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2020 (2) TMI 819 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHIOppression and Mismanagement - siphoning of funds - allegation that shares are not listed at Pune Stock Exchange, Siphoning of investors money, Company has not issued financial statement after 1995, Company changes registered office frequently - HELD THAT:- t is clear that in the terms of provisions of Section 62(1) of the Companies Act, 1956 the persons who are authorised to issue or prospectus of the public/persons to subscribe for shares in/or debentures of the company shall be liable to pay compensation to every person who subscribes any shares in/or debentures of the company on the faith of prospectus for any loss or damage. It is also found that the company came out with Initial Public Offer and issued prospectus to raise public funds on 10.10.1996. Thereafter the team of directors has completely changed. The initial promoters of the company are not We have carefully examined the balance sheets and financial statements for the financial year 2014-15 and 2015-16 which shows that the company has not carried out any business. We have also found that the respondent company has not filed any statements before the ROC since its incorporation. However, the ROC has not taken any action against the company and its directors. We have also seen that the directors have siphoned the money between 1996 to 2004. However, the inspection was ordered on 20th March, 2017 and the report submitted on 10.5.2018 and supplementary report on 13.8.2018 and the Inspecting Officer is unable to trace out real culprits i.e. the then directors. NCLT has passed the order against the appellant under 2nd proviso to sub- Section (5) of 140 of the Act which came into force on 1.6.2016. However, the appellant issued report for the FY 2014-15 and 2015-16 i.e. prior to the provision came into force. Therefore, NCLT cannot invoke jurisdiction retrospectively - The appellant was appointed on 12.3.2014 as statutory auditor of the Respondent No.2 company. The appellant issued audit report for the Financial Year 2014-15 and 2015-16 on 5.9.2015 and 05.09.2016 respectively. The appellant has issued the audit report for the FY 2015-16 on 5.9.2016 before that the 2nd proviso to sub-section (5) of Section 140 of the Act came into force with effect from 1.6.2016. Hence NCLT can exercise the powers in above referred provision. The act of the appellant is certainly a negligent act but there is no material on record to infer that he has acted fraudulently and colluded with the directors of the company in relation to affairs of the company or he has misused his position as statutory auditor of the company - the findings of the NCLT are not sustainable in law as well as in facts. Appeal allowed - decided in favor of appellant.
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