TMI Blog2016 (7) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... he amounts received in DAIL’s no lien escrow account, which was permitted with the secured creditor’s permission (on the representation that it would be used to receive investor’s contributions) from its subsidiary for services rendered are not really so. As noticed earlier, all indications are to the contrary. The explanation now sought to be given, i.e. that Odyssey made over the amounts to DAAI, as part of a conditional loan, do not detract from the inferences justifiably forming the basis of the previous judgment of 18.11.2005. - CO. APP.16 - 17/2011, C.M. NOS.6537/2011, 11771/2012 & 5412 - 5413/2013 - - - Dated:- 22-7-2016 - MR. S. RAVINDRA BHAT MS. DEEPA SHARMA JJ. Appellant Through: Sh. A.S. Chandhiok, Sr. Advocate with Sh. Dhruv, Sh. Ritesh Kumar, Sh. Mayank Banniyal and Sh. Dipender Chauhan, Advocates. Respondents Through: Sh. Y.P. Narula, Sr. Advocate with Sh. Aniruddha Choudhary, Advocate, for Canara Bank. Sh. Kanwal Chaudhary, Advocate, for Official Liquidator. MR. JUSTICE S. RAVINDRA BHAT 1. The present appeal is directed against a judgment of the Company Judge, dismissing two applications (CA Nos. 1459/2006 and 1061/2010). Those applications we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s account in Canara Bank. DAIL was granted permission to open an account with ABN Amro Bank, Chennai (hereafter ABN Amro ) for the limited purpose of receiving investors money. Account No. 1130826 was opened and an amount of US $17 million was received on 18th August, 2004 in that account from Data Access America Inc. (hereinafter referred to as DAAI , for short) a 100% subsidiary of DAIL. Canara Bank alleged that this amount was paid by DAAI on account of debt due to DAIL, which is charged/hypothecated with it (the Bank) and was contrary to the understanding permitting bank account opening with ABN Amro for the limited purpose of receiving investors money. Indisputably, DAAI was liable to pay and was indebted to DAIL on account of services rendered. 5. The said US $17 million, deposited in ABN Amro on 18th August, 2004, was converted into ₹ 78.45 crores. The next date, i.e. 19th August, 2004 that amount, i.e. Rs.78.45 crores was transferred to the account of CHPL in ABN Amro. Instantaneously, CHPL transferred ₹ 35,30,46,482.68/- to CEPL which too had an account in ABN Amro, ₹ 18,05,00,000/- was transferred to KCPAHPL in ABN Amro and on 28th October, 2004, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer these funds to other accounts so as to go out of the reach of the petitioner or the Canara Bank. ABN Amro Bank, Chennai and Syndicate Bank, Delhi would ensure that minimum balance, as mentioned in sub-paras (a), (c) and (d) is maintained in those accounts, namely, in account No. 922322 of M/s. Cheran Enterprises - ₹ 35,30,482/- (sic); in account No. 912277 of Sporting Pastime India Ltd - ₹ 25 crores and in account of KCP Associates Holding with Syndicate Bank, Delhi - 18.05 crores. As the applicant is not aware of the branch office of Syndicate Bank where this account is maintained, the order shall be served upon the zonal office of Syndicate Bank at Delhi. Notice for 7th January, 2005, dasti through counsel. Copy of the order be also given dasti under the signatures of the Court Master. 6. Odyssey thereafter preferred CA 35/2005 alleging that it had advanced US $17 million to DAAI subject to the condition that the amount would be further lent to DAIL on two conditions, namely, rollover of all loans and bank guarantees with Canara Bank and Syndicate Bank for a period of atleast 12 months and secondly, reinstatement of all points of interconnec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company. The letter dated 18th August, 2004 only disclosed that the transaction was within India; there was no indication or mention of foreign exchange remittance by any foreign company. It is clear from the letter that permission was sought for depositing the investor' money with Canara Bank (and for which escrow account was opened by the bank). That permission for opening of the account was granted. On 26.08.2004, a shareholder s agreement was signed by the concerned parties- however, the Bank was not consulted and had no role to play in the signing of the said earlier Agreement or the agreement of 26th August, 2004. This Agreement was given to the Bank sometime in October, 2004 and as per Clause 8 of the said Agreement the investor was to bring in the sum of ₹ 75 crore on certain express conditions. 8. The court s order observed that the Share Holder's Agreement, showed that as on 26th August, 2004, the investor's money had not been received by the Respondent Company. Thereafter, on 7th September, 2004 a consortium meeting was held in which Mr. Siddharth Ray and Mr. K.C. Palanisami participated on behalf of the Respondent Company. In the said meeting als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% subsidiary is false. In fact, as per the letter dated 18.8.2004, written by the Respondent Company, seeking no objection from the Bank for opening a current account with ABN AMRO Bank, Chennai, the investor was to infuse funds in to the Respondent Company by transferring amount in Indian Rupees from its account with ABN AMRO Bank, Chennai to the account of the Respondent Company in Indian Rupees. The investor was 'CHPL' and 'K.C.P.' and not 'DAA'. The swift message of 'DAA' received with the remittance of 17 Million US Dollars cannot be changed. The Respondent Company has fabricated the story of unsecured loan by 'CHPL' to 'DAIL' through 'DAA'. The said story is neither plausible nor possible. The court then concluded its prima facie determination: 69. No doubt the company has tried to give its own version and hue to the entire transaction and dubbing the receipt of funds in the company's account as an error. However, the admitted facts are : (a) The amount was received in the account of the company maintained with ABN AMRO Bank. (b) The amount was received through its subsidiary Data Access Ameri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose parties to the account of the company maintained with ABN AMRO Bank. Needful in this respect shall be done within two weeks. After receiving this amount the ABN AMRO Bank shall remit this amount to Canara bank. It is because of the admitted liability of the bank and charge of the bank over this money. Furthermore, in case it is found ultimately that the money is to be refunded to Odyssey Re etc., appropriate orders can be passed directing Canara Bank to refund the amount and the bank has sufficient means to carry out such directions. Appropriate orders shall be passed in the company petition as to how this amount is to be dealt with depending on the nature of the final orders passed in the company petition. 9. The above judgment of the Company Judge- dated 18th November, 2005 was matter of appeal by CHPL, KCPAHPL and SPIL. These appeals have been dismissed by order dated 20.11.2009 by the Division Bench. While dismissing the appeals filed by CHPL and SPIL, the challenge to the prima facie findings recorded by the Company Judge in the Order dated 18th November, 2005 as incorrect was rejected. The request of the appellants that the contempt proceedings should be kept in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the implementation of the directions given in paras 70 to 72 in the Order/Judgment dated 18th November, 2005. In terms of the directions issued in the said Order/Judgment, money i.e. 78.45 crores must come into the bank account in Canara Bank. Inspite of more than five years, this has not happened. The said companies cannot be permitted and allowed to stall compliance of the directions issued and must abide by the said Order/Judgment. 11. The Company Judge noticed that the previous judgment dated 18th November, 2005 referred to Section 531 of the Act and the principle of trust. He also referred to the principle of tracing and the observations of the House of Lords in its decision. Lipkin Gorman versus Karpnale (1992) 4 All.ER 512. The impugned judgment also cites restitution and the decisions reported as Orton v Butler (1822) 5 B. Ald. 652, Foster v. Green (1862) 7 H. N. 881; Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32; Hudson v Robinson 1816 (4) MNS 475; Bainbrigge v. Browne (1881) 18 Ch.D. 188; the decision of High Court of Australia in Black versus S. Freeman and Company 1910 (12) C.L.R. 105; Banque Beige Pour I'Etranger vs Hambro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding company of SPIL. Similarly, CHPL is a subsidiary of CEPL and KCPAHL is a subsidiary of CHPL. Prima facie, it does appear that all the companies were fully aware and conscious of the transfer of the money in ABN Amro Bank and the claim of Canara Bank. 31. C.P.No. 65/2005 has been filed by the CHPL represented by Mr. K.C. Palanisamy under 397, 398, 402 and 403 of the Act on account of certain purported acts of oppression and mismanagement in affairs of CEPL and other respondent. C.P.No. 76/2005 has been filed by the O.R.E. Holdings Pvt. Ltd. under section 397, 398, 402 and 403 of the Act on account of certain purported acts of oppression and mismanagement indulged by Mr. K.C. Palnisamy in affairs of CEPL. In these petitions interim order were passed by Company Law Board (CLB, for short) on 13th August, 2008 i.e. after the order dated 18th November, 2005 passed by the Company Court. Neither Canara Bank nor DAIL is a party in the said proceedings. It is pointed that applications filed by the Canara Bank to be impleaded as a party in C.P. No. 65/2005 C.P. No. 76/2005 was dismissed by the CLB vide order dated 18th July, 2007. Aforesaid orders do not affect and negate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accept the contention that the appellants in Company Appeals 3 4 of 2006 were unaware of these orders of the Madras High Court. 35. Order dated 21st January, 2009 passed in Crl. O. P. No. 1137/2009 initiated by Nandakumar Athappan against State Bank of India, Erode Branch including directions therein are not binding on Canara Bank and this court and do not justify recall of order dated 18th November, 2005 which is earlier in point of time. Canara Bank and DIAL the company under provisional liquidation are not parties to the said litigation. The order of criminal court dated 21st January, 2009 again is prior in point of time i.e. before the Company Appeals 3 4 of 2006 filed by CHPL and SPIL were dismissed on 29th November, 2009. 36. Keeping in view the aforesaid facts, the following directions are issued:- (1) All bank accounts and deposits of CEPL, CHPL, SPIL and KCPAHPL are hereby attached. No payments will be made from the said bank accounts except with the permission of the Company Court. The aforementioned companies are also restrained from selling, disposing of or creating third party interest in respect of movable and immovable assets. (2) Managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht impleadment in the writ petition before Madras High Court. Upon failing in that attempt, it moved the Supreme Court (SLP 1626470/2008), which was rejected on 14.12.2009. It was stated that Canara Bank filed another impleadment application and the Madras High Court was seized of the issue whether the amount was to be handed over to the Canara Bank, the Income Tax department, CG Holdings, or CEPL. These facts were disclosed and urged. However, the Company Judge erroneously did not consider their significance in relation to the two applications preferred by the CEPL. 13. Likewise, it was urged that the Company Judge erroneously overlooked the significance of the leave granted by the Supreme Court, to seek review of the order whereby Canara Bank had persuaded the issuance of a direction to State Bank, Erode, to deposit ₹ 18.14 crores in CA 688/2010. SLP 14368/2010 was preferred against that order, which was disposed of by order dated 13.05.2010 where the Supreme Court granted liberty to CEPL, the appellant, to seek modification of the said order in CA 688/2010 dated 20.04.2010. 14. It is urged that the impugned judgment failed to consider that on 01.07.2004, K.C. Palanis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended, based on that letter, that the remitter, DAAI had received amounts by Odyssey, which had required retention of funds by CHPL subject to certain conditions, i.e. rescheduling of dues to Canara Bank and Syndicate Bank and reinstatement of all points by BSNL and agreement with it for rescheduling outstanding amounts due over the next 12 months. These conditions were not complied and, therefore, Odyssey recalled the amounts. ABN Amro, therefore, had sought guidance from RBI to remit the amounts to DAIL in its letter dated 16.09.2004. These according to the appellant clearly revealed that Canara Bank could not claim any part of those amounts, as they belonged to some other concern. 17. The respondents including Canara Bank argue that this court should not disturb the observations and findings of the learned Single Judge. Counsel referred to the pleadings in the previous applications which were the subject matter of the order dated 18th November 2005 and urged that all that is being said here now was contended before the Company Judge in those proceedings, (CA 287/2005). There is absolutely no change of circumstances, emphasized counsel, necessitating intervention with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this Court is un-persuaded by the appellant s submissions. That there were income tax proceedings, or that subsequently orders were made in Company Law Board proceedings, in no way substantiate the appellant s arguments. Had CEPL so wished, the order of the income tax authorities could have been brought to the notice of the court- the court in fact made its order in the earlier round, on 18.11.2005. The income tax authorities order noticing the statement of Palaniswamy is dated 05.02.2005. Obviously, the appellant felt that this was not relevant at the time. Nor is there any averment in the two applications that the said statement, or the proceedings and orders of the income tax authorities are of such significance as to require a fresh look at the matter. The same can be said of the Company Law Board proceedings. 21. It is extremely important to notice here, that in the previous proceedings, the learned Company Judge had noted that a letter of 21.07.2004, of DAIL had informed that a sum of Rs. 83.81 crores was payable to it by DAAI. The Division Bench s appellate order, dismissing the challenge to the earlier judgment (dated 18.11.2005) notes this: 5. The learned Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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