By Pooja J. Punjabi, Chartered Accountant
1. Jella Jagan Mohan
Reddy, In re
(2017) 82 taxmann.com 422 (NCLT – Hyd.)
Date of Order: 5th June, 2017
Sections 211, 621A of Companies Act, 1956 read with Schedule
VI – Incorrect disclosure of Issued Capital in the Balance Sheet of the Company
was in violation of section 211 – The submission that there was no prejudice
caused to the members, creditors or public did not hold good – The application
for compounding was accordingly dismissed
FACTS
JCo was incorporated on 14.11.2006 as a private limited
company and was converted to a public company on 12.01.2009 under Companies
Act, 1956 (the Act). The Office of Regional Director carried out an inspection
of books of accounts of JCo for the years 2006-07 to 2012-13 and found that it
had violated provisions of section 211(1) read with Schedule VI of the Act. The
Balance Sheet of JCo as at 31.03.2009 disclosed the Issued Capital as Rs. 84.41
crore instead of Rs. 100 crore. The same allegedly resulted in a disclosure of
false particulars in the said Balance Sheet.
JCo admitted to the default and submitted that the same was
not intentional and that it was of a nature that did not prejudice interest of
members, creditors or others dealing with the company. JCo further pleaded that
the default did not in any way affect the public interest. JCo therefore filed
an application u/s. 621A for compounding of offence.
ROC highlighted that JCo did not mention how the offence was
made good and therefore be put to strict proof of
the same.
HELD
The Tribunal observed that it had the necessary power to
compound the offence as was established under Cambridge Technology Enterprises
Ltd., In re (2017) 77 taxmann.com 270 (NCLT – Hyd.). The Tribunal
observed that the Balance Sheet of JCo as at 31.03.2008 disclosed its Issued
capital as Rs. 106.41 crore whereas the same was reflected as Rs. 84.41 crore
in the Balance Sheet as at 31.03.2009. There was no mention of any reduction
being carried out in any of the Balance Sheets of JCo. Both the Balance Sheets
were signed by two whole-time directors of the Company, its Company Secretary
and reputed firm of Chartered Accountants.
The Tribunal further observed that the Balance Sheet was an
important financial statement used by the stakeholders for various purposes.
The factual error therein was not in accordance with section 211(1) of the Act
in as much as “True & Fair view” was not depicted in the Balance
Sheet, thereby resulting in disclosure of false particulars of Issued Capital.
In light of the aforesaid observations, it was held that the submission that
the error did not cause any prejudice to the creditors or members does not hold
good and the Tribunal proceeded to dismiss the application for compounding.
2. Hasmukh Bachubhai Baraiya
vs. Symphony Ltd.
(2017) 82 taxmann.com 420
(NCLT – Ahd.)
Date of Order: 26th April,
2017
Sections 56, 58 and 59 of Companies Act, 2013 – Tribunal
does not have power to issue directions for issue of duplicate share
certificate – The dispute as to title of shares has to be heard by a Civil
Court and the National Company Law Tribunal (NCLT) does not have the authority
to decide upon the same.
FACTS
H, a shareholder of SCo, a listed public company, alleged
that he misplaced the share certificates of the company. H made a request to
the share transfer agent of SCo for issue of duplicate share certificates
through a letter dated 11.09.2015. Subsequent letters were written to the Share
transfer agent on 07.10.2015 and 02.11.2015 for the same purpose. H visited the
office of Share transfer agent on 15.10.2015 and the office of SCo on
16.10.2015 and produced the relevant documents for verification in respect of
application for issue of duplicate share certificates. Upon failure of SCo and
Share transfer agent to issue the duplicate share certificate, H filed an
application before the NCLT under sections 56, 58 and 59 pleading it to issue
directions for issue of duplicate share certificate.
There was another Party who contested the ownership of the
shares in question stating that the same were acquired by him in the year 1997.
The said Party also sent the transfer deeds to the Share transfer agent but was
not issued the share certificates because there was a deficit in payment of
stamp duty. This claim of ownership by the Party has been disputed by H.
The Party had filed a civil suit to establish its case for
ownership and the said suit was pending in the Civil Court. SCo directed H and
Party to settle their dispute or produce an order from a Competent Court of
law.
HELD
Tribunal held that relief u/s. 58 was not available to H
since it was not his case that SCo refused to register his name in the register
of members.
Section 59 deals with rectification of Register of Members if
the name of any person is without sufficient cause entered into the Register of
members of a Company or without sufficient cause omitted the name of a Member
from the Register of Members or in case where a default was made or unnecessary
delay was made in making entry in the Register of Members. As the case of H did
not fall under any of the said categories, relief u/s. 59 was also held to be
not available to H.
Upon examining the provisions of section 56, the Tribunal
observed that where the instrument of transfer had been lost, the power to
issue duplicate shares was available with the Board of the Company. There was
nothing in section 56 which indicated that the Tribunal can give a direction to
the Company to issue duplicate shares.
The Tribunal proceeded to state that there was no specific
provision under the Companies Act, 2013 or rules framed thereunder which gave
it the authority to issue directions to a company for issue of duplicate
shares. When the Statute creates a right to obtain duplicate shares upon
satisfying the Board of a company about loss of shares and when the Board did
not exercise its discretion in the manner in which it is expected to exercise,
then the judicial authorities or quasi- judicial authorities are certainly
entitled to give appropriate directions.
It however observed that although H alleged that shares were
misplaced, he did not specify when they were misplaced. H did not inform the
Police about misplacement of shares either at the time when they were misplaced
nor when the Party contested his claim for ownership of the shares.
Also, in the aforesaid case, the challenge involved a dispute
as to title of the shares. The Tribunal dismissed the Petition by observing
that such title disputes could not be decided by it and only a Civil Court had
the jurisdiction to decide upon the same.
3. Himalay Dassani vs.
Isolux Corsan India Engineering & Construction (P.) Ltd.
(2017) 82 taxmann.com 143 (NCLT-Chd.)
Date of Order: 8th May, 2017
Section 9 of Insolvency and Bankruptcy Code, 2016 – Where an
application was already filed u/s. 9 against the subsidiary of Corporate Debtor
for recovery of debt, parallel proceedings on the same cause of action could
not be initiated against the Corporate Debtor.
FACTS
ICo being the respondent was incorporated on 25.06.2008. ICo
availed consultancy service of H (being the operational creditor) in respect of
awarding of a project for developing and executing the transmission system at
Mainpuri and associated works on a build, own, operate and transfer (BOOT)
basis. ICo entered into a Service Agreement for the same with H on 08.07.2010
by virtue of which it agreed to pay a consultancy fee of Rs. 84 crore plus
applicable taxes in respect of the services to be rendered by H. The amount was
payable within 120 days of signing the agreement or upon financial closure of
project; whichever was later. H alleged that final financial closure of the
project took place on 1.5.2014.
On 15.03.2016, ICo entered into a Final Settlement and
Consultancy Agreement dated 15.03.2016 (Final Settlement Agreement) in order to
fully and finally settle its claims and dues with H. H alleged that the same
was done fraudulently and without an intention to honour the obligations. In
terms of Final Settlement Agreement, SCo, a subsidiary of ICo had undertaken to
pay H a sum of Rs. 38 crore along with applicable taxes in full and final
settlement of amount due by ICo. H filed a petition before Allahabad Bench of
NCLT in order to take recourse against SCo u/s. 9 of the Code for payment of
sum of Rs. 59.2 crore due in terms of Final Settlement Agreement. H
subsequently filed an application before this Tribunal u/s. 9 of the Code for
recovering an amount of Rs 96.6 crore.
HELD
The Tribunal observed that there were two different amounts
recorded as payable in respect of the same service rendered by H. The date of
default in the present application was stated to be 1.5.2014, whereas before
the Allahabad Bench, the date of default against SCo was 15.03.2016. Thus, the
Tribunal held that there was a dispute so far as the ICo is concerned, and
hence, the present petition u/s. 9 could not be admitted.
The Tribunal further held that as H had alleged fraud and
inducement on part of ICo and there was a counter defence to the same by ICo;
the existence of dispute could not be ruled out. Final Settlement Agreement did
not have a provision that if the payment was not honoured, H would be entitled
to fall back on the original agreement of the year 2010.
The said recourse was further denied as H had already
commenced the proceedings against SCo.
As the Final Settlement Agreement was already in
place with SCo and proceedings for default under the same were already
initiated, the application was dismissed by the Tribunal and a cost of Rs.
50,000 was imposed upon H.
