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Companies Law - Case Laws

Showing 81 to 100 of 15082 Records

• 2025 (1) TMI 957
  

  Seeking grant of Regular bail - allegations of serious fraud and financial mismanagement under the Companies Act, 2013 and 1956 - twin conditions under Section 212(6) of the Companies Act, 2013, which pertain to the grant of bail in cases involving serious frauds investigated by the SFIO satisfied or not - HELD THAT:- It is observed by this Court that it is a common ground between the CSL and the investors that the liquidation of the Company is not in the interest of the investors as substantial amounts have been invested by them in residential/commercial projects proposed by the CSL and the said fact has been duly noted by the concerned Company Court in its order dated 24th August, 2023 (which is part of the record). It is pertinent to mention here that the said facts and circumstances were also taken into consideration by the Predecessor Bench of this Court while deciding the grant of interim bail to the applicants.

  It would not be impermissible under the law to consider the aspect of grant of regular bail in order to allow the accused applicants to revive the CSL in furtherance to the completion of the pending projects - This Court is well cognizant of the fact that the Courts ought to bear in mind that in a matter of regular bail under Section 439 of the CrPC (now Section 483 of the BNSS), the larger interest of the State must be taken into consideration. Further, a sensitive approach is required to be acquired by the Courts while dealing with the offences constituting economic offences which are increasing plight of this nation as the same impacts the individual roots of the society which is a common man, ultimately leading to minimize the trust of the public in law.

  Section 212(6) of the Companies Act imposes twin conditions for granting bail to accused persons in cases involving serious frauds investigated by the SFIO. These conditions are, that an offence covered under Section 447 of the Companies Act shall be cognizable and no person accused thereof shall be released on bail or on his own bond unless the Public Prosecutor has been given an opportunity to oppose the application for such release and where the Public Prosecutor opposes the application, the Court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he not likely to commit an offence while on bail.

  In the present case, this Court, while refraining from adjudicating on the merits of the allegations, observes that the applicants have made bona fide efforts to revive the projects and safeguard the interests of the investors. The said actions not only reflect their intent to rectify the consequences of the alleged offences rather than perpetuating fraudulent activities, but also prima facie satisfies this Court that there are reasonable grounds to believe that the applicants might not be guilty of the offences and they are not likely to commit any offence while on bail as they have sought bail so that they may make efforts towards revival of the CSL and complete the pending projects.

  This Court holds that the applicants meet the twin conditions under Section 212(6) of the Companies Act and their release on bail would serve the larger public interest without compromising the ongoing legal proceedings.

  Conclusion - This Court is of the considered view that directing the applicant to first physically surrender and then proceeding with the adjudication of the instant regular bail applications would not serve any substantial purpose and accepting the argument of the respondent might hinder the applicants’ ongoing pending efforts to resolve the grievances of the investors by implementing the proposed revival schemes.

  Both the applicants be released on regular bail subject to fulfilment of conditions imposed - bail application allowed.

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• 2025 (1) TMI 956
  

  Dissolution of the company - Section 481 of the Companies Act, 1956 - HELD THAT:- Having heard the learned advocate for the Official Liquidator and on perusal of the record of this report and in the facts of the case the report deserves to be accepted.

  The Official Liquidator is permitted to make payment towards professional fees of Rs. 1,500/- to M/s. P. C. Rathod & Co., Chartered Accountants towards preparation of Auditor’s Certificate from common pool account available with the Official Liquidator since there is no fund in the account of the company in liquidation.

  Conclusion - M/s. Tirupati Foundry Private Limited (In Liquidation) is hereby dissolved under Section 481 of the Act and the Official Liquidator attached to this Court stands discharged and is relieved as liquidator of M/s. Tirupati Foundry Private Limited., (in Liquidation).

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• 2025 (1) TMI 955
  

  Maintainability of the company petition - non-compliance of Section 244(1) of the Companies Act, 2013 was wrongly rejected by Ld. NCLT - Petition filed by legal representatives of a deceased shareholder - locus standi of the respondents to file the petition - HELD THAT:- Admittedly the consent terms were taken on record in such Testamentary Suit No.883/2014 also. Admittedly all legal heirs who had entered the consent terms were Class II legal heirs of Late Smt Tanna and it was noted in the order dated 04.05.2017 in view of consent terms Probate was not required. Now the Probate was only required when all legal heirs had wished to act under the Will of Late Smt Tanna but, admittedly, they never acted under such Will. Thus to say the Respondents No.1 and 2 could not have acted under the consent terms is not correct.

  A bare perusal of the impugned order, in the facts of this case pleaded before us depicts of no infirmity. Admittedly the shareholding of the deceased Smt Tanna have been brought from 66% to 6% after her death and the reason given is she could not invest more money after her death. Looking at the conduct of Respondent No.3 who was in control of appellant company after the death of Smt Tarla Tanna, it gives all the more reason that her Estate be represented by someone who could protect the interest of legal heirs either per Consent Terms and/or under a Will, if Respondent No.3 succeeds in any of the cases, but till such time her Estate and her shareholding needs to be protected and for this reason there must be someone to represent her estate/shareholding in the company.

  Conclusion - The respondents have the locus standi to maintain the company petition under Section 241. The NCLT did not exceed its jurisdiction, and the pending legal proceedings do not preclude the petition's maintainability. The allegations of oppression and mismanagement warrant examination, and the respondents are justified in representing the deceased's estate.

  Appeal dismissed.

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• 2025 (1) TMI 794
  

  Justification of Claim Management Advisor (CMA) in categorizing the claims related to delay in possession as "put under adjudication" - HELD THAT:- The CMA has categorically stated that the reimbursement of rent was not provided for in any document entered into between the Appellants and Maytas and there was no commitment to pay rent.

  In terms of the claims management process under the resolution framework, there is a clear distinction between verification of claim and adjudication of claim. The CMA has categorically and consistently stated that the reimbursement of rent was not provided for in any document entered into between the Appellants and Maytas and there was no commitment to pay rent to the Appellants. On looking into the clauses of the Agreement also, there are no provision for payment of loss of rent or alternative accommodation rent being the relevant parameter for quantification of damages for delay in construction. Given this backdrop, the CMA was right in asserting that he cannot verify any claim basis rental agreements unilaterally produced by the Appellant when the Agreement did not provide scope for such rental agreements to determine the damages for delayed possession. Under such circumstances, it is not found either unreasonable or unfair on the part of the CMA in having pointed out that any claim premised on the above parameters would fall in the realm of adjudication which would be beyond the limited jurisdiction of the CMA. The CMA clearly did not have the jurisdiction to determine the claim, nor are there any mitigating factors in the IBC or the CIRP Regulations framed thereunder bestowing any such adjudicatory jurisdiction on the CMA.

  Conclusion - There are no reason to differ with the findings of the Adjudicating Authority that the claims on account of delayed delivery of flat and mental agony is in nature of unliquidated damages and there is no agreement between the parties for payment of the same, hence the same cannot be admitted.

  Appeal dismissed.

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• 2025 (1) TMI 555
  

  Sanction of Scheme of Amalgamation - Section 230-232 of Companies Act, 2013 - material information was suppressed which had a substantial impact on valuation of the shares - rejection of scheme even when overwhelming majority of shareholders and creditors have approved it.

  HELD THAT:- DCF method is one of the recognised methods for valuation of shares and the valuers, as well as the amalgamating companies cannot be faulted for using it. It is also to be noted that DCF method relies on future earnings, rather than ownership of assets. The allegation that valuer has not verified the information before valuation is answered by the Amicus Curiae himself that work of the valuer does not include an audit and that he is not required to express any audit opinion or any other form of assurance on this information, and generally a valuer would consider circumstances existing on the valuation date.

  It is found that no objection to the Scheme was raised by any of the statutory or regulatory authority, except the Income Tax Department. The Competition Commission of India has stated that the Scheme does not cause any appreciable adverse impact on competition and they have no objection to its approval. The Competition Commission of India, The Registrar of Companies and The Regional Director, Ministry of Corporate Affairs have not raised any objections viz. a viz. compliance of various provisions of the Companies Act, 2013 and Competition Act. SEBI and Stock Exchanges have not raised any compliance issue regarding the listed entities involved in the Scheme.

  It has been held by Hon’ble Supreme Court in the case of MIHEER H. MAFATLAL VERSUS MAFATLAL INDUSTRIES LTD. [1996 (9) TMI 488 - SUPREME COURT], it is for the equity shareholders acting bona fide in the interest of their class as a whole to accept a particular scheme and once the exchange ratio is worked out by a recognised firm of Chartered Accountants who are experts in the field of valuation and if no mistake can be pointed out in the said valuation, it is not for the court to substitute its exchange ratio, especially when the same has been accepted without demur by the overwhelming majority of the shareholders.

  In the present case the valuation of shares and determination of Fair Equity Share Exchange Ratio has been done by experts, and the method of valuation used, namely, Discounted Cash Flow Method is universally accepted as a valid recognised method for valuation of shares - Income Tax Department had initially raised the objection but had later left the approval of the Scheme at the discretion of the Tribunal, stating that in case scheme is approved, Revenue’s interests be protected. The Revenue’s interests are protected in the Scheme and as noted in para – 11 supra the Transferee company has undertaken to bear the tax liabilities, and the proceedings, against the Transferor companies can be continued against the transferee company.

  Conclusion - i) Ld. NCLT, Chandigarh has erred in interfering in the Scheme ignoring the commercial wisdom of shareholders, creditors and Board of Directors of the appellant companies. ii) The prayer to sanction the scheme of amalgamation between the Appellants, allowed.

  Appeal allowed.

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• 2025 (1) TMI 554
  

  Reduction of share capital - Compliance with Section 66(1)(b)(ii) of the Companies Act, 2013 or not - permissibility of conversion of reduced share capital into interest-bearing unsecured loans - HELD THAT:- The company has a power to reduce its shareholding capital in any manner, it being a domestic issue. Thus considering the fact none of the creditors ever raised any objection, even the Regional Director (Western Region) and the Registrar of Companies did not object to such reduction and also a special resolution dated 29.11.2022, having been passed by 100% majority of shareholders, it is found that there is no impediment to grant permission to the appellant for reduction of its shares by confirming the special resolution dated 29.11.2022.

  Conclusion - The impugned order set aside, permitting the reduction of share capital as proposed by the appellant company.

  Appeal allowed.

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• 2025 (1) TMI 489
  

  Maintainability of appeal under Section 483 of the Companies Act, 1956 - transfer of Equity shares - fraudulent preferences or void transactions under Sections 531, 531-A, and 536 of the Companies Act, 1956 - HELD THAT:- There are no hesitation in holding that the appeal filed by the appellant No.1 CRBCML, through appellant No.2 Mr. C.R. Bhansali is not maintainable in law. First things first, it is pertinent to mention that the learned Single Judge while passing the impugned order dated 25.07.2023 had delved into the issue of the maintainability of the objections that were being raised on behalf of the appellants - it is an undisputed position that the shares in questions were purchased by the applicants through the RBI-approved Stock brokers in the open market. Furthermore, it is a matter of fact that the Reserve Bank of India's (RBI) order dated April 9, 1997, directing CRBCML not to proceed with any sale, transfer, or charge on the property or assets without written consent, was not in the public domain, and the applicants had no notice of the directions passed by the Company Court. The applicants, in ignorance of such facts, apparently bought the shares from open market and paid the consideration thereof.

  It is not within the jurisdiction of the Company Court to investigate, at the behest of the appellants, the sale of shares by CRBCML, including the recipients or the consideration involved. Undoubtedly, the transfer of equity shares occurred during a period when such transfers were typically executed through the exchange of share certificates along with signed or blank transfer deeds. The sole requirements were a Contract Note in favour of the transferee, substantiated by the payment of the share amount to the Stock Broker.

  Conclusion - i) The present appeal by Appellant No. 1, CCL, and Appellant No. 2/Ex-Director, is not maintainable under Section 483 read with Sections 521& 531-A of the Act. The objections raised by them to the clarification applications preferred by the applicants/transferees in the winding-up petition cannot be entertained in law. ii) Since the sale of shares took place prior to 09.04.1997, although the company (in liquidation) remained its de jure owner, the de facto legal right or title in the same passed on to the applicants in the ordinary course of business and thus was saved by Section 562 (2) of the Act.

  Appeal dismissed.

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• 2025 (1) TMI 488
  

  Maintainability of petition - availability of alternative remedy - Liability for default in holding the Annual General Meeting - HELD THAT:- The Petitioner herein in accordance with the scheme of the Companies Act, has rightly approached the NCLT with a Petition under Section 241 of the Companies Act, 2013 wherein admittedly one of the five Reliefs claimed are for holding of the Annual General Meeting. Though the waiver has not been granted to the Petitioner since the Petition was not supported by 1/5th members of the Company, however, Section 421 of the Companies Act, 2013 clearly provides for a remedy by way of an Appeal to Appellate Tribunal. The Petitioner himself has submitted that he intends to approach the NCLAT for redressal of his grievances of rejection of petition under Section 241 of the Companies Act, by NCLT.

  From the submissions of the Petitioner himself it is evident that firstly, the AGM was scheduled for 29.09.2023 but could not be held on account of sealing of premises by DDA which is still continuing. Secondly, he has already approached the NCLT and has an alternate efficacious remedy to file an Appeal against the orders of NCLT under Section 421 of the Companies Act, 2013.

  Conclusion - There being an alternate efficacious remedy available to the Petitioner, the present Writ Petition is not maintainable.

  Petition dismissed.

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• 2025 (1) TMI 436
  

  Seeking suspension of the LOC - whether the apprehensions raised by the investigative agencies justify the continued imposition of restrictions on Petitioner’s right to travel? - HELD THAT:- A Look Out Circular serves as a preventive measure to restrict an individual from leaving the country, particularly when there are reasonable grounds to believe that such departure may hinder legal proceedings or jeopardize investigations into serious transgressions. While the issuance of an LOC aims to safeguard the interests of justice, it must be reconciled with the constitutional guarantees of personal liberty. The right to travel abroad has been recognized as an integral aspect of the right to life and personal liberty enshrined under Article 21 of the Constitution of India.

  The principle of res judicata, enshrined in Section 11 of the Code of Civil Procedure, 1908, precludes a Court from adjudicating an issue that has been directly and substantially decided in a prior proceeding between the same parties. However, the doctrine of res judicata does not rigidly apply to writ proceedings, especially in cases where ongoing violations of fundamental rights are alleged. Even the principle of constructive res judicata which is often applied to ensure judicial finality, cannot prevent the enforcement of fundamental rights when the cause of action has undergone change. When subsequent developments alter the factual or legal matrix, courts retain the flexibility to revisit and adjudicate such matters to ensure justice.

  In the present case, while Petitioner’s earlier request for suspension of the LOC in W.P.(Crl.) 2332/2022 was declined, the doctrine of res judicata cannot mechanically bar the current petition. This is because the dismissal of the earlier writ petition was premised in the nascent stage of the SFIO investigation and the preliminary nature of the proceedings under the Black Money Act at that time. However, the circumstances prevailing at the time of adjudicating W.P.(Crl.) 2332/2022 have significantly changed - This assessment is currently under challenge by the Petitioner before the Commissioner of Income Tax (Appeals)-31, New Delhi. Moreover, vide Assessment Order dated 30th March, 2024, the total quantified taxable undisclosed assets of the Petitioner’s son, Mr. Shiv Punj, has been assessed at NIL.

  Proceedings under the RBI Master Circular on Fraud - HELD THAT:- The classification of PLL’s account as “fraud” by IDBI Bank was previously challenged before this Court in W.P.(C) 10796/2020. On 12th May, 2023, this Court set aside the Financial Monitoring Report and the classification of PLL’s account as fraudulent. However, this decision was rendered on account of procedural infirmities, resting on the lack of an opportunity of hearing provided to PLL rather than a substantive adjudication on the merits of the allegations. SFIO has correctly contended that the ruling did not exonerate PLL or the Petitioner but was limited to ensuring compliance with principles of natural justice.

  While these proceedings signal the gravity of the allegations, they remain at a preliminary stage. As of now, no formal complaint has been filed by IDBI Bank, nor any FIR has been registered against the Petitioner or PLL. This lack of conclusive action demonstrates that the allegations have yet to translate into definitive findings of wrongdoing - In the instant case, in absence of any definitive findings or legal proceedings, an imminent risk warranting the continuation of the LOC against the Petitioner cannot be established.

  Status of SFIO Investigation - HELD THAT:- SFIO possesses the mechanism to obtain evidence independently, including through forensic analyses of PLL’s financial accounts. The liquidator of PLL, appointed during the liquidation proceedings, holds custody of all relevant company records, which are readily accessible to the SFIO for their investigation. It is also noteworthy that the investigating agencies are already apprised of the Petitioner’s foreign assets, leaving little room for concealment or evasion. Crucially, there have been no credible allegations of evidence tampering, witness intimidation, or any conduct by the Petitioner that could potentially derail the investigation. In such circumstances, the indefinite continuation of the LOC imposed on the Petitioner cannot be justified. As observed in multiple judgments, including MANEKA GANDHI VERSUS UNION OF INDIA [1978 (1) TMI 161 - SUPREME COURT] any restriction on personal liberty must meet the test of proportionality and be reasonably connected to the legitimate - while the SFIO’s concerns regarding the gravity of the allegations cannot be dismissed outright, investigations must not become an instrument for imposing indefinite constraints on an individual’s fundamental rights, particularly when no substantive evidence has been presented to establish non-cooperation or obstruction by the Petitioner. Discharge from Personal Guarantees.

  Furthermore, an application filed by the Union Bank of India under Section 95 of the Insolvency and Bankruptcy Code, 2016, seeking to invoke the Petitioner’s personal guarantees, was dismissed by the NCLT in its order dated 10th January, 2024. The NCLT’s relied on the DRT’s findings, which had already discharged the Petitioner from his personal guarantees.

  Conclusion - The right to travel abroad, being an essential component of the right to personal liberty under Article 21 of the Constitution, cannot be curtailed arbitrarily or indefinitely. Restrictions such as an LOC must pass the test of proportionality and necessity, ensuring that they are imposed only when supported by credible material. In the present case, while the State’s interest in investigating allegations of financial impropriety is undeniable, this Court finds that the absence of tangible material on record of the Petitioner’s intent to abscond or tamper with the investigation tilts the balance in favour of permitting conditional travel - The permission to travel abroad given in this order shall be subject to all other applicable conditions and shall not be deemed as a direction to any other authority. In case any of the afore-noted conditions are violated, the security shall be forfeited.

  The present petition is disposed of.

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• 2025 (1) TMI 230
  

  Jurisdiction of High Court to transfer the Company Petition to the National Company Law Tribunal (NCLT) for initiating the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC) 2016 - winding-up proceedings makes it appropriate or feasible to transfer the case to the NCLT or not - HELD THAT:- This Court passed the winding up order on 21.09.2015 and the Liquidator was appointed. Since, nothing substantial could be achieved towards liquidation of the available assets of debtor company, this Court on the suggestions of stake holders ordered a meeting of Department of State Excise, official Liquidator and Bank of India (lead bank for consortium of creditors). Eventually, the creditors arrived at consensus and this Court passed an order dated 02.08.2019 authorizing Excise and Taxation Department of the State to conduct sale proceedings on the assets of debtor company.

  In ACTION ISPAT AND POWER PVT. LTD. VERSUS SHYAM METALICS AND ENERGY LTD. [2020 (12) TMI 535 - SUPREME COURT], the power of Company Court to transfer the matters before it dealing with winding up of the companies to NCLT under Section 434(1) (c) of Companies Act, 2013.

  This Court is having the jurisdiction to transfer Company Petition No.13 of 2014 to NCLT subject, however, to a condition that the winding up proceedings have not reached a stage where it would be irreversible, making it impossible to set the clock back - thus, partial sales of the assets of debtor company have already been made. Noticeably, the third party rights (auction purchaser) have come into being. There are pending issues with respect to confirmation of sales already effected.

  Conclusion - An irreversible situation has been created as partial sales of assets have been effected and a substantial amount has already been collected, therefore, it will not be in the interest of justice to exercise discretion in favour of the applicant-SBI.

  Application dismissed.

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• 2025 (1) TMI 155
  

  Rejection of application of the appellant for the listing of shares - appellant had not taken the approval of the shareholders for the allotment of the shares to the Asset Reconstruction Private Limited - HELD THAT:- The conversion of the debt into additional shares had taken place with the agreement of the appellant company and RARE, and it is on the basis of such an agreement between the parties that a resolution was passed on 02.05.2018 by the Board of Directors of the appellant company accepting the proposal to convert the debt into shares and to allot them in favor of RARE, thus, resulting in increase of the equity capital of the appellant company. Even the application for listing of the aforesaid additional shares was made by the appellant company to the BSE meaning thereby that the proposal for increasing the subscribed capital of the company by converting part of the debt into equity shares, as aforesaid, was initiated by the appellant company itself and not actually by RARE. Therefore, the proposal was that of the company only. Accordingly, as contemplated by Section 62(1)(c) of the Companies Act, 2013, the approval of the shareholders would be mandatory before the shares are accepted for listing on the BSE.

  For want of approval of the BSE, the Securities Appellate Tribunal has returned a clear finding that the approval of the BSE is necessary in view of Regulation 28 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and there are no different opinion on it rather the said finding is accepted which is not perverse in any manner. In view of the aforesaid facts and circumstances, it is opined that no error or illegality has been committed either by the BSE or the Securities Appellate Tribunal in refusing to accept the request of the appellant company for the listing of the shares at the Stock Exchange inasmuch as Section 62 of the Companies Act stands duly attracted and in the light of sub-clause (c) of sub-section (1) of Section 62 of the Companies Act, special resolution of the shareholders is necessary which is lacking in the instant case.

  Conclusion - When a company proposes to increase its subscribed capital, shareholder approval is mandatory under Section 62(1)(c) of the Companies Act, 2013.

  This statutory appeal under Section 22 F of Securities Contracts (Regulation) Act, 1956 is devoid of merit and is dismissed.

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• 2025 (1) TMI 154
  

  Dismissal of petition filed by the appellants under Section 241 of the Companies Act, 2013 - dismissal on the ground it does not meet the criteria as is provided for in Section 244 of the Companies Act, 2013 - HELD THAT:- A bare perusal of the impugned order would show the Ld. NCLT had observed Section 244 of the Companies Act, 2013 requires the following conditions for filing an application/petition under Section 241 of the Companies Act viz. a) in case of a company having share capital, not less than 100 members of the company; or b) not less than 1/10 of the total number of its members whichever is less; or c) Any member of members holding not less than 1/10 of the issued share capital of the company.

  Admittedly there were 30 members of Respondent No.1 at the time of filing of Company Petition. Admittedly four of them filed the petition under Section 241 hence condition (b) above viz. not less than 1/10 of the total number of members could apply was fulfilled, thus Company Petition was maintainable.

  Appeal allowed.

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• 2025 (1) TMI 19
  

  Professional misconduct under Section 132(4) of the Companies Act, 2013 - Penalties and sanctions - HELD THAT:- There exists reasons to believe that the Auditors did not exercise due diligence in ensuring the audit quality expected in an audit of a public interest entity and were grossly negligent in the conduct of the professional duties by not adhering to the requirements as laid down by the relevant statutes. The Auditors' conclusion that they do not have reasons to believe that fraud is committed by the officers of the Company is not supported by sufficient appropriate audit evidence. The Auditors also failed to identify the persons comprising TCWG. The Auditors' failures in the audit, as mentioned in Paragraphs 16 to 70 above, amount to professional misconduct as per Section 132 (4) of the Companies Act, 2013.

  The charges of professional misconduct in the SCN are established based on the evidence in the Audit File, the audit reports on the financial statements for the FY 2018-19 and 2019-20, the submissions made by the Auditors, and the Annual Report of ZEEL for FY 2018-19 and 2019-20.

  Penalties and sanctions - HELD THAT:- Section 132 (4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law.

  Because professional misconduct has been proved and considering the nature of violations and principles of proportionality and in view of the directions issued to the Audit Firm, in the exercise of powers under Section 132 (4) (c) of the Companies Act, 2013, it is ordered as under:

  a. Imposition of a monetary penalty of Rupees Two Crore upon M/s Deloitte Haskins & Sells LLP.

  b. Imposition of a monetary penalty of Rupees Ten Lakhs upon CA A.B. Jani and in addition CA A.B. Jani is debarred for 5 years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

  c. Imposition of a monetary penalty of Rupees Five Lakhs upon CA Rakesh Sharma and in addition, CA Rakesh Sharma is debarred for 3 years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

  Conclusion - Auditors must exercise due diligence, maintain professional skepticism, and obtain sufficient audit evidence to support their opinions. Failure to do so constitutes professional misconduct.

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• 2025 (1) TMI 18
  

  Professional misconduct - Engagement Partner (EP) and Engagement Quality Control Reviewer (EQCR) failed to meet the requirements of the Standards on Auditing (SA) and provisions of the Companies Act 2013 during the audit of DB Realty Limited for the Financial Year 2015-16 - Section 132(4) of the Companies Act 2013 - Penalties and sanctions.

  HELD THAT:- The EP and the EQCR have made a series of serious departures from the Standards and the Law, in conduct of the audit of DBRL for FY 2015-16. Based on the above discussion, it is proved that they had failed to exercise due diligence in performance of this audit. Based on the foregoing discussion and analysis, it is concluded that the EP and the EQCR 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 EP and the EQCR committed professional misconduct as defined by clause 7 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he "does not exercise due diligence or is grossly negligent in the conduct of his professional duties" - This charge is proved as the EP and the EQCR failed to conduct the audit in accordance with the SAs and applicable regulations, failed to evaluate valuation reports and failed to perform engagement quality control review.

  b) The EP committed professional misconduct as defined by clause 8 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he "fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion" -This charge is proved as the EP failed to conduct the audit in accordance with the SAs.

  c) The EP committed professional misconduct as defined by clause 9 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he "fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances" - This charge is proved since the EP failed to conduct the audit in accordance with the SAs.

  Penalties and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law - 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 that imposition of a monetary penalty of Rs five lakhs. upon CA Chetan Desai; and Rs three lakhs upon CA Rakesh Rathi. In addition, they are debarred for a period of five years, and three years respectively from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

  Conclusion - The EP and the EQCR failed to conduct the audit in accordance with the SAs and applicable regulations, failed to evaluate valuation reports and failed to perform engagement quality control review. Auditors must exercise due diligence, professional skepticism, and obtain sufficient audit evidence to support their audit opinions.

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• 2024 (12) TMI 1589
  

  Maintainability of second petition - applicability of Section 447 of Companies Act, 2013, on the basis of continuous offence and transactions made as per the complaint even after enforcement of the Act, 2013 - Invocation of jurisdiction of this Court for quashing of complaint case - offence was committed during the period from year 2006 - requirement of registration of offence u/s 186(7) and punishment to petitioner u/s 186(13) of Companies Act, 2013.

  Maintainability of second petition - HELD THAT:- Considering the submissions made by learned counsel for the petitioner in response to the objection raised by learned counsel for the respondent and looking to the legal position and also on perusal of earlier order of High Court in [2025 (3) TMI 1250 - MADHYA PRADESH HIGH COURT], it is clear that the present petitioner was not a party in the said petition and he was not the petitioner in the same.

  From the order and the facts considered therein, it is clear that the quashing of the complaint case was solely on the ground that the ex post facto application of penal provision is proper or not. The High Court while dismissing the petition observed that at the relevant point of time, it was not proper for the Court to enter into the factual aspect of the matter because Court was of the opinion that prima facie only on the basis of inter-departmental communication, if any summary is prepared, that summary note cannot be considered the opinion and it has no legal sanctity prima facie. The Court at that time refused to enter into the factual aspect of the matter and observed that it can be unveiled only after conducting the trial.

  It is clear from the order of High Court that the points raised before this Court in the present petition have not been discussed and no opinion was given by the Court on this aspect which has been argued before this Court. Accordingly, in view of the legal position, the objection raised by learned counsel for the respondent about maintainability of this petition is not sustainable and accordingly it is rejected and therefore, this petition is held maintainable.

  Applicability of the provisions of Section 447 of Act, 2013 - HELD THAT:- The submission made at the behest of the respondent is not convincing that it is a continuous offence even after the year 2013 and therefore Section 447 has rightly been applied. From the allegations made, it is clear that the Investigating Officer did take note of transactions made from 30.11.2000 to 25.07.2006 and also the transactions of Financial Year 2003-04 and Financial Year 2005-06 and further transactions made upto the year 2017-18. The allegations made in the FIR do confirm that it is not a continuous offence inasmuch as the transactions made in different years. The definition of Financial Year under the old Companies Act, 1956 is prescribed in Section 2(17), wherein it is provided that the period in respect of which any profit or loss account of the body corporate laid before it in annual general meeting is made up, whether that period is a year or not. Moreso, as per the ‘Financial Year’ as defined under Section 2(41) of Act, 2013, it is clear that the period ending on 31st of March of every year. Thus, it can profitably be held that it is not a continuous offence.

  The prosecution in the case at hand is not sustainable in the eyes of law and such proceedings can be quashed by this court exercising the power provided under Section 482 of CrPC.

  Exercise of power/inherent jurisdiction by this court at this stage to quash the complaint - HELD THAT:- It is a settled principle of law that if on the basis of allegations contained in FIR, the court finds considering the same to be true at its face value, the offence registered is not formulated and prosecution can be considered to be malicious prosecution, same can be quashed.

  Conclusion - i) A second petition under Section 482 Cr.P.C. is maintainable if it raises new grounds or involves different parties and facts not previously considered. ii) Section 447 of the Companies Act, 2013 cannot be applied retrospectively to offences committed prior to its enactment. iii) Transactions occurring in different financial years are discrete offences and cannot be aggregated as a continuing offence to extend applicability of penal provisions retrospectively. iv) Specific provisions under Sections 185, 186, and 188 govern loans, investments, and related party transactions, and offences under these sections should be prosecuted under their respective penal provisions rather than Section 447. v) The Court may exercise its inherent jurisdiction under Section 482 Cr.P.C. to quash proceedings where the complaint does not prima facie disclose an offence or where prosecution is malicious or an abuse of process.

  The proceedings of Complaint pending in the Court of XVIII District & Additional Sessions Judge, Bhopal are hereby quashed - petition allowed.

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• 2024 (12) TMI 1466
  

  Oppression and mismanagement - allowing the Annual General Meeting (AGM) to proceed, keeping the outcome of Agenda No.1 in abeyance - appealable order under Section 421 of the Companies Act, 2013 or not - HELD THAT:- Looking at the nature of the order, which has been subjected to challenge by invoking Section 421 of the Companies Act, 2013, it takes the shape of an Interlocutory Order, where the right of the Appellant in the context of provisions contained under Section 134 of the Companies Act, 2013, which though being procedural in nature and it’s not being a substantive provision, has been left open to be considered and thus the Impugned Order permitting holding of the AGM as scheduled would be an Interlocutory Order.

  Since no material right of the Appellant has been addressed or effected on the merits and all objections of the Appellant have been left open to be considered at the stage of the AGM, it will not fall to be an appealable order under Section 421 of the Companies Act, 2013, as it has been left open for him to agitate all his grievances, when the Company Petition itself is taken up on merits qua the decision taken on the AGM as directed to be held in pursuance to the Impugned Order. Thus, the appeal since being premature as it arises out of an Interlocutory order, it will not amount to be an adjudication of a right to sustain the appeal.

  Conclusion - Interlocutory orders that do not affect substantive rights are not appealable under Section 421 of the Companies Act, 2013. The appeal since being premature as it arises out of an Interlocutory order, it will not amount to be an adjudication of a right to sustain the appeal.

  Appeal dismissed.

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• 2024 (12) TMI 1317
  

  Entitlement to 1/3rd of all the family assets and properties including business, assets and property - Challenge to an order whereby, while deciding an application of the defendant/respondent no. 25 under Order VII Rule 11 of the Code of Civil Procedure, the learned Trial Judge treated the same to be one under Order VII Rule 10 of the Code and directed return of the plaint to be presented before the appropriate forum - Principles of res judicata - Partial rejection/return of plaint - Jurisdiction of the NCLT - Concept of quasi-partnership - Applicability of the Benami Transactions Act.

  Principles of res judicata - HELD THAT:- It is well-settled that the principle of res judicata operates at different stages of the same suit. Since both the applications have been filed under Order VII Rule 11 of the Code, no distinction can be drawn between the powers of the court or the competence of the court to decide the issues involved, which were similar in the present case as that on the earlier occasion, when a similar prayer was rejected by the order dated July 15, 2017. The said order has attained finality, having not been assailed successfully. Hence, the present application of respondent no. 25 is barred by the principle of res judicata.

  Partial rejection/return of plaint - HELD THAT:- It is found from the reliefs sought in the plaint that the argument as to the NCLT having jurisdiction applies only to certain consequential reliefs sought in the suit in respect of alleged mismanagement of the funds of the defendant-Companies. Even if the said reliefs are held to be barred at the final hearing of the suit, the primary relief of declaration and partition cannot be held to fall within the domain of the NCLT’s jurisdiction. As held in Ammonia Supplies [1998 (9) TMI 427 - SUPREME COURT] and Sangramsinh P. Gaekwad [2005 (1) TMI 409 - SUPREME COURT], disputed questions which are pure questions of title cannot be adjudicated under the Companies Act. As held in Dwarka Prasad Agarwal (D) by LRS. [2003 (7) TMI 481 - SUPREME COURT], the jurisdiction of the Civil Court is not completely ousted by the Companies Act, 1956.

  Importantly, the reliefs pertaining to the management of the affairs of the Companies are only consequential to the primary reliefs of declaration of the shares of the parties in respect of the subject-matter of the suit, flowing from the claim that those can be traced back to the joint family nucleus, and partition of such joint assets. The said primary reliefs cannot be granted by the NCLT but comes squarely within the purview of the Civil Court. Even as per the judgments cited by the respondents, if the disputes pertain to questions of title and squarely fall within the domain of the Civil Court, the exclusion of the jurisdiction of the Civil Court under Section 9 of the Code of Civil Procedure is not readily inferred. Thus, if at all, the plaint would have to be rejected/returned partially. Such split being not permissible in law, the impugned order returning the plaint as a whole is bad on such count as well.

  Jurisdiction of the NCLT - HELD THAT:- The reliefs do not confine themselves to mismanagement of the affairs of the Company standing on an independent footing. The plaintiffs claim over the entire subject-matter of the suit, including in the assets of the Company and the shares of the Companies, apart from certain other immovable properties which do not belong to the Companies. Such claim of title by inheritance to the shareholding and other assets is entirely beyond the jurisdiction of the NCLT to adjudicate upon under Sections 241 and 242 of the 2013 Act - The bar in Section 430 of the 2013 Act is only applicable in respect of reliefs which come within the exclusive jurisdiction of the NCLT and cannot be stretched beyond the same. Reliefs which can be granted exclusively by the Civil Court, thus, cannot be covered by Section 430 of the 2013 Act. Hence, the NCLT does not have jurisdiction to grant the primary reliefs claimed in the suit.

  Concept of quasi-partnership - HELD THAT:- The cross-holdings in the shares of the different Companies as pleaded in the plaint indicate pervasive control over the Companies by the descendants and family-members of Late Sukhdeo Prasad. The Directorship in most of the Companies is substantially held between the family-members and the plaint case is that the Companies were formed from the joint funds of the family. The cross-shareholdings averred in the plaint clearly show that control over all the assets of the defendants-Companies vests in the joint family. Hence, the concept of quasi-partnership can definitely by borrowed in the backdrop of the plaint case.

  It is to be noted that the decisions in Ammonia Supplies [1998 (9) TMI 427 - SUPREME COURT] and Shashi Prakash Khemka (Dead) by LRS [2019 (2) TMI 971 - SUPREME COURT] highlight the fact that the NCLT has jurisdiction only in cases covered by the Companies Act, 2013. In the said judgment, the Supreme Court also noted that Section 430 of the 2013 Act bars the jurisdiction of the Civil Courts only in matters in respect of which exclusive power has been conferred on the NCLT and not otherwise. Unless the remedy of a Civil Suit is completely barred, Section 430 is not attracted at all.

  Thus, in the present case, the primary reliefs sought are declaration of title and partition. In view of the cross-shareholdings and pervasive control over the defendants-Companies by the joint family-members, it is opined that the concept of quasi-partnership can be applied to the present case in view of the plaint averments.

  Applicability of the Benami Transactions Act - HELD THAT:- Section 2 (9) (A) (b) of the Benami Act, in sub-clauses (i) and (iv) thereof, incorporates certain exceptions to the bar of benami. Sub-clause (i) contemplates, as one of such exceptions, a scenario when the property is held by a Karta or a member of a Hindu Undivided Family (HUF), if the property is held for his benefit or for the benefit of the other members in the family and the consideration for such property has been provided or paid out of the known sources of the HUF. In the present case, the said exception is very much applicable at a glance, since the entire title to the suit properties and the shares of the parties in the suit properties are claimed on the premise of the joint family nucleus which allegedly forms the basis of acquisition of the properties - the bar under the Benami Act is, to say the least, an arguable issue and required to be decided upon adduction of detailed evidence on facts. Hence, no occasion arises at this premature stage for the court to return the plaint or reject the plaint on the ground of benami.

  Conclusion - The learned Trial Judge committed a patent error of law and fact in entertaining and deciding the application under Order VII Rule 11 of the Code at the behest of the respondent no. 25 and ultimately moulding the relief to return the plaint to be presented before the appropriate forum - Appeal allowed.

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• 2024 (12) TMI 1249
  

  Dismissal of company petition filed by the appellant on grounds of maintainability and delay - maintainability of petition filed by the appellant as per Section 244(b) of the Companies Act, 2013 - HELD THAT:- The appellant has not filed any record of the company wherein he was shown to be a member of the Respondent No.1 between 2012-2013 till the date he had filed Company Petition in the year 2023. Rather if one peruses the additional affidavit filed by the Respondent herein before the Ld. NCLT one would find at the time of the filing of the Company Petition there were 97 members of the Company, the list of which stood uploaded on the website of the ROC and appears to be the correct list. Thus considering this number of members on the date of filing the petition, the Ld. NCLT held the appellant did not meet the threshold for filing the Company Petition.

  Considering the fact the appellant was removed in the year 2012 from the list of members in EOGM dated 01.02.2012; such removal having been published in the newspaper; the appellant never took steps to challenge the decision of the EOGM dated 1.2.2012; he never filed any record wherein he could show he was a live member after 2012-13 till 2023, there are no infirmity in the impugned order. There are no force in the arguments of the learned counsel for the appellant that during these years he always believed he was still a member of the Club. Such an argument cannot be believed by any stretch of imagination.

  The appeal is thus devoid of merit and is accordingly dismissed.

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• 2024 (12) TMI 1205
  

  Constitutionality of Section 3 of the Judges (Protection) Act, 1985 - failure to pay debt - default on the part of a Corporate Debtor - forum shopping - suppression - multipicity of cases - wastage of time of the court - making unfair statements - prayer to restrain and prohibit the two learned members of the NCLT-1, Mumbai from functioning and exercising jurisdiction.

  HELD THAT:- The view taken by the Hon’ble Supreme Court in Swiss Ribbons Pvt. Ltd. and Anr. V/s. Union of India and Ors. [2019 (1) TMI 1508 - SUPREME COURT] is now crystallized that even the non-payment of a part of the debt, when it becomes due and payable, will amount to default on the part of a Corporate Debtor. In such a case, an order of admission under Section 7 of the IBC must follow. If the NCLT notices that there is a debt, but it has not become due and payable, the application under Section 7 can be rejected. When there is a non-payment of debt under Section 3 (12) of the Code, when whole or any part or installment of the amount of debt has become due and payable and is not paid by the debtor or the Corporate Debtor, as the case may be, it would amount to default and the proceeding under Section 7 of the IBC must follow. In view of the above, there are no illegality or error in the order dated 29th October, 2024.

  Forum shopping - suppression - multipicity of cases - wastage of time of the court - HELD THAT:- The impugned order dated 29th October, 2024, can neither be termed as perverse or illegal. Merely because a different view could be possible, would not call upon this Court to quash and set aside the impugned order, in view of the law laid down in Syed Yakoob V/s. K.S. Radhakrishnan, [1963 (10) TMI 26 - SUPREME COURT] and Surya Dev Rai V/s. Ram Chander Rai [2003 (8) TMI 527 - SUPREME COURT], this Petition to the extent of the challenge to this order, stands dismissed.

  Taking into account all the prayers put forth by the Petitioner, except the challenge to the impugned order dated 29^th October, 2024 and main Prayer Clause, all other prayers being practically ‘copied and pasted’, this Petition deserves to be dismissed.

  Petition dismissed - cost of Rs. 2.5 Lakhs imposed.

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• 2024 (12) TMI 1204
  

  Maintainability of suit - Seeking a decree of possession and permanent injunction & mesne profit in its favour and against the Defendants - consequence of the Plaintiff Company's struck-off status on its capacity to initiate legal proceedings - HELD THAT:- The present suit has been filed for seeking recovery of possession of the suit property from the Defendants on basis of the sale deed dated 30.10.1987 and sale deed dated 25.08.2011. However, the District Court on 15.09.2022 has granted a permanent injunction against the Plaintiff Company from relying upon the said documents and from interfering in the peaceful possession of the Defendants. In view of this permanent injunction, the present suit for recovery of possession is barred in law.

  The disputes between the parties arose in the year 2011 as acknowledged in the plaint at paragraphs 29 and 30. The Defendant Nos. 1 and 2, who were in possession and were threatened by the Plaintiff immediately to recourse to due legal process and filed the Civil Suit in year 2012, which culminated in the final judgment and order dated 15.09.2022 in favour of Defendant Nos. 1 and 2 as well as against the Plaintiff Company. The present suit filed after the passing of the final judgment and order dated 15.09.2022 is a gross abuse of process and is intended to nullify the binding effect of the said Judgment.

  A corporate entity is liable under the Companies Act, 2013 to make annual compliances with respect to its affairs by filing statutory returns. The Plaintiff Company would have been obliged between the year 2018 to 2024 to make several filings and would have immediately learnt that it is unable to do so since the company has been struck-off. This Court, therefore, finds no substance in the explanation offered by the Plaintiff Company - this Court is of the considered opinion that the captioned suit is liable to be rejected under Order VII Rule 11 (a) and (d) of the Code of Civil Procedure, 1908.

  The present suit is dismissed with actual costs awarded in favour of Defendant Nos. 1 and 2. Since, Plaintiff Company has been struck-off, Mr. Ram Dilawri will be personally liable for the costs awarded.

  List before the Taxing Officer/concerned Joint Registrar on 14.01.2025 - List before the Taxing Officer/concerned Joint Registrar on 14.01.2025.

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