2010 (4) TMI 596 - HC - Companies Law

Alleged inter-corporate deposits made by the petitioner with the common company and the alleged failure of the company to repay the same Held that - The company has made the submission as recorded here with full prejudice and with knowledge of the risks that it entails. If it is true it exposes the dirty underbelly of Indian corporate functioning and the market watchdog and sentinels must be alerted. But whatever may be the consequences the simple version of things that the petitioner in either case painted appears to be a trifle short on details. The claims of the petitioners are relegated to suits. That does not imply that the company s version has been accepted but only that a triable issue has arisen upon the company claiming that the payments made by either petitioner were part of a series of concurrent transactions that these parties with several others had devised. The two documents that the company has relied on in its original affidavit in either case do not appear to have been contemporaneously issued though the letterheads and the rubber-stamps have not been specifically questioned by the petitioners in their affidavits-in-reply. The petitioners have alleged that these are manufactured documents and it is more than likely that they are so but in the absence of the petitioners having denied the letterheads and the rubber-stamps the veracity of such documents have to be tested in more protracted proceedings than is conveniently permissible in this summary jurisdiction. C.P. No. 316 of 2008 and C.P. No. 315 of 2008 are permanently stayed.

Issues Involved:
1. Alleged inter-corporate deposits and the failure of repayment.
2. Lack of documentation for the deposits and interest agreements.
3. Company's defense of "concurrent transactions."
4. Petitioner's claim of statutory presumption under Section 434 of the Companies Act, 1956.
5. Alleged fabrication of documents by the company.
6. Equitable jurisdiction and the necessity for detailed proceedings.

Issue-wise Detailed Analysis:

1. Alleged Inter-Corporate Deposits and the Failure of Repayment:
The petitioner claimed that inter-corporate deposits totaling Rs. 4.18 crores were made during the financial year 2006-07, with an agreed interest rate of 10% per annum. The petitioner asserted that despite repeated requests, the company failed to repay the amount, except for Rs. 10 lakhs on account of interest on May 13, 2008. The statutory notice issued on August 7, 2008, detailed the deposits, which the company received but did not respond to.

2. Lack of Documentation for the Deposits and Interest Agreements:
A significant feature of the case was the absence of any written agreement or documentation exchanged between the parties at the time of the alleged deposits. The petitioner relied solely on the statutory notice as evidence. The company's affidavit denied the claim, asserting that the transactions were "concurrent" and not inter-corporate deposits.

3. Company's Defense of "Concurrent Transactions":
The company contended that the payments received were immediately passed on to other entities, suggesting that the transactions were mere book entries. The company provided bank statements to support this claim, showing simultaneous payments to entities like Computech and Compact Disc India. The company argued that these transactions were part of a series of concurrent dealings orchestrated by individuals associated with both the petitioner and the company.

4. Petitioner's Claim of Statutory Presumption Under Section 434 of the Companies Act, 1956:
The petitioner argued that the company's failure to respond to the statutory notice created a presumption of the company's inability to pay its debts under Section 434. The petitioner maintained that the onus was on the company to prove that there was no debt due, and the petitioner no longer needed to affirmatively establish its claim.

5. Alleged Fabrication of Documents by the Company:
The company relied on documents purportedly showing that the petitioner had instructed payments to be made to other concerns. The petitioner alleged these documents were fabricated for the proceedings. The petitioner pointed out that if these documents were genuine, there would have been no need for the company to make a payment of Rs. 10 lakhs in May 2008. The court noted that while the documents seemed likely fabricated, their veracity needed to be tested in more detailed proceedings.

6. Equitable Jurisdiction and the Necessity for Detailed Proceedings:
The court found the petitioner's claim somewhat incredible, given the lack of documentation for such significant transactions. The court noted the unusual nature of the petitioner's payments and the company's assertion of concurrent transactions. The court decided that the claims raised triable issues that required more protracted proceedings than could be handled in this summary jurisdiction. As a result, the petitions were relegated to suits, and the court ordered the Registrar to forward copies of the judgment to the Central Board of Direct Taxes and the Securities and Exchange Board of India for further action.

Conclusion:
The court permanently stayed C.P. No. 316 of 2008 and C.P. No. 315 of 2008, emphasizing the need for detailed examination of the claims and defenses presented. The court's decision highlighted the complexities and potential improprieties in the transactions, necessitating further investigation by relevant authorities.

← Previous Next →