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2019 (9) TMI 895 - NATIONAL COMPANY LAW TRIBUNAL, SINGLE BENCH, CHENNAIOppression and mismanagement - misutilization of funds - main controversy involved in the Petition is that the Respondents have not utilised the proceeds of the IPO as per the terms and conditions of the IPO mentioned in the Prospectus and Respondent No. 2 along with other Respondents has diverted the proceeds of the IPO to other entities which are under his control to defraud the members/investors of the 1st Respondent Company, which is a public listed Company - pre-requisites provided under Section 237(b) of the Companies Act, 1956. HELD THAT:- The powers conferred under Section 237(b) of the Companies Act, 1956 [Section 213(b) of the Companies Act, 2013] on the Tribunal are administrative in nature and can be exercised on the basis of the existence of circumstances as specified in the clause. The existence of the circumstances is a condition precedent as stipulated under Section 213(b), on the basis of which a prime facie honest opinion could be formed for ordering an investigation into the affairs of the company. In other words the order for investigation into the affairs of the company can only be made on the satisfactory grounds, which are available on the record of the case file. In the case on hand the 1st Respondent Company during the year 2010-2011, had availed secured loans of ₹ 37.81 Crores as per the cash flow statement from banks in addition to public issue proceeds of ₹ 73.60 Crores. The fact that the 1st Respondent Company has negative cash flow of ₹ 40.87 Crores under cash flow from operations clearly proves that the 1st Respondent Company has not utilized these IPO proceeds and loans from banks for the 1st Respondent Company but only diverted the same to its group companies - there are financial mis-management of funds of the 1st Respondent Company covertly disbursed to group entities for their own use and benefit through one of its group entity, RPPL, since the same could not have been done directly through the 1st Respondent Company. Thus, the 1st Petitioner and the respondents have allegedly diverted the funds of the 1st Respondent Company to their associates and companies and matters are pending before the different judicial forums. Thus, there exist the circumstances which prima facie suggest that the business of the company is being conducted with intent to defraud its members and the amount collected through IPO has been diverted to the associates and companies by the 1st Petitioner and the Respondents, which amounts to fraud played on the investors, which points out that the management of 1st Respondent company along with 1st Petitioner is guilty of fraud, misfeasance or other misconduct towards the company and its members - In the light of the circumstances stated, this tribunal is satisfied that it necessary to order the investigation into the affairs of the 1st Respondent Company under the provisions of Section 213(b) of the Companies Act 2013. The Central Government is hereby directed to appoint one or more competent persons as Inspectors to conduct investigation into the affairs of the 1st Respondent Company, as expeditiously as possible for filing report and on receiving the report, to follow the course of action as provided in law.
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