TaxTMI 
TaxTMI 
2025 (11) TMI 1567
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....mar Agarwala: Ms. Akanksha Mukherjee, Advocate For the Applicant in CA/6/2022, CA/7/2023, CA/8/2023, CA/11/2023: Mr. Swatarup Banerjee, Advocate Mr. Shaunak Ghosh, Advocate, Mr. Sariful Haque, Advocate Mr. Rajib Mullick, Advocate, Mr. Biswaroop Ghosh, Advocate. JUDGMENT RAVI KRISHAN KAPUR, J.: 1. By consent of the parties and in view of the common questions of fact and law involved, all these applications were taken up for hearing analogously. These applications pertain to Chrestien Mica Industries Limited (presently in liquidation). 2. M/s. Chrestien Mica Industries Ltd. was incorporated under the provisions of the Companies Act 1913 and was a publicly held company. The company since 1958 had been owned, controlled and closely held by six brothers belonging to one Agarwala family namely, Ram Kumar Agarwala, Om Kumar Agarwala, Manoharlal Agarwala, Ram Gopal Agarwala, Ramanand Agarwala and Badri Prasad Agarwala. Prior thereto, it appears from the available records that the company had as far back as in 1937, taken over the business of M/s. F.F Christian and Company Limited. In the course of business, the company by two separate agreements for sale dated 17 July 1946 a....
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.... 3. The Official Liquidator is directed to pay out of the funds in his hand a sum of Rs. 1,00,000/- to other with all accrued interest on the said sum at the agreed rate of 4% per annum upto November 30, 1991 to State Bank of Indore, the petitioning creditor, in full payment of its dues. 4(a) The Official Liquidator is directed to pay out of the funds in his hands a sum of Rs. 48,46,610/- to Punjab National Bank being the amount claimed in the suit filed by the said Bank against inter alia, the company being suit No. 579 of 1973 (Punjab National Bank Vs Christian Misc & Industries Ltd. in liquidation & Ors.) The said sum may at its discretion be accepted by Punjab National Bank in full satisfaction of all its claim against the company in liquidation subject to the question of interest to be decided in the said suit. (b) The said suit No. 579 of 1973 and the Mortgage suit be placed in the list for final disposal of the application herein is given liberty, to intervene in the said suit. (c) The Bank shall furnish Xerox copies of the Title Deeds and/or Mortgage Deeds in its possessions the special officers appointed herein subject to further orders to....
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....the company to whom they shall ultimately hand over charge and possession. 10. The Special Officers are directed to submit report to this Hon'ble Court with regard to the state of affairs of the company within a period of six months from the date of this order. 6. Pursuant to the above, the assets, properties and funds of the company were handed over to the Special Officers. It also appears that by a letter dated 30 July 1993 the Official Liquidator also handed surplus funds amounting to Rs.72,00,000/- to the Special Officers. Significantly, the directions of the Court with regard to convening and conducting an Extra Ordinary General Meeting were never complied with. There were other directions pertaining to the assets and properties which were not adhered to. Thereafter, diverse orders dated 11 June, 1993, 18 June, 1993 and 28 June, 1993 respectively were passed by the Company Court, which for convenience are set out below: 11.6.1993 CA/11/2023: A/O is to be filed by 25.6.93, A/R is to be filed by 2.7.93. The matter is adjourned till 5.7.93. Judge's Summons be signed as of today. There will be an interim order in terms of prayersta and 'b&....
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....hereof including its Registered office at 4, Lyons Range along with its furnitures and fixtures. (d) Board of Management and/or Committee of Management will tako necessary steps to hold a meeting of the shareholders and constitute a Board of Directors as and when possible after issuing notice to the shareholders by post or by publishing such notice once in Business Standard. 7. A report dated 25 August 1992 filed by the Special Officers suggests that the Official Liquidator had handed over the assets, properties and funds of the company to the Special Officers. Thereafter, innumerable correspondence has been issued by one of the Special Officers i.e. Mr. Arun Kumar Agarwal with different statutory authorities, banks and other institutions whereby the said Arun Kumar Agarwal acting singly has been representing the company (in liquidation). 8. The underlying complaint in all these applications is one of fraud. It is alleged that the said Arun Kumar Agarwal as Special Officer has manipulated and orchestrated affairs to get exclusive and absolute control and management of the company (in liquidation) and also dealt with its assets and properties to the prejudice of the c....
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.... these proceedings purchased shares of the company (in liquidation). Mr. Arun Kumar Agarwala holds substantial shares in Reliance Firebrick & Pottery Company Limited and had resigned as director from that company only on 18 March, 2020. However, the list of shareholders would inter alia, show that all the family members of the said Mr. Arun Kumar Agarwala including himself are the shareholders of the said company. In such circumstances, Arun Kumar Agarwala has during the pendency of these proceedings being a Special Officer clandestinely become the single largest shareholder and the single largest creditor of the company (in liquidation) through himself, his associates, family members, relatives and stooges. Any transfer or dealing by the Special Officer is not only in conflict of interest but also demonstrates self-dealing and misuse of powers as Special Officer. 11. There has been no compliance with the directions contained in the order dated 12 December 1991. There is no accountability of the assets and properties whether moveable or immoveable belonging to the company (in liquidation) which were specifically mentioned in the order dated 12 December 1991. The specific allegat....
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....as this court thinks just to the company or to contribute such sum to the assets of the company by way of compensation; C) An order be passed discharging Mr. Arun Kumar Agarwala to act as special officer of the company abovenamed with immediate effect; D) An order be passed directing Mr. Arun Kumar Agarwala to immediately hand over assets of the company abovenamed to the official liquidator and/or any other person which this court may deem fit and proper, E) An order be passed forming a committee of management by appointing all petitioners along with others family members if required take all necessary steps to revive the said company and to run the said company; F) Ad interim orders in terms of the above prayers; G) Such further or other order orders be passed and/or direction or directions be given s this Hon'ble Court may deem fit and proper. C.A. No. 7 of 2023-(application filed by the shareholders of the company namely Kailash Chandra Agarwala, Umesh Chandra Agarwala, Ratan Kumar Agarwala And Anand Kumar Agarwala) A) Leave may be granted to the application to file the instant proceedings with the short cause ti....
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....d directing examination and cross examination of Mr. Sushanta Dasgupta, one Mr. S. K. Pal and one Mr. Amit Hazra in regard to the assets and the accounts of the company during their tenure as the alleged committee of management of the company, if any formed; G) The registrar of companies may be directed to file a report containing the statutory compliances of the company and the shareholding of the company till December 1991; H) The registrar of companies may be directed to file a report containing the statutory compliances of the company, which has been made after December, 1991 and the shareholding of the company till date; I) The Calcutta Stock exchange and the Bombay Stock exchange may be directed to file a report in regard to the statutory compliances made by the company on and from December, 1991 and the present shareholding of the company; J) The Special Officers appointed by this Hon'ble Court in regard to the company may be discharged and the management of the company may be transferred back to the shareholders of the company; K) The alleged Committee of Management of the company consisting of Mr. Sushanta Dasgupta, one Mr. ....
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....the son and legal heir and/or representative of Ram Kumar Agarwala, be permitted to examine Arun Kumar Agarwala in accordance with law, and in the event he is found guilty, to compel him to repay or restore the money or property along with interest as this Hon'ble Court may deem fit and proper, and to contribute such sums to the assets of the Company (In Liquidation) by remuneration; D) An order may be passed directing examination and cross examination of the Special Officers appointed by this Hon'ble Court in regard to the report filed by them before this Hon'ble Court and in regard to the assets and the accounts of the company during their tenure as special officers of the company; E) An order may be passed directing examination and cross examination of Mr. Susanta Dasgupta, one Mr. S. K. Palit and one Mr. Amit Hazra in regard to the assets and the accounts of the company during their tenure as the alleged Committee of Management of the company, if any formed; F) An order may be passed directing the Central Government or any investigating agency of the Central Government to investigate the offences and actions committed by the said Mr. Arun ....
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....or having committed fraud on the said company; F) An order may be passed such that the Special Officer cannot transfer and/or alienate the property of the Chrestien Mica Industries Limited to any third party during the pendency of this instant proceedings; G) An order may be passed directing the Central Bureau of Investigation and/or the Serious Fraud Investigation Organization to investigate into the activities of Arun Kumar Agarwala during the period, when he was acting as the Special Officer of the company and submit a report in respect thereof, before this Hon'ble Court. H) Ad-interim orders in terms of prayers above; I) Costs of and incidental to this application; J) Such further or other order or orders be passed and/or direction or directions be given as this Hon'ble Court may deem fit and proper. 13. The Special Officers were represented separately in these proceedings. On behalf of Arun Kumar Agarwala, it was submitted that all these applications were barred by limitation and have been filed after a delay of more than 30 years. Thus, on the ground of inordinate and unexplained delay all these applications were liable ....
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....nts submitted to this Hon'ble Court and by not doing so have perpetrated fraud on Court. The Special Officers have not only failed to comply with the order dated 12 December 1991 but have failed to account for any of the assets and properties of the company (in liquidation). 16. Reports filed by Arun Kumar Agarwala in his capacity as Special Officer are distorted and only to mislead this Court. The purported Committee of Management consisting of Susanta Dasgupta, S.K. Palit and one Amit Hazra was an obvious sham and all three persons were employees and stooges of Mr. Arun Kumar Agarwala who remained untraceable despite orders of Court. In any event, the supervisory control of the Special Officers over any such Committee or Board of Management of the company (in liquidation) cannot possibly absolve either of the Special Officers. No details of appointment were ever filed by Mr. Arun Kumar Agarwala with the Registrar of Companies, Ministry of Corporate Affairs as directed by the order dated 12th December, 1991. No Annual General Meeting has been conducted of the company (in liquidation). The last available directors/shareholders/is only available as of 2 August, 1972. There ar....
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....he stakeholders of the company and on this Court. Significantly, any dues insofar as the Punjab National Bank ought to have been paid in full by virtue of the order dated 12th December, 1991. In the alternative, the matter should at least have been brought to the attention of this Court. The selective compliance with the order dated 12 December 1991 is without any justification. 19. Mr. Arun Kumar Agarwal has and continues to wrongfully and illegally hold himself to be the person in charge and in exclusive control of the company (in liquidation). By a letter dated 19th April, 2022, the Advocates for the applicant in CA 10 of 2023 had requested the Special Officers, to provide necessary documents and information pertaining to the company (in liquidation), including particular information relating to compliance with the order by which they had been appointed dated 12 December 1991. Mr. Arun Kumar Agarwala has sought to rely upon his alleged medical conditions i.e. vascular dementia and Parkinson's, to shield himself from non-compliance with the orders and directions of this Court. Strangely, the said Mr. Arun Kumar Agarwala had continued to participate regularly before the Hon....
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....1 : [1956] 2 WLR 502 (CA)]). b. In Shrisht Dhawan (Smt) v. Shaw Bros (1992) 1 SCC 534, it was held: Fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. It is a concept descriptive of human conduct. Michael Levi likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to, 'wing me into the easy-hearted man and trap him into snares'. It has been defined as an act of trickery or deceit. In Webster's Third New International Dictionary fraud in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or public policy forbids as being prejudicial to another. In Black's Legal Dictionary, fraud is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so ....
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....ce to its process and rules, protect its officers from indignity and to punish unseemly behaviour. If this were otherwise, the entire foundation of the system would be shaken. [Takhar v. Gracefield Developments Ltd. & Ors. (2019) UK SC 13 and National Insurance Company Ltd. vs. Maya Devi & Ors. (2024) SCC OnLine SC 4086]. 22. Ordinarily, companies are limited liability companies. The special feature of limited liability of human agencies is prone to abuse and wrongdoing. Upon a company being wound up by the Court, the Official Liquidator becomes the custodian, under section 456 of the Companies Act, 1956 of the company's properties. Such proceedings are in rem and bind all the stakeholders, creditors and contributories. To this extent, the Company Court acts as a trustee for all the creditors insofar as the company (in liquidation) is concerned. The statute requires the Official Liquidator to be promptly apprised of the company's business and assets and there is a duty cast on the officers of the company upon an order being made to file statements before the Official Liquidator and ensure that all of the wound-up company's assets are placed in his hands. The stringen....
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....in the Companies Act, 1956 or under any other law. It is settled law that to run the affairs of the company such as this, a Receiver should not be appointed. In order to remove a deadlock in a company this Court often had to resort to the appointment of a Special Officer of the company so that the affairs of the company could be run most beneficially by way of interim measure through the said Special Officer under the supervision. Of the Court in the pending matter. It is admitted by and on behalf of all the parties herein that since quite some time past a practice has grown up in this Court to make such appointments, in a suitable case if the Court so thinks fit and proper solely with a view that there might not be any deadlock in the company and so that the affairs of the company might be conducted in a suitable manner through such Special Officer. As to what would be the powers and functions of such Special Officers have not been laid down in any of the decided cases of this Court. 15.In my opinion, the powers and functions of a Special Officer must vary in accordance with the facts of each case but such powers and functions must be such so as to enable him to run the a....
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....ttee of Management of persons at the behest of Arun Kumar Agarwala was equally ill-motivated and illegal. These persons were obviously name lenders, employees and henchmen of Mr. Arun Kumar Agarwala and were untraceable notwithstanding orders of Court. The Special Officers were bound to exercise supervisory control over the Committee of Management in terms of the order dated 28 June 1993. In effect, Arun Kumar Agarwala managed to create a mask or shield whereby he single handedly and exclusively without any lawful authority continued to control and manage all the affairs of the company (in liquidation). 26. On a conjoint reading of sections 291, 292, 293 in Chapter VI of the Companies Act 1956, it is ordinarily the Board which is to function on behalf of the company in a specified manner and on certain specified conditions and restrictions. The Committee of Management or the Special Officers could not have greater powers unless specifically conferred by the Court in the order appointing the Committee of Management giving it such unrestricted powers. Whether the Committee of Management or the Special Officers, neither of them were permitted to deal with the assets or properties o....
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....imately four decades using his appointment as Special Officer as a cloak or guise to defeat the rights of all stakeholders including keeping all the statutory authorities at bay. Any appointment as Special Officer could only have been for a limited duration. Nevertheless, Mr. Agarwala continued to exercise authority and control of the company till date and represent the company before various authorities. There is nothing to demonstrate that the unsold stocks of mica were ever accounted for. The company had leasehold rights over several mines and substantial reserves in warehousing facilities which were also unaccountable. Similarly, the immoveable properties of the company (in liquidation) have not been accounted for. On the contrary, the Court was misled and material facts suppressed. The effect of the fraud and the abuse of process is so gross that it vitiates each and every act of the Special Officers, some of which are void ab initio and others voidable. The fraud perpetrated by the said Arun Kumar Agarwala involved not only siphoning off the funds and assets of the company (in liquidation) but also misutilization of his role as Special Officer. [State of A.P. vs. Suryachandra....
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....le largest majority shareholder of the company. The last balance sheet of the company was filed as on 31 December 1968.From the Report dated 16 January 2023 filed by the Registrar of Companies, it appears that the records pertaining to the company (in liquidation) have not been digitalized and the same remain untraceable. 31. Despite orders of Court, the Committee of Management chose not to appear before this Court. It is true that under the inherent powers which the Company Court possess, the sky is the limit when it comes to protecting and preserving the assets of the company but the appointment of any such Committee may in the pretext of revival emasculate the liquidation machinery and nullify the object and purpose of the Act. There is simply no accountability nor justification for any such Committee or the Special Officers and all this is done in the garb of revival of the company under section 466 of the Act. 32. Rule 9 of the Company Court Rules 1959 provides as follows: R.9. Inherent powers of Court - Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be neces....
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.... 34. CA 12 of 2024 is an application filed by Nomura Investment and Finance Private Limited as assignee of the erstwhile Punjab National Bank, a creditor of the company (in liquidation) inter alia seeking transfer of this company petition and all connected applications to the National Company Law Tribunal (NCLT).The applicant alleges to have obtained a registered assignment of debt dated 31 March 2011 in its favour from Punjab National Bank being the largest creditor of the company (in liquidation). 35. It is contended on behalf of the applicant that this company petition alongwith all connected applications ought to be transferred to the NCLT on the ground that no sale of assets has yet taken place and in view of the embargo under the Companies Act, 2013, this Court has no jurisdiction to proceed any further with this application. It is also urged that this company petition stood dismissed as appears from the Status Report of the Official Website of High Court as far back as on 15 August, 1947. 36. On behalf of the contributories of the company in liquidation it is contended that, the applicant has no locus to file this application. This application has been filed with obliq....
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....f transfer to the NCLT, there remains a limited discretion of the Company Court in appropriate cases to retain proceedings with the High Court. [Action Ispat and Power Pvt. Ltd. vs. Shyam Metalics and Energy Ltd. (2021) 2 SCC 641]. 39. In such view of the matter, CA 12 of 2024 is dismissed as being frivolous and meritless. This is an application filed in desperation to prevent any enquiry into the fraudulent acts pertaining to the company (in liquidation) from scrutiny by this Court. There are serious issues which also go to the bona fides of the applicant in filing this application. 40. The original records of these proceedings remain untraceable nor are any current records available with the Registrar of Companies. In view of the absence of the original records and the presumption under section 114(c) of the Evidence Act 1872 all allegations as to the veracity and genuineness of the orders dated 28 June 1993 and 11 June 1993 passed by the Hon'ble Justice Kalyanmoy Ganguly stand rejected. 41. The wrong which has been done is ultimately 'a wrong to the company' and it is the company which at its general meeting should decide any future course of action and that decision is....
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.... have been mentioned in paragraph 2 above. g. Appropriate steps be forthwith taken for rectification of the Register of Members to reflect the shareholding of the company as on 30 June 1970. h. In view of the gross fraud and abuse of process at the hands of Arun Kumar Agarwala, any transfer of shares which has taken place post the winding up order dated 5 November 1979 by Arun Kumar Agarwala is declared to be void and should not be taken into account for the purposes of holding the above meeting. In particular, any transfer of shares in favour of Reliance Firebricks and Pottery Company Limited is declared to be illegal, null and void and no effect be given to the same. i. As far as Nomura Investment Private Limited is concerned, the company is directed to take a final decision as to further steps to be taken insofar as the assignment of the debt and the dues of the erstwhile Punjab National Bank are concerned and whether to adopt, ratify or rescind such transaction and all steps taken pursuant thereto. j. The company at such meeting is at liberty to take appropriate steps vis-a-vis the remaining assets (both moveable or immoveable) of the company....