TMI Blog2020 (2) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... l requirements and most the of transactions were being carried out in cash and the Inspectors were helpless in verifying such transactions in absence of any cash book, accounting legers etc. - as per Section 223 Companies Act, 2013 the report submitted by any inspector appointed by the Central Government, shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report. Admittedly since inception, Respondent No.1 has been the Managing Director of the Company and no return has been filed till 2001. No records were maintained for AGM, Board Meeting, financial statement etc and lot of transactions has been taking place in cash only. Therefore, he cannot escape his responsibility for not running the company as per requirements of law - The annual returns filed by the appellant subsequently after they had been in control has been rejected in the impugned order. The consequence is that there is no annual return/financial statements since inception. This compliance needs to be ensured within three months from the date of this order. Inspite of present orders, ROC will be free to take any steps punitive or otherwise under the Companies Act, 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of company. The original 1st Petitioner was constrained to pump investment from 25 investors to a total extent of ₹ 12,45,000/- as share application money. 4. It is stated that the total cost expended in purchasing the lands of the company is ₹ 16,05,719/-. As the company could not succeed in launching the business activity, original 2nd and 3rd Respondent failed to bring further investment, the Respondent company became finally crippled, the company failed to return the money on which the original 1st petitioner constrained to pay back ₹ 4,20,000/- part of the company liability through his personal account as well as by borrowing from friends. It is stated that the borrowers who were unpaid, filed civil and criminal cases against Company and original 1st petitioner was defending long drawn legal battles by incurring expenditure personally whereas the original 2nd and 3rd Respondent remained silent and did not cooperate with original 1st petitioner. It is stated that the original 1st petitioner underwent number of civil and criminal cases and was also convicted in six criminal cases on behalf of Company and underwent imprisonment for 9 months and also r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per Articles of Association three directors namely original 1st petitioner and original Respondent No.2 and 3. It is stated that the Mr. APBS Sastry was the auditor of the company from the year 1994 to 2006. No Board Meeting and general Meeting were held in accordance with law during the tenure of original 1st petitioner as a Director of the Company alongwith original Respondent NO.2 and 3. It is stated that original 1st petitioner resigned from the Board in 2001 and made complaint before the ROC and RD, Hyderabad in the 2003. 7. Original Respondent No.11 (SFIO) filed its reply before the NCLT and stated that Respondent Company was not functioning as per the provisions of Companies Act, 1956 right from the beginning and promoter director especially Mr. B. Manpal Reddy was compelled to arrange funds through borrowings initially by way of Share Application Money (later converted to loans) with meagre finance available with the company. Respondent company was left with no working capital to run its operations and promoter directors did not maintain any records or documents including the accounting records in compliance of the regulatory and legal requirements. Most of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors and return all investments made by 1st respondent in the company. It is stated that in these process, 1st appellant asked 4th and 5th Respondent to sign several documents including a blank Form 32 and also informed that the company is required to file the annual returns and balance sheets to regularise the company and for bringing in their investments into the company. It is stated that the balance sheets were prepared by the Chartered Accountant and believing the words of 1st appellant, 4th and 5th Respondent signed these documents without verifying the contents of the said documents. It is stated that in October, 2003 , 4th and 5th Respondent received notice from ROC alongwith complaint filed by 1st respondent asking 4th and 5th Respondent to give parawise reply, they came to know about the contents of the annual returns and balance sheets for the years 1994-95 to 1999-2003. It is stated that 4th and 5th Respondent acted in good faith and in the interest of the company and without any ill motive. It is stated that the appellants never brought any amount in the company. It is stated that appellants in collusion with the Chartered Accountant filed Form No.2 one on 16.4.2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no evidence at all of any investment having been made by the appellants. It is stated that it is baseless to contend that the impugned order is entirely based on the SFIO s report. 9. After hearing the parties, NCLT passed the following order:- k) Considering the precarious position of the company and various litigations, criminal cases filed against director(s) of the Company etc considerable time spent by Investigating Agencies, SFIO and other agencies, to send a signal to the parties to avoid misuse of various authorities/functionaries, misappropriation, fraudulent action, non complying with various provisions of the Companies Act, not conducting Board Meetings, AGM s not finalising the Annual Returns/Balance Sheet etc the Bench inclined to levy a cost of ₹ 2,00,000/- (Rupees Two lakhs only)on each on the Respondents 1 to 8 and the same has to be remitted to the Prime Minister s Relief Fund within 3 weeks from the date of receipt of a copy of this order and report compliance of the same to the Registry, NCLT. 11. Being aggrieved by the impugned order the appellants have preferred this appeal. 12. Appellant stated that the Tribunal has deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013. 23. Appellant stated that the shareholding showing the appellants shareholding, including the allotments made on 28.3.1995 and 30.03.1998 were duly depicted in the statutory filings undertaken after the appellants came into the management. Respondent No.1 did not file any statutory returns during the years 1995 and 1998 when he was managing the Respondent No.3 company. 24. Appellant stated that the Respondent No.1 resigned and scribed an MOU sought to renege from the whole arrangement, with an objective to regain the entire shareholding and management of Respondent No.3 company. 25. Appellants stated that the SFIO grossly erred in holding that the appellants have misappropriate the funds resulting from the sale of 4.30 acres land and the direction of the NCLT to appellants to deposit ₹ 32 lakh with an interest of 12% per annum is completely erroneous and incorrect. 26. Appellant stated that the company petition filed by the Respondent No.1 is hopelessly barred by delay and laches. Respondent No.1 cam to know about the entire circumstances of events as early as 2003 and the other allegations pertaining to the sale of company s land also occurred in 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. As part of this arrangement Respondent No.1 resigned as director of the company on 29.11.2001 and handed over the resignation letter to Respondent No.4. It is stated that Appellant and Respondent No.4 and 5 in connivance with one Chartered Accountant filed Balance Sheets and Annual Returns forms on 2.5.2003 for the financial years 1994-95 to 1999-2000 without the knowledge of Respondent No.1. The appellants also filed one Form 32 on 7.10.2002 for appointment of the appellants herein as the directors and the removal of Respondent No1 as the director of the company without approval of the Board. 32. Respondent No.1 stated that he made a complaint on 8.9.2003 to the ROC and Regional Director about the removal of Respondent No.1 as director and appointment of Appellant as director, fraudulent allotment of shares to Respondents No.2 to 8, falsification of accounts of the company and filing of false Balance Sheets. The appellants failed to submit the relevant information, despite several notices by the ROC seeking explanation. It is further stated that without any approval from the members of the Company, the Appellants sold away the admeasuring Acre 4.20 guntas situate in Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal) directed the Central Government to investigate into the affairs of the company. The investigation was done and the report stated that right from the incorporation the affairs of the company were not running as enshrined in the provisions of the Companies Act but was running like a fiefdom of the promoter directors. No record is maintained, including the books of accounts, to comply with the regulatory and legal requirements and most the of transactions were being carried out in cash and the Inspectors were helpless in verifying such transactions in absence of any cash book, accounting legers etc. 38. We also note that as per Section 223 Companies Act, 2013 the report submitted by any inspector appointed by the Central Government, shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report. 39. We note that the balance sheet and annual returns for the years 1994- 95 to 1999-2000 were not filed in time and the same were filed by later on in 2003. We also note that no Board Meetings was conducted and Annual Return were not finalised in AGMs. This position has been admitted and it is also admitted that no record for the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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