2018 (2) TMI 1329 - Tri - Companies Law

Key Company Law Compliance Directives: Territorial Jurisdiction, Financial Obligations, Deposit Repayment

In Re : SRS Limited

The case involved issues of territorial jurisdiction, financial condition of the petitioner company, causes of financial problems, rescheduling of ... Company failure to repay the deposit or part thereof or any interest thereon within time specified - Held that:- When the matter was listed on 22.08.2017, the Tribunal had directed the petitioner to make due payment of the deposits upto principal amount of ₹ 1,00,000/- to the depositors. However, there was a specific undertaking given by the petitioner company on 22.08.2017 that the deposits upto ₹ 1,00,000/- shall be cleared within one week, but the petitioner company seems to have interpreted the undertaking as per its own choice to restrict to the depositors present in the Court. This conduct of the company would ipso facto disentitle the petitioner to any further relaxation. In paragraph 7 of the affidavit, it is re-iterated that the company has made payments to the depositors present in the Tribunal on 22.08.2017. As stated in this affidavit dated 04.09.2017 that the petitioner company may be allowed further extension of two years for making payment of the amount due, but not paid as on 31.08.2017 i.e. the amount of deposits due as per the order of the NCLT Delhi Bench upto 31.08.2017 to be paid by 31.08.2019. It is further prayed in this affidavit that for the deposits payable from 01.09.2017 onwards, the extension of two years more may be granted in addition to the time granted while approving the Scheme on 20.10.2016. Such a prayer made in the matter, which stood disposed of on 20.10.2016 is absolutely not tenable. This would amount to second time extension, which in any case cannot be permissible. No ground for further indulgence in the matter and hold that the petitioner company is bound to comply with the orders dated 20.10.2016 for making payment to the depositors in accordance therewith as further clarified in the order dated 02.02.2017 whereby the extension of time with regard to components of interest and the principal amount was granted. As the instant petition remained pending for quite some time, a direction is issued to the petitioner company to pay the upto date amount for which the petitioner company has defaulted despite the directions dated 20.10.2016 and further clarified on 02.02.2017, by 15.01.2018 and shall file an unconditional affidavit stating strict compliance, with the Registrar of Companies, NCT of Delhi and Haryana, by 24.01.2018. Issues Involved:1. Territorial Jurisdiction2. Financial Condition and Performance of the Petitioner Company3. Causes of Financial Problems4. Rescheduling of Payments to Depositors5. Compliance with Tribunal Orders6. Legal Provisions and Penalties under Companies Act, 2013Issue-wise Detailed Analysis:1. Territorial Jurisdiction:The petitioner is a listed company with its registered office in Faridabad, Haryana. Thus, the matter falls within the territorial jurisdiction of the National Company Law Tribunal (NCLT), Chandigarh.2. Financial Condition and Performance of the Petitioner Company:The company's authorized share capital is Rs. 280 crores, with a paid-up share capital of Rs. 278.58 crores. The jewellery segment contributes around 90% of the company's revenue. The consolidated revenue for the year ending 31.03.2016 was Rs. 412,042.48 lakhs. The company has been accepting deposits from the public since April 2013 and repaying them regularly until the financial year 2015-16.3. Causes of Financial Problems:The financial problems were attributed to several factors:- Regulatory constraints- Severe loss of revenues- Increase in expenditures- Low profitability- Cash crunch- Low profits in ongoing business assignments- Low liquidity- Stoppage in acceptance of fixed deposits- General downtrend in the economy- Seasonal fluctuations4. Rescheduling of Payments to Depositors:The company approved a rescheduling proposal for payment to depositors in a Board meeting on 30.04.2016. Public notices were issued on 20.05.2016 and 06.07.2016. The aggregate liability as of 31.03.2016 was Rs. 120,220.09 lakhs against assets worth Rs. 184,657.84 lakhs. A proposal was filed before the NCLT, New Delhi, for sanction. The NCLT, Delhi, directed the company to place on record the projected profit and loss statements and balance sheets for the next three years. The company filed these statements and a revised plan, but it was not acceptable. A fresh proposal was filed and modified multiple times.5. Compliance with Tribunal Orders:The NCLT, New Delhi, disposed of the matter on 20.10.2016 with specific directions for repayment of fixed deposits. The company was required to repay matured FDs in a phased manner and pay interest periodically. A Hardship Committee was constituted to address hardship cases and senior citizens. The company faced difficulties in adhering to the scheme due to liquidity problems and demonetization. Despite repeated indulgence by the Tribunal, the company failed to comply with the orders, leading to further legal proceedings.6. Legal Provisions and Penalties under Companies Act, 2013:Section 74 of the Companies Act, 2013, mandates the repayment of deposits accepted before the commencement of the Act. If a company fails to repay the deposit or interest within the specified time, it is punishable with a fine ranging from Rs. 1 crore to Rs. 10 crores, and officers in default can face imprisonment up to seven years or a fine ranging from Rs. 25 lakhs to Rs. 2 crores, or both. The Tribunal emphasized the stringent nature of these provisions and directed the company to comply with the orders by 15.01.2018, failing which prosecution would be initiated.Conclusion:The petition stands disposed of with a direction to the petitioner company to comply with the previous orders dated 20.10.2016 and 02.02.2017. The company must file an unconditional affidavit of compliance by 24.01.2018. The Registrar of Companies, NCT of Delhi and Haryana, is directed to initiate prosecution in case of non-compliance. The depositors also have the right to take appropriate steps for non-compliance. The Tribunal emphasized the importance of adhering to the legal provisions and protecting the interests of the depositors.