TaxTMI 
TaxTMI 
2021 (11) TMI 616
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.... 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 Applicant Company for recovery of their dues. The letter written to the 1st Applicant Company indicate the intention of the Lenders. Since, the order passed by the CLB is causing difficulty for the 1st Applicant Company to sell its assets to discharge the debt due to the lenders but the share capital of the Company can be enhanced, in which event all the shareholders are equally entitled to participate in the rights issue according to their shareholding under Section 62 (1) of the Companies Act, 2013. There is need for the 1st Applicant Company to raise additional share capital to enable the company to discharge the loans borrowed from the lenders in order to safeguard the in....
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.... At this stage, the Respondents preferred this Impugned Application dated 20.09.2019. Learned Counsel vehemently contended that the proposed Right Issue is for a mala fide purpose and is the modus operandi to siphon further funds from the first Respondent Company. It is submitted that the Application was filed seven months after the demands were made by the purported Lenders/Creditors on 28.02.2019, 22.04.2019 and 07.09.2019. There was no necessity for arranging funds of alleged loans/borrowings as the first Respondent Company had shut down its operations for more than 20 years. The Learned Counsel placed reliance on the Commissioner's Report dated 10.04.2019 which states as follows:- no manufacturing activity was observed in the factory premises and it was learnt that manufacturing activity stopped since 1991 as no HT power was available and only lighting power was available in the office premises. all movable items lying in the factory are old and rusty. It is submitted that the alleged loans were taken from companies managed by the brother-in-law of second Respondent and whose Director was also related to the second Respondent. Namely M/s. Rarefab Textiles Private Limi....
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....Sunil Industries Ltd., and are the relatives of the second Respondent herein. The Notice of Rights Issue dated 13.02.2020 which was received by the Appellant on 17.02.2020 and the Rights Issue remained open from 19.02.2020 to 04.03.2020. The present Appeal was filed on 24.02.2020 and was first listed on 28.02.2020 and thereafter this Tribunal vide Order dated 02.03.2020 directed that Status Quo shall maintain in regards to the Rights Issue. The Learned Counsel strenuously argued that there is no material on record to support the Respondent's case that they had subscribed to the Rights Issue and brought in money on 25.02.2020 and on the same date used the money to pay the principal amount due, to the purported Creditors/Lenders. It was also submitted that this fact was never disclosed to this Tribunal that the Respondent group had paid the principal amount on 25.02.2020, despite the fact that this Tribunal had directed Status Quo on 02.03.2020. Learned Counsel quoted that there are three Company Applications filed by them namely:- C.A. No. 104 of 2008 seeking direction for appointing of an Auditor to verify the Books of Accounts of the Company. C.A. No. 24 of 2010 seeking ....
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....udice and their interests have been protected by NCLT. The loans borrowed from Corporate Lenders do not fall within the ambit of 'related party transactions' under Section 2(76) of the Companies Act, 2013. Both the Companies have different registered offices operating since different time periods and Section 188 of the Companies Act, 2013, clearly lays down the nature of transactions which are covered within the ambit of 'related party transactions' and the subject inter-corporate borrowings do not fall under its purview. 4. Submissions of the Learned Counsel appearing on behalf of the Respondent No. 2: Learned Counsel for the second Respondent submitted that I.A. No. 913 of 2019, the subject Application was filed by the Respondent before NCLT seeking for raising Additional Capital by way of Rights Issue on appropriate basis under Section 62 of the Companies Act, 2013. The Company needed funds to repay the inter-corporate loans of Rs. 1.10 Crores/- as demanded by the Lenders; the Company could not raise loans from Banks and other Financial Institutions in view of the 'Status Quo' Orders on the immovable properties in the main Petition and also in the HUF Petition case pending ....
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....of the Appellant that the loans/borrowings raised are not genuine and that they are 'related party transactions'. It is the case of the Respondents that the first Respondent Company borrowed a sum of Rs. 18 Lakhs/- from M/s. Image Dealcom Private Ltd. in FY 2013-14 and Rs. 30 Lakhs/- from M/s. Rarefab Textiles Private Limited in the year 2015 for business operations of the Company. The material on record shows two letters dated 28.02.2019 and 22.04.2019 addressed by M/s. Image Dealcom Private Limited and M/s. Rarefab Textiles Private Limited to the first Respondent Company demanding repayment of the loan with interest. Annexure A-26 which is the letter dated 22.04.2019 also acknowledges receipt of Rs. 8,64,000/- on 30.03.2019 towards interest for FY 2018-19 and further seeks the TDS certificate for an amount of Rs. 96,000/- deducted towards TDS. It is the case of the Respondents that subsequent to raising of the loans their turnover in the FY 2010-11, 2012-13, 2013-14 and 2014-15 has increased substantially. The Learned Counsel drew our attention to the relevant table depicting the turnover to substantiate his argument. At this juncture, it is relevant to reproduce one such TDS cer....
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.... sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity; (viii) any body corporate which is - (A) A holding, subsidiary or an associate company of such company; (B) A subsidiary of a holding company to which it is also a subsidiary; or (C) An investing company or the venture of the company. Explanation.- For the purpose of this clause, "the investing company or the venture of a company" means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate;] (ix) such other person as may be prescribed;.............." 8. It is the Appellant's case that the Directors of M/s. Image Dealcom Pvt. Ltd. are the sons of the Director of M/s. Sunil Industries Limited. The inter se relationship between the Corporate Lenders is of no significance here. The Appellant's contention that their Directors are also related to the second Respondent is not substantiated by any tenable material. The nature of relationship between the Corporate Lenders and the second Respondent has also not been explained or corroborated by any documentation and we observe that the said ....
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....er, the main petition and all the I.As filed by the Appellants are pending before the NCLT for Adjudication and therefore we refrain from making any observations on the appointment of Auditor or valuation of assets or otherwise. 10. Now we address ourselves to whether NCLT was justified in directing the Rights Issue, keeping in view the factual matrix of this case. The material on record evidences that there is a 'Status Quo' Order passed by the III Additional Chief Judge, City Civil Court, Hyderabad in I.A. No.2371 of 2005 in OS No.328 of 2005, whereby and whereunder the City Civil Court restrained Company from alienating, transferring or encumbering the immovable property in any manner pending disposal of the Suit. The Company Law Board vide Order dated 14.07.2006 directed the Company to maintain 'Status Quo' in regard to the immovable properties held in the name of the Company, until further Orders. Annexure A-9, also establishes that there was a 'Status Quo' Order passed by Additional Principal Bench, Chennai, Company Law Board, on 07.12.2006 to be maintained in regard to the shareholding pattern until further Orders. 11. The Hon'ble Supreme Court in 'Shri V.S. Krishnan &....