SHREE SECO (P.) LTD. Vs. LAXMAN KUMAR SAGAR

JUDGEMENT

(1.) IN this case, the petition has been filed by the petitioner under sections 247 and 237 of the Companies Act, 1956 ('the Act') praying therein for preliminary. enquiry and investigation into the affairs of the respondent -company and the said petition is under consideration for adjudication. Precisely speaking, the petitioner is a decree -holder of award dated 29th May, 2009 for Rs. 2,61,33,684 with simple interest at 12 per cent per annum against the respondent -company and thereby, the respondent -company is a judgment debtor against whom the entire arbitral award dated 29th May, 2009 was passed. However, the respondent -company challenged the said award under section 34 of Arbitration and Conciliation Act, 1996 and the same was dismissed vide order dated 5th February, 2011 passed by Smt. Nisha Gupta, RHJS Distt., Judge, Jaipur. As a matter of fact, the aforesaid award dated 29th May, 2009 in favour of the petitioner is fall out of the agreement dated 19th January, 2002 which was signed by Shri Laxman Kumar Sagar (respondent No. 2) as a director of the respondent -company despite the fact that he was not director of the respondent -company on 19th January, 2002. As stated in the company petition, respondent No. 2 became additional director of the respondent -company on 20th January, 2002 as per the records available with Registrar of Companies ('RoC') and respondent No. 2 is also director of 8 companies as stated by the respondent -company while making application for loan to the banks and financial institutions. In addition, it has been pointed out that any objection that the documents with regard to notice dated 2nd September, 2002 for annual general meeting ('AGM') issued on 30th September, 2002 for regularisation of respondent No. 2 as additional director of respondent -company and further regularisation on 30th September, 2002 have also been filed with the RoC. The petitioner advocate has alleged that respondent No. 2 since beginning, i.e., 19th January, 2002 acted mala fidely with petitioner and conducted the affairs of respondent -company in unfair manner, with the intent to defraud the petitioner as soon as the dispute arose due to default or breach of agreement dated 19th January, 2002 by respondent -company. Not only this, respondent No. 2 resigned from the respondent -company on 12th February, 2003 without prescribing reason for designation. Under these circumstances, it has been pleaded in the petition that respondent No. 2 committed offence of fraud, falsification of accounts and impersonation which requires a fair investigation and prosecution under Act which is an additional provision other than the provisions prescribed for the offences under Indian Penal Code.

(2.) AS recorded in the order dated 1st August, 2013, counsel appearing for the petitioners stated that the petitioners do not wish to file any rejoinder. In view of this, the matter was allowed for arguments. The petitioner advocate pleaded that the petition was filed for the order of investigation against the respondent -company and respondent No. 2 and the actual true persons who have conspired to cause the systematic failure of the respondent -company by siphoning or the funds and assets of the company to defeat the interest or petitioner and the award dated 29th May, 2009 for Rs. 2,55,70.337 with interest at 12 per cent per annum till the date of actual payment of entire amount. In addition, it has also been averred that the petitioner -company has focus to file the present petition against the respondent -company as the petitioner is a creditor in whose favour it final judgment and decree/award dated 29th May, 2009 has been passed and the appeal under section 34 of Arbitration and Conciliation Act has also got dismissed vide order dated 8th February, 2011. The petitioner advocate pointed out that the respondent No. 2 signed sale selling agency agreement dated 19th January, 2002 with the petitioner -company and on the said date 19th January, 2002, the respondent No. 2 was not even the director of the respondent No. 1 -company and he was actually made director on 20th January, 2002 of the respondent -company However, subsequently, the aforesaid agreement was breached and a lot of damage has been caused to the petitioner. Under these circumstances, the respondent No. 2 secretly resigned from the respondent No. 1 -company on 12th February, 2003 without prescribing reason for resignation in a suspicious manner. Further to this, it has been alleged that the respondent was indulging in fraudulent conduct and the instance have been narrated as under :

(3.) THE respondents advocate extended the argument that the petition is not maintainable as the entire case is based only on assumptions and presumptions of the petitioner -company which failed to bring on record any factual foundation which even remotely suggest that the affairs of the respondent -company is required to be investigated. Further, it was pointed out that the petitioner filed the petition only to benefit itself in the execution proceedings already pending in District Court Tis Hazari and the petitioner chose to get the execution petition transferred to Delhi despite the fact that respondent does not hold any property in Delhi. The respondents advocate his contended that an investigation is ordered when business of a company is done in a fraudulent manner and there is no document on record which suggests the same on the contrary, the respondent -company has always compiled with the provisions of the Act and filed all the necessary forms on time. Not only this, the petitioner has failed to produce any document which suggests that business of the respondent -company is being conducted in a manner which is unlawful. Moreover, no investigation could be ordered merely because the company was running into losses and there is nothing on record to prove that the directors are in the process of transferring or disposing of the shares debentures or assets of the company. The respondent advocate has further argued that it was held in the case of Kamal K. Dutta v. Ruby General Hospital : [2005] 124 Comp Case 441 (CLB) that application under section 237 should show existence of prima facie reasons. In another case of V.K. Uppal v. Akshay International (P.) Ltd., hon'ble Del. High Court held that if execution is pending, corporate veil would not be lifted without any specific allegations. In addition, it was also held in the case of UA Sumathy v. Dig Vijay Chit Fund : [1983] 53 Comp Cas 493 (Ker.) that no investigation could be ordered unless that result linked with fraud, misfeasance, mismanagement, oppression and the like and the loss might be an ordinary business risk. Apart from this, it has been pleaded that the allegation that frequent change of directors or name of the company or amendment in the object clause was done with the intention to defraud its creditors is incorrect, unjustified and wholly unsubstantiated. In fact, there is no restriction in the Act to change the name of the company or directors, etc. If due process of law is followed. On the contrary, the petitioner has failed to show how altering the object clause of the respondent -company, led to defrauding of its creditors. In addition, on the issue that execution award was not reflected in the balance sheet, is due to the fact that admittedly a second appeal against the arbitration award is pending before the hon'ble High Court of Rajasthan and the respondent -company was under the bona fide belief that the appeal would be decided in its favour. Moreover, accounting rules and practices do not make it mandatory to reflect in the balance sheet the execution award passed against a company, not only this, an isolated instance of mismanagement already remedied may not justify the passing of an order under section 237(a)(ii) has been decided in the case of Kamal K. Dutta (supra) wherein It was held that :