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TMI Blog2001 (7) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... of India Act. Along with the said petition filed by the RBI for liquidation of the company, an application was also filed for appointment of a provisional liquidator. 3. The learned company Judge has by the impugned order dated 21-8-2000 admitted all the winding up petitions. It is needless to mention the four creditors had filed the petitions on the ground that the company had been unable to pay its debts for which, due notices were served by them under section 434 of the Companies Act to the company. The petition filed by the Reserve Bank, however, was based on the grounds under section 45MC. The learned company Judge, after hearing the parties elaborately, has admitted all the five petitions and has also appointed a provisional liquidator under section 450 of the Act. It is this order, which has been assailed before us in this appeal by the Company. 4. There is one more proceeding before us, which has been filed by the Reserve Bank of India, in the nature of the cross-objection, taking exceptions to the observations made by the learned company Judge. We propose to deal with both these proceedings simultaneously since the question and the parties are common. 5. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Jagmohan AIR 1981 SC 136. 8. As against this, the learned senior counsel, Mr. C.A. Sundaram, appearing on behalf of the RBI, Mr. Arvind P. Datar for the provisional Liquidator and Mr. T.R. Rajagopalan for the depositors pointed out that the plea of denial of opportunity was a myth. The learned counsel pointed out that the whole exercise went on for a month. They pointed out that not only did the Company filed detailed affidavits opposing the allegations, but the learned counsel were also extensively heard on its behalf. It was pointed out that the learned company Judge, in fact, could have straightaway passed an order to appoint provisional liquidator by way of ex parte orders more particularly considering the fates suffered by thousands of depositors on account of the complete mis-management tending to be of criminal nature. However, the learned company Judge on giving full opportunity to the company had also probed himself into the facts before arriving at the conclusion to admit the liquidation petitions and the petition for appointment of the provisional Liquidator. Indeed, from the records, it is clear that the company was very much on the scene even prior to 21-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht by the creditors were supplied. Though they are said to be the particulars supplied, in effect, those are also the plea to avoid the liquidation. Along with this, the balance-sheets of the company, the list of principal assets and the extent of deposits received by the company have all been referred to in these particulars besides the other important points like the loans obtained, the investments made, etc. Number of annexures are also filed along with this which include the actual balance sheets, the list of principal assets, the details of the secured creditors, etc. Even the details of the equity holdings of the other subsidiary companies seem to have been provided. The balance-sheets of the subsidiary companies have also been provided. So also, the details regarding the three firms promoted by the company and other details of investments made and transactions have been provided in the annexures. Complete list of deposits and the creditors and the pending litigations is also enclosed by way of annexures. The details of the outstanding from the group companies as also the details of the investments are to be found. It is seen that the learned company Judge had directed almost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tstandings against the Company are in far excess than its assets. This order and the whole record as such, therefore, goes totally contrary to the claim made by the learned senior counsel that the company had no opportunity. Paragraph 24 of S.L. Kapoor s case (AIR 1981 SC 136) cited ( supra ), was pressed into service to suggest the importance of the observance of the principles of natural justice. We have absolutely no quarrel with any of the principles laid down there which are binding on us. However, we do not see how the natural justice was trampled in this case or how it could be said that in this case the justice was not even manifested to have been done. 11. Mr. Datar, the learned senior counsel appearing on behalf of the provisional Liquidator invited our attention to the ruling of the Supreme Court (AIR 1999 SC 2583) ( M.C. Metha v. Union of India ) and more particularly to the observations made in paragraphs 20 and 21 and suggested that where only one conclusion was possible and permissible on admitted or undisputed factual position, the Court need not issue a writ merely because there is a violation of principles of natural justice. In the present case, the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that these investments were not bona fide. The learned Judge has taken care to suggest that a further probe is required to be made to ascertain the real beneficiaries of the amounts siphoned off from MCC Ltd., through the investment companies. The auditors have noted that brokerage was being paid to companies in the same group . The learned Single Judge also finds in paragraph 27 that the investments made by the company to the tune of Rs. 20 crores was also questionable and needed probe. After realising all these defects, the lack of bona fides and the total mis-management of the finance perhaps tending to be criminal in nature, the learned Judge comes to the conclusion in paragraph 29 that the appointment of a provisional liquidator was fully warranted. The learned Judge thereafter has commented upon the financial debacle in the non-banking financial companies and proceeds to appoint various persons as the Auditors, Legal Advisors, Administrators, etc. The learned Judge has proceeded to give proper reasons and it is a only then that the liquidation petitions have been ordered to be admitted. We do not find any fault with the reasons given by the learned Single Judge in clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng prima facie case that the management representing the majority shareholders of the Company is conducting the business of the Company to the prejudice of the Company and the minority shareholders, as if it were their own contrary to normal business principles, proving lack of probity and jeopardy to the interest of complaining shareholders; where the majority of the shareholders in collusion with each other are indulging in acts of manipulation and purported transactions which appear on their face to be a subterfuge or bogus; public interest; interest of Company or shareholders as a class. . . ." We are in total agreement with the observations of the learned Judge. We have no doubt that the considerations enumerated by the learned Judge for the appointment of provisional Liquidator are abundantly available in the present case. We are, therefore, in complete agreement with the learned Single Judge when the learned Single Judge has admitted the petitions and has also proceeded to appoint the provisional Liquidator. 14. The learned counsel then invited our attention to the observations made in paragraph 37 where the learned Judge has given the directions that the report forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the learned Single Judge in paragraphs 37 and 38. That is a general power of the Court and there can be no doubt that every Court has that power and the learned Single Judge also had the same power. Section 443 of the Act provides for the powers of the Court. Clause ( c ) of section 443( i ) thereof speaks of the Court s powers to make any interim order which the Court thinks fit to order an investigation. In our opinion, this has got no connection with section 541 to section 543 and, therefore, we reject the argument of the learned senior counsel that that part of the order is without jurisdiction. Instead, we hold that the Court had ample powers including the power under section 443 to recommend such an investigation. After all, an investigation into the affairs of the company does not mean a final conviction of the Directors this argument, therefore, is to be rejected. 15. The learned senior counsel then urged that when the matter came before this Court, to begin with this Court passed certain orders by which Rs. 50 crores were deposited by the appellant-company and the Division Bench had then released the Chairman, Shri A.L. Vadivelu and the Managing Director, Shri Jaw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further with the criminal matter pending before it in its own rights. We, therefore, reject the contention of the learned counsel in that behalf. We, therefore, dismiss the appeal and confirm the order of the learned Single Judge. 16. Mr. Sundaram, the learned senior counsel appearing on behalf of the RBI invited our attention to some remarks against the RBI and contends that the said remarks amount to the adverse findings to the RBI and, therefore, presses his cross-objections. 17. In the first place, we must observe that those remarks are not the findings as contemplated by Order XLI, rule 22 of Codes of Civil Procedure, 1908 providing for the cross-objections. The cross-objections can be only against the adverse findings though the party concerned has succeeded on the other issues. This was not a case involving any issue where the finding has gone against the RBI. The learned Single Judge has merely made some observations. We will not go into the justification of those observations as Mr. Sundaram seeks liberty from us to make application before the learned Single Judge for expunging the remarks which, in our opinion, would be the only right course to be adopted. We, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that order on the ground of the breach of the condition by the appellants particularly regarding the arrest of the Directors of the appellant-company would not be justified in pressing for their rearrest or the cancellation of grant of bail. Such relief can be claimed only before the Court by which the bail orders were passed. Strictly speaking bail orders have not been passed by the Division Bench and order dated 4-10-2000 cannot be termed to be a bail order in strict sense. We, therefore, dispose of these three applications. 20. C.M.P. No. 17066 of 2000 has been filed by the appellant praying for modification of the orders dated 4-10-2000 passed in this appeal wherein a direction is sought for disbursement of the money to the depositors or to invest the same suitably in a Nationalised Bank and pass such further or other orders as the Hon ble Court may deem fit. We are already told that the amounts which have been paid by the appellant have already been disbursed. At any rate, we do not find it necessary to pass any orders and leave it to the learned Single Judge to deal with the moneys. It would be for the provisional Liquidator to seek the directions regarding those amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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