TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 138
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....ritten submissions dated 31.03.2017. 2. The brief facts of the case are as follows: (a) The Applicants in the instant case have filed the instant Application seeking compounding of an offence allegedly committed under Section 297 of the Companies Act, 1956. Section 297 Prohibited Related Party Transaction except with the consent of the Board of Directors and in case the Company was having a paid up share capital not less than Rs. 1 Crore, previous approval of Central Government was required. (b) That the Applicants Company is a listed Company incorporated on 16.12.2002 under the provisions of Companies Act, 1956 and was duly registered with the Registrar of Companies, Hyderabad with CIN no. L22122AP2002PLC040110 and Applicant Nos. 2, and 3 are the Directors of the Applicants Company, having DIN Nos. 00287518 and 00287639 respectively. (c) That in the instant case there was an offence allegedly being committed on part of the Applicants qua various transactions carried out with one M/s. Flyington Freighters Pvt. Ltd., (FFPL). The Applicants had sought compounding of the alleged offence on the premise that the amount given by the Applicant Company to FFPL was duly repaid by FFP....
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....s not fall under any categories as provided under Section 297 of the Companies Act 1956. The Applicant No. 1 Company reiterated the above submissions again vide its letter dated 04.07.2013, further the Applicant company submitted that because for some reasons the Applicant company called its money back and the entire amount paid to FFPL was repaid by the said company to the Applicant Company, hence any consequential proceedings against the Applicant Company may be dropped. 7. Subsequently, a Show Cause Notice RAP/209A/DROC (SRD)/CK/DCHL/Sec297/2014/1148/15 dated 05.08.2014 was issued by the Respondent, wherein Applicants were asked to show-cause as to why action should not be taken for prosecution for contravention of Section 297 of the Act. 8. It is pertinent to mention herein that the Show Cause Notice dated 05.08.2014 was issued under Section 297 of the Act. However on and from 01.04.2014 as per the notification dated 26.03.2014, Section 297 of the Act ceased to be applicable, as Section 188 of the Companies Act, 2013 came into force. Copy of the Notification dated 26.03.2014 issued by the Ministry of Corporate Affairs is submitted. 9. It is stated that in view of the above N....
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....he company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to five thousand rupees, and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which the contravention continues." That on reading of the above Section with Section 621A of the Act, it is clear that the contravention of Section 297 of the Companies Act, 1956 it is most humbly submitted that this Hon'ble Tribunal may duly compound the offence as allegedly committed by the Applicants. 13. The Applicants in the instant case have approached this Hon'ble Tribunal bonafidely and no prejudice will be caused to any party in an eventuality the application of the Applicants seeking compounding of offence allegedly committed under Section 297 of the Act is allowed by this Hon'ble Tribunal. 14. That the Applicant Company has filed the instant Application on 23.09.2014, immediately after issuance of the Show Cause Notice dated 05.08.2014 and no proceedings in pursuance to the said Show Cause Notice have been initiated, nor any prosecution has been filed. Hence, ....
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.... However, in the instant case company by receiving the entire money back without receiving any interest from FFPL has caused enormous/substantial loss to its shareholders. 22. We are of the considered view that just receiving back the advances (principle) given at various points of times for almost 3.5 years without charging any interest to a related party entity is not a prudent way of running a business especially being a listed Company. Because of non-charging of interest, the Company lost crores of rupees as interest income which has caused Substantional prejudice especially, to the Applicant Company, and ultimately to its shareholders. Transparency in operations is one of the Key elements of Listed Company and appropriate disclosures of Related Party Transactions are very essential to various stakeholders and as such, the same is the duty of the Company/Board of Directors to give true and fair picture of the functioning of the Company to its shareholders especially any decision having adverse financial impact/loss on the Company which in turn will have an impact/loss on the shareholders directly or indirectly. As generally known, Related Party Transactions are gaining importa....