TMI Blog2009 (2) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... an (English) and Jansatta (Hindi) for 16-3-2009. The petitioner may take steps accordingly. - C.P. NO. 136 OF 2005 - - - Dated:- 16-2-2009 - VIPIN SANGHI, J. Ms. Vibha Mahajan Seth for the Petitioner. S.K. Sareen and M.K. Garg for the Respondent. JUDGMENT 1. This company petition under section 433( c ), ( e ) and ( f ) read with sections 434 and 439 of the Companies Act, 1956 (for short "the Act"), has been filed to seek the winding up of the respondent-company, namely, M/s. Indo Rollhard Industries Ltd. ("the company"). 2. The petitioners have primarily urged the following grounds to seek the relief as sought in this petition : ( i )That the respondent-company is indebted to petitioner No. 1 personally to the tune of Rs. 7,50,000 advanced as loan, and the company is unable to pay the said sum despite the statutory notice, and is thus liable to be wound up under section 433( e ) of the Act. I may note that in the company petition the petitioners had alleged that the respondent-company owes an amount of Rs. 59,06,780 to petitioner No. 1 and various companies under his ownership and control. However, at the time of arguments, with a view to avoid g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses after that period. (B)A loan to the tune of Rs. 72 lakhs was obtained by the company from Vijaya Bank in 1998 against hypothecation of raw materials, finished goods and work-in-progress, and the immovable properties of the company. (C)The company was not regular in holding its annual general meetings as per the provisions of the Act. The company even failed in discharge its statutory obligations in filing its balance-sheet and annual returns with the Registrar of Companies. Aggrieved by such a state of affairs of the company, the petitioners-shareholders (who claim to be holding 36.7 per cent shares) of the company gave notice under section 169 of the Act to the board of directors for convening of an extraordinary general meeting on 26-9-2002, for the purpose of questioning the acts of alleged misconduct of the company s management. But the company failed to hold such a meeting. Eventually, the shareholders on their own convened the extraordinary general meeting on 5-7-2004 and resolved to voluntarily wind up the company by appointing one Mr. Ashok Bhasin as a Liquidator. The communication was sent in this regard to the management and request was made to fully co-operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure A to the additional affidavit of the petitioner dated 29-8-2006. The petitioner demanded the amount of Rs. 9,50,000 from the respondent vide notice of demand dated 7-5-2004, (annexure G). The acknowledgement receipt is placed on record as annexure X. I may notice that the petitioners have, in their rejoinder to the reply of the respondents, to the additional affidavit, clarified that the claim of Rs. 9,50,000 as being the outstanding due of the company in the personal account of petitioner No. 1 is erroneous, and that the amount, in fact, due is Rs. 7,50,000. 7. Learned counsel for the respondents, on the other hand contends that the petitioner is not a creditor of the company. It is submitted that the entries in the books of the company are the result of manipulations by the petitioner in connivance with the then statutory auditor of the company, who is also the real brother of the petitioner. It is also claimed that the petitioner is a partner in the said auditing concern, namely, Mahajan and Co., which audited the accounts of the respondent-company up to 23-2-2003. 8. The respondents also submit that annexure F to the petition, viz., the acknowledgement of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the auditors of the company, it is averred that the auditors of the company make their reports on the basis of books of account maintained by the company. The allegation of manipulation is denied. 12. The undisputed position, which emerges from the documents filed on record and the respective averments of the parties, is that the respondent-company in its balance-sheet as on 31-3-2000, showed a closing balance of Rs. 9,50,000 outstanding and payable to petitioner No. 1. This balance-sheet is signed by the then managing director of the company. The argument that no amount whatsoever was due and payable to petitioner No. 1, and that he was not a creditor of the company cannot, therefore, be accepted. The defence that the brother of petitioner No. 1 was a partner of the firm that acted as the statutory auditors of the company till March, 2003, does not explain the conduct of the managing director in signing the balance-sheet as on 31-3-2000, which showed an outstanding amount of Rs. 9,50,000 payable to petitioner No. 1. As rightly contended by learned counsel for the petitioner, the accounts are maintained by the company. The auditor merely audits the accounts as maintained by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the amount claimed to be outstanding in the petition, and in the amount subsequently stated to be outstanding by the petitioner. The amount as claimed in the petition was Rs. 59,06,780. This amount was stated to be due to petitioner No. 1 and his various other concerns. The petitioner has given the break-up of the aforesaid amount in his rejoinder to the reply filed by the respondent-company, to the additional affidavit of the petitioner. 15. The petitioner states that while preparing the petition he relied upon only the documents/statement maintained by the respondent-company provided to the petitioner, like the copy of the ledger accounts of the respondent-company. The figures as reflected in the respondent s ledgers/books of account in relation to petitioner No. 1 and the company owned/controlled by him have also been disclosed. On a comparison of these statements/tabulations it is clear that the discrepancy in the amount claimed to be due to petitioner No. 1 has arisen on account of an error of accounting on the part of the company itself. 16. Merely because the demand made by the petitioners in their notice of demand dated 7-5-2004, in relation to the amount allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not disputed that the credit from the Vijaya Bank was reduced to Rs. 37 lakhs by releasing the property at Nangloi (at Sl. No. 2 above), and that it was sold off in April, 2000. 22. To substantiate the allegations made in the petition the petitioners submit that the original title deeds of property belonging to the company situated at 61/1, Naresh Park, Nangloi, New Delhi, hypothecated as a collateral security with the Vijya Bank for obtaining credit facility of Rs. 72 lakhs, were fraudulently procured by Mr. Anil Kaushal, managing director of the company in connivance with the officials of the Vijaya Bank. The said property has been subsequently sold without any information, approval or requisite authority from the other shareholders/guarantors/directors of the company, and Mr. Anil Kaushal has misappropriated its sale proceeds for his personal gain. The petitioners submit that the respondents had, before the Registrar of Companies, NCT, Delhi and Haryana taken the stand that the sale of the property was with the approval of the board of directors. However, they had not produced the record before the Registrar of Companies and, even before this court the respondents have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and ( ii )located at khasra No. 57/17 min. (0-08). 24. Counsel for the petitioner points out that the respondents as per their own admission in their reply to the petition, state that the properties at Mundka, Delhi, were purchased from the sale proceeds of the Nangloi property to start the work unit. In Form No. 8 filed before the Registrar of Companies, dated 4-5-2001, the factum of the two properties at Mundka being substituted for the property at Nangloi has been recorded. The relevant extract of this statement reads as follows : "The charger on property at 61/1, Naresh Park Extension, Najafgarh Industrial Area, New Delhi, is vacated with the release of documents of title in respect of the said property. However, in place of the above property, the charge for OLCC limit of Rs. 37 lakhs is now secured by equitable mortgage by deposit of title deeds of two plots at khasra No. 57/17, min (1-00) and 57/17 min (0-08) measuring of Bigha and 08 Biswas, respectively, situate in the revenue village of Mundka, Delhi other terms and conditions remain same." 25. It is clearly shown that the property at Nangloi was released in lieu of two plots in Mundka located at khasra Nos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Vijaya Bank and the original title deed of the property was deposited with the bank. This clearly demonstrates the manipulation and fraud perpetuated by the directors. Even this property was sold in a very clandestine manner and its proceeds were fraudulently misappropriated by the directors of the company. In this regard, it is pertinent to take note of the remark made by the auditor in schedule No. 16 pertaining to significant accounting policies and notes on accounts for the year ended 2002-03, which states that the company had sold land at Bahadurgarh and Delhi during the year for which no details/evidence is available. 27. The petitioner submits that there is justifiable lack of confidence in conduct of the company s affairs as the management has totally disregarded the provisions of the Act by not holding the annual general meeting for the last three years, in contravention of section 166 of the Act, despite repeated letters and reminders in this respect on behalf of the shareholders. The respondent-company, it is alleged, did not convene an extraordinary general meeting as provided under section 169 of the Act despite notices. It did not convene a creditors meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that the petitioners have been indulging in forum shopping as they have approached different forums for the same cause of action and with the same reliefs. They had earlier filed a petition before the Company Law Board under section 167 of the Act which was dismissed on 20-2-2004, for want of prosecution. Writ petitions were also filed before this court being W.P.(C). Nos. 451 of 2005, 452, 453, 455, 456, 457 and W.P.(C). No. 458 of 2005 which were disposed of without granting the reliefs as claimed. Even a petition under sections 397 and 398 of the Act was preferred before the Company Law Board, but the same has not been pursued and is lying in defect. On the non-holding of the annual general meeting, the respondent states that a petition had been filed before the Company Law Board, Northern Region under section 167 of the Act. The same was disposed of on the ground that the company has already held its annual general meeting. 30. The respondent-company has also sought to resist the present petition on the ground that it is filed pursuant to the resolution dated 5-7-2005, passed at the extraordinary general meeting which was illegally convened by the petitioners in violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 433 read with sections 434 and 439 of the Act and if the petitioner is able to make out their case for winding up on the grounds enumerated in section 433 this court has ample power to grant the relief. 34. The next case which is heavily relied upon by the petitioners is of Virendrasingh Bhandari s case ( supra ) in which the court has analysed the scope of section 433( f ). The relevant paragraph is reproduced hereunder: "The question that is raised in this appeal is as to what is the scope of section 433( f ) of the Act. Section 433 provides for the circumstances in which a company may be wound up by the court. There are six recipes in this section and we are concerned with the sixth, namely, that a company may be wound up by the court if the court is of the opinion that it is just and equitable that the company should be wound up. Section 222( f ) of the English Companies Act, 1948, is in terms identical with the Indian counterpart, section 433( f ). It is now well established that the sixth clause, namely, just and equitable , is not to be read as being ejusdem generis with the preceding five clauses. While the five earlier clauses prescribe definite co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut in the straitjacket of an inflexible formula. In an application of this type allegations in the petition are of primary importance. A prima facie case has to be made out before the court can take any action in the matter. Even admission of a petition which will lead to advertisement of the winding up proceedings is likely to cause immense injury to the company if ultimately the application has to be dismissed. The interest of the applicant alone is not of predominant consideration. The interests of the shareholders of the company as a whole apart from those of other interests have to be kept in mind at the time of consideration as to whether the application should be admitted on the allegations mentioned in the petition." (p. 105) 37. The proposition that emerges from the above decisions is that the foundation of applications for winding up, on the "just and equitable" rule must be based on a justifiable lack of confidence in the conduct arid management of the company s affairs. Mismanagement by the directors as a ground for winding up is a question to be decided on the facts of each case. Applying the above proposition in the present case, I shall probe whether there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the property at Bahadurgarh was sold during 2002-03. As mentioned above, the details regarding the said property was not made available to the auditors and it is clear that they were purposely withheld to keep the shareholders in dark. 40. The respondents have not provided any satisfactory explanation as to how the proceeds of the land situated at Nangloi, Mundka and Bahadurgarh were appropriated. They have failed to produce satisfactory records before the court. The explanations furnished by the respondents in this regard are vague and self-contradictory. 41. It is pertinent to mention here that this court had directed the respondents, vide an order dated 16-1-2008, to file all the annexures to the balance-sheet of the company for the year 2001 onwards. The respondents were put to notice that if the same are not filed, the court would be free to draw adverse inference against the respondent. These annexures would have demonstrated the manner of appropriation of the sale proceeds of the aforesaid properties of the company. But the respondents have failed to comply with the directions of this court, leading the court to draw an adverse inference to the effect that if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance, provident fund, wealth-tax, customs duty, excise duty and other material dues. In fact Income-tax Department, has raised demand to the tune of Rs. 79,783 for the year 2001-02 for which the company had filed an appeal with Commissioner of Income-tax (Appeals), which was dismissed and the company has still not made any provision for this demand. 44. The income of the company has nosedived to a dismal figure of Rs. 20,204 in the year ended dated 31-3-2006, as compared to its income of Rs. 1,78,88,963 in the year ended 31-3-2002, i.e., within a span of four years. The balance-sheets of the company continues to show losses year after year and there is nothing shown to suggest any improvement in the coming years. 45. In view of the law discussed above and by carefully analysing the facts and records relied upon by both counsel, I am of the considered view that it is just and equitable to wind up the company and allow this petition, under section 433( e ), ( f ) and ( c ) read with sections 434 and 439 of the Act. 46. I, accordingly, admit this petition and direct that the respondent-company be wound up. The Official Liquidator attached to this court is appointed as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
