TMI Blog2021 (10) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... ior counsel appearing for the applicant company with regard to conversion of some of the fixed deposits into shares and trading thereof, as the applicant failed to furnish the details of the fixed deposit receipts which were converted into equity shares and those equity shareholders who approached the company for refund of the fixed deposits and those equity shareholders who have not approached the company for refund of their original fixed deposits is unacceptable. There are no merits in the present application - application dismissed. - CA Nos. 785/2019 and 1207/2019 in CP No. 4/2005 - - - Dated:- 6-10-2021 - Ajay Kumar Vatsavayi, Member (J) And Raghu Nayyar, Member (T) For the Appearing Parties : Atul Nanda, Senior Advocate, Malvika Singh, Rameeza Hakeem and Alok Jain, Advocates ORDER Ajay Kumar Vatsavayi, Member (J) CA No. 785/2019 1. M/s. Morepen Laboratories Ltd. filed the instant CA seeking the following reliefs:- a) Modify the order dated 01.07.2005 to the extent that the appointment of two Government Directors/Government Nominee Directors is not necessary and is not required in light of the subsequent developments and events that have been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15% in the first year, 20% in the second year, 25% in the third year and balance 40% in the fourth year. The interest for both pre and post maturity period will be paid along with the last instalment. (v) All deposits of ₹ 50,001/- and above shall be paid within four years from the date of maturity at 10% in the first year, 15% in the second year, 35% in the third year and balance 40% in the fourth year. The interest for both pre and post maturity period will be paid along with the last instalment. (vi) The company shall issue post dated cheques for first instalment to all the depositors who have submitted/surrendered the original fixed deposit receipt, on demand by the company. (vii) The above scheme will be applicable to all depositors whether overdue or yet to mature and whether any application has been filed before the Company Law Board or not. (viii) The scheme shall be effective from the date of this order. 11. The company will adhere to the following guidelines in implementing the scheme:- i) While repaying the deposits as per the scheme above, all individual deposits will be treated as such and shall not be clubbed if any depositor holds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The company shall within three weeks, of release of this order send a copy of the operative portion of this order to all the depositors and at its discretion may also publish the same in leading newspapers. 15. A copy of this order shall be sent by the Bench Officer to the Secretary, Department of Company Affairs, New Delhi and I.P. Cell, Department of Company Affairs, New Delhi for information and necessary action. 16. A copy of this order shall be sent to the Registrar of Companies, Punjab, H.P. and Chandigarh at Jalandhar for taking necessary action in case of non-compliance of this order. Signed on this 19th day of August, 2003 at New Delhi. 5. When the applicant company failed to comply with the above referred scheme, the Union of India filed CP No. 4 of 2005 in terms of Section 408 read with Section 397/398 of the Companies Act, 1956, against the company before the CLB seeking for appointment of six Government Directors for a period of three years on the Board of M/s. Morepen Laboratories Ltd. on various grounds, more particularly, the failure of the company in repaying the public deposits. The CLB vide its order dated 01.07.2005 disposed of the said CP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors on the Board of the Company. It is appropriate to extract the certain portions of the observations made by this Board in that case: Therefore, we are of the view that in addition to whatever grounds the courts have held to justify appointment of Government directors, we may add that when the acts of directors/company have brought the affairs of a company to a stage wherein its existence is under threat due to financial difficulties, then such a situation would definitely be prejudicial to the interest of the company and its members satisfying the parameters of sections 408 and 398 During the last two years, after filing of these petitions and on our appointing two of our nominees on the Board, not only has there been transparency in the affairs of the company, there have been some checks and balances. Confidence building is the need of the day as far as this company is concerned. The company has proposed a scheme of arrangement to the Calcutta High Court and as per the scheme, the liabilities are to be discharged over a period of time. The company has also proposed certain measures of raising finance. For all these attempts to be successful, which would put the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se sections, is wither, a case has been made out to show that the affairs of a company are being conducted in a manner prejudicial to the interest of the company, shareholders or the public interest and one way of making out a case is showing that the state of affairs of a company on the date of presentation of the petition is such that the same is prejudicial to the interest of the company and that such state of affairs has been brought about by acts of commission and omission by the directors/company. Should the petitioners be in a position to show that such state has been brought about by acts of fraud, misfeasance of breach of trust, then of course, relief in drastic nature might be called for. Therefore, we are of the view that in addition to whatever grounds the courts have held to justify appointment of Government directors, we may add that when the acts of directors/company have brought the affairs of a company to a stage wherein its existence is under threat due to financial difficulties, then such a situation would definitely be prejudicial to the interests of the company and its members satisfying the parameters of sections 408 and 398. The said order of this Board was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. In our considered view the larger public interest must prevail and therefore this contention is rejected. We may also note that though no stay order was granted in the appeal filed by the Company, till date the Company has failed to accept the two Directors appointed by the Government has not even permitted the said Directors to attend a single meeting of the Board of Directors of the company. As far as the appeal of the Central Government is concerned, we are of the view that the purpose of Section 408 is to ensure that the Government Directors are appointed to act like a watch dogs to ensure that the affairs of the Company are run in a proper manner. Purpose of Section 408 is not to give majority vote to the Company but the purpose is only to ensure that the affairs of the Company are run properly. We are therefore not inclined to agree with the Central Government that six Directors should be appointed. Keeping in view the above discussion we find no error in the order of the CLB. Both the appeals are accordingly dismissed. Since the Company has failed to comply with the order of the CLB till date we direct that the Company shall hold a meeting of the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nally in CP No. 05 of 2004, the matter having been settled with the other creditors admittedly the same stands disposed of having been rendered infructuous. However, this order will not affect the allotment of the shares to the FD holders who have traded the shares to the third parties or transferred the allotted shares, for which it shall be the duty of the petitioner company to ascertain from the record of the stock exchanges and its own record. Even the d-mated shares which have still not been transferred by the original shareholders would stand cancelled as the 'Scheme' has been rejected. The petitioner company shall be bound to pay the outstanding amount as per scheme approved by the Company Law Board, to the original FD holders (except to those who have since traded/transferred) immediately, but positively within three months of the date of receipt of certified copy of this judgment under intimation to the Registrar of Companies, concerned. For non-compliance, the Registrar of Companies shall take further appropriate steps as per the provisions of law. 9. The Hon'ble NCLAT in Company Appeal No. 136 of 2018 by order dated 23.07.2019 upheld the aforesaid order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieu of their fixed deposits traded their shares in the market and thereby the shares were changed hands. After the Scheme of Arrangement was dismissed and after the applicant company was directed to repay the fixed deposits, the company repaid to those shareholders who responded to the advertisements issued by the company or on their own, after cancelling the corresponding share certificates submitted by them but there would be so many fixed deposit holders whose deposits were converted into shares and who traded their shares and who are not interested to cancel their shares and take back the value of their fixed deposit receipts, not approached the company for repayment. Hence, the company cannot be blamed for not repaying all the fixed deposits. 13. The learned senior counsel placed reliance on a judgment of the Hon'ble High Court of Judicature at Madras in Sterling Holiday and Resorts India Limited in CMA 3647 of 2005 dated 30.10.2012 reported in 2013-1-LW-596 in support of his submissions. 14. On the other hand, Mr. Alok Jain, the learned counsel appearing for the respondent-Union of India submits that the order dated 01.07.2005 in CP No. 4 of 2005 of the CLB has at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant company with regard to conversion of some of the fixed deposits into shares and trading thereof, as the applicant failed to furnish the details of the fixed deposit receipts which were converted into equity shares and those equity shareholders who approached the company for refund of the fixed deposits and those equity shareholders who have not approached the company for refund of their original fixed deposits is unacceptable. 17. As rightly pointed out by Mr. Alok Jain, the learned counsel appearing for the Union of India, the order in CP No. 4 of 2005 dated 01.07.2005 was upheld upto the Hon'ble Supreme Court of India and hence, this Tribunal, cannot modify or cancel the same. The observation of the Hon'ble Supreme Court of India while dismissing the civil appeals to the extent that it would be open for the appellant to agitate the subsequent events before the concerned forum cannot empower us to modify the order which was upheld by the Hon'ble Supreme Court of India. On the other hand, the observation that let the proceedings be concluded as far as possible within one year amounts to a direction for proper compliance of the order dated 01.07.2005 in CP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Supreme Court of India, however submits that the order dated 01.07.2005 of the CLB was finally merged with the orders of the Hon'ble Supreme Court of India dated 16.07.2017 and hence, the instant application filed under Section 425 of the Companies Act, 1956 seeking initiation of contempt proceedings against the respondents is not maintainable before this Tribunal. The learned senior counsel further submits that this is moreso when the order passed by the Hon'ble Supreme Court of India while upholding the orders of the CLB, was not in an SLP but on the other hand, it was in civil appeal. The learned senior counsel placed reliance on the following decisions in support of his submissions:- (i) Vitusah Oberoi and others v. Court of Its Own Motion, (2017) 2 SCC 314; (ii) Supreme Court Bar Association v. Union of India and Another, (1998) 4 SCC 409; and (iii) RP Vagehela v. State of Gujarat and others, 23. The submissions made by the learned senior counsel appearing for the respondent-contemnors are unsustainable. It is to be seen that the Hon'ble Apex Court while disposing of the Civil Appeal neither modified the orders of the NCLT/CLB nor issued ..... X X X X Extracts X X X X X X X X Extracts X X X X
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