NCLT orders respondent company to repay outstanding deposits by deadline, warns of penalties for non-compliance

The National Company Law Tribunal (NCLT) extended the time for a respondent company to repay outstanding deposits plus interest until 31st March 2017. Despite warnings and extensions, the company failed to make payments. The Tribunal directed the company to pay by the deadline, emphasizing potential penalties for non-compliance, including disqualification of directors and legal actions. The Tribunal ordered the closure of the Company Petition and stressed that further extensions without valid reasons were not permissible, especially when the company showed no initiative in repaying the deposits.

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Issues Involved:
1. Extension of time for repayment of deposits by the respondent company.
2. Compliance with Section 74 of the Companies Act, 2013.
3. Formation and role of the Hardship Committee.
4. Utilization of sale proceeds from the company’s assets.
5. Non-payment of deposits and interest to depositors.
6. Potential penalties and legal actions for non-compliance.
7. Disqualification of directors for non-repayment of deposits.

Detailed Analysis:

1. Extension of Time for Repayment of Deposits by the Respondent Company:
The appeal was filed against the order dated 17th June 2016 by the National Company Law Tribunal (NCLT), New Delhi, which extended the time for the respondent company to repay the outstanding amount of Rs. 1079.31 Crore plus interest till 31st March 2017. The Tribunal kept the petition pending for further reports.

2. Compliance with Section 74 of the Companies Act, 2013:
Section 74 mandates companies to repay deposits accepted before the commencement of the Act by 31st March 2015 or the due date, whichever is earlier. The respondent company failed to comply within the prescribed time and sought further time from the Tribunal under sub-section (2) of Section 74, which allows the Tribunal to grant additional time based on the company's financial condition and other relevant factors.

3. Formation and Role of the Hardship Committee:
The appellant argued that there is no provision under Section 74 for constituting a Hardship Committee to assess the payment situation. The Tribunal is competent to extend time based on the financial condition of the company and other relevant matters. The Tribunal extended the time up to 31st March 2017 without disposing of the main Company Petition.

4. Utilization of Sale Proceeds from the Company’s Assets:
The appellant contended that there was no specific direction from the Tribunal for the company to use the sale proceeds of its cement plants towards repaying the depositors. The company had entered into an agreement to sell its cement plants for Rs. 16,189 crores and intended to start repaying depositors around 25th March 2017, concluding by 30th March 2017. The Tribunal directed the company to deposit the sale proceeds in a specified bank account and not to withdraw any amount except for repaying depositors.

5. Non-Payment of Deposits and Interest to Depositors:
Despite the extension granted by the Tribunal, the respondent company had not deposited any amount in its account or paid any amount to depositors. The Tribunal noted that approximately three years had passed since the commencement of Section 74, yet the deposits with interest remained unpaid. The Tribunal directed the company to pay the dues by 31st March 2017 and close the Company Petition.

6. Potential Penalties and Legal Actions for Non-Compliance:
The Tribunal warned that if the company failed to pay the dues by 31st March 2017, the Registrar of Companies would take steps to file a petition under sub-section (3) of Section 74 to punish the company and its officers. The depositors could also sue the company for damages and fraud under Section 75 of the Companies Act, 2013. Additionally, the Central Government could investigate the company’s affairs under Sections 210 or 213 if there were indications of fraudulent conduct.

7. Disqualification of Directors for Non-Repayment of Deposits:
Failure to repay deposits or pay interest disqualifies directors from their positions under Section 164(2)(b) of the Companies Act, 2013. The Registrar of Companies was instructed to examine this aspect if the company failed to repay the dues by 31st March 2017.

Conclusion:
The Tribunal directed the closure of Company Petition No. 25/10/2014 and disposed of the appeal with the observations and directions mentioned above. The Tribunal emphasized that multiple extensions of time cannot be granted without any substantial grounds, especially when the company had shown no interest in repaying the deposits. The order was to be forwarded to the National Company Law Tribunal, New Delhi Bench.

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