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Companies Law - Case Laws
Showing 41 to 60 of 14638 Records
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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 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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2024 (1) TMI 189
Oppression or Mismanagement - equal rights were denied to equal inheritors - Lifting of corporate Veil - Invoking the just and equitable standard - Appellant's rights as a shareholder of R1 Company - Restructuring of the boards - Legitimate Expectation - Buyout of Shares.
Equal rights were denied to equal inheritors - HELD THAT:- The principles of quasi-partnership and legitimate expectation, if at all applicable, can be invoked only when there is an agreement or an understanding for a Joint management or a specific promise for Board representation at the time of incorporation or inducement for investment in the Company, which in the present facts, admittedly do not arise. It is not the case of the Appellant that the Appellant's mother had claimed any such legitimate expectation during her lifetime. Be that as it may, a family held Company cannot be ipso facto be treated as a quasi-partnership. There was no pre-existing partnership prior to incorporation of the 1st Respondent Company nor was there any existence of promise to offer Directorship to any Appellant who had become a Shareholder only by inheritance and not by inducement. It is seen from the record that the 1st Respondent Company was incorporated as a Private Company on 22/12/1938 long before the Appellant had become a Shareholder. There is no claim of partnership by the Appellant or his mother or any other Shareholder subsequent to his becoming a Shareholder in 1974 - The contention of the Appellant that this Family Company be viewed as a 'quasi-partnership' concern cannot be sustained.
Lifting of corporate Veil - HELD THAT:- It is a settled law that Holding Company and its Subsidiaries are incorporated Companies each having a separate Legal identity, and each, a separate Corporate Veil. The Corporate Veil between the Holding Company and the Subsidiary Companies remains in the absence of which they would all be construed as one Company and one Corporate Personality, which within the framework of law, they cannot be so. It is the case of the Respondent that the Appellant had given up the issue of lifting of the Corporate Veil and therefore, the NCLT had not dealt with the specific issue - In the instant case, the contention of the Learned Senior Counsel for the Appellant that the Holding Company and the Subsidiaries constitute a single economic unity and therefore, the question of lifting the Corporate Veil does not arise, is untenable.
The Holding and the Subsidiary Companies cannot be treated as a single economic unit and that the Corporate Veil which was required to be lifted keeping in view the nature of the Companies and specifically the direction of the Hon'ble Supreme Court, was not adhered to.
Invoking the just and equitable standard - HELD THAT:- The Appellant has not entered into any partnership argument or understanding with the other shareholders of the first Respondent Company or any other Company in the Group. The 'Amalgamation' group of Companies cannot be considered as a 'Partnership' in the light of the complex Shareholding pattern, independent management of each Company, Management participation from domestic / foreign investors and specifically in the absence of any kind of understanding between the Shareholders. This Tribunal is of the considered view that the equitable considerations can only flow from the fact if the Company had originally been started as a Partnership concern or if there was an Agreement or understanding that all or some of the Shareholders should participate in the conduct of the business. In the facts of the attendant case, there is neither any agreement nor understanding of any such nature and therefore, the question of the Respondent Company being viewed as a Partnership Concern, does not arise.
Appellant's rights as a shareholder of R1 Company - HELD THAT:- There is an absence of an element of lack of probity or fair dealing in the matter of his proprietary rights as a Shareholder. The Rights of a Shareholder include voting on Resolutions at Meetings of the Company; electing Directors and participating in the management of the Company; enjoying the profits of the Company in the shape of dividends as and when declared by the Company; applying to the Court/Tribunal for relief in case of Oppression and Mismanagement; and in the case of winding up a share in the surplus - In the facts of the instant case, having regard to the fact that the lack of confidence of the Appellant is grounded on the personal conduct of the Directors rather than a lack of probity in the conduct of the Company's affairs, it is opined that the Appellant's proprietary rights as a 'Shareholder' are not affected in any manner.
Restructuring of the boards - HELD THAT:- In the absence of any provision in the Articles of Association or any 'Agreement', the Appellant cannot be made a Director unless there is approval of the majority of the Shareholders, or the Articles provide for proportionate representation - also the Appellant does not have the Locus to seek restructuring of the Boards of the Subsidiaries where he is not a 'Shareholder'.
Legitimate Expectation - HELD THAT:- The 'legitimate expectation' for any participation in the Board cannot arise under Corporate Law without the mutual consent of the Shareholders and can be inferred only if it is founded on the sanction of law or custom or a precedent followed in regular sequence, which is not so in the instant case as the Appellant is unable to establish that there was any 'promise' of any position of Directorship in the Board, to construe that having such an 'expectation' is 'justifiable' and 'legitimate'. The Appellant's grievance that he has been unjustly treated by his family members, which cannot strictly constitute 'Oppression and Mismanagement' as defined under Section 397 and 398 of the Companies Act, 1956 or under Section 241 and 242 of the Companies Act, 2013 - The Appellant's Claim for Office of Profit is promised of 'Legitimate Expectation', being a Member of the family. But at the same time, the Appellant is a Shareholder of only the first Respondent Company and hence, the Claim for such an 'Office of Profit' in the other Subsidiary Companies, does not arise as the appointments in the Subsidiary Companies are controlled by the respective Board of Directors in accordance with their respective Articles of Association and any inheritance of Shares does not automatically entitle any of the family members to automatic post of Directorship and therefore any 'Legitimate Expectation' by the Appellant, in the facts of this situation, whether he is not a 'Shareholder' in the Subsidiary Companies, cannot be justified.
Buyout of Shares - HELD THAT:- This Tribunal is satisfied that 'the just and equitable proposition' cannot be made applicable in this case, where there is no irretrievable breakdown in trust and confidence, leading to a 'functional deadlock'. In the absence of any contractual right to demand any proportional representation in the Board, an Order in this direction is not justifiable. Moreover, facts arising subsequent to the filing of the Petition cannot be relied upon and the validity of the Petition will be judged on the facts existing at the time of the presentation of the Petition - there are no substantial grounds for concluding that there was any 'Oppression or Mismanagement' and therefore, the question of passing any Order directing buyout of shares, bringing to an end any matter complained of, cannot be done in the facts of this case. There is no case made out by the Appellant to exercise any equitable jurisdiction to grant such relief.
Appeal dismissed.
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2024 (1) TMI 95
Requirement of prior permission before filing of the joint application under Section 213, 241 and 242 of the Companies Act, 2013 - HELD THAT:- The impugned order is required to be affirmed. Moreover on bare examination of Section 244 of the Companies Act, 2013, it is found that there is no error in the impugned order. Accordingly the objection raised by the appellants appears to be misconceived and as such there is no reason to interfere with the impugned order.
Appeals dismissed.
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2024 (1) TMI 94
Maintainability of appeal - Condonation of delay in filing appeal - sufficient reasons for filing appeal not given - making incorrect statement in the condonation of delay application.
HELD THAT:- The appeal was not ripe for hearing in view of the fact that the main appeal was filed after the expiry of 45 days of limitation and in the appeal an Interlocutory Application was filed for condonation of delay
In para 3 the appellant has stated that the certified copy of the impugned order was applied for on 31.10.2022 and thereafter the certified copy of the impugned order was made available on 2.11.2022. The reasons for delay in filing the appeal has been explained as if the appellant was travelling and was out of station from 24th October, 2022 to 18.11.2022, whereas the impugned order reflects that the certified copy was applied for on 02.11.2022 and it was made available to the appellant on 03.11.2022. Meaning thereby that the facts disclosed in condonation of delay application is erroneous and contrary to the record. Moreover the reason assigned that the appellant was travelling and was out of station is also not a sufficient reason to persuades to act upon such reason in condoning the delay in filing the appeal.
Normally if delay is occurred in filing an appeal it is expected that the appellant may explain the delay on day to day basis. However, in the present case neither specific reason has been assigned nor correct statement has been made. In such situation as well as in the absence of showing any plausible reason which prevented the appellant to file appeal within time, there are no option but to reject the application for condonation of delay.
The condonation of delay application stands dismissed not only on the ground of delay in filing the appeal but also for making incorrect statement in the condonation of delay application.
Application for condonation of delay as well as appeal dismissed.
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2024 (1) TMI 48
Procedure for filing an appeal - failure to submit certified copy of order of NCLT - Seeking permission to argue on the merit of the appeal - Appellant argued on interlocutory application which was filed for condonation of delay in re-filing - HELD THAT:- The order impugned was passed on 13.06.2023 and thereafter the appeal was preferred on 26.07.2023. In normal course it was expected that the appellant would have obtained the certified copy of the order and filed the same without any further delay. An application for exemption in filing certified copy is to be filed where there is no time in filing appeal. Once an appeal is filed, it is expected that immediately thereafter certified copy will be filed - However, in the present case till date certified copy of the impugned order has not been brought on record.
The fact remains that appeal has been preferred under Section 421 of the Companies Act, 2013 against an order dated 13.06.2023 passed by National Company Law Tribunal, New Delhi (herein after referred to as NCLT) whereby an application filed by the Appellant on the point of maintainability was rejected. The order further reflects that company petition was ripe up for hearing and in the case reply was also filed however belatedly maintainability point was raised by filing an application which has been rejected by the order impugned.
The present appeal not entertained due to the latches on the part of the appellant, particularly in view of the fact that even after expiry of several months the appellant has not brought on record the certified copy of the order and also the fact that on instruction of the appellant on last date, i.e. on 18.09.2023 an advocate got the appeal adjourned for filing fresh Vakalatnama, whereas today it was intimated that the Counsel who had filed Vakalatnama along with Memo of Appeal has been again asked to appear - appeal dismissed.
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2023 (12) TMI 1256
Direction for investigation into the affairs of the company - reference the matter of SFIO on the request of the official liquidator - Application filed by an Ex-Director of the Company in liquidation to recall the order passed by this Court - Money Laundering - diversion of funds - HELD THAT:- It is not denied by the Official Liquidator that it has a panel of Chartered Accountants through whom the inspection and inquiries may be ordered. The sole purpose for which the Official Liquidator has sought for referring the matter to the SFIO was for detection of diversion of assets/funds of the company in liquidation. It is not denied by the Official Liquidator that the balance sheet, other books of account and documents are in possession of the official liquidator as well as the statement of affairs filed by the ex-Director on behalf of the company in liquidation.
Learned counsel for the applicant is right in saying that there was no material in the Official Liquidator’s report to demonstrate that there was any intention of the Ex-Director to defraud the creditors, members or any other person or that the management of the company was guilty of fraud and misfeasance or other misconduct towards the company or towards any of its members and, therefore, referring the matter to the SFIO is uncalled for.
As a matter of fact, the allegation against the company in liquidation by the Official Liquidator regarding a web of intrigue employed by the company and other groups of companies for defrauding the investors and creditors and diversion of funds of the company, could have been substantiated by the specific references to the entries made in the balance sheet and other books of account of the company in liquidation, which has not been done. To insinuate that the office of the Official Liquidator does not have the capacity or ability to detect diversion of funds of the company in liquidation, is not acceptable given the fact that a panel of Chartered Accounts is admittedly available to assist the Official Liquidator in discharge of its duties.
The provisions of the Act, 1956 and the Act, 2013 though, do not prohibit investigation to be initiated where the company has passed a special resolution for voluntary winding up or where other proceeding for winding of a company are pending before the Tribunal, however, the same may not applicable in the case of the company in liquidation, inasmuch as the winding up order of the company in liquidation was passed by the Court much prior to the report of the Official Liquidator filed before this Court seeking investigation by the SFIO.
It is not the case of the Official Liquidator that the powers conferred on it by virtue of the aforesaid provisions are inadequate for purpose of detection of the irregularities like the allegation of diversion of funds, etc. that caused it to move this Court for referring the matter to the SFIO. It should not appear to the Court that the Official Liquidator seeks referral of the matter to the SFIO for the reason that it finds itself inadequate to exercise the powers conferred on the Official Liquidator by the aforesaid sections of the Act.
The order dated 13.12.2019 is recalled and the Recall Application No.235 of 2020 is hereby allowed.
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2023 (12) TMI 1251
Interim measure to deposit an amount of Rs. 3.22 crores with the Registrar of Company, Delhi towards fees for delay in filing Form SH-7 - HELD THAT:- This amount has not been deposited. The petitioner has also not taken out any application seeking condonation of delay in making such deposit or permitting him to deposit in instalments.
A petition under Article 136 of the Constitution of India has a discretionary element for this Court to consider. Because of the petitioner’s conduct, we do not think such discretion ought to be exercised in favour of the petitioner. Otherwise also, we are also not satisfied with the petitioner’s case on merit.
Petition dismissed.
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2023 (12) TMI 1250
Professional misconduct - Auditor's conflict of interest with the auditee company - Acting as statutory auditor of SKNL while holding or controlling shares of SKNL in violation of section 141 of the Companies Act 2013 & section 226(3)(e) of the Companies Act 1956 resulting in failure to maintain independence of auditor - Non-compliance with para 7 to 9 of Standard on Auditing (SA) 705 - penalties and sanctions - HELD THAT:- It is clear that CA Shyam Malpani had violated the Companies Act 1956, the Companies Act 2013, SQC1, SA 220 and SA 705 by performing this audit despite having serious conflict of interest and in not giving appropriate audit opinions. It is therefore concluded that CA Shyam Malpani has committed Professional Misconduct as defined under Section 132 (4) of the Companies Act 2013 in terms of section 22 of the Chartered Accountants Act 1949 (CA Act). As per the clause 7 of Part I of the Second Schedule of the CA Act, an EP is guilty of professional misconduct if he "did not exercise due diligence and was grossly negligent in the conduct of his professional duties" - Since the EP compromised his independence and failed to recognize and report the pervasiveness of the deficiencies of the financial statements, his conduct undoubtedly falls into the category of lack of due diligence and gross negligence. Therefore, the charge of professional misconduct on the part of the EP on this account is proved.
Internationally also, similar cases of Auditor's conflict of interest with the auditee company has been viewed seriously.
In this case the audit done by the EP related to SKNL which was a large public listed company and involved interest of large number of shareholders and other stake holders such as banks, creditors etc. It is critical that the auditor and the EP performed their job with due diligence to give assurance to the investors and stakeholders on true and fairness of the financial statements and thereby protect public interest. Any default on this account impacts and jeopardizes the larger public interest which needs to be considered while determining the quantum of punishment.
Considering the nature and seriousness of violations and principles of proportionality, in the exercise of powers under Section 132 (4) (c) of the Companies Act, 2013, the sanctions ordered - a monetary penalty of Rupees Five Lakh imposed upon CA Shyam Malpani. In addition, CA Shyam Malpani is debarred for a period of Five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
Application disposed off.
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2023 (12) TMI 1220
Sanction of the Scheme of Amalgamation - NCLT fixed the Appointed Date to 01.10.2022, while allowing the Chennai Second Motion Petition and sanctioning the Scheme, when the NCLT – Mumbai, had sanctioned the Scheme filed by the Transferee Company with the Appointed Date of 01.10.2020.
It is argued that since NCLT, Mumbai, had by way of an Order dated 06.06.2022, already sanctioned the Scheme with the Appointed Date as 01.10.2020, the impugned order by changing the Appointed Date to 01.10.2022, has made the Scheme unworkable.
HELD THAT:- It is not in dispute that the NCLT, Mumbai had already sanctioned the Scheme with the Appointed Date of 01.10.2020, vide Order dated 06.06.2022. In the IA filed on 31.03.2023, the Appellants had sought for rectification of the Appointed Date to 01.10.2020, which was dismissed on the ground that NCLT did not have the power to review its own order. It is seen from the record that the Appointed Date as per the Scheme is 01.10.2020 ‘and the same is within a period of one year from the date of filing of the Application for Approval of the Scheme with NCLT i.e., 29.09.2021’.
It is relevant to rely on the Judgment of this Tribunal, in which matter, this Tribunal placed reliance on the Judgment of the Hon’ble Apex Court in Miheer H. Mafatlal v. Mafatlal Industries Limited., [1996 (9) TMI 488 - SUPREME COURT], in which case, the Court had laid down the broad contours of the jurisdiction of the Company Court in granting a sanction to the Scheme holding that jurisdiction of the Company Court while sanctioning the Scheme is supervisory only, i.e., to observe that the procedure set out in the Act is met and complied with and that the proposed scheme of compromise or arrangement is not violative of any provision of law, unconscionable or contrary to public policy. The Court is not to exercise the appellate jurisdiction and examine the commercial wisdom of the compromise or arrangement arrived at between the parties.
It is held by this Tribunal in the Accelyst Solutions Private Limited [2021 (3) TMI 1009 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI], that the ‘settled legal position, while exercising its power in sanctioning a Scheme of Amalgamation, the Courts / Tribunal has to examine as to whether, the Provision of Statute has been complied with’. The Courts / Tribunal would have no further jurisdiction to sit in Appeal over the ‘Commercial Wisdom of the Shareholders of the Company’.
In the instant case, apart from the fact that NCLT – Mumbai, had already fixed the Appointed Date of the Scheme as 01.10.2020, the date of filing of the Application for Approval of the Scheme with NCLT – Chennai is 29.09.2021 and therefore is within a period of one year, and hence, attracts Clause 6(c) of the MCA General Circular No. 09/2019 dated 21.08.2019 - Additionally, NCLT has the discretion to fix the Appointed Date which could be beneficial to the interests of the Company, which in the instant case ought to have been fixed at 01.10.2020 as having two different Appointed Dates, would render the Scheme unworkable. The NCLT has powers under Rule 11 of the NCLT Rules, 2016, to fix the Appointed Date, which would be beneficial to the Scheme of Amalgamation.
Appeal allowed.
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2023 (12) TMI 1177
Oppression and Mismanagement - shareholding slightly less than the threshold of 10% shareholding required for filing Petition under Sections 241 & 242 as per provisions of Section 244 of the Act - HELD THAT:- It is apparent that each branch of the family is represented in the Company and for resolution of any dispute, it will be better that each branch of the family is represented in the proceeding and is heard. We feel no prejudice shall be caused to anyone if the impleadment application is allowed. Wherever the Court is of the opinion that by adding any party, it would be in a better position to effectually and completely adjudicate upon the controversy, it is proper to exercise judicial discretion in impleading the said party. The Appellants herein are daughters of late Mr. Tarsem Singh and sister of Respondent No. 3, against whom allegations of Oppression and Mismanagement have been made. The Appellants have a defined subsisting, direct and substantive interest in resolution of the controversy and are necessary and expedient to be impleaded in the said Petition.
The Appellants are Shareholders of the Respondent No. 1 Company and are family members of the other Shareholders. They are concerned with the affairs of the Company and their arraignment as party to the proceedings would facilitate an effective, efficacious, just and fair adjudication of the case. It is held that they are proper and necessary party and their impleadment will assist in arriving at the correct decision in C.P. No. 129/ND/2019 pending with NCLT.
Appeal allowed.
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2023 (12) TMI 1153
Oppression and Mismanagement - Regarding implementation of the Resolution Plan is pending for adjudication - Sections 388B, 397, 398, 401, 402 and 408 of the Companies Act, 1956 - HELD THAT:- There is no dispute that the Appellant has filed the application no. 03 of 2014 for seeking various reliefs which is already mentioned herein before but this is also not in dispute that while the application was pending, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 filed by the Canara Bank as the financial creditor against M/s Deccan Chronicle Holdings Limited (Corporate Debtor therein) which was assigned CP No. 41/7/HDB/2017 has been admitted vide order dated 05.07.2017 and the Adjudicating Authority has initiated the CIRP proceedings. It is also not in dispute that the said CIRP proceedings have reached to the stage of consideration of Resolution Plan.
In such circumstance, once the Company against which the aforesaid application has been filed by the appellant on the allegation that there is mismanagement in the company and fraud has been played by the persons in control of the company, has gone into CIRP and, moratorium is imposed on Section 14 and the reins of the Companies are handed over to the IRP, the present application by itself does not survive as no relief be granted in the said application.
Thus, no error has been made by the Ld. Tribunal in dismissing the application as such. The appeal is thus found to be without merit and is hereby dismissed.
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