Company Violates Companies Act, Must Repay Deposits with Interest. Directors Liable for Unauthorized Actions.

The Tribunal found the Respondent company in violation of the Companies Act, 2013, for not repaying deposits and ordered repayment of Rs. 2,50,000 to the Petitioner with 12% interest. The company must file an affidavit of compliance by 01.05.2021, with potential prosecution for non-compliance. Directors were held liable for unauthorized actions, emphasizing the obligation to repay deposits with interest.

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Issues Involved:
1. Non-allotment of shares and treatment of payment as unsecured loan.
2. Non-repayment of the deposit and interest.
3. Compliance with Companies Act and Companies (Acceptance of Deposits) Rules.
4. Liability of the company’s directors and management.
5. Interest and penal interest on overdue deposits.

Issue-wise Detailed Analysis:

1. Non-allotment of shares and treatment of payment as unsecured loan:
The Petitioner, a shareholder of the Respondent company, paid Rs. 2,50,000 for 25,000 equity shares but was only allotted 500 shares for Rs. 5,000. The remaining Rs. 2,45,000 was treated as a deposit/loan by the Respondents without issuing shares. The Petitioner claimed this was done unilaterally by the Respondent's Managing Director, who issued a receipt instead of shares.

2. Non-repayment of the deposit and interest:
The Petitioner demanded the return of the deposit with 12% interest, quarterly compounded, via notice dated 01.03.2017, but received no response. The Petitioner argued that the Respondent company failed to repay the deposit or respond to the demand, leading to the filing of this petition.

3. Compliance with Companies Act and Companies (Acceptance of Deposits) Rules:
The Petitioner alleged that the Respondent company violated Clauses 50 & 51 of its Articles of Association and failed to comply with the Companies Act and Companies (Acceptance of Deposits) Rules. The Petitioner highlighted that the amount was treated as an unsecured loan without proper declaration and was not disclosed in the financial statements as required by Circular No. 5/2015.

4. Liability of the company’s directors and management:
The Petitioner contended that all directors, including the Managing Director, were liable for unauthorized collection of money without a Board Resolution. The Respondent's defense was that the previous Managing Director collected the unsecured loans and that the current management was unaware of these actions. The Tribunal found no evidence of a Board Resolution authorizing the collection of money and held the Board liable for failing to act per the Articles of Association.

5. Interest and penal interest on overdue deposits:
The Tribunal emphasized that companies must pay interest on overdue deposits and referred to the Companies (Acceptance of Deposits) Rules, 2014, which prescribe a penal rate of interest of 18% per annum for overdue deposits. The Tribunal decided to grant interest at 12% per annum for the delayed period, aligning with Section 42(6) of the Companies Act, 2013, which treats unallotted share application money as a deposit with 12% interest.

Findings and Orders:
The Tribunal found that the Respondent company failed to comply with Section 74(1)(b) of the Companies Act, 2013, by not repaying the deposits. The Tribunal ordered the Respondent company to repay the Petitioner Rs. 2,50,000 with 12% interest and file an affidavit of compliance with the Registrar of Companies, Kerala, by 01.05.2021. The Registrar was directed to initiate prosecution if the company failed to comply and to send a compliance report to the Tribunal.

Conclusion:
The Tribunal disposed of C.P No. 07/KOB/2020 with the above directions, emphasizing the company's obligation to repay deposits with interest and the liability of the company's directors for unauthorized actions.

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