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2018 (1) TMI 1178 - Tri - Companies LawExtension of time for repayment of deposits under Section 74 of the Companies Act, 2013 - Repayment of deposits, etc., accepted - Held that - Having earned extension for such a long duration from the original period of maturity of fixed deposits and even getting the relief of reduced interest @ 8% per annum after the date of maturity, how can the company bring another excuse of its difficult financial position in stopping unilaterally the payments and then move application for extension of time. There should be some end to the period of extension having sought a large flexibility in making payments to the deposit holders. The losses which the company suffered in the past about five years have been given in the tabulated information in the chart filed with the registry on 23.08.2017. The loss before tax was ₹ 2385.06 lacs for year ending 30.06.2012 which has been constantly increasing from year to year and the figure of loss for the financial year ending 31.03.2017 came up to ₹ 36291.47 lacs. With this financial position, there seems to be no sincere effort at all on the part of the company in complying with the directions issued by the Company Law Board in the year 2013. With this affidavit, the audited Balance Sheets for the financial years 2015-16 and 2016-17 are also attached. For how much period, the depositors would keep suffering because of such kind of the excuses by the company without any fault of theirs. The depositors have been constantly urging on the implementation of the directions passed in the order of the year 2013 of the Company Law Board. Thus this application to be without merit and the same is dismissed. However, the company is directed to pay the arrears which remain pending till date to the depositors within a period of two months from the date of this order and keep on paying the rest of the amount strictly in terms of the order dated 30.09.2013 of the Company Law
Issues Involved:
1. Financial difficulties and liquidity problems faced by the applicant company. 2. Previous scheme for repayment of deposits sanctioned by the Company Law Board. 3. Application for further extension of time for repayment of deposits under Section 74 of the Companies Act, 2013. 4. Objections raised by depositors and the Registrar of Companies. 5. Maintainability of a second application for further extension of time. 6. Compliance with previous orders and financial projections of the company. Issue-wise Detailed Analysis: 1. Financial difficulties and liquidity problems faced by the applicant company: The applicant company, incorporated on 06.06.1986, faced liquidity problems starting in the financial year ending 31.03.2013, incurring losses amounting to ?111.29 crores. The reasons included reduction in EBITDA margin, increase in raw material costs, speculation in raw material prices, institutional sales margin reduction, increase in finance costs, insufficient cash flow to service debt obligations, high levels of finished stock, loss due to clearance of slow-moving stock, fire at Unit I, Parwanoo, increased gestation period for cost recovery, investment in non-current assets/miscellaneous expenditure, and slow-moving stock and sticky debtors. 2. Previous scheme for repayment of deposits sanctioned by the Company Law Board: The Company Law Board sanctioned a scheme for repayment of fixed deposits on 30.09.2013, directing the company to repay the contracted rate of interest on fixed deposits until the date of maturity, and thereafter, interest at 8% per annum until repayment. The scheme included a detailed schedule for repayment based on the amount of the fixed deposits, with specific provisions for hardship cases like serious illness and senior citizens above 65 years of age. 3. Application for further extension of time for repayment of deposits under Section 74 of the Companies Act, 2013: The company filed an application on 27.09.2016 seeking further extension of time for repayment of deposits under Section 74 of the Companies Act, 2013, read with Rule 11, 15, and 73 of the National Company Law Tribunal Rules, 2016, and Section 58AA of the Companies Act, 1956. The company proposed a revised schedule for repayment, seeking an extension of two years for deposit holders from ?10,000 to ?50,000 and three years for those above ?50,001. 4. Objections raised by depositors and the Registrar of Companies: Various depositors filed objections opposing the further extension of time, citing non-payment of dues and bounced cheques. The Registrar of Companies, in consultation with the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi, opposed the extension, highlighting serious complaints from investors and non-compliance with previous undertakings by the company. 5. Maintainability of a second application for further extension of time: The Tribunal examined whether a second application for further extension of time is maintainable. It referred to Section 74 of the Companies Act, 2013, which mandates repayment of deposits within one year from commencement or from the date payments are due. The Tribunal emphasized the need to safeguard the interests of fixed deposit holders and concluded that further extension is not permissible, especially given the previous relief granted by the Company Law Board. 6. Compliance with previous orders and financial projections of the company: The company was found to have not made any payments to fixed deposit holders since the institution of the application, except for hardship cases. The financial projections for the next three years indicated continued losses, and the company’s efforts to improve its financial position, including debt assignments to Asset Reconstruction Companies, were deemed insufficient. The Tribunal directed the company to pay arrears within two months and comply with the original order dated 30.09.2013, warning of consequences under the Companies Act for non-compliance. Conclusion: The Tribunal dismissed the application for further extension of time for repayment of deposits, emphasizing the need to protect the interests of depositors and adhere to the original repayment schedule sanctioned by the Company Law Board. The company was directed to clear arrears and continue payments as per the 2013 order, with penalties for non-compliance.
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