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Companies Law - Case Laws
Showing 41 to 60 of 15043 Records
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2025 (2) TMI 21
Execution and compliance with the exit formula devised by the Company Law Board (CLB) for foreign investors ORE Holdings and Nandakumar Athappan to exit from a joint venture with Indian company CEPL - HELD THAT:- It was very obvious from the strategy of KCP and his group of companies who have been litigating since CLB took cognizance of the controversy, that they were keen to knock off the money invested by ORE and Athappan, but when KCP strategies were halted by the CLB vide its Order dated 13.08.2008, he appeared to have entertained a belief that by reading the exit-formula the way he and his group of companies had since chosen to read, they could deflect the focus from their need to abide by the directions of the CLB and bypass the exit-route prescribed for the self- preservation of both. This perhaps might have been the reason why the team-petitioner have chosen not to challenge the Order prescribing the exit- route for the foreign investors of the CEPL to quit from the company.
The CLB contemplated on reduction in the share capital when it pronounced its set of directions. Does not KCP, the captain of team-petitioner know it? He does. He knew it. His team's think-tank knew it. But he came to the wicket not to play cricket, a game considered as synonymous with fairness associated with the gentlemen who played it. Did KCP shrewdly tried to manipulate an argument to equate the surrender of shares for achieving reduction of share capital as buy-back of shares? Indeed, the CLB in the operative portion of its Order dated 13.08.2008 has underscored that its direction to CEPL to pay ORE and Athappan in cash or in kind will be the consideration for reduction of share capital, and has not described it as consideration for the purchase of shares from its foreign investors.
If the present petition is keenly observed KCP finds himself on an unplayable and slippery wicket. He even struggles for a cause of action. Therefore, he has laid his hands on a clarificatory note of the RBI, dated 28.08.2020, which decides nothing but only affirms its earlier decision dated 08.06.2015, permitting sale of 17.15 acres of VML land to the nominee of ORE. And, when VML chose to withdraw petition which it had laid before the Delhi High Court, challenging the proceedings of the RBI dated 08.06.2015, this Order became final. And necessarily what has been done pursuant to it has also attained finality, thanks to the Order of the Supreme Court in the batch of SLP filed against the Order of this Court in C.A 5 to 10 of 2016. What remains to be done is the repatriation of sale proceeds from India, for which permission has been sought from the RBI.
When KCP valued the shares of ORE and Athappan, it was not even 1% of the value which CEPL was under an obligation to pay them. KCP and his team's game-plan is very evident, to unravel which not even the IQ required to solve a beginners' sudoku is necessary. If he had gone to the CLB or the Court to seek clarification on the point, he knew what to expect. It is hence he tried to circumnavigate the CLB and the Court and approached RBI and even the PMO, faking a grievance where there is none, and avoided seeking clarification whether share-pricing could be telescoped into the clause in the Order of the CLB directing payment of money invested by ORE and Athappan.
Conclusion - The CLB's exit formula did not constitute a buy-back of shares, as it aimed to return the invested sums and reduce share capital. The legality of the sale of VML property to ORE's nominee affirmed, as it complied with FEMA regulations and was executed with necessary permissions.
Petition dismissed.
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2025 (2) TMI 20
Levy of penalty u/s 162 of the Companies Act, 1956 - failure to file the Board's Report for the financial years 2010-11 and 2013-14 - continuing offence or not - Compounding of offences under Section 441 of the Companies Act, 2013 for the offences made under Section 217 read with Section 220 of the Companies Act, 1956 - HELD THAT:- It is an admitted fact that the Appellants 1, 2 & 3 have failed to file Board Report with the financial statement for the financial years 2010-11 and 2013-14 respectively within the stipulated time and hence the offences have been committed. They have to be taken as a continuing offence. Penalty for Non-filing of Board Report for financial year ending on 31.03.2011 will be determined as per the provisions of Section 220 r/w Section 162 of the Companies Act, 1956 which is not disputed by either party.
The Appellant has contended that the mistake is inadvertent, that he himself has found out the mistake and has sought to rectify it by seeking composition of the offence, that he has failed to file the Board Report with ROC only, and that it has been circulated to shareholders within the due date, that the omission is not prejudicial to the interest of members, creditors, regulators or other stakeholders and that the content of the Board Reports was such that there is nothing to hide - In view of absence of any assertion to the contrary by the Respondent, the above contention is acceptable.
Conclusion - The offences were committed for the financial year 2010-11 and financial year 2013-14 under Section 220 of the Companies Act, 1956 only and that penalty levied for compounding appears excessive in view of orders issued by the same Ld. Tribunal and other Tribunals in similar cases and therefore penalty should be levied at the rate of Rs.50 per day for every day during which the default continued, both for the company and for the directors.
Appeal allowed.
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2025 (1) TMI 1455
Refund of excess amount of Additional Fees charged from the Petitioner Companies on account of delay in filing Financial Statements along with interest - HELD THAT:- It emerges that the AGM of a Company has to be held by the 30th September of the given year which can be extended maximum by three months by the ROC. It is a Statutory Provision and the date of holding of AGM cannot be modified or changed by any Office Order.
In the present case, the Petitioners in consonance with the provisions of the Companies Act, held their AGM on 29.10.2019 i.e. within the statutory period. Having so done and the financial statements having been approved in the AGM, they were bound to submit the said statements to the ROC within thirty days of the AGM as has been provided in Section 137 of the Companies Act. There is no circumstance in which Section 137 can be modified or the period of submitting the Financial Statements extended beyond the 30 days from the date of holding the AGM.
From this Section 403 also, it is evident that whatever are the timeframes provided under the Act for filing of the documents, statement etc., if not done within the given time, then the same shall be accepted on payment of the penalty as described therein i.e. not less than Rs.100/- per day. This Section also does not give any discretion to extend the time of taking the Statements u/s 92 or 137 of the Companies Act or of reducing/waiving the fines - From the bare perusal of Circular dated 29.10.2019, it is abundantly clear that it provided a window for filing the Financial Statements by the Companies latest by 30.11.2019. It was only to deal with the situation where any Company had failed to submit their Financial Statements within the prescribed time period, they permitted to be filed within the relaxation period extended vide Circular dated 29.10.2017, i.e. by 30.11.2019. This situation would have arisen for Companies which may have sought extension of time from ROC to conduct their AGM beyond 30th of September.
This Circular cannot be interpreted to read that the date of holding the AGM as provided under S. 97 or of consequent submission of Financial Statements within 30 days thereafter as provided under S. 137 of Companies Act, was modified or extended. To interpret the Circular as extending the time of filing the Financial Statements beyond 30 days of AGM, would tantamount to amendment of the Provisions of the Act, which no Administrative Circular can do - the Petitioners are not correct in their Claim that the Financial Statements could have been filed by 30.11.2019.
Conclusion - The Petitioners were liable to submit their Financial Statements by 29.10.2019 which they have failed to do in accordance with Section 137 of the Companies Act. Therefore, the penalty has been rightly imposed by the Respondents w.e.f. 30.10.2019.
Petition dismissed.
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2025 (1) TMI 1218
Winding up of Company - Section 466 of the Companies Act, 1956 - applicability of principles of res judicata apply to the second application under Section 466 of the Companies Act, given the dismissal of a similar earlier application - HELD THAT:- The Courts in NILKANTA KOLAY VERSUS THE OFFICIAL LIQUIDATOR [1995 (8) TMI 327 - CALCUTTA HIGH COURT] have held that bona fide must be established before a stay on winding up proceedings can be granted. Mere consent of the creditors or an offer of full payment to them is insufficient. The Court must consider the interests of commercial morality, not merely the wishes of the creditors or contributories. The jurisdiction to stay can be used to revive the company or its business and not merely for the benefit of its creditors. This jurisdiction certainly cannot be used to acquire immovable properties or assets of the company at some throwaway price or at a price that bears no proportion to the price that the liquidator could have obtained at a free, fair, transparent public auction.
The scope and import of Section 466 of the Companies Act and the principles on which the Company Court would exercise its powers to stay the proceedings in winding up either altogether or for a limited time on such terms and conditions as it thinks fit. The Appeal Court has held that Section 466(1) confers a discretion on the Court and not a mandate. The discretion must be exercised on the satisfaction that a stay of the proceedings in relation to winding up ought to be granted. The legislature has carefully used the expressions “on proof to the satisfaction” and “ought to be stayed”. Before the Court grants a stay, the statutory requirement is that there must be proof brought before the Court based on which it is satisfied that the proceedings ought to be stayed.
There is no question of this Court for the first time considering the materials on record and deciding whether the discretion should be exercised for grant of stay under Section 466 of the Companies Act. Perhaps, on the ground that there was no substantial change of circumstances or that no material was placed on record to displace the strong findings recorded regarding the motives of the first and third Respondents, we would have declined to exercise our discretion and stayed the proceedings under Section 466 of the Companies Act. But that is, to some extent, besides the point. The impugned orders deserve to be set aside for failure to consider vital material.
Conclusion - i) The principles governing the exercise of discretion under Section 466 of the Companies Act were not noticed and applied at either stage. ii) Mere settlement of the creditors or workers does not entitle any party to a stay of the winding up proceedings under Section 466 of the Companies Act.
The stay on the winding-up proceedings of the said company is dissolved - the impugned orders set aside - appeal allowed.
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2025 (1) TMI 1217
Validity of amendment to the Trust Deed by Respondent No.3, which replaced the Appellant as Principal Trustee - legality of actions taken by Respondent No.3 in convening a Board Meeting and revoking the Appellant's managerial powers - HELD THAT:- There exist extreme hostilities between entire family members and the Ld. Tribunal has also noted about the disputes inter se and went on to say its earlier orders of dated 19th December, 2024 and dated 27.12.2024 have not been complied with by either of the parties and both groups are trying to protect their own interest by changing management at their own will.
The impugned interim order rather serves to maintain critical corporate stability. It preserves the legally constituted board, including independent directors, ensures uninterrupted banking relationships, and protects Respondent No.1 company’s record and assets. Most notably, it maintains the Appellant’s own position as a director of Respondent No.1. The interim order thus not only prevents an illegal takeover but also protects the interests of 2500 employees, banking relationships, and Respondent No.1 company’s operational stability.
The impugned order has been passed by the Ld. NCLT in exercise of its powers under Section 242(4) of the Act, whereby it is empowered to make any interim order it thinks fit for regulating the conduct of the company pending the final hearing of a petition filed under Section 241-242 of the Act.
Conclusion - The interim orders upheld, maintaining the status quo ante regarding the company's management and shareholding structure.
It is not required to interfere in the interim order of Ld. NCLT - The appeal is accordingly dismissed.
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2025 (1) TMI 994
Seeking Court's intervention to direct respondents to adopt a rational policy framework to prevent registration of illegal buildings and to verify the authenticity of documentation submitted for project registration - HELD THAT:- It is pertinent to note the legislative intent behind the Real Estate (Regulation and Development) Act, 2016. The RERA Act, introduced in 2013 and enacted in 2016, was born out of the need for regulatory measures in a sector that had seen substantial growth but lacked adequate consumer protections. As stated in the Act's Statement of Objects and Reasons of the Act, the primary objective is to safeguard home buyers and promote transparency in real estate transactions. This regulatory framework was envisioned to address consumer grievances by establishing accountability mechanisms for developers, minimizing fraud, and reducing delays. Section 3 of the RERA Act mandates prior registration of real estate projects with RERA, prohibiting any advertisement or sale without proper registration, thus reflecting the legislature’s intent to curtail unscrupulous practices in the real estate sector.
The legal position is well settled that, under Article 226 of the Constitution, courts should not engage in speculative or roving inquiries. In A. Hamsaveni & Ors. v. State of Tamil Nadu, [1994 (8) TMI 322 - SUPREME COURT] the Supreme Court held that a petitioner must independently establish a prima facie case, and that court proceedings should not be used as a means to conduct speculative investigations. Similarly, in N.K. Singh v. Union of India [1994 (8) TMI 315 - SUPREME COURT] the Court emphasized that a speculative inquiry is neither warranted nor justified under judicial review, particularly when private rights are at issue. The principle was reiterated in Ratan Chandra Sammanta v. Union of India, [1993 (5) TMI 202 - SUPREME COURT] where it was held that a writ should only be issued when the petitioner has an established right, and that speculative inquiries unsupported by evidence are impermissible.
Conclusion - The integration of local authority websites with MahaRERA's portal is directed within three months to enhance document verification. The commencement and occupation certificates be uploaded within 48 hours of issuance until full integration is achieved.
The PIL petition is hereby disposed of.
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2025 (1) TMI 958
Challenge to orders passed by the Respondent No. 1 declaring him as Wilful Defaulter on the basis of a Transaction Audit Report - procedural requirements under the Master Circular on Wilful Defaulters issued by the Reserve Bank of India (RBI) complied with or not - substantial opportunity of being heard not provided - documents on the basis of which a decision to declare him as Wilful Defaulter was taken, were not provided - violation of principles of natural justice - HELD THAT:- Clause 2.5 of the Master Circular provides for initiation of penal measures against the persons or entities declared as wilful defaulter under Clause 2.1.3 of the Master Circular, which includes non-grant of additional loan facility by any bank or financial institution in the future; debarring them from floating new venture for a period of five years from the date of removal of name as wilful defaulter; initiation of criminal proceedings; change of management of borrower unit; non-induction of the person in the Board of the company etc.
The object of the Master Circular is salutary. The Master Circular aims to protect the country’s banks and financial institutions from unscrupulous entities and individuals. It is intended to identify and punish those entities and individuals who have diverted or siphoned off borrowed funds for purposes other than for which the loan facility was availed leading to default in the repayment obligations. Such individuals and entities must be identified and their names be published in public domain so that they are barred from availing any further loan facility from any other bank. If such an exercise is not undertaken, the cycle of diversion/siphoning of borrowed funds; default and re-borrowing, leading to same situation may continue. Such a scenario may adversely affect the liquidity of the banking system and affect the overall financial health of the country. There is, thus, no doubt that the Master Circular aims to achieve a very laudable object. Notably, the scheme of the Master Circular indicates that it is both a punitive and preventive measure.
The Supreme Court in the case of Jah Developers [2019 (5) TMI 862 - SUPREME COURT], had an occasion to examine the consequences of a person being declared as wilful defaulter under the Master Circular. The Supreme Court held that a person declared as wilful defaulter affects the fundamental right of a person under Article 19 (1) (g) of the Constitution as it directly affects the right to do business and thus, the Master Circular must be construed reasonably.
The graver the consequences of such civil action, the higher is the degree of proof required. If this principle of law is tested on the anvil of the Master Circular, it is clear that the Master Circular entails not only grave civil, but also penal consequences. Considering the subject matter and grave civil and penal consequences, the validity of an order declaring as wilful defaulter would require a closer scrutiny as to whether such an order falls within the four corners of the procedural mechanism prescribed in Master Circular or is it otherwise.
It is thus safe to accept that the basis of issuance of the SCN was primarily the findings in the TAR, which were observed by the NCLT to be mere assumptions. Considering the grave consequences that follow a finding by the WDC, the degree of proof required and expected to have been relied upon by the WDC should be much higher and not simply based on a TAR which itself was unacceptable to the NCLT.
Principles of natural justice - HELD THAT:- It is not for the WDC to shrug away its responsibility under the pretext of such presumptions and assumptions. The statutory procedural mechanism laid down in the Master Circular, interpreted in various decisions of the Supreme Court must be followed by the Respondent No. 1 and its committees in letter and spirit. There are no hesitation in agreeing with the Petitioner that the personal hearing cannot be construed to be meaningful with the Petitioner having his hands tied behind in the context of the Respondent No. 1 withholding the necessary documents and expecting to offer his comments.
Maintainability of the present petition against the Respondent No. 1-Bank - HELD THAT:- The Supreme Court in the matter of Jah Developers [2019 (5) TMI 862 - SUPREME COURT] clearly expressed its view that Article 19 (1) (g) of the Constitution of India is attracted as the moment a person is declared as wilful defaulter there is a direct and immediate impact on his fundamental right to carry on business. It is settled law that a Fundamental right under Article 19 or 21 can be enforced even against persons other than State or its instrumentalities - there are no hesitation in holding the present petition to be maintainable against the present Respondent No. 1.
Conclusion - The statutory procedural mechanism laid down in the Master Circular, interpreted in various decisions of the Supreme Court must be followed by the Respondent No. 1 and its committees in letter and spirit. The necessity of adhering to procedural fairness and natural justice in proceedings that have severe consequences, such as being declared a wilful defaulter established. The SCN and related orders quashed due to procedural lapses and violations of natural justice, while affirming the maintainability of the Petition under Article 226.
Petition allowed.
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2025 (1) TMI 957
Seeking grant of Regular bail - allegations of serious fraud and financial mismanagement under the Companies Act, 2013 and 1956 - twin conditions under Section 212(6) of the Companies Act, 2013, which pertain to the grant of bail in cases involving serious frauds investigated by the SFIO satisfied or not - HELD THAT:- It is observed by this Court that it is a common ground between the CSL and the investors that the liquidation of the Company is not in the interest of the investors as substantial amounts have been invested by them in residential/commercial projects proposed by the CSL and the said fact has been duly noted by the concerned Company Court in its order dated 24th August, 2023 (which is part of the record). It is pertinent to mention here that the said facts and circumstances were also taken into consideration by the Predecessor Bench of this Court while deciding the grant of interim bail to the applicants.
It would not be impermissible under the law to consider the aspect of grant of regular bail in order to allow the accused applicants to revive the CSL in furtherance to the completion of the pending projects - This Court is well cognizant of the fact that the Courts ought to bear in mind that in a matter of regular bail under Section 439 of the CrPC (now Section 483 of the BNSS), the larger interest of the State must be taken into consideration. Further, a sensitive approach is required to be acquired by the Courts while dealing with the offences constituting economic offences which are increasing plight of this nation as the same impacts the individual roots of the society which is a common man, ultimately leading to minimize the trust of the public in law.
Section 212(6) of the Companies Act imposes twin conditions for granting bail to accused persons in cases involving serious frauds investigated by the SFIO. These conditions are, that an offence covered under Section 447 of the Companies Act shall be cognizable and no person accused thereof shall be released on bail or on his own bond unless the Public Prosecutor has been given an opportunity to oppose the application for such release and where the Public Prosecutor opposes the application, the Court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he not likely to commit an offence while on bail.
In the present case, this Court, while refraining from adjudicating on the merits of the allegations, observes that the applicants have made bona fide efforts to revive the projects and safeguard the interests of the investors. The said actions not only reflect their intent to rectify the consequences of the alleged offences rather than perpetuating fraudulent activities, but also prima facie satisfies this Court that there are reasonable grounds to believe that the applicants might not be guilty of the offences and they are not likely to commit any offence while on bail as they have sought bail so that they may make efforts towards revival of the CSL and complete the pending projects.
This Court holds that the applicants meet the twin conditions under Section 212(6) of the Companies Act and their release on bail would serve the larger public interest without compromising the ongoing legal proceedings.
Conclusion - This Court is of the considered view that directing the applicant to first physically surrender and then proceeding with the adjudication of the instant regular bail applications would not serve any substantial purpose and accepting the argument of the respondent might hinder the applicants’ ongoing pending efforts to resolve the grievances of the investors by implementing the proposed revival schemes.
Both the applicants be released on regular bail subject to fulfilment of conditions imposed - bail application allowed.
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2025 (1) TMI 956
Dissolution of the company - Section 481 of the Companies Act, 1956 - HELD THAT:- Having heard the learned advocate for the Official Liquidator and on perusal of the record of this report and in the facts of the case the report deserves to be accepted.
The Official Liquidator is permitted to make payment towards professional fees of Rs. 1,500/- to M/s. P. C. Rathod & Co., Chartered Accountants towards preparation of Auditor’s Certificate from common pool account available with the Official Liquidator since there is no fund in the account of the company in liquidation.
Conclusion - M/s. Tirupati Foundry Private Limited (In Liquidation) is hereby dissolved under Section 481 of the Act and the Official Liquidator attached to this Court stands discharged and is relieved as liquidator of M/s. Tirupati Foundry Private Limited., (in Liquidation).
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2025 (1) TMI 955
Maintainability of the company petition - non-compliance of Section 244(1) of the Companies Act, 2013 was wrongly rejected by Ld. NCLT - Petition filed by legal representatives of a deceased shareholder - locus standi of the respondents to file the petition - HELD THAT:- Admittedly the consent terms were taken on record in such Testamentary Suit No.883/2014 also. Admittedly all legal heirs who had entered the consent terms were Class II legal heirs of Late Smt Tanna and it was noted in the order dated 04.05.2017 in view of consent terms Probate was not required. Now the Probate was only required when all legal heirs had wished to act under the Will of Late Smt Tanna but, admittedly, they never acted under such Will. Thus to say the Respondents No.1 and 2 could not have acted under the consent terms is not correct.
A bare perusal of the impugned order, in the facts of this case pleaded before us depicts of no infirmity. Admittedly the shareholding of the deceased Smt Tanna have been brought from 66% to 6% after her death and the reason given is she could not invest more money after her death. Looking at the conduct of Respondent No.3 who was in control of appellant company after the death of Smt Tarla Tanna, it gives all the more reason that her Estate be represented by someone who could protect the interest of legal heirs either per Consent Terms and/or under a Will, if Respondent No.3 succeeds in any of the cases, but till such time her Estate and her shareholding needs to be protected and for this reason there must be someone to represent her estate/shareholding in the company.
Conclusion - The respondents have the locus standi to maintain the company petition under Section 241. The NCLT did not exceed its jurisdiction, and the pending legal proceedings do not preclude the petition's maintainability. The allegations of oppression and mismanagement warrant examination, and the respondents are justified in representing the deceased's estate.
Appeal dismissed.
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2025 (1) TMI 794
Justification of Claim Management Advisor (CMA) in categorizing the claims related to delay in possession as "put under adjudication" - HELD THAT:- The CMA has categorically stated that the reimbursement of rent was not provided for in any document entered into between the Appellants and Maytas and there was no commitment to pay rent.
In terms of the claims management process under the resolution framework, there is a clear distinction between verification of claim and adjudication of claim. The CMA has categorically and consistently stated that the reimbursement of rent was not provided for in any document entered into between the Appellants and Maytas and there was no commitment to pay rent to the Appellants. On looking into the clauses of the Agreement also, there are no provision for payment of loss of rent or alternative accommodation rent being the relevant parameter for quantification of damages for delay in construction. Given this backdrop, the CMA was right in asserting that he cannot verify any claim basis rental agreements unilaterally produced by the Appellant when the Agreement did not provide scope for such rental agreements to determine the damages for delayed possession. Under such circumstances, it is not found either unreasonable or unfair on the part of the CMA in having pointed out that any claim premised on the above parameters would fall in the realm of adjudication which would be beyond the limited jurisdiction of the CMA. The CMA clearly did not have the jurisdiction to determine the claim, nor are there any mitigating factors in the IBC or the CIRP Regulations framed thereunder bestowing any such adjudicatory jurisdiction on the CMA.
Conclusion - There are no reason to differ with the findings of the Adjudicating Authority that the claims on account of delayed delivery of flat and mental agony is in nature of unliquidated damages and there is no agreement between the parties for payment of the same, hence the same cannot be admitted.
Appeal dismissed.
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2025 (1) TMI 555
Sanction of Scheme of Amalgamation - Section 230-232 of Companies Act, 2013 - material information was suppressed which had a substantial impact on valuation of the shares - rejection of scheme even when overwhelming majority of shareholders and creditors have approved it.
HELD THAT:- DCF method is one of the recognised methods for valuation of shares and the valuers, as well as the amalgamating companies cannot be faulted for using it. It is also to be noted that DCF method relies on future earnings, rather than ownership of assets. The allegation that valuer has not verified the information before valuation is answered by the Amicus Curiae himself that work of the valuer does not include an audit and that he is not required to express any audit opinion or any other form of assurance on this information, and generally a valuer would consider circumstances existing on the valuation date.
It is found that no objection to the Scheme was raised by any of the statutory or regulatory authority, except the Income Tax Department. The Competition Commission of India has stated that the Scheme does not cause any appreciable adverse impact on competition and they have no objection to its approval. The Competition Commission of India, The Registrar of Companies and The Regional Director, Ministry of Corporate Affairs have not raised any objections viz. a viz. compliance of various provisions of the Companies Act, 2013 and Competition Act. SEBI and Stock Exchanges have not raised any compliance issue regarding the listed entities involved in the Scheme.
It has been held by Hon’ble Supreme Court in the case of MIHEER H. MAFATLAL VERSUS MAFATLAL INDUSTRIES LTD. [1996 (9) TMI 488 - SUPREME COURT], it is for the equity shareholders acting bona fide in the interest of their class as a whole to accept a particular scheme and once the exchange ratio is worked out by a recognised firm of Chartered Accountants who are experts in the field of valuation and if no mistake can be pointed out in the said valuation, it is not for the court to substitute its exchange ratio, especially when the same has been accepted without demur by the overwhelming majority of the shareholders.
In the present case the valuation of shares and determination of Fair Equity Share Exchange Ratio has been done by experts, and the method of valuation used, namely, Discounted Cash Flow Method is universally accepted as a valid recognised method for valuation of shares - Income Tax Department had initially raised the objection but had later left the approval of the Scheme at the discretion of the Tribunal, stating that in case scheme is approved, Revenue’s interests be protected. The Revenue’s interests are protected in the Scheme and as noted in para – 11 supra the Transferee company has undertaken to bear the tax liabilities, and the proceedings, against the Transferor companies can be continued against the transferee company.
Conclusion - i) Ld. NCLT, Chandigarh has erred in interfering in the Scheme ignoring the commercial wisdom of shareholders, creditors and Board of Directors of the appellant companies. ii) The prayer to sanction the scheme of amalgamation between the Appellants, allowed.
Appeal allowed.
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2025 (1) TMI 554
Reduction of share capital - Compliance with Section 66(1)(b)(ii) of the Companies Act, 2013 or not - permissibility of conversion of reduced share capital into interest-bearing unsecured loans - HELD THAT:- The company has a power to reduce its shareholding capital in any manner, it being a domestic issue. Thus considering the fact none of the creditors ever raised any objection, even the Regional Director (Western Region) and the Registrar of Companies did not object to such reduction and also a special resolution dated 29.11.2022, having been passed by 100% majority of shareholders, it is found that there is no impediment to grant permission to the appellant for reduction of its shares by confirming the special resolution dated 29.11.2022.
Conclusion - The impugned order set aside, permitting the reduction of share capital as proposed by the appellant company.
Appeal allowed.
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2025 (1) TMI 489
Maintainability of appeal under Section 483 of the Companies Act, 1956 - transfer of Equity shares - fraudulent preferences or void transactions under Sections 531, 531-A, and 536 of the Companies Act, 1956 - HELD THAT:- There are no hesitation in holding that the appeal filed by the appellant No.1 CRBCML, through appellant No.2 Mr. C.R. Bhansali is not maintainable in law. First things first, it is pertinent to mention that the learned Single Judge while passing the impugned order dated 25.07.2023 had delved into the issue of the maintainability of the objections that were being raised on behalf of the appellants - it is an undisputed position that the shares in questions were purchased by the applicants through the RBI-approved Stock brokers in the open market. Furthermore, it is a matter of fact that the Reserve Bank of India's (RBI) order dated April 9, 1997, directing CRBCML not to proceed with any sale, transfer, or charge on the property or assets without written consent, was not in the public domain, and the applicants had no notice of the directions passed by the Company Court. The applicants, in ignorance of such facts, apparently bought the shares from open market and paid the consideration thereof.
It is not within the jurisdiction of the Company Court to investigate, at the behest of the appellants, the sale of shares by CRBCML, including the recipients or the consideration involved. Undoubtedly, the transfer of equity shares occurred during a period when such transfers were typically executed through the exchange of share certificates along with signed or blank transfer deeds. The sole requirements were a Contract Note in favour of the transferee, substantiated by the payment of the share amount to the Stock Broker.
Conclusion - i) The present appeal by Appellant No. 1, CCL, and Appellant No. 2/Ex-Director, is not maintainable under Section 483 read with Sections 521& 531-A of the Act. The objections raised by them to the clarification applications preferred by the applicants/transferees in the winding-up petition cannot be entertained in law. ii) Since the sale of shares took place prior to 09.04.1997, although the company (in liquidation) remained its de jure owner, the de facto legal right or title in the same passed on to the applicants in the ordinary course of business and thus was saved by Section 562 (2) of the Act.
Appeal dismissed.
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2025 (1) TMI 488
Maintainability of petition - availability of alternative remedy - Liability for default in holding the Annual General Meeting - HELD THAT:- The Petitioner herein in accordance with the scheme of the Companies Act, has rightly approached the NCLT with a Petition under Section 241 of the Companies Act, 2013 wherein admittedly one of the five Reliefs claimed are for holding of the Annual General Meeting. Though the waiver has not been granted to the Petitioner since the Petition was not supported by 1/5th members of the Company, however, Section 421 of the Companies Act, 2013 clearly provides for a remedy by way of an Appeal to Appellate Tribunal. The Petitioner himself has submitted that he intends to approach the NCLAT for redressal of his grievances of rejection of petition under Section 241 of the Companies Act, by NCLT.
From the submissions of the Petitioner himself it is evident that firstly, the AGM was scheduled for 29.09.2023 but could not be held on account of sealing of premises by DDA which is still continuing. Secondly, he has already approached the NCLT and has an alternate efficacious remedy to file an Appeal against the orders of NCLT under Section 421 of the Companies Act, 2013.
Conclusion - There being an alternate efficacious remedy available to the Petitioner, the present Writ Petition is not maintainable.
Petition dismissed.
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2025 (1) TMI 436
Seeking suspension of the LOC - whether the apprehensions raised by the investigative agencies justify the continued imposition of restrictions on Petitioner’s right to travel? - HELD THAT:- A Look Out Circular serves as a preventive measure to restrict an individual from leaving the country, particularly when there are reasonable grounds to believe that such departure may hinder legal proceedings or jeopardize investigations into serious transgressions. While the issuance of an LOC aims to safeguard the interests of justice, it must be reconciled with the constitutional guarantees of personal liberty. The right to travel abroad has been recognized as an integral aspect of the right to life and personal liberty enshrined under Article 21 of the Constitution of India.
The principle of res judicata, enshrined in Section 11 of the Code of Civil Procedure, 1908, precludes a Court from adjudicating an issue that has been directly and substantially decided in a prior proceeding between the same parties. However, the doctrine of res judicata does not rigidly apply to writ proceedings, especially in cases where ongoing violations of fundamental rights are alleged. Even the principle of constructive res judicata which is often applied to ensure judicial finality, cannot prevent the enforcement of fundamental rights when the cause of action has undergone change. When subsequent developments alter the factual or legal matrix, courts retain the flexibility to revisit and adjudicate such matters to ensure justice.
In the present case, while Petitioner’s earlier request for suspension of the LOC in W.P.(Crl.) 2332/2022 was declined, the doctrine of res judicata cannot mechanically bar the current petition. This is because the dismissal of the earlier writ petition was premised in the nascent stage of the SFIO investigation and the preliminary nature of the proceedings under the Black Money Act at that time. However, the circumstances prevailing at the time of adjudicating W.P.(Crl.) 2332/2022 have significantly changed - This assessment is currently under challenge by the Petitioner before the Commissioner of Income Tax (Appeals)-31, New Delhi. Moreover, vide Assessment Order dated 30th March, 2024, the total quantified taxable undisclosed assets of the Petitioner’s son, Mr. Shiv Punj, has been assessed at NIL.
Proceedings under the RBI Master Circular on Fraud - HELD THAT:- The classification of PLL’s account as “fraud” by IDBI Bank was previously challenged before this Court in W.P.(C) 10796/2020. On 12th May, 2023, this Court set aside the Financial Monitoring Report and the classification of PLL’s account as fraudulent. However, this decision was rendered on account of procedural infirmities, resting on the lack of an opportunity of hearing provided to PLL rather than a substantive adjudication on the merits of the allegations. SFIO has correctly contended that the ruling did not exonerate PLL or the Petitioner but was limited to ensuring compliance with principles of natural justice.
While these proceedings signal the gravity of the allegations, they remain at a preliminary stage. As of now, no formal complaint has been filed by IDBI Bank, nor any FIR has been registered against the Petitioner or PLL. This lack of conclusive action demonstrates that the allegations have yet to translate into definitive findings of wrongdoing - In the instant case, in absence of any definitive findings or legal proceedings, an imminent risk warranting the continuation of the LOC against the Petitioner cannot be established.
Status of SFIO Investigation - HELD THAT:- SFIO possesses the mechanism to obtain evidence independently, including through forensic analyses of PLL’s financial accounts. The liquidator of PLL, appointed during the liquidation proceedings, holds custody of all relevant company records, which are readily accessible to the SFIO for their investigation. It is also noteworthy that the investigating agencies are already apprised of the Petitioner’s foreign assets, leaving little room for concealment or evasion. Crucially, there have been no credible allegations of evidence tampering, witness intimidation, or any conduct by the Petitioner that could potentially derail the investigation. In such circumstances, the indefinite continuation of the LOC imposed on the Petitioner cannot be justified. As observed in multiple judgments, including MANEKA GANDHI VERSUS UNION OF INDIA [1978 (1) TMI 161 - SUPREME COURT] any restriction on personal liberty must meet the test of proportionality and be reasonably connected to the legitimate - while the SFIO’s concerns regarding the gravity of the allegations cannot be dismissed outright, investigations must not become an instrument for imposing indefinite constraints on an individual’s fundamental rights, particularly when no substantive evidence has been presented to establish non-cooperation or obstruction by the Petitioner. Discharge from Personal Guarantees.
Furthermore, an application filed by the Union Bank of India under Section 95 of the Insolvency and Bankruptcy Code, 2016, seeking to invoke the Petitioner’s personal guarantees, was dismissed by the NCLT in its order dated 10th January, 2024. The NCLT’s relied on the DRT’s findings, which had already discharged the Petitioner from his personal guarantees.
Conclusion - The right to travel abroad, being an essential component of the right to personal liberty under Article 21 of the Constitution, cannot be curtailed arbitrarily or indefinitely. Restrictions such as an LOC must pass the test of proportionality and necessity, ensuring that they are imposed only when supported by credible material. In the present case, while the State’s interest in investigating allegations of financial impropriety is undeniable, this Court finds that the absence of tangible material on record of the Petitioner’s intent to abscond or tamper with the investigation tilts the balance in favour of permitting conditional travel - The permission to travel abroad given in this order shall be subject to all other applicable conditions and shall not be deemed as a direction to any other authority. In case any of the afore-noted conditions are violated, the security shall be forfeited.
The present petition is disposed of.
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2025 (1) TMI 230
Jurisdiction of High Court to transfer the Company Petition to the National Company Law Tribunal (NCLT) for initiating the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC) 2016 - winding-up proceedings makes it appropriate or feasible to transfer the case to the NCLT or not - HELD THAT:- This Court passed the winding up order on 21.09.2015 and the Liquidator was appointed. Since, nothing substantial could be achieved towards liquidation of the available assets of debtor company, this Court on the suggestions of stake holders ordered a meeting of Department of State Excise, official Liquidator and Bank of India (lead bank for consortium of creditors). Eventually, the creditors arrived at consensus and this Court passed an order dated 02.08.2019 authorizing Excise and Taxation Department of the State to conduct sale proceedings on the assets of debtor company.
In ACTION ISPAT AND POWER PVT. LTD. VERSUS SHYAM METALICS AND ENERGY LTD. [2020 (12) TMI 535 - SUPREME COURT], the power of Company Court to transfer the matters before it dealing with winding up of the companies to NCLT under Section 434(1) (c) of Companies Act, 2013.
This Court is having the jurisdiction to transfer Company Petition No.13 of 2014 to NCLT subject, however, to a condition that the winding up proceedings have not reached a stage where it would be irreversible, making it impossible to set the clock back - thus, partial sales of the assets of debtor company have already been made. Noticeably, the third party rights (auction purchaser) have come into being. There are pending issues with respect to confirmation of sales already effected.
Conclusion - An irreversible situation has been created as partial sales of assets have been effected and a substantial amount has already been collected, therefore, it will not be in the interest of justice to exercise discretion in favour of the applicant-SBI.
Application dismissed.
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2025 (1) TMI 155
Rejection of application of the appellant for the listing of shares - appellant had not taken the approval of the shareholders for the allotment of the shares to the Asset Reconstruction Private Limited - HELD THAT:- The conversion of the debt into additional shares had taken place with the agreement of the appellant company and RARE, and it is on the basis of such an agreement between the parties that a resolution was passed on 02.05.2018 by the Board of Directors of the appellant company accepting the proposal to convert the debt into shares and to allot them in favor of RARE, thus, resulting in increase of the equity capital of the appellant company. Even the application for listing of the aforesaid additional shares was made by the appellant company to the BSE meaning thereby that the proposal for increasing the subscribed capital of the company by converting part of the debt into equity shares, as aforesaid, was initiated by the appellant company itself and not actually by RARE. Therefore, the proposal was that of the company only. Accordingly, as contemplated by Section 62(1)(c) of the Companies Act, 2013, the approval of the shareholders would be mandatory before the shares are accepted for listing on the BSE.
For want of approval of the BSE, the Securities Appellate Tribunal has returned a clear finding that the approval of the BSE is necessary in view of Regulation 28 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and there are no different opinion on it rather the said finding is accepted which is not perverse in any manner. In view of the aforesaid facts and circumstances, it is opined that no error or illegality has been committed either by the BSE or the Securities Appellate Tribunal in refusing to accept the request of the appellant company for the listing of the shares at the Stock Exchange inasmuch as Section 62 of the Companies Act stands duly attracted and in the light of sub-clause (c) of sub-section (1) of Section 62 of the Companies Act, special resolution of the shareholders is necessary which is lacking in the instant case.
Conclusion - When a company proposes to increase its subscribed capital, shareholder approval is mandatory under Section 62(1)(c) of the Companies Act, 2013.
This statutory appeal under Section 22 F of Securities Contracts (Regulation) Act, 1956 is devoid of merit and is dismissed.
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2025 (1) TMI 154
Dismissal of petition filed by the appellants under Section 241 of the Companies Act, 2013 - dismissal on the ground it does not meet the criteria as is provided for in Section 244 of the Companies Act, 2013 - HELD THAT:- A bare perusal of the impugned order would show the Ld. NCLT had observed Section 244 of the Companies Act, 2013 requires the following conditions for filing an application/petition under Section 241 of the Companies Act viz. a) in case of a company having share capital, not less than 100 members of the company; or b) not less than 1/10 of the total number of its members whichever is less; or c) Any member of members holding not less than 1/10 of the issued share capital of the company.
Admittedly there were 30 members of Respondent No.1 at the time of filing of Company Petition. Admittedly four of them filed the petition under Section 241 hence condition (b) above viz. not less than 1/10 of the total number of members could apply was fulfilled, thus Company Petition was maintainable.
Appeal allowed.
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2025 (1) TMI 19
Professional misconduct under Section 132(4) of the Companies Act, 2013 - Penalties and sanctions - HELD THAT:- There exists reasons to believe that the Auditors did not exercise due diligence in ensuring the audit quality expected in an audit of a public interest entity and were grossly negligent in the conduct of the professional duties by not adhering to the requirements as laid down by the relevant statutes. The Auditors' conclusion that they do not have reasons to believe that fraud is committed by the officers of the Company is not supported by sufficient appropriate audit evidence. The Auditors also failed to identify the persons comprising TCWG. The Auditors' failures in the audit, as mentioned in Paragraphs 16 to 70 above, amount to professional misconduct as per Section 132 (4) of the Companies Act, 2013.
The charges of professional misconduct in the SCN are established based on the evidence in the Audit File, the audit reports on the financial statements for the FY 2018-19 and 2019-20, the submissions made by the Auditors, and the Annual Report of ZEEL for FY 2018-19 and 2019-20.
Penalties and sanctions - HELD THAT:- Section 132 (4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law.
Because professional misconduct has been proved and considering the nature of violations and principles of proportionality and in view of the directions issued to the Audit Firm, in the exercise of powers under Section 132 (4) (c) of the Companies Act, 2013, it is ordered as under:
a. Imposition of a monetary penalty of Rupees Two Crore upon M/s Deloitte Haskins & Sells LLP.
b. Imposition of a monetary penalty of Rupees Ten Lakhs upon CA A.B. Jani and in addition CA A.B. Jani is debarred for 5 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.
c. Imposition of a monetary penalty of Rupees Five Lakhs upon CA Rakesh Sharma and in addition, CA Rakesh Sharma 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.
Conclusion - Auditors must exercise due diligence, maintain professional skepticism, and obtain sufficient audit evidence to support their opinions. Failure to do so constitutes professional misconduct.
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