DALLAH ALBARAKA (IRELAND) LTD. Vs. PENTAMEDIA GRAPHICS LTD.

JUDGEMENT

(1.) THIS is an application (un -numbered) filed under regulation 44 of the Company Law Board Regulations, 1991, seeking to (1) recall and set aside the order dated February 28, 2011, passed in the company petition; (2) implead the applicant as a party to the petition; and (3) stay the operation of the order dated February 28, 2011. The applicant claims to be a creditor of the Pentamedia Graphics Ltd. (respondent No. 1). According to the applicant, it had instituted a suit in Claim No. 2006 before the U.K. court for recovery of money. The claim arose from a deed of guarantee and indemnity executed by Pentasoft Technologies Ltd., dated September 21, 2000. The claim was decreed on July 13, 2007, directing recovery of US$ 1,33,62,754 with cost of UK pound 47,512. The judgment has become final and duly served on Pentasoft Technologies Ltd. In the year 2008 the applicant preferred a company petition before the High Court of Madras against Pentasoft Technologies for winding up on the basis of the above decree. However, the petition was dismissed by stating that the judgment of the U.K. court was not one on merits. Thereupon, the applicant preferred an appeal as O.S.A. No. 27 of 2009 seeking leave to take on record the "summary judgment" obtained from the U.K. court which is always a judgment on merits after considering the submissions on both sides, and is given only when the defendant has no real prospect of successfully defending the claim or issue. During the pendency of the appeal, M/s. Pentasoft Technologies Ltd., informed the applicant that M/s. Pentasoft Technologies Ltd., had been amalgamated with the first respondent herein and it had been dissolved without being wound up (vide order dated August 3, 2009 in C.P. Nos. 28 and 29 of 2009 of the High Court of Madras). Thus, all the assets and liabilities of Pentasoft Technologies stood vested with the first respondent. Based on the above communication, the applicant filed a memo in O.S.A. No. 27 of 2009 to implead the first respondent and the first respondent has been impleaded as a party in the above appeal. O.S.A. No. 27 of 2009 was disposed of on July 7, 2010 and the relevant portion is extracted below:

(2.) IT is stated that the decree of the U.K. court is executable against the first respondent. In the light of the judgment referred to above, the applicant filed two execution petitions before the hon'ble High Court of Madras as E.P. Nos. 299 and 300 of 2011. The first respondent entered appearance in the above petitions on February 1, 2011 and filed its counter on March 30, 2011, stating that they no longer own the shares in Mayajal Entertainment Ltd. (respondent No. 2). Respondent No. 1 is holding shares in respondent No. 2 company. When the applicant came to know that the judgment debtor (respondent No. 1) was intending to divest its shareholding in Mayajal Entertainment Ltd., the applicant filed a petition seeking an order restraining the first respondent from dealing with the shares in Mayajal Entertainment Ltd., and Num TV Ltd. By order dated November 2, 2011, the High Court restrained the first respondent from alienating or encumbering the shares held by the first respondent in the above two companies. In response to the above, they filed a counter affidavit stating that in pursuance of a compromise entered into in C.P. No. 106 of 2010 filed before the Company Law Board, the impugned shares have been extinguished and the petitioner therein (respondent No. 1) does not hold any shares in Mayajal Entertainment Ltd. The first respondent furnished a copy of the company petition as well as the order dated February 28, 2011, passed by this Board. On a perusal of the order it is understood that the order dated February 28, 2011, had been obtained in collusion among the respondents and others, just to defeat the rights of the applicant herein and other creditors including the Income -Tax Department. A fraud has been practised on the Board. The above order was obtained fully aware of the pendency of the execution petition in which the impugned shares was a subject matter. The order obtained from this Board is not only collusive and fraudulent but also to circumvent the mandate of the Companies Act, 1956. The various provisions of the Companies Act regarding the procedures for transfer of shares and reduction in share capital have been circumvented by the first respondent. The facts pleaded in the petition do not constitute an act of oppression or mismanagement and such a petition if contested on merits would not have resulted in an order favourable to the first respondent. The first respondent initiated the petition for the sole purpose of frustrating the execution petition, in which it was actively participating. The first respondent holds the majority shares in the second respondent -company. The chairman of the first respondent as well as the second respondent are one and the same person, namely, Mr. V. Chandrasekaran. The other major shareholders of the second respondent are entities controlled by Mr. Chandrasekaran. He holds 6.58 per cent of shares of second respondent. The fact that Mr. Chandrasekaran is in complete management and control of both the first respondent and the second respondent has been suppressed before this Board. The third respondent is the son -in -law of Mr. Chandrasekaran. The company petition has been filed projecting an imaginary cause of action, for the purpose of obtaining a collusive and fraudulent order under section 402(c) of the Companies Act. The compromise was entered on February 26, 2011 and the compromise order was passed on February 28, 2011. However, in the annual report for the period ended March 31, 2011, it is mentioned that the first respondent is re -looking at its investment in Mayajal Entertainment Ltd., and planning to divest its investment for which they have approached the Company Law Board. The first respondent willfully failed to disclose the pendency of the execution petition before this Board, and the non -disclosure of the relevant particulars would tantamount to a fraud. Hence, the order is liable to be recalled/set aside. The second respondent, a company controlled and managed by Mr. V. Chandrasekaran, has entered appearance before this Board and has managed and colluded with the first respondent, and thereby obtained a collusive order for purchase of the shares of the first respondent. Respondents one and two are controlled by Shri Chandrasekaran, and they belong to the Pentamedia group. These two companies, along with other associate concerns, constitute a single economic entity. It is necessary to lift the corporate veil and set aside the impugned order dated February 28, 2011. The first and second respondents herein have been used as channels for implementation of an illegal and fraudulent scheme of transferring shares and subsequently canceling them through reduction so as to frustrate the legitimate claims of the secured and unsecured creditors. Hence, the application.

(3.) COMPANY Petition No. 106 of 2010 was filed by Pentamedia Graphics Ltd. (respondent No. 1) against Mayajal Entertainment Ltd. (respondent No. 2) and others in December, 2010. On February 28, 2011, the company petition was disposed on the basis of a memorandum of understanding dated February 26, 2011, as follows: