TaxTMI 
TaxTMI 
2008 (3) TMI 730
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....under Section 454 of the Companies Act against the ex-directors and also to take action under Section 468 and 477 of the Companies Act against them, for their failure to file a statement of affairs and failure to produce the records and Accounts Books and assets of the company. However, till date the said report filed on 30.04.2004 has not been taken up. On account of the non-filing of the statement of affairs by the ex-Directors of the company, the prayer made in this report is allowed and the official liquidator is not only permitted, but also directed to file a criminal complaint under Section 454 of the Companies Act and an application under Section 468 and 477 of the Companies Act for non-filing of the statement of affairs by the ex-directors and not handing over the assets and records respondent company to the official liquidator. Necessary steps be taken within one week. Further report be filed before the next date. CA No.1017/2002 1. This application has been filed by three applicants namely Sh. Chaman Lal, Mr. M.N. Sobti and Mr. M.K. Kapoor, inter alia, under Section 542 of the Companies Act, against the Managing Director of the company in liquidation Sh. Sunil Shakt. ....
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....t. Ramesh Chand Saxena R/o A-2/141, Sector-3, Rohini, Delhi - 85. b) Naresh Tyagi S/o Lt. Yash Pal Singh Tyagi R/o 108, B-9, Sector-3, Rohini, Delhi- 85. c) Sayed Hasan Abbas Razvi S/o Dr. S.N.A. Rizvi R/o 249, Ghalib Apptt., Road No.42, Pitampura, Delhi. d) Neeru Arora D/o Shri H.K.L. Arora R/o 417, Mukherjee Nagar, Delhi. However, Naresh Tyagi & Neeru Arora @ Shilpy Shakt resigned from the Directorship of M/s Fintra System Ltd. on 22.2.91 and 1.9.91, respectively, while S.N.A. Rizvi left the said company sometimes during 1994 but did not inform to the Registrar of Companies. Thereafter Sunil Shakt appointed Wg. Cdr. R.N. Jain & Harender Singhal, CA as per the extracts of the Board's meetings held on 01.10.1995 by M/s Fintra Systems Ltd. and copy of account opening form in respect of A/c No.03258 with Canara Bank, Lajpat Nagar, New Delhi also bear the signature of Sunil Shakt and Wg. Cdr. R.N. Jain which have been collected from the above named bank. But the aforesaid Sunil Shakt, MD of M/s Fintra Systems Ltd. did not submit the required form No.32 with the Registrar of Companies, New Delhi showing the names of Wg. Cdr. R.N. Jain and Harendra Singhal as directors of M/....
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....entre 04/1996 (a) Naresh Tyagi, Prop. All the above noted persons & companies hold various accounts with a number of different bankers as per the Anenxure-1 attached herewith. However, current A/c No.120189 with Bank of America has been closed on 30.11.96. Consequently upon enquiries it is revealed that M/s Fintra System Ltd., M/s Fintra Centre, M/s Fintra Times & M/s KLP Finance Ltd. got published advts. in the Hindustan Times during 1995- 96 through Mrs. Shilpy Shakt of M/s AD-NSTYLE & M/s Shristhi International Pvt. Ltd. to get investment of money with the assurance of earning interest @ 30% & 36% per annum. The fee for all such advts. was paid to M/s AD-N-STYLE by Sunil Shakt out of the accounts of M/s Fintra Systems Ltd. in Bank of America and Canara Bank, New Delhi. In this manner, M/s AD-N-STYLE received a total sum of Rs.3,45,000/- by means of cheques and Rs.1,20,000/- in cash on account of avts. during the period from Dec., 1995 to Oct., 1996 in her C. A/c No.10249 with the Fetual Bank Ltd. M/s Shrishti International Pvt. Ltd. managed by Sunil Shakt & Shilpy Shakt as its directors, also received Rs.4.50 lacs out of the account of M/s Fintra Systems Ltd. for the purch....
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....1,13,210/- 9. Flex Industries 500 90,380/- 10. Gurdarshan Leathers Ltd. 100,000 4,50,000/- Total 1,24,31,931/- But there is no bank account transactions by means of cheques as per the accounts of Fintra Systems Ltd. with M/s Hylex Consultants for above shares but huge amount of cash were withdrawn from the account of Fintra Systems Ltd. by Sunil Shakt during the relevant period. Also, scrutiny of the accounts held by the said Fintra Systems Ltd. with SBI, Canara Bank and Bank of America reveal that during the period July, 1994 to May, 1996 Sunil Shakt withdrew huge cash amount from the current a/c No.1087 of the accused company without any expressed purpose and during the same period cash deposit of Rs.21.54 lacs were made in his personal account No.11581 with Andhra Bank, Connaught Circus Br., New Delhi out of which Sunil Shakt again withdrew cash by means of 'self' cheques and also made payments of Rs.65,000/- to his wife's brother Deepak Arora by means of cheques No.942816 dtd. 22.9.94, 942818 dtd. 12.10.94 and 942820 dtd. 13.1.95. During the course of further enquiry, it has come to notice that during the search of his business office....
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....deral Bank Ltd., Greater Kailash-I, New Delhi. (iv) Current A/c No.10329 in the name of Shrishti Intll. Pvt. Ltd. with the Federal Bank Ltd., Alaknanda Br., New Delhi of Smt. Shilpi Shakt and her husband, Sunil Shakt as Directors. It is further revealed that during the enquiry that during 1995-96, the aforesaid M/s ADN- STYLE had received a sum of Rs.5,78,467/- from Fintra Systems Ltd. in its bank a/c No.10248, Smt. Shilpi Shakt in fact acted as an advertising agency for Fintra Systems Ltd. and was designing, marketing and inducing the investors alongwith Naresh Tyagi, Director to invest in Fintra Systems Ltd. and Fintra Centre as per the advts. Sunil Shakt and his wife Smt. Shilpi Shakt also established a company in the name of Shrishti Intell. Pvt. Ltd. being the directors but this company did not carry out any business activities but its bank account No.10329 was credited with a sum of Rs.5 lacs on 17.2.96 and Rs.4,50,000/- was paid on account of purchase of 1,00,000 shares of a sick company, namely, Gurdarshan Leathers Ltd. on behalf of KLP Finance Ltd. (now Fintra Capital Services Ltd.) on 24.2.96 and out of the said amount Shilpy Shakt received Rs.50,000/- as commission f....
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....k a/c No.10248 which has been withdrawn on different dates and presently only a sum of Rs.6536 is lying credited in her a/c No.10248 with the Federal Bank Ltd., Alaknand Br. GK, New Delhi. Further enquiry has revealed that M/s AD-N-STYLE had only one source of income i.e. Fintra Systems Ltd. for which it was acting as an advertising agency and was designing to mislead the small investors by got publishing misleading catchy advts. in the Hindustan Times during 1995-96 and received Rs.5,78,467/- out of the a/c No.3258 of M/s Fintra Systems Ltd. Accused Sunil Shakt and Shilpi Shakt also established a company in the name and style of M/s Shrishti Intll. Pvt. Ltd. on 24.8.95 under the directorship of Shilpi Shakt and Sunil Shakt. However, the said M/s Shrishti Intell. Pvt. Ltd. did not carry out any stated business of exports etc. but received a sum of Rs.5 lacs through Fintra Systems Ltd. on 17.2.96, out of which Rs.4,50,000/- was paid to Gurdarshan Leathers Ltd. vide cheque No.492503 dt. 24.2.96 as mentioned earlier and another amount of Rs.50,000 was withdrawn on 19.2.96 and paid to Navraj Kwatra on 19.2.96 vide cheque dt. 19.2.96 drawn on a/c No.10329 with Federal Bank Ltd., New Del....
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....e having their office at 9-D, Masjid Moth, Phase-II, Greater Kailash, New Delhi and 306, Namdhari Chamber, D.B. Gupta Road, Karol Bagh, New Delhi, respectively, induced the public at large to earn interest @ 36% p.a. by making investments in the said companies. Consequently, the details of investments received by the accused companies during 1995-96 are as under: - A . F INTRA SYSTEMS LTD., 9-D, MASJID MOTH, PHASE-II, GREATER KAILASH, NEW DELHI. Sl. No. Investment made No. of investors Name of the scheme i) 3,49,11,322 672 Unsecured ii) 1,12,95,000 63 Secured Total Rs.4,62,06,322 735 B . F INTRA CENTRE, 9-D, MASJID MOTH, PHASE-II, GREATER KAILASH, NEW DELHI & 3306, NAMDHARI CHAMBER, KAROL BAGH, NEW DELHI. Sl. No. Investment made (Rs.) No. of investors Name of the scheme i) 64,98,200 24 Unsecured Total Rs 4,62,06,322 1. Thus, the abovenoted two companies collected a total sum of Rs.5,27,04,522/- (Rs. Five Crores Twenty seven lacs four thousand, five hundred twenty two only) from 759 number of investors during the period 1995-96. Further, upon through scrutiny of the accounts No.03258 with Canara Bank account No.1087 with SBI an....
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...., the shares of Gurdarshan Leathers Ltd were not transferred in the name of purchasing Company, and major quantity of shares of Fintra Capital Services Ltd were purchased in the name of Mr. Sunil Shakt and Mrs.Shilpi Shakt, although payment was made on behalf of Company in liquidation. Rs.50,000/- was paid to Mrs. Shilpi Shakt as commission for arranging the aforesaid deal. This amount of Rs.50,000/- was withdrawn in cash on 19.2.1996 to be paid to Navraj Kwatra on 19.2.1996 on account of the payment for purchase of terrace of flat No. S-185, Greater Kailash, Part II, New Delhi. Thus, the funds of the Company in liquidation were channeled for the purpose of purchasing the aforesaid property in the name of Mr. Sunil Shakt and Mrs.Shilpi Shakt. Mr. Sunil Shakt and his wife Mrs.Shilpi Shakt were the direct beneficiaries at the expense of funds of the Company in liquidation. vii) Funds to the tune of Rs.46.5 lakhs was transferred from the Company in liquidation into the accounts of Naresh Tyagi and Anoop Misra, Accountant of Fintra Group of Companies on the ground that they handed over cash to Sunil Shakt of the equivalent amount. In the year 1995-96, Rs. 1.24 crores of the Company i....
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....ing agency. He submits that the reports filed by the CBI can, therefore, form the basis of an action under Section 542. He further submits that for the purpose of Section 542 what is required is the formation of an opinion which is inferential, since the expression "it appears" has been used in the Section, regarding the conduct of the Directors being fraudulent qua the creditors of the company. 6. He further submits that these reports of the CBI have been on record since the year 2000. In fact the ex-Director Mr. Sunil Shakt had even sought time on 07.09.2000 to study the reports and to make his submissions. He further submits that these findings mentioned in the reports have not been specifically controverted by Mr. Sunil Shakt till date. Therefore, the Court can proceed to act under Section 542 of the Act and sell the aforesaid property to settle the dues of the creditors/depositors of the company. He also submits that to draw an inference of fraud, it is not necessary that each fraudulent transaction has to be established from beginning to end and it would be sufficient if the fraud is apparent from a general trend of transactions undertaken by the concerned parties. 7. On th....
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....n enacted, and the fact that timely action is of the essence, not only to prevent the presentation of a fiat accompli by the fraudulent Directors of the company, but also to provide relief to the victims of the fraud, it seems that the establishment of the fraudulent conduct for attracting the provision of Section 542 of the Companies Act does not require the same standard of proof as in a criminal trial and the rigours of the law of evidence as apply to a criminal trial would not apply to establish the commission of fraudulent acts and omissions by the Directors and managers of a company. It has also to be kept in mind that by its very nature, fraud is not easy to establish. This is even more so, when the fraudulent conduct is undertaken by the Directors of a company, sitting in their own office, with a view to defraud the creditors/investors who, though the victim of the fraud, are not involved in the transactions which constitute such conduct, and may have no personal knowledge of the same. In K.T. Dharanendrah v. R.T. Authority AIR 1987 SC 1321 the Supreme Court, while dealing with a case under the Customs Act, 1962 observed that "An economic offence is committed with cool calc....
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....rs of the company in a manner as to rob the company of its resources and allow it to bleed. Conduct, which does not appear to be bona fide or innocent, or a mere judgmental error, but which personally enriches the Directors/managers of the company directly or indirectly at the expense of the company, permits the Courts to take away the protective shield that the directors/manager enjoy under the law. The shield of corporate entity with limited liability of the shareholders/Directors, provided by the law is not meant to protect fraudsters. They cannot be permitted to defraud the shareholders and the public through the instrumentality of a corporate entity with limited liability, and then mock at their shareholders and creditors and the Courts, and seek to protect themselves behind the veil of the Corporate Entity. The law is not toothless, but empowers the Courts with authority to deal with such situations. 13. At the same time, it is equally true that no one can be condemned unheard. The language of Section 542 itself shows that an opportunity has to be given to the concerned persons to lead evidence in support of their case. The Director Sh. Sunil Shakt and his wife appear to hav....
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.... liquidation. These commissions appear to have been paid as a part of a design to siphon out the funds of the company in liquidation and was a device to hoodwink the investors/creditors. 15. I, therefore, direct the official liquidator to forthwith attach the property i.e. second floor and terrace above it, of property No.S-185, Greater Kailash-II, New Delhi. I further direct the SHO of the concerned police station to render all assistance required by the official liquidator in the attachment of the property. I further direct that the evidence in relation to this application be recorded by the Registrar (Companies), and the report be sent to this Court as expeditiously as possible. The applicants may file their affidavits by way of evidence before the Registrar (Companies) within six weeks. The official liquidator shall also place the material available with it on record with an affidavit. For this purpose, the official liquidator is directed to collect the documents, on the basis of which the reports have been prepared by the CBI, and the same be filed in this Court. Copies of the affidavit/documents be exchanged between the parties including Mr. Sunil Shakt and Mrs. Shilpi Shakt....