TaxTMI 
TaxTMI 
2008 (3) TMI 730
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.... liquidator sought to institute proceedings under Section 454 of the Companies Act against the ex-directors and also to take action under Section 468 and 477 of the Companies Act against them, for their failure to file a statement of affairs and failure to produce the records and Accounts Books and assets of the company. However, till date the said report filed on 30.04.2004 has not been taken up. On account of the non-filing of the statement of affairs by the ex-Directors of the company, the prayer made in this report is allowed and the official liquidator is not only permitted, but also directed to file a criminal complaint under Section 454 of the Companies Act and an application under Section 468 and 477 of the Companies Act for non-filing of the statement of affairs by the ex-directors and not handing over the assets and records respondent company to the official liquidator. Necessary steps be taken within one week. Further report be filed before the next date. CA No.1017/2002 1. This application has been filed by three applicants namely Sh. Chaman Lal, Mr. M.N. Sobti and Mr. M.K. Kapoor, inter alia, under Section 542 of the Companies Act, against the Managing Directo....
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.... were named as the Directors of the said company: - a) Sunil Shakt S/o Lt. Ramesh Chand Saxena R/o A-2/141, Sector-3, Rohini, Delhi - 85. b) Naresh Tyagi S/o Lt. Yash Pal Singh Tyagi R/o 108, B-9, Sector-3, Rohini, Delhi- 85. c) Sayed Hasan Abbas Razvi S/o Dr. S.N.A. Rizvi R/o 249, Ghalib Apptt., Road No.42, Pitampura, Delhi. d) Neeru Arora D/o Shri H.K.L. Arora R/o 417, Mukherjee Nagar, Delhi. However, Naresh Tyagi & Neeru Arora @ Shilpy Shakt resigned from the Directorship of M/s Fintra System Ltd. on 22.2.91 and 1.9.91, respectively, while S.N.A. Rizvi left the said company sometimes during 1994 but did not inform to the Registrar of Companies. Thereafter Sunil Shakt appointed Wg. Cdr. R.N. Jain & Harender Singhal, CA as per the extracts of the Board's meetings held on 01.10.1995 by M/s Fintra Systems Ltd. and copy of account opening form in respect of A/c No.03258 with Canara Bank, Lajpat Nagar, New Delhi also bear the signature of Sunil Shakt and Wg. Cdr. R.N. Jain which have been collected from the above named bank. But the aforesaid Sunil Shakt, MD of M/s Fintra Systems Ltd. did not submit the required form No.32 with the Regi....
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....endra Singhal, CA Sunil Shakt Alok Agarwal, CA (d) Alok Associate Pvt. Ltd. (e) Fintra System Ltd. (f) Mohan Jain (g) K. Singh 6. M/s Fintra Services Ltd. (non-functional) 55-71084 Dtd. 24.7.95 (a) (b) (c) Harendra Singhal, CA Sunil Shakt Alok Agarwal, CA (d) Alok Associate Pvt. Ltd. (e) Fintra System Ltd. 7. M/s Shristhi Inttl. Pvt. Ltd. 56-71051 (a) (b) Mrs. Shilpy Shakt Sunil Shakt 8. AD-N-STYLE 15.11.95 (a) Shilpy Shakt, Prop. 9. M/s Fintra Times 12.2.92 (a) Sunil Shakt, Prop. 10. M/s Fintra Centre 04/1996 (a) Naresh Tyagi, Prop. All the above noted persons & companies hold various accounts with a number of different bankers as per the Anenxure-1 attached herewith. However, current A/c No.120189 with Bank of America has been closed on 30.11.96. Consequently upon enquiries it is revealed that M/s Fintra System Ltd., M/s Fi....
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....a Systems Ltd. during the year 1995-96 through M/s Aruna Singhal, proprietor of M/s Hylex Consultants and wife of Harendra Singhal, one of the directors of the Fintra Group of Companies. Sunil Shakt further purchased 1,00,000 shares of Rs.10/- each face value of another sick company - Gurdarshan Leathers Ltd. @ of Rs.4.50 per share through Mrs. Shilpy Shakt of M/s Shrishti International Pvt. Ltd. but did not get these shares transferred in the names of M/s Fintra Systems Ltd. Sl. No. Name of the company of which shares purchased Quantity Total value (Rs.) 1. Premier Polyfilm Ltd. Illegible Illegible 2. Illegible 11,600 68,115/- 3. Flex Industries 500 Illegible 4. Mahadev Agro Illegible 5,40,480 5. Illegible 800 Illegible 6. Reliance Industries 1,800 3,94,607/- 7. Mahadev Agro 2,000 28,930/- 8. GEEKAY Textiles 7,500 1,13,210/- 9. Flex Industries 500 90,380/- 10. Gurdarshan Leathers Ltd. 100,000 4,50,000/- Total 1,24,31,931/- But there is no bank account transactions by means of cheques as per....
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....ntra Systems Ltd. and Fintra Centre to earn interest ranging between 30% to 36% p.a. and in this manner, they lured the small investors to invest their hard earned money in the said companies. Accused persons have also held large quantity of shares of sick companies namely, Premier Polyfilm Ltd., Fintra Capital Services Ltd. and Gurdarshan Leather Ltd. in their possession for giving these shares as security to the investors. So far Smt. Shilpi Shakt is concerned, it is learnt that she was proprietor of M/s AD-NSTYLE and a Director with her husband Sunil Shakt in M/s Shristhi International Pvt. Ltd. to publish misleading advts. in the Hindustan Times during 1995-96 and other transactions for and on behalf of M/s KLP Finance Ltd. & Fintra Systems Ltd. She is maintaining following bank accounts: - (i) SB A/c No.34000 with SBI, Lajpat Nagar, New Delhi. (ii) SB A/c No.6140 with SBI, Masjid Moth, Ph-II, GK, New Delhi. (iii) Current A/c No.10249 in the name of AD-N-STYLE with the Federal Bank Ltd., Greater Kailash-I, New Delhi. (iv) Current A/c No.10329 in the name of Shrishti Intll. Pvt. Ltd. with the Federal Bank Ltd., Alaknanda Br., New Delh....
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....pee of both the said companies. These companies were different only in the name but they were working in the same manner and pattern as a part of deep rooted conspiracy to cheat the public at large as per the few cheques/receipts signed by Naresh Tyagi on behalf of Fintra Systems Ltd. although he claimed to have left this company in Sept., 1991 but these cheques and receipts were issued during subsequent year. Shilpi Shakt, who maintained personal bank account No.34000 with the SBI, Lajpat Nagar, New Delhi, whereupon scrutiny of the said account opening form indicates the occupation of Shilpi Shakt as house wife but she recovered the total sum of Rs.11,34,232/- and the huge sums were, lateron, withdrawn in cash and this bank account No.34000 shows credit balance of Rs.9,557/- only at the moment. Besides above, Smt. Shilpi Shakt was having a proprietorship firm namely M/s AD-N-STYLE, which maintained a/c No.10248 with the Federal Bank Ltd. G.K.-II, New Delhi. Also during the period 1996-97, Shilpi Shakt received a total sum of Rs.5,73,367/- in her bank a/c No.10248 which has been withdrawn on different dates and presently only a sum of Rs.6536 is lying credited in her a/c N....
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.....10.95." ...................................................................... "As regards the immovable properties of M/s Fintra Systems Ltd. Sunil Shakt, Shilpi Shakt, Harendra Singhal, CA, Alok Agarwal, CA, Naresh Tyagi and Wg. Cdr. R.N. Jain all the former and present directors of M/s Fintra Systems Ltd. are shown below: - Sl. No. Name and address of the holder Area Authority under which held Cast value paid & source of funds (Rs.) 1. Sunil Shakt S/o late R.C. Saxena, S-185, GK-II, New Delhi 830 sq. ft. Sale deed dt. 26.5.95 by J.S. Suri and Pardeep Kaur 1,40,000/- out of the a/c No.1087 of Fintra Systems Ltd. 2. Shilpi Shakt W/o Sunil Shakt, R/o S-185, G.K.II, New Delhi. -do- Sale deed dt. 26.5.95 1,60,000/- out of her personal SB a/c No.34000 3. -do- Terrace of 2^nd floor area not shown Sale deed dtd. 24.5.96 1,00,000/- out of the personal SB a/c No.34000 It may not be out of place to mention here that through the advts. Published in The Hindustan Times during the year 1995-96, M/s Fintra Systems Ltd. and M/s Centre having their office ....
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.... Srishti International Pvt. Ltd. iii) Fintra Systems Ltd and Fintra Capital Services Ltd., its sister concern collected sum in excess of Rs.5.27 crores from over 750 unsuspecting investors and it made payment to only a few investors during 1995-96 but most of these funds were misappropriated by Mr. Sunil Shakt and his wife Mrs. Shilpi Shakt. iv) The aforesaid entities invited investment from the public on assurance of unusually high returns of 30% and 36% per annum. v) All the advertisements to attract investments by M/s Fintra Systems Ltd. were issued through M/s. AD-N-STYLE proprietary of Mrs. Shilpi Shakt and all the payment to AD-NSTYLE were made from the account of M/s. Fintra Systems Ltd., amounting to Rs.3.45 lacs by cheque and Rs.1.25 lakhs in cash between the period December 1995 to October 1996. vi) Rs. 5 lakhs was siphoned out of the account of the Company in liquidation by transfer to M/s. Srishti International Pvt.Ltd., managed by Mr. Sunil Shakt and Mrs.Shilpi Shakt. This company did not carry out any business. These funds are stated to have been provided for purchase of one lac shares of Gurdarshan Leathers Ltd. on behalf of KLP Fi....
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....loor at S-185, Greater Kailash-II, New Delhi, clearly appears to have been bought by Sh. Sunil Shakt and his wife Smt. Shilpi Shakt from the funds siphoned off by them, and the same should be directed to be sold and the proceeds distributed amongst the investors. He argues that under Section 542 of the Companies Act, all that is required is that it should "appear" to the Court in the course of the winding up proceedings, that the business of the company has been carried out by the Directors with the intent of defrauding the creditors of the company. If this condition is satisfied, the Court could, on an application of the official liquidator, or the liquidator or any creditor or contributory of the company declare that any persons, who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible without any limitation of liability for any of the debts or other liabilities of the company, as the Court may direct. He submits that normally it would have been the official liquidator, or the liquidator appointed by the court, who would be expected to carry out the investigation and bring the relevant material before the Court for init....
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....icants have, in fact, been paid off the amounts due to them, while in respect of some others, they were given shares of the company as security, and merely because the share values have in the meantime gone down, the applicants cannot raise a claim for return of their investments. The further submission of Mr. Srivastava is that there is already a restraint order passed by this Court in respect of the aforesaid immovable property of Mr. Sunil Shakt and his wife and no further orders are called for at this stage. He further submits that no evidence has been led in terms of Section 542 to arrive at a finding, or make a declaration that his client, and his wife have defrauded the creditors of the company. 9. Mr. S.K. Luthra, who appears for the official liquidator, has suggested a middle path. He submits that the aforesaid property should be directed to be attached at this stage, and the sale of the property could be considered after the parties have led their evidence, and in case the Court ultimately comes to the conclusion that the Directors have defrauded the creditors. 10. Having considered the respective submissions I am, as at present advised, inclined to agree with the s....
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....e opportunity presents itself. This is even more true, when such conduct is displayed by the relatively affluent members of society, as their conduct is not driven by their need or undertaken in desperation. The pattern that emerges from the conduct of Mr. & Mrs. Shakt shows that their actions were focused on collecting funds in the company from the public by promising huge returns, and then siphoning them out in one way or another. That seems to have been the true "business activity" of the promoter Directors and managers of the company. No other business appears to have been conducted by the company with a view to earn profits for the company, its shareholders and creditors. In the aforesaid process, the entity of the company has been misused and exploited. 12. From the aforesaid reports of the CBI, prima facie it appears to me that this is a fit case for holding the directors of the company in liquidation personally liable, without any limitation of liability. Section 542 is an exception to the general rule that in a limited liability company, the liability of the shareholders and directors is limited. The purpose and object of Section 542 is to catch up with the fraudulent d....
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....knowing party to the carrying on of the company's business with the intent of defrauding creditors was ordered to pay GBP 156,428 for its debts and liabilities. The company had exceeded its overdraft limits and had fallen behind with paying tax dues and trade creditors but continued to pay huge sums as remuneration to its managing director who was majority shareholder. The company went into liquidation. The liquidator sought to hold the director liable for fraudulent trading. It was held that the managing director was knowingly a party to the carrying on of the company's business with intent to defraud its creditors and there was real moral blame in procuring the company's continued trading when there was no reason for thinking that it could pay its debts as they fell due. The amount decreed represented the extent to which the creditors were defrauded and punitive element." 14. Mr. Srivastava argues that so far as the wife Mrs. Shilpi Shakt is concerned, she purchased her share in the said property from her own funds and not from the funds of the company. However, from the report of the CBI, it is seen that she was the recipient of huge amounts of commission from the company in ....