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Companies Law - Case Laws
Showing 461 to 480 of 15082 Records
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2023 (5) TMI 1165
Recovery of dues - direction to Recovery Officer, DRT, Bangalore to comply with the directions of the Hon'ble Division Bench - direction to R-3 to associate with the Official Liquidator to bring the properties for sale and then to take his portion of outstanding dues on the sale proceeds as per law or otherwise - seeking permission to Official Liquidator to engage the services of ITCOT for valuing the assets of the company in liquidation - conduct of sale through public auction by giving vide publicity in the newspapers - meeting out the expenses in connection with sale.
HELD THAT:- It is relevant to mention herein that when the applicant Tungbhadra Sugar Works Limited, being a third party, was not impleaded as a party respondent in the proceedings before the Supreme Court, the applicant, giving reasons for the delay and also proving their ownership over the properties, filed applications for impleadment before the Supreme Court stating that they were ready to settle the dues of the workers, creditors and other statutory dues and that the management was taking necessary actions for revival of the company for the welfare of 947 workmen. Accepting their case that the applicant was a necessary party and was ready to settle the dues of the workmen, creditors and other statutory dues and the management was also taking necessary actions for revival of the company for the welfare of 947 workmen, the Supreme Court allowed the impleadment applications. In the meanwhile, the debts of Tapti Machines Private Limited were later assigned to MTitanium Apartments Private Limited vide the deed of assignment dated 06.01.2012.
The motto of justice is to resolve the dispute and give a quietus to the problem once and for all. In the case on hand, when the Official Liquidator was appointed by the Court to resolve the disputes of the secured creditors, borrowers, workmen and the other creditors, peculiarly, the disputes between the creditors and the borrowers have been resolved. Evidently the borrower, having accepted the settlement, has given their acceptance in writing that there is no dispute pending between them. Secondly, the evidence with regard to the settlement of disputes of the workmen also has been enclosed showing that the claims and the dues payable to the workmen also have been settled and the workmen have also reached a settlement before the Assistant Labour Commissioner, Mangalore. But the only objection raised by the Official Liquidator shows that these settlements have not been effected through him. It is true that the Official Liquidator has been appointed to resolve the disputes.
It may be restated that when Tungbhadra Sugar Works Limited addressed a letter to the State Bank of Mysore for creation of mortgage by deposit of title deeds in respect of the loans of Deve Sugars Limited, the applicant has confirmed that even after the execution of the agreement dated 15.01.1994, the execution of the conveyance deeds for transfer of properties in favour of Deve Sugars Limited have not been completed yet. In the meanwhile, since the agreement for transfer dated 15.01.1994 was cancelled on 30.09.1998, the rights and liabilities sought to be created by the sale agreement have become non est in the eye of law.
The following directions are thus issued:-
(i) The applicant, Tungbhadra Sugar Works Limited has settled the debts of Deve Sugars Limited, the company in liquidation to the Pegasus Assets Reconstruction Private Limited and on receipt of the entire moneys, they have also returned the title deeds of the properties.
(ii) Since the charge against the company has been completely lifted, the applicant, Tungbhadra Sugar Works Limited is entitled to the possession of the land including the plant and machinery morefully described in the Schedule to the Judge's summons.
(iii) The first respondent, Official Liquidator is, accordingly, directed to handover the possession of the land, building, plant and machinery morefully described in the Schedule to the Judge's summons to the applicant, Tungbhadra Sugar Works Limited. Consequently, an injunction order is granted restraining the first respondent from in any manner interfering with the right of enjoyment of the applicant to the schedule mentioned properties.
(iv) Since the workmen's dues have also been settled by the applicant, as indicated above, the first respondent is hereby directed to pay the arrears of rent of the warehouse, after deducting the security expenses incurred for maintaining the properties, including the balance funds available, to the applicant within a period of four weeks from the date of receipt of a copy of this order.
Application allowed.
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2023 (5) TMI 1164
Requirement of maintenance of books of accounts - respondent can call upon the petitioner to provide the books of accounts for the period beyond the period of eight years or not (for financial years 2010-11 and 2011-12) - Section 128(5) of the Companies Act - HELD THAT:- The learned SPP for the CBI has now taken a plea per proviso to sub- Section 5 Section 128 of the Companies Act they have the power to ask the petitioner to provide the books of account prior to the period mentioned in sub-section. However, a bare perusal of the proviso would show it requires a direction by the Central Government to the company to keep the books of account for a longer period as it may deem fit. Admittedly, no such direction was ever passed per proviso to Section 128(5) of the Companies Act.
The petition stands allowed in terms of prayer a of the petition on the plea the petitioner does not have any books of account beyond the period of eight years viz. for the financial year 2010-11 and 2011-12. The respondent is at liberty to take further action in accordance with law, since the investigation is still going on. The petitioner shall continue to cooperate in the investigation.
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2023 (5) TMI 1163
Oppression and mismanagement - Consent Terms provided for acquisition of the entire shareholding - strict compliance with non-compete obligations.
It is contended that Consent Terms are in the nature of compromise decree and NCLT has jurisdiction to execute the Consent Terms under section 424 of the Companies Act, 2013, but before execution and passing of the Impugned Order, it should have looked into alleged breach of the non-compete obligations under the Consent Terms, should have adjudicated upon.
HELD THAT:- As provided in clause 4, a sum of Rs.2,23,00,000 is to be paid on the final execution of the Consent Terms immediacy and the balance Rs. five crores was to be paid in five equal instalments of Rs. one crore each on various dates between 30.4.2019 and 31.8.2019 respectively. It is also clear that the payment of Rs.7.23 crores against gratuity, salary, non-compete compensation and amicable settlement compensation are to be paid independent of the payment towards shares held by Mukund Muley and his wife Arati Muley entailing in consequent to the payments by the Appellants to them. Clause 7 of the Consent Terms provide that in the event there is any default by any party, the Consent Terms will cease to be binding on the non-defaulting party, but without prejudice to this condition, in case of breach of non-compete obligation by the Respondents (R-1 and R-2), R-1 and R-2 shall be liable to return the amounts paid towards non-compete compensation and amicable settlement compensation. Thus, it is clear that the non-compete obligation and related compensation has been given a special position in the Consent Terms, and significant amount has been provided to be paid to R-1 in compliance of the non-compete obligation.
NCLT is bound by law to execute its order/decree if called upon to do so, and that it has the power to execute an order under section 424(3) of the Companies Act, 2013. Further, as has been held in the judgment in the matter of M/s. Greisheim GmbH vs. Goyal MG Gases Pvt. Ltd. [2022 (1) TMI 1312 - SUPREME COURT] a litigant is entitled to receive the fruits of decree, which in the present case is amount of Rs. 28.77 crores against sale/transfer of their shareholding by the Respondents in addition to certain other payments. It, therefore, becomes abundantly clear that NCLT has not erred in taking action for execution of the Consent Terms which were taken on record and approved by the NCLT.
The facts of the case make it clear that the company Cotmac took unilateral action for termination of Consent Terms after it alleged breach of non-compete obligation by R-1, but it did not approach the NCLT for clarification or definite decision on breach of terms and conditions of the Consent Terms as it was required to do. Such an action by the Company and the Appellants fall short of the clause 27 of the Consent Terms and therefore the breach of Consent Terms by R-1 and R-2 remained mere allegation by one of the parties - since the breach of Consent Terms were not established by the Appellants, as was required under clause 27 of the Consent Terms, the NCLT moved correctly by considering the Execution Application filed by the Respondents.
In view of the fact that the Consent Terms were agreed to by the rival parties to ensure that the Company continues to function as a healthy, viable and active company, the issue of execution of the Consent Terms in entirety should also be looked at by the NCLT upon an application to be made by any of the parties to the Consent Terms - it would be just and proper that when the shares of A-2 and A-3 are sold by the Company pursuant to execution of Consent Terms, the first right of purchase of those shares are given to A-2 and A-3, so that the possibility of the Company falling in the hands of its competitors/rivals is obviated. This would be in keeping with the objective of the Consent Terms and would take care of the interests of the company.
There is no error in the Impugned Order of the NCLT, and the Impugned Order is maintained with the following clarification/direction:
(i) Only such number of shares out of the attached shares of A-2 and A-3 shall be sold by which the requisite amount of Rs.28,77,51,750 plus interest @ 10% p.a. for the period of delay in payment, keeping in mind the date/schedule of various instalments payments included in the Consent Terms is realized and paid to R-1 and R-2. The remaining shares shall be released to remain in the ownership of A-2 and A-3.
(ii) In para 12 of the Impugned Order, the NCLT has kept the issue of enforcement of other prayers made in the Execution Application open and still to be adjudicated upon. It may endeavour to do so as early as possible.
Appeal dismissed.
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2023 (5) TMI 1085
Seeking secured creditor of Malhotra Steel (Bombay) Ltd., (in liquidation) to deposit towards workers dues - at what point the workmen become entitled to distribution of sale proceeds? - HELD THAT:- Recourse to Sections 529 and 529A of the Act, 1956 becomes imperative. A conjoint reading of the provisions contained in Section 529 and 529A, would indicate that a secured creditor has the option to realise his security or relinquish his security. If the secured creditor exercises the option to realise his security, he is entitled to do so in a proceedings other than the winding up proceedings. The workmen of the company in winding up also acquire the status of secured creditors. Where a company is in liquidation, a statutory charge is created in favour of workmen in respect of dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen’s portion in relation to the security held by the secured creditors of the company as illustrated by Section 529 of the Act.
Point at which the secured creditor realised his security standing outside the liquidation process - HELD THAT:- It is well recognized that the filing of a Petition for winding up of a company does not preclude the secured creditor from enforcing his security. It is only when Liquidator is appointed, the secured creditor becomes liable to associate the Liquidator in sale assets of the company in liquidation. The fact that after the sale of the assets of the company in liquidation by the secured creditor by resorting to the provisions contained in the Recovery of Debts Due to banks and Financial Institutions Act, 1993 and/or The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Company goes into liquidation does not warrant the reopening of the sale and appropriation of the sale proceeds by the secured creditor.
The Supreme Court in the case of Bank of Maharashtra Vs. Pandurang Keshav Gorwadkar and Others [2013 (5) TMI 269 - SUPREME COURT] has ruled in clear and explicit terms that if the company goes into the liquidation, before the sale proceeds are fully and finally disbursed, Section 529A read with Section 529(1) proviso come into operation and statutory charge is created in favour of workmen in respect of their dues over such proceeds. The Supreme Court has made it clear that the relevant date to arrive at the ratio at which the sale proceeds are to be disbursed among the workmen and secured creditors of the company is the date of winding up order and not the date of sale. These principles apply even where the Provisional Liquidator has been appointed in respect of the company.
Reverting to the facts of the case, it is pertinent to note that so far as the quantum of workmen’s portion i.e. Rs. 2,53,977.20/- which the Bank is stated to be liable to contribute, there is not much controversy. From the affidavit of the Bank especially averments in paragraph No. 15 under the, “caption dates on which amount was received” it becomes evident that all the amounts except a sum of Rs. 18,06,210/- were received by the Bank even before the appointment of the Provisional Liquidator.
Indisputably, the amount which came to be accumulated constituted the lease rent which the company in liquidation was entitled to receive. The lease rent clearly falls within the ambit of the property which forms part of the assets of the company in liquidation. In the circumstances, distribution qua the said amount paid to the Bank by the Tribunal-Receiver can not be said to have been fully and finally complete before the appointment of the provisional liquidator. The analogy of sale proceeds of the assets sold by secured creditor standing outside winding up can be applied to the said amount. Consequently, the provisions contained in Section 529 A read with the proviso to Section 529 (1) of the Act come into play and the charge of the workers dues operates on the said amount as well.
The report stands partly allowed - The Kotak Mahindra Bank Ltd., Noticee shall deposit a sum of Rs. 2,53,977.20/- with the Official Liquidator towards the workmen’s dues, within four weeks from today.
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2023 (5) TMI 986
Seeking restoration of striken off name of company on the Register of Companies - preceding two years on behalf of the company no financial statement and annual returns were filed before the ROC and the company was non-operational - HELD THAT:- Once the appellant was taking a stand that the company was doing business, it was mandatorily required to satisfy the NCLT with, cogent evidence that the company was doing some business or company was operational. The plea of learned counsel for the appellant that company was operational or doing business in absence of any cogent material is not sustainable. It is further seen from the stand taken by the ROC before the NCLT in the application filed by the applicant i.e. Appeal No.150/2020 that the company was not operational and doing no business. The ROC in its reply in para 4,5,6 and 7 has clarified the position and also clarified that before striking off the name, the company was given full opportunity to explain.
On examination of the table in para No.7 of the reply, it is evident that the Colum No.1 i.e. Revenue from operation and Column No.4, GST Details, have been shown as blank. Meaning thereby that neither any GST was paid nor revenue from operation was collected. These facts are enough to draw an inference that the company was non-operational nor doing any business. Besides this there is admission of the appellant before NCLT that in the management of the company there was deadlock due to litigation and disputes amongst the directors.
On examination of the provision of section 250 of Companies Act, it goes without saying that even a company whose name has been struck off, is competent to realise claim/claims and similarly his liability can also be realised by others. It is evident that while considering the case of Indian Explosives Ltd [2010 (4) TMI 1185 - DELHI HIGH COURT] in the year 2010 there was no occasion for the Hon’ble High Court to examine the Section 250 of the Companies Act, 2013. Moreover, if a specific procedure has been provided under Section 248 of the Act for taking a decision in special exigency for striking off the name of the company taking lenient view in passing restoration of the name of the company may amount to render a statutory provision i.e. Section 248 of the Act redundant without any plausible explanation. In the present case the facts which have emerged are sufficient to persuade us that the Learned NCLT has committed no error in rejecting the appeal filed by the company under Section 252 of the Act for its restoration.
There are no error in the impugned order warranting interference - appeal dismissed.
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2023 (5) TMI 936
Holding Directorship of companies in excess of the limits prescribed (29 Companies) under the provisions of Section 165 of the Companies Act, 2013 - offence punishable under Section 165(6) of the Act - whether the amendment that was brought into force on 21.12.2020 by virtue of the Companies (Amendment) Act, 2020 can be applied to pending prosecutions?
HELD THAT:- At the relevant point of time, contravention was considered as an offence. Further, there was no Explanation II, which specifically clarified for the purpose of reckoning in the limit of Directorship of the 20 companies, the dormant companies shall not be included. By virtue of the Companies (Amendment) Act, 2019 and the Companies (Amendment) Act 2020, the contravention is now liable for penalty by the adjudicating officer appointed by the Central Government. If the contravention is liable for fine, it is triable by a Magistrate and it is an offence and therefore, triable by a Magistrate. Penalty, however, is imposed by the adjudicating officer by the Central Government and hence, the contravention is no longer an offence. The Act not only mollifies the punishment prescribed for contravention, but also the procedure, for determining the penalty.
The Hon'ble Apex Court in T. BARAI VERSUS HENRY AH HOE AND ANOTHER [1982 (12) TMI 186 - SUPREME COURT] had an occasion to consider the amendments made to Section 16(1)(a) of the Prevention of Food Adulteration Act, 1954. The Act originally prescribed punishment of 6 years for the said offence of the Act. In 1975, an amendment was made by the State of West Bengal by the West Bengal Amendment Act, which provided for punishment upto imprisonment for life for the said offence. Thereafter, the Parliament passed the Prevention of Food Adulteration (Amendment) Act, 1976, which provided for reduced punishment for the offence. The question that was raised before the Hon'ble Supreme Court inter alia was whether the amendment would be prospective or would apply to pending prosecutions as well in the State of West Bengal. The amendment not only brought about change in the punishment, but also change in the procedure. By virtue of the amendment, the punishment prescribed was only 3 years, whereas, in the West Bengal Act, the punishment prescribed was life imprisonment. Therefore, the earlier West Bengal Act provided a trial by the Court of Sessions and by virtue of the amendments, the trial was to take place before the Magistrate.
Applying the above principles to the instant case on hand, it is found that the Parliament had made amendments for the purpose of easing the doing of business and also for reduction of prosecution that are filed in the Special Court - there is no reason why the said Amendment cannot be applied in favour of the accused in the pending prosecution. The accused shall also be entitled to the benefit of Explanation-II to Section 165(1) of the Companies Act.
The intention of the Parliament is very clear and the since of the Amendment Act 2020 mollifies the rigour of punishment the beneficial construction has to be applied in favour of the accused in pending prosecutions and all the prosecution has to be withdrawn and transferred to the adjudicating authority appointed under Section 454 of the Companies Act for further proceedings in terms of the said provision.
This Court is of the view that it may not be necessary to deal with the other contentions of the parties - petition disposed off.
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2023 (5) TMI 902
Oppression and mismanagement - Illegal transfer of shares - ostensible intention (of two sons of Company's founder) to divide the Company into two parts through a scheme of demerger to distribute the proceeds between themselves leaving out the daughter from the sharing - wrongful cessation of the offices of Managing Director and Director held by A-1 and R-9 - seeking interim relief for appointing a Special Officer in R-1 Company to make an inventory of all books and accounts and take possession of all books and record of the Company - HELD THAT:- The Appellants have been reiterating the prayers made in the original CP No. 42/KB/2016 even though in the later applications prayer about reinstatement of A-1 and R-9 as Managing Director and Director has also been added. Thus it is seen that in the company applications filed after the status quo order dated 3.5.2016, clarificatory order dated 18.8.2016 and NCLT order dated 1.10.2019 for the appointment of a Special Officer, the issue of violation of these orders has also been regularly raised by the Appellants.
The order dated 1.10.2019 passed by NCLT, which pertained mainly to the appointment of Special Officer to investigate into the affairs of the Company and also supervise the conduct of business by holding meetings of the board of directors periodically was appealed before NCLAT in [2021 (1) TMI 766 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI], and that the NCLAT dismissed the appeal in view of the fact that 'the Report of the Special Officer will give a true and fair picture of the state of affairs of the R-1 Company’. This order of the NCLAT was challenged in ARUN GUPTA & ANR VERSUS SOUTH EASTERN CARRIERS LIMITED & ORS. [2021 (4) TMI 1359 - SUPREME COURT] before the Hon’ble Supreme Court of India.
The appointment of Special Officer was upheld by the Hon’ble Supreme Court and it was, therefore, not only desirable but necessary that the Special Officer submit his report regarding the affairs and management of the R-1 Company before the NCLT. It is noted by us that no such report is placed on record to show that the Special Officer could conduct any investigation or enquiry in the affairs of the Company and thereafter submit a report - eventually A-1 and R-9 were removed from office basically on the ground that they did not attend any of the four board meetings held on 14.7.2016, 26.10.2016, 19.1.2017 and 5.4.2017, though the hurdles being placed in their way of attending the board meetings was being regularly brought to the notice of the NCLT. It is not clear why the NCLT chose not to consider these prayers and give its findings in the Impugned Order. Thus the conclusion that A-1 and R-9 did not attend even one meeting in the past 12 months and were, therefore, presumed to vacate office under section 167(1)(b) of the Companies Act does not appear to be correctly arrived at after considering the rival contentions.
In the interest of justice and in view of multiple allegations of oppression and mismanagement raised by the Appellants, matter remanded to NCLT, Kolkata for decision afresh - appeal allowed.
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2023 (5) TMI 870
Appointment of Auditor for Forensic Audit - One partner of the firm, Haribhakti & Co. in his individual capacity - Locus of the another partner of the firm to file the final Report of the Forensic Audit who had not been appointed for this purpose - HELD THAT:- It is not in dispute that both the parties filed objections to the Draft Report but no objection is filed to the final Report though time was granted by the Learned Tribunal for that purpose by the Impugned Order dated 25.04.2023 rather the present Appeal has been filed by the Petitioners in the main Petition raising the issue of the locus of Mr. Mitesh Parekh to file the final Report of the Forensic Audit who had not been appointed for this purpose by the Tribunal vide its Order dated 19.04.2022.
Counsel for the Respondent has though argued that the Appellant is unnecessarily raising this issue and has referred to some emails but at this stage we are not going into the merits of the case because the matter is yet to be decided by the Learned Tribunal, who may take into consideration the objections of the Appellant raised before this Tribunal by way of this Appeal. Therefore, it would be just and expedient if a direction is issued to the Tribunal, seized of the matter, to consider the objections of the Appellant, including the final Report of the Forensic Audit having been prepared by Mr. Mitesh Parekh instead of Mr. Sundararaman who was not categorically appointed and also all the contentions of the Respondents in this regard as it has been argued by the Respondent that the appointment of Mr. Sundararaman of Haribhakti & Co. was an employee of that Company and therefore the Report has rightly been prepared by Mr. Mitesh Parekh who is also a part of Haribhakti & Company.
The present Appeal is therefore disposed of with a direction to the Learned Tribunal, seized of CP No.203/241/HDB/2020, to take into consideration the objections of the Appellant including the objection to the final Report of Forensic Audit submitted by Mr. Mitesh Parekh who was not so allegedly appointed vide Order dated 19.04.2022 as according to the Appellant Mr. Sundararaman was appointed in his individual capacity though he was working with M/s. Haribhakti & Co. Chartered Accountants.
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2023 (5) TMI 869
Oppression and Mismanagement - whether on the date of passing of the impugned order had ceased to be company under the Companies Act and its name was already struck off from the register of the ROC? - HELD THAT:- It is true that the appellant, while was on the role of the register of ROC, had filed a Company Petition on an allegation of oppression and mismanagement of Respondent No.1 company which was numbered as CP No.58/2012, but during the pendency of the said petition the name of the appellant company was struck off due to his own default of non-filing of statutory return before the ROC continuously after 2012 and finally on 08.08.2018 the name of the appellant company was struck off from the register of the ROC. CP No.58/2012 was filed by the appellant in the capacity of company incorporated under the Companies Act. Once the name of the appellant company was ceased to be company it was not competent to maintain the CP No.58/2012.
There is no doubt that after the striking off the name, a company ceases to remain as a company. However, even after dissolution of the company in view of striking off its name from the register, its existence remains only for the purpose of realising the amount due to the company or for the payment or discharge of the liabilities or obligations of the company. Meaning thereby that after striking off the name of the appellant company the appellant was not entitled to pursue the CP No.58/2012 which was primarily filed on an allegation of oppression and mismanagement of Respondent No.1 not for realisation of any debt.
The present case cannot be equated with a dispute relating to realisation/claim of the Income Tax liabilities.
Since the appellant on the date of passing of the impugned order had ceased to be company under the Companies Act and its name was already struck off from the register of the ROC, the CP No.58/2012 had become infructuous and learned NCLT has rightly dismissed the CP No.58/2012 - Appeal dismissed.
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2023 (5) TMI 818
Petitioner’s DIN number was incorrectly used - grievance of the Petitioner is that owing to the identity in names, the Petitioner has been wrongly reflected as a Director in Respondent No. 2 company- Katariya Multi Trade Private Limited - HELD THAT:- At the time of the incorporation of Respondent No. 2, the name of Sunil Rawat along with Indore, Madhya Pradesh address was mentioned. However, the DIN number of the Petitioner, who is a resident of Delhi, has been wrongly mentioned. It is this error that needs to be corrected in the records - In the facts and circumstances of the case, when there is no dispute that the DIN number has been wrongly mentioned due to an error of the Company Secretary concerned, the Petitioner cannot be visited with consequences unknown to him and for which he is not to blame. It is accordingly directed that Respondent No. 2 company Kataria Multi Trade Pvt. Ltd. shall be deemed to have been incorporated with the details of Directors given at page 43 of the petition as the correct details of the directors with the DIN numbers.
The Petitioner, whose DIN number has been incorrectly used, shall be saddled with no liability in respect of Respondent No. 2 company or its subsidiaries including any of their businesses or activities - If any rectification has to be carried out on the MCA website or ROC, Ahmedabad records, the same shall be done within 4 weeks from the date of filing of an application to this effect.
Petition disposed off.
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2023 (5) TMI 533
Change of categorization - declaring/ retaining the status of the JIICL as Green entity only - HELD THAT:- The categorization of the IL&FS Entities was noticed by this Tribunal in its order dated 11.02.2019 and 19.09.2019. the categorization was noticed and recorded on the basis of affidavit filed before this Tribunal. The order passed by this Tribunal does not indicate that the categorization could be changed by the Entities themselves, without any reference to the Tribunal. When the Entities are categorized in “Green”, the object is that the Entity should continue to discharge its all obligations, including the obligation to Lenders and the Entities should be incentivize by all including the Lenders to continue the categorization as a “Green”. If the entity is given liberty to change its categorization from “Green” to “Red”, there will be no obligation on the Entity to carry on its categorization as “Green”.
The Entity itself, which is categorized as “Green” cannot be permitted to change its categorization unilaterally. It was open for Respondent No.1 or any such Entity to bring necessary material before the Tribunal and asking leave of the Tribunal to re-categorize the Entity.
The Resolution Consultant having already recommended and the New Board in its meeting dated 24.03.2023 having already decided to grant conditional approval of re-categorization of JRPICL to “Green”, subject to receipt of additional annuities of INR 58 Crores in March 2023, we are satisfied that JRPICL has to be treated as a “Green” Entity. Insofar as the financial liability as referred to on the basis of arbitral award is concerned, suffice it to notice that the note itself mentions that arbitral award is under process of challenge. The arbitral award being under process of challenge, that cannot be any ground to refuse categorization of JRPICL as “Green”.
Liberty granted to Respondent No.1 to seek leave of this Tribunal for re-categorization in event any liability falls on the JRPICL on the basis of arbitral award and it is unable to discharge its liabilities - application allowed.
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2023 (5) TMI 396
Supplementary investigation under Section 212 of Companies Act - Summons issued to petitioner but the petitioner failed to appear - case of petitioner is that the supplementary order for investigation has been made without reference to Section 212 (16) of the Act and without jurisdiction; as per the proviso to Section 212 (16) of the Act.
The only case of petitioner is that the notice has been issued and investigation is ordered to be done only under Section 235 of the Companies Act, 1956 and not under Section 212 of the Act.
HELD THAT:- Admittedly, the Companies Act, 1956 was in force during the year 2010. The corresponding provision that was incorporated in the new Act for Section 235 of the old Act is Section 210. Section 210 of the Act speaks about the investigation into the affairs of the Company on receipt of the report from the Registrar / Inspector under Section 208 of the Act. Section 208 of the old Act states that the Central Government may at the expense of the Company appoint a person to inquire into and report to the Central Government for sanctioning any payment of interest on so much of that share capital as is for the time being paid up, for the period and subject to the conditions and restrictions. But under Section 212 of the Act, it is stated that the investigation into affairs of the Company should be done by SFIO, whenever the Central Government is of the opinion without prejudice to the provisions of Section 212, it is necessary to investigate into the affairs of the Company by SFIO. But in both the cases, action will be taken on the report of the Registrar / Inspector.
The petitioners without opting to abide the summons issued under Section 212(4), continues to claim that the correct provision applicable to their case is old Section 235 which is equivalent to Section 210 of the new Act. Such technicalities need not be adverted into at this stage of the proceedings. Since the petitioners have been called upon to give statement in view of the further investigation that has been ordered by the Central Government, it will be appreciable if they could cooperate with the investigation. However, the third respondent can also consider furnishing the copies of essential documents to the petitioners, if they are not secret documents and the interest of justice requires the copies to be furnished upon the petitioners.
Since the investigation has already been completed and the complaint has been given and on which, a case is also pending on the file of the Special Court in E.O.C.C.No.2/2018 and for certain reasons, further investigation has also been ordered, it is natural on the part of the petitioners to know the reasons on which further investigation has been ordered. After all they are informations need to be given to the petitioners at any time during the proceedings. If the informations are furnished, no harm will be caused to the proceedings of the Central Government which directed the SFIO to conduct further investigation.
The petitioners firmly believe that the action has to be taken only in accordance with Section 210 of the new Act which corresponds to the Section 235 of the old Act and not under Section 212 of the New Act, it is always open to them to appear before the third respondent in compliance of the summons issued to them without prejudice to their above contention.
The Criminal Original Petitions disposed off.
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2023 (5) TMI 395
Liability of Independent Director who was retired before the date of offence - additional director regularized as a director in the Company - Post being held by the petitioner on the date of filing the report - petitioner is responsible/liable for the offence alleged or not.
What post was being held by the petitioner on the date of filing the report? - HELD THAT:- Form No. DIR – 11 clearly shows that on the date of resignation (30.12.2016) the petitioner was the “Director” of the Company. As seen from the portal, the petitioner was an “Additional Director” from 02.06.2014 to 30.09.2014. Inspite of being shown on the portal as “Additional Director /Director” the petitioner did not lodge any complaint with the Ministry about the alleged wrong information. There is no case that the petitioner had filed any objection to the said wrong information (as alleged) on the portal.
Whether the petitioner is responsible/liable for the offence alleged? - HELD THAT:- Many people claim that the ROC knows about this director, as the company had already filed DIR 12 at the time of his appointment as additional director. So, following regularization DIR 12 is not required to be filed, which is absolutely a wrong understanding. Since he is now a director, and not an additional director. Therefore, ROC must be informed by filing a new DIR 12 that the additional director has been regularized as a director in the Company - Moreover, additional directors are on equal footing, in terms of, of power, rights, duties, and responsibilities, as other directors are. Yet, tenure of additional director is up to the date of forthcoming AGM unlike directors which are duly appointed by shareholders in the general meeting. If the company wishes to continue with an additional director beyond the AGM, then it will have to go for his/her regularization.
In the present case the petitioner as seen from the documents was an Additional Director on the date the board report was filed. To counter the same evidence is required to be adduced during trial so also to decide as to whether the petitioner at the relevant time of filing the report was a Director, Additional Director or an Independent Director. The responsibility of an Additional Director being the same as that of a director (but difficult from an independent director) they remain responsible, as the statute provides for the same - Thus to quash the proceedings by exercising this Courts inherent powers would amount to an abuse of the process of Court and would also amount to serious miscarriage of justice.
Revision dismissed.
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2023 (5) TMI 257
Claim against Official Liquidator representing company subsequent to the order of winding up - Demand of property tax and water tax from the appellant in relation to the company in liquidation from the date of order of winding up and until the date of confirmation of sale of assets to the auction purchaser - HELD THAT:- On perusal of the contents of the sale notice dated 09.05.2003 in the present case and the relevant terms and conditions of sale of the assets of the company in liquidation. It is evident that expansive technical expressions were used in the present case by the appellant OL in the terms and conditions of the sale that the same would be on “as is where is whatever there is” basis and then, further disclaimer was stated that the appellant OL was not providing any guarantee as to the quality, quantity or specification of the assets sold. Such stipulations and disclaimers were definitely putting the purchasers to notice to get themselves acquainted with what the property is (the nature and extent); where the property is (the locational attributes); and whatever there is (quantity and condition of the property) - All such stipulations were essentially pertaining to the physical properties/attributes of the assets in question but, the significant omission in those terms and conditions had been to make it obligatory on the bidder/purchaser to make himself aware about encumbrances, liens and claims attached to the assets in question. This omission strikes at the very root of the case of the appellant.
In UT Chandigarh Administration [2009 (3) TMI 862 - SUPREME COURT], this Court dealt with the consumer complaints of respondents filed to contend that the appellant was not legally entitled to claim balance of premium or annual rent, for having failed to provide basic amenities at the residential and commercial sites auctioned by way of advertisement. This Court allowed the appeals as the purchaser was not a consumer with reference to public auction of existing sites.
It has rightly been argued on behalf of the contesting respondents, with reference to Section 100 of the Act of 1882 and the decision of this Court in AI Champdany Ltd. [2009 (2) TMI 470 - SUPREME COURT], that in absence of any statutory provision, the auction purchaser without notice of any charge could not be made liable for the arrears of tax in question during the post-liquidation period. The provisions of the M.P. Act of 1956 were not creating any such encumbrance or charge on the property which would attach to the property for all times and under all circumstances nor they could be said to constitute any encumbrances which diminish the value of the property. In contrast, they would only qualify as expenses for “preserving, realising or getting in” the assets of the company and thus, shall have to be paid in priority and before any other payment in the course of distribution of the assets of the company or value thereof.
The Company Court and then the Division Bench of the High Court have rightly underscored the faults on the part of the appellant OL and have rightly held that the liability on account of the property tax and water tax claimed by the respondent No. 1 to the extent rejected by the appellant OL has been a post-liquidation liability, which the OL was obliged to discharge, in view of omission in the sale notice and then, in view of the operation of Rule 338 of the Rules of 1959 - Appeal dismissed.
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2023 (5) TMI 251
Seeking grant of anticipatory bail - Money Laundering - collection of huge amounts and after collecting these amounts floating of various companies numbering more than 100 in which said Mukesh Modi or his relatives were the Directors and the Co-operative society advanced loans to the said companies which were never repaid and thus the amount collected from innocent investors was siphoned off.
HELD THAT:- Although right to seek anticipatory bail is not a fundamental right, yet an individual is having a right to life and liberty, as granted by Article 21 of the Constitution of India. However, the said right can very well be curtailed by the procedure established by law. The normal procedure for curtailing the liberty of a person accused in an offence is that the accused can be arrested even without warrants from the court. Same is the situation under the new Companies Act as well and the authorized officer/designated officer can arrest a person even without warrants issued from a Court. However, to ensure that an innocent person is not unduly harassed by taking him into custody, the Courts have been conferred a special power under Section 438 CrPC. But this power has to be exercised sparingly by the courts, keeping in view the mitigating circumstances showing the ex facie innocence of the accused vis-a-vis the allegations leveled against him and further, that in case the accused is granted protection, the investigation of the case would not be unduly hampered.
In the present case, the petitioner was not apprehending his arrest so far as the investigation was over. The apprehension has arisen only from the impugned order issued by the Court for non-bailable offences. The petitioner is seeking protection against his arrest so as to appear before the trial court to face further proceedings in accordance with law. Hence, on its own facts, the present case stands on an altogether different footing.
It is trite that grant of anticipatory bail, at the stage of investigation may frustrate the investigating agency in interrogating the accused and in collecting the useful information and also the materials which might have been concealed and grant of anticipatory bail, particularly in economic offences would definitely hamper the effective investigation. Admittedly, the investigation of the present case is already complete and no further recovery is to be made from the petitioner. In that eventuality, it would not be justified to put the petitioner put that bars as no useful purpose would be served.
The Supreme Court in Siddharth vs. State of Uttar Pradesh & Ors. [2021 (8) TMI 977 - SUPREME COURT] while observing that it is not essential in every case involving cognizable & non-bailable offence to take the accused into custody at the time of filing of filing of charge-sheet especially where the accused have cooperated throughout the investigation, held that If the Investigating Officer has no reason to believe that the accused will abscond or disobey summons and has, in fact, throughout cooperated with the investigation we fail to appreciate why there should be a compulsion on the officer to arrest the accused.
Considering the fact that investigation of the case is complete; nothing more is to be recovered from the petitioner; undisputedly the petitioner fully cooperated with the investigating agency; apart from the undertaking given before this Court to the effect that the petitioner is ready and wiling to join the investigation, if any; and also keeping in view the education, antecedents and character of the present petitioner, the petitioner is not likely to flee from the course of justice since there is nothing on record to suggest that if the petitioner is granted concession of anticipatory bail, he would influence any witness in the case; and that admittedly, the petitioner has already left the company much before the start of investigation, this Court is of the considered view that the petitioner deserves to be granted the concession of anticipatory bail, at this stage.
The petitioner shall be released on bail, at this stage, by the trial court on his furnishing bail bonds/sureties to its satisfaction - Petition allowed.
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2023 (5) TMI 250
Illegal possession of the Office cum-guest house since the year 1987 - contention of the learned counsel for the applicant is that no offence against the applicant is disclosed and the present prosecution has been instituted with malafide intentions for the purposes of harassment - Section 452 of the Companies Act, 2013 - HELD THAT:- From the perusal of material on record and looking into the facts of the case at this stage it cannot be said that no offence is made out against the applicant. All the submissions made at the bar relates to the highly disputed question of facts, which cannot be adjudicated upon by this Court under Section 482 Cr.P.C. At this stage only prima facie case is to be seen in the light of the law laid down by Supreme Court in cases of M/s Neeharika Infrastructure PVT Ltd. Vs State of Maharashtra, AIR 2021 SC 1918, R.P. Kapur Vs. State of Punjab, [2021 (4) TMI 1244 - SUPREME COURT], State of Haryana Vs. Bhajan Lal, [1990 (11) TMI 386 - SUPREME COURT], State of Bihar Vs. P.P.Sharma, [1991 (4) TMI 365 - SUPREME COURT], lastly Zandu Pharmaceutical Works Ltd. Vs. Mohd. Saraful Haq and another [2004 (11) TMI 519 - SUPREME COURT], State of M.P. Vs Awadh Kishore Gupta and others [2003 (11) TMI 584 - SUPREME COURT], and Dr. Monica Kumar and Another Vs State of UP and Others, [2008 (5) TMI 687 - SUPREME COURT]. The disputed defence of the accused cannot be considered at this stage.
Moreover, the applicant has got a right of discharge under Section 239 or 227/228 Cr.P.C. or 245 Cr.P.C. as the case may be, before the court below and he is free to take all the submissions in the said discharge application before the trial court.
The application has no force and is accordingly dismissed.
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2023 (5) TMI 204
Prosecution proceedings against the Auditor of the company - High Court proceeded to hold that the petition filed by the Union of India under Section 140(5) of the Act, 2013 has been satisfied by the subsequent resignation of the auditor and therefore the petition under Section 140(5) of the Act, 2013 filed by the Union of India is no longer maintainable - Constitutional Validity of Section 140(5) of Companies Act, 2013 - direction under Section 212(14) assailed on the ground that issuance of the direction to prosecute within 30 hours of receipt of the IFIN SFIO Report demonstrates non-application of mind - assailed also on the ground that the IFIN SFIO Report was an incomplete report as investigation had not been completed and therefore Section 212(14) direction was incompetent
HELD THAT:- Section 140(5) of the Act, 2013 titled as “Removal, Resignation of Auditor and Giving of Special Notice” appears in Chapter X of the Act which is titled as “Audit and Auditors”. Therefore, Chapter X is a special provision under the new Act with respect of “Audit and Auditors”. It cannot be disputed that the auditor plays a very important role so far as the affairs of any company are concerned and therefore he should be independent and above board. Companies Act, 2013 is the result of the culmination of detailed study after taking into consideration the Parliamentary Standing Committee on Finance Report as well as the recommendations of the Standing Committee by introducing Companies Bill, 2009 and Companies Bill, 2011. When the earlier Companies Bill, 2009 was introduced, it was a culmination of the growing corporate economy and past experiences of corporate fiascos too and one of the suggestions were to provide for stricter accountability for auditors.
It is required to be noted that Section 143 of the Act deals with the powers and duties of the auditors. Sub-section (12) of Section 143 specifically provides that in the event that the auditor has reason to believe that an offence of fraud is being or has been committed in the company, the auditor shall report the matter to the Central Government. The detailed procedure is provided under the Rules issued in this regard. Therefore, a statutory duty is cast upon the auditor to report the matter to the Central Government about the offence of fraud being committed in a company. To see that the auditor is not holding any post in the company and he acts independently, Section 144 of the Act provides that the auditor cannot provide certain services including the management services - the prohibition and restriction created under Section 144 of the Act is primarily to protect the interest of the company in question and other stakeholders such as lenders and investors and the public at large. Keeping in mind the aforesaid provisions and the underlying public policy in the backdrop, Section 140(5) of the Act, 2013 is required to be interpreted and/or considered.
Section 140(1) of the Act provides for the procedure to remove an auditor by the company before the expiry of his term; section 140(2) and (3) of the Act deal with resignation of auditors and Section 140(4) of the Act deals with giving of special notice at an AGM for appointment of an auditor other than the retiring auditor and the process in that regard. However, Section 140(5) of the Act empowers the Tribunal (NCLT), either suo motu or on an application made to it by the Central Government or by any person concerned, to take action against the auditor who has acted in a fraudulent manner or is abetting or colluding in fraud with the management of a company - the powers under the first proviso to Section 140(5) can be said to be interim or pro tem measure to prevent an existing auditor from continuing and substitute him with an auditor based on a prima facie satisfaction that a fraud has been perpetrated and when circumstances warrant the substitution. Such an order can be said to be an interim order akin to a temporary suspension during the pendency of the detailed enquiry as provided in Section 140(5) of the Act and before any final order is passed by the Tribunal.
By the impugned judgment and order, though the High Court has upheld the vires of Section 140(5) of the Act, 2013, however, the High Court has held that once the auditor resigns as an auditor or is no more an auditor on his resignation, thereafter Section 140(5) proceedings are no longer maintainable as the petition filed by the Union of India under section 140(5) has been satisfied by the subsequent resignation of the auditor. The view taken by the High Court is absolutely erroneous and is unsustainable. Subsequent resignation of an auditor after the application is filed under section 140(5) by itself shall not terminate the proceedings under section 140(5). Resignation and/or removal of an auditor cannot be said to be an end of the proceedings under section 140(5).
The second proviso to section 140(5) of the Act, 2013 is a substantive provision, though it is by way of a proviso, and the same shall operate and/or depend upon the final order to be passed by the Tribunal in the first part of section 140(5). If the interpretation given by the High Court that on subsequent resignation and/or discontinuance of an auditor, proceedings under section 140(5) stand terminated and/or the petition under section 140(5) by the Central Government is no longer maintainable is accepted, in that case, second proviso to section 140(5) would become nugatory and in no case there shall be any action under the second proviso to section 140(5) - on true interpretation and scheme of Section 140(5) of the Act, 2013, once the enquiry/proceedings is/are initiated under first part of section 140(5) of the Act, either suo motu by the Tribunal or on an application made to it by the Central Government or by any person concerned, it must come to its logical end and irrespective of the fact whether during such enquiry/proceedings the auditor has resigned or not, there must be a final order to be passed by the Tribunal on whether such an auditor has, in fact, directly or indirectly, acted in a fraudulent manner or not. Direction to the company to change its auditor as provided in the first part of section 140(5) is only a consequence to the finding recorded by the Tribunal that the auditor has, directly or indirectly, acted in a fraudulent manner.
The High Court has materially erred in holding that on resignation of auditors – BSR & Deloitte and on appoint of new auditors, application under section 140(5) shall not be maintainable. Consequently, the High Court has erred in setting aside the order(s) passed by the NCLT/NCLAT by which the NCLT/NCLAT held that despite the resignation of the auditors, enquiry/proceedings under Section 140(5) shall be maintainable and/or continued.
Vires of Section 140(5) of the Act - HELD THAT:- Auditors play very important role in the affairs of the company and therefore they have to act in the larger public interest and all other stakeholders including investors etc. Chapter X of the Act specifically for the “Audit and Auditors” looking to the importance of the auditors. Therefore, section 140(5) cannot be said to be discriminatory and/or violative of Article 14 of the Constitution of India.
Section 140(5) of the Act has been enacted with the specific object and purpose as referred to hereinabove and the same has been enacted after due deliberations and taking into consideration the recommendations of the Standing Committee as well as the respective stakeholders. Therefore, taking into consideration the object and purpose for which section 140(5) of the Act is enacted, the same cannot be said to be arbitrary, excessive and violative of Article 14 of the Constitution of India and/or violative of fundamental rights guaranteed under Article 19(1)(g) of the Constitution of India, as alleged.
Thus, challenge to the constitutional validity of section 140(5) of the Companies Act, 2013 fails and it is observed and held that section 140(5) is neither discriminatory, arbitrary and/or violative of Articles 14, 19(1)(g) of the Constitution of India, as alleged. The impugned judgment and order passed by the High Court quashing and setting aside the application/proceedings under section 140(5) on the ground that as the auditors have resigned and therefore thereafter the same is not maintainable is hereby quashed and set aside - the impugned judgment and order passed by the High Court quashing and setting aside the NCLT order holding that even after the resignation of the auditors, the proceedings under section 140(5) shall be maintainable is hereby quashed and set aside.
Appeal allowed.
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2023 (5) TMI 203
Offence under Companies Act, 2013 - Jurisdiction - cognizance was taken by the Special Court and summons were issued -Erroneous allegations of giving false evidence before National Company Law Tribunal, Indore Bench under Section 193, 196, 120-B/34 of IPC and under Section 449 of the Companies Act, 2013 - submission of false information before the National Company Law Tribunal, Indore Bench - HELD THAT:- From bare reading of Section 435 of the Companies Act, it is evident that for the purpose of providing speedy trial of the offences under the Companies Act, the Central Government by notification may establish or designate as many special Courts as necessary and in that context IX Additional District and Sessions Judge, Gwalior has been designated as Special Court under the Companies Act vide notification dated 18.05.2016 issued by Industry and Corporate Forum.
Section 436 of the Companies Act starts with a non obstante clause “Notwithstanding anything contained in the Code of Criminal Procedure” which gives an overrding effect over the provisions of Act mention in the non obstante clause. It is trite to say that accept of provisions or act mentioned in the non-obstante clause, the enactment following it will have its full operation or that the provisions embrazed in the non-obstante clause will not be an impediment for the operation of the enactment, thus, a non-obstante clause may be used as a legislative device to modify the ambit of the provision of law mentioned in the non-obstante clause or override it in specified circumstances. Therefore, when the enacting part of the Section is clear, its scope cannot be cut down or enlarged by resort of non-obstante clause. Thus, it could safely be held that the provisions of Section 436 of the Companies Act will have over riding effect over the provisons of Code of Criminal Procedure, whenever an offence specified under the Companies Act is to be tried by Special Court.
Admittedly, Section 449 which deals with punishment for giving false evidence is an offence under the Companies Act, it is to be tried by Special Courts established/notified by the Central Government as per Section 435 of the Companies Act.
Maintainability of the complaint at the behest of complainant/respondent - HELD THAT:- Section 439 (2) of the Companies Act is very much clear. Section 449(2) lays down about the exception for the Courts taking cognizance upon complaint in writing made by the Registrar, a share holder or a member of the Company or a person authorized by the Central Government in that behalf. Thus, it is clear that any of the person mention in the Section can maintain the complaint and the complainant/respondent being one of the Directors (shareholders/members) of the accused/petitioner company could maintain the complaint.
The petitioner is partly allowed and disposed of.
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2023 (5) TMI 202
Prosecution proceedings against the Director - Non-submission of financial statement within the stipulated time with registrar of companies - not having registered office capable of receiving and acknowledging the communication - AGM has not been held and its proceedings has not been forwarded to Registrar - non-submission of 3 copies of Balance Sheet and Profit and Loss A/c with the Registrar - non-submission of annual return and holding of annual general meeting in the relevant year.
HELD THAT:- This is a case where admittedly petitioners worked as Directors of the Company between the period 30th September, 1992 till 19.04.1995 and 05.05.1998 and then resigned. In 2015, under the mistaken belief, complaint was filed against present petitioners also for alleged non-compliance of Section 12 of Act, 2013 for which penalty is provided under Section 12 (8) of the Act, 2013 - Admittedly, alleged non-compliance is for the period 2014 where some defaults on the part of the Company are made. Admittedly, petitioners resigned w.e.f. 19.04.1995 and 05.05.1998. Much thereafter, alleged defaults have been committed.
Considering the submission and going through the documents appended thereto as well as the reply filed by the respondent, it appears that petitioners made out their case for interference. Once, they resigned in the years 1995 and 1998, then they cannot be fastened with any liability for a period of 2014.
Petition allowed.
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2023 (5) TMI 201
Seeking restoration of the name of the Company in the Register maintained by the Registrar of Companies (RoC), NCT of Delhi and Haryana - Company is not carrying on any business or operation for two immediately preceding financial years and has not made any application within such period for obtaining the status of Dormant Company under Section 455 of the Companies Act, 2013 - Section 252 of Companies Act - HELD THAT:- The Company has Commercial Property bearing Plot No. B-235, Sector 16, Noida which was allotted by New Okhla Industrial Development Authority (NOIDA) for the purpose of Auto Parts Shop Repair Workshop & Motor Garage and the Company was paying electricity bill regularly from July, 2017 to September, 2020. Further, the Respondent No. 1/Registrar of Companies in his reply before the NCLT has stated that it has no objection if the name of the Company is restored on proving by the Company that it was carrying on business or was in operation and the Company be also directed to file financial statements up to date with appropriate filing and additional fees.
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. Hence, the order passed by the National Company Law Tribunal (New Delhi, Bench-II) as well as Registrar of Companies, NCT of Delhi & Haryana is not sustainable in law.
The name of the Company is directed to be restored to the Register of Companies subject to the compliances imposed - appeal allowed.
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