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Companies Law - Case Laws
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2024 (5) TMI 279
Professional misconduct by CA - Liability of the Engagement partner with audit firm - Acceptance of the Audit Engagement - Significant Matters Reported by the Previous Auditor - Evaluation of the Going Concern Assumption - Verification of Expected Credit Loss (ECL) on Financial Assets - Modification of the Audit Opinion on the Financial Statements - Use of the work of Management's Experts and Auditor's Expert - Engagement Quality Control Review (EQCR) - Compliance with SA 230 [SA 230, Audit Documentation] - penalty and sanctions - HELD THAT:- The Auditor has made a series of departures from the Standards and the Law, in conduct of the audit of Reliance Home Finance Limited for FY 2018-19. Based on the discussion, it is proved that the Audit Firm issued an audit opinion on the Financial Statements without adequate supporting evidence. Based on the discussion and analysis, it is concluded that the EP, EQCR Partner and the Audit Firm have committed Professional Misconduct as defined in the Act, as below:
a) The Audit Firm Mis Dhiraj & Dheeraj and the EP CA Piyush Patni committed professional misconduct as defined by Section 132(4) of the Companies Act, 2013, read with Section 22 and Clause 5 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA 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 Audit Firm and EP failed to disclose in their report the material non-compliances the Company.
b) Mis Dhiraj & Dheeraj and CA Piyush Patni committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 6 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA 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 Auditor failed to disclose in their report the material misstatements made by the Company.
c) Mis Dhiraj & Dheeraj, CA Piyush Patni and the EQCR Partner CA Pawan Kumar Gupta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 7 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 3 8 of 1949) as amended from time to time, which states that a CA 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 Auditor, conducted the audit of a Public Interest Entity in total disregard of their statutory duties, evidenced by multiple critical omissions and violations of the standards. The instances of failure to conduct the audit in accordance with the SAs and applicable regulations, and failure to report the material misstatements in the financial statements and non-compliances made by the Company.
d) Mis Dhiraj & Dheeraj, CA Piyush Patni and CA Pawan Kumar Gupta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he "fails to 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 Auditor failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their total failure to report the material misstatements and non-compliances made by the Company in the financial statements.
e) Mis Dhiraj & Dheeraj and CA Piyush Patni committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 9 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA 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 Auditor failed to conduct the audit in accordance with the SAs but falsely reported in their audit report that the audit was conducted as per SAs.
f) Mis Dhiraj & Dheeraj, CA Piyush Patni and CA Pawan Kumar Gupta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the First Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he "fails to communicate with outgoing auditor". This charge is proved since the Auditor failed to accept the audit in accordance with the law.
Thus it is concluded that the charges of professional misconduct in the SCN are established based on the evidence in the Audit File, the audit reports on the standalone financial statements for the FY 2018-19 dated 13th August 2019 and the submissions made by the Auditor, and the Annual Report of Reliance Home Finance Limited for the FY 2018-19.
Penalty and sanctions - HELD THAT:- Section 132 (4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law.
Because professional misconduct has been proved and considering the nature of violations and principles of proportionality, in the 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 One crore on the Audit Firm Mis Dhiraj & Dheeraj.
b. Imposition of monetary penalties of Rs 50,00,000/- and Rs.10,00,000/- respectively on CA Piyush Patni (EP) and CA Pawan Kumar Gupta (EQCR).
c. In addition, EP and EQCR partners are debarred for five years and three 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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2024 (5) TMI 140
Professional Misconduct by CA - Liability of the Engagement Partner (EP) with Audit Firm - Failure related to non-recognition of liabilities classified as Non-Performing Assets (NPAs) by the Lender Banks - Failure to evaluate the management's assessment of the entity's ability to continue as a Going Concern - Failure relating to Revenue Recognition - Failures relating to Audit Documentation - Failures relating to audit evidence for Inventory - Failure relating to forming opinion on Financial Statements without obtaining Sufficient Appropriate Audit Evidence - Lapses in fulfilling duties related to Engagement Quality Control (EQC) Reviewer - Failure to determine Materiality - Failures related to audit of Trade Receivables - Failures relating to communication with Those Charged With Governance - Failure to report non-compliances with provisions of the Companies Act 2013 - Penalty and Sanctions - Section 132 (4) of the Companies Act, 2013.
HELD THAT:- The Auditors have made a series of serious departures from the Standards and the Law, in their conduct of the audit of CMIL for FY 2019-2020, 2020-21 and 2021-22. Based on the above discussion, it is proved that the auditors failed to report in their audit report, the misstatement in the financial statements of CMIL. The poor quality of audit as reflected in failures related to fundamental aspects of audit like setting materiality, evaluation of going concern, carrying out external confirmation together with the incomplete documentation, further compound the professional misconduct of the auditors.
It is concluded that the Auditors have committed Professional Misconduct as defined under Section 132 (4) of the Companies Act, 2013 in terms of Section 22 of the Chartered Accountant Act 1949 (CA Act) as amended from time to time as follows:
i. The auditors committed professional misconduct in terms of by Section 132 (4) of the Companies Act, read with Section 22 and clause 5 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), 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 auditors failed to disclose in their audit report the material non-compliances by the Company in the area of recognition of the liabilities towards banks/financial institutions beyond the NPA dates.
ii. The auditors committed professional misconduct as defined by Section 132 (4) of the Companies Act, read with Section 22 and clause 6 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he 'Jails 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 auditors failed to disclose in their audit report the material non-compliances by the Company in the area of recognition of the liabilities towards banks/financial institutions beyond the NP A dates.
iii. The auditors committed professional misconduct as defined by Section 132 (4) of the Companies Act, read with Section 22 and clause 7 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he "does not exercise due diligence and is grossly negligent in the conduct of his professional duties". This charge is proved as the auditors failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their failure to report the material misstatements and non-compliances of the Company in its financial statements.
iv. The auditors committed professional misconduct in terms of by Section 132 (4) of the Companies Act, read with Section 22 and clause 8 of Part I of the Second Schedule of the Chartered Accountants Act 1949 ( as amended from time to time), which states that an auditor is guilty of professional misconduct when he ''fails to 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 auditors failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their failure to report the material misstatements and non-compliances of the Company in the financial statements.
v. The auditors committed professional misconduct as defined by Section 132 (4) of the Companies Act, read with Section 22 and clause 9 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor 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 auditors failed to conduct the audit in accordance with the SAs but falsely reported in their audit report that the audit was conducted as per SAs.
The charges of professional misconduct enumerated in the SCN dated 04.12.2023 stand proved.
Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed, is evident from the fact that a minimum punishment is laid down by the law.
Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered:
i. Monetary penalty of Rs 50,00,000/- (Rupees Fifty Lakhs) upon the Audit firm, M/s Krishna Neeraj & Associates.
ii. Monetary penalty of Rs 10,00,000/- (Rupees Ten Lakhs) upon CA Krishna Kr Neeraj.
iii. CA Krishna Kr Neeraj is also debarred for 2 (Two) 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 (5) TMI 75
Professional Misconduct by CA - Liability of the Engagement Partner (EP) with Audit Firm - Failure to disclose a material fact known - Failure report a material misstatement known - Failure to exercise due diligence and being grossly negligent in the conduct of professional duties - Failure to obtain sufficient information which is necessary for expression of an opinion - Failure to invite attention to my material departure from the generally accepted procedures of audit applicable - sanctions and penalties - section 132 (4) of Companies Act 2013 - HELD THAT:- It is proved that the audit firm failed to implement the quality control policies as required by SAs, within the firm.
Following are the observations:-
I. The audit firm committed professional misconduct as defined by clause 5 of Part I of the Second Schedule of the CA Act, which states that a CA 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 audit firm failed to disclose in his report the material non-compliances by the company.
II. The audit firm committed professional misconduct as defined by clause 6 of Part I of the Second Schedule of the CA Act, which states that a CA 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 audit firm, who was appointed as the statutory auditor, failed to disclose in its report the material non-compliances by the company.
III. The audit firm committed professional misconduct as defined by clause 7 of Part I of the Second Schedule of the CA Act, which states that a CA 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 audit firm, who was appointed as the statutory auditor, failed to exercise due diligence in the audit of the company in accordance with the SAs and applicable regulations.
IV. The audit firm committed professional misconduct as defined by clause 8 of Part I of the Second Schedule of the CA Act, which states that an EP is guilty of professional misconduct when he "fails to 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 audit firm, who was appointed as the statutory auditor, failed to conduct the audit in accordance with the SAs and applicable regulations and failed to analyse and report the appropriateness of accounting policy for recognition of interest cost on loans classifies as NPAs.
V. The audit firm committed professional misconduct as defined by clause 9 of Part I of the Second Schedule of the CA Act, which states that an FP is guilty of professional misconduct when he “fails to invite attention to any material departure from the generally accepted procedure of audit applicable in the circumstances”.
This charge is proved since the audit firm, who was appointed es the statutory auditor, failed to conduct the audit in accordance with the SAs.
It is concluded that the charges of professional misconduct enumerated in the SCN dated 04.12.2023 stand proved based on the evidence in the Audit File, the Audit Report issued by the EP on behalf of the audit firm, the submissions made by the audit firm, the annual report of Vikas WSP Limited for the FY 2019-20 and other materials available on record.
Penalties and sanctions - HELD THAT:- Section 132(4) (c) of the Companies Act 2013 provides that the National Financial Reporting Authority shall, where professional or other misconduct is proved, have the power to make order for.
A) imposing penalty of (I) not less chart one lakh rupees, bat which may extend to Ave times of the fees received. in case of individuals, and (II) not less than five lakh rupees, but which may extend to ten times of the fees received, in case of firms.
(B) debarring the member or the firm from (I) being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. or (II) performing any valuation as provided under section 247, for a minimums period of six months or such higher period not exceeding ten years as may be determined by the National Financial Reporting Authority.
Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, and also keeping in mind that the audit firm has not accepted the charges as pointed out in thy SCN, in exercise of powers under Section 152(4)(c) of the Companies Act, 2013, it is hereby ordered imposition of a monetary penalty of Rs 5,00,000/- upon M/s S. Prakash Aggarwal & Co.
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2024 (4) TMI 1280
Challenge to proceedings before the LIX Additional City Civil and Sessions Judge, Special Court, under the Companies Act, 2013, Bengaluru City - offenses punishable under Sections 36 read with Section 448 and 447 of the Companies Act, 2013, and Section 68 read with Section 628 of the Companies Act, 1956 - compliance with Sections 202 and 204 of the Cr.PC before issuing the process or not - reopening of scheme of arrangement under Sections 391 to 394 of the Act, 1956, approved by this Court - offence under Section 68 of Act, 1956.
Whether the learned Judge of the Special Court established under Section 435 of the Companies Act, 2013, can take cognizance of an offence committed under the provisions of the Act, 1956? - HELD THAT:- Admittedly, the offences were allegedly committed under the Act, 1956. The investigation of the offences alleged against the petitioner commenced after the enactment of the Act, 2013. The offence punishable under Section 68 of the Act, 2013 was triable by a Magistrate of First Class. The SFIO conducted an investigation in exercise of the power under Section 212 of the Act, 2013 - The SFIO, after investigation, filed a complaint before the Special Court established under Section 435 of the Act, 2013, presided by a Single Judge holding office as Sessions Judge appointed by the Central Government in concurrence with the Chief Justice of the High Court.
The Special Court established under Section 435 is vested with the jurisdiction to try the offences under this Act, i.e., Act, 2013, and the jurisdiction is not extended to the offences under the Act, 1956. The Special Court established is made available only to try the offences under the Act, 2013, and therefore, the jurisdiction of the Special Court cannot be extended retrospectively to try the offences under the Act, 1956, and the jurisdiction of the Special Court is restricted to the Companies Act, 2013, by deliberately omitting the usage of the expression 'previous Company Law' in Section 435(1), as opposed to the proviso to Section 435(1), which states that all other offences shall be tried, as the case may be, by the Magistrate to try any offence under this Act or under any previous Company Law - The cognizance of the offence under Section 68 of the Act, 1956, can be taken only on a complaint in writing by the person/s as enumerated in Section 621 of the Act, 1956, and the jurisdiction to take cognizance was vested with the Magistrate, as stated under Section 622 of the Act, 1956.
In view of the specific provisions contained in the Act, 1956, and the Act, 2013, the contention of the SFIO that the change of the forum of trial is only procedural, and as such, the cognizance taken by the Special Court does not stand vitiated for want of authority is unacceptable.
Whether the learned Judge of the Special Court has complied with Sections 202 and 204 of the Cr.PC before issuing the process? - HELD THAT:- The essence of forming an opinion before issuing a process under Section 204 of the Criminal Procedure Code is to ensure that there is sufficient basis or prima facie evidence to proceed against the accused. It entails a careful consideration of the available facts and evidence to determine whether there are reasonable grounds to believe that the accused has committed the alleged offense. This process safeguards against the arbitrary issuance of processes and helps ensure that legal proceedings are initiated only when there is a reasonable likelihood of establishing guilt during the trial.
In this case, the learned judge of the special court failed to form an opinion before issuing the process to determine whether there is a prima facie case to proceed against the accused. Consequently, the order issuing the process violates Section 204 of the Cr.PC. Additionally, the learned judge's decision to take cognizance of the offences under the Act 2013 also indicates a lack of consideration of the complaint averments and materials presented before him. Thus, the order passed by the Learned Judge issuing the process is rendered invalid.
Whether the scheme of arrangement under Sections 391 to 394 of the Act, 1956, approved by this Court and alleged to have been obtained by fraud, can be reopened by filing a complaint before the Special Court? - HELD THAT:- While sanctioning the scheme of arrangement, this court accepted the valuation of the business assessed by an independent body. Additionally, the shareholders and unsecured creditors approved the scheme by requisite majority. Therefore, the merger process alleged to have been obtained fraudulently cannot be reopened by launching criminal prosecution - In the absence of any material to substantiate that the scheme of arrangement was obtained by suppression of material facts, except stating that the projection used for share swap ratio was skewed in favor of shareholders of erstwhile KFAL and only two methods which were in favor of erstwhile KFAL were used, the initiation of criminal prosecution against the petitioners accused will be an abuse of the process of the law.
The present case, admittedly is a complaint case, and the report submitted by the SFIO would be deemed to be a report filed by the Police under Section 173 Cr.P.C only for the purpose of framing of charge. Therefore, the learned Judge of the Special Court, contrary to the guidelines issued by the Apex Court, issued an arrest warrant without issuing summons at the first instance to secure the presence of the accused - it is evident that the cognizance taken by the learned judge of the special court, established under the Companies Act of 2013, lacks legal authority. Furthermore, since this court has already approved the scheme of arrangement, the matter of whether the merger process was tainted by fraud cannot be revisited through the initiation of criminal prosecution. Therefore, allowing the criminal proceedings to proceed would constitute an abuse of legal process.
Offence under Section 68 of Act, 1956 or not - HELD THAT:- The allegations do not constitute an offence under Section 68 of the 1956 Act against the petitioners, especially professionals acting within their commercial discretion.
Conclusion - i) The Special Court under the 2013 Act lacks jurisdiction to try offences under the 1956 Act; such offences must be tried by Magistrates of First Class. ii) The Special Court failed to comply with Section 204 Cr.PC before issuing process, rendering the order invalid. iii) The sanctioned scheme of arrangement cannot be reopened by criminal prosecution absent evidence of fraud; the appropriate remedy is a civil challenge to the sanction order. iv) The allegations do not constitute an offence under Section 68 of the 1956 Act against the petitioners, especially professionals acting within their commercial discretion.
The impugned proceedings on the file of 59th Additional City Civil and Sessions Judge and Special Court under the Companies Act, 2013 stands quashed - petition allowed.
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2024 (4) TMI 1245
Oppression and Mismanagement - Sections 241 and 242 of the Companies Act 2013 - HELD THAT:- The NCLAT noted that the decision of this Court in TATA Consultancy Services Limited Vs Cyrus Investments Private Limited & Ors [2021 (3) TMI 1181 - SUPREME COURT] was delivered after the order of the NCLT. Thereafter, the NCLAT extracted from the judgment in Tata Consultancy Services Limited. Having done so, it remanded the proceedings back to the NCLT. The NCLAT held that the NCLT will have to reexamine the original petition in light of the judgment of this Court in TATA Consultancy Services Limited [2021 (3) TMI 1181 - SUPREME COURT].
Simply remanding the matter to the NCLT without examining the facts and without analysing the extent of the application of the decision in TATA Consultancy Services Limited to the facts at hand would amount to an abdication of the appellate jurisdiction of the NCLAT.
Appeal is restored to the file of NCLAT for fresh examination.
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2024 (4) TMI 871
Violation of Section 233 of the Companies Act, 2013 - requirement of holding at least ninety percent of the total numbers of shares, for approval of scheme of amalgamation - non-application of mind - HELD THAT:- In the present case it is evident that the trial Judge has taken cognizance without any application of judicial mind. The order taking cognizance in this case has been only a formality - There is absolutely no application of mind. Cognizance has been taken casually without any prima facie findings.
There is also no reason for the petitioner to commit fraud by making a false statement as the petitioner has the option to take recourse to Sections 233(5), 233(6) and Section 232 of the Companies Act - The Companies are also at liberty to once again convene a meeting of the shareholders, secured creditors and unsecured creditors to comply with the provision of Section 233(1)(b) of the Act, as per the circular/letter no. 2/31/2013-CAA-CL-V-Pt-2 dated 24.08.2017 of the Ministry of Corporate Affairs, New Delhi.
It is clear from the petition of complaint that neither the Company nor the persons, who were in-charge of the day affairs of the company, have been made parties in the case. Without the Company and the persons responsible for the day to day affairs of the Company, the prosecution of the petitioner alone, who acted on behalf of the company is bad in law and thus clearly an abuse of the process of law.
The proceedings pending before the Learned, 2nd Special Court, Calcutta at West Bengal under Section 448 of the Companies Act, 2013 for alleged violation of Section 233 of the Companies Act, 2013, is bad in law and thus liable to be set aside - revision allowed.
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2024 (4) TMI 728
Professional Misconduct by CA - Failure 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 the statutory auditors are concerned with that financial statement in a professional capacity - Failure to report a material misstatement known to him to appear in a financial statement with which EP is concerned in a professional capacity - Failure to exercise due diligence and being grossly negligent in the conduct of professional duties - Failure to obtain sufficient information which is necessary for the expression of an opinion, or its exceptions are sufficiently material to negate the expressions of an opinion - Failure to invite attention to any material departure from the generally accepted procedures to audit applicable to the circumstances - sanctions and penalties.
HELD THAT:- EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 5 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA 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 PHD and EP failed to disclose in their report the material noncompliances the Company made.
EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 6 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA 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 EP and PHD failed to disclose in their report the material misstatements made by the Company.
EP, EQCR Partner and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 7 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA 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 EP, EQCR Partner and PHD conducted the Audit of a Public Interest Entity in total disregard of their statutory duties, evidenced by multiple critical omissions and violations of the standards. The instances of failure to conduct the audit in accordance with the SAs and applicable regulations, and failure to report the material misstatements in the financial statements and non-compliances made by the Company.
EP, EQCR Partner and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to 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 since EP, EQCR Partner and PHD failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their total failure to obtain sufficient appropriate audit evidence to support their opinion on the financial statements.
EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 9 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA 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 EP and PHD failed to conduct the audit in accordance with the SAs as explained in Paras C1 to C7 above but falsely reported in their audit report that the audit was conducted as per SAs.
Thus it is concluded that the charges of professional misconduct in the SCN, as detailed above, stand proved based on the evidence in the Audit File, the audit reports on the standalone financial statements and consolidated financial statements for the FY 2018-19, the submissions made by EP, EQCR Partner and PHD and the Annual Report of RCL for the FY 2018-19.
Sanctions and penalties - HELD THAT:- Section 132 (4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law.
Because professional misconduct has been proved and considering the nature of violations and principles of proportionality, in the exercise of powers under Section 132 (4) (c) of the Companies Act, 2013, it is ordered: a. Imposition of a monetary penalty of ₹3 crore (Rupees Three Crore) on the Audit Firm M/s Pathak H.D. & Associates. b. Imposition of monetary penalties of ₹1 crore (Rupees One Crore) and ₹50 Lakh (Rupees Fifty Lakh) respectively on EP CA Parimal Kumar Jha and EQCR Partner CA Vishal D Shah. c. In addition, EP and EQCR partners are debarred for 10 years and 5 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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2024 (4) TMI 635
Seeking directions against the respondent no. 1/National Housing Bank (NHB) to consider and decide upon the petitioner’s representation dated 18th August, 2023 - seeking direction to call upon respondent no. 2, i.e., India Bulls Housing Finance Limited (IBHFL) to produce the responses and relevant documents, disclosing the actions taken by them in respect of the query dated 6th April, 2023 addressed by the petitioner.
HELD THAT:- The petitioner has been in litigation with IBREL and seeks to collect information and documents through the process of the present petition, so as to use the same to file intervention application before NCLAT, New Delhi in the appeal filed by IBREL against the order dated 9th May, 2023 passed by NCLT, Chandigarh, or to file a separate appeal himself against the order dated 9th May, 2023 passed by NCLT, Chandigarh.
Writ jurisdiction of this Court cannot be used by a party for collecting evidence and documents against another party, against whom the petitioner has pending disputes. Writ jurisdiction is meant to safeguard the constitutional, legal and vested rights of a party. The powers vested with this Court under writ jurisdiction are large that are used by this Court to ensure that the constitutional and legal rights of parties are protected and secured - The Court process, much less a writ jurisdiction, cannot be used as a fishing and roving enquiry against a party with whom the petitioner has pending disputes, for the purposes of collecting evidence and documents to be used against such a party. The present petition filed by the petitioner is clearly a misuse and abuse of the process of the Court.
The petitioner is trying to collect evidence and documents against IBREL, as is manifest from the representation dated 18th August, 2023 submitted by the petitioner to NHB. Neither any constitutional nor any legal right of the petitioner is being violated or breached, for protection of which the present petition has been filed. This Court will not become a party in a fact finding and evidence collecting process in order to aid the petitioner, which is the manifest purpose of filing the present petition. The present petition is clearly a misuse and abuse of the process of law.
Thus, no merit is found in the present petition - petition dismissed.
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2024 (4) TMI 480
Oppression and Mismanagement - Validity of the Lease Deed - Doctrine of Res Sub-Judice - Appellants argued that the Tribunal overstepped its jurisdiction by setting aside the lease deed while its validity was under scrutiny in a civil court - HELD THAT:- The bedrock of this case is the lease deed dated 26.08.2019, executed pursuant to the resolution dated 23.08.2019 which is not only contrary to the provisions of Section 188(1) of the Act r/w Rule 15 of the companies (Meeting of board and its powers) Rules 2014 but also clause 36(ii) of the AoA as on 23.08.2019, which provides that the board of directors shall not, without consent of 100% members of the company, in duly convened general meeting can lease and dispose of the property of the company by way of lease etc. and that the consent of 100% members of the company in a duly convened general meeting is conspicuous by its absence. There are no traces of the alleged oral settlement which has been made the basis of the lease, the terms of which are more against the company (R1) than its favour, therefore, these are unconscionable terms and conditions which would attract the provisions of Section 241 and 242 of the Act.
Moreover, the Appellant did not deliberately implead Rohit Agarwal and Shobhit Agarwal as parties to the present appeal though they were respondents in the main petition only in order to conceal the fact that Shobhit Agarwal who is the son of Appellant No. 1 (Ajay Kumar Agrawal), is a partner of Appellant No. 3 (TX Homes LLP) whereas as per Section 188 r/w 2(76) of the Act and Rule 4 of Companies (Specification of Definition Details) Rules, 2014, the lease deed would not have been executed in favour of the related party. The power under Section 241 and 242 of the Act would include the power to set aside the lease deed which has been executed on behalf of R1 in violation of mandatory provisions of the Act, AoA and terms and conditions of the impugned lease deed are against the very interest of R1 and is oppressive, therefore, the lease deed has rightly been set aside by the Tribunal.
Thus, it is a fit case in which the Tribunal has interfered and set aside the registered lease deed and as such, the impugned order does not call for any interference by this Court, the same is hereby upheld - appeal dismissed.
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2024 (4) TMI 479
Rightful owners of 4000 shares or not - Exercise of jurisdiction under Section 8 of the Arbitration and Conciliation Act - HELD THAT:- Language of Section 8 of the Arbitration and Conciliation Act has inherent restrictions. The Section puts a bar on the courts not to go outside the contours of Section 8 and the Court can only exercise jurisdiction to see if there is a valid clause and whether the dispute is arbitrable. Thus to give a finding at this stage to the effect R1 and R2 are owners of 4000 shares, which in fact is the main relief claimed in the Company Petition, the Ld. NCLT certainly had travelled beyond its jurisdiction. There was no occasion for Ld. NCLT to delve into the issue of ownership of 4000 shares in an application under Section 8 (Supra) and the said question would arise only when the maintainability of the main case would be decided.
Thus though the appellant forego their claim to challenge dismissal of its application under Section 8 of the Arbitration and Conciliation Act but the observations in the impugned order so far as it relate to the declaring of the ownership of 4000 shares was never warranted at this stage and is set aside.
This issue needs to be decided by the Ld. Tribunal at an appropriate stage and this order be not construed as an expression/opinion on merits upon the ownership of shares which fact shall be now decided by the Ld. NCLT on facts and law.
Appeal disposed off.
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2024 (4) TMI 442
Demand of unearned increase value - Amalgamation or merger of the two companies does not involve any transfer within the meaning of the Transfer of Property Act, 1882 or not - Interpretation of Lease Agreement Clause - HELD THAT:- There is a specific clause in the order of amalgamation which holds that the said plots stand transferred from the original permanent lessee to the transferee M/s. Jaypee Rewa Cement Ltd, which is now known as M/s. Jaiprakash Associates Ltd. Clause II(4)(a) covers all the categories of transfers as it provides that the lessee shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the commercial plots without the written consent of the lessor. The said clause does not exclude involuntary transfers. In the facts of the case, it cannot be said that there is an involuntary transfer, as the transfer is made based on a petition filed by the lessee and the transferee for seeking amalgamation. In a sense, this is an act done by them of their own volition.
A similar issue arose for consideration before this Court in the case of DELHI DEVELOPMENT AUTHORITY VERSUS NALWA SONS INVESTMENT LTD. AND ANR. [2019 (4) TMI 2009 - SUPREME COURT]. The Court was dealing with a case where the Company Court passed an order of arrangement and demerger. As a result, the plot given on lease to a company was transferred to another company. In paragraph 5 of the decision, this Court had set out the policy instructions regarding charging an unearned increase.
This Court was dealing with an order of the Company Judge, which provided that the property of a company shall stand transferred to the respondent before this Court, and therefore, it was a case of transfer to which clause 6(a) of the lease deed will be attracted. Clause 6(a) in the lease subject matter of the said case was identical to clause II(4)(a) of the perpetual lease in the present case. This Court also held that clause 2(d) of the policy determining unearned income was attracted in the case of transfer due to demerger. The same principles will apply to a merger, and an unearned increase will be payable.
In the case of Indian Shaving Products Limited [2001 (10) TMI 1042 - HIGH COURT OF DELHI], the High Court of Delhi dealt with the amalgamation of companies under the SICA and not under the Companies Act. In any event, this court confirmed the said decision by summarily dismissing the petition. In the present case, the relevant clause II(4)(a) of the leases covers involuntary transfers as well.
The relevant clause II(4)(a) in the perpetual leases subject matter of this appeal is very wide. It not only covers transfers but also parting with possession. Therefore, the transfer contemplated by the said clause is much wider than what is defined under Section 5. Importantly, Section 5 clarifies that nothing contained therein shall affect any law for the time being in force in relation to the transfer of property to or by companies. Therefore, Section 5 of the TPA will not be of any assistance to the appellant.
There is nothing illegal about the impugned judgment - appeal dismissed.
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2024 (4) TMI 308
Liability of stamp duty on increase in share capital - How stamp duty is to be applied to Articles of Association in cases of increased share capital? - HELD THAT:- Filing of Form No. 5 is only a method prescribed, whereby “notice” of increase in share capital or of members of a company has to be sent to the Registrar, within 30 days of passing of such resolution. The Registrar then has to record such increase in share capital or members, and carry out the necessary alterations in the articles. Stamp Duty is affixed on Form No. 5 as a matter of practical convenience because a company itself cannot carry out the alterations and record the increase in share capital in its Articles of Association. It is only the articles which are an instrument within the meaning of Section 2(l) of the Stamp Act and accordingly have been mentioned in Article 10 of Schedule-I of the Stamp Act.
It is a settled position of law that in case of conflict between two laws, the general law must give way to the special law. A conjoined reading of the Stamp Act and the Companies Act would show that while the former governs the payment of stamp duty for all manner of instruments, the latter deals with all aspects relating to companies and other similar associations - In the case at hand, we are concerned with an instrument which is chargeable to Stamp Duty and finds its origin in the Companies Act. The various provisions of the Companies Act provide the purpose and scope of the instrument. Thus, it has to be said that the Companies Act is the special law and the Stamp Act is the general law with regards to Articles of Association, and the special will override the general.
Whether the maximum cap on stamp duty is applicable every time there is an increase in the share capital or it is a one-time measure? - HELD THAT:- It is an admitted fact that when the respondent increased its share capital from Rs. 36 crores to Rs. 600 crores it paid a stamp duty of Rs. 1,12,80,000/- and at that time there was no provision for a maximum cap or upper ceiling on the amount payable - The fact that the maximum cap of Rs. 25 lakhs would be applicable as a one-time measure and not on each subsequent increase in the share capital of a company is fortified directly by the Maharashtra Stamp (Amendment) Act, 2015 which amended the charging section for Articles of Association i.e., Article 10 of the Stamp Act.
It is true that the amendment does not have retrospective effect, however since the instrument ‘Articles of Association’ remains the same and the increase was initiated by the respondent after the cap was introduced, the duty already paid on the same very instrument will have to be considered. It is not a fresh instrument which has been brought to be stamped, but only the increase in share capital in the original document, which has been specifically made chargeable by the Legislation.
The appellants are directed to refund Rs. 25 lakhs paid by the respondent along with interest @ 6% per annum. Let the needful be done within 6 weeks from today - order of the High Court of Bombay upheld - civil appeal dismissed.
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2024 (4) TMI 307
Division of shares among the deceased's children - Interpretation of will - To be treated as part of her "movable properties" or not - equal division of the 100 shares of the appellant company-Vantage Construction (P) Limited, between the three children of the testator - cancellation of allotment of 9800 shares - HELD THAT:- What is apparent is that the issue with regard to the shareholding of the deceased was very much alive and in the knowledge of the parties. The whole tone and tenor of the correspondence between the parties referred hereinabove would show that HPSC was always ready and willing to transfer 1/3rd shareholding in the two companies, provided both NPSC and NCD were to agree to compensate him for so called cumulative losses, which incidentally were never spelled out. Therefore, there is merit in the submission by the learned counsel for the respondents that after the death of HPSC on 03.04.2014, the legal heirs/successors of deceased HSPC are attempting to set up a new case, which was never espoused by the deceased - late HPSC. HPSC never challenged the entitlement of the respondents as regards 1/3rd shareholding in the company with regard to the shares left behind by the deceased – Smt. Ram Piari Chawla - the finding given by the CLB that the shareholding to the extent of 100 shares in Vantage Construction Private Limited and 5 shares in Earl Chawla & Company Private Limited were in the nature of movable properties encompassed in the Will dated 04.07.1986, appears to be without any blemish and the same cannot be faulted on any ground whatsoever. It is a finding based purely on the prevailing facts and on a fair and reasonable interpretation of the Will.
Decision of the CLB to cancel the allotment of 9800 shares in the appellant No. 1 company in favour of appellant No. 2/HPSC represented through legal heirs - HELD THAT:- It is pertinent to mention that the aspect of allotment of 9800 shares in the name of HSPC from 10.10.2002 was not indicated in the letter dated 22.11.2008 and it only came to be revealed in the subsequent letter dated 01.12.2008. There was a clear attempt on the part of late HPSC in dragging his feet on the matter by calling upon the respondents to submit certain documents vide letter dated 15.12.2009, despite being the real brother of the respondents and having common knowledge of the entire factual background.
It is also borne out from the record that the register of shareholding was fabricated so as to show 100 shares of his deceased mother in the name of his own daughter and as his mother had died on 27.10.1990. There is brought not an iota of evidence that any other person was brought in as the second director for mandatory compliance with the provisions of the Act and in the said circumstances the decision by the CLB thereby raising an inference that HPSC allotted 9800 shares to himself without holding any valid meeting as required by law and thereby making such increase behind the back of NPSC and NCD, required to be invalidated.
This Court finds that the impugned judgment dated 24.06.2013 passed by the CLB does not suffer from any patent illegality, perversity or incorrect approach in law. Accordingly, the present appeal is dismissed.
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2024 (4) TMI 306
Recovery of outstanding dues - priority of charges - whether Andhra Bank, which had the first charge over the property in question and is evidently a secured creditor, could have effected a sale of the property in question by way of a private treaty? - Legitimacy and consequences of a Sale Deed executed by the company in liquidation. - HELD THAT:- This Court has gone through the relevant provisions of the SARFAESI Act, 2002 as also the Companies Act of 1956. There is no gain saying that the company (in liquidation) was a borrower in terms of Section 2(f) of the SARFAESI Act and the debt was taken and in existence against the property in question, which was recoverable by the Bank. Further, the property in question was a financial asset of the Bank in terms of Section 2(l) and there also arose a default in so far that there was apparently non-payment of the debt taken by the borrower in terms of Section 2(j) of the SARFAESI Act.
Where a secured asset is an immovable property, sale by any method other than public auction or public tender may be effected on such terms as may be settled between the secured creditor and the proposed purchaser in writing. Although, in terms of sub-Section (2) to Section 13 of the SARFAESI Act, there was no specific declaration as to the account of the company in liquidation having become a Non-Performing Asset, such recourse was definitely on the cards.
This court finds substance in the plea advanced by the learned counsel for Andhra Bank, that by virtue of the order dated 03.12.2012 passed by the CLB, whereby liberty was granted to the Bank to take action against the mortgaged property as per law, the sale of the property in question by way of a private treaty with the borrower and the purchaser was squarely included and envisaged.
Whether the sale of the property in question on 30.01.2013 should be validated by this Court? - HELD THAT:- Unhesitatingly from the trail of correspondence viz., the letters/emails dated 20.12.2012, 22.12.2012, 27.12.2012, 28.12.20212 that preceded between the principal borrower i.e. the company (in liquidation) through Ms. Manju Kanwar and Andhra Bank before the sale was effected, does go to show that all efforts were being made to set the company (in liquidation) on course to recovery and revive it, and further to ensure that its account with the Bank does not become an NPA. If the said letters dated 20.12.2012, 22.12.2012, 27.12.2012 and 28.12.20212, emanating from the company (in liquidation) are to be believed, the company was going through a poor commercial phase due to a world-wide recession which greatly impacted Europe and United Kingdom in particular.
This Court finds that the reliefs claimed in Company Application No. 340/2016 moved on behalf of the Official Liquidator are not sustainable. There are no justifiable reasons to invalidate the sale deed, for the simple reason that the sale had been effected by Andhra Bank under its aegis through the principal borrower/debtor, under its overall supervision and control and the entire sale consideration was duly received and accounted for. There is not an iota of material placed on the record to suggest that any part of the sale consideration was siphoned off or misappropriated by anyone connected with the company (in liquidation).
Application dismissed.
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2024 (4) TMI 242
Seeking conversion from an unlimited liability company to a limited liability company - Section 18 of the Companies Act, 2013 - whether the Appellant’s application filed on 21st October, 2014 before the ROC will be governed by the conditions in the statutory provision of Section 18 of the Act as it existed on the said date or the additional criteria provided in Rule 37, which was inserted subsequently by the Legislature w.e.f. 27th July, 2016, would also be applicable to the said application? - HELD THAT:- The submissions of the Appellant cannot be accepted and it is opined that the Appellant did not acquire any vested right of conversion upon filing the application under Section 18 of the Act on 21st October, 2014 with the ROC. It is well settled by Supreme Court that the relevant law for grant of approval of an application would be the date on which the approval is granted.
Reference made to the judgment of Supreme Court in USMAN GANI J. KHATRI OF BOMBAY AND ORS VERSUS CANTONMENT BOARD AND ORS [1992 (5) TMI 205 - SUPREME COURT] where it has been held that At present the statutory bye-laws published on April 30, 1988 are in force and the fresh building plans to be submitted by the petitioners, if any, shall now be governed by these bye-laws and not by any other bye-laws or schemes which are no longer in force now.
Further the Supreme Court in RAMESH PRASAD VERMA VERSUS THE STATE OF BIHAR AND ORS [2009 (8) TMI 1291 - PATNA HIGH COURT] has held that a legislation, if clarificatory, declaratory or explanatory in nature and purport will have retrospective operation especially in the absence of any indication to the contrary.
The contention of the Appellant that the ROC by insisting on NOCs from the creditors, lenders and stakeholders has sought to render Section 18(3) otiose is without any merit. The requirement of NOC has been statutorily incorporated in Rule 37 and the said Rule also contemplates issuance of notice by the applicant-company to each of its creditors inviting objections, if any, to the proposed conversion. The Appellant has not challenged the vires of the Rule 37 and, in fact, consciously abandoned the challenge initially made to the said Rule. Thus, with the said Rule existing on the statute book, the objection of the ROC with respect to the non-circulation of this application of conversion to the creditors, lenders and stakeholders of the applicant-company is not arbitrary and is in conformity with Rule 37.
The contention of the Appellant that ROC in the impugned decision erred in referring to Section 366 of the Act read with Rules 3 and 4 of the Companies (Authorised to Register) Rules, 2014 as it is not attracted to an application filed under Section 18 of the Act, does not persuade to set aside the impugned decision. The ROC has recorded in the impugned order that it adverted to the principles laid down in Section 366 and the Rules, 2014 as the applicant herein was objecting to the newly inserted Rule 37 and as per ROC, the Rules of 2014 also embodied the same spirit of the statute.
There are no merit in the present appeal and the same is dismissed.
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2024 (4) TMI 177
Maintainability of Criminal proceedings - Violation of principles of natural justice - facts as mentioned in the chargesheet as well as other material placed on record were not taken into consideration - illegal allotment of shares - illegal appointment of petitioner as a director and transfer of shares by misusing the digital signatures of the petitioner - HELD THAT:- Without going into the details of the present case, this Court is of the considered opinion that the learned Trial Court while passing the impugned order did not take into consideration the facts as mentioned in the chargesheet as well as other material placed on record by the Investigating Officer. So far as the reliance placed by respondent no. 2 to 4 on the judgment of Hon’ble Supreme Court in Satish Mehra [1996 (7) TMI 555 - SUPREME COURT] is concerned, it is relevant to note that the said judgment has been overruled by the Hon’ble Supreme Court in STATE OF ORISSA VERSUS DEBENDRA NATH PADHI [2004 (11) TMI 564 - SUPREME COURT], wherein it has been recorded in our view, clearly the law is that at the time of framing charge or taking cognizance the accused has no right to produce any material. Satish Mehra case holding that the trial court has powers to consider even materials which the accused may produce at the stage of Section 227 of the Code has not been correctly decided.
So far as the ground that the petitioner did not specifically deny the execution of the MoU in the proceedings before the learned NCLT is concerned, it is pertinent to note that the rejoinder filed on behalf of the petitioner before the Company Law Board was placed on record wherein in paragraph 2 thereof, it was categorically stated that the MoU is a forged and fabricated document and does not bear the true signatures of the petitioner. It is also pertinent to note that the material placed by the Investigating Officer along with the chargesheet filed before the learned Trial Court was not placed on record before the learned NCLT.
The impugned order dated 17.08.2019 passed by the Learned Trial Court is set aside. The matter is remanded back to the learned Trial Court for fresh consideration on the point of charge. The learned Trial Court shall give opportunity to the parties and thereafter pass appropriate orders in accordance with law - Petition allowed.
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2024 (4) TMI 121
Oppression and Mismanagement - Deletion of names of Respondent No. 4 to 8 and 13 from the array of the Respondents - Section 241, 242 and 243 of Companies Act - HELD THAT:- The very fact that the stay granted against the Respondent No. 4 to 8 and 13 continued for two years and was vacated on 18.12.2019 may be with an observation that Respondent No. 4 to 8 were nowhere related with such transaction, the recourse of which lie in the civil court and also the fact that the said order was not challenged rather the civil suit was filed by the Appellants and thereafter in order to avoid legal complication of maintaining the main petition on the same cause of action against Respondent No. 4 to 8 and 13 against whom the civil suit has also been filed on the same cause of action, application for deletion of their name and the prayer made in the main petition would be enough to show that Respondent No. 4 to 8 and 13 were unnecessary dragged in the litigation initiated against them in the main petition in which Respondent No. 4 to 8 and 13 had to file their reply, contested the application and the said proceedings continued for two years till the stay was vacated and the application bearing 219 of 2020 was filed in the year 2020 is sufficient to hold that Respondent No. 4 to 8 and 13 had rightly been awarded the amount of Rs. 5,00,000/- by the Tribunal on account of being unnecessarily dragged in the main petition in which stay was also operating against them in respect of the plot in question which is stated to have been purchased by them lawfully as alleged.
There is no error in the approach of the Tribunal in so far as direction granted in the impugned order, which does not call for any interference by this Court - Appeal dismissed.
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2024 (4) TMI 120
Recovery of premium dues, interest, default interest, penal interest, interest overdue etc. - priority of charges - waterfall mechanism - whether as per the Concession Agreement and the Escrow Agreement, payment of premium has priority over the payment of debts of the Bank? - HELD THAT:- The Concessionaire has agreed that it shall pay to the Authority for each year of the Concession Period, a premium in the form of an additional concession fee. The Clauses 25.4 and 26.2 contain an agreement of Concessionaire to pay the Authority a premium in the form of an additional concession fee. The definition, thus, clearly indicate that premium is treated to be additional concession fee - on looking into Clause 31.3.1 and Clause 4.1.1, it is clear that both the provisions provide same priority and Clauses (e) [Concession Fee due and payable to the Authority], (f) [monthly proportionate provision of Debt Service due in an Accounting Year] and (g) [Premium due and payable to the Authority] are the same. The bone of contention between the parties are that since Clause (e) uses word ‘Concession Fee due and payable to the Authority’, it is higher in priority from Clause (f), which deals with ‘monthly proportionate provision of Debt Service due in an Accounting year’ and concession fee includes the premium, hence, the premium has to be paid priority to the payment under Clause (f).
Parties having categorized ‘premium’ in different Clause, which is below the monthly proportionate provisions of Debt Service due in an Accounting year, it cannot be said that the same was done without any meaning and ‘premium’ payment is in lower priority to monthly proportionate provision of Debt Service due in an Accounting Year. There are substance in the submission of learned Counsel for the Applicant that with regard to withdrawal from Escrow Account, the priority as given in Clause 4.1.1 of Escrow Agreement has to be followed.
It is noticed that in the present case, the ‘resolution’ of Respondent No.2 as per the Resolution Framework approved by this Tribunal on 12.03.2020 is in final stages. The order dated 15.09.2021 passed by the NCLT has been brought on the record, which notices the approval by Justice D.K. Jain also. When an entity is to be resolved as per Resolution Framework, payments to all creditors/ claimants including the Lenders have to be as per the Resolution of the Entity - It is also relevant to notice that when Resolution of Respondent No.2 is at the final stages, there is no occasion for Respondent No.1 to proceed to terminate the Concession Agreement to further complicate the Resolution of an Entity.
Application allowed.
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2024 (3) TMI 1337
Seeking to restrain the Respondent Nos. 1 to 5 from convening and conducting of the proposed Extraordinary General Meeting - direction to the Respondent No. 1 to urgently disclose by way of an affidavit by its Chief Executive Officer - HELD THAT:- The R-1 Company, in response vide letter dated 15.02.2024 (which is placed on record at page no. 1330 of the main CP) informed that the Respondent company had no objection in providing the information and the same will be provided to the Petitioners/Shareholders in the next five business days. However, the same was not furnished.
It is not required to stay the conducting of the EGM proposed to be held on 29.03.2024. However, all the contentions raised in the main CP are kept open for being argued and consideration before this Tribunal when the main CP is taken for hearing on 04.04.2024.
Application disposed off.
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2024 (3) TMI 1318
Cognizance of an offence punishable under Section 447 of the Companies Act, 2013 on a private complaint by a shareholder or a member of a Company by the Special Court constituted under Section 435 of the Companies Act, 2013 - HELD THAT:- The Division Bench of this Court upon reference by the learned Single Judge and the Division Bench has held that upon reading Section 212(6) along with 439(1), the Special Court constituted under Section 435 of the Act cannot take cognizance of an offence punishable under Section 447 of the Act upon a private complaint by a shareholder or a member of a Company, but can take cognizance only upon complaint by the Special Fraud Investigation Officer in terms of Second Proviso of Section 212(6) of the Act. Therefore, the cognizance taken on a private complaint filed by the shareholder is one without jurisdiction, and the continuation of the proceedings will be an abuse of the process of law.
The entire proceedings on the file of the Special Court (Economic Offences) at Bengaluru, insofar as it relates to petitioners/accused No.2 and 3, is hereby quashed - Petition is allowed.
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