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TMI Blog2018 (10) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... on before Company Law Board, New Delhi having CP No.27/2/2013 under Section 58AA of the old Act read with Rule 44 of the Company Law Board Regulations, 1991. Under the said Section, the Appellant had submitted a scheme for repayment of its deposits as per the schedule of repayment and sought exemption for the Company from requirement to maintain liquid assets under Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975 till the validity of the scheme as may be sanctioned by the Board. The Appellant claimed before the CLB that against authorized capital of Rs. 40 crores, the paid up capital of the company was 23.43 crores as on 31.03.2013. The Company was in business of manufacture of drugs and formulations at six units. In the Financial Year ending 31st March, 2013, sales turnover of the Company stood at Rs. 399.46 crores. The Appellant claimed before CLB that it had been regular and punctual and sincere in deposit/payments of its taxes as well as repayment of fixed deposits and interest accrued. As public limited company, it had accepted deposits since 2002 and regularly paid back till 28th February, 2013. In 2013, it started facing liquidity problems and incurred losses to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made within four years from the date of maturity of deposits, at 25% in the first year 25% in the second year, 25% in the third year and balance 25% in the fourth year. The interest for both pre and post maturity period will be paid along with the last instalment. (v) All the fixed deposits of Rs. 25,001/- to Rs. 50,000/- shall be paid within four and half years from the date of maturity of deposits at 20% in the first year, 20% in the second year, 25% in the third year, 25% in the fourth year and the remaining 10% in the next six months of the fifth year. The interest for both pre and post maturity period will be paid along with the last instalment. (vi) With regard to deposits of Rs. 50,001/- to Rs. 1,00,000/-, payment shall be made within 5 years from the date of maturity of deposits by 15% in the first year, 15% in the second year, 20% in the third year, 30% in the fourth year and the remaining 20% in the fifth year. The interest for both pre and post maturity period will be paid along with the last instalment. (vii) Regarding fixed deposits of Rs. 1,00,001/- and above, payment shall be made within five years from the date of maturity of deposits, at 10% in the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons, the Appellant again came up with a "scheme" as mentioned in Para - XVII of the application. Again it proposed reschedule of repayment of deposits for different slabs with extension of periods and suggesting instalments as is mentioned in the Company Application. The Appellant stated the scheme to be:- "That the Applicant Company prays for the following scheme for consideration and approval of this Hon'ble Tribunal:- a) The applicant company is praying for further re-scheduling of the repayment of the deposits in respect of the deposits from Rs. 10,000-50000 by extension of two years and extension of three years in repayment of deposits in respect of deposits from Rs. 50,001 and above in addition to the relief granted by the Hon'ble CLB vide its order dated 30th September, 2013. b) The Fixed Deposits up-to the amount of Rs. 10,000/- shall be paid fully in one year from the date of order. c) The repayment of Fixed Deposits ranging from Rs. 10,001/- to Rs. 15000/- will be made within 2 years from the date of order, at 50% in the first year and 50% in the second year. d) All Fixed Deposits ranging from Rs. 15,001/- to Rs. 25,000/- will be paid in 6 years tenure, 15% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant, where it was stated before the NCLT that out of 5575 depositors, the Company had received 45 objections. Few of the objectors filed objections even in the Tribunal. Registrar of Companies filed Report dated 29.09.2016 in consultation with Regional Director. The ROC informed the NCLT that ROC was regularly receiving complaints against the Appellant regarding repayment of fixed deposits which had been forwarded to the Company for necessary actions. The NCLT noted from the Report of Registrar of Companies that the Company had failed to file written undertaking that it had not violated the CLB Orders. The Registrar of Companies opposed further extension of time. 4. It appears that various depositors filed objections in the NCLT. One U.C. Wadhwa - fixed deposit holder of Rs. 3 Lakhs has on 22.10.2011 raised objections that the Company agreed to pay on expiry of 3 years with interest @ 12.50% per annum and that the Company had issued two cheques. One was dated 22.10.2014 for Rs. 1,20,608/- and another cheque was for Rs. 3 Lakhs but the cheques bounced. This Wadhwa claimed before NCLT that he had to recover Rs. 1,72,000/- from the Company and he was 80 years old and also a cancer p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which had been constantly increasing and in 2016 -2017 the Appellant suffered losses of Rs. 362.91 cores, it was stated. The Appellant in this CA 144/2017 claimed before the NCLT that it had made a "revised proposal" in CA 39/2017 to pay senior citizens as per CLB Order dated 30.09.2013 from the date of Order of the Tribunal and for rest of the depositors also, it prayed that it will pay the depositors as per original Order dated 30.09.2013 but from the date of the Order of the NCLT. Impugned Order - Discussion 7. NCLT took note of the fact that the Appellant had not made any payments to the fixed deposit holders since the institution of the application before NCLT. It was then observed:- "The only amount being paid after institution of the instant application is the amount of Rs. 15 lacs per quarter for meeting requirement of hardship cases which was increased to Rs. 30 lacs per quarter vide order dated 18.08.2017 on the prayer made on behalf of the applicant company. Can the applicant company now be permitted to implement the order of the year 2013 w.e.f. the date of order passed by this Tribunal? This all depends on whether this miscellaneous application filed in CP No.27/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t loss projected for the financial year ending 31.03.2017 as well as 2018-2019 and observed:- "40. Having earned extension for such a long duration from the original period of maturity of fixed deposits and even getting the relief of reduced interest @ 8% per annum after the date of maturity, how can the company bring another excuse of its difficult financial position in stopping unilaterally the payments and then move application for extension of time. There should be some end to the period of extension having sought a large flexibility in making payments to the deposit holders." 10. NCLT observed that with the financial position of the Company, there seemed to be no sincere effort at all on the part of the Company to comply with directions of the CLB in 2013. Discarding the arguments which were raised before it, NCLT observed:- "For how much period, the depositors would keep suffering because of such kind of the excuses by the company without any fault of theirs. The depositors have been constantly urging on the implementation of the directions passed in the order of the year 2013 of the Company Law Board." 11. Thus the NCLT concluded that there was no merit and rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal emergency, etc. Response of ROC 14. The Respondent - ROC has filed counter Affidavit in this Appeal. Part of the Affidavit refers to the provisions. It is stated that whether second extension of time for repayment of deposits can be granted, is a matter to be decided by this Tribunal. It is claimed in the Affidavit that the NCLT rightly dismissed the application of the Appellant seeking further extension of time in repaying public deposit holders. According to the ROC, interest of the public deposit holders is required to be secured. The Appellant was granted sufficient time by CLB while extending the time for repayment vide Order dated 30th September, 2013. Even for deposit holders of Rs. 15,001/- minimum period of 4 years was provided along with lower rate of interest @ 8%. ROC has claimed that in spite of such benefit, the Appellant Company defaulted in making payments in terms of the Order dated 30th September, 2013. The Impugned Order shows that deposit holders had raised objections against the application seeking further extension of time. According to ROC, the performance of other group companies has no bearing on the present Appeal and the performance of other Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion could not be filed. 18. We have heard the counsel and have gone through the material placed before us. Going through the Impugned Order, we find that the NCLT did not reject the applications filed by the Appellant only on the ground that it was another application for further extension of time. The Judgement shows that the NCLT considered that the Appellant had at the time of first grant of time got relief of huge extension and that there was no reason to accept the plea for further extension. The NCLT appears to have found that when big relief had already been granted to the Company, further extension was not justified. NCLT noted that there was absolutely no reason for the Appellant to have stopped making payments just because the application had been filed in NCLT. The NCLT considered the objections of depositors who had raised objections and which included old persons aged 80 and 70 years. Objector - U.C. Wadhwa claimed before NCLT that he was 80 years old and a cancer patient also. With such depositors objecting, and complaints of default as well as complaints of cheques given bouncing, the NCLT rightly appears to have declined to entertain the applications for extension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the claim for time, we do not find that there is any substance. In earlier petition under Section 58AA of the old Act, which basically dealt with small depositors who deposit in a financial year a sum not exceeding Rs. 20,000/- in the Company (see Explanation below Section 58AA), the Appellant obtained a huge relief in terms of not only multiple instalments over many years, but also in terms of interest not merely with regard to small depositors but even others. The list of depositors filed with ROC in view of Section 74(1)(a) of the new Act (Diary No.6022) does not show that the list was limited to depositors of amounts less than Rs. 20,000/-. The CLB Order shows deposit holders being put in slabs of even Rs. 50,000/-, Rs. 1 Lakh and Rs. 1 Lakh and above. We are aware that we are not sitting in Judgement over the Order of CLB. Our reference is limited for the purpose that when relief had been obtained even beyond contractual rates of interest and comfortable instalments were got fixed in terms of slabs and time, the Appellant failed to keep up with the scheme settled before CLB and came up with the present fresh application before NCLT to again re-fix the instalments and tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the company, after considering the financial condition of the company, the amount of deposit or part thereof and the interest payable thereon and such other matters, allow further time as considered reasonable to the company to repay the deposit. (3) If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees and every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both." 21. It appears that the Appellant in view of Section 74(1)(a) filed statement with ROC with Form GNL-2. The Form annexed was DPT-4 along with a certificate of Chartered Accountant and list of depositors. This form appears to have been submitted to ROC on 28.08.2014. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of interest/deposit or not. 23. In this context, it would be appropriate to refer to "The Companies (Acceptance of Deposits) Rules, 2014" ("Rules", in short). Rule 19 is as under:- "19. Applicability of sections 73 and 74 to eligible companies.- Pursuant to provisions of sub-section (2) of section 76 of the Act, the provisions of sections 73 and 74 shall, mutatis mutandis, apply to acceptance of deposits from public by eligible companies. Explanation.- For the purposes of this rule, it is hereby clarified that in case of a company which had accepted or invited public deposits under the relevant provisions of the Companies Act, 1956 and rules made under that Act (hereinafter known as "Earlier Deposits") and has been repaying such deposits and interest thereon in accordance with such provisions, the provisions of clause (b) of sub-section (1) of section 74 of the Act shall be deemed to have been complied with if the company complies with requirements under the Act and these rules and continues to repay such deposits and interest due thereon on due dates for the remaining period of such deposit in accordance with the terms and conditions and period of such Earlier Deposits a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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