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2004 (12) TMI 705

CP No. 75 of 1999 - Dated:- 2-12-2004 - S. Balasubramanian For the Appellant: U.K. Choudhary, Sr. Adv. and Ranjana Roy Gawai, Adv. For the Respondents: S.N. Mookherjee, Sr. Adv. and T. Aich, Adv. ORDER S. Balasubramanian, Chairman 1. The petitioner claiming to hold 52% shares in M/S Ruby General Hospital Limited (the company) has filed this petition under Sections 235/237 of the Companies Act, 1956 (the Act) seeking for an investigation into the affairs of the company on three main allegations t .....

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ere was an addition to the fixed assets of a sum of ₹ 190.60 lacs out of which a sum of ₹ 139.96 lacs had been spent on alleged renovation addition to the existing building. Such renovation/addition was inconceivable as the entire hospital building had been completed in the year 1995-96 itself at a cost of ₹ 237.65 lacs with all ultra modern facilities. There was absolutely no need, within 2 years, for making any further addition to or renovation of the building completed only .....

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5 lacs without any justification. Even though the respondents have tried to substantiate their claims of purchase of equipments by filing copies of invoices etc., a perusal of these invoices/bills would indicate that they are all procured ones. There are no details of the addresses of suppliers, their sales tax registration numbers, excise registration number etc. Therefore, no reliance can be placed on these invoices or bills. By showing exorbitant lease rentals without incurring the same, the .....

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2nd respondent. In P.R. Ramakrishnan v. V. R. Textiles Limited (CP No. 37 of 91), the Company Law Board has held that cases of dishonesty, lack of probity, malafide for personal gain on the part of the management would warrant investigation into the affairs of the company. In the present case, the petitioner has given ample evidence of siphoning of funds of the company by the respondents and as such investigation is called for. In Alembic Glass Industries Ltd. (42 CC 63), Gujarat High Court has .....

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ed before this Bench and as such the Calcutta High Court is already seized of the said affidavit. 7. On merits, the learned counsel submitted: The sum of ₹ 139.96 lacs in the building account for the year ended 31st March, 1998 comprises of a sum of about ₹ 111 lacs transferred from the building progress account. This amount of ₹ 111 lacs is the cumulative figure of work in progress from 1994-95 onwards as is evident from the Chartered Accountant's Certificate at Annexure R .....

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n in the allegation that the 2nd respondent has siphoned of funds of the company by showing expenditure on addition to building. 8. The learned counsel further submitted: The allegation relating to increase in liabilities has to be straightway rejected. The increase is due to the better performance of the company and as a percentage to the gross revenue, the liabilities have come down from 61% as on 31st March, 1996 to 28.9% as on 31.3.1997 and to 25.4% as on 31.3.1998. By no stretch of imaginat .....

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f siphoning of funds through purchase of these equipments does not arise. 10. Summing up his arguments, Shri Mookherjee submitted that since the respondents have refuted each and every allegation with proper explanation have proved that all the allegations are baseless, the question of investigation does not arise. Further, the petition filed by the petitioner under Sections 397/398 has already been disposed of and in terms of Section 243 of the Act, the ultimate result of an investigation is to .....

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tion is under appeal. Therefore, the petition deserves to be dismissed. 11. In rejoinder, Shri Choudhary submitted: It is wrong to say that the ultimate result of investigation is filing of a petition under Sections 397/398 or filing of a winding up petition. If it is established in the investigation that the respondents are guilty of siphoning of funds of the company, criminal action can be taken against them. The petitioner is not seeking a roving enquiry but has placed concrete materials for .....

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es and purchase and leasing of equipments. As far as the expenditure on building is concerned, I do not find any merit in the allegation of the petition that by allegedly incurring the expenditure on building, the 2nd respondent has siphoned of funds of the company. A perusal of the annual accounts of the company indicates that there had always been building work in progress account right from 1994-95 onwards. In the balance sheet as on 31st March, 1998, I find that the figure of capital work in .....

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l the amounts spent on the purchases/lease of equipments should have been accounted for in the books of accounts under the respective heads and should have been scrutinized by the statutory auditors. If the invoices are bogus, the auditors would have pointed out the same. Rather in the present case, the Chartered Accountant has given a certificate at Annexure -19 that all the lease payments and purchases of equipments are genuine. Under the circumstances and in the absence of other un-refutable .....

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CC 778) to urge that an order of investigation should be made on the basis of the allegations made in the petition. The facts of that case cannot be compared with the present ones. In that case the company was a public listed company, it had not filed balance sheets for a number of years, it had not disclosed material facts in the proceedings pending before this Board under Sections 397/398 of the Act and therefore this Board ordered investigation. In the present case, the respondents have satis .....

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