TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 819
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....ctively. On 20.3.2017 Respondent No.1 herein through Ministry of Corporate Affairs ordered inspection of Respondent No.2 company on the basis of complaint received from Jagdip H Vaishnav against Respondent No.2 company inter alia alleging syphoning of investors' money and also about irregularities in statutory compliances including non-listing of company with Pune Stock Exchange, non-issuance of financial statements after 1995. On 10.5.2018 the Inspecting Officers of Respondent No.1 submitted its inspection report wherein it was highlighted that many times notices were sent to Respondent No.2 company through post but postal articles were returned with endorsement "Left". On 13.8.2018 Inspecting Officer furnished supplementary inspection report to Respondent No.1. 3. Respondent No.1 through MCA addressed a letter to the Regional Director, Western Region and forwarded inspection report of Respondent No.2 company, with a direction to take action under Section 140(5) of the Companies Act, 2013 (hereinafter referred to as the "Act"). On the basis of the inspection report, Asstt. Registrar of Companies, Maharashtra, Mumbai filed a Special Company Case No.34 of 2018 before the City Civil....
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....ated 10.3.2014 to the appellant stating that they had certified balance sheets and Profit & Loss Account of the company for the year ending on 31st March, 2013 on the basis of information given to them that there were no business transactions during the year. They have also clarified that Respondent No.2 company was not carrying on any business since many years and no books of accounts were produced before them for the purpose of audit. After considering the fact that the previous auditor had also adopted the same process the appellant has prepared the audit report for the financial year 2014-15 and 2015-16. 8. It is also submitted that Inspecting Officer before recording appellant's statement has not provided the material documents, therefore, the appellant answered the questions as per the knowledge. Thus the reasonable opportunity has not been given to the appellant and the statement recorded by the Inspecting Officer cannot be used against the appellant. 9. Learned counsel for the appellant submits that Respondent No.1 except filing the inspection report has not placed on record any evidence to prove that the appellant directly or indirectly acted in a fraudulent manner or co....
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....ntaining any books of accounts. However, such letter has not been brought to the notice of Inspecting Officer nor before the NCLT. This letter was produced before this Appellate Tribunal. At this stage the appellant may not be allowed to raise new submissions. The appellant has specifically admitted that the Respondent No.1 has not produced any accounts books and without the accounts books he has prepared the audit report and has given a conclusion report. It seems that he is actively colluded with the Management of the company in perpetrating frauds. The appellant has failed to discharge his duty as statutory auditor. The impugned order is well reasoned order. Hence the appeal may be dismissed. 14. Respondent No.2 company is unrepresented. 15. Having considered the submissions on behalf of the parties we have perused the record. 16. The findings of the NCLT is based on the report of Inspecting Officer, hence firstly we would like to refer the allegations raised in the complaint by Mr. Jagdip H. Vaishnav and findings of Inspecting Officer in his report which are as under:- i) shares are not listed at Pune Stock Exchange. ii) Siphoning of investors money. iii) Company has n....
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....0 equity shares of Rs. 10/- each as per aggregating Rs. 39550000/-. As per the statement made in the prospectus the shares of Respondent Company were to be listed on Pune, Vadodara and Ahmedabad Stock Exchange. However, it has been noted by the Inspecting Officer that the company is not listed in any of the Stock Exchange. In the report the details of funds collected and siphoned off has been mentioned. As per report before public issue loans and advances as on 31st March, 1996 amounting to Rs. 33,14,592/- and post public issue the said amount is tremendously increased to Rs. 3,41,04,407/- as on 31st March, 2016. The Respondent company has diverted funds to loans and advances. Apart from this the Respondent Company has used public issue proceeds to write off more than Rs. 15.33 lakhs as expenses pertaining to capital issue, prospectus and registration fee/expenses etc. 19. It is clear that the directors of Respondent No.2 company have not spent public issue money for the purpose for which the public issue was made, have not met the promise made in the prospectus, have diverted the funds and thus the prospectus dated 10.10.1996 issued by the Respondent company contains false and mi....
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....he relevant period. Only on this ground it cannot be inferred that the appellant being an auditor acted in a fraudulent manner or abated or colluded in any fraud by or in relation to the company or its directors. It is apparent from the report of the Inspecting Officer that the funds collected by IPO has already been siphoned off by the earlier directors and the directors who are looking to the affairs of the company till 2004 are not traceable. 22. We have carefully examined the balance sheets and financial statements for the financial year 2014-15 and 2015-16 which shows that the company has not carried out any business. We have also found that the respondent company has not filed any statements before the ROC since its incorporation. However, the ROC has not taken any action against the company and its directors. We have also seen that the directors have siphoned the money between 1996 to 2004. However, the inspection was ordered on 20th March, 2017 and the report submitted on 10.5.2018 and supplementary report on 13.8.2018 and the Inspecting Officer is unable to trace out real culprits i.e. the then directors. 23. Now we have considered the legal issue raised in this appeal i....