TMI Blog2015 (4) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... d transaction of 2008 appearing in the balance-sheet of the Respondent No. 1 Company and in my judgment, this is not a sufficient ground to warrant an order for investigation into the affairs of the Company. Further, taking into consideration the most pertinent fact that the Respondent No. 4 has not come forward to file its reply, nor rebutted the fact of having received back the amount-in-question, it is established that the Respondent No. 1 Company has paid back the amount to the Respondent No. 4 as shown in its Books of Accounts - It has been held in various decisions that the powers conferred on the CLB under Section 237 of the Act are ought to be exercised carefully on proper facts and circumstances considering its far-reaching consequences. Therefore, no case as alleged by the Petitioner, is made out. There are no merits in the petition - petition dismissed. - C.P. No. 43 of 2014 - - - Dated:- 8-4-2015 - Ashok Kumar Tripathi, Member (J) For Appellant: Zal Andhyarujina, Kunal Dwarkadas and Mahika Parikh, Advocates, i/b., Dave Girish Co. For Respondents: Farhan Dubash, Nafisa Khandeparkar and Malvika Kalra, Advocates, i/b., ALMT Legal JUDGMENT As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent No. 5 was to generate funds and facilitate the recovery of the previous loans advanced by Dallah Albaraka Investment Company Limited (DAICO), a sister/associate company of the Petitioner and subsidiary of Dallah Albaraka (UK) Limited to Constellation Shipping (Bahamas) Limited (hereinafter referred to as Constellation for short), which was owned by one late Capt. Mehernoosh R. Khajotia, who is father of the Respondent No. 2 and husband of the Respondent No. 3 (hereinafter referred to as the Khajotia Family ). 2.5 It is stated that in or around 1994, the DAICO financed the acquisition of five marine shipping vessels by Constellation , a shipping company, owned by late Capt. Mehernoosh R. Khajotia, In order to repay the loans advanced to Constellation by DAICO, in or about early 2000, said late Capt. Mehernoosh Khajotia approached DAICO with a scheme/proposal for the repayment of the outstanding amount of US Dollars 2,595,826.75 due and payable to DAICO. By the said proposal late Capt. Khajotia asked DAICO whether it would be interested in assisting him to acquire further vessels. He further said this would be a profitable venture and would also accelerate the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent Nos. 2 3, Mr. Arish M. Khajotia and Mr. Tamineh M. Khajotia filed by DAICO, when the Advocates of DAICO made an attempt to hand deliver a communication dated May 9, 2014 to the licensee of one of the properties being subject matter of said proceedings, the same came to be accepted by the Respondent No. 3 on behalf of that licensee at a completely different address, namely, 15G, Raheja Centre, 214, Free Press Journal Road, Nariman Point, Mumbai-400 021 (hereinafter referred to as the said premises in short). It is stated that the aforesaid conduct of the Respondent No. 3 of accepting the communication on behalf of that licensee and having regard to the past conduct of the Respondent Nos. 2 and 3 of intermeddling with the estate of late Capt. Mehernoosh Khajotia, gave rise to a suspicion and led to some inquiries in connection with the ownership of the said premises. The Petitioner also learnt that the Respondent No. 1 Company has been operating from the said premises. 2.12 It is further stated that as a part of the said inquiry, the Petitioner took search of the record of the Registrar of Companies with respect to the Respondent No. 1 Company and gathered copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsecured loan was shown to the credit of and as owed to the Respondent Nos. 2 and 3 instead of the Respondent No. 4, who was the original lender in the year 2008 as reflected in the balance-sheet of that year. (g) That in the balance-sheet of the subsequent years, though the office premises acquired by the Respondent No. 1 Company from the said unsecured loan advanced by the Respondent No. 4 continue to remain on the books, there is no amount shown outstanding to the Respondent No. 4. Further, in fact, there is no mention of the Respondent No. 4 in the subsequent balance-sheets and Annual Accounts of the Respondent No. 1 Company. (h) That the balance-sheet of the Respondent No. 1 Company for the year ended 31/3/2011 shows that this time a sum of ₹ 25.17 Lacs has been taken by the Respondent No. 1 Company as an unsecured loan from the Respondent No. 5, which also, according to the Petitioner, has never been repaid to the Respondent No. 5. 2.14 In addition to the above, the Petitioner has also discovered that the Respondent No. 1 Company has been set up solely for the purposes of diverting the funds from the Respondent Nos. 4 and 5 into the Respondent No. 1 Company an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent No. 4, the books of account of the Respondent No. 1 Company subsequently has substituted the Respondent Nos. 2 and 3 as creditors. In place and instead of the Respondent No. 4 for the said loan, and this act demonstrates the fraudulent intent of the Respondent Nos. 2 and 3 to deprive the Respondent No. 4 of its loan amount, and thus the Respondent Nos. 2 and 3 have clearly acted in breach of their fiduciary duties by adopting the aforesaid device and strategy. 2.18 That the Respondent Nos. 2 and 3 continued to take away moneys from the Respondent Nos. 4 and 5 at a time when each of them had knowledge that there was no real prospect of the Petitioner or any of its associate companies being repaid as the monies were surreptitiously being siphoned off into the Respondent No. 1 Company and other entities thereby leading to a reasonable and proper inference that the Respondent No. 1 Company is carrying on business with Intent to defraud and divert the funds for their own benefit. 2.19 That the Respondent Nos. 2 and 3, being Directors in the Respondent Nos. 4 and 5, owed a fiduciary duty to the shareholders and the creditors, including the Petitioner, and ought to have ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istrar of Companies, Mumbai not to take on record any of the documents pertaining to change in shareholding pattern of the Respondent No. 1 Company. (h) To pass an order thereby superseding the Board of Directors of the Respondent No. 1 Company and to appoint an administrator until the investigation is complete. (i) To pass necessary orders in respect of matters provided under Sec.250 of the Companies Act, 1956 as well as to prevent misapplication of funds/fixed and movable assets/permissions and privileges of the Respondent No. 1 Company. 4. Pursuant to the notice, the Respondent Nos. 1 to 5 appeared and filed their Reply on 8/12/2014. In their reply, these Respondents have denied all the allegations made by the Petitioner against them. 5. In the Reply, the Respondents have assailed the maintainability of the petition as a preliminary objection. On merits, they denied all the charges levelled by the Petitioner and sought dismissal of the petition contending that no case for passing an order to the Central Government to appoint an Inspector for investigation into affairs of the Company is made out as contemplated in Section 237(b) of the Act. 6. In rebuttal of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an investigation into the affairs of the company . 10. On the other side, the Ld. Counsel appearing for the Petitioner contended that the Petitioner, being 50% shareholder of the Respondent No. 4 Company, who had advanced the loan to the Respondent No. 1 Company, is the person/entity aggrieved within the definition envisaged in Section 237(b)(i) of the Act, and It is, therefore, entitled to file the present petition. The Ld. Counsel further submitted that the Respondents have failed to produce any documentary proof to show that the admitted outstanding loan amount of ₹ 1.35 Crores has been repaid to the Respondent No. 4 Company, as sought to be contended by the Respondent No. 1 Company. It is, therefore, argued that the Petitioner, being 50% shareholder in the Respondent No. 4 Company, is not only a party entitled to bring this petition under Section 237(b) of the Act, but it has succeeded to prove a case in its favour for investigation into the company's affairs as contemplated in the said provisions. 11. I have considered the rival submissions and I find enough force in the submissions of the Respondents. First, I would like to extract the relevant provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a reliable proof, and therefore, the Petitioner is a party aggrieved in terms of the provisions of Section 237(b)(i) of the Act to bring this petition. In my opinion, for the reasons stated hereinabove, the Petitioner is not entitled to file the present petition. 13. On behalf of the Respondents, another preliminary objection raised is that the petition suffers from inordinate and unexplained delay and laches. According to the Ld. Counsel for the Respondents, the allegations made by the Petitioner pertain to the year 2008 and the petition came to be filed in July, 2014, The Ld. Counsel submitted that the petitioner has not averred even a word with respect to the delay caused in filing the petition or not even tried to explain the delay caused in filing the petition. It is, therefore, submitted that the petition deserves to be dismissed on account of unexplained delay and laches on the part of the Petitioner in filing the present petition. 14. I have considered the above submissions on behalf of the Respondents. In my opinion, this submission too has substance. There is apparent delay in filing the petition, which has not been explained by the petitioner. It is a set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectors to investigate the affairs of a company if the company, by a special resolution, or the court, by order declares that such investigation is necessary. Similarly, this may be done if in the opinion of the Company Law Board there are circumstances suggesting that the business of the company is being conducted with the intent to defraud its creditors, member or any other person or otherwise for a fraudulent or unlawful purpose or in a manner oppressive of any of its members or that the company was formed for any fraudulent or unlawful purpose. The Company Law Board may also come to a conclusion that there are circumstances suggesting that the persons concerned in the formation of the company or management of its affairs have been guilty of fraud, misfeasance or other misconduct towards the company or any of its members; or that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect. In these circumstances, on the basis of the opinion so framed by the Company Law Board, the Central Government may order an investigation. Neither the Central Government nor the Company Law Board has been moved by the first r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived back the amount-in-question, it is established that the Respondent No. 1 Company has paid back the amount to the Respondent No. 4 as shown in its Books of Accounts. It has been held in various decisions that the powers conferred on the CLB under Section 237 of the Act are ought to be exercised carefully on proper facts and circumstances considering its far-reaching consequences. Therefore, in my view, no case as alleged by the Petitioner, is made out. 18. I have also gone through the decisions cited by the Petitioner's Counsel. In my opinion, the facts and circumstances in the cited cases were different than that of the case in hand. Therefore, the decisions referred to by the Petitioner are of no help. 19. For the reasons discussed herein above, I do not find any merit in the petition. The same, therefore, deserves to be dismissed. The order is as follows. ORDER (i) C.P. No. 43 of 2014 stands dismissed. (ii) No order as to costs. (iii) Interim order, if any, stands vacated. Pending C.A., if any, stands disposed of. (iv) Copy of the judgment be issued to the parties. Manupatra Information Solutions Pvt. Ltd. - - TaxTMI - TMITax - Corporate ..... 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