TaxTMI 
TaxTMI 
2020 (10) TMI 826
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....properties to raise funds from Banks and other Financial Institutions. Secondly, there is a threat from the lenders to surge the interest rate and take coercive legal steps if the dues of corporate lenders are not cleared. FACTS OF THE CASE 3. It is stated the main company petition was moved during 2006 which is pending disposal due to various reasons including attempt to settle the disputes via mediation, which ultimately failed. 4. The total paid up capital of the Company is Rs. 2,87,300/-and the Company is one of the defendants in a partition suit bearing OS No.328 of 2008 pending before Hon'ble Court of XIII Additional Chief Judge (FTC), City Civil Court, Hyderabad. It is also stated the parties involved in the main petition are defendants in the said suit. 5. Apart from the above pending suit, there exists two status quo orders passed by the Hon'ble CLB, one with regard to the immovable properties held in the name of the Company vide its order dated 14.07.2006 and the other with regard to its shareholding pattern vide order dated 07.12.2006. 6. It is stated owing to restrictions by way of above interim orders, the Company could not pledge its properties and raise ....
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.... to Mediation Centre at Hon'ble High Court of Judicature at Hyderabad and further directed this Tribunal to proceed with the matter in case mediation fails. 11. Pursuant to the above order of Hon'ble NCLAT and based on the memo filed by the parties this Tribunal vide order dated 19.09.2018 appointed Mr. Henry Richard as Mediator under Companies (Mediation and Conciliation) Rules, 2016. It was reported to this Tribunal on 24.09.2019 that the mediation had failed. This Tribunal, complying with the directions given by Hon'ble NCLAT, listed the matter to 23.10.2019 for hearing. 12. The Respondents submitted that this Application is filed only with a malafide intention to delay the matter. The main objection raised by the Respondents is that the Application is barred by limitation as the allegations with respect to unsecured loans stated to have been received by the Company pertains to the financial year 2011-12. 13. The Respondents contend that there was no necessity for Applicant No.1 Company to raise any working capital loans for its operations by pledging its shares when the operations is shut down for about two decades. According to Respondents, no details have been ....
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.... 1st Applicant Company and as such there is no need for it to repay the same. According to Respondents, the appointment of Mr. Girish Gupta/2nd Applicant herein and Mr. Mitesh Gupta as Directors is illegal and invalid and that any transaction done by these both Directors is not binding on the Company. 19. It is the case of Respondents that they infused money in the form of unsecured loans in the year 2005 which has not been repaid by the Applicants in spite of repeated requests and urged this Tribunal to direct the Applicants to repay the loan amount with interest of Rs. 5,38,99,594/- that is due to the Respondents. 20. Respondents also stated that no prejudice will be caused if the application is dismissed as Applicants have moved this application with unclean hands and prayed this Tribunal to proceed with the main petition instead. DISCUSSION 21. We have heard the PCS for Applicant and Counsel for Respondents. The Learned PCS would contend that the 1st Applicant Company raised various inter-corporate loans from time to time to actively pursue its business operations due to which there was substantial increase in the turnover of the Company. Learned PCS would contend for the F....
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....st Applicant Company cannot sell the assets for clearing the debts due by the Company to the creditors/lenders. Similarly, the PCS would contend that there is a similar order passed by the CLB when the main petition was first filed by the Respondents for oppression and mismanagement where under two orders are passed by CLB directing status-quo with regard to the assets of 1st Applicant Company and also status-quo with regard to share-holding. Thus, PCS would contend that in order to discharge the liabilities of 1st Applicant Company, it is necessary to modify or relax the order passed by the CLB directing status-quo with regard to shareholding pattern, until further orders. Thus, PCS would contend that sufficient foundation is laid for granting relief in favour of Applicants. 26. The PCS would further contend that Respondents referred to an order passed by this Tribunal on 22.02.2018 where under the Tribunal passed order appointing an Auditor for doing valuation of the shares of 1st Applicant Company. However, the said order was appealed before Hon'ble NCLAT which was set aside and Hon'ble NCLAT directed mediation to be effected between the parties at the first instance an....
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.... it is the case of Respondents that the said amount is lying idle and same can be used for discharging the debts instead of going for raising capital by going for rights issue. PCS would contend there is a schedule attached to the balance sheet as on 31.03.2019 which was filed by the Respondents at page No. 57. In the schedule under the Head "2.7 (a)" "other current liabilities" in which it is clearly mentioned the particulars of the over drafts against the fixed deposit. PCS has referred to the said table mentioned at page 4 of the counter filed in IA 1152 of 2019. Particulars 31.03.2019 31.03.2019 Bank overdraft against fixed deposits Rs. 79,93,219 Rs. 91,36,819 28. PCS would contend by pledging fixed deposit and borrowing money against fixed deposit, the 1st Applicant Company has saved Rs. 8 lakhs. PCS has given details how the 1st Applicant is able to save Rs. 8 lakhs by pledging fixed deposit with the bank in the table given below- Financial Year Int. Recd on FD from Bank (Rs) Int. paid on OD to Bank (Rs.) Difference Income 2014-15 10,30,302.00 7,46,189.00 2,84,113-00 ....
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....on that it is necessary to raise additional capital as otherwise the business operations of the Company would come to standstill. The relevant paragraphs of the said judgement is reproduced below: As rightly pointed out that CLB missed a most basic principle of Section 397, namely, that mere unfairness does not constitute oppression. When the petitioners were given the right to subscribe to the 'rights issue' along with all others in the same proportion, no prejudice, whatsoever, could have been caused to them. It is not in dispute even by the petitioners that the need for more funds was an admitted position. In Needle Industries (supra) this Court has pointed out if there is a need for funds the fact that the directors have incidentally enriched themselves would not entail a court to set aside the issue of shares. In fact, no unfair prejudice has been caused to the petitioners. The CLB failed to take note of all these vital aspects and relied on irrelevant materials. Apart from these, it is pointed out that the company having turned the corner and doing well, it would be fair exercise of discretion by this Court not to interfere with the High Court judgment. In the light....
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....licant Company by order dated 22.02.2018. However, the Applicant preferred appeal to the Hon'ble NCLAT against the order and Hon'ble NCLAT directed the parties to go for mediation and in case mediation fails, the Tribunal to proceed with the matter. The Counsel reported that the mediation failed and when matter is coming up for hearing, this Application is filed. The Counsel contended that CLB passed an order dated 07.12.2006 directing status quo with regard to the shareholding pattern and the present application is filed in 2019 is therefore totally barred by limitation. The Counsel contended that there was no need to raise any working capital for its operations. No proof is filed with reference to the intercorporate loans. The Counsel contended that 1st Applicant Company shut down its business two decades ago and Company is defunct. The Counsel contended that 1st Applicant Company is showing fictitious 'trading' turnover in the Company's books. The Counsel contended the fictitious "trading" turnover is the subject matter of CA 105/2005 filed by the Respondents which is pending. Therefore, he requested the Tribunal to first take up CA 105 of 2005 at the first i....
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....cant Company. It is the case of Applicants that the Company started increasing its turnover from year after year and details are given in the Application. It is also the case of Applicants that dividend was paid for 2 years. The 1st Applicant is bound to discharge the loan amount due to the lenders which is reflected in the latest balance sheet ended 31.03.2019. The Applicants also filed letters received from the lenders. There is no other way for the Company to discharge the debts, otherwise the assets of the Company will be at risk. To protect the assets of the Company, it is necessary for the 1st Applicant Company to raise working capital by issuing additional shares. 35. We have seen the voluminous documentary evidence placed by the Applicants, not only in this Application but also in the counter filed in IA 1152 of 2019. There is sufficient proof filed by the Applicants that money was borrowed from the corporate lenders. It is true that the said money is to be discharged. The apprehension of the 1st Applicant Company is well founded that in any case the debt due to the Corporate Lenders are not paid there is every possibility, the lenders may take coercive action against 1st ....