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TMI Blog2016 (6) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... t signed on 12.07.2010 and that the respondents had invested an amount of ₹ 12.7 crores whereas the appellants had made investment of only ₹ 1 lakh at the time of incorporation of the said company, which amount has already been paid back to him by the investors' group of companies. Any investigation under Rule 235 of the Act would be a fact finding process and such power would be administrative in nature. However, since the facts were already known to the parties, through the statutory filings of the company, no further information would come out from the investigation. Indeed the said information has already been placed before the various law enforcing agencies by the appellants for them to carry out their respective necessary action. Evidently, the impugned order takes into account all the relevant facts and has come to the conclusion that the circumstances under Section 237 do not exist to warrant an investigation. - CO.A.(SB) 39/2013 - - - Dated:- 2-6-2016 - MR. NAJMI WAZIRI J For the Appellants: Ms Manmeet Kaur, Mr Yashvardhan Bandi Mr Manan Chaddha, Advs.. For the Respondents: Mr U.K. Chaudhary, Sr. Advocate with Mr Naveen Dahiya Mr Himanshu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 234, or under sub- section (7) of that section, read with sub- section (6) thereof, appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct. (2) Where- (a) in the case of a company having a share capital, an application has been received from not less than two hundred members or from members holding not less than one- tenth of the total voting power therein, and (b) in the case of a company having no share capital, an application has been received from not less than one- fifth of persons on the company' s register of members, the Company Law Board may, after giving the parties an opportunity of being heard, by order, declare that the affairs of the company ought to be investigated by an inspector or inspectors, and on such a declaration being made, the Central Government shall appoint one or more competent persons as inspectors to investigate the affairs of the company and to report thereon in such manner as the Central Government may direct. 4. The appellants therefore filed a petition under section 235 of the Companies Act befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed and collected evidences pertaining to the violations, irregularities and statutory non-compliances. But, as stated by the Respondents, there was some deed of settlement which was signed on 12th July, 2010 and the Respondent Advocate has also stated that the amount of ₹ 12.7 crores have been invested by the Kuwait Group Companies from the incorporation while not a single penny has been invested by the Petitioners except ₹ 1 lakh paid at the time of incorporation of the Respondent No.12 Company on behalf of AI Futtooh Investments and its associates and the said amount of ₹ 1 lakh has already been paid to the Petitioners in the year 2004 itself. However, the main grievances of Petitioners relate to dilution of shareholding of the Petitioners, removal of Petitioner No.2 3 from the directorship and appointment of Respondent No.2 as Executive Director and prima facie, documents/returns/forms pertaining to these controversial matters are available on the Portal of the Ministry of Corporate Affairs and the same can be used for action u/s 397/398 of the Companies Act, 1956. Admittedly, the investigation u/s 235 of the Act is a fact finding process and to order i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half of Respondent No.12 before this Hon'ble Bench taken be taken on record since it suffers from the infirmity that it does not have a legally sworn affidavit. It is the submission of the Petitioners that this Hon'ble Bench may therefore disregard each and every averment made in the said reply and not place any reliance on the same. 7. The learned counsel for the appellants submits that the impugned order has not even referred to this objection which is most preliminary in nature as it discusses the issue of authorization of a person to pursue the case before the CLB. In effect, the contention is that in the absence of due authorization before a notified Government officer, such representation on behalf of the company would be non est in the eyes of law. 8. In reply, the respondents contend that this is a curable technical defect. The learned counsel for the respondents refers to the judgments of the Supreme Court in Union Bank of India v. Naresh Kumar and Ors., (1996) 6 SCC 660 and this Court in Mahesh Nathani v. Sir Edward Dunlop Hospitals India Limited, 2005 (82) DRJ 136 which have held that defects relating to authorization of power of attorneys can be cured and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as it amounts to forum shopping; and (iii) therefore, the present petition is infructuous and deserves to be dismissed. He further submits that the factual finding of the CLB does not amount to a judgment within the ambit of Clause 15 of the Letters Patent, 1865 and as such cannot be appealed by an aggrieved party. He relies on the case law laid down by the Calcutta High Court in Mayank Kocher v. Transport Handling Equipments MFG. Co. P. Ltd, (2008) 143 Comp Cas 601 (CLB). While discussing section 235 of the Act, the order records that: Under this Section directing an investigation is only analogous to the issue of a fact finding commission by a civil court for looking into accounts or making an investigation and does not amount to a judgment within Clause 15 of the Letters Patent, so as to enable an aggrieved party to appeal. 11. Refuting this, the learned counsel for the appellants argues that an appeal under section 10F of the Companies Act is maintainable even if the order is judicial, quasi-judicial or administrative in nature; that in the case of R.P. Khosla v. Connaught Plaza Restaurant Pvt. Ltd. Ors., (2014) 184 Comp Cas 305 it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 399. It held: This Board has always taken the view that if the shareholding of the petitioners is reduced below 10% of account of further issue of shares and if the issue of further shares is also challenged in the petition, then, the petition will not be dismissed as not maintainable in terms of Section 399. Instead, the allegation relating to the issue of further shares would be examined first as to whether the same is an oppressive act and if it is found to be so, then only other allegations in the petition would be examined. 14. The appellants contend that the money which was received by them under Foreign Direct Investment was only a loan from the companies M/s Al Futtooh Investment Company, M/s Hamoor International Trading and M/s Kuwait Investment Projects Company. The appellants refer to the Foreign Inward Remittance Certificates (FIRCs) which would indicate that the money came into the country in the form of borrowings from the abovementioned Kuwaiti companies. They submit that the respondents have failed to produce any documentary evidence to show any connection between respondent Nos. 1 and 2 with the three abovementioned Kuwaiti companies an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment, and in view of the audited balance sheet for the year ended 31.03.1992 reflecting the paid up capital as ₹ 75 lakhs, the voting strength was determined by reckoning the paid up capital of ₹ 75 lakhs. As such, on the date of filing of the petition, i.e., 17 November, 1992, the petitioners held less than one-tenth of the total voting power and so could not maintain this application under section 235 of the Act. We, however, in view of the circumstances as set out in the petition and the various pleadings ast(sic) the facts, having regard to the provisions of Section 237(b) of the Act, the various circumstances set out in the pleadings were considered as 'information' for examining whether there was justification for forming an opinion, with regard to investigation under that section. 17. Likewise in In Re: Shree Rama Multi Tech Ltd. [2005] 63 SCL 154 (CLB), the CLB relied upon the judgment in Smt. Chandra Prabha and Another v. Hotel Shweta (P) Ltd. Others (supra) and held as under: I have gone through the pleadings and heard learned counsel for both the parties and it is observed that the petitioner has not fulfilled the conditions laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yers, which could be prayed for only in a petition under Section 111 of the Act of 1956 clearly reveal along with other averments made in the petition that the petitioner is not a shareholder and is, therefore, not entitled to maintain the petition. Since as on date (or as on date of filing of the company petition), he is not a member of the respondent-company, he, therefore, has no locus standi to inspect and take copies of the documents of the respondent-company. Reliance is placed on the judgment of the hon'ble Delhi High Court in the case of V.V. Purie v. E.M.C. Steel Ltd. [1980] 50 Co. Cas 127, wherein it is held that a person having no manner of interest or concern in the company as a shareholder, creditor or otherwise, has no locus standi to prefer an application to the court for an order under Section 237(a)(ii) of the Companies Act, 1956, declaring that the affairs of a company ought to be investigated by an inspector appointed by the Central Government. The judgment further lays down that (headnote): Though Section 237 is couched in very wide language, the basic limitation that the courts will not entertain action on behalf of private persons to enforce the observance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors., (1970) 40 Comp Cas 282 (All), wherein it was held that in appropriate cases, a probe under Sections 235 to 237 may be a necessary prelude to proceedings under Sections 397 to 399 of the Act. It reads as under: 28. Before concluding, I may indicate a procedure which could, in appropriate cases, be held to be a necessary prelude to proceedings under Sections 397 and 398. Sections 235 to 237 of the Act empower the Central Government to appoint one or more inspectors to investigate the affairs of a company and to submit a report, which is made legally admissible evidence, by Section 246 of the Act, in proceedings before a court of law. Such a report could provide the basis of action by the Central Government against a company under either Section 397 or Section 398 of the Act, as laid down by Section 243 of the Act, or, for recovery of damages in respect of any fraud, misfeasance, or other misconduct in the management of the company's affairs, where this is necessary in public interest, as provided by Section 244 of the Act. It could, therefore, be urged, in cases where a detailed inquiry into the conduct of the affairs of a company is called for, that a petition u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power to investigate under Section 397/398 of the Act. It went on to hold that an investigation under S. 237 can be directed upon the subjective satisfaction of the existence of circumstances as enumerated in the said section. This means that if the CLB comes to the conclusion that circumstances as mentioned in S237 do not exist, or that it is not possible to form such an opinion of the existence of such circumstances on the basis of available facts and allegations made by the applicant, then no investigation will be warranted. 26. The present impugned order has taken into consideration the facts taken on record as well as the allegations of wrongdoing made by the respondents regarding digital signatures, reduction in shareholding and voting rights of the petitioners, their removal from directorship from the company, infusion of share capital and change of registered office of the company twice. All this information has been made available through filing before the Registrar of Companies from the years 2005 onwards and the impugned order takes into consideration the same and concluded that nothing new could come out in the process of investigation. Therefore it fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders; the information was already available and has been obtained by the appellants through an e-filing of the E-form before the Registrar of Companies. Other allegations against the company relate to compliance certificates and Balance Sheets for the year ending 31.03.2005, 31.03.2006, 31.03.2007, 31.03.2008, 31.03.2009, 31.03.2010 and 31.03.2011, and this information has been gleaned from the documents and returns and forms filed with the ROC, which are available in the public domain. Therefore, the effect of the aforesaid documents would have to be, at best, examined by the proceedings under Section 397 and 398 of the Act. The objective of investigation under section 235 of the Act is to unearth and find out the new material or data. Since no further information beyond the aforesaid documents pertaining to the company is likely to be obtained, the impugned order rightly rejected the application. It also recorded that regarding other violations, complaints have already been filed before the law enforcing agencies, including, SHO, Safdarjung Police Station, New Delhi, SHO Kalkaji Police Station, New Delhi, Economic Offences Wing, New Delhi, Registrar of Companies, First C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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