TMI Blog2018 (9) TMI 1979X X X X Extracts X X X X X X X X Extracts X X X X ..... y the two directors of SBF, being its only two directors and the assets Of SBF, it is evident, have also been stripped off. Thus, SBF has become a complete farce. It is also seen that public interest will Only be best served by SBF being wound up as even otherwise due to non-filing of annual retums and balance sheets, SBF in any case is liable to be struck Off, as the pending proceedings before this Tribunal cannot be factor for not filing the annual retums and balance sheets and thereby the Statutory compliances, all of which goes to the root Of corporate governance, Thus, in any which way looked at, SBF is a fit candidate to be wound up taking into consideration the noted factors. This Tribunal is Of the considered view that in relation to the affairs Of SBF there has been a absolute lack of probity in its dealings by both the petitioners and hence SBF is required to be wound up taking into consideration the facts and circumstances of the two company petitions filed by the rival panies to the lis and also having come to the conclusion that both the parties are not entitled to any reliefs as sought for in the respective petitions - this Tribunal has been empowered to wind up co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those persons whose names are approved by Board. b. No invitation cannot be issued to public 5. PG claims that he discovered on and 01.03.2008 from inspection on MCA portal that LA has sought to convert unsecured loan Of ₹ 73.35 lacs into share capital. The said loans had been advanced to SBF by the LA group. PG claims that the following allotments have been made: Date of Allotment Name of Allottee No. of equity shares allotted 17.12.2007 Satish Chand 50,000 17.12.2007 Santokh Singh (Khatter Export) 30,000 17.12.2007 Jas-winder Singh (Khatter Export) 30,000 17.12.2007 Ialit Aggarwal 47,500 17.12.2007 Ialit Aggarwal 45.500 17.12.2007 Seema Aggarwal 13,750 28.12.2007 Ramesh Nath Mehra (Kankisha export) 1,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Rupees In favour of 139478 2 lacs Self 139479 3 Iacs Self 139481 5 Iacs Rexona (unconnected party) 139482 4 lacs Rexona 139457 15 lacs BSL 139458 15 lacs BSL (when confronted by PG, R2 remitted a sum of ₹ 25 lacs Company's account but rest ₹ 5 out of Rs. to the Iacs 30 lakhs were not returned 139459 and 139460 5 Iacs each BSL 8. Further, the petition states that the Company had a term loan of ₹ 275 lacs and OCC of ₹ 85 lacs sanctioned by Canara Bank in February 2005 and the limits were enhanced to ₹ 200 Iacs for OCC and 225.75 Iacs for term loan in January 2008. Amongst the collaterals to be fumished to Canara Bank, was Plot No, 594 at Piiakhwa, Ghaziabad owned by BSL Build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no way prejudicial to the interests cf PG or SBF. Further, LA states that no board meetings have been held in SBF till date, not even for the earlier allotments of shares to PG and his group and thus, similarly, no board meeting was held for the concerned allotments to the group. 14.LA also claims that the digital signature Of PG was with PG himself and he had placed the same on the Form 2 and also claims that the earlier forms filed for allotment of shares were filed physically and thus, required PG's physical signature. 15.Further, LA states that Santokh Singh and Jaswinder Singh are proprietors of Khatter Exports whereas Ramesh Nath Mehra is the proprietor of Kanishka Exports and that the money for allotment was received before 31.03.2017. however, PG has only annexed bank account statements Of SBF from 01.12.2007 to 14.12.2007. 16. Regarding the withdrawal of money through cheques, LA states that ch. No. 139478 for ₹ 2 lakhs and ch.No. 139479 for ₹ 3 lacs were issued on PG's instructions for SBF'S business purpose ag PG was out oftown at that time. The cheques 139481 for RSS lakhs and 139482 for ₹ 4 lakhs for Rexona were issued as advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PG, contrary to what has been claimed by LA in his reply. Fulther, from all the collaterals furnished to Canara Bank, almost 70% Of the collaterals and guarantees was that of PG' s group. 23.PG states that LA has admitted in his reply that no board meeting ever took place in SBF and that no boalli resolution was passed in favour of the allotment of the shares. Thus, by the own admission Of LA the allotment was illegal. Another discrepancy which PG has pointed Out in the rejoinder regarding the allotment Of shares is that the Form 2 uploaded On the MCA portal indicates that the shares have been allotted against cash however no cash was received by SBF and no cash transactions have been recorded in the books of accounts for the same; on the contrary, the unsecured loan lying with the company has been converted for allotment Of the shares. Further, PG also states that Mrs. Seema Agarwal, wife Of LA, has stated on affidavit that she had never provided consent for allotment Of shares in return for conversion Of unsecured loans. 24. PG questions that if LA did not approve the enhancement Of OCC by Canara Bank then why did LA proceeded to withdraw huge sums of money even after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition are also false, fabricated and baseless and should be dismissed qua R3. 29. PG in his reply has stated that R3 has hidden the fact that a charge sheet has been filed against R3 and investigation is also pending in relation to charges of connivance and fabrication levelled against him. PG, relying on the charge sheet has tried to substantiate the allegations against R3 and has claimed that R3 has hidden the fact of the criminal proceedings pending against him from the Tribunal because R3 is aware that he will be eventually convicted in the criminal proceedings. C.P. 47/2008 Petition 30.The second C.P. NO. 47 of 2008 has been filed under the Sections 397 and 398 Of the Companies Act, 1956 by LA, who is the second respondent in the first petition C.P. 15/2008, along with Seema Aggarwal, LA's wife and Lalit Aggarwal HUF against PG, the only other director of SBF, Ritesh Goyal son of R2, Udit Goyal son of RI, Ruchi Goya! wife of R2, Chief Manager of Canara Bank, Mayur Vihar Branch ( IV') and Chairman/Managing Director of Canara Bamk (RI ). The second petitioner Seema Aggarwal was deleted as a party to the petition by the CLB as a consequence to an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laims that PG has pocketed the above sums causing serious loss not only to the SBF but also to the stakeholders including LA. An analysis Of the power bills for the period 2007-08 indicates that average rate per Limit is ₹ 3.79 per unit as was projected by SBF and the said average rate per unit has been used for calculating the 'ought to be actual turnover' as against purported/reflected actual turnover . d. In October 2007 LA wrote to R6 for making the Oration of the bank account Of SBF jointly in place Of several signatures Of LA and PG. However, R6 rejected the request Of LA stating that it has to be accompanied by a board resolution. LA states that though R6 rejected LA's request for joint operation on the pretext of unavailability of board resolution, R6 sanctioned the enhancement of the cash credit limit without asking for a board resolution to that effect. Reply: 32.PG has filed his reply and has made the same averments as found in C.P. 15/2008. The grounds/explanations taken in the present reply which are raised for the first time herein are as follows: a. enquired about the affairs Of SBF only for about the first Six months but neither enq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to simplify matters, it was not a practice to take down the minutes of the meetings Of Board Of Directors. All resolutions used to be passed after lengthy and detailed discussions between the two directors. It has also been stated that being a director of SBF, it is also the responsibility of LA to ensure that the statutory meetings are convened at the appropriate time, in compliance with the law. Thus, the aforesaid conduct of LA shows the lack of interest of LA in the affairs of SBF. e. Further, PG states that Canara Bank enhanced the working capital only at the behest of both directors since both the directors approached the bank together for the enhancement. f. PG states that on 24.07.2008 the Company Law Board had directed the convening of a board meeting within 15 days and agenda for the board meeting to be given within a week. Pursuant to the said order, an attempt was made to conduct board meetings on ()4.08.2008 which was reconvened for 21.08.2008. On 21.08.2008, LA and the Company Secretary accompanying him resorted to rude, obnoxious and unprofessional conduct towards PG and his advocates. PG's advocates were thus compelled to write a letter of complaint da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013 to the extent that a comprehensive audit Of the accounts Of SBF may be undertaken by the chartered accountant appointed by CLB from the year 2007-08 to 2012-13. However, the auditor appointed resigned for various reasons and another auditor kapoor S. Jain Co. vide order dated 30.08.2013 was appointed by the Hon'ble High Court The auditor so appointed contacted PG for relevant documents to carry out the audit but were not supplied with any documents. The Hon'ble High Court took note of this fact in its order dated 09.1-2013 and imposed costs of₹ 25,000t- On the respondents. 35.Another application CA 18/2013 was filed by LA for appointment Of administrator of SBF and thus, the CLB appointed Mr. Rakesh Chandra as the administrator of SBF vide order dated 30.01.2014 for monitoring and coordinating the date to day working Of SBF. On 24.032014 the administrator Rakesh Chandra filed his report before the CLB, in which, after noting the violation of various provisions of the Companies Act 1956 the administrator requested CLB to discharge him from the post Of administrator as he was unable to discharge the duties in view of the lack Of documents or any records Of SBF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ator. The administrator Mr. Justice Anil Kumar resigned from his post on 29.02.2016. 38.Certain more additional documents have been filed by LA which show the dubious workings carried out in relation to SBF. The Registrar Of Companies ( Roe) issued a show cause notice dated 03.10.2013 to SBF, PG and LA stating that registered office has been stated to be at 3/56, Ram Gali, Pandav Nagar. Shahdara, Delhi - 32 but SBF is in default for not maintaining its registered office at the Shahdara address, as the letter sent to SBF's registered office is returned back to the ROC office. Delhi with the remark 'Left without Address' and for violating Section 146 of Companies Act 1956. 39.Amongst the various Orders passed against SBF and its officers by various authorities, an order dated 2003.2013 passed by the Office of Commissioner, Customs, Central Excise Commissionerate has found that during the year 2008 SBF and its officers were involved in claiming CENVAT credit on invoices against goods,haw materials which were not actually, received by SBF and thus, imposed a demand Of ₹ 35,74, 199/- and further interest and penalty on SBF. 40. PG has filed his written submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? i. Whether the enhancement of the cash credit limit from 85 !acs to 200 lacs by Canara Bank if frvour Of RI was in violation Of specified procedure? First Issue 43.1n view Of allegations of grave nature being made by each Of the petitioner's primarily against the Other in the respective petitions in relation to the affairs Of the respondent company, for deciding the first issue it is necessary to discuss the principle of equity that the person who seeks equity must come with clean hands and its application in cases of oppression and mismanagement. 44. The Hon'ble Supreme Court in Sangramsinh P. Gaekwad Ors. vs. Shantidevi P. Gaekwad (Dead) through LRs Ors. , while discussing the nature of reliefs that can be granted in the case, stated as follows: 204. The Court may also refuse to grant relief where the petitioner does not come to court with clean hands which may lead to a conclusion that the harm inflicted upon him was not unfair and that the relief granted should be restricted. (See Re London School Of Electronics, [1986) Ch. 2/ 1 45. The Hon'ble High Court of Bombay in bdul Wahid Abdul Gaffor Khatri Ors. vs. Safe Heights Developers Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfied that the petitioner 's earlier conduct borders on recklessness as he is prepared to disown his own obligations, his own documents for the sake of obtaining some advantage against his adversary. so, such a person should not be entitled to the reliefs under sections 397 and 398 ofthe Act. 47. The Hon'ble National Company Law Appellate Tribunal in Surgi Aid Lifecase p. Ltd. Ors. vs Rahu/dev Vyas, overruled the order Of the NCLT in which the NCLT had granted relief 10 the petitioner even when it was apparent that the petitioner had not approached NCLT with clean hands. 9. From the above, it is clear that the learned National Company Law Tribunal could see from the record that the original petitioner was not with Clean hands. Rather, the last paragraph Of the impugned Order shows that the National Company Law Tribunal was not in a position to give a finding on noppression and mismanagement but strained itself to pass orders for setting aside appointment of respondent No. 3 and cancelled the allotment of shares On December 26, 2016 (which development had occurred pending the company petition). When it is on record that the petitioner himself opted not to oversee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief The maxim may be invoked where the conduct complained of is unfair and unjust in relation to the subject-matter Of the litigation and the equity sued for. The CLB would do well to consider the severity Ofthe allegations of oppressive conduct and the prejudice caused to the petitioner vis-a- vis the respondents since the primary purpose Of the remedy provided by the sections 397 and 398 is to protect minority shareholder from the oppressive Conduct Of the majority shareholder. If a person acts in a manner prejudicial to the interest Of the company as well as the shareholders acting in violation Of mutual trust and coqfidence his conduct would be that of a person who has not come to the court with clean hands. The affairs of a comgxzny Can be conducted oppressively by the directors doing nothing to defend its interest when they Ought to do something just as they can conduct its affairs oppressively by doing something injurious to its interests when they ought not to do 49. The petitioners in both as evidenced from the facts have not approached the Tribunal with clean hands and have not only suppressed vital facts but are also responsible for acts which have caused grave preju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itable in relation to SBF and its shareholders including the petitioners Of the respective petitions. Both the petitioners Of the respective petitions do not have the right to relief under the equitable jurisdiction Of this Tribunal in view Of their prejudicial conduct, which can be ascertained by the subsequent developments in the matter thus being guilty either according to their own admission or in view Of their conduct before judicial authorites. 52.At the cost of repetition, PG, the petitioner in C.P. 15/2008, has avoided furnishing the documents Of SBF at even' tum, then claimed that all documents were accidentally destroyed and failed to reconstruct the documents even after undertaking the task of reconstruction, giving rise to the presumption that PG has an ulterior motive in not furnishing the documents of SBF for inspection/audit. Further, it appears PG has hoodwinked this Tribunal as Weil as the ROC with regard to the maintenance Of the registered office of SBF. mm the various Orders placed on record it also appears that PG has handled SBF's affairs in a dishonest manner. Thus, PG does not deserve the grant of any reliefs from this Tribunal and his petition is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up, which also include certain criminal proceedings. The CLB vide its order dated 18.11.201S directed the ROC, NCT Of Delhi and Haryana, on the basis of the repott filed by the first administrator Of SBF, Rakesh Chandra, in which it was stated that SBF is responsible for violation of multiple provisions Of the Companies Act, 1956. It appears from letter dated 16.062016 Of the ROC addressed to LA that the matter is under process. However, no futther information is available in relation to these proceedings. 56.Keeping in mind all the facts and circumstances of the present matter it is evident that there exists a ground for winding up SBF on the grounds that it is just and equitable to do so. The only question confronting the Tribunal is whether by such an action the shareholder of SBF wili be unfairly prejudiced Or the public interest will be prejudiced. This Tribunal is of the considered view that neither will be prejudiced, as it is seen that the SBF has no operations Or business over the past several years because Of the inter-se disputes between the main protagonists, namely the two directors of SBF, being its only two directors and the assets Of SBF, it is evident, have also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. Further more the lack Of confidence must spring not from dissatisfaction at being Out voted on the business affairs or on what is called the domestic policy Of the company. On the Other hand whenever the lack of confidence is rested on a lack of probity in the conduct Of the company's affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound up. 58. Thus, this Tribunal is Of the considered view that in relation to the affairs Of SBF there has been a absolute lack of probity in its dealings by both the petitioners and hence SBF is required to be wound up taking into consideration the facts and circumstances of the two company petitions filed by the rival panies to the lis and also having come to the conclusion that both the parties are not entitled to any reliefs as sought for in the respective petitions. 59. In consonance with the above decision and from this Tribunal has been empowered to wind up companies by virtue of Section 271 and 272 Of the Act having been notified as amended by Insolvency and Bankruptcy Code, 2016 and on the grounds that it is just and equitable to do so, orders winding u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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