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Companies Law - Case Laws

Showing 441 to 460 of 15082 Records

• 2023 (6) TMI 1375
  

  Professional misconduct by CA - penalty order u/s 132 (4)(c) of the Companies Act, 2013 - submission is that after filing of the Appeal and deposit of 10% of penalty, further proceedings as contemplated in Rule 12 regarding the intimation cannot take place - HELD THAT:- Rule 12, sub-rule (3), uses expression imposition of penalty or debars the Auditors from practices. Sub-rule (3) requires sending of the order to every company or body corporate in which the Auditor is functioning as Auditor. Sub-rule (3) of Rule 12 is, thus, independent provision. Thus, Rule 12, sub-rule (2) provides that action against Auditor in event the Appeal is filed under Rule 12, sub-rule (1), after depositing the 10% penalty amount, the consequences as contemplated under Rule 12, sub-rule (2) shall not take place. Thus, in case when an Appeal is filed with deposit of 10% of penalty, it is not obligatory to the company or body corporate to appoint a new Auditor as required by sub-section (2) of Rule 12. However, sub-rule (1) and (2) are only confine to cases where only monetary penalty has been imposed. These two sub-rules have no application with regard to cases where penalty of ‘debarment’ has been imposed. Omission of ‘debarment’ in sub-rules (1) and (2) are with the purpose and object.

  The learned Counsel for the Respondent has placed reliance on judgment of Hon’ble Supreme Court in MD. ALAUDDIN KHAN VERSUS KARAM THAMARJIT SINGH [2010 (7) TMI 1006 - SUPREME COURT] where Hon’ble Supreme Court while considering the principle of statutory construction has noted the principle that express inclusion of one thing is the exclusion of all others.

  The consequence of subrule (4), Rule 12 is that when procedure under Rule 12, sub-rule (2) has been initiated, company or body corporate has to appoint a new Auditor, the clear intendment is that in case of a debarment, the Auditor is not entitled to continue to discharge his functions and a new Auditor as contemplated is to be appointed - Rule 11, sub-rules (6) and (7), which provides that the orders passed under sub-rules (6) and (7) shall not become effective until thirty days have elapsed from the date of issue of the order unless the Division states otherwise in the order along with the reason for the same.

  Present are cases where the orders were not to become effective until thirty days have elapsed. There is purpose and reason for providing the thirty days period. Thirty days period is provided for Auditors against whom orders have been passed to wound up their affairs in company or body corporate where they have been functioning.

  Filing of the Appeal by the Appellant(s) with deposit of 10% of the penalty shall have no effect on the order of ‘debarment’ passed against the Appellant(s) under Section 132(4)(c) and under head (B). Order of ‘debarment’ shall continue to operate unless an order is passed by the Appellate Tribunal - it is deemed fit and appropriate to give an opportunity to the Appellant(s) to make their submissions on the merit and this Tribunal after hearing the Appellant(s) as well as Respondents shall take appropriate decision on the application filed for the interim relief in each of the Appeal(s).

  All these Appeal(s) be listed for admission and consideration of application for interim relief on 3rd July, 2023.

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• 2023 (6) TMI 1350
  

  Jurisdiction of the National Financial Reporting Authority (NFRA) established inter alia under Section 132(1) of the Companies Act, 2013 - HELD THAT:- The direction is that all Petitioners must coordinate between themselves to present their arguments on one day together on the jurisdictional issue. It seems unworkable to expect the Authority to hear the same argument on jurisdiction repeatedly. How the submissions are to be divided between the parties and their counsel is a matter left to them but the scheduling by the Authority should ideally be in such a way that the jurisdictional point is on one day when all counsel for all matters can be heard. Thereafter a different schedule can be set for the facts for the individual cases that follow thereafter, if necessary, i.e., if the authority finds that it does have jurisdiction.

  Petition disposed off.

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• 2023 (6) TMI 1086
  

  Interest earned on the aggregate escrowed amount - Liability of the petitioners to deposit to the Investor Education Protection Fund (IEPF) under Section 125 of the Companies Act, 2013 - whether the petitioner no. 1-Company is liable to transfer the interest earned on the aggregate escrowed amount (including the principal and the accrued interest thereon) also to the IEPF? - Doctrine of estoppel against statute -

  HELD THAT:- A close examination of Section 205C and Section 125 of the 1956 and 2013 Acts shows that the said provisions do not have any direct conflict with Chapter IIIB of the RBI Act. Whereas the provisions of the said two Companies Acts govern all companies generally, Chapter IIIB of the RBI Act pertains to certain provisions specifically relating to non-banking institutions receiving deposits and to financial institutions, insofar as such disputes are concerned.

  The Peerless, that is, the petitioner, is squarely covered under the said definition and, as such, Chapter IIIB governs the functioning of the petitioner’s company as well - Chapter IIIB operates in particular spheres. Whereas a variety of functioning of NBFCs is covered by the directions contemplated in Chapter IIIB, very few of the same are pertinent in the present context. As for example, Section 45 IA pertains primarily to requirement of registration and net owned fund, Section 45 IB to maintenance of percentage of assets and 45 IC to reserve fund. Section 45 ID deals with the power of the bank to remove directors from office and Section 45 IE with supersession of Board of Directors of NBFCs other than Government Companies. Section 45 J pertains to regulation or prohibition of issue of prospectus of advertisement soliciting deposits of money.

  It is relevant to mention here that the Escrow Account was created in terms of the order of Court and specifically to deposit the amount which was the subject-matter of the present lis. Hence, the said deposits were sub judice and it was de hors the authority of the RBI to dictate the fate of the same. Moreover, as discussed above, nothing in Chapter IIIB pertains to interest on Escrow Accounts in cases such as the present one. Even if the RBI advised the petitioner that any interest received by the Company on investment in FDs/government securities would be available to the company, the same pertained only to interest “received by the company”. However, the interest which accumulated on the deposits in the Escrow Account in the present case, under no stretch of imagination, could be said to be received by the Company. The said amounts were sub judice and were subject to the outcome of the present writ petition. Hence, the argument that the directives of the RBI prompted the petitioner to use such interest is neither here nor there.

  The entire entitlement of the deposits in the Escrow Account, on which the interest was accrued, belongs to the IEPF.

  The interest accrued in the Escrow Account in the present case was not a component of the usufructs of the petitioner’s functions in any manner but, all along, belonged to the IEPF, which is an entity constituted statutorily for specified purposes. The purpose of the creation of the IEPF would itself be defeated if the petitioner is permitted to usurp the said interest. Hence, it cannot be said that the petitioner is entitled to such interest in any manner.

  Doctrine of estoppel against statute - Power of RBI to issue instructions under the Companies Acts, 1956 or 2013 - NBFC - HELD THAT:- The same need not be invoked in the present case since, the RBI did not give any specific direction to the petitioner, nor did the petitioner construe any such direction so as to defeat the right of the IEPF conferred under a different statute that is the 2013 Act and, thereinbefore, by the 1956 Act.

  Petition allowed.

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• 2023 (6) TMI 1059
  

  Seeking mandamus in relation to an ongoing investigation and seek compliance of sections 217 and 220 of The Companies Act, 2013 - jurisdiction to hear the present writ petition on the same cause of action - whether the present writ petition is barred by the principle of constructive res judicata? - HELD THAT:- The statutory position under section 212 of The Companies Act, 2013 and the decision of the Supreme Court in Rahul Modi [2019 (3) TMI 1411 - SUPREME COURT], discourage passing of orders which would be contrary to law.

  The observations made with regard to the legitimate expectation of the petitioners for completion of the investigation within a reasonable time frame however remains. The SFIO is hence expected to act in terms of such legitimate expectation as well as the principles of equity and fair play with regard to completing the investigation within a reasonable time frame.

  Application disposed off.

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• 2023 (6) TMI 903
  

  Liability of Purchaser of the Company which was sold as a going concern in liquidation proceedings - Old and past sales tax dues - raising tax demand against the petitioners as impugned, which include demands under the Sales Tax Act - HELD THAT:- In view of the orders dated 9th March, 2021 passed by NCLT, the petitioners would submit that it was always open to the respondents to take steps to recover the tax dues from the Directors of the erstwhile company, as it stood prior to the same being taken over by the petitioner.

  The next contention as urged on behalf of the petitioners is that the respondents in the present case cannot take any action, which is contrary to resolution plan which has attained finality in view of the order dated 9th March, 2021 passed by NCLT - In the said application, the State Tax Authorities sought to contend that the claims of the Sales Tax Department, should be treated as the claim of a secured creditor and in that regard the adjudicating authority viz. NCLT had committed an error - It is stated that till the date no further steps are taken by the State Government to challenge the said order. In this view of the matter, there appears to be much substance in the contentions as urged on behalf of the petitioners in assailing the actions of the respondents as challenged in the petition.

  The parties need to be finally heard on the present proceedings. Hence, Rule. Respondents waive service. Rule is made returnable on 25 August 2023.

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• 2023 (6) TMI 855
  

  Prosecution proceedings against the petitioners / accused - Allegation of illegal removal complainant from Directorship - Using forged signatures and uploading DIR-12 with resignation letter - Allegation of mismanagement and oppression - authority to convene any extraordinary general meeting of the Company - whether the criminal proceeding instituted against the petitioners is liable to be quashed under Section 482 of the Cr.P.C.?

  HELD THAT:- With extensive scope and ramification, inherent powers under Section 482 of the Criminal Procedure Code include the power to stop any criminal case pending before any court subordinate to the High Court. Depending on the specifics of a case, these powers may be used to secure the ends of justice, prevent abuse of any court's process, and issue any orders as may be necessary to give effect to any order under the Code. The court can always take note of any injustice and stop a criminal proceeding by using its authority under Section 482 of the Criminal Procedure Code. No other clause of the Code restricts or limits their capabilities. Such natural powers should only be used sparingly and with caution.

  In State of Haryana v. Bhajan Lal [1990 (11) TMI 386 - SUPREME COURT], a two-Judges Bench of the Supreme Court of India considered in detail the provisions of Section 482 and the power of the High Court to quash criminal proceedings or FIR where it was held that The Government order authorised the Inspector General of Police to investigate only the offences failing under Section 5 of the Act. Therefore, the SHO who has taken up the investigation of the offences inclusive of those under Section 161 and 165 IPC is not at all clothed with any authority to investigate these two offences, registered under the IPC, apart from the offence under Section 5(2) of the Act.

  The matter at hand is not a rare case that justifies the Court's interference at the investigation stage. The allegation in the FIR makes out a prima facie case against the accused, and for this reason, the FIR registered in the Hare Street Police Station under Sections 120B/406/465/467/468/471/420 of the Indian Penal Code, 1860 should not be quashed.

  There are no reason to interfere with the investigational process of the investigating agency in the instant case. Criminal proceeding shall continue - the instant revision is dismissed on contest.

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• 2023 (6) TMI 854
  

  Jurisdiction of Court to entertain the suit - doctrine of forum conveniens - Invoice is raised from Delhi for the work performed within the State of Maharashtra - Seeking a decree alongwith interest compounded annually - rejection of Plaint on the ground of jurisdiction - seeking deletion of names from the array of Defendants - HELD THAT:- The essential prerequisite for invoking clause 8 is the existence of a dispute. In the facts of the present case, the record bares out that infact the Defendants had at no point of time, prior to the filing of the Affidavit in Reply to the Summons for Judgment never raised any dispute whatsoever qua any of the said invoices - the Defendants have also received the Plaintiffs letter dated 8th April, 2020 and legal notice dated 14th August, 2020 both of which have remained unanswered and undisputed. Thus, in the facts of the present case, there infact exists no dispute and hence the Defendants’ reliance upon clause 8 is not only entirely misconceived but also malafide.

  The invoices do not either expressly or by implication provide that the moneys are payable in Delhi. The invoices infact set out the modes of payment acceptable to the Plaintiff, i.e., either by account payee cheque, demand draft or NEFT/RTGS - Merely because the details of the receiving bank are within the jurisdiction of another city, this fact alone would not mean (a) that the amounts are payable in that city and (b) that part of the cause of action had arisen in that city. Additionally, even assuming that the only mode for payment under the said invoices was via RTGS/NEFT, the same would not by itself amount to monies being payable in Delhi under the contract. The details of the Plaintiff’s bank are set out only to facilitate the payment by electronic mode and nothing else. This by no stretch of imagination can be construed to mean that the amounts due under the said invoices were payable in Delhi.

  The common law proposition is undoubtedly based on the doctrine of forum conveniens, it is basis this that the Plaintiff has filed the present suit in this Court only to be told by the Defendant who neither disputes nor denies the Plaintiffs claim that Suit must necessarily be instituted in a Court which for the Plaintiff is clearly not forum conveniens and within which, no part of the cause of action has arisen. Such a contention must only be stated to be rejected.

  Challenge to the Jurisdiction Bombay High Court rejected.

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• 2023 (6) TMI 853
  

  Violation of Section 148(6) of the Companies Act punishable under Section 148(8) of the Companies Act - failure to appoint cost auditor within the time limit prescribed under Section 148(3) and Rule 6(2) of Companies (Cost Records and Audit) Rules, 2014 - HELD THAT:- This Court finds that admittedly, the petitioner was the Chief Financial Officer of the Company from 02.05.2016 to 01.08.2016. The company ought to have appointed the cost auditor for the financial year 2015-2016 within 180 days from 01.04.2015 i.e. on or before 01.10.2015. The case of the respondent, therefore, is that the company committed the offence on 01.10.2015. The offence under Section 148(8) of the Companies Act may be a continuing offence. However, it cannot be said that the petitioner, who was not in the company when the offence was first committed, is liable merely because he did not rectify the alleged violation during the period when he held the office. The company and the officers, who are in default at the time when the offence was committed, could only be made liable.

  The persons/accused of an offence cannot be based on the date on which the complaint is filed. The accused would and should remain the same whenever the complaint is filed since the offence is committed on a particular date. Persons who came to know of the offence subsequently cannot be made liable merely because the offence is continuing. Any interpretation to the contrary as submitted by the respondent, would lead to an illogical and absurd situation. Whether an offence is continuing or not is relevant only for the purpose of determining as to whether the complaint is barred by limitation. In this case, the company had already committed the offence and the persons who ceased to be the Directors before the alleged offence or had joined the company after the alleged offence cannot be held liable for the said offence.

  In view of the admitted fact that the petitioner joined on 02.05.2016 and resigned on 01.08.2016, and the offence was committed on 01.10.2015, he cannot be held liable for the alleged violation. Hence, the impugned complaint against the petitioner is liable to be quashed.

  Petition allowed.

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• 2023 (6) TMI 706
  

  Oppression and Mismanagement - increase in the paid-up capital from Rs.1 crore to Rs.2 crores in the Extraordinary General Body Meeting - Allegation of fraudulent allotment of shares in respect of the increased share capital against the appellant. - NCLT issued direction for re-issue of shares to existing shareholders - Further directions issued for conducting audit against allegation of siphoning of funds.

  HELD THAT:- The shareholders from the V.P. Patel Group and the Sheth Group, admittedly, did not apply seizing the opportunity given to them. They did not participate in the Extraordinary General Body Meeting held on 27.01.2010 by which the Authorised Capital was increased. Though there is some controversy sought to be raised that the shareholders were not sent any intimation by way of reminder of their right to apply for the shares, we are inclined to hold that the communication was indeed sent in keeping with the decision taken by the Board of Directors, following the Extraordinary General Body Meeting held on 27.01.2010. The members of the appellants Group, on the other hand, applied for shares. Since, it was contemplated that shareholders could apply not only in the ratio of 1:1 but for larger number of shares, apparently, the members of the appellants Group, applied for more number of shares. Thus, though the wife of the first appellant may have been entitled to only 20 shares, if the rights issue was limited to ratio 1:1, since it was decided to give an opportunity to shareholders to apply for more shares than they held and as, apparently, shares were available to be allotted in numbers far greater than what the shareholders were actually holding, the wife of the first appellant, apparently, came to be allotted the seemingly disproportionate number of shares.

  As regards the last complaint, the appellants would point out that actually all that happened was repayment of money brought in earlier by appellant-Group, which was parked with the Company and in connection with the marriage of a family member, the amount was returned. It must be noticed that the allegations and responses from both sides are the subject matter of the audit. We cannot be deflected by the same in ruling on the ‘defect’ or alleged illegality in the matter of allotment of the shares.

  There is no case, that there was any impediment for the respondents to apply, once it is found that they were informed and aware of their right to apply.

  In certain situations, a single act could found a case of oppression. This is not a case where allotment of additional shares was made to anyone other than the existing shareholders. This is a case where the terms were applied equally to all the existing shareholders. The change in shareholding, in that the appellants shareholding grew from 30.80% to 63.58% is the result of the respondents refusal to apply despite being given the opportunity.

  One of the complaints of the respondents is that the purported reason for the increase in the authorized capital and the allotment of the shares also was to infuse fresh funds - HELD THAT:- A perusal of Section 81(1) indicates that it dealt with a proposal to increase ‘the subscribed capital’ of the company by allotment of ‘further shares’. Section 105-C of the Companies Act, 1913, used the words ‘where the Directors decide to increase the ‘capital’ of the company by issue of ‘further shares’. In Section 81 of the Companies Act, 1956, the words used are ‘it is proposed to increase the subscribed capital of the company by allotment of further shares’.

  The Authorised Capital cannot be increased by the Board of Directors. It is out of the Authorised Capital that a company issues shares. It then becomes the Issued Capital. Whatever is issued, need not be subscribed to. Whatever is subscribed to, would become the Subscribed Capital. Paid-up Capital is defined in Section 2(32) of the Companies Act, 1956 as including capital credited as paid-up. The Subscribed Capital may be wholly or partly paid-up.

  An increase in the Authorised Capital does not fall within the powers of the Board, as contemplated in Section 291 of the Act. In Nanalal Zaver (supra), this Court was essentially dealing with the question, as to whether the obligation to offer the shares upon there being a further issue of shares, must be made in conformity with Section 105-C of the earlier Act, which, as we have noticed is essentially the regime continued under Section 81 of the 1956 Act. It is in the said context that the Court held that the Directors could at their own initiative only increase the shares from out of the existing Authorised Capital, but the increase in Authorised Capital could be done only by the company in a meeting of its shareholders. It has been further held that once the Authorised Capital is increased, the Board of Directors would be bound to act under Section 105-C of the Act - The position under the Companies Act, 1956, under Section 81, remained the same in that it is only the company, in its General Body Meeting, which could increase the Authorised Capital. The position still continued that call it increase in Subscribed Capital, it must be within the limits of the Authorised Capital.

  As far as the aspect that, the purported object was shown as generating fresh funds but in place of Rs.90 lakhs only Rs.21 lakhs was brought in goes, the fact that the paid-up capital was apparently shown as credited by cancelling loans due by the company to the appellants group, should not prevent this Court from overlooking the fact that the debt-equity ratio has undoubtedly been improved. It must be borne in mind that the whole idea was to get funds from the Bank for the expansion of the company. The case of the respondents that there were loans due to them also may not advance their case. It would have been different if the respondents had applied and sought adjustment of the consideration by cancelling loans given by them to the company and it was rejected.

  The appellants cannot be described as having acted in a defective or in an unfair manner, in the matter of allotment of further shares particularly when the contention of the respondents about the bona fides of the decision to increase the authorised capital has been found in favour of the appellants - Appeal allowed in part.

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• 2023 (6) TMI 651
  

  Seeking to declare the Meetings of the Board of Directors of the first Respondent Company/M/s. MetroCorp Infrastructure Ltd. as null & void - seeking to declare the Mortgage Deeds signed pursuant to the aforesaid Meetings as null & void - direction of removal of the second Respondent from the Board of Directors of MetroCorp. - case of Oppression and Mismanagement or not.

  HELD THAT:- It is seen from the record that it is an admitted fact by the Appellants themselves that Board Meetings were conducted on 29.10.2008, 25.02.2009, 23.06.2009, 02.09.2009, 27.12.2010, 18.03.2011, 05.10.2011 & 17.10.2011, but it is the case of the Appellants that the four Board Meetings dated 02.11.2009, 10.11.2009 & 25.10.2010 were conducted without issuing proper Notice and were not convened as Article 87(iii) of the AoA and that their nominee Director was not present only because due process of service of Notice was not followed. It is seen from the record that the Board Meetings dated 02.11.2009, 10.11.2009 & 25.10.2010 which the Appellant is strongly contesting are illegal, null & void, are the dates falling in between the aforenoted admitted Board Meetings and being a majority Shareholder the Appellant has failed to adduce any evidence in support of his case that these Board Meetings were not conducted as per procedure of Law specifically taking into consideration that Mr. Jason Van Hoong, who has based in Singapore and China has not chosen to attend a single Meeting either personally or through video conference.

  This Tribunal is of the view that the Appellant has not denied the submission of the Respondent before the NCLT regarding the entries in the passport of Mr. Jason Van Hoong standing testimony to the fact that he had never attended any of these Meetings in India. It is stipulated in Section 283 of the Act that if a Director absents himself from three consecutive Meetings of the Board of the Directors or from all Meetings of the Board for a continuous period of three months, whichever is longer without obtaining leave of absence from the Board, the said Director is ceased to be a Director - The Appellants have not filed any material/documents in support of their contention that being a majority Shareholder they had taken all the steps to be lawfully involved in the Project through their Directors.

  It is evidenced from the record that a Notice of EGM dated 24.06.2013 for the Meeting proposed to be held on 30.07.2013 was sent through RPAD and the Respondent herein has filed the Postal Receipts establishing that the ‘Notices’ were indeed sent and served. A Board Meeting was also scheduled to be held on the same date and a Notice was also issued for the same, the agenda being increase of Share Capital to Rs.1,10,00,000/- and to pass special Resolution to allot Equity Shares to the existing Shareholders - This Tribunal keeping in view the fact and circumstances of the case on hand and the documentary evidence holds that both the EGM and the Board Meetings held on 30.06.2013 were legal & void. As far as the impugned Mortgage Meetings which the Appellant is contesting, keeping in view the material on record we agree with the finding given by NCLT that though the other Board Meetings held before and after the Impugned Meetings, were admitted by the Petitioner/Appellant, being a majority Shareholder, has indulged in dereliction of their statutory duties and has indulged in filing multiple proceedings before various fora.

  Subsequent to these developments, a Settlement Agreement was entered into between the parties vide a Share Purchase Agreement dated 29.09.2016 an MoU of the same date and an Escrow Agreement dated 14.02.2017 of the same date. It is the case of the Appellant that a fraud was committed by the Respondents as the Plots which were meant to finance the purchase of the Appellant’s shares, have already been sold by the Respondents. The scope and objective of Sections 397, 398 & 399 of the Act defining Oppression and Mismanagement does not entail the Tribunal to adjudicate on the issues arising from the facts of the attendant case on hand. Even if there is any breach of the Terms of Settlement, it cannot be construed as an issue which would fall within the ambit of the definition of ‘Oppression and Mismanagement’ as defined under the Act.

  Appeal dismissed.

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• 2023 (6) TMI 196
  

  Sanction of scheme of Amalgamation - Section 230-232 of Companies Act - HELD THAT:- As per Section 230(9) of the Companies Act, 2013, the Tribunal may dispense with the calling of a meeting of creditors or class of creditors, where such creditors or class of creditors, having at least ninety per cent value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. As the Appellant/Transferor Company No-1 is a closely held family company and sole unsecured creditor, had conceded to the scheme of Amalgamation by way of affidavit, therefore, in terms of section 230(9) of the Companies Act, 2013 the meeting of sole unsecured creditor of Appellant/Transferor Company Appellant No-1 could have been dispensed with by the ‘Tribunal’ and as such, there are merit in the averments of the ‘Appellant’.

  It is noted that Transferee company did not obtain the NoC/consent from its secured and unsecured creditors. Therefore, the directions were sought by Transferee Company from the ‘Tribunal’ to convene the meetings of its secured and unsecured creditors - As per Explanation to Rule 5(d) of the Companies (Compromises, Arrangements and Amalgamation Rules,) 2016 the Chairman, inter-alia shall, at the general meeting, at the end of discussions on the resolutions on which voting is to be held, allow voting by use of electronic voting system for all those members who are present at the general meeting but have not cast their votes by availing the remote e-voting facility. Hence, by not allowing to vote in other modes other than in person in meeting of secured and unsecured creditor of Transferee company as permitted as per Companies Act, 2013 and rules made thereunder to vote on resolution is not sustainable and the ‘Tribunal’ erred on this account.

  The ‘impugned order’ deserves to be set aside with direction to look into all these issues in accordance with the law - Appeal allowed.

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• 2023 (6) TMI 105
  

  Restoration of the name of the Appellant Company to the register of the Registrar of Companies, NCT of Delhi and Haryana - Section 252 of the Companies Act, 2013 - HELD THAT:- The Company is a juristic person, it takes birth with its incorporation which takes place in terms of Section 7 of the Act and after incorporation and registration, its effect has been mentioned in Section 9 of the Act. Section 248 of the Act provides the power to the Registrar to remove name of company from register of companies for the reasons mentioned from 248(a)to(e) and effect of the order passed under Section 248 is provided in Section 250 of the Act. However, the remedy to an aggrieved person against the order of the Registrar, passed under Section 248 is provided under Section 252 and in Section 252(3) it is provided that the Tribunal, if satisfied that the company at the time of its name was struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored on the register of Companies it may pass the order that the name of the company be restored to the register of the Companies.

  It would be a hard case if the name of the company is struck off of the Companies and it falls under ‘the just or otherwise’ category even if it is not being called in operation as stated. However, it cannot be lost sight of the fact that the Appellant has been remiss in its statutory obligation which became the basis for striking off the name of the Company from the register of the Registrar of the Companies, therefore, in the peculiar facts and circumstances, the end of the justice would meet with the restoration of the name of the Company to the Register of Registrar of the Companies with imposition of fine/cost.

  The present appeal is hereby allowed. However, subject to payment of Rs. 2 lakh as cost which shall be deposited by the Appellant with the RoC within a period of 30 days from the date of passing of this order.

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• 2023 (6) TMI 104
  

  Oppression and Mismanagement - Transfer of Shares - allotment of shares - Forum Shopping - Removal of Appellants No. 2 and 6 from the Directors of the Company and to declare them as unfit to be appointed as Directors in any Company - whether the Company Petition was barred by Limitation? - HELD THAT:- Keeping in view that the Form 32 for removal of the Respondent as Director was filed only on 01/12/2005 and the Petition was filed in April 2008, apart from the fact that the removal is interlinked with the subsequent development and form a continuous act, this Tribunal is of the considered view that the Petition is not barred by limitation.

  As regards the merits of the matter and the issues raised in this Appeal, this ‘Tribunal’ address to whether the Resolution dated 05/02/1996 allotting 420 shares to Mr. T.S. Rathnasabapathy by himself was in accordance with Law. There is no documentary evidence on record to establish that the ‘Notice’ of the Meeting stated to be sent to the Respondent are known to have been received. Even if the Notice of the Meeting was indeed dispatched and served, it is seen from the record that the requisite quorum as maintained under Law and as per the Articles of Association was not available for conduct of the 05/02/1996 Board Meeting, as the Petitioner/Respondent is holding 50% of the shares and is one of the two Directors. Annexure R-2 is the Notice issued by the ‘Registrar of Companies’ to the 1st Appellant Company on 09/12/1998, which is reproduced as hereunder for better understanding of the case.

  It is clear that even as on 1998, there was no business conducted by the Company, and hence there was no need to infuse any additional Capital by allotting Shares specifically in the absence of any offer to the Petitioner/Respondent to subscribe to any Rights issue, as no Rights issue was ever offered. Keeping in view these aforenoted reasons, this Tribunal is of the considered view that the Resolution dated 05/02/1996 is null and void.

  It is not in dispute that the only asset of the ‘Company’, is the immovable Property, that is the subject land in question, which the Appellant contends has been sold legally with the knowledge of the Petitioner/Respondent. The documentary evidence on record does not substantiate that the subject land was sold involving the Petitioner/Respondent. Admittedly, disputes were raised before the Hon’ble High Court of Karnataka in the Civil Court and in ‘Company Law Board’ and when the Company Petition is pending, the act of the Appellants No. 2 to 5, in selling the ‘Land’ without ‘Notice’ to the Petitioner/Respondent is held to be a unilateral sale, constituting an act of Oppression and Mismanagement meaning thereby that the affairs of the Company were mismanaged by the Appellants, as the only asset of the Company was this ‘Land’ - the subsequent act of the Appellants herein in selling the subject land, without informing the Respondent; in the ‘absence’ of a specific ‘Notice’ issued to the Petitioner/Respondent herein, as per the Provisions of Law; and increasing the ‘Share Capital’ in the ‘Board Meeting’, once again in the absence of the Petitioner/Respondent who is the only other Director; all fall within the ambit of the ‘definition’ of ‘Oppression and Mismanagement’, as defined under Sections 395 and 396 of the Companies Act, 1956.

  This Tribunal is of the earnest view, that there is no illegality or infirmity in the Impugned Order dated 11/10/2018 and hence this Company Appeal fails and is accordingly dismissed.

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• 2023 (6) TMI 103
  

  Seeking restoration of the name of the Company in the Register maintained by the Registrar of Companies - HELD THAT:- The Appellant Company has failed to file its Financial Statements and Annual Returns for the Financial Years 2015-16 and 2016-17 due to change of circumstances. Further, it is observed that the audited accounts for the Financial Years 2016-17 and 2017-18 shows that the company is in active and carrying on day-to-day business. Keeping in view of the above facts, the Appellant Company is having substantial movable as well as immovable assets, therefore, it cannot be said that the Appellant Company is not carrying on any business or operations.

  The name of the Company be restored to the Register of Companies subject to the compliances fulfilled - application allowed.

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• 2023 (6) TMI 73
  

  Seeking grant of Regular Bail - alleged illegal movement of the goods worth Rs. 1,023 crores from the plant without raising invoices inter alia caused wrongful loss to BPSL - Fraud with the intent to injure interest of company punishable under Section 447 of the Companies Act - Siphoning off funds from BPSL in the form of bogus capital advances and routing the same as equity or unsecured loans to related entities of BPSL - Siphoning off funds from BPSL in the form of bogus advances to suppliers - Siphoning of funds through purchase of property through Assurity Real Estate LLP at Mumbai - Fraudulently availing the credit facilities from banks through the instrument of LCs by using false documents and other fraudulent activities punishable under Section 36(c) read with 447 of the Companies Act - Cheating upon the banks liable to be punished under Sections 120B, 417 and 420 of the Indian Penal Code, 1860 - Fraudulent inducement of banks as laid down in Section 36(c) of the Companies Act, punishable under Section 36(c) read with 447 of the Companies Act - Liability for making false representations in the financials for the Financial Year 2017-18, under Sections 129 and 448 read with 447 of the Companies Act - Falsification of books of accounts for not providing true and fair view of financials of BPSL for the financial year 2009-10 to 2016-17, liable for penal action under Section 129, 448 read with 447 of the Companies Act and Sections 211 and 628 of Companies Act, 1956 - Other fraudulent transactions punishable under Section 447 of the Companies Act - liability under Section 447 of the Companies Act, for misuse and fraudulent abuse of the structure of audit committee.

  HELD THAT:- This Court has to examine the case of the applicant with respect to the twin conditions contained in Sections 212(6)(i) and (ii) of the Companies Act, which are in addition to conditions for bail under Section 439 of the CrPC As mentioned hereinabove, the foundation of the case of the respondent with respect to the present applicant is that he was the Chief Financial Officer and being a Key Managerial Person had signed the financial statements of the year 2013-14 to 2016-17. The entire case of the respondent is primarily on the basis of aforesaid status of the present applicant. The material on record, by way of statements made by the entry operators, co-accused, employees of the companies, documents including the attendance registers of the board meetings as well as meetings of audit committee, as noted in the preceding paragraphs, prima facie indicates to the contrary. Reliance placed by the respondent on the statement made by Dinesh Kumar Behal to show that the present applicant attended the meetings is contradictory to their own documents which are contemporaneous in nature, which shows that the present applicant never attended the board meetings as well as audit committee. The veracity of the statement made by aforesaid Dinesh Kumar Behal will be tested at the time of his examination.

  The conspicuous absence of the present applicant’s name from the attendance registers of board meetings and audit committee will have a bearing for the purposes of deciding the present application. It is pertinent to note that while grave allegations have been made qua the applicant with regard to connivance/conspiring with the promoters and other co accused, but no allegation with regard to his receiving benefits have been made.

  Admittedly, the evidence in the present case is predominantly documentary in nature and it has been pointed out by learned Senior Counsel, the complaint is accompanied with documents contained in 09 trunks. It is common knowledge that the trial is likely to take a long time. The reliance placed by the respondents on the orders with regard to co-accused Amarjeet Sharma and Alkesh Sharma, dismissing their bail applications by a coordinate bench of this court is misplaced. The aforesaid order of the coordinate Bench was with respect to the contention of the said co-accused with regard to Section 167(2) of the CrPC In any case the present application is being decided on the basis of its own facts.

  It is further noted that the present applicant was granted interim bail during the pendency of the present bail application and he surrendered in time without misusing the liberty granted. In the present case, in view of the discussion made herein before, this Court is of the opinion that from the material brought on record, the requirements of Sections 212(6)(i) and (ii) of the Companies Act, are satisfied.

  The applicant is admitted to bail upon furnishing a personal bond in the sum of Rs. 5,00,000/- alongwith two sureties of like amount to the satisfaction of the learned Trial Court/Link Court, further subject to the conditions imposed - bail application allowed.

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• 2023 (6) TMI 72
  

  Seeking restoration of the name of the Company in the Register maintained by the Registrar of Companies (RoC) - HELD THAT:- The impugned order dated 17.12.2021, the NCLT has rightly held that the Audited Financial Statements of the two immediately preceding Financial Years i.e., 2015-16 and 2016-17 filed by the Appellant Company reflected “Zero revenue” from its operations and have come to the conclusion that the Appellant Company was neither in operation nor carrying out its business at the time of its name was struck off from the register of Registrar of Companies.

  There are no merit in the instant Appeal to interfere with the order impugned passed by the NCLT. The impugned order dated 17.12.2021 passed by the National Company Law Tribunal (New Delhi Bench, Court-II) is hereby affirmed - The instant Appeal is hereby dismissed.

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• 2023 (6) TMI 71
  

  Compounding of offences - default in holding Annual General Meeting the company - non-compliance of Section 166/96 of the Companies Act, 1956/2013 - HELD THAT:- The fact remains that it was a joint application filed by the applicant alongwith other six persons including the company in question under Section 441 of the Companies Act, 2013. Section 441 of the Companies Act, 2013 deals with the compounding of offences. From the materials on record particularly the application filed before the NCLT which was number as CP 155/441/ND/2020 it is evident that the appellant has admitted default and days of default to the extent of 2905 days was admitted by the appellant. At this juncture it would be apt to reproduce Section 96 of the Companies Act, 2013 which mandate annual general meeting by the company and also consequences for non-compliance of provisions contained in Section 96 or 97 or 98 of the Act.

  It is also admitted case of the appellant that the appellant has committed default under Section 166 of the Companies Act, 1956 and for such default penalty is prescribed under Section 168 of the Companies Act, 1956.

  If there is default in holding Annual General Meeting the company and every officer of the company in default shall be punishable with fine. The appellant in the present case himself has admitted default and this was the reason that he was also a joint applicant before the NCLT. 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. Learned NCLT virtually has allowed the compounding application and as per legal position reduced the penalty. It is evident that as per calculation chart/report of the ROC the maximum fine was to be imposed on the appellant was to the extent of Rs.1,32,65,000/-. However, the Learned NCLT has reduced the said fine to the 1/5th of maximum fine and appellant has been imposed fine of Rs.26,53,000/-. It is further clear from the impugned order that the learned NCLT has taken consistent stand in respect of other defaulting members.

  No interference required in the impugned order - there is no merits in the appeal - appeal dismissed.

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• 2023 (5) TMI 1393
  

  Service of notice under Section 11 of the Arbitration and Conciliation Act, 1996 - communications served at a wrong address of the applicant-Company - suppression of correct address - HELD THAT:- There is nothing on record to indicate any reason for the present respondent to have enquired regarding the change of address of the Company. Even if it is assumed that the change of address was duly intimated to the Registrar of Companies in time, the same does not give rise to the assumption that the said intimation was uploaded on the relevant website by the Registrar of Companies immediately thereafter. In fact, there was no occasion for the present respondent to make such enquiry in the first place, having no reason to apprehend such alteration of address - In all the documents throughout, the respondent herein had mentioned the address of the applicant-Company as its last-known address which could not be faulted per se.

  In the absence of any palpable error apparent on the face of the order under recall, there is no occasion for this Court to sit in judgment over the order of a co-ordinate Bench under Section 11 of the 1996 Act - In the absence of any ineligibility of the Arbitrator within the contemplation of the 1996 Act being pleaded or proved, there is no reason why the order dated February 16, 2023 passed in AP No.49 of 2023 should be recalled.

  The order dated February 16, 2023 appointing an Arbitrator passed in AP No.49 of 2023 is hereby affirmed - Application dismissed.

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• 2023 (5) TMI 1321
  

  Professional misconduct by CA - Continuation of Audit engagement disregarding Independence requirements - Failure to understand nature or business of Giri Vidhyuth (India) Limited (GVIL) - Lapses in audit relating to fraudulent diversion of funds worth Rs. 520 crores, understatement of related party loan by Rs. 350 crores and evergreening of loans - Lapses in evaluation of going concern assumption - Lapses In audit relating to Statement of Cash Flows - Failure to ensure compliance with section 134(1) of the Act - Failure to comply with SA 700-Forming an Opinion and Reporting on Financial Statements - Failure to comply with SA 230-Audit Documentations, SA 260, Communication with Those Charged With Governance & SA 265-Communicating deficiencies in Internal Control to Those Charged With Governance and Management - Failure to comply with SA 300-Planning an audit of Financial Statements - Failure to comply with SA 720-The Auditor's Responsibilities Relating to Other Information - sanctions and penalties.

  HELD THAT:- The Auditors have committed Professional Misconduct as defined under Section 132(4) of the Companies Act 2013 in terms of section 22 of the Chartered Accountants Act 1949 (CA Act) as amended from time to time, and as detailed below:

  a) The Auditors committed professional misconduct as defined by clause 5 of Part 1 of the Second Schedule of the CA Act, which states that an auditor is guilty of professional misconduct when he "fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity",

  b) The Auditors committed professional misconduct as defined by clause 6 of Part 1 of the Second Schedule of the CA Act, which states that an auditor is guilty of professional misconduct when he "fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity".

  c) The Auditors committed professional misconduct as defined by clause 7 of Part 1 of the Second Schedule of the CA Act, 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".

  d) The Auditors committed professional misconduct as defined by clause 8 of Part 1 of the Second Schedule of the CA Act, 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".

  e) The Auditors committed professional misconduct as defined by clause 9 of Part 1 of the Second Schedule of the CA Act, which stales 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".

  In addition to above, the Audit Firm has committed Professional Misconduct as defined Section 132(4) of the Act as failure to exercise due diligence and being grossly negligent in the conduct of professional duties, as the Audit Firm failed to exercise due diligence and was grossly negligent in the conduct of professional duties, thus, violated SQC 1.

  Thus, all the charges of professional misconduct in the SCN (Except charges relating to noncompliance with SA 320, which has been dropped) stand proved based on the evidence in the Audit File, the Audit Report dated 21.11.2020 issued on behalf of the Firm, the submissions made by the Auditor and the Financial Statements of GVIL for the FY 2019-20.

  Penalties and sanctions - HELD THAT:- Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered:

  a) Imposition of a monetary penalty of Rs. One Crore upon M/s. Sundaresha & Associates. In addition, M/s. Sundaresha & Associates is debarred for a period of Two years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. This debarment period will start after completion of two years debarment period imposed in case of Tanglin Development Limited for FY 2018-19 vide NFRA order dated 26.04.2023.

  b) Imposition of a monetary penalty of Rs. Five Lakhs upon CA C. Ramesh-In addition, CA C. Ramesh 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.

  c) Imposition of a monetary penalty of Rs. Five Lakhs upon CA Chaitanya G. Deshpande. In addition, CA Chaitanya G. Deshpande 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.

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• 2023 (5) TMI 1255
  

  Oppression and mismanagement - Fraud and illegal financial activities committed by them while managing the company - criminal breach of trust and forgery

  Contention is that even if the case of the prosecution is taken on its face, as is emerging from the first information reports and the grounds on which the charge sheet has been filed, no cognizable offence is emerging and therefore the trial court has committed manifest illegality in taking cognizance of the offences and in issuing process against the applicants.

  HELD THAT:- There is no bar in lodging an FIR or in conducting an investigation or even in the trial or conviction of an offender under two different enactments, but the bar is only with regard to the punishment of the offender twice for the same offence. Where an act or an omission constitutes an offence under two enactments, the offender may be prosecuted under either or both enactments but shall not be liable to be punished twice for the same offence.

  The word civil court appearing herein above could not be read as criminal court. If the intention of the Legislature was to exclude the provisions of Indian Penal Code, with regard to the offences investigated under Companies Act, then nothing had prevented the Legislature from making such a provision. Even otherwise, it is a well established principle of law that the exclusion of the jurisdiction of the Court has to be specific and cannot be inferred, and the provisions excluding the jurisdiction have to be construed strictly. Thus, in the considered opinion of this Court the word "Civil Court", emerging in this section cannot be read as "Criminal Court".

  Prima facie, there are specific allegations made by opposite party no. 2 in the FIR's lodged by him and the Investigating Officer having conducted investigation by collecting the material and recording the statements of the witnesses under Section 161 of the Cr.P.C. and considering the same, filed the charge sheet - The Court has to consider whether from allegations contains in FIR and material collected during the course of investigation prima facie any offence is disclosed. Correctness or otherwise of the said allegations has to be be decided only during trial. At the initial stage of issuance of process, it was not open to Courts to stifle proceedings by entering into merits of the contentions made on behalf of the accused. Criminal complaints could not be quashed only on the ground that, allegations made therein appear to be of a civil nature. If ingredients of offence alleged against Accused were prima facie made out , Criminal proceeding shall not be interdicted.

  Thus, no illegality appears to have been committed by the investigating officer in submitting the charge sheet or by the trial court in taking cognizance and in issuing process. Resultantly all the petitions filed by the applicants placed above are not having force and for the reasons mentioned herein before, all these petitions are dismissed.

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