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Companies Law - Case Laws
Showing 81 to 100 of 14638 Records
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2023 (10) TMI 1369
Grant of bail - diversion of funds or not - accusation is that the applicant defrauded the bank by declaring false value of stock offered as collateral - bail sought on medical grounds - Section 447 of the Companies Act, 2013 - HELD THAT:- The Forensic Audit Report which SFIO is relying upon indicates that JACPL has faced genuine business losses and that there is no financial irregularities. It appears that there is no independent stock audit done by SFIO. The SFIO has arrived at value of the stock based on the statement of the store keepers and there are some substance in the contention of learned senior advocate for the applicant that SFIO did not carry out any independent forensic analysis relating to valuation of the stock.
So far as the accusation that Rs. 550 crores have gone to ‘Jagat Overseas’ from the account of the company which amounts to siphoning is concerned, it appears that in the financial year 2014-2015 Rs. 522.60 crores were transferred from ‘Jagat Overseas’ account to the account of JACPL and Rs. 552.41 crores was received back from JACPL to ‘Jagat Overseas’. Prima facie, this may be a transaction squaring up of the amount credited and debited. In prima facie opinion, there is a reasonable ground to believe that the offence punishable under Section 447 of the said Act may not be attracted in the present case.
The applicant is 63 years of age. It is thus seen that the applicant needs constant medical treatment. No doubt the same is available and provided to the applicant at Sir J. J. Hospital and in prison hospital. However, there are no hesitation in opining that the applicant needs constant medical attention considering his age and ailment. The age and medical condition of the applicant is one of the circumstance which is taken into consideration for enlarging the applicant on bail.
Though it is stated that the applicant is willing to furnish a surety having valuation of upto Rs. 5 crores for the purpose of releasing him on bail, on behalf of the applicant, learned counsel on instructions of the applicant through his son who is personally present in the Court submitted that a sum of Rs. 5 crores will be deposited with the Special Court by way of Fixed Deposit in the name of the concerned Registrar/ Superintendent of the Special Court within a period of two months from the date of the applicant’s enlargement on bail. The statement is accepted as an undertaking to this Court. The affidavit to that effect be filed by the applicant in this Court before his release. Registry to accept. The said deposit will abide by the orders passed by the Special Court.
The applicant is in custody for more than 18 months with no possibility of the trial concluding any time soon. The investigation is complete. The charge-sheet has been filed. There are no criminal antecedents reported against the applicant. The applicant does not appear to be a flight risk. Further incarceration will only be by way of a pre-trial punishment.
The applicant- Sant Lal Aggarwal shall be released on bail on his furnishing P.R. Bond of Rs. 1,00,000/- with one or more local sureties in the like amount and subject to fulfilment of conditions imposed.
Bail application allowed.
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2023 (10) TMI 1347
Seeking permission from this Tribunal to withdraw the instant Comp Appeal - HELD THAT:- The Learned Counsels are permitted to raise before this ‘Tribunal’ and this ‘Tribunal’, by taking into consideration the pleas, averments made in this regard, pass a reasoned / speaking Order, of course, uninfluenced and untrammelled by any of the observations made by this ‘Tribunal’, in this ‘Appeal’, in the interest of ‘Justice’.
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2023 (10) TMI 1259
Seeking transfer of winding up proceedings to National Company Law Tribunal (NCLT) - HELD THAT:- The said issue of transfer of pending cases has also been considered by this Court in Citicorp International Limited v. Shiv-Vani Oil & Gas Exploration Services Limited [2023 (7) TMI 1188 - DELHI HIGH COURT] wherein the Court relying on the decision of the Supreme Court in ACTION ISPAT AND POWER PVT. LTD. VERSUS SHYAM METALICS AND ENERGY LTD. [2020 (12) TMI 535 - SUPREME COURT] has held that It is only where the winding up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to now be decided in accordance with the provisions of the Code.
A conjoint reading of Rule 5 of the notification dated 7th December, 2016 along with the aforementioned judgment would show that in cases where the petition is not at an advanced stage, the matter is to be transferred to the NCLT.
Considering the fact that the winding up proceedings are at a nascent stage and only initial publication/citation was done in the newspapers, this Court is of the opinion that the matter cannot proceed before two fora - IBC being a statute which is meant to encourage revival of the company, it is deemed appropriate to transfer the present petition to NCLT, Allahabad Bench, Prayagraj.
Petition disposed off.
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2023 (10) TMI 1222
Seeking transfer of proceedings pending before High Courts relating to winding to the NCLT - HELD THAT:- Clearly, the winding up petition is at a nascent stage and no proceedings have been taken after the issuance of notice in these petitions. Only pleadings have been completed. In the meantime, the Companies Act, 1956 has been amended and a provision has been enacted for transfer of winding up proceedings pending before the High Courts. Transfer of proceedings pending before High Courts relating to winding to the NCLT has been provided in Section 434 of the Companies Act, 2013.
The Supreme Court in ACTION ISPAT AND POWER PVT. LTD. VERSUS SHYAM METALICS AND ENERGY LTD. [2020 (12) TMI 535 - SUPREME COURT], has held that winding up proceedings which have not reached an advanced stage ought to be transferred to the National Company Law Tribunal (NCLT).
In the opinion of this Court, since hardly any proceedings have been taken towards winding up of the company, the petition no longer deserves to be continued before this Court. The petition is itself at the very nascent stage and no substantive orders have been passed towards winding up of the company. Accordingly, in view of this position and in view of the settled law, the petition is liable to be transferred to the NCLT.
The NCLT shall now proceed in accordance with law in all three petitions. The Registry to transfer all these petitions as also the electronic record of this Court to NCLT. Parties to appear before the NCLT on 5th December, 2023.
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2023 (10) TMI 1221
Re transfer of shares on account of non fulfillment of MoU by Arcadia - whether the Arcadia can be restrained from taking any decision which will hamper the interest of Hexogon while protecting their right to two mortgaged flats?
Grievance is when the full amount is not advanced, the transfer of shares of defendant nos. 5 and 6 are ineffective.
HELD THAT:- The law is well settled in case of Life Insurance Corporation of India [1985 (12) TMI 289 - SUPREME COURT] and it is reiterated by the Division bench of this Court in case of Invesco Developing Markets Fund and Ors. [2022 (3) TMI 1175 - BOMBAY HIGH COURT]. Court cannot restrain holding of any Extra Ordinary General meeting. There are only certain exceptions, where Court can interfere and it can be only when procedural and numerical requirements are not fulfilled.
The Division bench of this Court has also cautioned what will be situation if the Court will start interfering in holding of the meeting of the Company. Ultimately, it is part of the Corporate democracy. No ground is made out for stalling of EOGM. The Court cannot stall holding of any meeting of the company. This is the prerogative of the shareholders.
About offering corporate guarantee by Hexagon - when the proceeding will be go on with DRT, there will be conflict of the interest in between the Defendant No. 4 being managed only by Arcadia on one hand and Arcadia as borrower of the Kotak Mahindra Bank Limited on the other hand - HELD THAT:- No doubt, it is true that Plaintiff or Hexagon does not say that they have paid dues of the Arcadia. It is an independent issue. It is also true that the Arcadia being lender has got right as per the Memorandum of Understanding to sell those flats by giving a notice. No doubt notices are also given. That right is an independent right. However, when the question of the proceeding before the DRT arises, certainly the interest of the Hexagon needs to be protected to certain extent. The issue raised about notice by India bulls to the Hexagon cannot be considered in this application. So also the argument of by plaintiff’s counsel about newspaper articles about the antecedents of directors of Arcadia is not impressing.
This Court is aware that the issue of those flats is not subject matter of the inquiry before this Court. However, when it is question of taking decision by Arcadia being in management of the Hexagon, on limited extent, this Court can certainly interfere. It may also happen that the Arcadia being in control of the Hexagon may pass a resolution about their possible stand before DRT or may even submit to the Orders of DRT - the interest of the Plaintiff and shareholder of the Hexagon needs to be protected.
As a shareholder of defendant No. 4, Defendant No. 1 is restrained from taking any decision which may amount to giving consent/NOC for handing over possession of two flats before DRT in proceedings involving Kotak Mahindra Bank Limited. - application disposed off.
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2023 (10) TMI 1220
Seeking transfer of proceedings pending before High Courts relating to winding to the NCLT - HELD THAT:- The petition was filed some time in 2015 and since then, the pleadings have been completed in the matter. However, no further orders have been passed. In the meantime, the Companies Act, 1956 has been amended and a provision has been enacted for transfer of winding up proceedings pending before the High Courts. Transfer of proceedings pending before High Courts relating to winding to the NCLT has been provided in Section 434 of the Companies Act, 1956.
The Supreme Court in ACTION ISPAT AND POWER PVT. LTD. VERSUS SHYAM METALICS AND ENERGY LTD. [2020 (12) TMI 535 - SUPREME COURT], has held that winding up proceedings which have not reached an advanced stage ought to be transferred to the National Company Law Tribunal (NCLT).
In the opinion of this Court, since hardly any proceedings have been taken towards winding up of the company, the petition no longer deserves to be continued before this Court. The petition is itself at the very nascent stage and no substantive orders have been passed towards winding up of the company.
The petition is liable to be transferred to the NCLT. Parties to appear before the NCLT on 2nd November, 2023.
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2023 (10) TMI 1122
Professional Misconduct - Chartered Accountant (CA) - Lapses in evaluation of writing-back of liabilities - Failure in evaluation and attendance at physical verification of Inventory - Inappropriate reporting of matters through KAM - Forming inappropriate Audit Opinion - Non-evaluation of utilisation of IPO proceeds - Non-evaluation of Related Parties Transactions - Non-implementation of Quality Control Measures - Failure on the part of audit firm - Penalties and sanctions.
Lapses in evaluation of writing-back of liabilities - HELD THAT:- It is expected that the Auditors would show a high level of professional skepticism and be alert to the possibility of mis-statement if restrained by the management from obtaining external confirmations, which is an essential component of independent audit. The Auditors should not only have re-assessed the risks posed by this restraint on their audit and performed alternative audit procedures to mitigate such risk (Para 8 of SA 505) but also considered this informing their audit opinion. Instead, it is found that the auditors have given unmodified opinion ignoring the restraint imposed by the management on their independent audit. The procedures referred to by the Auditors neither meet the requirements of alternate audit procedures, nor were appropriate or documented. Therefore, the Auditors responsible for carrying out the audit without due diligence and in a perfunctory manner.
Failure in evaluation and attendance at physical verification of Inventory - HELD THAT:- There are no audit documentation regarding the physical count of the inventory. It is noted that SA 501 mandates an auditor to attend physical count of the inventory (para 4) and if it is impracticable to attend the physical count and not possible to apply alternative audit procedures, then the auditor is required to modify the audit opinion (para 7). In the case of LGIL, inventory constituted 49.85% of the current assets in FY 2017-18, 65.10% in FY 2018-19 and 65.53% in FY 2019-20, making it a significantly material item for the Auditors to attend its physical count, but they failed to do the same. As per section 143 (9) of the Act, it is the statutory duty of the auditor to comply With the SAS and Para 18 of SA 200 also requires the auditor to comply with all the SAS relevant to the audit. Failure to attend the physical count of the inventory was a serious non-compliance of SA 501 and the provisions of the Act - the charge that the Auditors did not comply with the provisions of SA 200, 230, 315 and 501 to obtain sufficient appropriate audit evidence for the audit of the inventory, is established.
Inappropriate reporting of matters through KAM - HELD THAT:- When enquired by NFRA with the company, replied vide email dated 14.09.2023 that there was a failure on the part of the company as there was error on printer side while composing the Annual Report for better presentation. LGIL said that the error was unintentional and regretted the same. However, it is observed that this does not appear to be a printing error, as there were differences not only in the number of the KAMs issued, but also there were differences in the subject matter of KAMs - Para 13 of SA 720 requires an auditor to determine through discussion with the management, the documents that comprise the annual report; the entity's planning and timing of the issuance of such documents; make appropriate arrangements with the management to obtain the final version of the documents comprising the annual report in a timely manner and, if possible, prior to the date of the auditor's report. Therefore, the reply of the Auditors attributing the errors to the company also shows ignorance of SA 720 and its eventual non-compliance.
Forming inappropriate Audit Opinion - HELD THAT:- It is observed earlier that the accounting policy regarding unilateral extinguishment of liabilities and valuation of finished goods was not in accordance with the FRF, and the Auditors were restrained from obtaining external confirmation in respect of extinguishment of liabilities. Therefore, the Auditors could not conclude that they had obtained sufficient appropriate audit evidence to state that the FS were free from material misstatements and to issue unmodified opinion, which they did.
Non-evaluation of utilisation of IPO proceeds - HELD THAT:- The audit procedures mentioned by the Auditors in their reply to the SCN is not evidenced from the Audit File. Mere obtaining a certified copy from the management regarding utilisation of the IPO proceeds, does not relieve the Auditors from the responsibility of performing the required audit procedures. There is no evidence in the Audit File that the auditors had performed risk analysis of potential misstatements before the issuance of IPO (over statement of revenue / assets or understatement of expenses / liabilities to present rosy picture to the investors) and after realization of the IPO proceeds (misappropriation of the proceeds for purposes other than the declared purpose). The Auditors did not show the skepticism expected from them while reporting under CARO 2016 about proper utilization of money raised from the IPO, especially in light of the observed instances of artificial inflation of profits and reduction of liabilities by unilateral write-back of outstanding payables, and significant payments (44.29% of the IPO proceeds) to the related party from the IPO proceeds - the Auditors responsible for not performing the due audit procedures, for failure to obtain sufficient appropriate audit evidence for reporting under CARO 2016 about proper utilisation of IPO proceeds, and for their failure to comply With SA 315.
Non-evaluation of Related Parties Transactions - HELD THAT:- There are no audit documentation by the Auditors in respect of verification of the RPTs, except for obtaining the list of Related Parties and their transactions. It is also observed that the Auditors are frequently mentioning of keeping the data in the digital files, which could easily be made part of the audit files, but the same was not done. The Auditors while replying to the SCN submitted minutes of meeting of the Audit Committee for three FYs and price comparison statement of purchase of coal from the related party with the price from the other parties etc. as a token of their performance in accordance with SA 550. This is not evidenced from the audit files, and therefore is deemed an afterthought, as Para S and 1 4 of SA 230 requires the assembling of such documents in the audit file within 60 days after the date of the auditor's report, which the Auditors failed to do.
Non-implementation of Quality Control Measures - HELD THAT:- There are no audit documentation establishing that CA Ashok Holani was appointed as EQCR. Name of CA Ashok Holani has been referred at only one of the workpapers named 'Activity Log' at page no. 3.1 of the audit files, however it does not establish his appointment as EQCR. The EQCR is duty bound to document his work as per Para 25 of SA 220, however we did not find any working of EQCR in the audit files, establishing performance of his work during the audit. Therefore, the Auditors' failure in implementation of quality control measures and ensuring of independence is established.
Failure on the part of audit firm - HELD THAT:- M/S Ashok Holani & Co. was the statutory auditor of LGIL for the FYs 2017-18 to 2019-20 and, the Audit Firm and the EP have made departures from the SAS and the Companies Act, 2013 and have been grossly negligent in performing the audit of LGIL, by placing blind reliance on the assertions of the management in accounting of unilateral extinguishment of liabilities, valuation of inventory, verification of the utilisation of IPO proceeds and RPTs etc. The contention that they are a small audit firm, cannot be accepted as auditors are duty bound to comply with the requirements of the statutes to safeguard the interest of public. Therefore, in addition to the EP, we hold the Audit Firm also responsible for the lapses discussed.
Penalties and sanctions - HELD THAT:- Considering the fact that professional misconducts have been proved and considering the nature of violations and principles of proportionality, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is ordered:
i. Imposition of a monetary penalty of Rupees Ten Lakhs upon the Audit Firm M/S Ashok Holani & Co., the appointed Statutory Auditor
ii. Imposition of a monetary penalty of Rupees Five Lakhs upon CA Rahul Jangir, the Engagement Partner. In addition, CA Rahul Jangir is debarred for three years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial Statements or internal audit of the functions and activities of any company or body corporate.
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2023 (10) TMI 1002
Failure to get its cost accounting records to be audited by a Cost Auditor and failed to file Cost Audit Report to the Central Government - time limitation for filing such reports - violation of Section 148(8) of Companies Act, 2013 - HELD THAT:- According to the notice sent by the Registrar of Companies, it was observed from the records of the accused company that the cost audit report was not filed with the Central Government for the financial year ending 31.03.2014 within the stipulated time.
The period of limitation is dealt under Code of Criminal Procedure under Section 468 to 473. Admittedly, punishment prescribed under the Section 147 of the Companies Act is one year in the present facts of the case. Accordingly, under Section 468 of Cr.P.C, the period of limitation for an offence punishable is one year under Section 468(2)(b) of Cr.P.C. Under Section 469 of Cr.P.C, the commencement of period of limitation is prescribed - In view of Section 469 of Cr.P.C, the commencement of period of limitation would be from the date of knowledge to the Registrar of Companies. The said date can be taken as 14.06.2016 on which date the show-cause notice was sent to the accused company.
Since complaint was filed on 30.05.2017, complaint is well within time. The date of filing the complaint would be criteria and not the date on which the Court takes cognizance of the offences in the said complaint. For the said reason, the ground of complaint being barred by limitation cannot be accepted - Since the company itself had mentioned that the industry is “Edible Oil Seeds and Oils (including vanaspati) industry, the same cannot be determined in the proceedings for quashing the complaint. If the ROC has no provision of seed manufacturing companies and for which reason, the company had entered the name as “Edible Oil Seeds and Oils (including vanaspati)”, to enable themselves to upload the relevant documents into the ROC, the said ground can be agitated only before the trial Court.
Petition dismissed.
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2023 (10) TMI 962
Scope of an asset and security freeze order - assignment or not - documents executed by IL&FS by which rents were made over to the respondent, Housing Development Finance Corporation Ltd (HDFC or the lender) - HELD THAT:- The Lease Rental Discounting (LRD) arrangement - a new kind of financial agreement by which a banker allows credit facilities to a commercial property owner, has the flexibility of ensuring that the asset owner is given access to credit. The dominant condition is that a substantial portion or the entire rent or receivables which the owner would be entitled to are made- sold or assigned, absolutely to the creditor bank. This is with the intention that the borrower’s liabilities are discharged automatically from the proceeds payable in respect of the property. Such amounts virtually are by way of unsecured debts. In other words, future rent payable is actually an unsecured debt that the owner/borrower would have been otherwise entitled to claim, but for the assignment or transfer, to the lender/creditor.
The borrower is correct in arguing that the expression LRD is nowhere used in any of the documents executed at the time - An application of the rule that all the contemporaneous documents are to be read together, to discern the true purport of the contract, it is evident that what the parties intended was the assignment of the debt, i.e., the rents payable.
The reference to pledge, in some places in the documents, did not undermine the fact that the rents payable to and receivable by the lender (IL&FS) stood absolutely assigned to HDFC. The provisions of the TPA and the discussion of the various authorities support the conclusion that there can be a transfer of debts, which are defined as actionable claims. In the present case, the rents payable by IL&FS tenants, lessees and licensees are debts, which stood transferred to the creditor, i.e. HDFC Bank. Therefore, the NCLAT’s conclusions are unexceptionable; the challenge to its correctness, therefore fails.
This court holds that there is no merit in the appeal - Appeal dismissed.
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2023 (10) TMI 897
Prayer for recall of the order dated 21.08.2023 - by order dated 21.08.2023, Appeals filed by the Appellant were dismissed on the ground of delay in filing the Appeals - HELD THAT:- When the Appellants themselves filed an application which was also disposed of by this Tribunal on 14.02.2023, they cannot be heard to say that they are not served the order. Thus, as per Section 421, Appeals were barred by limitation.
In the judgment of Sagufa Ahmed [2020 (9) TMI 713 - SUPREME COURT], it was held that till the free of cost copy is not supplied, the limitation will not commence. In the said case, the certified copy was also applied and then the Court held that when certified copy is applied, the claim on the basis of that till the free of cost copy is received limitation will not run, was rejected. The said judgment does not in any manner help the Appellant.
Moreso, present is an application for recall of the judgment. The order passed by this Tribunal was passed after hearing the counsel for the Appellant. The ground for recall has already been settled by Five Member Bench’s Judgment of this Tribunal in “Union Bank of India (Erstwhile Corporation Bank) vs. Dinkar T. Venkatasubramanian & Ors. [2023 (7) TMI 209 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] where grounds for recall are clearly laid down.
There is no ground for recall of the judgment. Applications are rejected.
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2023 (10) TMI 896
Grant of Interim Order - stay order on the implementation of the resolutions approved in the EGM - balance of convenience.
Whether the Appellants were able to make out a case in their favour for interim order regarding the EGM dated 3.5.2019, and since the EGM took place on 3.5.2019, for granting stay order on the implementation of the resolutions approved in the EGM?
HELD THAT:- It is clear from the ad-interim injunction given by NCLT vide order dated 18.11.2016 that EGM dated 21.11.2016 was allowed to be conducted to discuss only the ordinary business of Orbit Electricals and to only take necessary steps connected with statutory compliances required to be made urgently. Further, Orbit Electricals and other Respondents were restrained from not alienating the moveable assets as listed in the agenda of EGM scheduled to be held on 21.11.2016. The essence of this ad-interim injunction, even though granted only till the next date of hearing, is that Ld. NCLT, after considering and noticing relevant facts and arguments of the parties, allowed the EGM dated 21.11.2016 to be conducted to only discuss the ‘ordinary business’ and take necessary approvals connected with the filing of the statutory compliances. The ad-interim injunction also restrained the Respondents from alienating the moveable assets to those that were enlisted in the agenda of the EGM to be held on 21.11.2016.
The Learned Senior Counsel for Respondents has argued that the Articles 59 and 60 were not designated as ‘entrenched articles’ as neither a specific notice under section 5(5) was given and moreover, only four out of thirteen members attended the EGM of Orbit Electricals Pvt. Ltd. held on 30.9.2014, which does not fulfil the requirement of section 5(4) - we are satisfied after considering the arguments and averments that Articles 59 and 60 can in a ‘prima facie’ manner be considered as ‘entrenched articles’ and therefore, their amendment/deletion in the EGM dated 3.5.2019 could have been done, after satisfaction of the provisions of sub-sections (3) and (4) of section 5 of the Companies Act, 2013. In particular, sub-section (4) of section 5 of the Companies Act, 2013 makes it necessary that an amendment in the Articles should be agreed to by all the members of the company, in the case of a private company.
In order to consider whether a ‘prima facie’ case has been made out in favour of the Appellants regarding the EGM dated 3.5.2019 and the implementation of the Resolutions passed in this EGM, we also look at the voting share of members present and voting in the EGM. It is noted that the shareholding of Prakash Pralhad Chhabria in R-1 company became 70.1% resulting in his having achieved majority shareholding in R-1 Company, was due to the fact that a Gift Deed was executed in his favour by his father Pralhad P. Chhabria on 28.3.2019, and subsequently, the Securities Transfer Form was also signed and executed on the same date i.e. 28.3.2019.
The prima facie view that the Gift Deed, Securities Transfer Form and the holding of Board meeting on 31.3.2016 are all under a cloud of suspicion, especially since they sought to override the stated view and intention of PPC to apportion the business of the Finolex Group companies between his own children and nephews. Of course, the non-holding of Board Meeting on 31.3.2016 will be decided by the NCLT in CP 47/2016 which is pending - the balance of convenience lies in favour of Deepak Chhabria, the appellant who by virtue of being AR of Orbit Electricals in FCL has been able to continue as Chairman of FCL.
The issue decided in favour of the Appellants by directing that, since EGM dated 3.5.2019 has taken place, the resolutions passed in the said EGM may not be acted upon and such an interim order should continue till the time CP No. 47/2016 is finally decided.
Appeal disposed off.
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2023 (10) TMI 752
Condonation of delay in both re-filing and filing of the Appeal - Notice was never received by the Applicant / Appellant herein - ex-parte Order was passed on merits.
It is the contention of the Learned Counsel for the Applicant / Appellant that having been set ex-parte before the Adjudicating Authority, they were unaware of the Order till 03/10/2022 when the IRP had sent communication of the same, the Appeal could not be filed within the statutory limit of 30 days, and there was a delay of 15 days from the date of the Impugned Order.
HELD THAT:- The Hon’ble Supreme Court in ESHA BHATTACHARJEE VERSUS MANAGING COMMITTEE OF RAGHUNATHPUR NAFAR ACADEMY AND OTHERS [2015 (1) TMI 1053 - SUPREME COURT] has clearly laid down that an Application for condonation of delay should not be dealt with, in a routine manner on the base of individual philosophy which is basically subjective - In the instant Case, it is seen that there is an inordinate delay in re-filing also. As per the Report of the Registry, defects were intimated and the file was returned on 07/12/2022 but the Applicant had refiled the same only on 31/03/2023 with a delay of 115 days. The contention of the Learned Counsel for the Applicant / Appellant that the delay is only 85 days is incorrect. Be that as it may, there is no explanation for this delay except for stating that ‘there was a communication gap between the Clerk and the Registry on account of the wedding of the clerk coupled with technical difficulty associated with filing and tracking in the e-filing portal’. We do not find this explanation ‘a sufficient cause’ and this Tribunal is of the view that the reason cited are not ‘adequate’ to condone the inordinate delay of 115 days in refiling.
This Tribunal is of the earnest view that despite service of ‘Notice’ and two paper publications as noted by the ‘Adjudicating Authority’ the Applicants / Appellants have not chosen to appear before the ‘Adjudicating Authority’ and now cannot state that they were unaware of the Order, specifically having regard to the fact that two of the addresses to whom the ‘Notices’ were returned, unserved are one and the same given in the Memo of Parties in the Appeal.
This Tribunal is not satisfied with the explanation furnished and therefore, the Applications seeking condonation of delay in refiling as well as the delay in filing of the Appeal are dismissed.
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2023 (10) TMI 607
Principles of natural justice - opportunity of hearing not provided to the Appellant - non-speaking order - Appellant was restrained from disturbing the possession of the Respondent No.1 - HELD THAT:- Basis the appeal and also the written and oral submissions of Appellant and Respondents, it emerges that Apparently the appellant was not given any opportunity to file reply and in the very first hearing interim orders were issued on 04.07.2023.
The impugned judgment and order passed by the Adjudicating Authority is quashed and set aside. The matter is remitted back to the Adjudicating Authority to look into all the aspects before passing any order in accordance with law - Appeal allowed.
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2023 (10) TMI 359
Violation of principles of natural justice - Petition for Oppression and Mismanagement dismissed as withdrawn without furnishing any reasons for denying liberty - HELD THAT:- When a ‘civil suit’, is filed, all the provisions of the ‘Civil Procedure Code’, 1908 will apply, pertaining to the ‘conduct of the proceedings before Court’. However, in respect of proceedings filed under the ‘Companies Act, 2013’, the procedure, to be followed, shall be as ‘specified in the Rules’ - As a matter of fact, any order, passed by the Tribunal / Appellate Tribunal, shall be enforced as a ‘Decree’, passed by the ‘Court’. The fetters of ‘Civil Procedure Code’, are not binding on the ‘Tribunal’, and the ‘Appellate Tribunal’, but they are guided by the ‘Principles of Natural Justice’.
The ‘power to grant ‘permission to withdraw’ a ‘suit’ with ‘Liberty to file a fresh suit’, is to be used very cautiously. Also that ‘withdrawal of a suit’, as ‘plaintiff’, wants to file fresh ‘suit’ ‘on a new cause of action’, ‘Leave’ of the court, is not required - A ‘Court of Law’, cannot exercise its ‘discretionary jurisdiction’ de-hors, the ‘Statutory Law’ and in fact, ‘its discretion’ must be exercised in terms of the ‘existing statute’.
It cannot be brushed aside, that the ‘grant of such a relief’, in the light of express provisions of the ‘statute’, to the contrary, ‘is not permissible’. After all, ‘Equity’ must yield to ‘Law’, as opined by this ‘Tribunal’. More importantly, this Tribunal, points out that a ‘Civil Court’, does not ‘Grant Leave’, to file ‘another suit’. If the ‘Law’, permits, the ‘plaintiff’, may file ‘another suit’, ‘but not on the basis of ‘observations’ made by a superior court’.
This ‘Tribunal’, significantly, points out that a ‘Petitioner’, has no right to withdraw his ‘Application’ / ‘Petition’ filed before the ‘Tribunal’, unless, he is granted ‘Leave’, to withdraw the Application/ ‘Petition’. Once he is granted the ‘Leave’, the ‘Withdrawal Application’/ ‘Petition’ under sub-Rule (1) of Rule 82 of the NCLT Rules, 2016 shall be filed in Form NCLT 9.
Appeal dismissed.
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2023 (10) TMI 322
Sanction of composite scheme of amalgamation - locus Standi to challenge the Impugned Order - HELD THAT:- There is no mandatory requirement under the Companies Act, 2013 to conduct a meeting of secured and unsecured creditors if an arrangement or compromise is not envisaged with them. Hence, as per the provisions of the Companies Act, 2013, there was no necessity of either conducting a meeting of the unsecured creditors of Respondents, or of obtaining consent affidavits from the unsecured creditors of the Respondents before dispensing with the meeting of unsecured creditors.
Since, both the Appeals fails on the account of locus itself and do not meet the minimum threshold of 10% shareholding and 5% of the total outstanding debts as per latest Auditors Financial Statement (in the relevant period at that time), it is not required to go into details of other issues.
Appeal dismissed.
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2023 (10) TMI 242
Recall of final Order/Judgement dated 31.07.2023 and Order dated 19.07.2023 - It is strongly contended by the Learned Sr. Counsel that the Order dated 19.07.2023 wrongly notes that both these Appeals were heard at length and Judgements were reserved and parties were directed to file their Additional Written Submissions - existence of element of fraud or not - HELD THAT:- The grounds on which a Tribunal or a Court can recall the Order has been clearly laid down - there is no element of ‘fraud’ or ‘collusion’; that this Tribunal did not commit any ‘mistake’ or ‘prejudice any party’ or has acted outside its jurisdiction
On adhering to Principle of Natural Justice, and therefore, it is held that the power to ‘recall’ our Orders/Judgements dated 19.07.2023 and 31.07.2023 ought not to be exercised in the facts of the attendant matter on hand.
Application dismissed.
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2023 (10) TMI 241
Oppression and mismanagement - Determination of minimum shareholding for filing complain / petition against the company - NCLT rejected the petition - the impugned order, was passed by Hon’ble Member (Judicial) of the ‘Tribunal’, sitting singly, in the absence of the Hon’ble Member (Technical).
Failure to possess requisite Shareholding necessary to maintain the underlying petition - appellant possessed 19.83% shareholding in the 1st Respondent / Company, at the time of filing the present petition - conduct in breach of the fiduciary duties of Directors owed towards 1st Respondent / Company as per Section 166 of the Companies Act, 2013.
Appellant contends that the Tribunal had committed an error, in coming to the conclusion that the shareholding at the time of accruing of cause of action, would be determinative, of the maintainability of the petition and in sequel, had also held, that the Appellant at the relevant point of time, due to less than 10% shareholding at such time, could not have maintained the petition and eventually determine the said point, as well as the underlying petition against the Appellant herein.
HELD THAT:- Section 419(3) of the Companies Act, 2013, enjoins that the ‘powers, of Tribunal’, shall be exercisable by ‘Benches’ consisting of two Members, out of whom, one shall be a ‘Judicial Member’ and other shall be a ‘Technical Member’. As a matter of fact, the proviso to sub-section 3 of Section 419 of the Companies Act, 2013 points out that it shall be competent for the ‘Members of the Tribunal’ authorised in this behalf to function as a Bench comprising of a single ‘Judicial Member’ and exercise the powers of ‘Tribunal’, in respect of such class of cases or such matters relating to ‘such class’ of cases as the President, may, by general or special order specify.
Also, in the second proviso it is mentioned that if at any stage of ‘hearing’ of any such case or matter, it appears to the Member’, that the case or matter is of such nature / character, that it should be Heard, by a Bench consisting of two members, the case or matter may be transferred by the President, or as the case may be, referred to him for transfer to such Bench, as ‘President’, may deem fit. Hence, considering the importance of issues / controversies / disputes involved in a case, a ‘single member’, of the Tribunal, may ‘transfer’ or refer the matter to the President, for hearing by a Bench consisting of two Members or to such Bench as the President may deem fit.
It cannot be gainsaid that the ‘Principal Bench’ of Tribunal, shall be at New Delhi, whose powers, shall be exercised by ‘Two Members’ it shall be competent for the Members, authorised in this behalf to function as Bench consisting of a single Judicial Member, in respect of such class of cases, as ‘President’, may by ‘general’ or ‘special order’ specify.
This ‘Tribunal’ holds that the ‘impugned order’ dated 27.11.2019, in Company Petition No. 20/2016 (TP No. 248/2017) passed by the Hon’ble Member (Judicial) of NCLT, Bengaluru Bench, sitting singly, cannot be found fault, with because of the fact that Section 419(3) of the Companies Act, 2013 empowers, the ‘Judicial Member’, of the ‘Tribunal’ to ‘Hear the case’, based on the order dated 22.10.2019 of the NCLT, New Delhi, which had the ‘Approval’, of ‘President of NCLT’, New Delhi and hence, the impugned order dated 27.11.2019, passed by the ‘Tribunal’ is not a ‘nonest’, ‘illegal’ and ‘void ab initio’ one and the point, is so answered.
The primary plea of the Appellant, is that the Learned Single Member of the Bench of the ‘Tribunal’, had effectively over ruled the said order passed by the Division Bench and upheld by this Tribunal. In effect, the said point according to the Appellant, vitiates the impugned order of the Tribunal, and hence, the ‘impugned order’ of the Tribunal, is liable to be set aside.
Possession of shareholding - HELD THAT:- This Tribunal, is of the ‘cocksure’ considered opinion, that although, the ‘Appellant’, held 10% as on date of filing of the CP No.486/2018, on 06.09.2018, but in respect of the events, that took place, before the ‘Appellant’, held 10% shareholding, then, it is held by this Tribunal, that he had not fulfilled the qualitative ‘criteria’, to sustain the ‘Company Petition’, in as much as, he had not possessed, the ‘requisites shares’, at the particular point of time, when the ‘purported’ ‘cause of action’ arose. As such, it is, ‘safely’ and ‘securdly’ concluded by this Tribunal, that the Appellant’s / Petitioner’s petition, in CP No. 486/2018, on the file of National Company Law Tribunal, Bengaluru Bench, on the date of filing of the petition, (on 06.09.2018), is, perfectly, ‘maintainable’, but he is precluded, from adverting, to the ‘events’, which took place, ‘before he possessed / acquired, 10% shareholding in the Company’.
The ‘onus’, to establish ‘Membership’ is on the Petitioner, and it is up to him to prove, that he is a Member, of a Company, ‘on the day’ of filing of petition. When he is not a Member of Company, he cannot allege ‘Oppression’, to invoke, Section 241 of the Companies Act, 2013, against the Company, as opined, by this ‘Tribunal’ - There is ‘no straight jacket cast iron formula’, specified, to define the ‘term’, ‘oppression’ and ‘mismanagement’. A ‘single act’ may not be enough for the grant of relief of ‘oppression’, and ‘continuous course, of oppressive code of conduct’, on the part of the ‘Majority Shareholder’, is very much necessary.
The ‘onus of proof’, in proving the ‘affairs of the Company’, were / are being, ‘conducted in a manner prejudicial or oppressive to ‘any Members’, or against the ‘public interest’ / or in any way, ‘prejudicial’, to the interest of the Company etc. and this Tribunal, ongoing through the impugned order dated 27.11.2019 passed by the NCLT, Bengaluru Bench in CP No. 486/BB/2018, comes to a consequent conclusion, that the Appellant / Petitioner has not established to the subjective satisfaction of this ‘Tribunal’, that ‘affairs of the Company’, are conducted, in ‘any manner prejudicial’ or ‘oppressive’ either to the Appellant, or other ‘shareholders’ / stakeholders.
The ‘ultimate conclusion’, arrived at by the NCLT, Bengaluru Bench, in dismissing the CP No. 486/BB/2018 through its order dated 27.11.2019, without costs is free from any legal flaws - Appeal dismissed.
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2023 (10) TMI 240
Professional Misconduct - Acceptance of audit engagement without valid authorization and without complying with ethical requirements; and issuing an audit report in violation of the Act - Failure to comply with Standards on Auditing (SAs) - penalties and sanctions - HELD THAT:- Given the actions and omissions, it is established that CA Aabhas Tiwari did not comply with the stipulations in the Chartered Accountants Act, 1949 regarding the acceptance of the statutory audit engagement and showed gross negligence and lack of due diligence while accepting an invalid appointment as auditor. In addition to accepting a legally invalid appointment, the EP also did not ensure the audit quality. The EP was grossly negligent in performing his professional duties by not adhering to the requirements laid down by the relevant SAs. This has led to the issuance of an audit report not backed by valid audit evidence and the absence of quality in the audit work.
Specifically, the following failures on the part of BP Aabhas Tiwari as contained under the Articles of Charges in the SCN are established.
a) Failure to exercise due diligence and ascertain from the audited Company whether the requirements of Sections 139 of the Act in respect of such appointment had been duly complied with, as explained and proved in part C-1 above. (As per Section 22 and Clause 9 of Part I of the First Schedule to the CAs Act);
b) Failure to exercise due diligence and being grossly negligent in the conduct of professional duties, because of the lapses and omissions as explained and proved in parts C-1 and C-11 above. (As per Section 22 and Clause 7 of Part I of the Second Schedule to the CAs Act);
c) Failure to obtain sufficient information which is necessary for the expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion, because of the lapses and omissions as explained and proved in part C-11 above. (As per Section 22 and Clause 8 of Part I of the Second Schedule to the CAs Act); and
d) Failure to invite attention to material departure from the generally accepted procedures of audit applicable to the circumstances of the audited Company, because the EP certified in the report that the audit was done as per SAs mandated under section 143 of the Act and committed the lapses and omissions as explained and proved in part C-11 above. (As per Section 22 and Clause 9 of Part I of the Second Schedule to the CAs Act).
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 law lays down a minimum punishment for such misconduct.
Considering the fact that the EP has admitted his mistake regarding the acceptance of the engagement and that professional misconduct has been proved and considering the nature of violations and principles of proportionality and keeping in mind the deterrence, signalling value of the sanctions and time required for improvement in knowledge gaps, we, in the exercise of powers under Section 132(4)(c) of the Companies Act, 2013, proceed to order the following sanctions:
i. Imposition of a monetary penalty of Rs. 100,000 (One Lakh) upon CA Aabhas Tiwari;
ii. CA Aabhas Tiwari is debarred for six months from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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2023 (10) TMI 155
Condonation of delay in filing application - extension due to Covid-19 pandemic - period of 30 days to file the written statements had expired on 08.03.2020 - whether the High Court justified in rejecting the application for extension of time dated 20.01.2021 and in not taking the written statements on record? - HELD THAT:- The very basis of the judgment in Sagufa Ahmed [2020 (9) TMI 713 - SUPREME COURT] that under the 23.03.2020 order, only the period of limitation has been extended and not the period up to which delay can be condoned, has been taken away by expanding the protection by excluding the period even for computing outer limits within which the court or tribunal can condone delay. This is an important subsequent aspect which has a great bearing in deciding the present controversy.
Prakash Corporates case [2022 (2) TMI 1268 - SUPREME COURT] also notices the fact that the order of 08.03.2021 and subsequent orders also by a Bench of three Hon’ble Judges were not and could not have been available for the Bench which decided Sagufa Ahmed’s case since Sagufa Ahmed’s case was decided on 18.09.2020. In Prakash Corporates, though the period of 30 days for filing written statements expired on 05.02.2021 and the 120-day outer limit expired on 06.05.2021, written statements notarized on 07.07.2021 was directed to be taken on record. The Court in Prakash Corporates relied on the orders of 23.03.2020, 08.03.2021, 27.04.2021 and also noticed the order of 23.09.2021 while so ordering.
While summons was served on 07.02.2020, the 30 days period expired on 08.03.2020 and the outer limit of 120 days expired on 06.06.2020. The application for taking on record the written statements and the extension of time was filed on 20.01.2021. Applying the orders of 08.03.2021 and the orders made thereafter and excluding the time stipulated therein, the applications filed by the applicants on 19.01.2021 are well within time. The judgment passed by the High Court needs to be set aside. The principle underlying the orders of this Court dated 08.03.2021, 27.04.2021 and 23.09.2021, in In Re: Cognizance for Extension of Limitation, albeit those orders being passed, subsequent to the impugned order, would enure to the benefit of the applicants-defendants.
The Appeals are allowed.
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2023 (10) TMI 73
Condonation of delay of 44 days in refiling appeal - intentional delay or not - HELD THAT:- Since a plea has been taken that the appellant was not arrayed party before the NCLT and adverse order has been passed against the appellant, it is opined that instead of filing appeal the appellant was required to file an appropriate application before the NCLT for recall of the order and also for impleading him as Respondent in the main petition. It was submitted by Mr. Mukherjee, Ld. Sr. Counsel for appellant that subsequently an intervention application was also filed.
Be that as it may, considering the fact that a plea has been taken that without impleading Appellant order has been passed, it is desirable to dispose of this appeal granting liberty to the appellant to file appropriate application before the NCLT. If such application is filed it is expected that Ld. NCLT without any further delay preferably within ten days from the date of filing of such application by the Appellant may pass appropriate order in accordance with law, after hearing all the parties - It goes without saying that Ld. NCLT may not be influenced by any of the observation recorded by this Tribunal, since no opinion recorded on the merit of the case.
Appeal disposed off.
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