2010 (3) TMI 681 - HC - Companies Law

Public deposits, Company Law Board - Appeal against orders of, Provisions relating to non-banking institutions receiving deposits and financial institutions, Winding up - Circumstances in which a company may be wound up

Issues Involved:
1. Investigation into the affairs of the company by an independent agency.
2. Impleading a person not a party to the proceedings before the Company Law Board.
3. Public interest challenge regarding failure to repay deposited amounts.

Issue-wise Detailed Analysis:

1. Investigation into the affairs of the company by an independent agency:
The court examined whether it could direct an investigation into the affairs of a company by an independent agency like the Central Bureau of Investigation (CBI) by lifting the corporate veil. The appellant and depositors contended that severe irregularities and diversion of funds necessitated an investigation by an independent agency. However, the court held that the Companies Act, 1956 provided sufficient mechanisms for investigating company affairs through sections 235 to 242, which allow for investigations by the Central Government or the Registrar of Companies. The court emphasized that the Act is a self-contained code with adequate provisions to safeguard depositors' interests and prosecute any misdeeds by past or present directors. Therefore, the court concluded that there was no necessity to order an investigation by an independent agency like the CBI.

2. Impleading a person not a party to the proceedings before the Company Law Board:
The court addressed whether a person not a party to the proceedings before the Company Law Board could be impleaded in an appeal under section 10F of the Companies Act, 1956. The appeal in question was filed against an order of the Company Law Board, and the appellant sought to implead the erstwhile promoter, directors, and holding companies as respondents. The court held that section 10F allows appeals only on questions of law arising from facts already on record. Introducing new parties would necessitate new facts and evidence, which is against the scope and spirit of section 10F. Consequently, the court determined that new parties could not be added to the appeal.

3. Public interest challenge regarding failure to repay deposited amounts:
The court considered whether the failure of a company to repay deposited amounts could be challenged as a matter of public interest in an appeal under section 10F of the Companies Act, 1956. The court noted that section 10F provides for appeals on questions of law only and that individual depositors have the right to file applications under sections 58A and 58AA for the recovery of their amounts. Since the recovery of deposits is a matter of individual right, there would be no common interest among depositors to justify a public interest challenge in an appeal under section 10F. Therefore, the court concluded that such an appeal in the nature of public interest is not maintainable.

Separate Judgments:
The court delivered separate judgments on various related petitions and appeals:

1. C.A. No. 15 of 2003: The appeal against the Company Law Board's order dated 23-6-2003 was dismissed as the time sought by the NFL company had expired, and no issue remained to be decided.

2. C.A. No. 23 of 2003: The appeal against the Company Law Board's order dated 31-10-2003 was addressed, noting that the appellant could execute the decree under section 634A of the Act.

3. W.P. No. 17814 of 2004: The writ petition seeking a CBI investigation into the affairs of the NFL company was disposed of, directing the petitioners to avail themselves of remedies under the Act.

4. W.P. No. 3780 of 2004: The writ petition seeking to declare the inaction of the Registrar of Companies as illegal was dismissed as it overlapped with other proceedings.

5. C.P. No. 80 of 2004: The company petition filed by the Reserve Bank of India for winding up the NFL company was allowed, and the Official Liquidator was appointed.

6. C.P. No. 55 of 2002 and batch: Various company petitions filed by depositors seeking the winding up of the NFL company were allowed, and the Official Liquidator was appointed to manage the company.

Conclusion:
The court concluded that all petitions seeking the winding up of the NFL company were allowed, and the Official Liquidator was appointed. Other related petitions and appeals were referred back to the learned single judge for disposal.

← Previous Next →