2010 (9) TMI 1305 - HC - Companies Law

Summary

Issues:
Recovery of amount under S.446 of the Companies Act, 1956 from respondent M/s Arcon Engineering Co. Ltd. for an inter-corporate loan taken by the respondent.

Analysis:

1. The Official Liquidator filed an application under S.446 of the Companies Act, 1956 seeking recovery of Rs. 56,51,107 with interest from M/s Arcon Engineering Co. Ltd. The respondent company had taken an inter-corporate loan of Rs. 50 lakhs from the company in provisional liquidation. The loan was evidenced by a demand draft issued by the company in provisional liquidation in favor of the respondent. The respondent reimbursed a sum of Rs. 3,000 for bank charges and paid interest at 24% per annum on the loan amount. Despite multiple notices for payment, the respondent failed to make any payment, leading to the current application for recovery.

2. In response, the respondent denied receiving an inter-corporate loan and claimed that the Rs. 50 lakhs was share application money paid by the company in provisional liquidation to purchase shares in the respondent company. However, the respondent failed to provide supporting documents initially. Subsequently, a photocopy of a share application form was produced, but its authenticity was challenged by the ex-management of the company in provisional liquidation. The respondent also failed to produce the original share application form or provide details of the alleged share allotment to the company in provisional liquidation.

3. The Court analyzed the nature of share application money, highlighting that it is usually paid by cheque and not necessarily by demand draft. The Court noted that the additional expense incurred by the company in provisional liquidation for the demand draft indicated a different purpose than a simple share application. The Court found the respondent's explanation regarding the nature of the amount received as share application money unconvincing, especially considering the lack of supporting documentation and failure to produce the original share application form.

4. Consequently, the Court directed the respondent to pay the outstanding amount of Rs. 56,51,107 to the applicant, along with interest at 6% per annum from the date of the application till realization. The Court found the amount claimed by the Official Liquidator to be proved based on the evidence presented, the lack of credible defense from the respondent, and the failure to produce essential supporting documents.

5. The judgment concluded by disposing of the application in favor of the Official Liquidator, emphasizing the respondent's obligation to make the payment as directed by the Court.