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2019 (8) TMI 222

..... pany - guilty of acts of misfeasance, fraud, cheating, breach of trust, misappropriation of funds or not - HELD THAT:- We have carefully perused the reports of the Investigation Officer, and accepted the report with regard to finding given him in respect of Respondent No. 2. While holding that the Respondent No 2. is held responsible for mis-managing the affairs of Company and the Petitioner has contributed a lot in comparison with the Respondent No 2, as detailed supra, simultaneously holding the petitioner is also responsible for loss to the Company for an amount of ₹ 47, 12,500 on par with second Respondent for an amount of ₹ 1,42,84,389/- (Rupees One Crore Forty Two Lakhs Eighty Four Thousand Three Hundred and Eighty Nine only) is not reasonable and justifiable. And we have accepted the Investigator Report in toto except with regard to the findings given in respect of the Petitioner. The Tribunal is of the opinion that the affairs of the Company are being conducted pre-judicially to the interest of the Company as well as to the Petitioner and other stakeholders ,and thus it is a fit case to wind up the Company, which would unfairly prejudice to the interest of the P .....

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..... ly received by from Mandi Agents of the Company; (9) To hold that the 3rd Respondent is also guilty of fraud and of misappropriation of money belonging to the Company and that he is also liable to make good the sum of ₹ 87,00,000/- and such other amount as may be determined by this Bench along with interest @ 24% p.a. (10) To award the costs of these proceedings including the Counsel fees. 2. Brief facts of the case, as mentioned in the Company Petition, which are relevant to the issue in question, are as follows: (1) M/s. MG-6 Wholesale Market (India) Private Limited and 2 Ors. (Hereinafter referred as Respondent No. 1) was incorporated on 08.06.2011 with the registration No.08/59045 in the office of the ROC in Karnataka at Bangalore. It is Authorized and Paid-up share capital is ₹ 5,00,000/- as on the date of incorporation divided into 50000 Equity shares of ₹ 10/- each. There has been no further increase in the Capital structure till date. The main object of the Company as contained in its Memorandum is to carry on the business of marketing of vegetables and fruits, wholesale and retail, import and export and also trading into all types of green and agricultura .....

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..... nd Respondent who had a clear intention to cheat the Company and also the Petitioner has siphoned of more than ₹ 8 Crores by drawing amounts from the Bank account of the Company and also by getting payments made to his nominees without they providing any supplies towards the construction of market yard and cold storage facility of the Company. (6) The following are the illegal acts committed by the 2nd Respondent: i. Manipulation of shareholding percentage at the time of incorporation. ii. Illegally getting contract for interiors and other works awarded to the 3rd Respondent without disclosing that he is none other than his brother-in-law. iii. Getting kick backs from the 3rd Respondent to the extent of ₹ 87 Lakhs by routing it through the Company's Bank Account. iv. Making unauthorized withdrawal of over 6.59 Crores from Company's Bank Account and not accounting for it. v. Collecting security deposits from various Mandi Agents trading in the Company premises and not accounting it in Company's favour. vi. Not co-operating with the Petitioner for finalization of accounts and avoiding to attend any Board or General Meetings. vii. Taking away the Laptop belongi .....

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..... esale Market during June, 2013 in as much as the 2nd Respondent failed to provide accounts for the various amounts drawn/ spent by him from out of the Company's funds which exceeds ₹ 8 Crores. The 2nd Respondent failed to provide any accounts of the amounts drawn/ spent by him, the Petitioner started verifying the Bank accounts pertaining to the Company and found various acts of omissions and commissions on the part of the 2nd Respondent which are narrated hereunder and thus it became obvious that the 2nd Respondent had a clear intention of defrauding the Petitioner from the beginning. (10) It is stated that the Petitioner had absolutely acquired in his name converted land measuring 5 ½ Acres on which the Wholesale Market is set up by the Company. As per the proposal for availing loan, the Petitioner was required to provide the 5 ½ Acres of land at Kappalamadagu, on lease to the another dubious plan in as much as contrary to the draft lease deed provided to the Petitioner, at the time of registering the lease deed, the 2nd Respondent modified the term of lease of the land in favour of the Company as 30(thirty) years as against 10 years agreed by the Petition .....

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..... Account of SBI, Mulbaglu and within a span of 9 months made total transaction of ₹ 6,59,90,434/-. On further enquiries with the said Bank, the Petitioner has also come to know that the said Bank has also allowed cash withdrawals through "Self" cheques aggregating to ₹ 4,16,95,000/- The SBI has also allowed transaction through bearer cheques issued by the 2nd Respondent which is not permissible under the Banking norms and regulations. The 2nd Respondent has also made payments two of the aforesaid persons (his nominees) namely, Sri Chowdappa and Sri B.R.Manjunath from the said account on different dates which establishes the unholy nexus between the 2nd Respondent and the said persons and also that the said persons were mere nominees of the 2nd Respondent to extract money from the Company. (14) The Company has also issued a legal notice dated 14th November, 2014 to the 3rd Respondent asking him to provide a complete account of the amounts received by him along with proper invoices and till date the said Sri Ramachandra has failed to provide proper accounts or bills. Further, it has also come to light much later that the 2nd Respondent had vested interest in get .....

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..... the whole sale market. (17) It is alleged that the 2nd Respondent has defrauded the Company by collecting amounts from Agents and Buyers and also not accounting for more than six crores of rupees transacted by him in the account of the Company with State Bank of India, Mulbagalu. As a result, the Company is now under serious threat of not filing its Balance Sheet and paying requisite Income Tax thereby exposing itself to be prosecuted under the Income Tax Act, 1961 and also under the Companies Act. The Petitioner with a view to provide a last opportunity to the 2nd Respondent to provide accounts for amounts spent by him and received by him caused the issue of a legal notice dated 22.12.2014. The 2nd Respondent who received the said Notice issued a reply dated 23.1.2015 to the same without directly addressing any of the issues. (18) The acts of the 2nd Respondent have caused serious injury to the business and assets of the Company and to its shareholders and creditors and all persons dealing with the Company. The Petitioner has accordingly initiated criminal prosecution against the Respondent No.2 under the Companies Act, 2013. It is alleged that the 2nd Respondent has made wrongful .....

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..... opriating funds of the Company to the extent of over ₹ 8 Crores. Out of the other three persons, Shri B.R Manjunath is none other than the Car driver appointed by the 2nd Respondent. Further the affidavits of Shri Naveen Kumar and Shri Devaraj claim that amounts taken by them has been returned by cash to the Petitioner. ed that the Petitioner states that out of the aforesaid four persons, Shr. B.M. Chowdappa and Shri B.R.Manjunath are the two persons who have drawn various amounts in their name from the Bank account of SBI out of cheques issued by the 2nd Respondent. This shows the nexus between the said persons and the 2nd Respondent and at the instance of the 2nd Respondent the said persons have submitted false affidavits. (21) The Petitioner while accepting the report of the Investigating Officer, Sri B. N. Harish, Regional Director (Retd.) MCA, has disputed adverse finding given against him by inter alia stating that amounts misappropriated and siphoned off and accounted for by R-2 has not been quantified together and aggregated though the observations of the Investigating Officer accepts most of the amounts quantified as mis-appropriated by R-2 in the Company Petition; o .....

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..... by the 2nd Respondent. (3) It is stated the very nature of the business of the 1st Respondent Company is such that the products are dealt with are perishable goods and most of the traders are from the interior villages and far off places thus, most of the transactions takes place through cash to the farmers/ vendors which is the fact of affairs and was in knowledge of the Petitioner. No activity is being carried on due to such prejudicial conduct of the Petitioner for which Respondent No.2 cannot be made responsible. The business of the Company has now stopped at the instance of the Petitioner who has issued a letter to the State Bank India Mulbagal Branch revoking "either or survivor" mandate and further he did not co-operate in issuing fresh cheque towards license fee to the APMC. In view of these circumstances, the license issued by the APMC to run the Company business, stands cancelled. The notice dated 22.10.2013 issued by APMC on bouncing of cheque. Cancellation of license intimation dated 03.06.2014 and 17.06.2014 from APMC respectively. The Company activities have been stopped for which the Petitioner alone is responsible and accountable. (4) It is submitted that .....

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..... ors not cleared, however it was decided that after the completion of the audit and on receipt of the audit report, it shall be decided whether it can be retained by any one or heading for separation/ liquidation, etc..." (9) Accordingly, both Petitioner and the Respondent No.2 have settled the matter and have entered into compromise on 16.03.2014 and when the two parties have been settled and when the Petitioner has agreed that he would give ₹ 75.00 lakhs to the Respondent No.2 and that the Respondent No.2 should go out of the Company, therefore, the company petition itself is not at all maintainable and hence it is liable to be dismissed. (10) The decision is awarding contract to M/s. Sri Balaji Interiors were taken by both Petitioner and the 2nd Respondent together and the allegation is made contrary to the above and is totally incorrect and misleading. The 3rd Respondent brought the site property during 2006 (10-11-2006) from Smt. K. S. Swaroopa. It is baseless to state that the 3rd Respondent constructed the building out of Misappropriated funds from the company and it has no relevance to the Company Petition as there are no such materials from the construction activ .....

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..... sues mentioned in the Company petition and also issues mentioned in the memo dated 06.08.2018 viz., to take accounts from both the parties for the amounts spent from the Company's Bank Accounts with Indian Bank and SBI and amounts collected in cash by the Respondent No. 2 from Traders; to consider the investments made by the Respondent No 2 with regard to his shareholding; to taken accounts with regard to contract awarded to Respondent No. 3; to submit a report as to acts of misfeasance, misuse of position by the respondent No. 2 and to quantify the losses to the Company. Accordingly, the Investigator submitted his report dated 24.01.2019, by inter alia stating that the affairs of the Company being conducted in a manner prejudicial to the interest of the Company U/ s 398 of the Companies Act, 1956, U/ s. 241 (1) (a) of the Companies Act, 2013; by holding that Respondent No.2 is solely responsible to the affairs of the Company, being Managing Director of the Respondent No. 1 Company etc. 7. It is relevant to point out para No. 27 and 30, report of the Investigator which reads as under: 27. Investment in share capital and signing in the MOA (Para (ii) of the Order):- (1) As per t .....

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..... ner and Respondent No.2 shown in the Balance Sheet as at 31.03.2012 but not accounted in Bank Account:- Sl. No. Name of the Parties Amounts in Rs. 1 Mr M Gopal ₹ 67,54,954/- 2 Mr. Gangareddy ₹ 27,17,450/- Total ₹ 94,72, 404/- In the latest Balance Sheet as at 31.03.2012 filed with ROC, the then Directors Short term borrowings was shown as:- "Loan from Directors," M. Gopal ₹ 67,54,954/-and Ganga Reddy ₹ 27,17,440/- totalling ₹ 94,72,404/-. But those funds were not accounted in the bank accounts of the Company. Therefore the then directors have not followed the prudent practice. (3) Total investment by the Shareholders (i.e. Petitioner and Respondent No.2) from all sources: (i) Borrowings accounted in the bank a/c:- Sl. No. Name of the Parties Amounts in Rs. 1 Mr M Gopal ₹ 3,71,000/- 2 Mr. Gangareddy ₹ 2,91,03,000/- Total ₹ 2,94,74000/- (4) Investment in the share capital:- Sl. No. Name of the Parties Amounts in Rs. 1 Mr M Gopal ₹ 2,75,000/- 2 Mr. Gangareddy ₹ 2,25,000/- Total ₹ 5,00,000/- (5) Total of borrowings and share capital as above: Sl No. Name of the Parties Amounts in Rs. 1 Mr M Gopal ₹ .....

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..... the directors U/ s. 137 of the Act, and for non-filing of Annual return the responsibility is vested on officers who is in default and Managing Director U/ s. 92 of the Act. (2) Petitioner replied that Respondent No.2 is responsible for not maintaining books of accounts and being Managing Director of the Company he is also liable. Counsel for R-2 replied that the Company has not passed any resolution appointing R-2 as Managing Director. To prove this R-2 has to produce Minute Books since he himself claimed as Managing Director of the Company in several documents including documents submitted to ROC and Bank and he was also over all in charge of the Company at the relevant time. (3) On books of account R-2 stated that "the entire accounts was with Mr. Gangareddy and all the Books of accounts, Company affairs, premises key and other related things in terms of undertaking letter dated 16.03.2014 before DY. SP. Mulbagal police station. The Documentary evidence for having handed over and taken over is with NCLT". But undertaking letter dated 16.03.2014 does not in specific words stipulated that books of accounts were handed over by Mr. M. Gopal to Mr. Gangareddy and further th .....

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..... mpany and the Petitioner has contributed a lot in comparison with the Respondent No 2, as detailed supra, simultaneously holding the petitioner is also responsible for loss to the Company for an amount of ₹ 47, 12,500 on par with second Respondent for an amount of ₹ 1,42,84,389/- (Rupees One Crore Forty Two Lakhs Eighty Four Thousand Three Hundred and Eighty Nine only) is not reasonable and justifiable. And we have accepted the Investigator Report in toto except with regard to the findings given in respect of the Petitioner. 10. By perusal of the averments made by the Petitioner as well as the Respondents along with documents, as briefly stated supra, and also basing on the report submitted by the Investigating Officer, as briefly stated supra, the Tribunal is of the opinion that the affairs of the Company are being conducted pre-judicially to the interest of the Company as well as to the Petitioner and other stakeholders ,and thus it is a fit case to wind up the Company, which would unfairly prejudice to the interest of the Petitioner as well as the Company. Therefore, it is a fit case to invoke the powers conferred on the Tribunal U/ s 241(1)(a) of the Companies Act, .....

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..... liable to compensate of ₹ 1,42,84,389/- (Rupees One Crore Forty Two Lakhs Eighty Four Thousand Three Hundred and Eighty Nine only) to the Company ,within a period of two months from the date of receipt of certified copy of this order. (2) Both the Petitioner and the Respondent are permitted and directed that the petitioner should nominate two of his Directors whereas the Second Respondent can nominee of his Director to the Board of Directors of R 1 Company within a period of one month from the date of receipt Copy of this order.;. (3) The Nominee Directors are directed to convey the Board meeting, within a period of one month from the date of their appointment and they are directed to conduct the affairs of the Company strictly in accordance with law; (4) Nominee Directors will remain in the office till the affairs of the Company put on track and till the settlement of exit of Respondent takes place. (5) Since the Second Respondent earlier agreed to quit subject to settlement of his claim and then it was not materialised, the parties are liberty to revive issue of exit by the Respondent No. 2 way of fresh settlement as early as possible. No order as to costs. - Corporate Law .....

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