that the provisions of statute have been complied with; and that there is no violation of any provision of law, or the proposed scheme of compromise or arrangement is not unquestionable, unconscionable or contrary to public policy, then the NCLT has no further jurisdiction to sit in appeal over the commercial wisdom of the class of person who with their eyes open have given their approval, even if, the Court is of the view that better scheme could have been framed. Further we also agree the alterations in the appointed date would affect the calculation and would have a serious financial implication. Hence if the parameters for sanctioning the scheme are complete, then the Tribunal would only have a supervisory jurisdiction.

  There was no reason to change the appointed date as was given in the scheme of merger and even the reliance on Sterlite Port [2023 (12) TMI 1220 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI] was incorrect since in the said case the definition of the term “Appointed Date” itself gave an authority to the Ld. NCLT to fix a date other than the date fixed by the Scheme but though the NCLT had fixed another date than the Appointed Date yet in the cited case this Tribunal retained the Appointed Date to be the one as fixed under the Scheme.

  The appeal is allowed holding the Appointed Date be the date as fixed by the scheme per para 5 above and it shall not be the date of pronouncement as is held by the Ld. NCLT.

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• 2024 (5) TMI 1154
  

  Rejection of drant of statutory interest in accordance with Rule 156 of the Companies (Court) Rules, 1959 in favour of the workmen - workmen and the secured creditor have been treated to be pari passu, in view of the provision of Section 529 of the Companies Act - Interpretation of Rule 156 of the Companies (Court) Rules, 1959.

  Effect of Section 529 of the Act 1956 - HELD THAT:- The effect of Sections 529 and 529-A is that the workmen of the company become secured creditors by operation of law to the extent of the workmen's dues provided there exists secured creditor by contract. If there is no secured creditor then the workmen of the company become unsecured preferential creditors under Section 529-A to the extent of the workmen's dues - The purpose of Section 529-A is to ensure that the workmen should not be deprived of their legitimate claims in the event of the liquidation of the company and the assets of the company would remain charged for the payment of the workers' dues and such charge will be pari passu with the charge of the secured creditors.

  Further, there is no other statutory provision overriding the claim of the secured creditors except Section 529-A. This section overrides preferential claims under Section 530 also. Under Section 529-A, the dues of the workers and debts due to the secured creditors are to be treated pari passu and have to be treated as prior to all other dues - it appears that the arrears of amount have been paid in favour of the workmen. But, the amount has been paid in favour of the workmen only with respect to the arrears of salary. After the subsequent time having been elapsed, one interlocutory application being I.A. No.7469 of 2016 has been filed seeking therein the statutory interest which is to be paid in favour of the workmen also on the ground that the secured creditor and the workmen are to be treated as pari passu.

  Whether the workmen claim parity with respect to the payment of interest on the basis of principle of pari passu, will be said to be acceptable? - HELD THAT:- In the light of the definition of the “vested right”, it is evident that right accrues to person or persons attached to an institution or building or anything whatsoever, meaning thereby, if an incumbent is claiming a vested right, he is to substantiate before the court of law that the right has been created in his favour by an order passed by the competent authority in accordance with law.

  It is evident that in the instant case, the workmen never raised the claim of interest and no such claim of interest was ever adjudicated upon. The payments have been made to the workmen in priority against sale proceeds of unsecured assets of the company in compliance of the order dated 12th August 2016. It has been accepted by the parties and has attained finality - Moreover, at the time of making claim before the Company Court for arrear of the salary, there was no claim for making payment of the interest upon the said arrear which also suggests that the workmen are well aware with the fact that they are not entitled for the interest, otherwise, the issue of interest would have been raised at the very inception by raising the said issue in the interlocutory application which has been filed for arrears of the salary.

  Further, it is evident that the section 483 of the Act 1956, confers power of the widest amplitude on the appellate court so as to do complete justice between the parties and such power is unfettered by consideration of facts like who has filed the appeal and whether the appeal is being dismissed, allowed or disposed of by modifying the judgment appealed against. The object sought to be achieved by conferment of such power on the appellate court is to avoid inconsistency, inequity, inequality in reliefs granted to the parties concern.

  The instant Company appeals are hereby dismissed.

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• 2024 (5) TMI 1062
  

  Investigation under Section 212 (1) (c) of the Companies Act, 2013 - scope of judicial review - whether the Central Government has applied its mind and formed an opinion and whether there exist material and circumstances to form such opinion are open to judicial review? - HELD THAT:- Once the liquidator and the authorities have taken action against the company for the alleged transactions covered under section 66 of the IBC, there is no question of SFIO carrying out investigation with respect to the same transactions and same cause of action, more particularly on the ground of public interest, which will otherwise amount to double jeopardy. In the present case the Application under section 66 is pending therefore investigation by the SFIO pursuant to sanction under section 212 would amount to double jeopardy.

  There is no element of public interest involved in the present case. Factual Existence of public purpose and interest is by the language of section 212 (1) (c) a condition precedent to order investigation - it is abundantly clear that there did not exist requisite material and circumstances based on which the Respondent No. 1 could have ordered investigation at the behest of SFIO.

  The commencement of investigation under section 212 of the Companies Act has far fetched impact on the functioning of a Company. Mere commencement of investigation by SFIO may cause serious injury as soon as it is made and such injury may not be capable of being entirely erased. These powers cannot be used ordinarily or in normal circumstances or in a mechanical way - there is no opinion formed by the Central Government as contemplated and mandated under section 212 of the Companies Act. Merely ordering investigation in a routinely fashion and in a mechanical way, as is done in the present case, would not qualify as forming of opinion for the purposes of Section 212 of the Companies Act.

  In the present case, the functions of the Company have come to stand still since its admission under the CIRP by order passed by the NCLT Mumbai dated 03.03.2020 and is pending liquidation, further there is an Application under section 66 of the IBC for recovery of monies which will be decided on its own fate, therefore, in our opinion there is no public interest involved or even a prima-facie case made out for initiation of investigation under section 212 of the Companies Act, even assuming the material and circumstances available with the Central Government at the time of passing the impugned sanction to be true and correct.

  An order of sanction under Section 212 of the Companies Act, 2013 needs to be a reasoned order, there needs to be existence of opinion formed by the Central Government on the basis of material facts and circumstances warranting such investigation and in compliance with principles of natural justice - the impugned sanction dated 30.11.021 fails on all counts.

  The sanction dated 30.11.2021 under Section 212 (1) (c) of the Companies Act, 2013 is arbitrary, illegal and bad in law and ought to be set aside. Any steps taken in furtherance of the sanction dated 30.11.2021 deserves to be quashed and set aside - Petition allowed.

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• 2024 (5) TMI 1003
  

  Quashing Disciplinary proceedings against the Regional Director (NR) of ROC - executive function under the Act - Whether an act of an authority qualifies as a quasi-judicial act - Transfer (shifting) of registered office of 5 companies from Delhi to Maharashtra - siphoning off funds - Allowing application without exercising due diligence - violation of Section 13(4) of the Act and 30(9) of the Rule.

  The primary ground on which the petitioner has assailed the findings of the learned Tribunal is that the respondent’s action of approving the request of shifting of the registered offices of the 5 companies of the Carnoustie Group was not a quasi-judicial function but an executive act.

  HELD THAT:- It is found that the main plank of the petitioner’s contention that under Section 13 of the Act an authority cannot be treated as an authority discharging quasi-judicial function is that, unless the authority is required to determine a lis between two contesting parties, the exercise of deciding shifting application cannot be treated as a quasi-judicial act.

  What emerges from the dicta of the Apex Court in STATE OF ANDHRA PRADESH VERSUS S.M.K. PARASURAMA GURUKUL [1973 (5) TMI 98 - SUPREME COURT] is that, for an act of an authority to qualify as a quasi-judicial act, it is not a sine qua non that there must be two competing parties. No doubt when there are two parties to the lis, the decision of the authority qua their inter se claims will necessarily be a quasi-judicial act. This, however, does not imply that unless there are two parties whose competing rights the authority is required to decide, and the function of the authority can never be a judicial function. The question whether an authority is required to act judicially and whether its function can be termed as quasi-judicial, would have to be gathered from the cumulative effect of all attending circumstances, including the nature of rights affected by its decisions, as also the manner in which the duty imposed on the authority is to be discharged - Cases where policy and expediency are the guiding factors for a final decision, would no doubt be an executive decision, while on the other hand, where objective criteria are required to be adopted and objections to claims need to be considered, the act would generally qualify as a quasi-judicial function.

  It would be also apposite to refer to a recent decision of the Apex Court in ORISSA ADMINISTRATIVE TRIBUNAL BAR ASSOCIATION VERSUS UNION OF INDIA (UOI) AND ORS. [2023 (3) TMI 1490 - SUPREME COURT], relied upon by the respondent, wherein the Apex Court has reiterated that the question as to whether the function of an authority is quasi-judicial or administrative, is not always well defined and has to be determined after considering several factors, including the nature of the rights affected.

  Unlike as contended by the learned ASG, the Apex Court has consistently held that for determining as to whether an action of an authority is a quasi-judicial act or an administrative one, it is not necessary that there must be adjudication of a lis between the two parties before the authority. Thus, holding otherwise would be going against the settled position of law.

  Before passing an order under Section 13, the competent authority is required to not only seek information regarding the creditors and debtors of the applicant company, but is also obliged to invite objections from the general public. Further, in case objections are received, an oral hearing is required to be granted to all the parties and it is only upon examination of these objections, that a shifting order can be passed and that too, after considering the reports of the concerned RoCs. What, thus, emerges is that an elaborate procedure has been laid down under Rule 30 for dealing with a shifting application filed under Section 13 of the Act; it being incumbent upon the authority to not only take into account the detailed information supplied by the company under Rules 30(1) to 30(4), but also to hear objections - there are no infirmity with the finding of the learned Tribunal in this regard and hold that the act of the respondent in allowing the shifting applications was only in discharge of a quasi-judicial function.

  Thus, it is evident that despite the respondent having allowed the applications for shifting of the registered offices of all the 5 companies of the Carnoustie Group, which action the petitioner contends constitutes misconduct, he continued with the inspection not only against these companies but against other companies of the said Group. It is based on this inspection that the respondent submitted a detailed report setting out the gross mismanagement and siphoning off of funds, not only by these 5 companies but also other companies of the same Group, There is no dispute about the fact that this report was promptly accepted by the petitioner and directions were issued to the respondent to take penal and other appropriate actions against the said companies.

  Taking the case of the petitioner to the hilt, there certainly seems to be more than one officer barring the respondent involved in processing of the application, however, strangely and for no plausible reason absolutely no explanation has been provided by the petitioner as to why no action has been initiated against the two RoCs as also the other officers involved in forwarding the files to the respondent for approval, who failed to inform him about the order for inspections against the 5 companies of the Carnoustie Group. Strangely, the petitioner is also silent as to why no alert message was generated in the MCA 21 system.

  The fact cannot be lost sight that the respondent, as a Regional Director, was dealing with about 500 cases every month and therefore, had to rely on the information supplied by the RoCs as also the officers dealing with the files. In the present case, these officers had while putting up these applications before the respondent admittedly annexed a check-list where there was no mention of any pending inspection against any of the company. It is also not the case of the petitioner that there are any other allegations and/ or complaints of the similar nature or of any other kind filed/ pending against the respondent.

  There are no reason to differ with the finding of the Tribunal that the respondent was not apprised of the pending inspections when he allowed the shifting applications - there are no infirmity with the impugned order - petition dismissed.

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• 2024 (5) TMI 942
  

  Winding up of the respondent (unregistered foreign) company - non-payment of outstanding dues with interest - Section 433 (e) and (f) read with Sections 434 and 439 of the Companies Act of 1956 - Transfer of proceedings to the National Company Law Tribunal (NCLT) - HELD THAT:- A careful perusal of Section 583 of the Companies Act, 1956 would clearly bring out that the respondent company is an unregistered company and the circumstances under which an unregistered company may be wound up are indicated vide sub-clause (4) to Section 583 of the Companies Act. A fortiori, since the respondent company has been unable to pay its debts, winding up proceedings against the company are clearly maintainable. Incidentally, even an unregistered company is amenable or subject to winding up proceedings under Part-II comprising of Section 375 of the newly enacted Companies Act, 2013 and sub-Clause 3(b) is pari materia to Section 583 of the old Companies Act, 1956.

  Reference can be invited to the decision of the Supreme Court in the case of Rajah of Vizianagram v. Official Receiver and Official Liquidator [1961 (11) TMI 34 - SUPREME COURT] wherein Section 270 of the Companies Act, 1930 came up for consideration, which defines “unregistered company”, as also Section 271 of the said Act which provides for winding up of an unregistered company. Suffice to state that Section 270 and 271 of the 1930 Act are in pari materia as the provisions of Section 582 and 583 of the 1956 Act respectively.

  The decision of the Supreme Court in Action Ispat [2020 (12) TMI 535 - SUPREME COURT] has been relied upon by this court in Citicorp International Limited v. Shiv-Vani Oil & Gas Exploration Services Limited [2023 (7) TMI 1188 - DELHI HIGH COURT] wherein it was held that winding up proceedings pending before High Courts, which are at a nascent stage and have not progressed to an advanced stage, ought to be transferred to the NCLT. It is but evident that the present company petition has not yet reached an advanced stage and no substantive orders have been passed towards the winding up of the respondent company.

  The present winding up proceedings are transferred to the NCLT - Petition disposed off.

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• 2024 (5) TMI 941
  

  Maintainability of the contempt petition - wilful disobedience by the Company and Respondent No. 2 to 9 (directors) - power to punish for the contempt of the order passed by the CLB - CLB having the jurisdiction or power to issue contempt notice on the alleged disobedience or not - Doctrine of merger - order of the CLB dated 27.05.2016 had merged with the order of the Guwahati High Court.

  Maintainability of the contempt petition - CLB, constituted under Section 10E of the Companies Act, 1956 had no power to punish for contempt of its order - HELD THAT:- Reference made to the decision of the Hon’ble Andhra Pradesh High Court rendering in the case of N Venkata Swamy Naidu [2007 (9) TMI 403 - HIGH COURT OF ANDHRA PRADESH] in which it has been held that the High Court under Section 10 of the Contempt of Courts Act has the power to punish for contempt of a subordinate court, coextensive and congruent with its power to punish for contempt of itself. Thus, it is clear that the CLB had no jurisdiction of issuing order of contempt because the power to punish for contempt has to be specifically provided for and conferred under the Act.

  Power to punish for the contempt of the order passed by the CLB - application under Section 425 of the Act has been filed - HELD THAT:- Reference made to the provisions of Section 425 of the Act in which the legislature has categorically used the words ‘Contempt of themselves’ which means that it can issue the rule for contempt of its own order like that of the High Court but it does not have the power to issue rule for the alleged contempt of the order of CLB.

  Jurisdiction or power of CLB to issue contempt notice on the alleged disobedience of its order - HELD THAT:- Section 434(1)(a) of the Act categorically provides that all matters, proceedings or cases pending before the CLB, immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act. It means that the proceedings, cases or matters which were pending as on 01.06.2016 before the CLB shall automatically be transferred to the Tribunal but if the proceedings are not pending on that date then it cannot be transferred automatically to the Tribunal - the CLB passed the order on 27.05.2016, much before the date of notification i.e. 01.06.2016 and no contempt proceedings or even execution filed by 3A Capital was pending which could have been transferred to the Tribunal for the purpose of taking decision on it. Thus, it is afresh petition which has been filed by 3A Capital before the Tribunal for the alleged disobedience of the order dated 27.05.2016 and is not a case of transfer of petition.

  Doctrine of merger - order of the CLB dated 27.05.2016 had merged with the order of the Guwahati High Court because the appeal was dismissed on 12.07.2017 and further appeal before the Hon’ble Apex Court was dismissed on 02.02.2018 - HELD THAT:- Reliance placed upon two decisions of the Supreme Court in the cases of Shanthi [2018 (10) TMI 2034 - SUPREME COURT] and Chandi Pd. [2004 (10) TMI 550 - SUPREME COURT] in which it has been held that “when a higher forum entertains an appeal and passes an order of merit, the doctrine of merger would apply. The doctrine of merger is based on the principles of the propriety in the hierarchy of the justice delivery system. The doctrine of merger does not make a distinction between an order of reversal, modification or an order of confirmation passed by the Appellate Authority. The said doctrine postulates that there cannot be more than one operative decree governing the same subject matter at a given point of time.”

  In so far as the appeal filed by the Directors are concerned, they have categorically said that they were non-executive director/nominee director and had no control over the affairs of the Company about which no contrary observations has been made by the Tribunal but they have not been absolved only on the ground that till the payment is made by the Company to 3A Capital, they will remain bound by the order.

  Appeal allowed.

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• 2024 (5) TMI 901
  

  Renewal of the three mining leases that were granted to Bird and Co. - whether the High Court at Calcutta was justified in directing the formation of a High-Powered Committee comprising no more than three members, representing the Union of India, State of Odisha, and OMDC? - Non-payment of dues to creditors and workmen of BPMEL - HELD THAT:- OMDC has been operating the mining leases throughout. The undertakings with respect to the mining leases were vested with BPMEL, which had executed a power of attorney in favour of OMDC to continue the mining activities. BPMEL itself never undertook any winning or mining activities from the three mines. On liquidation of the holding company, BPMEL, the power of attorney stood terminated, per Section 201 - Moreover, OMDC, a subsidiary of BPMEL, is a separate juristic entity. The plea that the juristic entity should be ignored has not been raised or argued.

  The three leases, namely, Kolha-Roida, Thakurani and Dalki, had expired by effluxion of time in 1996, 2004 and 1994 respectively. At this distant point in time, when BPMEL has been non-operational and undergoing winding-up proceedings, we do not see any reason to even remotely consider the exercise of power under Section 457(1)(b) of the Companies Act, 1956 to sanction the Official Liquidator to carry on business of the company so far as necessary for winding up, or for that matter the Official Liquidator to appoint OMDC as agent to conduct business in the place of BPMEL.

  It is evident that entertaining any notion of lease renewal would be an exercise in futility, devoid of any practical or tangible benefit. The sheer magnitude of the liabilities involved renders the prospect of renewal implausible. Besides, the proposition advanced doesn’t have any discernible plan or vision for the requisite financial, technical, and managerial support. BPMEL went into liquidation in 1996 and has been defunct for nearly three decades. OMDC is also barely operational. As such, it cannot be considered a viable option to undertake mining activities. In light of these facts, it is imperative to bring this dispute to an end. Prolonging it any further, sans a feasible resolution in sight, would be otiose.

  Non-payment of dues to creditors and workmen of BPMEL - HELD THAT:- The workers' dues are pending. During the course of the hearing, an appearance was made on behalf of 57 workers and it is stated that they have received payment of Rs.99,00,000/- of the admitted amount of Rs.3,00,00,000/-. The workers are also entitled to interest on the unpaid amount - However, non-payment of the workers' dues does not merit an order of the nature as sought by TGP. The workers will be paid in terms of the Companies Act, 1956.

  The direction to constitute a High Powered Committee is set aside. The question of renewal of lease, would not be examined by the Company Court - the impugned judgement is set aside - appeal allowed.

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• 2024 (5) TMI 900
  

  Professional misconduct - Debarment from being appointed as an auditor or internal auditor or from undertaking any audit - levy of penalty - constitutional validity to Section 132 (4) of the Companies Act, 2013 and Rules 10, 11 and 12(4) of the NFRA Rules, 2018 - negligent and failure to obtain sufficient appropriate audit evidence to support opinion and failure to identify and report material misstatements in the financial statements of RCL.

  HELD THAT:- The Audit Committee’s conclusion was based solely on EP’s presentation to the Committee in which EP concluded that the PW observations did not attract the provisions of section 143 (12) of the Act. The opinions of the two legal counsels did not examine the merits of the transactions. Nor did the PHD subject the points raised by PW to the rigours of audit examination commensurate with fraud risk to agree or disagree with them and arrive at its own conclusions before the “mandate”. Ultimately the same conclusion appeared in the Board’s Report with acknowledgement of its origin to PHD. It is also disclosed in the Financial Statements in the form of a material assertion. Finally, PHD audited the same disclosure, based on its own opinion, and provided its audit opinion, in the form of an EoM-16, that there was no matter attracting section 143 (12) in the PW observations. The draft note containing the above disclosure was included in the draft financial statements by the management only one day before the signing of the audit report. Thus, it is evident that the disclosure note emanated from information originally prepared by EP.

  The total balance sheet size of RISL for the FY 2017-18 was only ₹20.7 crore, without the above-said transaction. This is only 3.5% of the loan amount of ₹581 crore. Thus, the balance sheet size is negligible as compared to the loan amount. During the oral hearing, EP submitted that RISL had created a charge on the assets in favour of RCL. Neither the liability towards RCL nor the assets represented by the loan to Reliance Communications appear in the audited balance sheet of the borrower. Yet a charge was created on its assets, and the balance confirmation was provided - Despite the presence of a report under Section 143 (12), these factors did not prompt EP to revise the risk assessment or perform additional procedures to rule out the existence of any material misstatements due to fraud or error, such as the authenticity of the confirmations or validity of the charges in all the cases. Thus, EP ignored the contradictory evidence and did not perform any further procedures to confirm the facts in accordance with the requirements of para 26 of SA 330 and failed to obtain sufficient appropriate audit evidence as required by SA 500 to support the audit opinion.

  There are no ground to grant any interim relief at this stage - application dismissed.

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• 2024 (5) TMI 742
  

  Willful Defaulters - whether the respondent-Bank, that is, the Central Bank of India was justified in declaring the petitioners to be willful defaulters through its First Committee and in affirming the same in the decision of the RC? - HELD THAT:- The present respondent-Bank, the Central bank of India, was one of the constituents of the Consortium and thus, being represented by the Liquidator, is also bound by the NCLT order refusing to accept the said report. Thus, the respondent-Bank’s efforts to declare the writ petitioners as willful defaulters on the sole basis of the TAR are not tenable in the eye of law.

  To add to the woes of the respondents further, the lead Bank of the Consortium, the Punjab National Bank (PNB), although initially took a view that the petitioners were willful defaulters, subsequently did a volte face and, by relying on the dismissal of the TAR by the NCLT, as affirmed by the NCLAT, the PNB held that the petitioners are not willful defaulters, leaving it open for the Bank to proceed in future on the basis of independent material, if the same comes forth. However, till date, nothing has come forward by way of independent material to substantiate the stand of the respondents - the reliance on the TAR in the decisions of the First Committee and the RC are entirely de hors the law and perverse.

  Several allegations have been made regarding fixed deposits being opened, furniture and cars having not been shown as assets, etc. The petitioners categorically refuted the claims by contending that there was no link between the credit taken from the Consortium and the utilization of such assets/funds. Hence, having failed to substantiate any link between the loan granted and the use alleged and in the absence of any material to substantiate that the loan was used for any other purpose than that intended, the very premise of the willful defaulter declaration goes - The Bank, vainly, has sought to project that the NCLT order was confined to the TAR not being used for lodging criminal complaints.

  The Bank also argues that the Central Bank of India, being a constituent of the creditor-Consortium, could have proceeded with the willful defaulter proceeding despite no specific allegation regarding the loan given by the Central Bank having been referred to either in the Show Cause or the TAR or the First Committee order - Such argument is wholly untenable. If the respondent-Bank seeks to take refuge of its being a constituent of the Consortium, it is bound by the decision of the lead Bank, the PUNJAB NATIONAL BANK, to drop the charges of willful defaulter in terms of the NCLT Order refuting the TAR.

  There is no reasoned order at all in the present case by the RC which vitiates the decision of the RC on such count alone. However, the observations made hereinabove vitiate the First Committee decision itself, thus rendering the RC decision an exercise in futility ab initio - the decision of both the First Committee and the RC declaring the petitioners to be Willful Defaulters are hereby set aside and quashed.

  Petitions are allowed on contest, thereby setting aside and quashing the decisions of the Willful Defaulters Identification Committee and the Review Committee declaring the petitioners to be Willful Defaulters.

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• 2024 (5) TMI 729
  

  Oppression and mismanagement - reduction in shareholding - illegal transfer and allotment of shares - subsequent fresh transfer whereby the Respondent No.1 Company retransferred the same exact number of shares to the Appellant No.2 Company under alleged separate Board Resolution - challenge to validity of the Board Resolution and fresh transfers made thereon.

  HELD THAT:- There was no dispute regarding the first transfer of shares dates 19th May, 2010. However, the second transfer dated 24.5.2010 was challenged and was adjudicated by the Tribunal as well as this Appellate Tribunal - The second transfer dated 24.5.2010 recorded in the register of members transferred the shares in favour of Appellant No.2 was set aside and further direction was given to the Appellant No.1 company to rectify the Register of Members so as to reflect 16,94,000 shares standing in the name of Respondent No.1 Company w.e.f. 19.5.2010 and second transfer dated 24.5.2010 shall stand ignored.

  The intent of this Appellate Tribunal was very clear to restore the status quo as was at the time of first transfer of shares on 19th May, 2010 and all subsequent actions of the Appellants was set aside.

  There are no sound logic of the Appellants to issue alleged fresh transfer dated 28.11.2017 to justify the action of transferring back 14,96,000 shares in the name of Appellant no.2.

  There are force in the logic of the respondents No.1 to 9 that despite 12 years legal battle and winning the legal battle before the Tribunal as well as this Appellate Tribunal, the Respondents No.1 to 9 are still being treated as minority shareholders - there are no error in the Execution Order of the Tribunal dated 03.06.2022.

  Appeal dismissed.

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• 2024 (5) TMI 682
  

  Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings - HELD THAT:- The contract postulated and the parties had agreed that MSSIDCL would be liable to pay SSPL only after the goods are delivered and accepted by the consignee, namely, Maharashtra State Electricity Board (MSEB) and on the payment being received by MSSIDCL from the MSEB.

  If the proviso to Section 3 applies, this contractual clause will get modified in terms of the proviso to Section 3, which has fixed the upper time limit for payment to 120 days from the day of acceptance or the day of deemed acceptance. However, the question would arise as to whether the said proviso would be applicable to the agreement in question, which was entered into between the parties on 30.03.1995, albeit the proviso was enacted and enforced with effect from 10.08.1998.

  There are no good ground and reason to interfere with the conclusion in the impugned judgment passed by the Division Bench of the High Court, setting aside the arbitral award dated 30.06.2003 - appeal dismissed.

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• 2024 (5) TMI 681
  

  Professional misconduct - Role of NFRA V/s ICAI on disciplinary matters of Chartered Accountants - Retrospective V/s prospective applicability of provisions as contained in Section 132 of Companies Act, 2013 as well as NFRA Rules, 2018 - Violation of Principle of natural justice w.r.t. separate division of NFRA - Role of Statutory Auditors of the Company V/s Statutory Auditors of the Branches of the company - Are Standards of Auditing (SA) mandatory or Advisory or to be treated as guidance notes to Auditors - it was held by NCLAT that 'It is of utmost importance that Auditors realise their responsibilities which is necessary not only to the company but also to the public. In view thereof, giving effect to the Impugned Orders which highlights the professional misconduct and other misconduct on the part of the appellant vis-à-vis a public listed company become quintessential so as to make public aware and enable them to make informed and sound financial decisions and investments. Any deviation to this will only result is catastrophic effect on economy of the nation and cause immense prejudice and harm to the public, shareholders and various stakeholders such as banks, lenders, and creditors.'

  HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal - appeal dismissed.

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• 2024 (5) TMI 680
  

  Restoration of name of the company in the records of the Registrar of Companies - HELD THAT:- Section 252(1) of the Act states that any person aggrieved by an order of the Registrar, notifying a company as dissolved under Section 248, may file an appeal to the Tribunal within a period of three years from the date of the order of the Registrar. The Tribunal can direct the restoration of the name, if it is satisfied that the removal of the name of the company from the register of the companies, is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar.

  In the present case, the order passed by the Registrar of Companies dated 21.08.2017, directed the removal of name of the appellant/company – R.P. Casting Private Limited from the register of companies. The appeal was preferred within time. A practical rather than a technical view should be taken, while putting the appellants to terms on account of their lapses. The company/appellant – R.P. Casting Private Limited was in existence and even operative during the relevant time.

  The Directors of the company/appellant – R.P. Casting Private Limited were negligent in not complying with the requirements of the Companies Act, 2013 in filing annual accounts etc., and also in not responding to the notice under Section 248(1) of the Act - it is also directed that the appellant – R.P. Casting Private Limited will pay a cost of Rs.5,00,000/- to the Registrar of Companies, within a period of 60 days from today, as they were at fault, and had not complied with the provisions of law. Restoration of name in the Registrar of Companies will be subject to payment of the costs.

  The impugned judgment is set aside - Appeal allowed.

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• 2024 (5) TMI 571
  

  Grant of temporary bail on medical grounds - twin provisions of Section 212 (6) (ii) of the Companies Act, 2013 satisfied or not - HELD THAT:- The Hon’ble Supreme Court in case of JAINAM RATHOD VERSUS STATE OF HARYANA & ANR [2022 (4) TMI 1421 - SUPREME COURT] has granted bail to the appellant who was being prosecuted for violation of the provisions of Section 447 of the Companies Act, 2013 as well as various provisions of the Indian Penal Code, 1860, including Sections 406, 417, 418, 420, 467, 468, 471, 474 and 477A. A Special Leave petition preferred by the appellant was dismissed by the Supreme Court on 27th January, 2020 with observations that it was always open for the appellant to move a fresh application for bail.

  The Hon’ble Supreme Court has also noted it’s judgment in the case of SERIOUS FRAUD INVESTIGATION OFFICE VERSUS NITTIN JOHARI & ANOTHER [2019 (9) TMI 570 - SUPREME COURT] while granting bail to the appellant Jainam. The appellant was released in light of the fact that in the absence of a fair likelihood of the trial being completed within a reasonable period, personal liberty of the appellant is to be protected in case of delay in conclusion of the trial.

  The applicant was to be examined by a Panel of Doctors of J.J. Hospital, Mumbai comprising of Dean, General Physician, Medical Oncologist, Urologist and Gastrointestinal Oncosurgeon. The applicant was directed to appear before the Panel and report of the said Panel on the health condition of the applicant was called for. Thereafter, from time to time, various orders came to be passed by the Co-ordinate Benches. As such, the application for bail bearing No.2487 of 2022 was not finally disposed of.

  Having taken into consideration the entire history of the applicant as well as various decisions of the supreme Court and this Court, interim bail granted to the applicant by this Court stands confirmed - bail application allowed.

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• 2024 (5) TMI 555
  

  Misappropriation of funds/assets/shares/stocks of the said company by illegally transferring them to the petitioner no. 4 - offence under Sections 185/447/452 of the Companies Act read with Section 120B of the IPC - requirement of taking cognizance of the offence y Director only - Time Limitation - HELD THAT:- Recently, the Karnataka High Court, in its judgement dated 01st March, 2024 passed in SRI. ARUN BALLAKUR AND SMT. MADHAVI BALLAKUR VERSUS SRI. M. KRISHNA REDDY [2024 (3) TMI 1318 - KARNATAKA HIGH COURT], has quashed the proceedings for an offence under Section 447 of the Companies Act initiated on a private complaint by the shareholder therein, on the ground that the cognizance for the offence under Section 447 of the Companies Act can be taken only on a complaint filed by the Director, SFIO in terms of the Second Proviso of Section 212(6) of the Companies Act.

  The Order dated 05.01.2019 of the learned Trial Court as also the Impugned Order, in so far as it summons the petitioners for the offence under Section 447 of the Companies Act, cannot be sustained and are, accordingly, set aside.

  Time Limitation - HELD THAT:- As the offence under Section 185 of the Companies Act is punishable with imprisonment for a term which may extend to six months or with fine and, therefore, in terms of Section 468 Cr.P.C., the period of limitation shall be one year - In the present case, as the complainant himself is a shareholder of the Complainant no. 2 company, and, in any case, has not pleaded that he did not know of the offence having been committed by the petitioners, the cognizance taken of the offence under Section 185 of the Companies Act which is stated to have been committed between the years 2002-2008, on a complaint filed in 2017, was barred by limitation and is, therefore, bad in law.

  As Section 452 of the Companies Act is a ‘continuing offence’, it continues to be committed as long as the property of the company is withheld by the accused officer of the company. A fresh period of limitation begins to run at every moment such property is in the wrongful possession of such a person - As far as cognizance taken by the learned Trial Court of the offence under Section 452 of the Companies Act is concerned, it cannot be faulted on the ground of being beyond the period of limitation.

  In the present case, the alleged handing over of the property of the Company by the petitioner no. 1 to the petitioner no. 4, as alleged in the paragraphs 13 and 21 of the complaint, constitutes an offence under Section 185 of the Companies Act. The non-return of the property, that is, loan and the advances, is alleged to constitute an offence under Section 452 of the Companies Act. Therefore, in terms of Section 220 of the Cr.P.C. both the offences can be tried together - it is to be noted that the punishment for the offence under Section 452 of the Companies Act is in fine alone. In terms of Section 468(2) of the Cr.P.C., therefore, the period of limitation for filing of the same would be six months. Therefore, the same shall have no effect on the “period of limitation” for the offence under Section 185 of the Companies Act. Merely because offence under Section 185 of the Companies Act can be tried alongwith the offence under Section 452 of the Companies Act, the period of limitation does not extend as far as the cognizance of an offence under Section 185 of the Companies Act is concerned.

  In the present case, however, neither is the offence under Section 120B of the IPC standalone and as a separate offence pleaded by the respondent no. 2 to have been committed by the petitioners, nor has the learned Trial Court taken cognizance of such offence as a standalone or separate offence - The respondent no. 2, cannot take any benefit of the same for seeking an extension of the period of limitation for the offence under Section 185 of the Companies Act.

  The Order dated 05.01.2019 passed by the learned Trial Court, taking cognizance of the offence under Sections 185/447 of the Companies Act read with Section 120B of IPC as against the petitioners, cannot be sustained and is liable to be set aside - As far as the Order 05.01.2019 passed by the learned Trial Court, taking cognizance of the offence under Section 452 of the Companies Act read with Section 120B of the IPC is concerned, the same is upheld.

  The petition is allowed.

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• 2024 (5) TMI 427
  

  Suit for recovery of dues - Jurisdictional bar on the civil court in deciding the suit instituted by the original plaintiff by virtue of Section 22(1) of the 1985 Act - legality & validity of the interest rate of 24% per annum awarded by the High Court in the original plaintiff’s favour - Levy of deductions towards the liquidated damages and penalty - failure to consider the evidence properly and had wrongly awarded the amounts under different heads to the original plaintiff.

  Whether the suspension of legal proceedings as envisaged under Section 22(1) of the 1985 Act would extend to a civil suit for recovery of money even if the debt sought to be proved in the plaint has not been admitted by the sick industrial company? If so, whether the decree in favour of the original plaintiff could be said to be coram non-judice? - HELD THAT:-

  Whether the High Court was correct in granting 24% compound interest on the principal decretal amount in favour of the original plaintiff? - HELD THAT:- It is seen from the plain reading of Section 22(1) of the 1985 Act, for an industrial company to avail the benefit of suspension of legal proceedings, two conditions have to be fulfilled – First, one of the four requirements as mentioned in paragraph 64 should be satisfied, that is, the industrial company must be at the prescribed stage of proceedings before the BIFR or the AAIFR. Secondly, the nature of proceedings sought to be suspended should be one which falls within the ambit of proceedings.

  The Board of Directors of the defendant company, passed a resolution dated 20.04.1992 to the effect that the company had become a sick company for the purposes of the 1985 Act and thus a reference to the BIFR was required to be made. In accordance with the resolution, a reference was accordingly made under Section 15(1) of the 1985 Act - The defendant company continued to remain a sick company under the 1985 Act and proceedings before the BIFR continued and it was only on 27.06.2013, after a detailed consideration of the progress made by the company towards revival, that the BIFR declared the defendant company to have ceased to be a sick industrial company. Consequently, the defendant company was deregistered from BIFR on the said date.

  The original defendants have strongly relied upon the decision of a two-judge bench of this Court in Bhoruka Textiles [2009 (5) TMI 546 - SUPREME COURT]. In the said case, the respondent therein, filed a suit for recovery against the appellant, a sick industrial company. The civil court decreed the suit in favour of the respondent therein with the finding that the transaction referred to took place subsequent to the reference of the appellant company to the BIFR and thus the suspension under Section 22(1) of the 1985 Act would not apply. The civil court also held that in the absence of any final order declaring the appellant company as a sick company by the BIFR, mere reference of the said company to the BIFR would not bring the protection under Section 22(1) of the 1985 Act into effect.

  In M/s Haryana Steel & Alloys Ltd. v. M/s Transport Corporation of India [2012 (4) TMI 831 - DELHI HIGH COURT] it was held that the mere contention of the sick company unsubstantiated by any material indicating that the amount forming subject-matter of the recovery suit is covered under the scheme, would not be sufficient to bring the company under the protective ambit of Section 22(1) of the Act.

  By no stretch of imagination could it be said that the legislature intended to include even the proceedings for the adjudication of the liabilities not admitted by a sick company within the protective ambit of Section 22(1) of the 1985 Act. Such an adjudicatory process only determines the liability of the defendant towards the plaintiff, and does not threaten the assets of the sick company or interfere with the formulation of the scheme unless execution proceedings are initiated pursuant to the completion of such adjudicatory process - there was a vacuum in the legal framework to deal with sick industrial companies and provide ameliorative steps for their revival. The 1985 Act was thus enacted to fill in this vacuum. The mischief which was sought to be dealt with by the enactment of Section 22 was any such legal proceeding which could impact the assets of the sick company and in-turn negatively impact the formulation and implementation of the rehabilitative scheme.

  In Tata Motors [2008 (5) TMI 423 - SUPREME COURT] it was Section 26 and not Section 22 of the 1985 Act which was under consideration. As opposed to Section 26 of the Act, which bars the jurisdiction of the civil courts in respect of those matters for which the BIFR or the AAIFR are empowered, Section 22 only places a temporary embargo on the initiation or continuation of legal proceedings in respect of certain matters mentioned therein. Further, unlike Section 22, where the said suspension can be revoked by seeking express permission of the BIFR or the AAIFR, no such permission can be sought under Section 26 of the 1985 Act. Again, in any view of the matter, the adjudication and determination of a contested liability under a contract is undoubtedly the domain of the civil court or an arbitral tribunal and not that of the BIFR or the AAIFR.

  Whether the High Court was correct in granting 24% Compound Interest on the Principal Decretal Amount in favour of the original Plaintiff? - HELD THAT:- In the present case, the suit was decreed in favour of the original plaintiff by the trial court vide its judgment dated 19.09.2001. However, while the adjudication of the suit of the original plaintiff could not have been said to be barred under Section 22(1) of the 1985 Act as it was for the mere determination of liability of the parties inter-se, the execution of decree obtained as a result thereof was expressly suspended during the period as mentioned in the said provision, unless the requisite permission from the BIFR or the AAIFR could be obtained - while there is a stay on proceedings in the nature of distress and execution, etc. against the properties of the sick company, to safeguard its assets, awarding interest for that very same period, though not expressly barred under any provision of the Act, could not have been the intention of the legislature.

  The decree awarded by the trial court was contested by both the parties before the High Court. No material was placed before us to show whether any steps were taken by the original plaintiff to obtain the permission of the BIFR for the execution of the decree of the trial court, or for the inclusion of the said decree in the rehabilitation scheme. At the same time, the original defendants too failed to bring anything on record to show if any steps were taken by them for the inclusion of the dues of the original plaintiff in the rehabilitation scheme.

  The doctrine of harmonious construction is based on the principle that the legislature would not lightly take away from one hand what it had given with the other. Thus, this doctrine provides, that as far as possible, two seemingly conflicting provisions within a statute, or the seemingly conflicting provisions of one statute vis a vis another, should be construed in a manner so as to iron out any conflict - Section 10 of the 1993 Act provides for an overriding effect to the provisions of the said Act to the extent of inconsistency with any other statute. Similarly, Section 32 of the 1985 Act provides overriding effect to the provisions of the said Act except for the enactments specified therein. Dealing with a case involving the apparent conflict between the two statutes containing overriding provisions.

  It is deemed fit to exclude the period commencing from the date when FCIL was declared to be a sick company under the 1985 Act going up to the date when it was discharged by the BIFR and declared to be no longer a sick industrial company from the purview of the applicability of the interest provision under the 1993 Act. Thus, while the applicability of the 1993 Act to the dues of the original plaintiff is not disputed, such interest shall not be calculated for the period between 06.11.1992 and 27.06.2013.

  Thus, in short, it was held as follows:

  I. The suit instituted by the original plaintiff before the trial court was not hit by the embargo envisaged under Section 22(1) of the 1985 Act. Thus, the decree awarded in favour of the original plaintiff by the trial court and modified by the High Court, cannot be said to be coram nonjudice.

  II. The High Court committed no error in awarding 24% interest to the original plaintiff on its dues as per the provisions of the 1993 Act. However, the period during which the defendant company was a sick company as per the 1985 Act should be excluded for the purposes of calculation of interest.

  The impugned judgment and order of the High Court is upheld subject to the modification of the period for which interest may be granted as discussed aforesaid. To clarify, the interest will be calculated at 24% p.a. with monthly compounding - Appeal disposed off.

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• 2024 (5) TMI 426
  

  Seeking winding up of the respondent company - failure to pay debt in the normal and ordinary course of its business - HELD THAT:- From a perusal of the record, it is borne out that the present company petition is a complete non-starter, in so far then neither a Provisional Liquidator nor an Official Liquidator has yet been appointed in the present petition.

  In view of the fact that the Insolvency and Bankruptcy Code, 2016 as well as the Companies Act, 2013, have since been enacted during the pendency of these proceedings, it is the opinion of this court that the present petition does not deserve to continue before this Court, and it would be appropriate for the same to be transferred to the National Company Law Tribunal.

  It would also be expedient to place reliance on the decision of the Supreme Court in the case titled ACTION ISPAT AND POWER PVT. LTD. VERSUS SHYAM METALICS AND ENERGY LTD. [2020 (12) TMI 535 - SUPREME COURT], whereby it was held that those winding up proceedings pending before High Courts, which have not progressed to an advanced stage, ought to be transferred to the NCLT.

  This above noted decision of the Supreme Court has been relied upon by this court in Citicorp International Limited v. Shiv Vani Oil & Gas Exploration Services Limited [2023 (7) TMI 1188 - DELHI HIGH COURT], wherein it was held that winding up proceedings pending before High Courts, which are at a nascent stage and have not progressed to an advanced stage, ought to be transferred to the NCLT.

  Hence, the instant petition is transferred to the NCLT. In view of the same, the present company petition as well as pending applications, if any, are accordingly disposed of - List before the NCLT on 08.07.2024.

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• 2024 (5) TMI 425
  

  Direction to refund the amount deposited by the applicant pursuant to the directions/order dated 03.06.2009 by the learned DRT, Delhi along with due interest from the date of deposit - IFCI did not provide a break-up or bifurcation of the amounts received with respect to the properties sold/auctioned under the aegis of the learned DRT - HELD THAT:- ICFI is cutting an extremely sorry figure in demonstrating that the amount of Rs. 57.50 Lacs received from the applicant/third party objector was remitted to the Official Liquidator comprised in the payment made on 26.02.2015/27.02.2015 amounting to Rs. 88,66,077/-. First things first, evidently the amount of Rs. 57.50 Lacs, which was deposited by the applicant/third party objector with the DRT was remitted to the ICFI and received by it on 19.03.2010. The applicant/third party objector was constrained to move the instant application before this Court on 01.05.2017 and the matter has lingered on for want of submission of better particulars on the part of IFCI.

  Even in Annexure ‘C’, filed with the affidavit dated 04.02.2022, the receipt of Rs. 57.50 Lacs from Mr. Sachin Jain i.e. the applicant/third party objector is not accounted for. There is no covering letter accompanied with the remittances that have been made on 26/27.02.2015 so as to suggest that the amount of Rs. 88,66,077/- included the refund of amount of Rs. 57.50 Lacs with interest payable to the applicant/third party objector - Even assuming the deposition in the affidavit dated 28.02.2024 to be correct for the sake of convenience and it is true that the amount, which was refunded to the S.K. Trading with regard to the property at Haldwani, had been refunded, by the same very logic the tabulated statement should have shown the amount which is due to the applicant/third party objector.

  The IFCI has not duly accounted for the amount payable to the applicant/third party objector. The details of the remittances made by IFCI to the Official Liquidator are yet to be verified and their claims as to the secured creditor are yet to be adjudicated upon by the Official Liquidator, apart from the other secured creditor, which is IDBI. Therefore, unhesitatingly, this Court finds that IFCI remains accountable and liable to make payment of Rs. 57.50 Lacs to the applicant/third party objector and the said amount should be refunded along with interest.

  The present application moved by Mr. Sachin Jain i.e. applicant/third party objector is allowed.

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• 2024 (5) TMI 334
  

  Disqualification from participating in the tender - Scope of the Balance Sheet Prepared under the Companies Act - Importance of explanatory notes to the Balance Sheet - rejection of technical bid on the premise that it has not complied with the necessary pre-requisite qualification in filing the explanatory notes of account being an integral part of the Balance Sheet - HELD THAT:- The Balance Sheets can only be understood by going into the factual narrations made in the explanatory notes of accounts. When one speaks about Balance Sheet, it takes along with it the explanatory note. To be noted, all the other bidders have complied with this part, even M/s. BVG India Ltd. was quite conscious of the said compliance as could be seen from one of the communication made by it. Thus, it is held that the reasoning of the High Court, finding fault with disqualification of the technical bid of M/s. BVG India Ltd. cannot be sustained in the eye of law.

  The only other issue to be considered is with respect to disqualification of M/s. Pashupatinath Distributors Private Limited. All the bidders had been called for a meeting and their queries have been answered by the tendering authority. As rightly pointed out by the learned senior counsel appearing for the respondent No.1, the document concerned would clearly show that even the technical committee was of the view that the request made by M/s. Pashupatinath Distributors Private Limited to dilute Clause 2.2 and 2.3 is not feasible of consideration. While interpreting the terms of a tender, a simple interpretation is to be followed.

  Thus, both M/s. BVG India Ltd. and M/s. Pashupatinath Distributors Private Limited are disqualified from participating in the tender concluded. In view of the aforesaid conclusion, the ultimate decision of the High Court in remitting matter back for a fresh consideration by the State is upheld while clarifying that the aforesaid two entities cannot be permitted to participate with the existing disqualification as discussed above, unless they are otherwise qualified in the light of the interpretation of the notice inviting tender.

  Appeal disposed off by way of remand.

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• 2024 (5) TMI 333
  

  Professional misconduct by CA - Liability of the Engagement partner with audit firm - Failure to submit requisite information and non-cooperation with NFRA - Penalties and sanctions - HELD THAT:- It is established that M/s PCN & Associates, and CA Gopala Krishna Kandula committed professional misconduct by not submitting the requisite information to NFRA; not attending personal hearing; and submitting false affidavit. We conclude that the following failures on their part, as contained under the Articles of Charges in the SCN, stand established:

  a) Failure to exercise due diligence and being grossly negligent in the conduct of professional duties as defined by clause 7 of Part I of the Second Schedule of the Chartered Accountants Act 1949.

  b) Failure to supply the information called for, and non-compliance with the requests of NFRA, as defined in clause 2 of Part-II of First Schedule of The Chartered Accountants Act, 1949.

  Considering the professional misconduct by the Firm and the EP; and considering the nature of the violation, in exercise of powers under section 132(4)(c) of the Companies Act, 2013, it is ordered as follows:

  a) Imposition of a monetary penalty of Rupees Fifty Lakhs upon. M/s PCN & Associates (FRN: 0160168), the Audit Firm and Rupees Thirty Lakhs upon CA Gopala Krishna Kandula (ICAI Membership No. — 203605), the Engagement Partner.

  b) In addition, M/s PCN & Associates and CA Gopala Krishna Kandula are debarred for a period of Two years and Ten years respectively 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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