2012 (8) TMI 380 - HC - Companies Law

Winding up alleged that company was unable to pay its debts respondent company was taken over by another company but no payment was made by either company Held that - Petitioner is an admitted creditor and the respondent is unable to pay its debts, present petition is admitted and respondent company is directed to be wound up. Fraud on investors - held that - Mr. Vijay Kumar Sharma and his family members are targeting small and middle class investors as they know that they are unorganized and do not have resources to defend themselves. Even the statutory authorities like the Official Liquidator s office who are entrusted with the duty to bring the culprits to book are not able to keep pace with the scams perpetrated by Mr. Vijay Kumar Sharma and his family members. In fact, the Official Liquidator s office is ill-equipped, under-staffed, untrained and manned by non-professionals. Had it not been for the SFIO and police inquiry, Official Liquidator would never even have come to know about the real diversion of funds even in JVG Finance Company, despite lapse of more than ten years. Direction given to the Central government to revoke DIN in order to prevent them creation of new company. Directions given to all banks to stop operation of their accounts.

Summary

Issues Involved:
1. Petition for winding up under Section 433(e) read with Sections 434 and 439 of the Companies Act, 1956.
2. Admission of debt by the respondent company.
3. Alleged transfer of liability to a third party.
4. Appointment of Provisional Liquidator.
5. Restraint on respondent company's transactions.
6. Investigation into the affairs of associated companies and individuals.
7. Coordination among statutory authorities.

Issue-wise Detailed Analysis:

1. Petition for Winding Up:
The petitioner filed a winding-up petition under Section 433(e) read with Sections 434 and 439 of the Companies Act, 1956, claiming that the respondent company is unable to pay its debts amounting to Rs. 1,18,12,836/-.

2. Admission of Debt by Respondent Company:
The petitioner argued that the respondent company had placed various orders for advertisements and had acknowledged a debt of Rs. 1,07,17,568/- in a letter dated 28th July 2007. This letter was reproduced in the judgment, confirming the respondent's admission of the debt.

3. Alleged Transfer of Liability to a Third Party:
The respondent's counsel claimed that the liability had been taken over by M/s. Vian Infrastructure Ltd., with the petitioner's consent. However, no agreement was provided to substantiate this claim. The court noted that the status report from the Economic Offences Wing indicated some payments in the past by M/s. Vian Infrastructure Ltd., but these were shown as advances and not as settlement of the debt.

4. Appointment of Provisional Liquidator:
The court, considering the respondent's admission of debt and lack of evidence for payment, admitted the petition and directed the winding up of the respondent company. The Official Liquidator was appointed as the Provisional Liquidator to take over the assets and records of the respondent company.

5. Restraint on Respondent Company's Transactions:
The court restrained the respondent company, its Directors, officers, and representatives from selling, transferring, or encumbering any assets or funds. They were also restrained from withdrawing any money from the company's accounts.

6. Investigation into the Affairs of Associated Companies and Individuals:
The judgment highlighted the involvement of Mr. Vijay Kumar Sharma and his associates in multiple financial scams. The court directed the Serious Fraud Investigation Office (SFIO) to investigate the affairs of several companies associated with Mr. Sharma and his family. The investigation was to be completed expeditiously, with a report submitted to the court within eight weeks.

7. Coordination among Statutory Authorities:
The court observed a lack of coordination among various statutory authorities investigating Mr. Sharma. It directed the Secretary, Ministry of Corporate Affairs, to convene monthly meetings to ensure coordinated action by all relevant authorities, including the Reserve Bank of India, Economic Offences Wing, Delhi Police, Central Bureau of Investigation, SFIO, and the Official Liquidator's office.

Additional Orders:
- The court directed the revocation of Director Identification Numbers issued to Mr. Vijay Kumar Sharma and his two wives, preventing them from incorporating or managing any company until the proceedings were concluded.
- Banks were instructed not to allow the operation or opening of any accounts related to the aforementioned companies by Mr. Sharma and his wives, except for their personal accounts.
- The Reserve Bank of India was to issue directions to banks to identify the individuals clearly to avoid harassment to others with similar names.
- The court emphasized the need for effective measures to prevent future financial scams by Mr. Sharma and his associates.

Conclusion:
The petition was admitted, and the respondent company was directed to be wound up. The Provisional Liquidator was appointed to take over the company's assets and records, and extensive measures were ordered to investigate and prevent further financial misconduct by the involved parties. The matter was listed for further hearing on 1st October 2012.