TMI Blog2021 (11) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... ney received from the two Corporate Lenders was a genuine loan. The material on record evidences that there is a Status Quo Order passed by the III Additional Chief Judge, City Civil Court, Hyderabad in I.A. No.2371 of 2005 in OS No.328 of 2005, whereby and whereunder the City Civil Court restrained Company from alienating, transferring or encumbering the immovable property in any manner pending disposal of the Suit. The Company Law Board vide Order dated 14.07.2006 directed the Company to maintain Status Quo in regard to the immovable properties held in the name of the Company, until further Orders. The inter-corporate loans were genuine and observe that if the debt due is not paid, there was a possibility that the Lenders could have taken coercive action for the recovery of their dues, the prayer sought for by the Respondents seeking Additional Capital by going for Rights Issue, is justified. When there is a need for funds and there is a Status Quo Order restraining the Company from sale of any immovable property, the direction given by NCLT to allow the Respondent Company to raise Additional Capital by issuing Additional Shares for discharging the debt due to the Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the Company and also in the interest of the shareholders. The request of the Applicant to raise Additional Capital by going for rights issue which is justified. Sufficient foundation is laid by the Applicant for raising the share capital. We do not find any ground to deny this request of the Applicants. Therefore, we permit the Applicants to go for rights issue. 36. No prejudice will be caused to the Respondents if 1st applicant is allowed to go for rights issue. It will be in proportion to the shares held by all the shareholders including Respondents. 37. 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 provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arefab Textiles Private Limited and M/s. Image Dealcom Private Limited are the companies where Mr. Laxmikant Lath and Mr. Prateek Pradeep Runtga are Directors and are related to the second Respondent. The said loans were availed during the pendency of the concerned Company Petition alleging misappropriation and divergent of funds by the second Respondent. NCLT had based its observations only on the Statements of Account which were prepared by the Respondent themselves several years after the filing of the Company Petition No. 38 of 2006 and therefore are not admissible as reliable events in the present proceedings. The Appellants also filed a Company Application No. 1 of 2015 where the contents of the Balance Sheet of the first Respondent Company was contested. The debts of the alleged loans do not match with the dates specified by the alleged Lenders and the same is evident from the fact that the Respondent had pleaded in the Impugned Application that there was a substantial increase in the turnover of the first Respondent from the year 2011 12 onwards, though the alleged Creditors have stated that the said amounts were given in the year 2013 14 by (M/s. Image Dealcom Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the Company. C.A. No. 24 of 2010 seeking a direction to place on record the Fixed Asset of the Company and the proceeds of sale of machinery. C.A. No. 01 of 2015 praying for inspection of Books and Records etc. It is contended that NCLT had wrongly decided the Application preferred by the Respondents without deciding the aforenoted pending Application, despite the Appellants having mentioned the Applications for listing in their memo dated 04.01.2019. 3. Submissions of Learned Counsel appearing on behalf of Respondent No.1: Learned Counsel submitted that the Rights Issue by the first Respondent Company was necessary to repay the inter-corporate loans amounting to ₹ 1.10 Crores/-. The ledger extracts of M/s. Image Dealcom Private Limited and M/s. Rarefab Textiles Private Limited, certified by the Auditor, discloses the outstanding dues of ₹ 80 Lakhs/- and ₹ 30 Lakhs/- respectively as on 31.03.2019. The Balance Sheets of the Company in the year 2019 and the earlier years were never challenged by the Appellants herein. Both the Corporate Lenders vide letters dated 28.02.2019, 22.04.2019 sought repayment of the entire amount along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.A. No. 913 of 2019, the subject Application was filed by the Respondent before NCLT seeking for raising Additional Capital by way of Rights Issue on appropriate basis under Section 62 of the Companies Act, 2013. The Company needed funds to repay the inter-corporate loans of ₹ 1.10 Crores/- as demanded by the Lenders; the Company could not raise loans from Banks and other Financial Institutions in view of the Status Quo Orders on the immovable properties in the main Petition and also in the HUF Petition case pending in the City Civil Court, Hyderabad and that the Company was unable to raise funds from the Financial Institutions on account of the ongoing litigation. Learned Counsel submitted that the Company received funds through RTGS from M/s. Image Dealcom Private Limited in the FY 2013 14 and from M/s. Rarefab Textiles Private Limited in the FY 2015 16. He drew our attention to pages 873 and 863 of the Appeal Book to demonstrate that the amounts were received through RTGS. Learned Counsel also drew our attention to the Ledger Account which showed an outstanding of ₹ 80 Lakhs/- as on 31.03.2019 and ₹ 30 Lakhs/- as on 31.03.2019 in the books of M/s. Ima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure A 26 which is the letter dated 22.04.2019 also acknowledges receipt of ₹ 8,64,000/- on 30.03.2019 towards interest for FY 2018 19 and further seeks the TDS certificate for an amount of ₹ 96,000/- deducted towards TDS. It is the case of the Respondents that subsequent to raising of the loans their turnover in the FY 2010 11, 2012 13, 2013 14 and 2014 15 has increased substantially. The Learned Counsel drew our attention to the relevant table depicting the turnover to substantiate his argument. At this juncture, it is relevant to reproduce one such TDS certificate Annexure 04:- 6. The aforenoted TDS certificates specify the Name and Address of the deductor as M/s. Krishna Metal Industries Private Limited (the first Respondent Company) and the Name and Address of the deductee as M/s. Image Dealcom Private Limited Mumbai and as M/s. Rarefab Textiles Private Limited respectively. The Auditor s statement at pages 864 and 865 Volume-V of the Paper Book show that the loan from Ms. Image Dealcom Private Limited was grouped under Sundry Creditors and the loan from M/s. Rarefab Textiles Private Limited was grouped under Unsecured Loans from others till t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ix) such other person as may be prescribed; .. 8. It is the Appellant s case that the Directors of M/s. Image Dealcom Pvt. Ltd. are the sons of the Director of M/s. Sunil Industries Limited. The inter se relationship between the Corporate Lenders is of no significance here. The Appellant s contention that their Directors are also related to the second Respondent is not substantiated by any tenable material. The nature of relationship between the Corporate Lenders and the second Respondent has also not been explained or corroborated by any documentation and we observe that the said loans do not fall within the ambit of the definition of Related Party Transactions as envisaged under Section 188 of the Companies Act, 2013. Be that as it may, keeping in view the Ledger Accounts, the Balance Sheets, we are of the considered view that the Respondents have sufficiently substantiated their contention that the money received from the two Corporate Lenders was a genuine loan. 9. Now we address ourselves to the argument of the Appellant that when there were Fixed Deposits available there were no reasons for the Respondent Company to have raised these borrowings. We find forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t restrained Company from alienating, transferring or encumbering the immovable property in any manner pending disposal of the Suit. The Company Law Board vide Order dated 14.07.2006 directed the Company to maintain Status Quo in regard to the immovable properties held in the name of the Company, until further Orders. Annexure A-9, also establishes that there was a Status Quo Order passed by Additional Principal Bench, Chennai, Company Law Board, on 07.12.2006 to be maintained in regard to the shareholding pattern until further Orders. 11. The Hon'ble Supreme Court in Shri V.S. Krishnan Ors. Vs. (Supra) has observed as follows:- As rightly pointed out that CLB missed a most basic principle of Section 397, namely, that mere unfairness does not constitute oppression. When the petitioners were given the right to subscribe to the 'rights issue' along with all others in the same proportion, no prejudice, whatsoever, could 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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