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2019 (4) TMI 1450
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....f the affairs and management of the Company Megaciry Bangalore Developers & Builders Limited; seeking to invoke provisions of Section 388B r/w Section 406 of the Companies Act, 1956; to remove the entire Board of Directors of MBDL in view of the various fraudulent acts of the omission and commission in the affairs of MBDL; to issue appropriate directions for attachment of properties/assets (both movable/immovable) of the Respondent No.2-5 in public interests and in the interests of the Company, its Creditors and Customers/Members and pass other appropriate orders in terms of Section 402 and declare that aforesaid Respondents shall be personally responsible without any limitation of liability for all the debts and other liabilities including losses suffered by Public/Customers/Creditors etc. in terms of Section 406 r/w Schedule XI to the Act, 1956, etc. 2. Brief facts of the case, as mentioned in the Company Petition, are as follows: (1) The Union of India, the petitioner herein, has filed the present Petition through Ministry of Corporate Affairs, New Delhi and Shri S.K. Nanda S/o. Late Shri Narayan Nanda working as Assistant Director, Serious Fraud Investigation Office....
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....10 crores.The Company on the date of offer to the investors/public were neither having sufficient lands nor the approval from the competent authority for its conversion. And accordingly the said Vajragiri Project stalled when the Karnataka Industrial Area Development Board (KIADB) issued notification in the Karnataka State Gazette u/s. 6 of the Land Acquisition Act, 1894 and the intention to acquire the land around 130 acres falling in the Vajragiri project area. (6) The paid-up Capital of the Company was Rs. 6,00,000/- and were only seven shareholders mainly Shri C.P. Yogeshwara, MD of MBDL and his family members. The Company had taken no loan during the period 1994-2006.Total approx.9300 persons enrolled themselves as member for the Vajragiri Township and paid initial membership fees but out of these approx.9300 members, only 3100 members paid full amount for the plot in the said township project as agreed by the members and MDBL by signing the Agreement. The remaining 6200 members paid only 2-40 instalments. (7) During the period between 1995-1998, Directors/Relatives acquired around 200 acres lands and incurred capital expenditure of Rs. 13 crores in the form ....
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....lic. i. During the investigation, it has been observed that MDBL is a closely held company, the paid-up capital of the Company was only Rs. 6 lakhs and there were only seven shareholders mainly Shri C.P. Yogeshwara, MD of MDBL and his family members, there was no bank loan taken by the Company during the period 1994-2006. The Share Application money brought in by way of cash by Shri C.P. Yogeshwara and his family members was Rs. 199 lakhs and regarding this amount MD of the MDBL could not give any authenticated evidence to the investigating agency. Therefore, all the business conducted by the Company was from the Vajragiri Township Members money only. ii. The Balance Sheet for the year 2005-06 of the MDBL shows Sundry Debtors balance of Rs. 37 crores outstanding as on 31.03.2006 and which was written off in the subsequent years i.e. 2006-07, the MD of MDBL explained that Rs. 37 crores are the balance represent land advances paid to 450 farmers, however, no agreement to sell was produced, and it was alleged that the Income-tax department has taken away with it during the raid. However, from out of total 450, only 62 copies could be seized by the Income-tax departme....
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....vii. The investigation also revealed that the withdrawal of Rs. 3.60 crores by the MD of MDBL Shri C.P. Yogeshwara from the Company accounts, no documentary evidence for spending the said amount was produced before the investigating team. viii. The Share Capital and Share Application money of Megacity (Bangalore) Developers & Builders Ltd. as on 31.03.1997 stood at Rs. 5 lakhs and Rs. 84 lakhs respectively. The Shareholders and Directors of MDBL has withdrawn Rs. 4.49 crores as Loans and Advances. This meant that Shareholder had taken fund from the Company to the extent of Rs. 4.49 crores - (Rs. 5 Lakhs + Rs. 84 lakhs) i.e. Rs. 3.60 crores, which is much more than the Capital they had actually invested in the Company. In other words, the shareholders did not really put any capital into the Company and on the other hand swindle Company's fund much more than that, the amount infused by them. (13) Therefore, Union of India has inter alia urged the Tribunal to debar the present Directors from managing the affairs of the Company and to permit it to nominate five Directors to the Company to manage affairs of the Company while several Civil and criminal cases are pen....
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....ted Company under the name Megacity (Bangalore) Developers and Builders Private Ltd. on 11.08.1994. On 12.08.1998 Megacity (Bangalore) Developers and Builders Private Ltd. became a public limited Company and its name was changed to Megacity (Bangalore) Developers and Builders Ltd. (hereinafter referred to as "MDBL"). The Registered Office of the Respondent No.l Company is in Mega Tower, 120, Kengal Hanumanthaiah Road, Bangalore-560027. (6) It is stated that one Shri Raveendra Belyur and others have filed complaints before District Consumer Redressal Forum, Bangalore by inter alia seeking a relief of execution of the sale deeds. However, those cases were rejected. Appeals preferred against those orders are also rejected by Karnataka State Consumer Disputes Redressal Commission and National Consumer Disputes Redressal Commission. Aggrieved by that, SLPs are filed before the Hon'ble Supreme Court, which are pending. It is further stated that the subject matter of the present Petition is also a subject matter of several criminal proceedings and the Hon'ble High Court of Karnataka has also granted stay in those matters. (7) MCA, on the basis of the report of th....
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....required to examine the records within the parameters of the order dated 17.04.2009. However, SFIO team, while submitting its report, has investigated the matter beyond its scope of authority or jurisdiction vested by the order of ld. MCA. The SFIO team has gone to look into the affairs of Respondent No.l beyond 2007. Therefore, the investigation carried out by SFIO team is without jurisdiction and is thus non-est, void in law. (9) It is stated that SFIO team has alleged that Respondent No.2, Managing Director of Respondent No.l has violated Section 266(c) r/w Section 628 of the Companies Act, 1956. The MD was allotted three DINs in his name i.e. 01743266, 02233500 and 01637527. These three DIN applications, which were filed at three different times as MD's ID and address proof have different initials and names in different documents. This has happened due to inadvertence and not intentional. The MD has already applied for cancellation of two DINs namely 02233500 and 01637527 and filed an application for compounding the said violation. 4. The Respondent Nos.3 to 5 have filed a reply dated 20.10.2014, by inter alia contending as follows: (1) Any reliance to ....
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....ecord the changed circumstances supported by regulatory filings, statutory compliances and Orders of the CLB compounding purported offences of the Respondent No. 1 which shows that the facts and circumstances of the present Petition have changed and that the Company Petition filed against the Respondent has become infructuous and non-maintainable. (2) It is stated that the present reference under Section 388B of the erstwhile Companies Act, 1956 is not maintainable after the coming into force of the Companies Act, 2013. Further, none of the shareholders of the Company have complained of any acts of the Company prejudicial to the interests of its members. Insofar as the allottees of the land under the Vajragiri scheme is concerned, over 1600 plots have been registered in favour of allottees. In accordance with the NCRDC order affirmed by the Supreme Court, the Company has proceeded to refund all booking amounts to the members of the Vajragiri scheme. (3) A review of the Application further show that all the circumstances on the basis of which the provisions of Section 388B invoked are no longer exists. Further, there is no new material as of date which would indica....
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....ot be put on trial for the same set of offence. (2) The claims of the complainants have been settled in disputes initiated by the complainants at various different forums. The Respondent has settled the claims amicably and to the satisfaction of the various courts. In this context it is submitted that the disputes initiated by various complainants now stands settled and there exists no disputes between the parties. (3) The SFIO has initiated criminal complaints as against Directors of the Respondent herein for the very allegations made in this Petition. The same has been challenged by the Directors before the Hon'ble High Court of Karnataka, at Bengaluru in Criminal Petition No.206,670-676, 772 of 2017, wherein the Hon'ble High Court was pleased to grant an order of stay of all further proceedings as against the Directors of the Respondent. (4) The Respondent further submits that the Board of Directors of the Respondent have been reconstituted by a new Board consisting of Respondent Nos.3 to 5 as the new Directors of the Respondent No.1. The Respondent No.2 on whom all allegations are in this Petition made has resigned as Managing Director w.e.f. ....
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....mpany in 1998 and the paid-up Capital was raised to Rs. 6 lakhs and more family members of Shri C.P Yogeshwara was inducted as Directors of the Company. Since 1996-97 to 2005-06, the Company had been controlled by C.P. Yogeshwara as Managing Director and his younger brother Shri C.P.Gangadhareshwara, Executive Director, his brother-in-law Shri Mahadvaiah, Director, Shri H.R. Ramesh as Non-Executive Director. b. During the period 1994-2001, total approx. 9300 persons enrolled themselves as member for the Varjragiri Township and paid initial membership fees. But out of the, approx 9300 only approx, 3100 members paid full amount for the plot in the said township project as agreed by the members and MDBL by signing the agreement. The remaining 6200 members paid only 2-40 instalments. During the investigation it was found that maximum default of instalment was during 1998-99 and 1999-2000. This was mainly because KIADB issued notification of acquiring (intention) the land in three villages comprising from the Vajragiri Township Project. c. The members of the Vajragiri Township Project started demanding their money back since 1999 but the Company MDBL informed that as p....
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....09. The matter has not been disposed of and is still pending in the Hon'ble Supreme Court. e. During the investigation it has been observed that MDBL is a closely held Company. The paid-up capital of the Company was only Rs. 6 lacs and there were only 7 shareholders mainly Shri C.P. Yogeshwara, MD of MDBL and his family members. There was no bank loan taken by the Company during the period of 1994-2006. The share application money brought in by way of cash by Shri C.P. Yogeshwara and his family members was Rs. 199 lacs and for this amount Shri C.P. Yogeshwara, MD of MDBL could not give any authenticated evidence to the investigation agency. Therefore, all the business conducted by the Company was from the Vajragiri Township members money only. f. 62 Letters were sent to the farmers of nine villages with the address mentioned in the agreement of sale. Out of 62, only 2 farmers replied and 30 letters returned back undelivered. The investigation team then went to the nine villages along with the local person made available by the RoC, Karnataka for on the spot clarification. After a lot of persuasion statement of 3 farmers were recorded on oath. All of them denie....
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....eesha, Statutory Auditor (2005-06 and 2006-07) have been recommended. n. Section 266G deals with penalty for contravention of Provisions of Section 266A or Section 266C or Section 266D or Section 266E. as per section:- "if any individual or director, referred to in section 266A or section 266C or Section 266D or a Company referred to in Section 266E, contravenes any of the provisions of those sections, every such individual or director or the Company, as the case maybe, who or which, is in default, 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 extent to five hundred rupees for every day after the first during which the contravention continues". Section 628 speaks about penalty for false statements. The provisions of this section are as following: "if in any return, report, certificate, balance sheet, prospectus, statement or other document required by or for the purposes of any of the provisions of this Act, any person makes a statement- (a) Which is false in any material particular, knowing it to be false; or ....
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.... in cash was paid to the farmers for purchase of land for Vajragiri Township Project and Agreements to Sell were executed between the farmers and MDBL and this transaction has been shown as Sundry Debtors in the balance sheet. During investigation, this transaction could not be verified from the statement of bank account of MDBL because the amount was said to be paid to the farmers by way of cash. The Agreement to Sell was found forged as mentioned above. The plots/land were not allotted to the members who had deposited the money and neither the money was refunded to the members. Thus, the Directors of MDBL (1) Shri C.P. Yogeshwara, MD (2) Ms. Manu Kumari, Director, (3) Shri P. Mahadeviah, Director, (4) C.P. Gangadhareshwara and (5) Shri H.P. Ramesh, Director misappropriated the amount of Rs. 37 crores through forged Agreements to sell. The Directors were entrusted the amount of Rs. 37 crores which was out of the money deposited by the members of Vajragiri Township Project and as such Directors had dominion over the amount of Rs. 37 crores but the Directors dishonestly inappropriately and converted to their own use the above money and failed to discharge the contract and trust with....
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....ers and Builders limited for the year ending 31.03.2006 Under Section 628 of Companies Act 10 Misappropriation of Rs. 37 crores Through forgery By Promoters/directors of Megacity (Bangalore) Developers & Builders Ltd. (MDBL) Under Section 403, 404, 405, 409, 463, 464, 465, 468, 120A & 120B of IPC 11 Wilful misleading representation in brochures/pamphlets to deceives the investor public Under Section 415, 420, 120A & 120B of IPC 12 Forgery (making false document i.e. "DIN by Shri C.P. Yogeshwara, MD of M/s MDBL Under Section 177, 416, 419 & 420 of IPC 13 Misappropriation of Rs. 3.60 crores by Shri C.P. Yogeshwara, MD of M/s. MDBL Under Section 403, 405, 406 & 409 of IPC 14 Dishonest Misappropriation of Rs. 25,000/- p.m from the funds of Megacity (Bangalore) Developers & Builders Ltd. (MDBL) by Shri C.P. Yogeshwara, MD of MDBL Under section 403 and 409 of IPC 15 Cheating with the members under the scheme of Vajragiri Township project by Promoters/directors of M/s. Megacity (Bangalore) Developers & Builders Ltd., Bangalore Under section 415, 420, 403, 405, 406, 120A read with 120B of IPC 16 Professional misconduct under th....
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....ipal Bench, by inter alia contending as follows: a. At the outset it is submitted that the present petition/reference under Section 388-B of the Companies Act, 1956 is not maintainable since the matter of this Petition/reference is also the subject matter of several criminal proceedings, on the set of charges, initiated by the Union of India, against the Respondents and few others, and as such two parallel proceedings relating to the same subject matter cannot proceed at the same time. The Respondents may be seriously prejudiced if they are made to disclose their defence in the present proceedings to the selfsame charges before the commencement of the trial in the criminal proceedings and the same is not tenable under law. b. The petition is not maintainable as being barred by laches limitation as the Petitioner/Union of India has filed the instant petition after inordinate delay in making the reference relating to the charges alleged to have occurred long before filing this reference. All the allegations relating to which the charges were made arose during the period 1994-2007. Therefore, there is a delay of 6 years, which is beyond normal acceptable period of li....
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....st them in terms of Section 388B. The entire petition is founded on the fact that the "Vajragiri Township Project" of the Answering Respondent No. 1 could not be completed on time due to the litigation issues in which the said Project got entangled. It is asserted that the entire Board of Directors of the Company has acted in the interest of the Company and not acted against its interest, as alleged by the Central Government. Therefore, the Petition not only being of devoid of merits but also not maintainable, should be dismissed. 14. After considering the contentions made in the above CA No. 139 of 2014, the Principal Bench, CLB , New Delhi , dismissed it by an order dated 10th August, 2015 by inter alia holding that the matter was investigated by Serious Fraud Investigation Office. Investigation report was submitted in September, 2009. Investigation under 239 was ordered in April, 2009 and report by SFIO was submitted on 30.07.2011. The instant petition was first filed on 30.01.2013 and refiled on 09.07.2014 with an application seeking condonation of delay in refilling. Therefore, the Tribunal held the case was filed well within time and it does not suffer from undue delay and....