B.Sudhakar Reddy & Ors vs B.Manpal Reddy & Ors

IN THE MATTER OF: Before NCLT Before NCLAT

1. B. Sudhakar Reddy S/o Venkat Ramreddy, H.No. 13-17/2, Maruthi Nagar, Near Yadagiri Theatre, Santosh Nagar, Hyderabad 500089 4th Respondent 1st appellant

2. Mr A. Mahesh, S/o Narayana, H.No.8-1-60.5.501m SVS Complex, Karman Ghat, Hyderabad 500079 5th Respondent 2nd appellant

3. Mr. T Achary, S/o Ramulu, H.No.10-108/1, Venkateswara Colony, Amangal (Post, Village & Mandal) Mahboob Nagar 500321 6th Respondent 3rd appellant

4. N. Srinivas, S/o R. Venkaiah, Flat No.302, Loukya Apartments, Asmangadh, Malakpet, Hyderabad 500036 7th Respondent 4th appellant

Vs

1. Mr B. Manipal Reddy, 1st Petitioner 1st Respondent S/o B. Narayan Reddy, R/o Plot No.171, H.No.42-281/2 Maruthi Nagar, Moula Ali, Hyderabad 500040

2. Mr. G. Alwal Reddy, S/o G Chinna Reddy, Post & Village Revally, Midjil (Mandal), Mahboob Nagar, Telangana. 2nd Petitioner 2nd Respondent

Company Appeal (AT) No.193/2018 2

3. M/s Palamoor Agro Complex Ltd, Regd Office at H.No.1-70/G, Vasavi Residency (Near GBR Hospitals) Prabhat Nagar, Chaitanya Puri, Hyderabad 500038 1st Respondent 3rd Respondent

4. Mr S. Ramesh Reddy, S/o Papi Reddy, Plot No.92, Road No.3, Green Hills Colony, L.B. Nagar, Hyderabad 500035 2nd Respondent 4th Respondent

5. Mr. R. Manohar Rao, S/o Lakshmi Narasimha Rao House No.1-64, Station Road, Valigonda (Post , Village & Mandal), Nalgonda Distt 508112 3rd Respondent 5th Respondent

6. Mr. G. Mahender Reddy, S/o G Venkat Reddy, Urumudla (Post & Village), Chityala Mandal, Nalgonda Distt. 8th Respondent 6th Respondent

7. The Regional Director (South Eastern Region), Ministry of Corporate Affairs, 3rd floor, Corporate Bhavan, GSI Post, Nagole, Bandlaguda, Hyderabad 500068 9th Respondent 7th Respondent

8. The Registrar of Companies, 2nd floor, Corporate Bhavan, GSI Post, Nagole, Bandlaguda, Hyderabad 500068 10th Respondent 8th Respondent

9. The Serious Fraud Investigation Office, Ministry of Corporate Affairs, 2nd Floor, Paryavaran Bhavan, CGO Complex, Lodhi Road, New Delhi-110003. 11th Respondent 9th Respondent

10. The Secretary, Ministry of Corporate Affairs, Government of India,

Company Appeal (AT) No.193/2018 3

5th floor, A-Wing, Shastri Bhavan, Dr Rajendra Prasad Road, New Delhi-110001 12th Respondent 10th Respondent

Mr Yogesh Raavi, Ms Snigdha Singh, Mr A Venkateshwar Reddy, Advocates for appellant. Mr Nikhil Nayyar, Sr. Advocate with Mr. Diyanshu Rai, Advocate. Mr Amit Acharya, Advocate appearing on behalf of Mr. Sanjib K Mohanty, Sr. Panel Central Govt Counsel for UOI, R7,8 and R10. Mr. M.L. Sharma, Advocate for R4 and R5. Mr. Ashim Sood, Ms Senu Nizar, Advocates for R9.

JUDGEMENT

(31stJANUARY, 2020)

MR. BALVINDER SINGH, MEMBER (TECHNICAL)

The present appeal has been filed by the appellants under Section 421

of Companies Act, 2013 against the impugned order dated 23.02.2018

passed by the National Company Law Tribunal, Hyderabad Bench,

Hyderabad in C.P. No.16 of 2013.

2. The brief facts of the case are that the company petition was filed by

the Respondent No.1 and 2 (original petitioners) against Respondent No.3

(original Respondent No.1) and others under Sections 397, 398, 111A read

with provisions 402 and 403 of the Companies Act, 1956 for oppression and

grave mismanagement to the detriment of Respondent No.3 (original

Respondent No.1).

3. Respondent No.3 company was incorporated on 11.5.1994 with the 1st,

2nd, 4th, 5th Respondent and 4 other members as subscribers of the

memorandum of association of the Company 1st, 4th and 5th Respondents

were the first directors of the company and pre-incorporation and

incorporation expenditure was borne solely by 1st Respondent. The original

petitioners hold 25% of the outstanding paid up share capital of the

Company Appeal (AT) No.193/2018 4

Respondent Company and original 1st petitioner is Promoter -Director of the

company. The original petitioners acquired 99 Acres of land at Revally and

Urukonda villages of Mahaboob Nagar Distt and advance of Rs.6 lac to land

owners in October 1993 was paid, out of which Rs.2 lac was contributed by

the original 2nd and 3rd respondent and to establish manufacturing unit,

original 1st petitioner acquired 4.20 acres at Kadthal Village Mahboob Nagar

at the rate of Rs.60,000/- per acre and paid Rs.1,00,000/- as advance by the

original 1st petitioner before the incorporation of company. The original 1st

Petitioner was constrained to pump investment from 25 investors to a total

extent of Rs.12,45,000/- as share application money.

4. It is stated that the total cost expended in purchasing the lands of the

company is Rs.16,05,719/-. As the company could not succeed in launching

the business activity, original 2nd and 3rd Respondent failed to bring further

investment, the Respondent company became finally crippled, the company

failed to return the money on which the original 1st petitioner constrained to

pay back Rs.4,20,000/- part of the company liability through his personal

account as well as by borrowing from friends. It is stated that the borrowers

who were unpaid, filed civil and criminal cases against Company and original

1st petitioner was defending long drawn legal battles by incurring expenditure

personally whereas the original 2nd and 3rd Respondent remained silent and

did not cooperate with original 1st petitioner. It is stated that the original 1st

petitioner underwent number of civil and criminal cases and was also

convicted in six criminal cases on behalf of Company and underwent

imprisonment for 9 months and also repaid Rs.7,20,000/- to various

creditors of the Respondent company. It is stated that after filing petition in

Company Appeal (AT) No.193/2018 5

Hon'ble High Court, the original petitioner settled creditors of the Company

to extent of Rs.1,30,000/-. It is stated that Respondent No.2 and 3 colluding

with original Respondent No.4,5,6 and 7 and Chartered Accountant filed

balance sheet and annual returns from financial year 1994-95 to 1999-2000

without the knowledge of original 1st petitioner who was also promoter

director of the and also filed one Form 32 on 7.10.2002 for appointment of

Respondent No.4,5,6, and 7 as directors and for the removal of original 1st

petitioner as the Director of the company. The original 1st petitioner made

complaint to ROC and RD for his removal and appointment of Respondent

No.4,5,6 and 7 as directors and allotment of shares to original Respondent

No.2 to 8, falsification of accounts of the company and filing of false balance

sheet.

5. It is stated that the Respondent did not file reply, Ministry of Corporate

Affairs ordered inspection of the Company under Section 209 of the

Companies Act, 1956. It is stated that the original Respondent failed to

submit records and appear before the ROC, ROC submitted its report

pointing out various violations against company and Respondents and on

9.3.2006 without any approval from the members of the company, original

Respondent No.2 and 3 sold away the company property and

misappropriated entire sale proceeds by suppressing the fact that above

property was already attached by the Hon'ble City Civil Court, Hyderabad. It

is stated that the SFIO conducted the inspection and submitted its report on

29.2.2012. In the report it is stated that original Respondent No.2 to 7

falsified the accounts, unsecured loan, contribution to equity etc are false,

allotment of equity shares was fraudulently allotted without any payment to

Company Appeal (AT) No.193/2018 6

the company and report explicitly elaborates on various acts of oppression

and mismanagement.

6. Original Respondent No.1, 4-7 filed their counter for the petition filed

by the original petitions. Respondents stated that the authorised capital of

the company was Rs.60,00,000/- and the company had 8 shareholders

holding 10 shares each. Therefore, the paid up share capital as on date of

incorporation of the company was Rs.800/- divided into 80 shares of Rs.10/-

each. The company had as per Articles of Association three directors namely

original 1st petitioner and original Respondent No.2 and 3. It is stated that

the Mr. APBS Sastry was the auditor of the company from the year 1994 to

2006. No Board Meeting and general Meeting were held in accordance with

law during the tenure of original 1st petitioner as a Director of the Company

alongwith original Respondent NO.2 and 3. It is stated that original 1st

petitioner resigned from the Board in 2001 and made complaint before the

ROC and RD, Hyderabad in the 2003.

7. Original Respondent No.11 (SFIO) filed its reply before the NCLT and

stated that Respondent Company was not functioning as per the provisions

of Companies Act, 1956 right from the beginning and promoter director

especially Mr. B. Manpal Reddy was compelled to arrange funds through

borrowings initially by way of Share Application Money (later converted to

loans) with meagre finance available with the company. Respondent

company was left with no working capital to run its operations and promoter

directors did not maintain any records or documents including the

accounting records in compliance of the regulatory and legal requirements.

Most of the transactions were carried out in cash and the investigation was

Company Appeal (AT) No.193/2018 7

helpless in verifying such transactions in absence of any cash book. No board

meeting was held and the promoters directors resigned in the year 2001. The

new board also failed to act in their fiduciary capacity to safeguard the

interests of the Company and breached the faith of the company. The new

management also engaged in falsifying the books of account not only for the

period prior to their incumbency but also thereafter. During the

investigation, most of the directors also confessed that no books of accounts

were maintained by the company and preparation of annual statement of

accounts and annual return filed with the ROC. It is also revealed that the

sale proceeds of the land owned by the Respondent company were also

misappropriated by two of its directors original Respondent No.2 and 6.

8. Respondent No.4 and 5 stated that before incorporation of the

company, 1st respondent negotiated and acquired 99 acres of land and paid

Rs.6 lacs as advance in October, 1991. It is stated that 1st Respondent also

acquired 4.20 guntas of land and paid Rs.1 lac as advance to the land

owners. It is stated that 4th Respondent subscribed 10 equity shares each

and invested Rs.1,90,000/- It is stated that Respondent No.5 invested

Rs.1,60,000/- in the company. 1st Respondent invested an amount of Rs.7

to 8 lakhs in December, 1994 and brought further investment from his

friends and relatives an amount of Rs.15 lacs and paid balance amount to

the land owners and got the land registered in the company's name in 1995.

It is stated that as the investors could not be repaid in time, 1st respondent

was involved in long drawn litigations and the project of the company could

not take off and statutory compliances could not be made by the company.

It is stated that 1st appellant approached 4th respondent to invest in the

Company Appeal (AT) No.193/2018 8

company and for reviving of the company. It is stated that in the year 2003,

4th Respondent introduced the appellants to 5th Respondent who assured

that all the liabilities of the company would be cleared and stated that a

settlement would be drawn with 1st respondent for the amount paid by him.

It is stated that under the circumstances 4th and 5th Respondent had no

choice but to accept the offer of 1st appellant to revive the company and to

repay the creditors and return all investments made by 1st respondent in the

company. It is stated that in these process, 1st appellant asked 4th and 5th

Respondent to sign several documents including a blank Form 32 and also

informed that the company is required to file the annual returns and balance

sheets to regularise the company and for bringing in their investments into

the company. It is stated that the balance sheets were prepared by the

Chartered Accountant and believing the words of 1st appellant, 4th and 5th

Respondent signed these documents without verifying the contents of the

said documents. It is stated that in October, 2003 , 4th and 5th Respondent

received notice from ROC alongwith complaint filed by 1st respondent asking

4th and 5th Respondent to give parawise reply, they came to know about the

contents of the annual returns and balance sheets for the years 1994-95 to

1999-2003. It is stated that 4th and 5th Respondent acted in good faith and

in the interest of the company and without any ill motive. It is stated that the

appellants never brought any amount in the company. It is stated that

appellants in collusion with the Chartered Accountant filed Form No.2 one

on 16.4.2007 and another on 17.4.2007 showing as if the company allotted

shares on 28.3.1995 and 30.3.1998. It is stated that these fraudulent forms

were filed only after complaints made by 1st Respondent with ROC which

Company Appeal (AT) No.193/2018 9

clearly nails the fraud committed by 1st appellant in collusion with the

Chartered Accountant by misusing the Digital signatures of 4th respondent.

It is stated that the appellants never invested in the company and the

allotments shown in the list of shareholders in the annual returns for the year

1995-2006 are entirely false. It is stated that 1st, 4th and 5th Respondent were

the only three directors in the company, 4th and 5th Respondent have no

knowledge about the allotment of shares and annual returns filed by attaching

a list of shareholders which was not signed by 4th and 5th Respondent. It is

stated that the 4th and 5th Respondent have no knowledge about the meeting

alleged to have been held on 7.10.2002 for appointment of the appellants as

directors as they did not receive any notice of the above meeting. It is stated

that it is falsely shown that the Respondent No.4 had given any loan and 1st

appellant did not bring any amount. It is stated that the appellant did not

bring any amount but they sold the company's land situated at Kadtal Village

for the sale consideration of Rs.32 lakh. It is stated that mediator Mr.D.

Narshimha Reddy and others received Rs.30 lakhs from Chalapathi Estates,

the buyers. It is stated that the appellants are responsible for selling the

company's land at throw away price by colluding with Mr. D. Narshimha

Reddy and thereby causing loss to the company. It is further stated that after

receiving the sale consideration these appellants did not pay to the creditors

of the company and did not release the court attachments as promised. It is

stated that the whole case of the appellants has been based on the MOU dated

29.11.2001(Page 98 of appeal) but the MOU is among the original three

directors namely 1st, 4th and 5th Respondent and has nothing to do with the

appellants. The MOU is about acceptance of the liabilities of the Respondent

Company Appeal (AT) No.193/2018 10

Company by these three directors to certain persons not the appellants and

custody of documents relating to the properties of company. It is stated that

the MOU does not talk about transfer of entire management and shareholding

of the company to the appellants. It is stated that there is no evidence at all

of any investment having been made by the appellants. It is stated that it is

baseless to contend that the impugned order is entirely based on the SFIO's

report.

9. After hearing the parties, NCLT passed the following order:-

"k) Considering the precarious position of the company and various

litigations, criminal cases filed against director(s) of the Company etc

considerable time spent by Investigating Agencies, SFIO and other

agencies, to send a signal to the parties to avoid misuse of various

authorities/functionaries, misappropriation, fraudulent action, non

complying with various provisions of the Companies Act, not conducting

Board Meetings, AGM's not finalising the Annual Returns/Balance Sheet

etc the Bench inclined to levy a cost of Rs.2,00,000/- (Rupees Two lakhs

only)on each on the Respondents 1 to 8 and the same has to be remitted

to the Prime Minister's Relief Fund within 3 weeks from the date of receipt

of a copy of this order and report compliance of the same to the Registry,

NCLT. "

11. Being aggrieved by the impugned order the appellants have preferred

this appeal.

12. Appellant stated that the Tribunal has decided the company petition

solely relying on the SFIO's report. It is stated that SFIO in its report has

stated that its findings and analysis are severely handicapped due to lack of

Company Appeal (AT) No.193/2018 11

sufficient material in view of non-maintenance of books and registers from

1994 to 2001.

13. It is stated that the Tribunal relied on the SFIO report and further stated

that all the 26 prosecution complaints initiated by SFIO resulted in acquittal

of the appellants.

14. It is stated that the Tribunal only considered the observations against

the appellants and not even adverting to the findings against the Respondents.

15. It is stated that the company petition was barred under the doctrine of

delay and latches as the Respondent No.1's cause of action relates to 2003

and 2006 whereas the company petition was filed in the year 2013.

16. It is stated that the company petition was barred for non-joinder and

misjoinder of parties.

17. It is stated that the company petition was barred under the principles

of estoppel and res judicata as the entire matter was earlier contested by

Respondent No.1 before the Hon'ble High Court in Company Petition No.85 of

2006 which was dismissed for default, thus attaining finality.

18. Appellant stated that the SFIO's report categorically stated that

Respondent No.1 on his own volition scribed and executed his resignation

letter and MOU dated 29.11.2001. Appellant stated that the letter of

resignation and MOU was a part of a larger comprehensive understanding

whereby the appellants were to eventually take over the entire company,

including its liabilities.

19. Appellant stated that the promoter directors are guilty of severe lapses

in the management of Respondent No.3 company from 1994 to 2001.

Company Appeal (AT) No.193/2018 12

Appellant stated that the promotor directors did not maintain any books or

complied with the regulatory requirements prior to 2001.

20. Appellant stated that the allotment of shares made on 28.3.1995 and

30.3.1998 were made after the appellants came into the management of

Respondent NO.3 company.

21. Appellant stated that the SFIO selectively proceeded against the

appellants despite concluding that several lapses are attributable to

Respondent No.2.

22. Appellant stated that the SFIO limited its enquiry till 2006 without

seeing that several changes in shareholding and management occurred even

after 2006 till 2013.

23. Appellant stated that the shareholding showing the appellants'

shareholding, including the allotments made on 28.3.1995 and 30.03.1998

were duly depicted in the statutory filings undertaken after the appellants

came into the management. Respondent No.1 did not file any statutory

returns during the years 1995 and 1998 when he was managing the

Respondent No.3 company.

24. Appellant stated that the Respondent No.1 resigned and scribed an

MOU sought to renege from the whole arrangement, with an objective to regain

the entire shareholding and management of Respondent No.3 company.

25. Appellants stated that the SFIO grossly erred in holding that the

appellants have misappropriate the funds resulting from the sale of 4.30 acres

land and the direction of the NCLT to appellants to deposit Rs.32 lakh with

an interest of 12% per annum is completely erroneous and incorrect.

Company Appeal (AT) No.193/2018 13

26. Appellant stated that the company petition filed by the Respondent No.1

is hopelessly barred by delay and laches. Respondent No.1 cam to know about

the entire circumstances of events as early as 2003 and the other allegations

pertaining to the sale of company's land also occurred in 2006 and the

company petition was filed in 2013.

27. Appellant stated that the Respondent No.1 is already contesting several

civil/criminal proceedings with respect to the same subject matter as was

alleged in the company petition. Respondent No.1 clearly is forum shopping,

hoping to get some or other order from each Court/Tribunal based on the

same facts and circumstances.

28. Appellant stated that the Respondent No.2 joined Respondent No.1 in

Company Petition only to purport satisfaction of the mandatory requirements

under Section 399 of the Companies Act. It is stated that Respondent No.2 is

none other than the father in law of Respondent No.1 to whom 10 shares were

allotted in the year 1994 during incorporation.

29. Reply affidavit has been filed by the Respondent No.1 and 2. It is stated

that the investigation was conducted by SFIO as per Section 237 of the

Companies Act, 1956 pursuant to the directions of Hon'ble High Court of

Andhra Pradesh in CP No.109/2008.

30. It is stated that the company was incorporated by Respondent No.1,2,

4 and 5 and 4 other members as subscribers of the Memorandum of the

company. It is stated that only the Respondent No.1 invested after borrowing

from 25 investors to a total extent ofRs.12,45,000/- as share application

money into the company and got the lands to the extent of Acres 4.30 Guntas

at Kadthal Village and about 99 Acres of land at Revally and Urukonda Villages

Company Appeal (AT) No.193/2018 14

of Mahabubnagar Distt and registered in the name of company during the

period from January, 1995 to May, 1995. The total cost expended in

purchasing the lands of the company is Rs.16,05,719/-. All this money was

repaid by the Respondent No.1 between 9.2.1997 to 11.3.1997 through his

personal account as well as by borrowing from friend. The unpaid investors

filed civil/criminal suits against the Respondent No.1 and Respondent No.1

paid Rs.7,20,000/- (in addition to Rs.4,20,000/- already paid) to various

creditors and also settled with creditors of the company to the extent of

Rs.1,30,000/- on 17.7.2014, as the creditors obtained sale order of 14 acres

of company property.

31. It is stated that the in 2001 the appellant and Respondent No.4

contacted Respondent No.1 and assured him that they would repay the entire

investments made by the Respondent No.1 by inviting other investors into the

company to revive the company. As part of this arrangement Respondent No.1

resigned as director of the company on 29.11.2001 and handed over the

resignation letter to Respondent No.4. It is stated that Appellant and

Respondent No.4 and 5 in connivance with one Chartered Accountant filed

Balance Sheets and Annual Returns forms on 2.5.2003 for the financial years

1994-95 to 1999-2000 without the knowledge of Respondent No.1. The

appellants also filed one Form 32 on 7.10.2002 for appointment of the

appellants herein as the directors and the removal of Respondent No1 as the

director of the company without approval of the Board.

32. Respondent No.1 stated that he made a complaint on 8.9.2003 to the

ROC and Regional Director about the removal of Respondent No.1 as director

and appointment of Appellant as director, fraudulent allotment of shares to

Company Appeal (AT) No.193/2018 15

Respondents No.2 to 8, falsification of accounts of the company and filing of

false Balance Sheets. The appellants failed to submit the relevant information,

despite several notices by the ROC seeking explanation. It is further stated

that without any approval from the members of the Company, the Appellants

sold away the admeasuring Acre 4.20 guntas situate in Kadthal Village in

Mahabubnagar District at throw away price and misappropriated the entire

sale proceeds. It is stated that the appellants executed the sale by suppressing

the fact that the said property was already attached by City Civil Court,

Hyderabad in OS 941, 942 and 943 of 1999.

33. It is stated that Respondent No.1 filed Company Petition No.109/2008

before Hon'ble Andhra High Court seeking direction to investigate the affairs

of the Company. The company petition was allowed and direction was given

to investigate the affairs of the company. It is stated that the investigation

was carried out and it was reported that appellant and Respondent No.4 and

5 had falsified the accounts and allotment of equity shares was fraudulent

done without any payment to the company etc. SFIO was directed to take

penal action against the appellant and the chartered accountant. It is stated

that the appellants were involved in a series of fraudulent acts like falsifying

the accounts, allotment of shares to themselves without any payment and

without approval from Board and selling the Company's properties without

approval and misappropriating the funds of the company, therefore,

Respondent No.1 approached Company Law Board, Chennai Bench under

Sections 397, 398 and 111A read with Section 402 and 403 of the Companies

Act, 1956. It is stated that the Respondent No.1 did not approach the

Company Appeal (AT) No.193/2018 16

Company Law Board solely on the ground that an investigation into the affairs

of the company by SFIO has taken place.

34. Respondent No.1 stated there was no reason to implead Mr. Sastry as a

party as the petition was filed under Section 397/398 against the appellants.

Neither relief was sought against Mr. Sastry nor any relief was granted.

35. Respondent No.9 stated that SFIO is expected to be a multi-disciplinary

organisation consisting of experts in the field of accountancy, forensic

auditing, law, information technology, investigation, company law, capital

market and taxation for detecting and prosecuting or recommending for

prosecution white collar crimes/frauds. Respondent No.9 stated that it carried

out investigation under Section 235 to 237 of the Companies Act.

36. We have heard the learned counsel for the parties and perused the

record.

37. It is not in dispute that the Hon'ble High Court of Andhra Pradesh vide

its order dated 07.07.2011(Page 155 of the appeal) directed the Central

Government to investigate into the affairs of the company. The investigation

was done and the report stated that right from the incorporation the affairs of

the company were not running as enshrined in the provisions of the

Companies Act but was running like a fiefdom of the promoter directors. No

record is maintained, including the books of accounts, to comply with the

regulatory and legal requirements and most the of transactions were being

carried out in cash and the Inspectors were helpless in verifying such

transactions in absence of any cash book, accounting legers etc.

Company Appeal (AT) No.193/2018 17

38. We also note that as per Section 223 Companies Act, 2013 the report

submitted by any inspector appointed by the Central Government, shall be

admissible in any legal proceeding as evidence in relation to any matter

contained in the report.

39. We note that the balance sheet and annual returns for the years 1994-

95 to 1999-2000 were not filed in time and the same were filed by later on in

2003. We also note that no Board Meetings was conducted and Annual

Return were not finalised in AGMs. This position has been admitted and it is

also admitted that no record for the same was maintained.

39. We also note that the assets of the company situated at Kadtal Village

were sold by appellants at throw away price in collusion with Mr. D.

Narshimha Reddy and did not pay to the creditors of the company and also

did not release the court attachments as promised.

40. We have also noted that though Respondent No.1 disputed the report

taking evidence has submitted that his resignation is a genuine one.

Admittedly since inception, Respondent No.1 has been the Managing Director

of the Company and no return has been filed till 2001. No records were

maintained for AGM, Board Meeting, financial statement etc and lot of

transactions has been taking place in cash only. Therefore, he cannot escape

his responsibility for not running the company as per requirements of law.

41. The annual returns filed by the appellant subsequently after they had

been in control has been rejected in the impugned order. The consequence is

that there is no annual return/financial statements since inception. This

Company Appeal (AT) No.193/2018 18

compliance needs to be ensured within three months from the date of this

order. Inspite of present orders, ROC will be free to take any steps punitive

or otherwise under the Companies Act, 2013 for non-filing of statutory

returns/documents against the company and directors.

42. We also note that the various litigations, criminal cases filed against

directors of the company.

43. In view of the aforegoing discussions and observations we find no merit

to interfere in the impugned order. The appeal is accordingly dismissed. No

order as to costs.

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

(Dr. Ashok Kumar Mishra) Member (Technical) New Delhi Bm

Company Appeal (AT) No.193/2018