2021 (11) TMI 481 - Tri - Companies Law

Seeking directions to Respondents 1, 2 3 Banks herein, to remove the freeze on the accounts of Applicant Company - siphoning of funds - HELD THAT - This Tribunal has not passed any order directing defreezing of the accounts of the Applicant as contended by the Learned Counsel for the Applicant/Petitioner Company. At the same time, it is also held that there is sufficient force in the plea of the Learned Counsel for Applicant that the freeze order which is admittedly in vogue, is preventing the Applicant Company from paying the salaries and wages to its staff and workers. There are force in the submissions of the Learned Counsel for the proposed Respondents that if the relief sought for by the applicant in this IA is granted pending consideration of the implead application, the same would result in grave injustice to the proposed respondents. Therefore, this Tribunal is of the opinion that interest of justice require, that an interim arrangement be made pending disposal of this IA. Respondent Banks are hereby directed to de-freeze the following accounts of the Applicant Company enabling the Applicant Company to operate the same subject to condition that the Applicant Company shall draw the amounts that is actually necessary and required to pay the wages and salaries to its duly employed workers and staff and to manage the day to day operations of the Company - application allowed.

Summary

Issues:
1. Freeze on company accounts by respondent banks
2. Alleged financial irregularities and diversion of funds
3. Non-compliance by respondent banks with tribunal orders
4. Dispute regarding removal of debit freeze on accounts
5. Impleadment of ex-directors as respondents

Analysis:

Issue 1: Freeze on company accounts by respondent banks
The applicant filed an application seeking directions to the respondent banks to remove the freeze on the accounts of the company. The freeze on the accounts was preventing the company from making statutory payments, salaries, and managing day-to-day operations. Despite the tribunal's order directing the de-freezing of the accounts, the respondent banks had not complied. The tribunal acknowledged the financial impact of the freeze on the company's ability to pay its workers and staff.

Issue 2: Alleged financial irregularities and diversion of funds
The applicant alleged financial irregularities and diversion of funds by the ex-director of the company, leading to the decision to change signatories for operating the accounts. The applicant sought various reliefs in the main petition, including deposit/refund of siphoned funds, removal of debit freeze, investigation against certain respondents for fraud, and setting aside the appointment of the first auditor.

Issue 3: Non-compliance by respondent banks with tribunal orders
The respondent banks had not complied with the tribunal's order for removal of the debit freeze on the accounts, despite the applicant's memo highlighting the non-compliance. The tribunal noted the email correspondence between the applicant and one of the banks where the bank denied any relationship with the company, raising further issues of non-cooperation.

Issue 4: Dispute regarding removal of debit freeze on accounts
The tribunal considered the arguments of both parties, with the counsel for the proposed respondents opposing the application, citing unresolved issues raised in their counter. The tribunal emphasized the need for a fair process, balancing the interests of the applicant and the proposed respondents, and decided to make an interim arrangement pending the impleadment of the proposed respondents.

Issue 5: Impleadment of ex-directors as respondents
The ex-directors, who were not initially impleaded as respondents in the application, filed a separate application to be included. Their counsel argued that passing an order in the absence of the proposed respondents would violate natural justice and cause hardship to them. The tribunal acknowledged the importance of their inclusion and deferred further consideration of the reliefs sought until the impleadment issue was resolved.

In conclusion, the tribunal directed the respondent banks to de-freeze specific accounts of the company to facilitate essential payments, while requiring the applicant to submit payment statements periodically. The tribunal deferred the consideration of other reliefs sought pending the resolution of the impleadment application, emphasizing the need for a fair process and interim relief to address the company's immediate financial challenges.