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TMI Blog2019 (9) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... follows :- (a) To declare that the present Board of Directors comprising Respondent Nos. 2 to 9 and are not fit and proper persons to occupy the office of directors of the Company; (b) To supersede the present Board of Directors comprising Respondent Nos. 2 to 9 and appoint an independent Board of Directors to run the operations and affairs of the Company; (c) To restrain the Company permanently from sanctioning and disbursing any loans, advances or investments to the Respondent Nos. 2 to 9 or any of their group or body corporate or other entities; (d) To restrain the Company permanently from issuing any securities of the Company either to Respondent Nos. 2 to 9 or their associates or any of the related parties of Respondent Nos. 2 to 9 either on preferential basis or on the rights basis; (e) To direct the Respondent Nos. 2 to 9 and their group, associates and related parties to sell their shares in the company to other investors and to direct the independent Board of Directors to ascertain and identify such investors in the interests of the Company and its shareholders; (f) To direct the Serious Frauds Investigation Office of the Ministry of Corporate Affairs to invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hol including and other beverages including aerated and mineral waters and other drinks, etc. The 1st Respondent Company is presently engaged in the business of manufacturing and marketing of Indian Made Foreign Liquor (IMFL). 5. The 2nd Respondent viz., Mr. Ravi Kumar, is the Managing Director of 1st Respondent Company, and is associated with the said Company since its incorporation and is responsible for the operations and management of the same. The Respondent Nos. 3 and 4 are the whole-time Directors of 1st Respondent Company. The Respondent Nos. 5 to 9 are ordinary Directors of 1st Respondent Company. 6. The petitioners state that Respondent Nos. 10 to 13 viz., M/s. Ravikumar Properties Private Limited, M/s. Brahmar Cellulose Products Private Limited, M/s. Craze (India) Private Limited, and M/s. Ravikumar Resorts & Hotels Private Limited respectively are the Companies in which the Respondent No. 2 holds substantial stakes and controls the same. 7. The Petitioners state that the 1st Respondent Company came out with its Initial Public Offering (IPO) in the year 2010, with an issue of 1,15,00,000 Equity Shares of Rs. 10/-. each and issue constituted 47.92% of the fully diluted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. Further, the 1st Respondent Company recovered only a marginal sum out of the total outstanding amount of Rs. 41.99 Crores paid as advances to suppliers and as other advances and has shown an amount of Rs. 30.32 Crores as still recoverable. 10. It is stated by the Petitioners that in terms of Clause 49(IV)(D) of the Listing Agreement, under the head Utilization of the Proceeds of Public Issue, the issuer company shall disclose uses/application of funds by major category on a quarterly basis as part of their quarterly declaration of financial results and such disclosure shall be made only till such time that the full money raised through the issue has been spent. This has been stipulated by the SEBI so that it would make investors and others to monitor the application of funds. The 1st Respondent Company has made advances to the Respondent No. 10 and thereafter, it has brought it back to the 1st Respondent Company as narrated in by way of refund of capital advances during 2011-2012 so that it would escape monitoring by the investors and others. 11. It is stated in the Petition that the Utilization Statement given in Q2 results of the Financial Year, 2011-2012 ended September, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the director of leading company, which is an instance of oppression and mis-management on the part of the Respondents. 14. It is also stated in the Petition that Section 372A (1) of the Companies Act, 1956 provides that no company shall directly or indirectly (a) make any loans to any other body corporate or (b) give any guarantee or provide security in connection with a loan made by any other person to, or to any other person by anybody corporate, exceeding 60% of its paid-up capital and free reserves or 100% of free reserves, whichever is more. Sub-Section (3) of the Section 372A provides that no loan to anybody corporate shall be made at a rate of interest lower than the prevailing bank rate, being the standard rate made public under Section 49 of the RBI Act, 1934. The 1st Respondent Company under the directions and instructions of the Respondent No. 2 has advanced monies in the Financial Year, 2010-2011 in the form of 'interest free' loans to Respondent No.2 and his related entities viz., RPPL, which is an apparent non-compliance of the provisions laid down under the Section 372A of the Companies Act, 1956. 15. It is submitted by the Petitioners that as per the Annual Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the benefit of related entities of the Respondent No.2, which is inconsistent and not in compliance with the main objects of the 1st Respondent Company as stated under its Memorandum of Association (MoA). The 1st Respondent Company is now burdened with high debt and interest costs whereas the Respondent No.2 and his entities are enjoying interest free unsecured loans totally at the expense and financial well-being of the 1st Respondent Company. 19. Having stated as above, the Petitioners alleged that the 1st Respondent Company being the public listed company is being used for private purposes post the IPO. It is alleged that the Management had a long drawn plan or modus operandi of defrauding investors which is being strategically implemented initially by, getting investors to invest in the IPO and then using the same funds covertly for their personal benefits and thereby playing a fraud on the investors. The Petitioners state that the current management is totally oppressive and mis-managing the 1st Respondent Company only to serve their own vested interests. The acts of the management and especially the Respondent No.2 are prejudicial to the interests of the 1st Respondent Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies in the process of preparation of documents for the IPO issue had asked the Respondent No.2 to sign blank letter heads, blank printed forms and blank cheques and that the 2nd Respondent, though in the liquor business for more than 35 years, is not well educated and had been successfully doing liquor business only on the experience that he had acquired. To further coerce the 2nd Respondent into signing the documents and the Cheques, Mr. Anil Agrawal had made a payment of Rs. 2.20 Crores into the account of RKDL allegedly to show his bona fide, but the fact remains that the intent of the said Mr. Anil Agrawal from the beginning is to hatch a plan to deceive the 2nd Respondent and 1st Respondent Company. 24. The Respondents further submit that reposing faith and confidence in Mr. Anil Agrawal, the Respondent No.2, signed all the blank cheques, blank forms and blank letter heads and handed over the same to Mr. Anil Agrawal on trust and subsequently the Respondent No.2 realized that the said payment was only an eye wash to carry out a much larger conspiracy against RKDL, Respondent No.2 and other shareholders of the company and further submitted that the IPO which was done in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice for Rs. 7,49,08,025/- on 16.12.2011 wherein he demanded the said amount payable by 17.12.2011 and the lock-in period, pursuant to the IPO, in respect of the 31.77% shares held by the Respondent Nos. 2 and 10 expired on 18.12.2011 and immediately thereafter the said Mr. Anil Agrawal invoked the purported pledge of the shares of Respondent No.2 and there was no need for RKDL to ask for any loan to its BRLM and the Company never asked for the loan and the 2nd Respondent never signed the purported pledge documents. Further, even purported demand notice was never received by RKDL. The said sanction and the demand notice dated 16.12.2011 were created only for the purpose of transferring the entire shares of Respondent Nos. 2 and 10 in favour of M/s. Comfort Intech Limited, a Company which is also managed and controlled by Mr. Anil Agrawal. In this hasty process, Mr. Anil Agrawal has forged the documents of M/s. Axis Bank and it was the intention of Mr. Anil Agrawal to cheat the 2nd Respondent and RKDL and to achieve the ill-object of usurping the 1st Respondent Company. 29. It is alleged that the criminal intention of Mr. Anil Agrawal was to takeover RKDL by using dubious method an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of LIL and it is pending. The present Petition is only a counter-blast to the above proceedings initiated by RKDL. 32. After receipt of IPO proceeds, on 24.12.2010 the 1st Petitioner Company has withdrawn Rs. 12.88 Crores from the account of the 1st Respondent Company. However, despite repeated demands to return the balance amount out of Rs. 12.88 Crores, Mr. Anil Agrawal failed to return the sum. Further, Mr. Anil Agrawal transferred from the 1st Petitioner viz., M/s. Comfort Intech Limited an amount of Rs. 1,13,00,000/- on 08.07.2011, Rs. 30.00 Lakhs on 27.07.2011, Rs. 25.00 Lakhs on 06.08.2011 and Rs. 25.00 Lakhs on 10.08.2011 and immediately thereafter transferred these amounts to his associate companies. The said Mr. Anil Agrawal is guilty of playing a calculated fraud and in the process has enriched himself. Besides taking Rs. 12.88 Crores from the accounts of RKDL as stated supra, other payments have been made by the Company on 30.05.2011 and 29.12.2011 to the tune of total Rs. 12.68 lakhs. 33. It is stated that out of Rs. 72.35 Crores that were collected through IPO a net amount of Rs. 29.00 Crores was transferred by Mr. Anil Agrawal to his associate companies lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availed by M/s. Liquors India Limited - Rs. 4.85 Crores, payment to M/s. Dhanuka Estates & Investments P. Ltd. - Rs. 5.50 Crores towards getting back of RKDL shares, Excise license fees of Rs. 1.05 Crores, interest and operational expenses of Liquor India Limited - Rs. 5.10 Crores. * An amount of Rs. 5.50 Crores has been paid through M/s. Liquors India Limited to M/s. Dhanuka Real Estates and Investments Private Limited a group/associate company of Mr. Anil Agrawal and his associates and the ultimate beneficiary of this amount was Mr. Anil Agrawal, who against this amount of Rs. 5.50 Crores returned back part of RKDL's shares. Out of the balance amount of Rs. 8.32 Crores as on 31.03.2012, paid towards the advance for purchase of land for Distillery project at Madurai, Tamil Nadu, an amount of Rs. 2.75 Crores has been received during the Financial Year 2012-2013. It is stated that the company is taking all measures to get back this balance of Rs. 5.57 Crores. 35. It is submitted by the answering Respondents that the illegal transfer of 40% of proceeds of IPO is the main reason for the financial crunch in the 1st Respondent Company. The Respondents have submitted that the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn a portion of the Order of the Single Judge that the policy decision of Government of Tamilnadu is discriminatory. It is further stated in the reply that Rs. 5.57 Crores is pending from Respondent No. 10 as on 31.03.2013 and once the Government of Tamilnadu issues a fresh license the land purchased from Respondent No.6 will be utilized for the purpose. It is also reiterated that the company is only going to be benefitted from RPPL which is controlled by Respondent No.2. 38. The answering Respondents state that the provisions of Section 372 A of the Act has been duly complied with by passing a resolution to that effect in the General Meeting held on 06.08.2011. With regard to the violation of Section 295 of the Act, it is stated that the company has filed applications under Section 621 A of the Act to compound the offences committed inadvertently under Section 297 of the Act and that the offences under Sections 297 and 295 are compoundable in nature and the violations of those Sections cannot be held as an act of oppression and mis-management in affairs of the company. 39. The answering Respondents submit that the Petitioners who have become shareholders of the company in violat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther submitted that the 3rd Petitioner is an individual who had acquired 957 equity shares of Rs. 10/- each in the Initial Public Offer (IPO) made by the 1st Respondent Company through the Prospectus dated 14.12.2010 and 4th Petitioner is also an individual who has acquired 957 equity shares of Rs. 10/- each in response to the said IPO. The counsel for the Respondent has submitted that the 1st and 2nd Petitioners have become the shareholder of the 1st Respondent Company after the issuance of the IPO dated 14.12.2010. Therefore, they cannot question the utilization of the proceeds of the IPO dated 14.12.2010, because they were not the shareholders at that point of time, when the IPO was issued, as they have acquired the shares during 2011, only. 43. The main controversy involved in the Petition is that the Respondents have not utilised the proceeds of the IPO as per the terms and conditions of the IPO mentioned in the Prospectus and Respondent No. 2 along with other Respondents has diverted the proceeds of the IPO to other entities which are under his control to defraud the members/investors of the 1st Respondent Company, which is a public listed Company. The Petitioners are chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose; (ii) persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or (iii) the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, or the manager, of the company," 47. The powers conferred under Section 237(b) of the Companies Act, 1956 [Section 213(b) of the Companies Act, 2013] on the Tribunal are administrative in nature and can be exercised on the basis of the existence of circumstances as specified in the clause. The existence of the circumstances is a condition precedent as stipulated under Section 213(b), on the basis of which a prime facie honest opinion could be formed for or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any expansion of manufacturing unit and rather advanced the amount to related parties once again. Therefore, all representations, warranties and obligations set out by the Respondent No.2 to the investors under the IPO have been dishonoured and disregarded with ulterior intentions for his own greed and avarice. 51. The Utilization Statement given in Q2 results of the Financial Year, 2011-2012 ended September, 2011 showing an amount of Rs. 48.00 Crores as utilized for Working Capital, is false. The 1st Respondent Company has completely misled the investors and the regulatory authorities like Stock Exchanges and others by falsely representing that the IPO proceeds had been completely utilized to simply escape from further reporting on the actual utilization of the IPO proceeds over a period of time as required under the Listing Agreement thereby is committing a serious violation of the Listing Agreement. 52. The Company being a liquor manufacturing company is operating as a finance company since its IPO, and using the IPO proceeds for the benefit of related entities of the Respondent No.2, which is not in compliance with the main objects of the 1st Respondent Company as stated und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her C.P filed by the Respondent Nos. 1 and 2. Mr. Anil Agrawal appears to be the guilty of cheating and fraud for having breached the trust and diverted a sum of Rs. 29 Crores from the IPO to his associates and group companies. In this connection a Civil Suit in OS. No. 103 of 2013 is pending before the Second Additional District Judge, Ranga Reddy District, AP., wherein a prayer is made to declare the MoUs as null and void. The 1st Respondent Company has also filed a Petition under Section 111A r/w 111(4) of the Act before this Bench in the matter of LIL which is stated to be pending. It appears that out of Rs. 73.60 Crores of IPO funds as on 31.03.2011, Rs. 39.35 Crores remains to be utilized leaving a balance of Rs. 34.25 Crores, out of which it is alleged that Mr. Anil Agrawal has swindled/transferred Rs. 29 Crores by way of transfer to his associate companies. 55. From the facts mentioned above, it has become clear that both, the 1st Petitioner and the respondents have allegedly diverted the funds of the 1st Respondent Company to their associates and companies and matters are pending before the different judicial forums. Thus, there exist the circumstances which prima facie s ..... 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