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Companies Law - Case Laws
Showing 281 to 300 of 15082 Records
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2024 (2) TMI 1261
Effect of resignation from Directorship - Removal of name of the Petitioner as a Director of Respondent No. 4-company - HELD THAT:- Although certain compliances on the part of the company were necessary, however, in the peculiar facts of the present case, it is clear that the company itself did not commence its business, as also the other director being a foreign director did not take any steps in that regard. Added to this was the Covid-19 pandemic period during which such compliances could not be made. All these circumstances ought not to weigh against the petitioner, for deletion of his name as a director from the record of the Registrar of Companies. This also for the reason that severance of the petitioner’s relationship as a director of the company took effect from 1 September 2021 as per the petitioner’s letter dated 24 August 2021 received by the company. This is the legal consequence as brought about by Section 168(2) of the Companies Act, 2013.
Except for certain forms not being filled by the company within the prescribed time, there does not appear to be any other gross default or illegality or any other justifiable reason for the Registrar of the Companies to give effect to the resignation of the petitioner, in the official records, as maintained by him. This is fortified from the contents of the reply affidavit of the official respondents which categorically state that even the explanations / comments and / or compliances as demanded by the Registrar of Companies from respondent No. 4/company were reported to be not answered by the company. This was a default on the part of a non-functional company. Thus, this is clearly a case where the company itself was stillborn.
Petition allowed.
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2024 (2) TMI 1188
Violation of principles of natural justice - Interim Demand Notice demanding stamp duty issued without adequately scrutinizing the case, and without going into the details along with all the supporting documents in the matter - HELD THAT:- The Petitioner had filed an Appeal challenging the Order dated 14th September 2021 on 2nd November 2021. A hearing was held in the said Appeal on 7th June 2023 and Petitioner filed its written submissions on 7th August 2023. Despite the same, and despite a period of more than 2 years having elapsed, Respondent No. 2 has not passed any order on the said Appeal. It is informed that the Presiding Officer of Respondent No. 2, who heard the said Appeal on 7th June 2023, has changed. In these circumstances, it would be in the interests of justice that Respondent No. 2 is directed to re-hear the Appeal and pass an order in the said Appeal filed by the Petitioner, in accordance with law, within a period of four months from the date of intimation of this Order.
Further, since, the said Demand Notice dated 16th March 2022 and the letter dated 23rd January 2024 had been issued by Respondent No. 3, pursuant to the said Order dated 14th September 2021, which is the subject matter of the aforesaid Appeal, it would also be in the interests of justice that, till the said Appeal is re-heard and an order is passed on the said Appeal, the said Demand Notice dated 16th March 2022 and the said letter dated 23rd January 2024 remains stayed.
Respondent No. 2 is directed to re-hear Appeal No. 227 of 2021 filed by the Petitioner and pass an Order, in accordance with law, expeditiously and, in any case, within a period of four months from the date of intimation of this Order - Till the said Order is passed by Respondent No. 2 on the said Appeal, the Demand Notice dated 16th March 2022 and the letter dated 23rd January 2024 issued by Respondent No. 3 shall remain stayed and the Petitioner shall be permitted to operate its ICICI Bank Account.
Writ petition disposed off.
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2024 (2) TMI 1095
Prayer for being excused of any criminal liability and relieved of the alleged defaults complained of by the respondent in the notice dated 6.10.2020 - prayer for an injunction restraining the respondent / Registrar of Companies (ROC), West Bengal from initiating criminal proceedings in respect of any of the matters referred to in the notice dated 6.10.2020 - section 463(2) of the Companies Act, 2013 - HELD THAT:- In the present case, the respondent did not pass any reasoned order pursuant to the reply given by the Company on 17.11.2020. This letter was a detailed reply to the impugned Notice dated 6.10.2020. Criminal proceedings were instituted in June, 2023 after almost 3 years from the date of issuance of the preliminary findings letter. In the present case, the respondent issued the Notice dated 9.11.2023 which is a supplementary Inspection Notice from the Office of the Regional Director after filing of the present writ petition. Thus, the petitioner’s apprehension was correct and ultimately came true by issuance of the Notice dated 9.11.2023.
The Departmental Circular dated 20th June, 2016 relied on by the respondent is an internal document. The contents of the circular are mostly illegible. In any event, the consent/sanction referred to in section 470(3) of The Code of Criminal Procedure would only be applicable where the prosecution has exceeded the limitation period due to the requirement for sanction from the concerned authority.
The reasons persuade the Court to allow the prayers in the writ petition and excuse the petitioners and each one of them of any criminal liability in respect of the alleged defaults complained of by the respondent in the impugned notice dated 6th October, 2020. The respondent is accordingly restrained from instituting or proceeding with any criminal proceedings in respect of the matter referred to in the notice dated 6th October, 2020 or take any further steps in respect thereto.
Petition allowed.
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2024 (2) TMI 977
Constitutional Validity of Rule 37(8) of the Companies (Incorporation) Third Amendment Rules, 2016 - rejection of conversion of the Petitioner's company from an “Unlimited Liability Company” to a “Limited Liability Company” - HELD THAT:- This Court is of the opinion that the lacuna in the Companies (Incorporation) Rules, 2014 is being sought to be cured by the 2016 Amendment. Since the purpose of the amendment is to cure the defects which existed in the law by giving discretion to the RoC to satisfy himself that there are sufficient means in the company to answer their debts even after conversion, it cannot be said that it would operate only to applications filed after the 2016 amendment. Merely filing an undertaking as mandated under Section 18(3) would not take care of the interests of the creditors which is now sought to be protected under the 2016 amendment.
The Division Bench of this Court in its [2020 (3) TMI 527 - DELHI HIGH COURT] had only directed the RoC to decide the application of the Petitioner afresh in accordance with law. As of today there is no challenge to the 2016 Regulations. This Court is of the opinion that since the 2016 Amendment was only curative in nature and only intended to protect the interests of the creditors, the amended rules, therefore, must apply to applications which are pending with the RoC, and the same must apply to the application of the petitioner/company. The right of the Petitioner for conversion from unlimited company to limited company has not been taken away. In fact, the petitioner/company had no vested right to be granted a certification of conversion to a limited liability company.
The reasons given by the RoC for rejecting the application of the Petitioner on the ground that various prosecutions have been filed by the Serious Fraud Investigation Organization against the Petitioner for offences under the Companies Act and the IPC and that the e-Form 27 which was to be filed with the Registrar of Companies was not in compliance with Rule 37 of the 2016 Rules cannot be said to be so perverse especially keeping in mind the interest of the shareholders and the interest of the creditors. The RoC has also observed that the petitioner/company has suffered substantial financial losses and has a net deficit in current liabilities over the assets in excess of Rs. 2100 Crores. The registrar was also not provided with an NOC or undertaking from all the shareholders to support the conversion application and the petitioner did not even issue a public advertisement inviting objections from various creditors/stakeholders on the issue of conversion.
The anxiety on the part of the Registrar of Companies that the creditors and stakeholder should not be left high and dry cannot be said to be completely unjustified.
Petition dismissed.
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2024 (2) TMI 976
Legality of SFIO Investigation - Alleged incorrect address mentioned in Form No.10 filed by the petitioner/Company with Registrar - Invocation of Section 12 of Companies Act, 2013 for the alleged non-maintenance of the registered office at the address mentioned in Form No.10 filed before the Registrar - HELD THAT:- Once investigation has commenced under Section 210, the statute does not render the Government of India powerless, to assign the investigation under Section 212 to the SFIO. It neither results in duplication of investigation, nor takes away any right of the petitioner. Sub-section (2) clearly mandates that once the SFIO is entrusted with investigation under Section 212, any other investigation already initiated shall not be proceeded further and further, those agencies who are/were conducting any investigation, shall transfer all the relevant documents and records in respect of those offences to the SFIO. The powers of SFIO is statutorily determined from sub-section (3) to sub-section (17) of Section 212 and for conduct of investigation there is procedure in place which need not require elaboration at this juncture.
The submission of the learned senior counsel for the petitioner is that when the proceedings under Section 210 are underway, assignment of investigation to the SFIO cannot take place. The strength on which the said submission is made is that there should a report under Section 210, as is directed, and only then the investigation can be handed over to the SFIO. The effect of such submission is that handing over of investigation to the SFIO, should precede a final report under Section 210. This submission is sans countenance as it travels on a slippery slope. Section 210 does speak of a report, the report can be either interim or final it need not be the final report only - It is entrusted to the SFIO which is created under the Act, i.e., in terms of Section 211 with elaborate functions under Section 212. The protection to any Company from duplication of proceedings is kept tight under sub-section (2) of Section 212 and above all, and after all, it is investigation.
A bleak attempt is made by the learned senior counsel to submit that the phrase ‘interim report’ is found only in sub-section 11 of Section 212, and nowhere in Section 210 suffers from want tenability, as observed hereinabove, the report under Section 210, can either be interim or final. The said report will not result in any penalty being imposed straight away against any Company. It is for the purpose of investigation. Investigation is for the purpose of unearthing the alleged unethical activities of any Company, in the case at hand, the petitioner/Company. The Apex Court, in plethora of cases, has observed that with the advancement of technology, economic offences have become a real threat to the functioning of the financial system of the country. Those offences become a great challenge for Investigating Agencies to detect and comprehend intricate nature of transactions, as also the role of persons involved therein.
No reasons provided to invoke Section 212 of the Act - non-application of mind - HELD THAT:- The statement of objections are, in defence of interim report necessitating assignment of investigation. If the Union of India has thought it fit to entrust the investigation to the SFIO, owing to certain factors which have emerged while conduct of investigation under Section 210 and in public interest, this Court in exercise of its jurisdiction under Article 226 of the Constitution of India would not by a stroke of pen, annul such opinion of the Union of India, unless it is contrary to the statute or the action is demonstrably arbitrary. Neither of the two is present in the case at hand, as the projection of the two, by the learned senior counsel for the petitioner is sans acceptance. Therefore, there is no warrant to interfere at this stage.
Insofar as the judgments relied on by the leaned senior counsel in support of his submissions in the case of MODERN DENTAL COLLEGE AND RESEARCH CENTRE v. STATE OF MADHYA PRADESH [2016 (5) TMI 1366 - SUPREME COURT] and in the case of UTTAM DAS CHELA SUNDER DAS v. SHIROMANI GURDWARA PRABANDHAK COMMITTEE [1996 (5) TMI 431 - SUPREME COURT] are inapplicable to the facts situation at this juncture. Reliance is placed on paragraph 60 of the judgment of the Apex Court in the case of MODERN DENTAL COLLEGE AND RESEARCH CENTRE which deals with doctrine of proportionality. It is the submission that the statute should be used only for the designated proper purpose. In the considered view of the Court, the statute is used for the designated proper purpose. Proportionality is not what can be considered at this stage of the proceedings. The stage, as observed in the course of the order, is conduct of investigation and the Apex Court is clear that investigation process should not be interdicted or annihilated unless the grounds projected are in support of such interdiction - the judgments relied on would not lend any support to the submissions of the learned senior counsel for the petitioner, in any manner. The action impugned does not suffer from any statutory aberration and therefore, the petition does not deserve any entertainment.
Petition dismissed.
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2024 (2) TMI 775
Manipulation of voters’ list for the tenure of office bearers of the association from 2021 to 2023 by the named appellant defendants - inclusion of members whose membership had expired but renewed illegally - Order 7 Rule 11 of the Civil Procedure Code - HELD THAT:- It is not necessary to go into the issue whether the dispute between the parties was covered by Section 241 of the said Act. The reason given by the learned judge that the remedy sought by the plaintiffs could not be availed of by them because of their lack in number is in my opinion a plausible one. I also agree with the learned judge that availing of this remedy was conditional upon grant of an application by the tribunal to waive the eligibility requirement which would result in unnecessary consumption of time.
It is added that if the plaintiffs approached the tribunal for dispensing with the eligibility criteria, there was no guarantee that the tribunal would allow the application. In the event the tribunal rejected the application the plaintiffs would have to approach the civil court. The plaintiffs were justified in availing of a certain remedy rather than one which did not exist but could come into existence on fulfillment of an uncertain condition.
The plaintiffs’ decision to directly approach this court to file the civil suit was a proper step. Hence there are no reason to interfere with the impugned judgment and order dated 8th February, 2023 - impugned judgement upheld.
Appointment of independent officer or court appointed officer to act as an Administrator of the Association - appointment of independent officer or court appointed officer for smooth running of the day to day work of the Association and also only to meet the expenses of the Association to the extent to pay the salary of the employees of the AssociationInjuncting the present executive committee from taking any decision related to any financial matter on behalf of the Association or to spend any money - HELD THAT:- The election procedure of the association conducted in the year 2021 for election of the elected executive committee of the association from 2021- 2023 was challenged in this suit. It was said that the electoral roll was manipulated and fabricated showing membership of members whose membership had expired or wrongfully renewed. With this untrue voters’ list, the election was conducted by the defendants so as to elect executive committee members who were not eligible to be elected.
During argument it was conceded by both learned counsel that even after extension by the Registrar of companies, the term of the executive committee had come to an end and could not be continued to run the association. The interest of the members of the association would be best subserved if an election of the executive members of the association was conducted under the aegis of the court through an administrator. The administrator would be first responsible for preparation of a true and correct voters’ list of eligible members and then convene and hold an Annual General Meeting of the appellant association.
The appeal is disposed of by holding that the suit is maintainable before this court.
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2024 (2) TMI 571
Condonation of delay of 18 days in preferring the instant Company Appeal - Section 421(3) of the Companies Act, 2013 - only ground pleaded for delay was the alleged indisposition of the 2nd Appellant - bonafide reasons for condoning the delay or not - HELD THAT:- Where the delay in preferring an Appeal/Restoration Application/Review etc. is not wanton or intentional, the Court would not be justified in rejecting the ‘delay condonation application’ on the basis that the Applicant had not produced a medical certificate, to show that he/she was ill and the Doctor had advised him/her to take rest, as per decision in Marry Susheela V. Shalee Kasturibai [2014 (4) TMI 1302 - MADRAS HIGH COURT].
When substantial justice and technical consideration are pitted against each other, cause of substantial justice deserves to be preferred, for the opposite party, cannot claim to have vested right in justice being denied to him / them, because of a non-deliberate delay. There cannot be any presumption or assumption that the delay as occasioned, wantonly, or on account of culpable negligence or on account of malafides - refusing to condone the delay can even result in a ‘meritorious matter’ being thrown out at the early stage and cause of justice being defeated. Also that, when the delay in question is condoned, the highest thing that can happen is that the case will be decided on merits after hearing the parties.
This ‘Tribunal’ on a careful consideration of respective contentions, on going through the facts and circumstances of the instant case comes to a ‘cocksure conclusion’ that the delay of 18 days in preferring the instant ‘Appeal’ has occurred on account of the indisposition of the 2nd Appellant, the authorised signatory of the 1st Appellant. Furthermore, on 01.05.2023, five days before the expiry of limitation period, the 2nd Appellant / MD and the authorised signatory of the 1st Appellant underwent tooth extraction, tooth implant etc. and the two weeks period came to an end of 14.05.2023 and the further delay of 10 days from 14.05.2023 to 24.05.2023 had occurred, according to the Appellants in the course of 2nd Appellant furnishing instructions in regard to the preferring of Appeal along with ancillary applications.
This ‘Tribunal’ by resorting to an elastic approach and the delay of 18 days that has occurred is covered within the further limitation period of 45 days prescribed in proviso to Section 421(3) of the Companies Act, 2013, condones the said delay of 18 days subject to a condition that the Petitioners/Appellants are hereby directed to pay a cost of Rs. 8000/- (Rupees eight thousand only) to the Prime Ministers’ Relief Fund to be paid within two weeks from today.
Appeal allowed.
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2024 (2) TMI 570
Prayer for reception of additional documents and to consider the revival of the Company - Respondent / ROC had not followed the procedure u/s 248(1) of the Companies Act, 2013 - ‘Notices’ u/s 248(1) were not sent - ingredients of Section 248(6) of the Companies Act, 2013 not taken note of - HELD THAT:- The power of a Tribunal, to permit additional evidence to produce/documents are within the jurisdiction of the Appellate Authority. A document not pertinent to decide the dispute/controversy in a given proceeding/suit, is not to be accepted as Additional Evidence. Besides this, if there is any lacuna or gap in evidence to be filled up, the discretionary power conferred upon the ‘Appellate Authority’ does not authorise the Appellate Authority to fill the gap in question.
This Tribunal on going through the impugned order [2023 (8) TMI 1429 - NATIONAL COMPANY LAW TRIBUNAL CUTTACK] passed by the Tribunal is of the considered view that additional evidence is not to be accepted by this Tribunal, just because the documents/evidence will tilt the decision in Petitioner/Appellant’s favour - In fact, the ‘Tribunal/Court of Law’ is to see whether the Petitioner/Appellant lacked due diligence to be seen and he cannot be allowed to fill up the ‘Lacuna’ at the belated stage. As a matter of fact, the production of Additional Evidence, is not to be allowed, when an individual does not satisfy the Court of Law / Tribunal that such evidence was not within the knowledge or could not be produced with ‘Due diligence’.
This Tribunal on going through the impugned order is of the earnest opinion that the Appellant had not preferred IA No. 19/CB/2023 in CP No. 70/CB/2020 within a two years period, as enjoined as per Section 420(2) of the Companies Act, 2013 and indeed, the IA No. 19/CB/2023 in CP No. 70/CB/2020 came to be filed before the Tribunal on 16.12.2022 after a lapse of two years period on 16.12.2022. Therefore, the Tribunal had rightly opined that IA No. 19/CB/2023 in CP No. 70/CB/2020 was not to be considered in regard to the reception of additional documents/additional evidence.
Appeal dismissed.
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2024 (2) TMI 510
Revival of the Appellant / Company - Removal the company for non-filing of Annual Return - Going Concern or not - Misinterpretation of meaning and ‘purport of Liberty’ granted to the Appellant - disregard by Tribunal of clear liberty granted to the Appellant by the Hon’ble High Court, by holding that since the Company petition was not pending, there was no question of receiving additional documents in a disposed of petition/proceeding - HELD THAT:- The power of a Tribunal to permit ‘Additional’ evidence to produce / documents is in the jurisdiction of the Appellate Authority. A document not relevant for deciding the question of controversy in a given proceeding / suit is not to be accepted as additional evidence. Also, if there is any gap or lacuna in evidence to be filled up, the discretionary power conferred upon the Appellate Authority does not authorise the ‘Appellate Authority’ to fill the gap in question.
The ‘Tribunal / Court of Law’ is to see whether the Petitioner/Appellant lacked due diligence to be seen, and he cannot be allowed to fill up the ‘lacuna’ at the belated stage. Moreover, the production of additional evidence is not to be permitted where a person does not satisfy the Tribunal / Court that such evidence was not within the knowledge or could not be produced with due diligence.
Even though in the present case, the Appellant has come out with a reason that the Petitioner/Appellant had engaged a Part Time Employee to file the Annual Return before the ‘Registrar of Companies’ and that because of the reason unknown to the Appellant, the said employee left and therefore, the Return could not be filed on time for the financial years 2016-2017 and 2017-18 and by the time it came to the knowledge of the Appellant/Petitioner Company, his name was already struck off from the register maintained by the ‘Registrar of Companies’, the Tribunal, in CP(Appeal) No.69/CTB/2020 on 21.08.2020, at para No.11 had clearly observed that ‘before striking off the name of the company from its register, ROC, had issued a show cause notice to the Company enquiring whether the said Company was carrying any business or was in operation’.
This ‘Tribunal’, on going through the impugned order dated 08.08.2023 in CA 15/CB/2023 in CP/69/CTB/2020 is of the considered view that the Appellant had not filed CA 15/CB/2023 in CP/69/CTB/2020 within the two years period as envisaged under Section 420 (2) of the Companies Act, 2013 and in fact had filed the CA 15/CB/2023 in CP/69/CTB/2020 before the ‘Tribunal’ 16.12.2022, after the lapse of two years’ period on 16.12.2022. Therefore, the ‘Tribunal’ had rightly opined that the CA 15/CB/2023 was not to be considered in regard to the receiving of additional documents / additional evidence.
Appeal dismissed.
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2024 (2) TMI 442
Seeking winding up of the respondent company - disobedience of the orders of the Court - Sections 433(e) & (f), 434 and 439 of the Companies Act, 1956, read with Rules 6 and 9 of the Companies (Court) Rules, 1959 - HELD THAT:- The proposition of law is established that disobedience of the orders of the Court have to be shown to be ‘wilful’, such that there lies a certain mental element, and that such inaction or disobedience is done knowingly, intentionally, consciously and in a calculated and deliberate manner, with full knowledge of the consequences that may be flowing therefrom.
Hence, it flows that even when there is disobedience of an order, in such cases where the disobedience is a result of compelling circumstances, outside the control of the contemnor, the contemnor cannot be punished. The plea canvassed on behalf of the respondent is sound in so far that it has been urged that the disobedience was not wilful or intentional and this court finds the same to be sustainable in law. There has never been any wilful disobedience to violate the directions of this Court. It is but evident that efforts have been made to repay the outstanding amount as also towards revival of the company through infusion of funds. The fact that winding up proceedings were underway and thereafter proceedings under the IBC have been initiated in the interim, affords a valid and sustainable defence to the contemnor in these proceedings.
The present contempt petition is dismissed.
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2024 (2) TMI 262
Seeking permission for withdrawal of appeal - HELD THAT:- In the instant TA (AT) No.113/2021 (Comp App (AT) No.200/2019), on the file of this ‘Tribunal’, the ‘Appellant’, is so far as the relief sought for `Set aside’ Order, dated 16.05.2019, passed by the ‘National Company Law Tribunal’, Hyderabad Bench in IA No.365/2018 in IA No.52/2018 in CA No.73/97/HYD/2016 and to punish the ‘Contemnor’ / ‘Respondent No.2’, in accordance with `Law’. The ‘Appellant’, comes out with a crystalline stand that she is not pressing the said relief.
Not resting to the above, in the said ‘Memo’, dated 30.10.2023, the ‘Appellant’, had also while seeking relief in the instant ‘Appeal’, for issuance of directions to the ‘Contemnor’ / ‘2nd Respondent’, to forthwith comply with the `Order’, dated 08.03.2018, passed by the ‘National Company Law Tribunal’, Hyderabad Bench in CA No.73/97/HYD/2016 and once again the ‘Appellant’, seeking to agitate the relief in CP No.385/2019, pending before the ‘Tribunal’, this ‘Tribunal’, is of the earnest view that according to the ‘2nd Respondent’, the instant ‘Appeal’, has become an ‘Infructuous one’ and furthermore, the ‘Appellant’ is not pressing for the relief sought for, in the instant ‘Appeal’, hence the ‘Appellant’, is not pressing the relief in the instant ‘Appeal’, seeking permission from this ‘Tribunal’ to ‘withdraw’ the same.
This ‘Tribunal’, taking into account of the Appellant’s contents of the ‘Memo’, dated 30.10.2023, filed before this ‘Tribunal’, in the instant ‘Appeal’, at this juncture, simpliciter, is of the considered view that the ‘Appeal’, has become an ‘Infructuous one’, especially the ‘Appellant’, is not pressing for the relief in the instant TA (AT) No.113/2021 (Comp App (AT) No.200/2019), and accordingly, the said `Appeal’, is ‘Dismissed’, as an ‘Infructuous one’.
Appeal dismissed.
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2024 (2) TMI 95
Seeking to restore the name of the Company in the Register of the Respondent / Registrar of Companies (RoC), Chennai - Failure to file returns - seeking a direction to be allowed to file the remaining Financial Returns without being saddled with additional Fees and also to be allowed to Scan and Upload all the physically filed Returns of the Company till 2017 - HELD THAT:- The CODS Scheme 2018 is meant for providing an opportunity for the disqualified Director who has defaulted by not filing the Annual Return or Financial Statement for a continuous period of three years. Therefore, this Tribunal is of the considered view the CODS Scheme 2018 is not applicable to the facts of this case, where due to the non-filing of Returns, the Company was `Struck Off’ from the Register of RoC. It is also interesting to note that the Hon’ble Madras High Court Order dated 26.03.2018, relied upon by the Learned Company Secretary is only an Interim Order whereunder, the Hon’ble Madras High Court has directed the matter to be posted after a period of 8 weeks.
There are force in the contention of the Learned Counsel for the Respondent that in AMALRAJ BARNABAS VERSUS UNION OF INDIA, REPRESENTED BY ITS MINISTRY OF CORPORATE AFFAIRS, NEW DELHI; THE REGISTRAR OF COMPANIES, CHENNAI [2019 (11) TMI 1813 - MADRAS HIGH COURT], it is held by the Hon’ble High Court, that a Director can be appointed in any other Company without hindrance, once the CODS Scheme has been complied with and therefore the direction given by the Hon’ble High Court in the Section 164 (2) (a) is distinctly different from any Notice / Direction issued under Section 248 of the Companies Act, 2013.
Having regard to the nature of the business of the Appellant Company which provides Mental Healthcare & Services to the Members of the Society apart from the fact that a bare perusal of the Financial Statements shows that the Company has Creditors and Loans and was in the process of setting up a Hospital, this Tribunal is of the considered view that the ratio of the Three Judge Bench Judgment in Shailendra Bafna Versus The Registrar of Companies, Bilaspur Chhattisgarh [2022 (12) TMI 919 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] can be made applicable to the facts of this case.
This Appeal is Allowed.
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2024 (1) TMI 1323
Leasehold rights of Corporate Debtor - whether it is unregistered Framework Agreement dated 29th March, 2007, or the Original Registered Lease Deed dated 31st March, 2007 that will determine the lease hold rights of the Corporate Debtor (SHPL), in regard to the inclusion of the 3.5 acres of land in question to be (subject property) in the Information Memorandum (IM)? - HELD THAT:- It is already noted that the said unregistered Framework Agreement has not been referred to in any of the subsequent registered instruments pertaining to the lease in question. Meaning there by that even if there existed an Agreement between the parties to enter into a lease Agreement subsequently, with a termination Clause which speaks of right to terminate upon lessee’s insolvency, the parties may have resiled from their stand later and entered into a Lease Agreement without such termination Clause, and further got it modified to include a termination Clause totally different from that of purported previous informal Agreement.
The original unregistered Framework Agreement with signatures of parties is perused. It is not required to be impounded for the sole reason that it is an unregistered document expressing an interest to execute a lease deed, which neither creates nor extinguishes any right, title or interest in the subject property.
The Framework Agreement cannot be looked into for the purpose of determining the lease or to ascertain whether the subject property can be made a part of CIRP Process of the Corporate Debtor, or to conclude that in terms thereof the lease stood terminated due to initiation of the CIRP against the Corporate Debtor - Applicaton dismissed.
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2024 (1) TMI 1253
Liquidation order - HELD THAT:- The concern of the applicants that the shares can be sold for around Rs. 45-50 crores whereas the Liquidator is putting up the shares at 9 crores which is the book value is not sustained. The book value of the 77500 shares are Rs. 54.85 lakhs. The average fair value as per IBBI Registered Valuers is Rs. 9.21 Crores and average liquidation value is Rs. 4.61 Crores. The shares have been put up for auction Rs. 9.21 Crores i.e., at the average fair value, hence valuation of shares and quoting of price cannot be faulted.
Regulation 21A of the Liquidation Regulation says that if the secured creditor has not discharged its obligations within 30 days from liquidation commencement date 06.04.2022, the shares will automatically form part of the Liquidation Estate - Alliance is directed to handover the certificates in original to the Liquidator within a week from the date of pronouncement of this order.
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2024 (1) TMI 1060
Transfer of pending application for winding up of the respondent company to the NCLT under IBC - non-payment of dues arising out of a contract for services entered into between the parties - Section 433(e) read with Sections 434 and 439(1)(b) of the Companies Act, 1956 - HELD THAT:- Reliance may be placed 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.
It is the opinion of this Court, that since no substantive proceedings have been undertaken towards winding up of the company, the present petition does not deserve to be continued before this Court. The present company petition is at a very nascent stage and no effective orders as such have been passed towards the winding up of the company. Before parting with this matter, it would be suffice to state that the three decisions [WEST HILLS REALTY PRIVATE LTD. & RAVI GHAI AND ANOTHER VERSUS NEELKAMAL REALTORS TOWER PVT. LTD. [2016 (12) TMI 1253 - BOMBAY HIGH COURT], COMMISSIONER OF INCOME TAX-8, MUMBAI VERSUS REGISTRAR OF COMPANIES, MUMBAI, MR. KESAVAN VARADARAJAN DIRECTOR, MOTECH SOFTWARE PVT. LTD., MR KAUSHIK VRAJDAS VED [2017 (5) TMI 315 - BOMBAY HIGH COURT], THE JAYABHARAT CREDIT LIMITED VERSUS JALGAON RE-ROLLING INDUSTRIES LTD. [1996 (10) TMI 527 - BOMBAY HIGH COURT]] have no bearing on the matters in issue in view of categorical directions of the Supreme Court in the above noted case of Action Ispat and Power Limited.
The instant petitions are transferred to the NCLT. Parties to appear before the NCLT on 01.04.2024. The interim orders passed by this Court in these petitions, if any, shall continue till the said date.
Petition disposed off.
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2024 (1) TMI 833
Transmission of shares - transmission of the shares ordered without such necessary documentation - HELD THAT:- It is seen from Section 44 of the Companies Act, 2013 that shares are construed as movable property governed by the Articles of Association of the Company and Article 8.15 mandates that a Succession Certificate is required for the transmission of the shares. When Section 44 of the Act provides that shares of any member in a Company are required to be transferred in the mode and manner provided for under the Articles of Association of the Company, the sole Respondent is bound to meet the requirements of the said article 8.15.
This Tribunal in the matter of ‘M/s. Nalini Hari Vs. M/s. Mysore Stoneware Pipes and Potteries Limited’ in Company Appeal (AT) (CH) No. 55/2021 dated 05.12.2022 [2022 (12) TMI 367 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI] has recognised the importance of a valid Succession Certificate in a matter where the Applicant was seeking transmission of shares under Section 58 of the Act. In this matter this Tribunal upheld the refusal to direct transmission of shares even though a Succession certificate was issued, the same was under challenge. There are force in the contention of the Learned Counsel for the Appellant that considering the same ratio, the prayer of the first Respondent herein seeking transmission of Shares without even obtaining a Succession Certificate, cannot be sustained.
A Company cannot refuse `Transmission of Shares’, once the `legal heirs’ proves his/her entitlement to them, through a `Probate’, a `Succession Certificate’. It is to be pointed out that `transfer’ is an act of parties or law by which the title to the party is conveyed from one person to another. This would lapse by `Operation of Law’ or `Succession’. `Transmission of Shares’ on the basis of `will’ can raise complicated issues which require an `evidence’, to be read by the parties and need to be determined by a Court of Law.
The Succession Certificate, specifies the debts and securities entitles a legal heirs not only to receive the Interest or Dividends’ but also to negotiate or transfer them, as per decision in Themappa Chettiar Vs. Indian Oversees Bank [1943 (3) TMI 11 - HIGH COURT OF MADRAS]. In regard to disputes pertaining to `Will’, parties are expected to get that dispute settled from a `Competent Court of Law’ as per decision in `C. Rajesh Kapoor’ Vs. `Tirupati Balaji Hotels P. Ltd.’. If the `Probate Proceedings’ are pending in `Civil Court’ then the `Petitioner’ under the `Companies Act’ for `rectification of register’ will not be `maintainable’. In the facts of the attendant matter on hand, the Company can effect `transfer of shares’, on the basis of `Succession Certificate’, as per Section 370 of the `Indian Succession Act, 1925’.
The impugned order set aside - appeal allowed.
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2024 (1) TMI 589
Professional Misconduct - 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 to give an appropriate audit opinion - Lapses in fulfilling duties related to Engagement Quality Control (EQC) Reviewer - Failure to determine Materiality - Failure to plan the audit of Financial Statements - Failures relating to communication with Those Charged With Governance - Failures relating to communicating deficiencies in internal control to TCWG and Management - Failures relating to identifying and assessing the risks of material misstatement - Failure to report non-compliances with provisions of the Companies Act 2013 - penalties and sanctions.
HELD THAT:- The EP issued audit opinion on the Financial Statements without any basis. We also conclude that the EP has committed Professional Misconducts 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, and as detailed below:
i. The EP 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 or is grossly negligent in the conduct of his professional duties".
This charge is proved as the EP failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to his failure to report the material misstatements and non-compliances of the Company in its Financial Statements, as explained in the paras 24 to 93 above.
ii. The EP committed professional misconduct m terms of 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 EP failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to his failure to report the material misstatements and non-compliances of the Company in the Financial Statements, as explained in the paras 24 to 93 above.
iii. The EP 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 EP failed to conduct the audit in accordance with the SAs (as explained in paras 24 to 93 above), but falsely reported in his audit report that the audit was conducted as per SAs.
Therefore, it is concluded that the charges of professional misconduct enumerated in the SCN dated 16.06.2023 stands proved based on analysis of the evidence in the Audit File, the Audit Report issued by auditor, the submissions made by auditor, and other materials available on record.
Penalties and sanctions - HELD THAT:- Considering the proved professional misconducts and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, we, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, hereby order imposition of monetary penalty of INR 3,00,000/- upon CA Pankaj Kumar. In addition, CA Pankaj Kumar is debarred for 3 years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of Financial Statements or internal audit of the functions and activities of any company or body corporate. This debarment shall run concurrently with Penalty Order dated 21.04.2023 in respect of audit of M/s. SRS Ltd. issued against CA Pankaj Kumar.
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2024 (1) TMI 461
Professional Misconduct - Failure to maintain Audit Files and to co-operate with NFRA - sanctions and penalties - HELD THAT:- It is established that CA Anil Chauhan committed professional misconduct by not submitting the Audit Files and related documentation to NFRA and by not responding to the SCN issued by NFRA under Section 132 (4) of the Act - It is concluded that the following failures on the part of CA Anil Chauhan as contained under the Articles of Charges in the SCN stand established:
i. 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 because of the lapses and omissions.
ii. Failure to supply the information called for, and non-compliance with the requests of NFRA, as defined in clause 2 of Part-III of First Schedule of The Chartered Accountants Act, 1949 because the EP did not co-operate with NFRA.
Considering the aforementioned proved professional misconduct by the EP and considering the nature of the violations, in exercise of powers under section 132(4)(c) of the Companies Act, 2013, it is ordered that:
i. Imposition of a monetary penalty of Rs Twenty Lakhs on the EP, CA Anil Chauhan, proprietor of M/s Anil Chauhan & Associates.
ii. Debarment of CA Anil Chauhan and the audit firm M/s Anil Chauhan & Associates (FRN: 0140786W), for Ten Years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
This order will become effective after 30 days from the date of issue of this Order.
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2024 (1) TMI 255
Compounding of offences - default in holding Annual General Meeting the company (AGM) - non-compliance of Section 166/96 of the Companies Act, 1956/2013 - It was held by NCLAT that Once the appellant has admitted his default and thereafter approached the Tribunal for compounding the offence there was no ground for the appellant to assail the order of the compounding passed by the NCLT.
HELD THAT:- There are no reason to interfere with the impugned judgement - Civil appeal dismissed.
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2024 (1) TMI 254
Professional Misconduct - The reports issued in form 10 DA u/s 80 JJAA of Income Tax Act - failure to obtain sufficient appropriate evidence and failure to exercise due diligence & professional skepticism - Failure to verify reorganization of business with various parties - Failure to exclude employees whose contribution was paid by the Government - Lapses in reporting additional employees during FY 2020-21 - Failure to verify payment of additional employee cost by account payee cheque/draft/electronic means - Failure to verify salary limit of Rs 25,000 per month for new employees - penalties and sanctions.
HELD THAT:- It has been established that CA Pawan Jain failed to obtain sufficient appropriate evidence and failed to exercise due diligence & professional skepticism before issuing report in Form 10 DA. He did not verify the basic conditions i.e., (a) excluding the additional employees of merged/amalgamated business; (b) excluding additional employees whose EPS contribution was paid by the Government; (c) whether there was increase in the total number of employees; (d) whether additional employee cost was paid by account payee cheque/draft/electronic means; and (e) whether total emoluments of additional employee was not more than Rs 25000 per month.
In addition to the above charges, there are many other conditionalities under section 80JJAA, which are required to be checked by the CA who certifies eligibility of the amount of Income Tax deduction to be claimed by the assessee company. These relate to ascertaining whether the new employees participated in a recognized Provident fund, whether there was no rehiring of old employees, and whether additional employees were employed for not less than 240 days. Besides these, there were deficiencies in sample testing done by the CA. The CA was charged with non-verification of the same.
While denying all of these charges, the CA claimed that he had looked into these matters. As stated earlier, none of these are evidenced in the working file and therefore, we are unable to accept his defense.
Findings on the Articles of Charges of Professional Misconduct - HELD THAT:- CA Pawan Jain has failed to exercise due diligence in ensuring the presence of the basic qualifying criteria to qualify for the tax benefit and obtaining sufficient appropriate evidence to support his certification. Thus, he was negligent in the conduct of his professional duties by not adhering to the scope of the work undertaken by him. As per section 132(4) of the Companies Act, "Professional or other misconduct" shall have the same meaning assigned to it under section 22 of The Chartered Accountants Act 1949. Thus, failure of CA Pawan Jain to exercise due diligence and failure to obtain sufficient appropriate evidence resulted in the following professional misconducts within the meaning of Section 132 (4) of the Companies Act, 2013:
a) Failure to exercise due diligence in the conduct of professional duties (clause 7 of part-I of second schedule of The Chartered Accountants Act 1949),
This charge is proved that the CA Pawan Jain failed to exercise due diligence in the conduct of professional duties as explained in Section - C- I to V above.
b) Failure 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. (clause 8 of part-I of second schedule of The Chartered Accountants Act 1949).
This charge is proved as CA Pawan Jain failed to obtain sufficient information which was necessary to ensure that the report issued by him in Form 10 DA is true and correct.
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 - CA Pawan Jain failed to exercise due diligence in the conduct of professional duties while certifying the information in form 10 DA based on examination of the relevant records. It has been proved that before issuing the reports, the CA did not obtain sufficient appropriate evidence with regard to compliance of conditions stipulated in section 80 JJAA for claiming deduction in respect of new employees.
Considering the proved professional misconduct and keeping in mind the nature of violations, their impact on revenue and deterrence against future professional misconduct, monetary penalty of Rs fifty (50) lakhs only imposed upon CA Pawan Jain.
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