TMI Blog2008 (12) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... of Companies, he said that since his elder brother was looking after all the legal and account section activity of the Company, he was not aware about the same, in an answer to the question as to who was the person responsible for affairs of the company, he gave the name of Shri Rajendra Natvarlal Dilkhush, the accused No. 3 herein residing at 56, Subhash Nagar Society, Surat. However, this accused No. 3 is not found despite several summons and warrants issued on him. He is stated to be non-traceable. Initially he filed affidavit on behalf of the Company in winding up petitions. Thereafter, he filed affidavit in the present proceedings. But, thereafter, when the matters are on the verge of finalization, he disappeared from the scene. This shows the conduct of the accused Nos. 2 and 3. There was a deliberate and systematic attempt to dupe the creditors, dispose off the assets of the company and commit a breach of discharging their statutory duties by non-filing of statement of affairs under the guise of reasonable excuse and facts and evidence found on record justifies this Court to take the view that the prosecution has discharged its burden to prove that there was no reasonable e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements under rule 130 of the Companies (Court) Rules, 1959. 3. Company Application No. 241 of 2006 is filed by two unsecured Creditors, namely, M/s. Gayatri Corporation and M/s. IPB Enterprise seeking direction to the Official Liquidator to take over the possession and charge of all the movable and immovable assets and properties of the Company in liquidation as per the order passed by this Court on 24-8-2005 in Company Petition No. 240 of 2003. They have also prayed for the direction to the Official Liquidator to take necessary action for obtaining the statement of affairs from the Ex-Directors of the Company in liquidation as per the order of this Court dated 24-8-2005. They have also prayed for the direction to the Official Liquidator to submit a compliance report under section 455 of the Companies Act, 1956 before this Court. Lastly, they have prayed for the direction to the Official Liquidator to take all necessary steps to dispose of the properties of the Company in liquidation and to disburse the amounts of claims of all the creditors of the Company in liquidation in accordance with law. 4. So far as OLR No. 29 of 2006 is concerned, this Court has passed an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... averments made in the said report, this Court has passed an order on 4-8-2006. This Court has issued directions to M/s. M. Kantilal Exports to hand over possession of land and building constructed at Final Plot No. 251; to M/s. Creamy Fashions, to hand over the machineries to M/s. Pushpa Synthetics Private Limited and also to Shri Natvarlal R. Dilkhush, Ex-Director and Shri Prashant Natvarlal Dilkhush to furnish details about the company s assets, properties and claims to the Official Liquidator. Since the names of Rajendra Natvarlal Dilkhush and Prasant Natvarlal Dilkhush have been mentioned in the rent agreement executed with M/s. Gayatri Corporation, the Court has ordered them to be joined as parties in these proceedings. Hence, fresh notice was issued on them. On 18-12-2006, this Court has passed further order in Company Application No. 241 of 2006 recording the submissions made on behalf the applicants, namely, unsecured creditors that plants and machineries of the company in liquidation have been sold after the Company Petition was filed. It was, right from the beginning, the case on behalf of the applicants that some boiler was sold to M/s. Creamy Fashions and the partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was asked to them as to what consideration has been paid to Pushpa Synthetics Pvt. Ltd. for purchase of boiler and whether any Books of Account and/or income-tax returns of Creamy Fashions were there to know that if the boiler in fact were purchased by them, then it must have been reflected in the Books of Account and/or the income-tax returns. The Court was informed by the learned advocates of the Ex-Directors and partners of Creamy Fashions that no consideration has been paid to Pushpa Synthetic Pvt. Ltd. towards the aforesaid boiler. The Court was further informed that the said boiler has been sold to one Salim Silk for Rs. 1,20,000. This Court was, therefore, of the view that the alleged transaction between the Creamy Fashions and said Salim Silk was in breach of RBI Rules and Guidelines and the Court was also of the view that the Ex-Directors as well as the partners of the Creamy Fashions have not come before the Court with clean hands and the entire transaction of selling the boiler is mala fide. Considering the market value of the Boiler, the Court has directed the Ex-Directors to deposit an amount of Rs. 3 lakhs towards value of the boiler which was sold by them after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Partners of M/s. Creamy Fashions that the said firm was virtually closed and even the premises which was rented one was given back to the original owner. All these facts were stated by Mr. Prasant Natvarlal Dilkhush who was personally present in the Court and possession receipt dated 26-11-2007 was shown to the Court whereby rented premises of M/s. Creamy Fashions was handed over to the original owner. The Court, therefore, directed the said Prasant Natvarlal Dilkhush to state all these facts on affidavit. The said affidavit should also contain the detail as to where the assets of M/s. Creamy Fashions have gone and if they were sold to any one, necessary details about the persons to whom the assets were sold and how the sale proceeds were utilised by the partners of M/s. Creamy Fashions should also be indicated. The Court has made it clear that if the statement of affairs is not filed, the Court would proceed with the hearing of the criminal case and appropriate order would be passed. 13. On 28-2-2008, Prashant Natvarlal Dilkhush was personally present before the Court and he has filed an affidavit as per the directions issued on 15-2-2008. The Court, therefore, directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egations levelled against them are absolutely baseless and because of the circum- stances beyond their control, they could not make the timely compliance of the Court s order. However, there was no mala fide intention on their part. On the contrary, they have tried to settle with all the Creditors of the Company in liquidation and even after liquidation, they have made all their sincere efforts to pay their creditors. There was a major fire in the Company on 15-10-2002 wherein the Company suffered tremendous financial jolt and the entire stock- cum -trade was destroyed. A substantial part of the machinery was also destroyed due to this fire. Immediately after one year, the Company further suffered one more set back whereby the said factory premises were burnt due to the devastating fire which took place on 3-5-2003 whereby the entire stock in trade, raw materials, documents of the Company lying at the registered office, payment vouchers made to the secured and unsecured creditors and substantial part of the machinery were destroyed. The most expensive machines used in the factory were destroyed during the said fire and only some machineries were to be salvaged. Even the said mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of settlement arrived on through their respective Unions, whatever cash on hand was remaining was also paid to the trade creditors. Pursuant to the said affidavit, the Company had also vacated the premises wherein it was functioning and hence, whatever machinery, documents, stock etc. were lying at the factory premises were to be removed by the Company and handed over the possession of the factory premises to the lessor of the said property. There was nothing left in the factory premises except the Boiler as well as certain documents containing the receipts of payments made to the workmen as well as to the trade creditors. The Boiler was also shifted to other premises on temporary basis. He has further submitted that the Boiler which was sold to M/s. Salim Silk Mills and the amount realised therefrom was also deposited with this Court. The Ex-Directors of the Company did not have any personal property in their name. There was only one vehicle in the house which was also in the name of the one of the Ex-Director. After devastating flood in the city of Surat, the said vehicle was also damaged. Certain important documents were also destroyed. The Ex-Directors were facing multiple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Delhi High Court in the case of C.R.E. Wood Co. (P.) Ltd. (In Liquidation) v. Sardar Iqbal Singh [1986] 59 Comp. Cas. 978 wherein it is held that since the records of the Company had been completely spoiled, the Directors had reasonable excuse for not filing the statement of affairs. 22. Mr. Jani has also relied on the decision of this Court in the case of Official Liquidator, Trimurthy Agro-Chemical Ltd. (In Liquidation) v. Niranjan Jayantilal Tolia [1984] 56 Comp. Cas. 380 wherein the Official Liquidator of the Company in liquidation had issued notice to the accused to file statement of affairs. On their failure to file statement of affairs, complaint was filed against them under section 454(5) and 454(5A) of the Companies Act, 1956 for not submitting statement of affairs of the Company. The third accused was not in a position to submit the statement of affairs of the Company. The Court, therefore, held that prosecution failed to prove that the third accused committed default in complying with section 454 without reasonable excuse. The Court, however, held that, other accused did not comply with the requirements of section 454 and hence, they were lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to May 2003 and May 2003 to June 2003. However, letter from one of such purchasers, namely, M/s. Gomti Sales Corporation dated 13-2-2007 confirms that the details given in the previous letters are not true. 25. Mrs. Soparkar has further submitted that two affidavits filed by the respective General Secretaries of Gujarat General Textiles Labour Union and New Jay Bharat Labour Union confirmed that the Company was closed in 2003 and the Directors of the Company have paid the outstanding dues of the workers in June, 2003. This statement is, however, contrary to the affidavits filed in winding up petitions where the Company confirmed that about 400 employees were working for the Company in November, 2003 and March, 2004. 26. Mrs. Soparkar has further submitted that the Ex-Directors have not filed the complete list of the machinery owned by the Company and their respective values. It is unbelievable that the Ex-Directors of the Company did not know which machinery they had with which the business was conducted for years. The Ex-Directors have repeatedly submitted that due to the two consequent fires in the month of October 2002 and May 2003, the entire machinery of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale deed dated 11-2-2004 entered into between the original landlords and purchasers M/s. M. Kantilal Exports is produced on the record of the present proceedings. Clause 10 of the said sale deed confirms that the company was the sitting tenant in the said premises and it was the responsibility of the purchaser to get the vacant possession of the property from the said tenant. The said tenancy right was also one of the valuable property of the Company and since the said right is given up after the commencement of the winding up, the said realisation has to be taken into custody by the Official Liquidator and be utilized in the interest of the creditors. 29. Mrs. Soparkar has further submitted that the Ex-Directors have admitted in the affidavits and vide statements made before this Court that Boiler was transferred to M/s. Creamy Fashions without, any consideration and the same was in turn sold to M/s. Salim Silk Mills by the said M/s. Creamy Fashions. M/s. Creamy Fashions should not have sold the said Boiler as it had no right or interest in the same. The apprehension, therefore, is that a large part of the machinery has been transferred to M/s. Creamy Fashions unauthorized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said affidavit that the Company in liquidation has faced true and genuine difficulties time and again. There was a major fire in the Company in liquidation on 5-10-2002 which is clear from the certificate of the Surat Mahanagarpalika, Fire Brigade department. During this fire, the Company had incurred tremendous financial loss to the tune of Rs. 25 lakhs whereby the entire stock-in-trade was destroyed along with huge amount of machinery which had been established. The applicant has deliberately tried to conceal this particular facts from this Court as well as from the Official Liquidator so as to create a false situation against the ex-Management of the Company in liquidation. During this fire, substantial amount of important machinery used for dying and printing was burnt and destroyed which was also claimed from the Insurance Company. However, the Insurance Company did not pass the entire claim resulting into a substantial loss to the Company in liquidation. 32. It is further stated that the said fire had created in the factory of the Company in liquidation and the Company could not come of the major substantial jolt and had to try hard to sustain itself from further l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose, 8 weeks time was sought for by the accused. 34. The Official Liquidator has filed his report on 29-4-2008 wherein it is submitted that the accused No. 2, namely, Prashant N. Dilkhush remained present in his office on 8-4-2008 and his statement was recorded under Rule 130 of the Companies (Court) Rules, 1959. Since the said statement was inadequate, a supplementary statement was recorded on 21-4-2008. The said statement was produced on the record along with his report. 35. Having heard the learned advocates appearing for the respective parties and having considered their pleadings and submissions made in light of the documents produced before the Court in all the three matters and having given conscious thoughts to the statutory provisions and the decided case law on the subject, the Court is of the view that the Company and its Directors and/or Partners of M/s. Creamy Fashions, have all attempted to dispose off the properties of the Company in liquidation. No accounts were properly maintained nor they were filed with the Registrar of Companies. Fire was committed in 2002 and 2003. However, there is serious controversy about the extent of damage caused to the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Surat on 1-7-2006, and in absence of any details available on record establishing the charge of Punjab National Bank on any property of the Company in liquidation or even existence of the property itself, the prayer No. 2 cannot be granted. (C)Since the statement under Rule 130 of the Companies (Court) Rules, 1959 of Mr. Prashant Natvarlal Dilkhush was recorded by the Official Liquidator on 25-4-2008, prayer No. 3 in part is treated to have been granted. 38. Company Application No. 241 of 2006 ( i )In view of the finding given by the Court in OLR No. 29 of 2006 in view of the fact that no other property is reported to be the property of the Company in liquidation, no directions are issued to Official Liquidator for taking possession of the properties of Company. Compliance report being OLR No. 29 of 2006 is already filed by the Official Liquidator. With regard to controversy about boiler, appropriate directions are already issued by interim order of the Court and amount of Rs. 1,20,000 has already been deposited. The Official Liquidator has already taken steps such as recording of statement of the Ex-Director under Rule 130 of the Companies (Court) Rules, 1959 and also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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