The Court dismissed the applications filed by the applicant ...

Court Rejects Relief for SMS Textiles: Shell Company Ties, Fund Diversion, and Unclear Authority Cited.

August 1, 2024

Case Laws     Companies Law     HC

The Court dismissed the applications filed by the applicant company, SMS Textiles Limited, observing that it is a shell company of the company in liquidation and its mastermind Mr. K.C. Palanisamy. The Court found that there has been diversion of funds from the company in liquidation to the tune of Rs. 78.45 crores, at the behest of Mr. K.C. Palanisamy. The applicant failed to place on record the certified or attested copy of the registered sale deed dated 14.03.2005, by which it claimed to have purchased the property in question. The License Deed whereby the property was allegedly leased to the respondent company was not a registered document. The authority of Mr. Piyush Kumar, who filed the application as Authorized Representative, was not explained, and no Board resolution was placed on record. The sale deed was executed after the appointment of the Provisional Liquidator, raising doubts about the applicant's claims. The Court found sufficient grounds to infer that the applicant company is a shell company and has not come to the Court with clean hands, and therefore, the reliefs claimed cannot be granted.

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