TMI Blog2003 (1) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... Employees Welfare Association, is the Registered Association duly registered with the Registrar of Firms and Societies at Punjab, Chandigarh and the other petitioners are either office bearers of the association or the individual investors. The members of the association deposited different amounts of money with M/s. Incan Mutual Fund Benefit Limited, which is the sister concern of M/s. Incan Group of Companies. The total of the sums invested by the members of the association in Chandigarh, Jalandhar and Ludhiana is approximately Rs. 51.99 crores. M/s. Incan Group of Companies with its above named sister concerns by way of lucrative offers collected lot of money from individual investors with a positive assurance that they will get very good returns. The company had opened many branches in the States of Uttar Pradesh, Haryana, Punjab, Himachal Pradesh and Union Territory Chandigarh. The main object of M/s. Incan Mutual Fund Benefit Limited was lending and borrowing to and from its members and the investments were made in fertilizers, real estate as well as agro pharma plantations. The opposite-party No. 1 as on 31-12-1998 had deposits worth Rs. 7,200 lakhs and the maturity amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s money. However, when the depositors approached the Branch Managers for encashment of their Fixed Deposit Certificates, they could not find anyone in the offices as all such offices were closed. In the meantime, the opposite-party No. 2 through its Managing Director executed term loans to its different sister concerns but they made no efforts to recover such loan amounts from them and pay the same back to the investors. The directions issued by the Company Law Board in accordance with the Scheme submitted by the company were also not carried out by the opposite-party Nos. 1 and 2. The opposite-party No. 9, namely, the Reserve Bank of India also failed to keep a check upon the opposite-parties 1 and 2 while issuing them the certificate of non-banking financial company and in this way, the officers of the Reserve Bank of India were equally responsible for the act committed by the opposite-parties 1 to 8. All efforts of the investors including the petitioners in getting their money back went futile and even a notice served upon the opposite-party Nos. 1 and 2 through the petitioners association under section 434 of the Companies Act did not yield any result. The opposite-party Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablished in 1992 and it successfully carried out its operations by making timely payments to its members/depositors. It was only in 1998 that this company suffered the wrath of the depositors. As there was a run on the deposits, the company was put in a precarious condition. Due to severe liquidity crunch, the opposite-party No. 2 could not fulfil its commitment towards its members and on account of the compelling circumstances, it filed a petition for re-schedulement of payment before the Company Law Board, Northern Bench, New Delhi. Mr. Aujla submitted further that he has no concern with the Incan Mutual Fund Benefit Limited, as he ceased to be the Director of the said company on March 31, 1997. He was not a party to the framing of the scheme floated by the company. As regards the properties, Mr. Aujla asserted that the properties, referred to in para 9 of the petition, do not belong to M/s. Incan Mutual Fund Benefit Limited, as these properties were not purchased out of the funds of the said company. As regards M/s. Incan Fertilizers and Chemicals Limited is concerned, it is a separate and independent legal authority and has no concern with the Incan Mutual Fund Benefit Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te-party No. 2, namely, M/s. Incan Mutual Fund Benefit Limited. New Board of Directors under the Chairmanship of Mr. Justice Ujjagar Singh (Retd.) has now been constituted. The Board has authorized him to conduct pairvi on behalf of the opposite-party No. 2. Previously, the opposite-party No. 2 was a Mutual Benefit Company, which was notified by the Government as Nidhi Company under section 620A of Companies Act. Due to mismanagement and some other reasons, the Incan Mutual Benefit Company Limited could not function properly and as a consequence, the company committed default in repayment of the amounts deposited by the members/shareholders/depositors. A large number of members/shareholders/depositors filed petitions before the Company Law Board, New Delhi in which the Company Law Board passed an Order dated August 31, 1999 and thereby framed a scheme for repayment of deposits. A copy of the said order is Annexure No. CA-2 on record. However, neither the Board of Directors nor anyone else on behalf of the company took any interest to implement the scheme for repayment. The Company Law Board then exercising powers under section 186 of the Act appointed vide its Order of June 30, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Postmaster allotted a Post Box with Bag No. 455 in the name of the Company. The Chairman, then, issued a public notice on 1st July, 2001 directing the shareholders/members of company to send photocopies of their holdings to the company so that the repayment may be made at the earliest. In pursuance of the said public notice, a large number of shareholders/members furnished the information regarding their holdings. In this way, the reconstituted Board of Directors is making all efforts to implement the Company Law Board s Order dated 31st August, 1999 and 30th June, 2000. However, it is pertinent to note, as pleaded further, that the petitioners have wrongly impleaded Incan Group of Companies as opposite-party No. 1 as it is not a legal entity. In accordance with the legal provisions of the Companies Act, a particular company can be sought to be wound up. In the present case, other companies have neither been arrayed as opposite-parties nor they have been heard. 7. Mr. B.D. Sharma also raised a legal issue regarding the maintainability of all these petitions with the averment that the depositors/members/ shareholders of the company have not yet challenged the Company Law Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 31-8-1999. Even the newly appointed Directors of the Board are interested in winding up of the Company as is evident from their Affidavits (Annexure No. RA-2). Since the investors money has been siphoned off to various other sister concerns of the opposite-party No. 1, their assets are liable to be auctioned and it would be more so necessary because the opposite-party No. 2 is now left with no assets nor it has any liquid money with them to discharge their liability vis-a-vis the petitioners/depositors. 10. The crucial question, which arises for determination, is as to whether the company M/s. Incan Group of Companies and M/s. Incan Mutual Fund Benefit Limited are liable to be wound up under the provisions of section 434 of the Companies Act. Another point to be decided is as to whether the petitioners are entitled to recover their money along with interest from the opposite-parties or their assets. 11. Before proceeding to discuss the merit of this case, it would be appropriate to discuss the preliminary objections raised by the opposite-party No. 2 regarding maintainability of this petition. The first such objection asserted by the contesting opposite-party No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts dropped the petitioners prayer for any relief or winding up proceedings against the opposite-party No. 1. As a matter of fact, the petitioners and other investors, as supplemented further by the petitioners counsel, were mislead by the publicity, which was made on behalf of M/s. Incan Group of Companies that this company was managing the affairs of all the abovementioned nine companies. Therefore, the relief in view of the prayer clause of the petitioners petition shall remain confined to the liabilities of M/s. Incan Mutual Fund Benefit Limited only. In view of this, the contention pressed into service on behalf of the opposite-party No. 2 that the petition is not maintainable stands rejected. 12. The next submission advanced on behalf of the opposite-party No. 2 that since the proceedings under section 186 of the Companies Act were pending before the Company Law Board, this petition should not be kept alive as some of the petitioners have participated in the proceedings pending before the Company Law Board. In this context, it may be observed that section 186 is no bar to a petition that may be filed under section 434 of the Act. A perusal of the provisions of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditors. Obviously, therefore, the plea of alternative remedy is misconceived and as observed earlier, such an inadequate alternative remedy cannot operate as an impediment to the winding up proceedings of a company. 14. Now arises the question for determination as to whether the company known as M/s. Incan Mutual Fund Benefit Limited is liable to be wound up? 15. The petitioners have submitted that the main object of M/s. Incan Mutual Fund Benefit Limited (hereinafter referred to as the company ) was lending and borrowing to and from its members. The company made huge investments in Fertilizer, Real Estate and Agro Firm Plantation and up to 31st December, 1998, it had collected a sum of Rs. 7,200 lakhs. Although the company appears to own total assets of Rs. 14,036 lakhs (Annexure 4) and the liability as on 30-6-1998 does not seem to exceed Rs. 7,760 lakhs, the company can repay to all its investors including the petitioners their dues. But the mismanagement, under which the company sailed and faced a rough weather, is responsible for its debacle. Mr. Manjit Singh Aujla, who was the Chairman of M/s. Incan Group of Companies and was the Director of M/s. Incan Mutual Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sits on maturity up to 30% of their maturity amount along with the up-to-date interest at the stipulated rate and the balance amount of 70% had to be reinvested for a period of six months. The same circular letter recited further that the members, whose deposits had maturity in December 1998 could contact their branches for payment after 15th March, 1999 and members, whose deposits were to mature in January 1999 were requested to collect their dues after 15th April, 1999. In the sequence, the members, whose deposits were to mature in February 1999, were asked to take their payment after 15th March, 1999. There were certain other directions for the depositors, the details of which need not be referred to. What is important to mention here is that the aforesaid payment - plan proved to be a total flop and what is further pertinent to make a mention of is that the company has not paid even to those petitioners/creditors, whose credit balance in the Savings Bank Account was even less than Rs. 500. The company had earlier undertaken to refund the dues of all members, whose deposits were less than Rs. 500 in toto . Obviously, in these circumstances, the company cannot be believed to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achieved and the depositors were kept on groping in the dark. The aforesaid scheme of the Company Law Board has not been implemented till date and the main reason for the company s failure to do so was that it could not recover back the amount of its loans advanced to M/s. Incan Fertilizers and Chemicals Limited, M/s. Ratan Micro Nutrients Limited and M/s. Incan Construction Limited, although all these sister concerns stood guarantee to the tune of Rs. 1,100 lakhs. It was, in such circumstances, that this Court had appointed the official liquidator with a direction to him to take charge of all the assets of M/s. Incan Mutual Fund Benefit Limited. He was authorized to exercise all his powers of an official liquidator and submit his report within six weeks. It was on the basis of his report that the District Magistrate, Rai Bareilly had been instructed to keep Rs. 59,95,000 intact until further orders of this Court. The Official Liquidator had taken over in his charge the properties situated at 5-A and B, Lal Bahadur Shastri Marg, Lucknow. But he could not lay his hands upon the properties situated at Rajpura in Punjab State. 17. The assurances given by the newly appointed Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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