9911796707
TMI Blog2000 (8) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for financial assistance for acquiring some computers that they are carrying on business in software development for the Navy, Defence and Telecommunications Department. The plaintiff entered into a hire-pur- chase agreement with the first respondent and the contract commenced on 31-3-1995, and ended on 31-3-1998. The total facility granted was Rs. 34,54,735 inclusive of finance charges. The first respondent is expected to discharge the loan amount in 36 instalments, but they failed to comply with the terms of the contract in paying instalments and as on date the total amount outstanding is Rs. 30,67,443. In addition to the aforesaid contract, they also entered into another hire-purchase agreement for financial facility to the extent of Rs. 25,08,480 inclusive of finance charges. The first respondent did not pay any instalment ever since the facility was granted. There is an overall outstanding of Rs. 78,52,110 as on date. Despite legal notices and several attempts to collect the money, the first respondent has not discharged any of the dues till date. In the meantime it was brought to the notice of the petitioner that the first respondent has issued a prospectus inviting the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted towards purchase of equity shares will be totally lost. The first respondent-company ought to have mentioned the liability payable to the plaintiff-company in the prospectus so as to enable the public to take proper judgment before they decide on making any investments. As there is a deliberate suppression, the first respondent is duping the public for unlawful gains. The first respondent-company is supposed to mention about the current liabilities for the previous six months prior to the date of issue. The auditors are only watch-dogs and in connivance with the auditors, the first respondent-company had prepared the accounts in such a camouflaged way to influence the public illegally for subscribing to the public issue. It is mandatory for every prospectus to set out all the details stated in Parts I and II of Schedule II to the Companies Act. The first respondent had not divulged all such material information to the second respondent. The lead managers who had drafted and designed the prospectus had lost sight of this crucial information on the current liabilities and they are expected to exercise due diligence to ensure that the first respondent discharges its responsibility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration has been passed. They have also issued reply notice to the legal notice issued by the plaintiff. On 12-2-2000, the deputy manager of the plaintiff-company one Mr. Ashok brought the inspector of police and his team to the residence of K. Padmanabhan who is a director of this respondent without any notice or search warrant and threatened the members. In the prospectus of the said public issue, they have clearly mentioned their liability in pages 102 and 104 that they have secured loans as on 30-4-2000, of Rs. 68.78 lakhs. They have not withdrawn the permission already granted for the said public issue. This respondent published the opening of public issue of 20-7-2000, in Economic Times and in the publication itself a specific note was put up regarding the liability towards the plaintiff. They also published closure notice of the public issue on 24-7-2000, in The Hindu with the very same specific note regarding the liability. There are no pending litigation against them. This respondent was not served with any criminal case notice for any alleged misappropriation. The computers purchased under the hire-purchase agreement are very much available with them. Their compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g respondent Nos. 1, 3 and 4 from proceeding with the issue of equity shares to the public and obtained an interim injunction by the order dated 24-7-2000. The first respondent filed Application No. 3107 of 2000 to vacate the order of interim injunction. The learned counsel for the plaintiff contended that they entered into two hire-purchase agreements with the first respondent and there is an outstanding of Rs. 78,52,110. Despite legal notice and demands, the first respondent has not discharged the dues; but on the other hand, the first respondent had issued prospectus inviting public to subscribe 25 lakh equity shares of Rs. 10 each at a premium of Rs. 15 per share aggregating to Rs. 625 lakhs. The public issue is slated to open on 20-7-2000, and coming to close on 24-7-2000. The first respondent is misleading the public by saying that there are no dues and defaults to the financial institutions and banks and there are no pending litigations. The Learned counsel further stated that in the prospectus issued by the first respondent-company, the particulars of the loans and the pendency of cases have not been furnished and as a result of which, there is every possibility to mislead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sister concern as well as other companies from paying any money to the plaintiff-company. This being the state of affairs, admittedly the plaintiff-company has not come forward with any suit claiming the amount legally due and payable by the first respondent. Now the first respondent had issued a prospectus relating to issue of shares opening on 20-7-2000, and closing on 24-7-2000, and taking advantage of this, the plaintiff has come forward with the suit and application so that the company will come to terms. The plaintiff alone has to establish that they have got a prima facie case and the balance of convenience is in their favour. The records produced on the side of the first respondent and the materials now available clearly indicate that the plaintiff has no prima facie case and the balance of convenience is not in their favour. 11. The main contention put forward by the plaintiff is that the particulars of the liability have not been disclosed in the prospectus and it is further stated that particulars of the pending cases have also not been furnished. Although the plaintiff stated that a complaint was given against the first respondent-company, no document has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lute responsibility : The issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this offer document contains all information with regard to the issuer and the issue, which is material in the context of the issue, that the information contained in this offer document is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinion or intentions misleading in any material respect. 13. It is, therefore, clear that even in the first page of the prospectus, the investors must rely on their own examination of the issuer and the necessary particulars are clearly furnished and the apprehension now put forward by the plaintiff is nothing but a fertile imagination. 14. The second respondent is the Securities and Exchange Board of India (for briefly called as SEBI) has given necessary permission to the first respondent for the public issue of shares. It appears that the plaintiff had already sent a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intiff has no prima facie case. Similarly the balance of convenience is also not in favour of the plaintiff. Now the shares have been issued and it is stated that they have been oversubscribed. According to the prospectus, share certificates ought to be issued in a period of ten days from the date of closure and in view of the order of interim injunction, the first respondent-company is not in a position to issue the share certificates and by this, there is every possibility that the persons who had purchased the shares may resort to court and by this, there will be multiplicity of proceedings. If that is taken into consideration, I am of the view that the balance of convenience is also in favour of the first respondent-company. 16. The learned senior counsel for the first respondent contended that there is no board resolution authorising the person to file a suit or application of this type. The learned senior counsel in support of his contention relied on a decision in Swadharma Swarajya Sangha v. Indian Commerce Industries Co. (P.) Ltd. [1999] 98 Comp. Cas. 151 (Mad.); wherein it was stated that the suit having been filed without there being any resolution and as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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