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Companies Law - Case Laws
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2024 (5) TMI 742 - CALCUTTA HIGH COURT
Willful Defaulters - whether the respondent-Bank, that is, the Central Bank of India was justified in declaring the petitioners to be willful defaulters through its First Committee and in affirming the same in the decision of the RC? - HELD THAT:- The present respondent-Bank, the Central bank of India, was one of the constituents of the Consortium and thus, being represented by the Liquidator, is also bound by the NCLT order refusing to accept the said report. Thus, the respondent-Bank’s efforts to declare the writ petitioners as willful defaulters on the sole basis of the TAR are not tenable in the eye of law.
To add to the woes of the respondents further, the lead Bank of the Consortium, the Punjab National Bank (PNB), although initially took a view that the petitioners were willful defaulters, subsequently did a volte face and, by relying on the dismissal of the TAR by the NCLT, as affirmed by the NCLAT, the PNB held that the petitioners are not willful defaulters, leaving it open for the Bank to proceed in future on the basis of independent material, if the same comes forth. However, till date, nothing has come forward by way of independent material to substantiate the stand of the respondents - the reliance on the TAR in the decisions of the First Committee and the RC are entirely de hors the law and perverse.
Several allegations have been made regarding fixed deposits being opened, furniture and cars having not been shown as assets, etc. The petitioners categorically refuted the claims by contending that there was no link between the credit taken from the Consortium and the utilization of such assets/funds. Hence, having failed to substantiate any link between the loan granted and the use alleged and in the absence of any material to substantiate that the loan was used for any other purpose than that intended, the very premise of the willful defaulter declaration goes - The Bank, vainly, has sought to project that the NCLT order was confined to the TAR not being used for lodging criminal complaints.
The Bank also argues that the Central Bank of India, being a constituent of the creditor-Consortium, could have proceeded with the willful defaulter proceeding despite no specific allegation regarding the loan given by the Central Bank having been referred to either in the Show Cause or the TAR or the First Committee order - Such argument is wholly untenable. If the respondent-Bank seeks to take refuge of its being a constituent of the Consortium, it is bound by the decision of the lead Bank, the PUNJAB NATIONAL BANK, to drop the charges of willful defaulter in terms of the NCLT Order refuting the TAR.
There is no reasoned order at all in the present case by the RC which vitiates the decision of the RC on such count alone. However, the observations made hereinabove vitiate the First Committee decision itself, thus rendering the RC decision an exercise in futility ab initio - the decision of both the First Committee and the RC declaring the petitioners to be Willful Defaulters are hereby set aside and quashed.
Petitions are allowed on contest, thereby setting aside and quashing the decisions of the Willful Defaulters Identification Committee and the Review Committee declaring the petitioners to be Willful Defaulters.
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2024 (5) TMI 729 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Oppression and mismanagement - reduction in shareholding - illegal transfer and allotment of shares - subsequent fresh transfer whereby the Respondent No.1 Company retransferred the same exact number of shares to the Appellant No.2 Company under alleged separate Board Resolution - challenge to validity of the Board Resolution and fresh transfers made thereon.
HELD THAT:- There was no dispute regarding the first transfer of shares dates 19th May, 2010. However, the second transfer dated 24.5.2010 was challenged and was adjudicated by the Tribunal as well as this Appellate Tribunal - The second transfer dated 24.5.2010 recorded in the register of members transferred the shares in favour of Appellant No.2 was set aside and further direction was given to the Appellant No.1 company to rectify the Register of Members so as to reflect 16,94,000 shares standing in the name of Respondent No.1 Company w.e.f. 19.5.2010 and second transfer dated 24.5.2010 shall stand ignored.
The intent of this Appellate Tribunal was very clear to restore the status quo as was at the time of first transfer of shares on 19th May, 2010 and all subsequent actions of the Appellants was set aside.
There are no sound logic of the Appellants to issue alleged fresh transfer dated 28.11.2017 to justify the action of transferring back 14,96,000 shares in the name of Appellant no.2.
There are force in the logic of the respondents No.1 to 9 that despite 12 years legal battle and winning the legal battle before the Tribunal as well as this Appellate Tribunal, the Respondents No.1 to 9 are still being treated as minority shareholders - there are no error in the Execution Order of the Tribunal dated 03.06.2022.
Appeal dismissed.
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2024 (5) TMI 682 - SUPREME COURT
Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings - HELD THAT:- The contract postulated and the parties had agreed that MSSIDCL would be liable to pay SSPL only after the goods are delivered and accepted by the consignee, namely, Maharashtra State Electricity Board (MSEB) and on the payment being received by MSSIDCL from the MSEB.
If the proviso to Section 3 applies, this contractual clause will get modified in terms of the proviso to Section 3, which has fixed the upper time limit for payment to 120 days from the day of acceptance or the day of deemed acceptance. However, the question would arise as to whether the said proviso would be applicable to the agreement in question, which was entered into between the parties on 30.03.1995, albeit the proviso was enacted and enforced with effect from 10.08.1998.
There are no good ground and reason to interfere with the conclusion in the impugned judgment passed by the Division Bench of the High Court, setting aside the arbitral award dated 30.06.2003 - appeal dismissed.
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2024 (5) TMI 681 - SC ORDER
Professional misconduct - Role of NFRA V/s ICAI on disciplinary matters of Chartered Accountants - Retrospective V/s prospective applicability of provisions as contained in Section 132 of Companies Act, 2013 as well as NFRA Rules, 2018 - Violation of Principle of natural justice w.r.t. separate division of NFRA - Role of Statutory Auditors of the Company V/s Statutory Auditors of the Branches of the company - Are Standards of Auditing (SA) mandatory or Advisory or to be treated as guidance notes to Auditors - it was held by NCLAT that 'It is of utmost importance that Auditors realise their responsibilities which is necessary not only to the company but also to the public. In view thereof, giving effect to the Impugned Orders which highlights the professional misconduct and other misconduct on the part of the appellant vis-à-vis a public listed company become quintessential so as to make public aware and enable them to make informed and sound financial decisions and investments. Any deviation to this will only result is catastrophic effect on economy of the nation and cause immense prejudice and harm to the public, shareholders and various stakeholders such as banks, lenders, and creditors.'
HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal - appeal dismissed.
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2024 (5) TMI 680 - SC ORDER
Restoration of name of the company in the records of the Registrar of Companies - HELD THAT:- Section 252(1) of the Act states that any person aggrieved by an order of the Registrar, notifying a company as dissolved under Section 248, may file an appeal to the Tribunal within a period of three years from the date of the order of the Registrar. The Tribunal can direct the restoration of the name, if it is satisfied that the removal of the name of the company from the register of the companies, is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar.
In the present case, the order passed by the Registrar of Companies dated 21.08.2017, directed the removal of name of the appellant/company – R.P. Casting Private Limited from the register of companies. The appeal was preferred within time. A practical rather than a technical view should be taken, while putting the appellants to terms on account of their lapses. The company/appellant – R.P. Casting Private Limited was in existence and even operative during the relevant time.
The Directors of the company/appellant – R.P. Casting Private Limited were negligent in not complying with the requirements of the Companies Act, 2013 in filing annual accounts etc., and also in not responding to the notice under Section 248(1) of the Act - it is also directed that the appellant – R.P. Casting Private Limited will pay a cost of Rs.5,00,000/- to the Registrar of Companies, within a period of 60 days from today, as they were at fault, and had not complied with the provisions of law. Restoration of name in the Registrar of Companies will be subject to payment of the costs.
The impugned judgment is set aside - Appeal allowed.
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2024 (5) TMI 571 - BOMBAY HIGH COURT
Grant of temporary bail on medical grounds - twin provisions of Section 212 (6) (ii) of the Companies Act, 2013 satisfied or not - HELD THAT:- The Hon’ble Supreme Court in case of JAINAM RATHOD VERSUS STATE OF HARYANA & ANR [2022 (4) TMI 1421 - SUPREME COURT] has granted bail to the appellant who was being prosecuted for violation of the provisions of Section 447 of the Companies Act, 2013 as well as various provisions of the Indian Penal Code, 1860, including Sections 406, 417, 418, 420, 467, 468, 471, 474 and 477A. A Special Leave petition preferred by the appellant was dismissed by the Supreme Court on 27th January, 2020 with observations that it was always open for the appellant to move a fresh application for bail.
The Hon’ble Supreme Court has also noted it’s judgment in the case of SERIOUS FRAUD INVESTIGATION OFFICE VERSUS NITTIN JOHARI & ANOTHER [2019 (9) TMI 570 - SUPREME COURT] while granting bail to the appellant Jainam. The appellant was released in light of the fact that in the absence of a fair likelihood of the trial being completed within a reasonable period, personal liberty of the appellant is to be protected in case of delay in conclusion of the trial.
The applicant was to be examined by a Panel of Doctors of J.J. Hospital, Mumbai comprising of Dean, General Physician, Medical Oncologist, Urologist and Gastrointestinal Oncosurgeon. The applicant was directed to appear before the Panel and report of the said Panel on the health condition of the applicant was called for. Thereafter, from time to time, various orders came to be passed by the Co-ordinate Benches. As such, the application for bail bearing No.2487 of 2022 was not finally disposed of.
Having taken into consideration the entire history of the applicant as well as various decisions of the supreme Court and this Court, interim bail granted to the applicant by this Court stands confirmed - bail application allowed.
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2024 (5) TMI 555 - DELHI HIGH COURT
Misappropriation of funds/assets/shares/stocks of the said company by illegally transferring them to the petitioner no. 4 - offence under Sections 185/447/452 of the Companies Act read with Section 120B of the IPC - requirement of taking cognizance of the offence y Director only - Time Limitation - HELD THAT:- Recently, the Karnataka High Court, in its judgement dated 01st March, 2024 passed in SRI. ARUN BALLAKUR AND SMT. MADHAVI BALLAKUR VERSUS SRI. M. KRISHNA REDDY [2024 (3) TMI 1318 - KARNATAKA HIGH COURT], has quashed the proceedings for an offence under Section 447 of the Companies Act initiated on a private complaint by the shareholder therein, on the ground that the cognizance for the offence under Section 447 of the Companies Act can be taken only on a complaint filed by the Director, SFIO in terms of the Second Proviso of Section 212(6) of the Companies Act.
The Order dated 05.01.2019 of the learned Trial Court as also the Impugned Order, in so far as it summons the petitioners for the offence under Section 447 of the Companies Act, cannot be sustained and are, accordingly, set aside.
Time Limitation - HELD THAT:- As the offence under Section 185 of the Companies Act is punishable with imprisonment for a term which may extend to six months or with fine and, therefore, in terms of Section 468 Cr.P.C., the period of limitation shall be one year - In the present case, as the complainant himself is a shareholder of the Complainant no. 2 company, and, in any case, has not pleaded that he did not know of the offence having been committed by the petitioners, the cognizance taken of the offence under Section 185 of the Companies Act which is stated to have been committed between the years 2002-2008, on a complaint filed in 2017, was barred by limitation and is, therefore, bad in law.
As Section 452 of the Companies Act is a ‘continuing offence’, it continues to be committed as long as the property of the company is withheld by the accused officer of the company. A fresh period of limitation begins to run at every moment such property is in the wrongful possession of such a person - As far as cognizance taken by the learned Trial Court of the offence under Section 452 of the Companies Act is concerned, it cannot be faulted on the ground of being beyond the period of limitation.
In the present case, the alleged handing over of the property of the Company by the petitioner no. 1 to the petitioner no. 4, as alleged in the paragraphs 13 and 21 of the complaint, constitutes an offence under Section 185 of the Companies Act. The non-return of the property, that is, loan and the advances, is alleged to constitute an offence under Section 452 of the Companies Act. Therefore, in terms of Section 220 of the Cr.P.C. both the offences can be tried together - it is to be noted that the punishment for the offence under Section 452 of the Companies Act is in fine alone. In terms of Section 468(2) of the Cr.P.C., therefore, the period of limitation for filing of the same would be six months. Therefore, the same shall have no effect on the “period of limitation” for the offence under Section 185 of the Companies Act. Merely because offence under Section 185 of the Companies Act can be tried alongwith the offence under Section 452 of the Companies Act, the period of limitation does not extend as far as the cognizance of an offence under Section 185 of the Companies Act is concerned.
In the present case, however, neither is the offence under Section 120B of the IPC standalone and as a separate offence pleaded by the respondent no. 2 to have been committed by the petitioners, nor has the learned Trial Court taken cognizance of such offence as a standalone or separate offence - The respondent no. 2, cannot take any benefit of the same for seeking an extension of the period of limitation for the offence under Section 185 of the Companies Act.
The Order dated 05.01.2019 passed by the learned Trial Court, taking cognizance of the offence under Sections 185/447 of the Companies Act read with Section 120B of IPC as against the petitioners, cannot be sustained and is liable to be set aside - As far as the Order 05.01.2019 passed by the learned Trial Court, taking cognizance of the offence under Section 452 of the Companies Act read with Section 120B of the IPC is concerned, the same is upheld.
The petition is allowed.
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2024 (5) TMI 427 - SUPREME COURT
Suit for recovery of dues - Jurisdictional bar on the civil court in deciding the suit instituted by the original plaintiff by virtue of Section 22(1) of the 1985 Act - legality & validity of the interest rate of 24% per annum awarded by the High Court in the original plaintiff’s favour - Levy of deductions towards the liquidated damages and penalty - failure to consider the evidence properly and had wrongly awarded the amounts under different heads to the original plaintiff.
Whether the suspension of legal proceedings as envisaged under Section 22(1) of the 1985 Act would extend to a civil suit for recovery of money even if the debt sought to be proved in the plaint has not been admitted by the sick industrial company? If so, whether the decree in favour of the original plaintiff could be said to be coram non-judice? - HELD THAT:-
Whether the High Court was correct in granting 24% compound interest on the principal decretal amount in favour of the original plaintiff? - HELD THAT:- It is seen from the plain reading of Section 22(1) of the 1985 Act, for an industrial company to avail the benefit of suspension of legal proceedings, two conditions have to be fulfilled – First, one of the four requirements as mentioned in paragraph 64 should be satisfied, that is, the industrial company must be at the prescribed stage of proceedings before the BIFR or the AAIFR. Secondly, the nature of proceedings sought to be suspended should be one which falls within the ambit of proceedings.
The Board of Directors of the defendant company, passed a resolution dated 20.04.1992 to the effect that the company had become a sick company for the purposes of the 1985 Act and thus a reference to the BIFR was required to be made. In accordance with the resolution, a reference was accordingly made under Section 15(1) of the 1985 Act - The defendant company continued to remain a sick company under the 1985 Act and proceedings before the BIFR continued and it was only on 27.06.2013, after a detailed consideration of the progress made by the company towards revival, that the BIFR declared the defendant company to have ceased to be a sick industrial company. Consequently, the defendant company was deregistered from BIFR on the said date.
The original defendants have strongly relied upon the decision of a two-judge bench of this Court in Bhoruka Textiles [2009 (5) TMI 546 - SUPREME COURT]. In the said case, the respondent therein, filed a suit for recovery against the appellant, a sick industrial company. The civil court decreed the suit in favour of the respondent therein with the finding that the transaction referred to took place subsequent to the reference of the appellant company to the BIFR and thus the suspension under Section 22(1) of the 1985 Act would not apply. The civil court also held that in the absence of any final order declaring the appellant company as a sick company by the BIFR, mere reference of the said company to the BIFR would not bring the protection under Section 22(1) of the 1985 Act into effect.
In M/s Haryana Steel & Alloys Ltd. v. M/s Transport Corporation of India [2012 (4) TMI 831 - DELHI HIGH COURT] it was held that the mere contention of the sick company unsubstantiated by any material indicating that the amount forming subject-matter of the recovery suit is covered under the scheme, would not be sufficient to bring the company under the protective ambit of Section 22(1) of the Act.
By no stretch of imagination could it be said that the legislature intended to include even the proceedings for the adjudication of the liabilities not admitted by a sick company within the protective ambit of Section 22(1) of the 1985 Act. Such an adjudicatory process only determines the liability of the defendant towards the plaintiff, and does not threaten the assets of the sick company or interfere with the formulation of the scheme unless execution proceedings are initiated pursuant to the completion of such adjudicatory process - there was a vacuum in the legal framework to deal with sick industrial companies and provide ameliorative steps for their revival. The 1985 Act was thus enacted to fill in this vacuum. The mischief which was sought to be dealt with by the enactment of Section 22 was any such legal proceeding which could impact the assets of the sick company and in-turn negatively impact the formulation and implementation of the rehabilitative scheme.
In Tata Motors [2008 (5) TMI 423 - SUPREME COURT] it was Section 26 and not Section 22 of the 1985 Act which was under consideration. As opposed to Section 26 of the Act, which bars the jurisdiction of the civil courts in respect of those matters for which the BIFR or the AAIFR are empowered, Section 22 only places a temporary embargo on the initiation or continuation of legal proceedings in respect of certain matters mentioned therein. Further, unlike Section 22, where the said suspension can be revoked by seeking express permission of the BIFR or the AAIFR, no such permission can be sought under Section 26 of the 1985 Act. Again, in any view of the matter, the adjudication and determination of a contested liability under a contract is undoubtedly the domain of the civil court or an arbitral tribunal and not that of the BIFR or the AAIFR.
Whether the High Court was correct in granting 24% Compound Interest on the Principal Decretal Amount in favour of the original Plaintiff? - HELD THAT:- In the present case, the suit was decreed in favour of the original plaintiff by the trial court vide its judgment dated 19.09.2001. However, while the adjudication of the suit of the original plaintiff could not have been said to be barred under Section 22(1) of the 1985 Act as it was for the mere determination of liability of the parties inter-se, the execution of decree obtained as a result thereof was expressly suspended during the period as mentioned in the said provision, unless the requisite permission from the BIFR or the AAIFR could be obtained - while there is a stay on proceedings in the nature of distress and execution, etc. against the properties of the sick company, to safeguard its assets, awarding interest for that very same period, though not expressly barred under any provision of the Act, could not have been the intention of the legislature.
The decree awarded by the trial court was contested by both the parties before the High Court. No material was placed before us to show whether any steps were taken by the original plaintiff to obtain the permission of the BIFR for the execution of the decree of the trial court, or for the inclusion of the said decree in the rehabilitation scheme. At the same time, the original defendants too failed to bring anything on record to show if any steps were taken by them for the inclusion of the dues of the original plaintiff in the rehabilitation scheme.
The doctrine of harmonious construction is based on the principle that the legislature would not lightly take away from one hand what it had given with the other. Thus, this doctrine provides, that as far as possible, two seemingly conflicting provisions within a statute, or the seemingly conflicting provisions of one statute vis a vis another, should be construed in a manner so as to iron out any conflict - Section 10 of the 1993 Act provides for an overriding effect to the provisions of the said Act to the extent of inconsistency with any other statute. Similarly, Section 32 of the 1985 Act provides overriding effect to the provisions of the said Act except for the enactments specified therein. Dealing with a case involving the apparent conflict between the two statutes containing overriding provisions.
It is deemed fit to exclude the period commencing from the date when FCIL was declared to be a sick company under the 1985 Act going up to the date when it was discharged by the BIFR and declared to be no longer a sick industrial company from the purview of the applicability of the interest provision under the 1993 Act. Thus, while the applicability of the 1993 Act to the dues of the original plaintiff is not disputed, such interest shall not be calculated for the period between 06.11.1992 and 27.06.2013.
Thus, in short, it was held as follows:
I. The suit instituted by the original plaintiff before the trial court was not hit by the embargo envisaged under Section 22(1) of the 1985 Act. Thus, the decree awarded in favour of the original plaintiff by the trial court and modified by the High Court, cannot be said to be coram nonjudice.
II. The High Court committed no error in awarding 24% interest to the original plaintiff on its dues as per the provisions of the 1993 Act. However, the period during which the defendant company was a sick company as per the 1985 Act should be excluded for the purposes of calculation of interest.
The impugned judgment and order of the High Court is upheld subject to the modification of the period for which interest may be granted as discussed aforesaid. To clarify, the interest will be calculated at 24% p.a. with monthly compounding - Appeal disposed off.
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2024 (5) TMI 426 - DELHI HIGH COURT
Seeking winding up of the respondent company - failure to pay debt in the normal and ordinary course of its business - HELD THAT:- From a perusal of the record, it is borne out that the present company petition is a complete non-starter, in so far then neither a Provisional Liquidator nor an Official Liquidator has yet been appointed in the present petition.
In view of the fact that the Insolvency and Bankruptcy Code, 2016 as well as the Companies Act, 2013, have since been enacted during the pendency of these proceedings, it is the opinion of this court that the present petition does not deserve to continue before this Court, and it would be appropriate for the same to be transferred to the National Company Law Tribunal.
It would also be expedient to place reliance on the decision of the Supreme Court in the case titled ACTION ISPAT AND POWER PVT. LTD. VERSUS SHYAM METALICS AND ENERGY LTD. [2020 (12) TMI 535 - SUPREME COURT], whereby it was held that those winding up proceedings pending before High Courts, which have not progressed to an advanced stage, ought to be transferred to the NCLT.
This above noted decision of the Supreme Court has been relied upon by this court in Citicorp International Limited v. Shiv Vani Oil & Gas Exploration Services Limited [2023 (7) TMI 1188 - DELHI HIGH COURT], wherein it was held that winding up proceedings pending before High Courts, which are at a nascent stage and have not progressed to an advanced stage, ought to be transferred to the NCLT.
Hence, the instant petition is transferred to the NCLT. In view of the same, the present company petition as well as pending applications, if any, are accordingly disposed of - List before the NCLT on 08.07.2024.
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2024 (5) TMI 425 - DELHI HIGH COURT
Direction to refund the amount deposited by the applicant pursuant to the directions/order dated 03.06.2009 by the learned DRT, Delhi along with due interest from the date of deposit - IFCI did not provide a break-up or bifurcation of the amounts received with respect to the properties sold/auctioned under the aegis of the learned DRT - HELD THAT:- ICFI is cutting an extremely sorry figure in demonstrating that the amount of Rs. 57.50 Lacs received from the applicant/third party objector was remitted to the Official Liquidator comprised in the payment made on 26.02.2015/27.02.2015 amounting to Rs. 88,66,077/-. First things first, evidently the amount of Rs. 57.50 Lacs, which was deposited by the applicant/third party objector with the DRT was remitted to the ICFI and received by it on 19.03.2010. The applicant/third party objector was constrained to move the instant application before this Court on 01.05.2017 and the matter has lingered on for want of submission of better particulars on the part of IFCI.
Even in Annexure ‘C’, filed with the affidavit dated 04.02.2022, the receipt of Rs. 57.50 Lacs from Mr. Sachin Jain i.e. the applicant/third party objector is not accounted for. There is no covering letter accompanied with the remittances that have been made on 26/27.02.2015 so as to suggest that the amount of Rs. 88,66,077/- included the refund of amount of Rs. 57.50 Lacs with interest payable to the applicant/third party objector - Even assuming the deposition in the affidavit dated 28.02.2024 to be correct for the sake of convenience and it is true that the amount, which was refunded to the S.K. Trading with regard to the property at Haldwani, had been refunded, by the same very logic the tabulated statement should have shown the amount which is due to the applicant/third party objector.
The IFCI has not duly accounted for the amount payable to the applicant/third party objector. The details of the remittances made by IFCI to the Official Liquidator are yet to be verified and their claims as to the secured creditor are yet to be adjudicated upon by the Official Liquidator, apart from the other secured creditor, which is IDBI. Therefore, unhesitatingly, this Court finds that IFCI remains accountable and liable to make payment of Rs. 57.50 Lacs to the applicant/third party objector and the said amount should be refunded along with interest.
The present application moved by Mr. Sachin Jain i.e. applicant/third party objector is allowed.
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2024 (5) TMI 334 - SUPREME COURT
Disqualification from participating in the tender - Scope of the Balance Sheet Prepared under the Companies Act - Importance of explanatory notes to the Balance Sheet - rejection of technical bid on the premise that it has not complied with the necessary pre-requisite qualification in filing the explanatory notes of account being an integral part of the Balance Sheet - HELD THAT:- The Balance Sheets can only be understood by going into the factual narrations made in the explanatory notes of accounts. When one speaks about Balance Sheet, it takes along with it the explanatory note. To be noted, all the other bidders have complied with this part, even M/s. BVG India Ltd. was quite conscious of the said compliance as could be seen from one of the communication made by it. Thus, it is held that the reasoning of the High Court, finding fault with disqualification of the technical bid of M/s. BVG India Ltd. cannot be sustained in the eye of law.
The only other issue to be considered is with respect to disqualification of M/s. Pashupatinath Distributors Private Limited. All the bidders had been called for a meeting and their queries have been answered by the tendering authority. As rightly pointed out by the learned senior counsel appearing for the respondent No.1, the document concerned would clearly show that even the technical committee was of the view that the request made by M/s. Pashupatinath Distributors Private Limited to dilute Clause 2.2 and 2.3 is not feasible of consideration. While interpreting the terms of a tender, a simple interpretation is to be followed.
Thus, both M/s. BVG India Ltd. and M/s. Pashupatinath Distributors Private Limited are disqualified from participating in the tender concluded. In view of the aforesaid conclusion, the ultimate decision of the High Court in remitting matter back for a fresh consideration by the State is upheld while clarifying that the aforesaid two entities cannot be permitted to participate with the existing disqualification as discussed above, unless they are otherwise qualified in the light of the interpretation of the notice inviting tender.
Appeal disposed off by way of remand.
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2024 (5) TMI 333 - NATIONAL FINANCIAL REPORTING AUTHORITY
Professional misconduct by CA - Liability of the Engagement partner with audit firm - Failure to submit requisite information and non-cooperation with NFRA - Penalties and sanctions - HELD THAT:- It is established that M/s PCN & Associates, and CA Gopala Krishna Kandula committed professional misconduct by not submitting the requisite information to NFRA; not attending personal hearing; and submitting false affidavit. We conclude that the following failures on their part, as contained under the Articles of Charges in the SCN, stand established:
a) Failure to exercise due diligence and being grossly negligent in the conduct of professional duties as defined by clause 7 of Part I of the Second Schedule of the Chartered Accountants Act 1949.
b) Failure to supply the information called for, and non-compliance with the requests of NFRA, as defined in clause 2 of Part-II of First Schedule of The Chartered Accountants Act, 1949.
Considering the professional misconduct by the Firm and the EP; and considering the nature of the violation, in exercise of powers under section 132(4)(c) of the Companies Act, 2013, it is ordered as follows:
a) Imposition of a monetary penalty of Rupees Fifty Lakhs upon. M/s PCN & Associates (FRN: 0160168), the Audit Firm and Rupees Thirty Lakhs upon CA Gopala Krishna Kandula (ICAI Membership No. — 203605), the Engagement Partner.
b) In addition, M/s PCN & Associates and CA Gopala Krishna Kandula are debarred for a period of Two years and Ten years respectively from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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2024 (5) TMI 279 - NATIONAL FINANCIAL REPORTING AUTHORITY
Professional misconduct by CA - Liability of the Engagement partner with audit firm - Acceptance of the Audit Engagement - Significant Matters Reported by the Previous Auditor - Evaluation of the Going Concern Assumption - Verification of Expected Credit Loss (ECL) on Financial Assets - Modification of the Audit Opinion on the Financial Statements - Use of the work of Management's Experts and Auditor's Expert - Engagement Quality Control Review (EQCR) - Compliance with SA 230 [SA 230, Audit Documentation] - penalty and sanctions - HELD THAT:- The Auditor has made a series of departures from the Standards and the Law, in conduct of the audit of Reliance Home Finance Limited for FY 2018-19. Based on the discussion, it is proved that the Audit Firm issued an audit opinion on the Financial Statements without adequate supporting evidence. Based on the discussion and analysis, it is concluded that the EP, EQCR Partner and the Audit Firm have committed Professional Misconduct as defined in the Act, as below:
a) The Audit Firm Mis Dhiraj & Dheeraj and the EP CA Piyush Patni committed professional misconduct as defined by Section 132(4) of the Companies Act, 2013, read with Section 22 and Clause 5 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he "fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity". This charge is proved as the Audit Firm and EP failed to disclose in their report the material non-compliances the Company.
b) Mis Dhiraj & Dheeraj and CA Piyush Patni committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 6 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he "fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity". This charge is proved as the Auditor failed to disclose in their report the material misstatements made by the Company.
c) Mis Dhiraj & Dheeraj, CA Piyush Patni and the EQCR Partner CA Pawan Kumar Gupta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 7 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 3 8 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he "does not exercise due diligence or is grossly negligent in the conduct of his professional duties". This charge is proved as the Auditor, conducted the audit of a Public Interest Entity in total disregard of their statutory duties, evidenced by multiple critical omissions and violations of the standards. The instances of failure to conduct the audit in accordance with the SAs and applicable regulations, and failure to report the material misstatements in the financial statements and non-compliances made by the Company.
d) Mis Dhiraj & Dheeraj, CA Piyush Patni and CA Pawan Kumar Gupta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he "fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion". This charge is proved as the Auditor failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their total failure to report the material misstatements and non-compliances made by the Company in the financial statements.
e) Mis Dhiraj & Dheeraj and CA Piyush Patni committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 9 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he "fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances". This charge is proved since the Auditor failed to conduct the audit in accordance with the SAs but falsely reported in their audit report that the audit was conducted as per SAs.
f) Mis Dhiraj & Dheeraj, CA Piyush Patni and CA Pawan Kumar Gupta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the First Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he "fails to communicate with outgoing auditor". This charge is proved since the Auditor failed to accept the audit in accordance with the law.
Thus it is concluded that the charges of professional misconduct in the SCN are established based on the evidence in the Audit File, the audit reports on the standalone financial statements for the FY 2018-19 dated 13th August 2019 and the submissions made by the Auditor, and the Annual Report of Reliance Home Finance Limited for the FY 2018-19.
Penalty and sanctions - HELD THAT:- Section 132 (4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law.
Because professional misconduct has been proved and considering the nature of violations and principles of proportionality, in the exercise of powers under Section 132 (4) (c) of the Companies Act, 2013, it is ordered as follows:
a. Imposition of a monetary penalty of Rupees One crore on the Audit Firm Mis Dhiraj & Dheeraj.
b. Imposition of monetary penalties of Rs 50,00,000/- and Rs.10,00,000/- respectively on CA Piyush Patni (EP) and CA Pawan Kumar Gupta (EQCR).
c. In addition, EP and EQCR partners are debarred for five years and three years respectively from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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2024 (5) TMI 140 - NATIONAL FINANCIAL REPORTING AUTHORITY
Professional Misconduct by CA - Liability of the Engagement Partner (EP) with Audit Firm - Failure related to non-recognition of liabilities classified as Non-Performing Assets (NPAs) by the Lender Banks - Failure to evaluate the management's assessment of the entity's ability to continue as a Going Concern - Failure relating to Revenue Recognition - Failures relating to Audit Documentation - Failures relating to audit evidence for Inventory - Failure relating to forming opinion on Financial Statements without obtaining Sufficient Appropriate Audit Evidence - Lapses in fulfilling duties related to Engagement Quality Control (EQC) Reviewer - Failure to determine Materiality - Failures related to audit of Trade Receivables - Failures relating to communication with Those Charged With Governance - Failure to report non-compliances with provisions of the Companies Act 2013 - Penalty and Sanctions - Section 132 (4) of the Companies Act, 2013.
HELD THAT:- The Auditors have made a series of serious departures from the Standards and the Law, in their conduct of the audit of CMIL for FY 2019-2020, 2020-21 and 2021-22. Based on the above discussion, it is proved that the auditors failed to report in their audit report, the misstatement in the financial statements of CMIL. The poor quality of audit as reflected in failures related to fundamental aspects of audit like setting materiality, evaluation of going concern, carrying out external confirmation together with the incomplete documentation, further compound the professional misconduct of the auditors.
It is concluded that the Auditors have committed Professional Misconduct as defined under Section 132 (4) of the Companies Act, 2013 in terms of Section 22 of the Chartered Accountant Act 1949 (CA Act) as amended from time to time as follows:
i. The auditors committed professional misconduct in terms of by Section 132 (4) of the Companies Act, read with Section 22 and clause 5 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he ':fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity". This charge is proved as the auditors failed to disclose in their audit report the material non-compliances by the Company in the area of recognition of the liabilities towards banks/financial institutions beyond the NPA dates.
ii. The auditors committed professional misconduct as defined by Section 132 (4) of the Companies Act, read with Section 22 and clause 6 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he 'Jails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity".
This charge is proved as the auditors failed to disclose in their audit report the material non-compliances by the Company in the area of recognition of the liabilities towards banks/financial institutions beyond the NP A dates.
iii. The auditors committed professional misconduct as defined by Section 132 (4) of the Companies Act, read with Section 22 and clause 7 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he "does not exercise due diligence and is grossly negligent in the conduct of his professional duties". This charge is proved as the auditors failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their failure to report the material misstatements and non-compliances of the Company in its financial statements.
iv. The auditors committed professional misconduct in terms of by Section 132 (4) of the Companies Act, read with Section 22 and clause 8 of Part I of the Second Schedule of the Chartered Accountants Act 1949 ( as amended from time to time), which states that an auditor is guilty of professional misconduct when he ''fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion". This charge is proved as the auditors failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their failure to report the material misstatements and non-compliances of the Company in the financial statements.
v. The auditors committed professional misconduct as defined by Section 132 (4) of the Companies Act, read with Section 22 and clause 9 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he ''fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances".
This charge is proved since the auditors failed to conduct the audit in accordance with the SAs but falsely reported in their audit report that the audit was conducted as per SAs.
The charges of professional misconduct enumerated in the SCN dated 04.12.2023 stand proved.
Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed, is evident from the fact that a minimum punishment is laid down by the law.
Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered:
i. Monetary penalty of Rs 50,00,000/- (Rupees Fifty Lakhs) upon the Audit firm, M/s Krishna Neeraj & Associates.
ii. Monetary penalty of Rs 10,00,000/- (Rupees Ten Lakhs) upon CA Krishna Kr Neeraj.
iii. CA Krishna Kr Neeraj is also debarred for 2 (Two) years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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2024 (5) TMI 75 - NATIONAL FINANCIAL REPORTING AUTHORITY
Professional Misconduct by CA - Liability of the Engagement Partner (EP) with Audit Firm - Failure to disclose a material fact known - Failure report a material misstatement known - Failure to exercise due diligence and being grossly negligent in the conduct of professional duties - Failure to obtain sufficient information which is necessary for expression of an opinion - Failure to invite attention to my material departure from the generally accepted procedures of audit applicable - sanctions and penalties - section 132 (4) of Companies Act 2013 - HELD THAT:- It is proved that the audit firm failed to implement the quality control policies as required by SAs, within the firm.
Following are the observations:-
I. The audit firm committed professional misconduct as defined by clause 5 of Part I of the Second Schedule of the CA Act, which states that a CA is guilty of professional misconduct when he "fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity". This charge is proved as the audit firm failed to disclose in his report the material non-compliances by the company.
II. The audit firm committed professional misconduct as defined by clause 6 of Part I of the Second Schedule of the CA Act, which states that a CA is guilty of professional misconduct when he "fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity". This charge is proved as the audit firm, who was appointed as the statutory auditor, failed to disclose in its report the material non-compliances by the company.
III. The audit firm committed professional misconduct as defined by clause 7 of Part I of the Second Schedule of the CA Act, which states that a CA is guilty of professional misconduct when he "does not exercise due diligence or is grossly negligent in the conduct of his professional duties". This charge is proved as the audit firm, who was appointed as the statutory auditor, failed to exercise due diligence in the audit of the company in accordance with the SAs and applicable regulations.
IV. The audit firm committed professional misconduct as defined by clause 8 of Part I of the Second Schedule of the CA Act, which states that an EP is guilty of professional misconduct when he "fails to obtain sufficient information which is necessary for expression of an opinion, or its exceptions are sufficiently material to negate the expression of an opinion".
This charge is proved as the audit firm, who was appointed as the statutory auditor, failed to conduct the audit in accordance with the SAs and applicable regulations and failed to analyse and report the appropriateness of accounting policy for recognition of interest cost on loans classifies as NPAs.
V. The audit firm committed professional misconduct as defined by clause 9 of Part I of the Second Schedule of the CA Act, which states that an FP is guilty of professional misconduct when he “fails to invite attention to any material departure from the generally accepted procedure of audit applicable in the circumstances”.
This charge is proved since the audit firm, who was appointed es the statutory auditor, failed to conduct the audit in accordance with the SAs.
It is concluded that the charges of professional misconduct enumerated in the SCN dated 04.12.2023 stand proved based on the evidence in the Audit File, the Audit Report issued by the EP on behalf of the audit firm, the submissions made by the audit firm, the annual report of Vikas WSP Limited for the FY 2019-20 and other materials available on record.
Penalties and sanctions - HELD THAT:- Section 132(4) (c) of the Companies Act 2013 provides that the National Financial Reporting Authority shall, where professional or other misconduct is proved, have the power to make order for.
A) imposing penalty of (I) not less chart one lakh rupees, bat which may extend to Ave times of the fees received. in case of individuals, and (II) not less than five lakh rupees, but which may extend to ten times of the fees received, in case of firms.
(B) debarring the member or the firm from (I) being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. or (II) performing any valuation as provided under section 247, for a minimums period of six months or such higher period not exceeding ten years as may be determined by the National Financial Reporting Authority.
Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, and also keeping in mind that the audit firm has not accepted the charges as pointed out in thy SCN, in exercise of powers under Section 152(4)(c) of the Companies Act, 2013, it is hereby ordered imposition of a monetary penalty of Rs 5,00,000/- upon M/s S. Prakash Aggarwal & Co.
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2024 (4) TMI 871 - CALCUTTA HIGH COURT
Violation of Section 233 of the Companies Act, 2013 - requirement of holding at least ninety percent of the total numbers of shares, for approval of scheme of amalgamation - non-application of mind - HELD THAT:- In the present case it is evident that the trial Judge has taken cognizance without any application of judicial mind. The order taking cognizance in this case has been only a formality - There is absolutely no application of mind. Cognizance has been taken casually without any prima facie findings.
There is also no reason for the petitioner to commit fraud by making a false statement as the petitioner has the option to take recourse to Sections 233(5), 233(6) and Section 232 of the Companies Act - The Companies are also at liberty to once again convene a meeting of the shareholders, secured creditors and unsecured creditors to comply with the provision of Section 233(1)(b) of the Act, as per the circular/letter no. 2/31/2013-CAA-CL-V-Pt-2 dated 24.08.2017 of the Ministry of Corporate Affairs, New Delhi.
It is clear from the petition of complaint that neither the Company nor the persons, who were in-charge of the day affairs of the company, have been made parties in the case. Without the Company and the persons responsible for the day to day affairs of the Company, the prosecution of the petitioner alone, who acted on behalf of the company is bad in law and thus clearly an abuse of the process of law.
The proceedings pending before the Learned, 2nd Special Court, Calcutta at West Bengal under Section 448 of the Companies Act, 2013 for alleged violation of Section 233 of the Companies Act, 2013, is bad in law and thus liable to be set aside - revision allowed.
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2024 (4) TMI 728 - NATIONAL FINANCIAL REPORTING AUTHORITY
Professional Misconduct by CA - Failure to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where the statutory auditors are concerned with that financial statement in a professional capacity - Failure to report a material misstatement known to him to appear in a financial statement with which EP is concerned in a professional capacity - Failure to exercise due diligence and being grossly negligent in the conduct of professional duties - Failure to obtain sufficient information which is necessary for the expression of an opinion, or its exceptions are sufficiently material to negate the expressions of an opinion - Failure to invite attention to any material departure from the generally accepted procedures to audit applicable to the circumstances - sanctions and penalties.
HELD THAT:- EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 5 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity” - This charge is proved as PHD and EP failed to disclose in their report the material noncompliances the Company made.
EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 6 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity” - This charge is proved as EP and PHD failed to disclose in their report the material misstatements made by the Company.
EP, EQCR Partner and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 7 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “does not exercise due diligence or is grossly negligent in the conduct of his professional duties” - This charge is proved as EP, EQCR Partner and PHD conducted the Audit of a Public Interest Entity in total disregard of their statutory duties, evidenced by multiple critical omissions and violations of the standards. The instances of failure to conduct the audit in accordance with the SAs and applicable regulations, and failure to report the material misstatements in the financial statements and non-compliances made by the Company.
EP, EQCR Partner and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion” - This charge is proved since EP, EQCR Partner and PHD failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their total failure to obtain sufficient appropriate audit evidence to support their opinion on the financial statements.
EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 9 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances” - This charge is proved since EP and PHD failed to conduct the audit in accordance with the SAs as explained in Paras C1 to C7 above but falsely reported in their audit report that the audit was conducted as per SAs.
Thus it is concluded that the charges of professional misconduct in the SCN, as detailed above, stand proved based on the evidence in the Audit File, the audit reports on the standalone financial statements and consolidated financial statements for the FY 2018-19, the submissions made by EP, EQCR Partner and PHD and the Annual Report of RCL for the FY 2018-19.
Sanctions and penalties - HELD THAT:- Section 132 (4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law.
Because professional misconduct has been proved and considering the nature of violations and principles of proportionality, in the exercise of powers under Section 132 (4) (c) of the Companies Act, 2013, it is ordered: a. Imposition of a monetary penalty of ₹3 crore (Rupees Three Crore) on the Audit Firm M/s Pathak H.D. & Associates. b. Imposition of monetary penalties of ₹1 crore (Rupees One Crore) and ₹50 Lakh (Rupees Fifty Lakh) respectively on EP CA Parimal Kumar Jha and EQCR Partner CA Vishal D Shah. c. In addition, EP and EQCR partners are debarred for 10 years and 5 years respectively from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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2024 (4) TMI 635 - DELHI HIGH COURT
Seeking directions against the respondent no. 1/National Housing Bank (NHB) to consider and decide upon the petitioner’s representation dated 18th August, 2023 - seeking direction to call upon respondent no. 2, i.e., India Bulls Housing Finance Limited (IBHFL) to produce the responses and relevant documents, disclosing the actions taken by them in respect of the query dated 6th April, 2023 addressed by the petitioner.
HELD THAT:- The petitioner has been in litigation with IBREL and seeks to collect information and documents through the process of the present petition, so as to use the same to file intervention application before NCLAT, New Delhi in the appeal filed by IBREL against the order dated 9th May, 2023 passed by NCLT, Chandigarh, or to file a separate appeal himself against the order dated 9th May, 2023 passed by NCLT, Chandigarh.
Writ jurisdiction of this Court cannot be used by a party for collecting evidence and documents against another party, against whom the petitioner has pending disputes. Writ jurisdiction is meant to safeguard the constitutional, legal and vested rights of a party. The powers vested with this Court under writ jurisdiction are large that are used by this Court to ensure that the constitutional and legal rights of parties are protected and secured - The Court process, much less a writ jurisdiction, cannot be used as a fishing and roving enquiry against a party with whom the petitioner has pending disputes, for the purposes of collecting evidence and documents to be used against such a party. The present petition filed by the petitioner is clearly a misuse and abuse of the process of the Court.
The petitioner is trying to collect evidence and documents against IBREL, as is manifest from the representation dated 18th August, 2023 submitted by the petitioner to NHB. Neither any constitutional nor any legal right of the petitioner is being violated or breached, for protection of which the present petition has been filed. This Court will not become a party in a fact finding and evidence collecting process in order to aid the petitioner, which is the manifest purpose of filing the present petition. The present petition is clearly a misuse and abuse of the process of law.
Thus, no merit is found in the present petition - petition dismissed.
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2024 (4) TMI 480 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Oppression and Mismanagement - Validity of the Lease Deed - Doctrine of Res Sub-Judice - Appellants argued that the Tribunal overstepped its jurisdiction by setting aside the lease deed while its validity was under scrutiny in a civil court - HELD THAT:- The bedrock of this case is the lease deed dated 26.08.2019, executed pursuant to the resolution dated 23.08.2019 which is not only contrary to the provisions of Section 188(1) of the Act r/w Rule 15 of the companies (Meeting of board and its powers) Rules 2014 but also clause 36(ii) of the AoA as on 23.08.2019, which provides that the board of directors shall not, without consent of 100% members of the company, in duly convened general meeting can lease and dispose of the property of the company by way of lease etc. and that the consent of 100% members of the company in a duly convened general meeting is conspicuous by its absence. There are no traces of the alleged oral settlement which has been made the basis of the lease, the terms of which are more against the company (R1) than its favour, therefore, these are unconscionable terms and conditions which would attract the provisions of Section 241 and 242 of the Act.
Moreover, the Appellant did not deliberately implead Rohit Agarwal and Shobhit Agarwal as parties to the present appeal though they were respondents in the main petition only in order to conceal the fact that Shobhit Agarwal who is the son of Appellant No. 1 (Ajay Kumar Agrawal), is a partner of Appellant No. 3 (TX Homes LLP) whereas as per Section 188 r/w 2(76) of the Act and Rule 4 of Companies (Specification of Definition Details) Rules, 2014, the lease deed would not have been executed in favour of the related party. The power under Section 241 and 242 of the Act would include the power to set aside the lease deed which has been executed on behalf of R1 in violation of mandatory provisions of the Act, AoA and terms and conditions of the impugned lease deed are against the very interest of R1 and is oppressive, therefore, the lease deed has rightly been set aside by the Tribunal.
Thus, it is a fit case in which the Tribunal has interfered and set aside the registered lease deed and as such, the impugned order does not call for any interference by this Court, the same is hereby upheld - appeal dismissed.
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2024 (4) TMI 479 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Rightful owners of 4000 shares or not - Exercise of jurisdiction under Section 8 of the Arbitration and Conciliation Act - HELD THAT:- Language of Section 8 of the Arbitration and Conciliation Act has inherent restrictions. The Section puts a bar on the courts not to go outside the contours of Section 8 and the Court can only exercise jurisdiction to see if there is a valid clause and whether the dispute is arbitrable. Thus to give a finding at this stage to the effect R1 and R2 are owners of 4000 shares, which in fact is the main relief claimed in the Company Petition, the Ld. NCLT certainly had travelled beyond its jurisdiction. There was no occasion for Ld. NCLT to delve into the issue of ownership of 4000 shares in an application under Section 8 (Supra) and the said question would arise only when the maintainability of the main case would be decided.
Thus though the appellant forego their claim to challenge dismissal of its application under Section 8 of the Arbitration and Conciliation Act but the observations in the impugned order so far as it relate to the declaring of the ownership of 4000 shares was never warranted at this stage and is set aside.
This issue needs to be decided by the Ld. Tribunal at an appropriate stage and this order be not construed as an expression/opinion on merits upon the ownership of shares which fact shall be now decided by the Ld. NCLT on facts and law.
Appeal disposed off.
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