TMI Blog2020 (10) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... f discretion by this Court not to interfere with the High Court judgment. The impugned judgment of the High Court is fair to both sides and safeguards the interest of the directors and shareholders; hence there is no valid ground to interfere under Article 136 of the Constitution of India. It is true that there is status-quo order passed by the CLB as well as Civil Court with regard to the assets of the Company. Therefore, 1st Applicant Company cannot sell any of its assets to discharge the debt due to the lenders. The only way to discharge the debt of the Creditors is to raise additional capital by issuing shares to the existing shareholders and for which purpose the order dated 07.12.2006 passed by the CLB directing the company to maintain status-quo with regard to shareholding pattern, is to be relaxed by permitting the 1st Applicant Company to go for rights issue according to the provisions of Section 62 of the Companies Act, 2013 - We are making it very clear that relaxation of order dated 07.12.2006 is for the limited purpose of raising additional capital by issuing additional shares for discharging the debt due to the creditors and after completing the process, the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g pattern vide order dated 07.12.2006. 6. It is stated owing to restrictions by way of above interim orders, the Company could not pledge its properties and raise working capital loans from banks and financial institutions for its day to day operations. As such the Company arranged funds from private resources by way of inter-corporate borrowings. The Applicant has shown turn over before inter-corporate loans and turn over after raising inter-corporate loans at para.5 of the application and further stated that the total outstanding intercorporate loans is ₹ 1,10,00,000/- payable to M/s. Image Dealcom Pvt Ltd and M/s. Rarefab Textiles Private Limited, who are now insisting for their loans to be repaid. According to the Applicants, it is pursuant to said borrowings the Company could make profits and was in a position to pay dividends in the past two years to the shareholders. The Corporate lenders are threatening the Applicant of enhancing the interest rate if full amount is not repaid to them. The communications exchanged between the above corporate lenders are marked as Annexure-4 (colly). 7. In order to sustain the operations, to safeguard the valuable assets of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company to raise any working capital loans for its operations by pledging its shares when the operations is shut down for about two decades. According to Respondents, no details have been furnished by the Applicants to substantiate its argument that company borrowed money from private sources. 14. Respondents stated that they filed CA No. 105/2005 for deciding the issue of fictitious Trading turnover and the Rights issue in the present Application deals with paying off debts of creditors for enabling the trading turnover. Hence prayed this Tribunal to dispose of CA 105/2005 first and then take up the present Application. 15. Respondents allege that Balance Sheet of the Company for the year ended 31.03.2019 shows there are fixed deposits worth ₹ 1,10,00,000/- which is being carried forward for many years and that there is no need for the Company to raise further capital for funds. 16. Respondents refute the claim made by the Applicants that the turnover increased from ₹ 1,18,860/- in the year 2010-11 to ₹ 2,01,84,449/- in the year 2011-12 and such an increase was possible only with inter-corporate borrowings from two companies i.e. M/s. Rarefab Textiles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st Applicant Company raised various inter-corporate loans from time to time to actively pursue its business operations due to which there was substantial increase in the turnover of the Company. Learned PCS would contend for the Financial Year 2009-10, the turnover was ₹ 83,350/- and in the year 2010-11 it was ₹ 1,18,860/-. 22. PCS would further contend that after availing intercorporate loans, the turnover of the Company continued to increase from year after year and for the year 2018-2019, the turnover was ₹ 14,51,45,724/-. PCS would contend that as on date, the inter-corporate outstanding loans is ₹ 1,10,00,000/- payable to M/s. Image Dealcom Private Limited and M/s. Rarefab Textiles Private Limited. The PCS would contend these lender Companies are insisting for repayment of their loans. PCS would contend that the Company is able to earn profits due to availing loans from above two Companies and 1st Applicant Company was able to pay dividend in the past two years. 23. PCS would contend that these lender companies are insisting for repayment and threatened to initiate action against the 1st Applicant Company in case it failed to repay the loans and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting an Auditor for doing valuation of the shares of 1st Applicant Company. However, the said order was appealed before Hon'ble NCLAT which was set aside and Hon'ble NCLAT directed mediation to be effected between the parties at the first instance and in case mediation fails, matter to be proceeded with. So, PCS would contend that order dated 22.02.2018 was set aside. PCS would further contend that Applicants are able to establish availing of loan from the two Corporate Lenders. PCS would contend that a memo was filed on 19.12.2019 enclosing ledger statements of the parties duly certified by the statutory Auditors of the Company. PCS would contend the loan availed from M/s. Image Dealcom Private Limited was grouped under Sundry Creditors till the Financial Year ending 31.03.2018 and the loan from M/s. Rare Fab Textiles Private Limited was grouped under unsecured loans till the Financial Year ending 31.03.2018. PCS would contend that Applicant has filed bank statements showing the receipt of payment from the Corporate Lenders. Thus, PCS contended that relevant material is placed before the Tribunal by the Applicants to establish that 1st Applicant Company availed loans from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Company has saved ₹ 8 lakhs. PCS has given details how the 1st Applicant is able to save ₹ 8 lakhs by pledging fixed deposit with the bank in the table given below- Financial Year Int. Recd on FD from Bank (Rs) Int. paid on OD to Bank (Rs.) Difference Income 2014-15 10,30,302.00 7,46,189.00 2,84,113-00 2015-16 9,56,972.00 6,44,244-00 3,12,728.00 2016-17 8,49,103.00 7,13,153.00 1,35,950.00 2017-18 7,17,011.00 6,12,198.00 1,04,813.00 Thus, the contention of the PCS that the funds of the Company was being judiciously utilized and further says how the company is saving money. PCS contended the Company has also earned interest over the fixed deposit. The interest earned was around ₹ 7.70 lakhs and interest paid on over draft was only ₹ 6.20 lakhs, thereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have been caused to them. It is not in dispute even by the petitioners that the need for more funds was an admitted position. In Needle Industries (supra) this Court has pointed out if there is a need for funds the fact that the directors have incidentally enriched themselves would not entail a court to set aside the issue of shares. In fact, no unfair prejudice has been caused to the petitioners. The CLB failed to take note of all these vital aspects and relied on irrelevant materials. Apart from these, it is pointed out that the company having turned the corner and doing well, it would be fair exercise of discretion by this Court not to interfere with the High Court judgment. In the light of the above discussion, we are of the view that the impugned judgment of the High Court is fair to both sides and safeguards the interest of the directors and shareholders; hence there is no valid ground to interfere under Article 136 of the Constitution of India. Consequently, the main appeal filed by V.S. Krishnan and Others fails and the same is dismissed. In view of the said conclusion, other appeals are also dismissed. No costs. 31. Further the Learned PCS also relied on para 28 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng pattern and the present application is filed in 2019 is therefore totally barred by limitation. The Counsel contended that there was no need to raise any working capital for its operations. No proof is filed with reference to the intercorporate loans. The Counsel contended that 1st Applicant Company shut down its business two decades ago and Company is defunct. The Counsel contended that 1st Applicant Company is showing fictitious 'trading' turnover in the Company's books. The Counsel contended the fictitious trading turnover is the subject matter of CA 105/2005 filed by the Respondents which is pending. Therefore, he requested the Tribunal to first take up CA 105 of 2005 at the first instance and then consider the present application. The counsel contended that as per balance sheet for the year ended 31.03.2019, 1st Applicant Company is having fixed deposit at ₹ 1,10,00,000/-. Counsel is contending that Applicants failed to show how turnover has been increasing year after year from 2011-12. The Counsel contended, the Directors of the corporate lenders are related to 2nd Applicant and demand is made for the first time by the alleged lenders only in 2019. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge the debts, otherwise the assets of the Company will be at risk. To protect the assets of the Company, it is necessary for the 1st Applicant Company to raise working capital by issuing additional shares. 35. We have seen the voluminous documentary evidence placed by the Applicants, not only in this Application but also in the counter filed in IA 1152 of 2019. There is sufficient proof filed by the Applicants that money was borrowed from the corporate lenders. It is true that the said money is to be discharged. The apprehension of the 1st Applicant Company is well founded that in any case the debt due to the Corporate Lenders are not paid there is every possibility, the lenders may take coercive action against 1st Applicant Company for recovery of their dues. The letter written to the 1st Applicant Company indicate the intention of the Lenders. Since, the order passed by the CLB is causing difficulty for the 1st Applicant Company to sell its assets to discharge the debt due to the lenders but the share capital of the Company can be enhanced, in which event all the shareholders are equally entitled to participate in the rights issue according to their shareholding under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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