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TMI Blog2019 (12) TMI 1466X X X X Extracts X X X X X X X X Extracts X X X X ..... about alleged execution of agreements dated 22.11.1995 and 24.4.1996 with CRB Capital Markets Limited cannot be accepted and appears to be make belief. NSEIL is directed to transfer 1,02,000 shares of Reliance Industries Limited with accumulated benefits including dividend, bonus shares etc. in favour of the applicant Committee formed by the court - Application allowed. - CO.PET. 379/2009 - - - Dated:- 5-12-2019 - MR. JUSTICE JAYANT NATH, JJ. For the Appellant : Mr.Abhishek Baid and Mr.Praneet Das, Advs. For the Respondent : Mr.Anurag Ahluwalia, CGSC for UOI, Mr.Sumit Nagpal, Adv. for National Stock Exchange, Mr.Sudhanshu Batra, Sr.Adv. with Mr.Bhuvan Gugnani and Mr.Aditya Mishra, Advs. for CRB Special Committee, Mr.Avneesh Garg and Mr.Neelkamal Mishram, Advs. for non-applicant No.2 ORDER JAYANT NATH, J. CA No.1132/2017 1. This application is filed by the Special Committee constituted by order of this court dated 29.5.2013 for appropriate directions to the National Stock Exchange of India Limited (hereinafter referred to as to the NSEIL ) for release of 1,00,000 shares of Reliance Industries Limited including all corporate benefits thereon tog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommittee got knowledge about the issue which is raised in the present application on coming to know about pendency of a Civil Suit being No.2158/2008 filed by one Rommel Investment Private Limited which was pending adjudication before this court. It is stated that after going through the suit and the sketchy and incomplete record received, the background facts came to light. As per the facts which have come to the knowledge of the committee the said CRB Mutual Funds had purchased shares of two different Reliance Companies. On account of a merger that took place of the two companies with Reliance Industries Limited the said CRB Trustee Limited a/c CRB Mutual Fund were allotted shares of Reliance Industries Limited. It is stated that in June 1996 the said CRB Asset Management Company Limited and CRB Trustee Limited decided to sell approximately 1,10,000 shares of Reliance Industries Limited. The mandate was given to Rommel Investment Private Limited (hereinafter referred to as Rommel). In the mandate dated 10.6.1996 it was agreed that before finalising any deal with the prospective buyer written consent was mandatory from the mutual fund. Reliance is placed on a communication dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rommel agreed to purchase 18,75,000 units of Arihant Mangal from Exxon Financial Services Limited. CRB Capital Markets Limited again pledged 80,000 shares of RIL to Rommel. It is claimed that on account of default in repurchasing of the units by CRB Capital Markets Limited Rommel sold 1,02,000 shares of RIL which were pledged by CRB Capital Markets Limited, in the open market. Thereafter from the said proceeds Rommel is said to have purchased 1 lac shares of RIL which were transferred in the name of Rommel. Out of these, in April 1997, 60,400 shares were sold in the open market through one broker Triumph International Finance India Limited (hereinafter referred to as Triumph) for a sum of ₹ 1,87,43,559. However, sale proceeds were not paid by Triumph to Rommel. Pursuant to a complaint made by Rommel, Triumph furnished a bank guarantee of ₹ 1,80,00,000/-. Subsequently, Triumph replaced the Bank Guarantee for ₹ 1,80,00,000/- with 1,00,000 shares of RIL then valued at ₹ 1,36,25,000 and balance sum of ₹ 43,75,000 was put in a Fixed Deposit. 9. It is the grievance of Rommel that National Stock Exchange of India Limited has wrongly continued to withhold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged to CRB Capital Marks Limited are involved. 13. I may first refer to a letter written by the National Stock Exchange of India Limited to the office of Official Liquidator on 30.09.2004. This communication provides some details of the transactions that have taken place between the applicant and Rommel. The relevant part of the letter reads as follows:- From the facts mentioned in the complaint, it was observed that certain transactions took place in 1996 related to shares held by CRB Trustees Limited A/c CRB Mutual Fund and therefore the above sale consideration was not released by Triumph to Rommel. .......... From the above facts and submission made by Rommel, the following factual position emerges:- 1. IIT Corporate Services Ltd., the custodian for CRB Mutual Fund have confirmed that the sales proceeds in respect of 89,400 shares sold in 1996 have been directly received by the CRB Mutual Fund. 2. The Court order dated September 7, 2001 issued by the Hon ble High Court at New Delhi does not include the name of Rommel Investment P Ltd. and also name of Triumph International Finance India Ltd. As Rommel Investment P. Ltd. has been pursuing the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given any details of the manner by which the payments were allegedly made. 17. Apart from the above aspect for the reasons which I shall state hereinafter, in my opinion the non-applicant Rommel has failed to place on record the full relevant records/facts. Its defence regarding title to those shares appear to be make belief and cannot be relied upon. 18. Rommel s defence is around the agreements allegedly entered into with CRB Capital Market Limited dated 22.11.1995 and 24.4.1996 where it is stated that 1,02,000/- shares were pledged on account of loans given by Rommel for subscription to Arihant Mangal Scheme. This plea is bereft of material details. A perusal of the three agreements placed on record allegedly executed between Rommel and CRB Capital Markets Limited would show that there are no details mentioned of the share No., folios etc. of Reliance Industries Ltd. which were allegedly hypothecated to Rommel for alleged loans given to the said CRB Capital Markets Limited. There is no detail also forthcoming as to through which instrument or method loan/consideration for purchase of units of the Arihant Mangal Scheme were paid by Rommel to CRB Capital Markets Limited. Rom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elate to 1,02,000 shares pledged on account of a loan given by Rommel for subscription to Arihant Mangal Scheme appears make belief. 23. Reference in this context may be had to the judgment of the Supreme Court in Union of India vs. Ibrahim Uddin, (2012) 8 SCC 148 where the Supreme Court held as follows:- 12. Generally, it is the duty of the party to lead the best evidence in his possession, which could throw light on the issue in controversy and in case such material evidence is withheld, the court may draw adverse inference under Section 114 Illustration (g) of the Evidence Act notwithstanding, that the onus of proof did not lie on such party and it was not called upon to produce the said evidence. [Vide Murugesam Pillai v. Manickavasaka Pandara: AIR 1917 PC 6, Hiralal v. Badkulal: AIR 1953 SC 225, A.Raghavamma v. A. Chenchamma: AIR 1964 SC 136, Union of India v. Mahadeolal Prabhu Dayal: AIR 1965 SC 1755, Gopal Krishnaji Ketkar v. Mohd. Haji Latif: AIR 1968 SC 1413, BHEL v. State of U.P.: (2003) 6 SCC 528, Mussauddin Ahmed v. State of Assam: (2009) 14 SCC 541, and Khatri Hotels (P) Ltd. v. Union of India: (2011) 9 SCC 126] . 24. Thus, in view of the above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for return of the FD amount. The approach shows a half hearted attempt to try and get the money which was stuck since 1997 with Triumph/NSEIL. 25. Before proceeding further, I may look at the legal position in this regard. A Coordinate Bench of this court in the case of M.R. Bakshi vs. Fintra Systems Ltd., 2008 (151) DLT 1 while dealing with section 542 of the Companies Act, 1956 held as follows:- 10. Having considered the respective submissions I am, as at present advised, inclined to agree with the submissions of Mr. Rajiv Shakdher, Sr. Advocate the learned Amicus Curiae. Keeping in view the purpose for which Section 542 has been enacted, and the fact that timely action is of the essence, not only to prevent the presentation of a fiat accompli by the fraudulent Directors of the company, but also to provide relief to the victims of the fraud, it seems that the establishment of the fraudulent conduct for attracting the provision of Section 542 of the Companies Act does not require the same standard of proof as in a criminal trial and the rigours of the law of evidence as apply to a criminal trial would not apply to establish the commission of fraudulent acts and omissions b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the aforesaid process, the entity of the company has been misused and exploited. 12. From the aforesaid reports of the CBI, prima facie it appears to me that this is a fit case for holding the directors of the company in liquidation personally liable, without any limitation of liability. Section 542 is an exception to the general rule that in a limited liability company, the liability of the shareholders and directors is limited. The purpose and object of Section 542 is to catch up with the fraudulent directors and other persons responsible for defrauding the creditors and shareholders of the company, who deliberately conduct the affairs of the company in a manner as to rob the company of its resources and allow it to bleed. Conduct, which does not appear to be bona fide or innocent, or a mere judgmental error, but which personally enriches the Directors/managers of the company directly or indirectly at the expense of the company, permits the Courts to take away the protective shield that the directors/manager enjoy under the law. The shield of corporate entity with limited liability of the shareholders/Directors, provided by the law is not meant to protect fraudsters. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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