2004 (12) TMI 705 - Board - Companies Law

Issues Involved:
1. Alleged siphoning of funds through bogus expenditure on building renovation.
2. Alleged unjustified increase in lease rent.
3. Alleged fabrication of documents and creation of unauthorized charges.
4. Alleged siphoning of funds through purchase and leasing of equipment.
5. Alleged financial irregularities and oppression of majority shareholders.

Issue-Wise Detailed Analysis:

1. Alleged Siphoning of Funds through Bogus Expenditure on Building Renovation:
The petitioner claimed that the 2nd respondent siphoned off Rs. 140 lacs by showing bogus expenditure on building renovation. The petitioner argued that the hospital building was completed in 1995-96 at a cost of Rs. 237.65 lacs and there was no need for further renovation within two years. The respondent countered that Rs. 111 lacs was transferred from the building progress account, which was a cumulative figure from 1994-95 onwards, and only Rs. 28.75 lacs was spent during 1997-98. The Chartered Accountant's certificate confirmed this. The judgment found no merit in the petitioner's allegation, noting that the capital work in progress had been reduced and the Chartered Accountant had validated the transfer of work in progress to the building account.

2. Alleged Unjustified Increase in Lease Rent:
The petitioner alleged a significant increase in lease rent from Rs. 6.62 lacs to Rs. 24.5 lacs without justification. The respondent explained that all lease payments were genuine and supported by lease agreements and Chartered Accountant certificates. The judgment did not find substantial evidence to support the petitioner's claim of siphoning funds through lease rent.

3. Alleged Fabrication of Documents and Creation of Unauthorized Charges:
The petitioner alleged that the respondents fabricated documents and created unauthorized charges on the company's properties in favor of Bank of Baroda, violating a Calcutta High Court order. The respondent argued that these issues were already raised in the appeal before the Calcutta High Court. The judgment did not consider these allegations, as they were part of the ongoing appeal proceedings.

4. Alleged Siphoning of Funds through Purchase and Leasing of Equipment:
The petitioner claimed that the invoices for equipment purchases were procured and lacked necessary details, suggesting bogus transactions. The respondent provided detailed lists of equipment purchases and leases, supported by Chartered Accountant certificates. The judgment acknowledged that while the invoices lacked some details, it did not necessarily mean they were bogus. The Chartered Accountant had validated the transactions, and without irrefutable evidence, the claim of siphoning funds was not substantiated.

5. Alleged Financial Irregularities and Oppression of Majority Shareholders:
The petitioner argued that the 2nd respondent engaged in financial irregularities and oppressed majority shareholders, citing previous adverse findings by the Board in CP 86 of 1997. The respondent maintained that the company had progressed well under the 2nd respondent's management and that the petitioner's allegations were baseless. The judgment noted that the previous order was under appeal and that the current petition needed to stand on its own merits. The judgment found that the respondents had satisfactorily explained the allegations, and there was no basis for ordering an investigation.

Conclusion:
The judgment concluded that the petitioner did not provide sufficient evidence to warrant an investigation into the company's affairs. The respondents had satisfactorily addressed the allegations, and the Chartered Accountant's certificates supported their explanations. Therefore, the petition for investigation under Sections 235/237 of the Companies Act, 1956, was dismissed.

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