TaxTMI 
TaxTMI 
2015 (4) TMI 1299
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....iding finance. The Petitioner claims to be a 50% shareholder and a creditor of the Respondent Nos. 4 and 5 Companies, who in turn are creditors of the Respondent No. 1 Company. 2.2 The Respondent No. 1 Company is engaged in the business of consulting and advisory services including management consulting, technical consulting, financial consulting, etc. more particularly described in its Memorandum and Articles of Association. 2.3 The Respondent Nos. 2 and 3 are the Directors, of the Respondent No. 1 Company, and both are 50% each shareholder of it. Both these Respondents are also Directors of the Respondent No. 4 Company, and are also Directors and shareholders of the Respondent No. 5 Company, The Respondent No. 4 is a private limited company incorporated as a 50:50 joint venture under the Act between the Petitioner and the Respondent No. 5. The Respondent No. 5 is a private company incorporated under the Act in which the Petitioner claims to hold 50% shareholding, The Respondent No. 6 is a Director of the Respondent Nos. 4 and 5 Companies. The Respondent No. 7 is the Registrar of Companies and is the administrative authority for the compliance of the provisions o....
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....is resulted in the incorporation of the Respondent No. 4 company. 2.7 To give effect to the aforesaid arrangement, the Petitioner and the Respondent No. 5 executed, amongst others, certain documents, which are at Annexures A2 to A5 to the Petition, on the terms more particularly stated therein. 2.8 Pursuant to the arrangement arrived at between the parties, the Petitioner made an equity investment of US Dollar 2 Million in the Respondent No. 4 Company, Apart from this, the Petitioner also advanced various loans to the Respondent No. 4, which were partly outstanding even the date of filing of the petition. It is stated that the Petitioner also made equity investments in the Respondent No. 5 and currently owns 50% shares In it, apart from the fact that DAICO had advanced various loans to the Respondent No. 5, which even today remain partly outstanding. 2.9 It is stated by the Petitioner that as part of the arrangement between the parties and having regard to the circumstances set out in the petition, the entire management and control of the Respondent Nos. 4 and 5 Companies was at all time with the Khajotia Family. 2.10 It appears that the disputes....
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.... Respondent No. 1 Company is shown to have received an unsecured loan of Rs. 1.35 Crores from the Respondent No. 4 Company, in which the Petitioner is a 50% shareholder and is also a creditor of the Respondent No. 4 Company. According to the Petitioner, the fact with respect to the unsecured loan of Rs. 1.35 Crores from the R-4 Company availed by the Respondent No. 1 Company has never been disclosed to him or any of its officers. (c) That in the same year 2008, the Respondent No. 1 Company is shown to have acquired an office premises valued at Rs. 1,32,16,972/-, which the Petitioner believes is "the said premises". (d) That in the year 2008, the Respondent No. 1 Company did not carry on any business activity whatsoever. Further, there was neither any capital raised by way of shares nor any other amount was borrowed from any other entity save and except the Respondent No. 4. It is thus clear that the entire loan amount of Rs. 1.35 Crores purportedly advanced by the Respondent No. 4 Company to the Respondent No. 1 Company was only for the purpose of and intended to enable the Respondent No. 1 Company to acquire the immovable property referred to herein by diverting ....
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....ear 2007, it virtually did not conduct any business till date, save and except acquisition of the office premises. Thus, the unsecured loans availed by the Respondent No. 1 Company from the Respondent Nos. 4 and 5 were never returned to them, and this fact squarely falls within the scope and ambit of Section 237 of the Act, which was enacted precisely to deal with such situations and safeguard the interests of those affected by the dealing of the company and where the management is so conducted as to jeopardize such interest and where the company is floated for a fraudulent or an unlawful object. 2.16 That the Respondent Nos. 2 and 3 have acted dishonestly and induced the Petitioner to believe that there were huge losses in the conduct of the business of the Respondent Nos. 4 and 5, when, in fact, the amounts were being siphoned off by the Respondent Nos. 2 and 3 into various entities including the Respondent No. 1 Company; and the amounts have been transferred to the Respondent No. 1 Company as unsecured loans from the Respondent Nos. 4 and 5, which were never repaid but shown as purportedly due to the Respondent Nos. 2 and 3. The Respondent No. 1 Company is a company, th....
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....ed by the Respondent No. 1 Company and its Directors and shareholders, namely, the Respondent Nos. 2 and 3, by siphoning off the funds borrowed by the Respondent No. 1 Company from the Respondent Nos. 4 and consequently to prosecute the Respondent No. 1 Company, the Respondent Nos. 2 and 3. (b) To pass an order thereby appointing an investigator forthwith due to existence of circumstances specified in S. 237(b) of the Act and to pass necessary interim orders to safeguard and protect the interests of the Petitioner. (c) To pass an order thereby directing the Respondent No. 7 to seize and take into custody all books, bank statements and records of the Respondent No. 1 Company to prevent the books and records from being destroyed, altered, etc. (d) To pass an order thereby directing an investigation into the affairs of the Respondent No. 4 and Respondent No. 5 to ascertain the terms of the unsecured loans granted, including the period for which such unsecured loans were given, the rate of interest chargeable on such unsecured loans and the circumstances in which the repayment is not reflected in the books of accounts of the Respondent No. 4 and Respondent No....
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....e Petition, being not maintainable, deserves to be dismissed. In this connection, it was argued on behalf of the Respondents that the Petitioner is not a shareholder, creditor, and contributory, a person aggrieved or related in any manner to the Respondent No. 1 Company and hence he is not a person covered within the provisions of Section 237(b)(i) of the Act who are entitled to file the petition under the said provision. According to the Ld. Counsel, the Petitioner, claims to be a shareholder of the Respondent No. 4, who is stated have advanced Rs. 1.35 Crores to the Respondent No. 1 Company. According to the Ld. Counsel, the Respondent No. 1 Company has repaid the loan amount to the said Respondent No. 4, as can be seen from its statement of account filed along with sur-rejoinder by the Respondent No. 1 Company. The Ld. Counsel submitted that the Respondent No. 4 has not come forward to file any reply to rebut this fact. It is further contended that the words "any other person(s)" used in Section 237(b)(i) of the Act means "any person(s) aggrieved". The Ld. Counsel submitted that a stranger cannot maintain a petition under the said provision. It was, therefore, submitted that the....
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....ppressive of any of its members, or that the company was formed for fraudulent or unlawful purpose. (ii) that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or (iii) that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director or the manager of the company." 12. On perusal of the said provisions, it is thus clear that the words used "any other person(s)" means ''a party(ies) aggrieved" and not a stranger(s). The party aggrieved In this case Is the Respondent No. 4 Company, who, admittedly, had advanced a loan to the tune of Rs. 1.35 Crores to the Respondent No. 1 Company. The Petitioner is only a shareholder in the said Company (Respondent No. 4). From the statement of account filed by the Respondents, it is established that the Respondent No. 4 Company has received back the amount advanced by it to the Res....
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....arises for my consideration is as to whether a case is made out under section 237(b) of the Act to pass an order for investigation into affairs of the Respondent No. 1 Company. In this regard, it was argued on behalf of the Respondents that object of an investigation under Section 237 of the Act is to discover something which is not apparently visible and where a petition alleges facts which are apparent from the balance-sheets of the respective companies, an investigation in the affairs of the company cannot be ordered. It is, therefore, submitted on behalf of the Respondents that the petition deserves to be dismissed on this ground alone. To support the contentions of the Respondents, the Ld. Counsel appearing for them relied on the following decisions:- a. Delhi Flour Mills Co. Ltd., In re: S.V. Verma vs. Delhi Flour Mills Co. Ltd. & Ors. ([1975] Comp Cas 33, Vol.45) (Delhi High Court), wherein the Hon'ble Delhi High Court, inter alia, held that- "the object of an investigation under section 237 is to discover something which is not apparently visible to the naked eye. Where a petition discloses merely facts which are apparent from the balance-sheet of the ....
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....n. An investigation may seriously damage a company and should not be ordered without proper material gathered in the manner provided in the Companies Act. The power of investigation has been conferred on the Central Government on the faith that it will be exercised in a reasonable manner. The department of the Central Government which deals with companies is presumed to be an expert body in company law matters. Therefore the standard that is prescribed under Section 237(b) is not the standard required of an ordinary citizen but that of an expert". 16. On the other side, to support the Petitioner's contentions, the Ld. Counsel appearing for them, has relied on decisions rendered in the case of (i) HSB (P.) Equity India Fund Ltd. v. Shree Rama Multi Tech Ltd. & Ors. ([2004] 61 226 (CLB) and (ii) Red Apple General Trading FZE & Anr. vs. Jinbhuvish Power Generations (P.) Ltd. & Ors. (MANU/CL/0029/2013 : [2013] 117 CLA 316 (CLB) and submitted that the Respondents have failed to prove that the amount of loans advanced by the Respondent Nos. 4 and 5 to the Respondent No. 1 have not been refunded to it until date and therefore, this leads to only conclusion that the affairs of the R....