2020 (4) TMI 419 - Tri - Companies Law

Invalid Incorporation Due to Fraud; Liability Imposed on Respondent; Petitioner Can Pursue Remedies

Mrs. NagappanSwarnalatha Versus M/s. Colour Books Associates Private Limited, Shri Sundaram Chockalingam, Shri R. Madesh Nayak, A.C.A. Chartered Accountant, The Registrar of Companies Karnataka

The Tribunal declared the incorporation of the Respondent No. 1 Company invalid due to fraud, holding the second Respondent responsible for all ... Cancellation of Certificate of Incorporation - whether the incorporation of the R-1 Company was done in accordance with extant provisions of Law with due consent of the Petitioner or not? - HELD THAT:- As per Section 7(1)(b) of the Companies Act 2013, a declaration in the prescribed form by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary etc. has to certify the requirements of this Act and the Rules made thereunder in respect of registration and matters precedent or incidental thereto have been complied with. As per Section 7 (5) of the Companies Act 2013, says if any person furnishes any false or incorrect particulars of any information or suppresses any material information, of which he is aware in any of the documents filed with the Registrar in relation to the registration of a company, he shall be liable for action under Section 447. The Respondent No. 3 failed to fulfil his statutory professional duties in following the extant provisions of the Companies Act, in incorporating the R 1 Company. He has given false declaration that the petitioner has signed the requisite documents in question before him. Therefore, the incorporation of R 1 Company ab initio void as per the said proviso, apart from criminally liable for action against the Second and third Respondent - also, the Lease Agreement in question for lease of house of father of Petitioner for the office of the Company cannot be relied upon and the statement in this regard by the third Respondent is also deemed to be false. The incorporation of R 1 Company vitiated by fraud, and the same is done by the Second Respondent in connivance with third Respondent - Application disposed off. Issues Involved:1. Validity of incorporation of the Respondent No. 1 Company.2. Allegations of fraud and forgery in the incorporation process.3. Jurisdiction of the Tribunal to address allegations of fraud and forgery.4. Responsibility for liabilities incurred by the Respondent No. 1 Company.5. Other reliefs sought by the Petitioner.Issue-wise Detailed Analysis:1. Validity of Incorporation of the Respondent No. 1 Company:The main issue was whether the incorporation of the Respondent No. 1 Company was done in accordance with extant provisions of law with due consent of the Petitioner. The Tribunal found that the incorporation process did not comply with the legal requirements. The Respondent No. 3, a Chartered Accountant, admitted that he did not witness the Petitioner signing the requisite documents and relied on the second Respondent's assertions. The Tribunal concluded that the incorporation of the company was ab initio void due to the false declaration made by the third Respondent.2. Allegations of Fraud and Forgery in the Incorporation Process:The Petitioner alleged that the second Respondent forged her signatures and used her personal documents without her consent to incorporate the company. The Tribunal found that the signatures on the incorporation documents did not match the Petitioner's genuine signatures. Additionally, the Petitioner had filed criminal cases for forgery, supporting her claims of fraud. The Tribunal determined that the incorporation was vitiated by fraud perpetrated by the second Respondent in connivance with the third Respondent.3. Jurisdiction of the Tribunal to Address Allegations of Fraud and Forgery:The Tribunal affirmed its jurisdiction to address allegations of fraud and forgery under Section 7 of the Companies Act, 2013. The Act empowers the Tribunal to take appropriate action if the incorporation of a company is based on false declarations. The Tribunal held that it had the authority to declare the incorporation invalid due to the fraudulent actions of the Respondents.4. Responsibility for Liabilities Incurred by the Respondent No. 1 Company:The Tribunal directed the second Respondent to discharge all liabilities incurred on behalf of the company. Since the second Respondent was responsible for the fraudulent incorporation, he was held solely accountable for any transactions made in the course of the company's business.5. Other Reliefs Sought by the Petitioner:The Tribunal rejected the Petitioner's other reliefs but granted her the liberty to pursue remedies available under the Companies Act, 2013, and the Rules made thereunder for her other grievances. The Tribunal did not recommend criminal action against the second and third Respondents due to the ongoing matrimonial disputes between the Petitioner and the second Respondent.Conclusion:The Tribunal declared the incorporation of the Respondent No. 1 Company invalid due to fraud and directed the second Respondent to discharge all liabilities of the company. The Petitioner's other reliefs were rejected, but she was granted the liberty to seek other legal remedies. No costs were ordered.