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TMI Blog2021 (1) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... relief from either of the forums and the applicants are indulging in forum shopping and Bench hunting. Respondent No. 2 has further alleged that the applicants have siphoned off an amount of ₹ 56 crores unto themselves and their relatives. Applicant No. 1 alone had diverted ₹ 3.28 crores to himself and his related parties. Respondent No. 2 has further alleged that cause of action arose prior to filing of the company petition. The applicant cannot raise issues, which relate prior to filing of petition, as provided under Order 2, rule 2 of the Code of Civil Procedure. Respondent No. 2 further submitted that the courts will not interfere in the internal affairs of the company as long as the company functions under the articles of association - In order to avoid more diversion of funds by the applicant acting solely, the board of directors in their meeting dated June 18, 2020 passed a resolution to receive all the funds in the account maintained with Yes Bank account and instructed the debtors accordingly. It is directed that the bank account of respondent No. 1 maintained with Punjab National Bank (PNB), Wardha as well as the bank account maintained with Yes Bank be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners are primarily alleging that customers of respondent No. 1-company are misled not to deposit the outstanding amounts into the account of respondent No. 1 maintained with the Punjab National Bank (PNB), Wardha, rather the customers are encouraged to deposit the same into the bank account maintained at Hyderabad so that it can be misused. Secondly, the account of respondent No. 1 maintained with Punjab National Bank, Wardha, was sought to be closed and the petitioners have obtained order from the Civil Judge, Junior Division, Wardha restraining them from doing so. It is also alleged that respondents Nos. 2 to 4 have surreptitiously transferred amounts into their personal accounts from the company's account maintained at the PNB, Wardha and Hyderabad Branch. Specific allegations : 3. It is averred that respondents Nos. 2 to 4 are trying to get illegal monetary benefits by manipulating records of the company. It is alleged that the said respondents are trying to deposit amount from debtors in bank accounts other than that of respondent No. 1-company, with intent to grab more and more funds of respondent No. 1-company. 4. It is averred in paragraphs 4 and 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company (paragraph 21). 10. It is alleged that resolution in board meeting dated September 12, 2020 (annexure G) was mischievously placed and the Tribunal stayed the same (paragraph 22). 11. It is submitted that circular resolution dated November 6, 2019 (annexure I) was passed for operating accounts with signatures of four directors of the company for any banking transaction of more than ₹ 1,000. However, on November 19, 2019 the respondents held board meeting where resolution dated November 6, 2019 was reversed authorizing two directors for banking operations (paragraph 25). 12. It is further alleged that vide resolutions dated November 19, 2019 (annexure-AO) and June 18, 2020 (annexure-BB) respondents Nos. 2 to 4 have mischievously decided to wind up operations of Wardha Branch and factory in respondent No. 1-company. Aggrieved by said decision employees of Wardha addressed letter dated July 20, 2020 (annexure-BP) requesting for salaries. Counter dated November 9, 2020/November 12, 2020 by respondent No. 2 : 13. Respondent No. 2/Mukund Maheswari, S/o. Maheswari Ghan Shyam Das Kanayalal has filed counter alleging that the applicants have diverted huge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present petition. The applicants are quoting false dates to make out a cause of action (paragraph 10). 17. It is averred that though applicant No. 1 has filed Regular Civil Suit No. 117 of 2020 before the learned Civil Judge, Senior Division, Wardha, he could not get any interim relief therein. The learned judge however, directed maintenance of status quo. Even before this Tribunal the applicants filed I. A. No. 664 of 2020, but could not get any relief. The present IA is filed with identical reliefs. Thus, the applicants are not only acting against the interest of respondent No. 1/company but are also misusing the proceedings of this Tribunal (paragraphs 13 and 14). 18. It is submitted that the applicant being a minority director cannot dictate the majority board. In this context respondent No. 2 relied on the majority rule principle in Foss v. Harbottle [1843] 2 Hare 461 ; (67 All ER 189) (paragraph 16). Counter dated November 24, 2020/November 26, 2020 filed by respondent No. 3 and response given thereto by petitioner No. 1 vide rejoinder dated November 24, 2020/November 25, 2020 : 19. Counter dated November 24, 2020/November 26, 2020 is filed by respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returns without verifying from Wardha Office. As a result it did not contain certain entries. Vide letter dated September 3, 2020 petitioner No. 1 had volunteered that respondent No. 2 may share the working prepared for returns so that the applicant can trace unreported entries and returns can be filed properly. 4. Selling away fixed assets, tools and dyes : Statement attached to e-mail dated October 1, 2020 (annexure 2) discloses the applicant has sold away critical dyes and capital moulds worth ₹ 36,48,000 without approval of board of directors. The company wrote letter dated October 22, 2020 about unreported sales and about legal cost of ₹ 89.32 lakhs incurred without authority. Petitioner No. 1 dismisses the allegations as false. He enclosed letter dated October 24, 2020 (annexure A) addressed by him to the respondents, which self explanatory. Procurement of capital assets under his supervision. Dyes and moulds damaged due to wear and tear sere sold at scrap rates. It was well known to board of directors that various litigations were pending before various forums and senior counsels were appointed. GST was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eges that respondents Nos. 2, 3 and 4 are determined to oust applicant No. 1 by various means as explained in paragraphs 3, 4, 5 and 6. 22. It is submitted that this Tribunal vide order dated September 23, 2020 in C. P. No. 203/241/HDB/ 2020 has granted status quo ante as regards composition of the board of directors as existed prior to board meeting dated September 12, 2020. Said order has been upheld by the hon'ble National Company Law Appellate Tribunal in an appeal filed by respondent No. 2 (paragraph 7). 23. It is averred in paragraphs 8 to 10 that having received statement from Karnataka Bank it is learnt that respondents Nos. 2 to 4 were siphoning off large amounts of money from respondent No. 1/company to the tune of ₹ 3,88,07,500 for the periods April 1, 2019 to October 26, 2020. 24. The applicant relied on decision of the hon'ble National Company Law Appellate Tribunal in Company Appeal (AT) No. 55 of 2020, in the matter of Jaideep Halwasiya v. AA Infraproperties P. Ltd. [2020] 223 Comp Cas 96 (NCLAT), to contend that the Tribunal is vested with powers under section 242(4) of the Companies Act, 2013 to grant interim relief as may be necessary for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Applicant No. 1 alone had diverted ₹ 3.28 crores to himself and his related parties (paragraph 3). 31. Applicant No. 1 in his e-mail dated October 1, 2020 has admitted that he had indulged in unreported turnover to the tune of ₹ 5.11 crores. It is contended that wrong doer cannot expect any sympathy of the court. Respondent No. 2 relied on decision of the hon'ble Supreme Court in Dale and Carrington Invt. P. Ltd. v. P. K. Prathapan [2004] 122 Comp Cas 161 (SC) ; [2005] 1 SCC 212 (paragraph 10). 32. It is submitted that the transactions alleged relate to the year 2019, whereas the company petition was filed on August 7, 2020. Thus, the cause of action arose prior to filing of the company petition. The applicant cannot raise issues, which relate prior to filing of petition, as per Order 2, rule 2 of the Code of Civil Procedure, 1908. He relied on decision of the hon'ble Supreme Court in the matter of Virgo Industries (Eng.) P. Ltd. v. Venturetech Solutions P. Ltd. [2013] 1 SCC 625 (paragraph 12). 33. It is submitted that the courts will not interfere in the internal affairs of the company as long as the company functions under the articles of associatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prayers made in the present IA are identical. 40. The allegations made in the submissions are broadly as under : (i) Applicant No. 1 is responsible in operating bank accounts solely and his illegalities of misusing funds led to freezing of bank account of respondent No. 1/company. Respondent No. 4 being sister of the applicant did not file complaint against his misfeasance. (ii) Applicant No. 1 addressed letters to NAFED asking them not to make payment to respondent No. 1/company. (iii) The applicants diverted company funds to their own associates. (iv) The PNB was fully aware of board resolution dated November 19, 2019 that two directors (including applicant No. 1) shall operate bank account, yet allowed applicant No. 1 to operate singly. (v) The company owes huge amounts to respondents Nos. 2 to 4, which was acknowledged by applicant No. 1. (vi) Operating account of the PNB, Wardha Branch singly applicant No. 1 has (a) siphoned off ₹ 56 crores without making royalty and statu tory dues, (b) siphoned off ₹ 3.28 crores meant for payments towards royalty to ICAR-IISS during 2016-17, (c) diverted around ₹ 6.17 crores to himself and his group co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicity of proceedings. The present case also suffers from the same. On that ground the application is required to be dismissed. 48. Pointing out specific instances from the counter filed by respondent No. 2 in I. A. No. 664 of 2020, respondent No. 3 alleges that (i) the applicants are non-co-operative, (ii) they are not providing information on operations, (iii) applicant No. 1 had operated the bank account singly, (iv) the PNB though fully aware of board resolution dated November 19, 2019 had allowed applicant No. 1 to operate singly. 49. It is stated in paragraph 18 of the written submissions that strangers are arrayed as respondent/parties without leave of the Tribunal. 50. Respondent No. 3 reiterated the fraudulent acts of applicant No. 1 in paragraphs 1 to 7 on pages 13 to 15. The deponent has also reiterated the fact about applicant No. 1 filing suit before the Civil Judge, Senior Division, Wardha, appeal before the District Judge, Wardha as stated in counter of respondent No. 2 in I. A. No. 664 of 2020. 51. In paragraphs 13 to 18, the deponent delved into the counter filed by respondent No. 2 in I. A. No. 664 of 2020 to point out the contradictions found in e-ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of accounts for financial year 2018-19. All these averments are reproduction of what is averred in counter filed by respondent No. 2 in I. A. No. 664 of 2020. 56. It is submitted in paragraphs 71 and 72 that respondent No. 1/company had borrowed amounts from Kiah Biotech and India Agri Innovative Technologies. Applicant No. 1, being signatory to the financial statements had pleaded ignorance and levelled allegations on repayment of said amounts. Respondent No. 1/company owes huge amounts to respondents Nos. 2 to 4, some of which have been repaid. Details are furnished in paragraph 72. Hence the allegations of applicant No. 1 are false. Observations : 57. We have gone through the case record placed before us and considered the written submissions made by the applicants as well as the respondents in the matter. The applicants claimed that respondent No. 1/company is a closely held family company run by applicant No. 1 and respondents Nos. 2, 3 and 4 as directors and close family members. It is the case of the applicants that respondents Nos. 2 to 4 were siphoning off large amounts of money from respondent No. 1/company to the tune of ₹ 3,88,07,500 during the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the internal administration of the company is not warranted. Respondent No. 2 has averred that the board resolution was passed on November 19, 2019 minutes of which were sent to the applicants on November 26, 2019. The alleged account has been in operation since more than a year. Hence it cannot be reversed. Besides, applicant No. 1 is operating the account of PNB even after the said resolution dated November 19, 2019 acting hand in glove with the bank rather than joint signatures of both the directors. He further alleged that applicant No. 1, has diverted huge amounts unto himself and his group of company by solely operating the bank account of PNB, Wardha Branch. 59. Respondents Nos. 4 and 5 have also contended that the prayers made in Regular Civil Suit No. 117 of 2020 before the learned Civil Judge, Senior Division, Wardha, were identical to the prayers made in I. A. No. 664 of 2020 and the prayers made in this IA. It is also averred that applicant No. 1 is solely operating the bank account. It is further averred that the applicants have addressed letter to creditors not to make payment into the account of respondent No. 1/company and have diverted company funds to their re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntil the parties resolve the differences amicably. (ii) The allegations levelled by the applicants and the respondents against each other on the financial irregularities require investigation by the Registrar of Companies. Accordingly, we direct the Registrar of Companies to conduct an investigation into the affairs of the company, initiate action against the directors or persons responsible for irregularities, if any found, for siphoning off funds as alleged. (iii) The above direction in clause (i) above is valid till the Registrar of Companies conducts investigation and takes appropriate action against the persons found guilty. Thereafter, respondent No. 1/company will be at liberty to take appropriate steps, in the interest of the company, and deter mine its future course of action strictly adhering to the provisions of the Companies Act, 2013. (iv) The Registrar of Companies shall complete their investigation within 6 (six) months from today and submit their report to the Ministry of Corporate Affairs for appropriate action. 62. The IA is disposed of in the above terms. The registry is directed to send a copy of this order to the Registrar of Companies, Hyderabad to ..... 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