Application for Time Extension Denied, Upholding Deposit Repayment Schedule. Protecting Depositors' Interests.

The Tribunal dismissed the application for further extension of time for repayment of deposits, emphasizing the need to protect depositors' interests and adhere to the original repayment schedule sanctioned by the Company Law Board. The company was directed to clear arrears, continue payments as per the 2013 order, and warned of penalties for non-compliance.

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Issues Involved:
1. Financial difficulties and liquidity problems faced by the applicant company.
2. Previous scheme for repayment of deposits sanctioned by the Company Law Board.
3. Application for further extension of time for repayment of deposits under Section 74 of the Companies Act, 2013.
4. Objections raised by depositors and the Registrar of Companies.
5. Maintainability of a second application for further extension of time.
6. Compliance with previous orders and financial projections of the company.

Issue-wise Detailed Analysis:

1. Financial difficulties and liquidity problems faced by the applicant company:
The applicant company, incorporated on 06.06.1986, faced liquidity problems starting in the financial year ending 31.03.2013, incurring losses amounting to Rs. 111.29 crores. The reasons included reduction in EBITDA margin, increase in raw material costs, speculation in raw material prices, institutional sales margin reduction, increase in finance costs, insufficient cash flow to service debt obligations, high levels of finished stock, loss due to clearance of slow-moving stock, fire at Unit I, Parwanoo, increased gestation period for cost recovery, investment in non-current assets/miscellaneous expenditure, and slow-moving stock and sticky debtors.

2. Previous scheme for repayment of deposits sanctioned by the Company Law Board:
The Company Law Board sanctioned a scheme for repayment of fixed deposits on 30.09.2013, directing the company to repay the contracted rate of interest on fixed deposits until the date of maturity, and thereafter, interest at 8% per annum until repayment. The scheme included a detailed schedule for repayment based on the amount of the fixed deposits, with specific provisions for hardship cases like serious illness and senior citizens above 65 years of age.

3. Application for further extension of time for repayment of deposits under Section 74 of the Companies Act, 2013:
The company filed an application on 27.09.2016 seeking further extension of time for repayment of deposits under Section 74 of the Companies Act, 2013, read with Rule 11, 15, and 73 of the National Company Law Tribunal Rules, 2016, and Section 58AA of the Companies Act, 1956. The company proposed a revised schedule for repayment, seeking an extension of two years for deposit holders from Rs. 10,000 to Rs. 50,000 and three years for those above Rs. 50,001.

4. Objections raised by depositors and the Registrar of Companies:
Various depositors filed objections opposing the further extension of time, citing non-payment of dues and bounced cheques. The Registrar of Companies, in consultation with the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi, opposed the extension, highlighting serious complaints from investors and non-compliance with previous undertakings by the company.

5. Maintainability of a second application for further extension of time:
The Tribunal examined whether a second application for further extension of time is maintainable. It referred to Section 74 of the Companies Act, 2013, which mandates repayment of deposits within one year from commencement or from the date payments are due. The Tribunal emphasized the need to safeguard the interests of fixed deposit holders and concluded that further extension is not permissible, especially given the previous relief granted by the Company Law Board.

6. Compliance with previous orders and financial projections of the company:
The company was found to have not made any payments to fixed deposit holders since the institution of the application, except for hardship cases. The financial projections for the next three years indicated continued losses, and the company’s efforts to improve its financial position, including debt assignments to Asset Reconstruction Companies, were deemed insufficient. The Tribunal directed the company to pay arrears within two months and comply with the original order dated 30.09.2013, warning of consequences under the Companies Act for non-compliance.

Conclusion:
The Tribunal dismissed the application for further extension of time for repayment of deposits, emphasizing the need to protect the interests of depositors and adhere to the original repayment schedule sanctioned by the Company Law Board. The company was directed to clear arrears and continue payments as per the 2013 order, with penalties for non-compliance.

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