9911796707
TMI Blog2008 (8) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of 1995. The brief facts of the case in Company Application No. 888 of 1995 are thus : (a)M/s. Dhanalakshmi Funds (India) Ltd. was ordered to be wound up by an order of this court, dated November 16, 1990, in C. P. No. 88 of 1989 and the official liquidator became the liquidator of the said company. The company in liquidation was incorporated on August 9, 1985, and it was declared as "Nidhi" on August 22, 1986, under the Companies Act, 1956. The main object of the company is to encourage and afford all facilities on mutual basis for cultivating thrifts, saving and to render all types of financial assistance to its members only by receiving long and short-term deposits from the members and in particular recurring time deposits, term deposits, fixed deposits and other deposits and to grant loans only to members on securities. As per the memorandum of association of the company in liquidation, the authorised share capital of the company is Rs. 2,00,000 divided into 2,00,000 equity shares of Re. 1 each. As per the provisional balance-sheet of the company in liquidation as on March 31, 1989, the share capital of the company was Rs. 1,96,090. There were 48 branches of the company. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidation for taking over either the assets and effects or the liability or the business of those two firms by the company in liquidation. (c)The original balance-sheets for the years ended December 31, 1986 and December 31, 1987, are not available among the records taken possession by the official liquidator. Even though claims have not been called for, the official liquidator has received 4421 claims filed voluntarily claiming various amounts aggregating to. Rs. 7,04,03,266.22. As per the statement of the administrators in their report in October, 1990 filed before the court in C. P. No. 88 of 1989, a total sum of Rs. 33,57,350.16 was due and payable to the company in liquidation by the sister concerns of the Dhanalakshmi group. The partners of the two firms, namely, respondents Nos. 8 to 10 are the pivotal persons, who have conducted the business in the name of the company in liquidation and they are equally liable to the deposits/creditors of the company in liquidation even though not inducted as directors of the company in liquidation. They have siphoned off funds of the company in liquidation to their sister concerns. In paragraph 41 of the report of the official liquidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm and accordingly, the assets and liabilities of the firm were taken over by the company as reported by the official liquidator. The company, namely Dhanalakshmi Funds (India) Ltd., was incorporated with the object of accepting deposits and lending money on interest to its members as "Nidhi" company. The applicants in this application were not inducted as directors of the company and they were not involved in the day-to-day management of the company. For a while, the first applicant was helping Mr. K. V. Sasidhar to evolve broad policy matters as requested by him. In Priya Rubber Estates and Plantations P. Ltd., the first applicant was a non-executive director and Mr. K. V. Sasidhar was the chairman and managing director, who was controlling the affairs of the company. All investment decisions were made by K. V. Sasidhar only. But misunderstandings arose between the applicants herein and K. V. Sasidhar and the applicants herein resigned from the directorship in consequence of the misunderstanding during the end of 1986. (b)In these circumstances, one of the depositors filed C. P. No. 88 of 1989 for winding up the company under the provisions of the Companies Act and by ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. The applicants cannot be held liable either jointly or severally for the said loss and the present proceedings under section 542 of the Act is misconceived and is a result of an afterthought. Counter affidavit has been filed by the official liquidator in C. A No. 1321 of 2001 stating that the records of the company clearly indicate that the applicant in C. A. No. 1321 of 2001 was involved in the day-to-day affairs of the company and he had signed the share certificates. The first applicant states that for a while, the first applicant was helping Mr. K. V. Sasidhar to evolve broad policy matters in the affairs of the company though there were directors in the company. The broad policy matters can be taken only at the top management level and therefore, it is very clear that they have occupied top management positions in the company. The applicants cannot say that only K. V. Sasidhar has taken all business decisions. The applicants herein have purposely avoided signing documents and as per their instructions only, the employees-signatories had signed the memorandum and articles of association of the company in liquidation. Though the first applicant was not a director, he had g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gations and accusations made ; that in the instant case, the liquidator failed to discharge his burden ; that sections 542, 543 and 545 of the Companies Act have a distinct legal connotation and the court can exercise power to order prosecution and make a declaration and indict a person under the said provisions only after it follows the procedure established by law and not deal with the issues in a summary manner; that it is pertinent to point out that the copies of the subsequent documentary evidence were not given to the appellants ; that the documents produced at the instance of Varghese in no way prove that the appellants were involved in the fraudulent conduct of the business of the company in liquidation; that Sasidhar offered to bring in Rs. 1 crore immediately ; that despite that, the liquidator failed in his obligation to take timely step to preserve the assets and protect the interest of the depositors; that the learned single judge failed to appreciate that Sasidhar filed an affidavit owning responsibility for the conduct of the business of the company ; that under the circumstances, non-production of the records of the company cannot be attributed to the appellants, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of funds against the vehicle maintenance ; and (7) transfer of funds to sister concerns. In order to substantiate the claim, the official liquidator relied on not only the report of the auditor appointed by this court, but also the statement given by the seventh respondent Mr. P.C. Varghese and also number of letters written by the contesting respondents and also all circumstances attendant. The respondents contested the application in C. A. No. 888 of 1995, inter alia, stating that they were carrying on business in which they were partners, by accepting deposits from the members of the public and also advancing moneys on interest; that on maturity, the depositors were paid interest regularly; that in view of the restrictions on payment of interest, respondents Nos. 8 to 10 decided to close down their financial business run by the firms ; that at that time, a company was promoted by respondents Nos. 1 to 7 who offered to take the assets and liabilities of the firms; that accordingly, the assets and liabilities of the two firms were taken over by the company in liquidation as' reported by the official liquidator; that the said Dhanalakshmi Funds (India) Ltd., was incorporated wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respondents Nos. 9 and 10 were partners in the former and respondents Nos. 8 and 9 were partners in the latter. The business of the firms was to receive deposits from the public and also paying interest to the depositors. At that time, since they could not make payment of interest on the higher rate, they decided to close down the business in view of the prohibition under section 45B of the Reserve Bank of India Act. At that time, the company in liquidation was registered with the Registrar of Companies on August 9, 1985. It was also declared as "Nidhi" on August 22, 1986. It was adumbrated that the main object of the company was to encourage and afford all facilities on mutual basis for cultivating thrifts, saving and to render all types of financial assistance to its members only by receiving loan and term deposits from the members. At this juncture, from the materials available, it would be quite dear that these two firms were dissolved. According to the respondents, a resolution was passed in that regard, and pursuant to the resolution passed, the assets and liabilities were taken over by the company in liquidation and the deposits receipts were renewed by the company in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industrial Investments. Subsequently, he was appointed as the executive of the company in liquidation. Even before the company petition was filed, the seventh respondent who was not satisfied with the conduct of respondents Nos. 8 to 10 and also the diversion of funds from the company, has sent a letter dated October 10, 1988, to respondents Nos. 8 to 10 and also to one Mr. Vijyakumar, the Chief Administrative Manager. The letter itself is in the nature of a warning. It is stated therein that they have been acting with dishonest intention from collecting deposits from various persons through various branches and the funds collected were taken by respondents Nos. 8 to 10. He has also cautioned that they were responsible for the acts done by them. Though he happened to be the signatory under the document, he has stated that they were to settle the accounts of various depositors and all the signatures were put by him only on their obligation. This letter brought forth a reply from the ninth respondent Mr. Sasidhar on October 11, 1988. Paragraph 2 of the letter reads as follows : "In view of your apprehension of certain untoward things taking place in the event of failure of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... President, and the ninth respondent was termed as the chairman of the company in liquidation. When the Department of Company Affairs took up inspection of books and accounts of the three sister companies to examine the flow of funds from the company in liquidation, the books and records were not produced. The non-production of accounts would be indicative of the fact that the funds of the company in liquidation were diverted to its associate concerns which were completely under the control of respondents Nos. 8 to 10. The fact that the diversion of funds from the company in liquidation to the different concerns which were under the control of respondents Nos. 8 to 10, was made dear by Mr. Varghese in his letter referred to above. This fact which was mentioned with the caution by Mr. Varghese, was not at all denied in the reply sent by the ninth respondent to the seventh respondent Varghese. Apart from the above, materials are available to indicate that after the firms were taken over, the deposit receipts were sent by the eighth respondent in respect of the first firm and by the ninth respondent in respect of the second firm. But, it is pertinent to note that the certificates of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld clearly indicate the acts of fraud, misfeasance, breach of trust and the misapplication of funds of the company and also the diversion of the funds to the different sister concerns. The contention put forth by the appellants' side that the statement of the seventh respondent was self serving and it was given by him with an intention to escape from the liabilities; that apart from that, an opportunity should have been given to cross-examine him, but not permitted to do so, and hence, no credence could be attached to the statement or the examination of the seventh respondent cannot be countenanced for the simple reason that the official liquidator has filed a detailed report speaking of the fraud, misfeasance, etc., and also placed the materials relied on by him. Thus, it would be quite clear that it was a dear discharge of the burden by adducing sufficient proof; but, on the contrary, respondents Nos. 8 to 10 have not chosen to challenge the report of the official liquidator by filing a counter. Under the circumstances, the contention put forth on the side of the official liquidator that the question of cross-examination would not arise has got to be accepted. As far as the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respondent that respondents Nos. 8 and 10 were actually the promoters of the company in liquidation. The official liquidator has filed the application under sections 542 and 543 of the Companies Act on the strength of the report of the auditor, the statement given by the seventh respondent, and also the other circumstances attendant. Respondents Nos. 8 to 10 have made a flat denial which was thoroughly falsified in view of the available materials. Admittedly, the deposits made with the two firms were not repaid. In order to get over their obligation, respondents Nos. 8 to 10 have actually promoted the company showing respondents Nos. 1 to 7 as directors; but, they have been actually carrying on the business of the company. There is no evidence at all that the assets and liabilities of the firms were taken over by the newly formed company under liquidation. Respondents Nos. 8 to 9 have neither made available the balance-sheets for the year 1986-87, nor no answer in that regard. It is pertinent to point out that when the criminal cases were filed for non-payment, these respondents have cleverly settled the complainants by making payment and made the situation quiet. While the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, it cannot be stated that respondents Nos. 8 and 10 were out of the liability or they could plead discharge of the liability, and under the circumstances, that contention has got to be rejected. Accordingly, it is rejected. Learned single judge marshalling the entire materials available has come to the conclusion that the company has lost Rs. 18,32,39,002 on various accounts, and respondents Nos. 1 to 10 were liable to make good the loss and granted the reliefs in the application by the official liquidator and rejected the application of discharge. As far as the appeal by the seventh respondent in O. S. A. No. 56 of 2004 is concerned, this court is unable to see any merit whatsoever. Admittedly, he was one of the directors of the company under liquidation. It is true that he made a statement, and he has also filed a communication between him and the contesting respondents. It is an admitted fact that he was the signatory under the document. Having acted as a director and also being a party to all the acts of misfeasance, fraud and breach of trust, he cannot now come forward to state that he has got to be discharged. This court is unable to see any reason or ground to discharge h ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
