Jainendra Sahai Sinha vs Jaiprakash Associates Ltd

(arising out of Order dated 17th June 2016 passed by NCLT, New Delhi in C.A. No. 01/2016 in C.P. No. 25/10/2014)

Jainendra Sahai Sinha Appellant

Vs. Jaiprakash Associates Ltd. Respondents

Present: For Appellants: Mr. M.P.Sahal, Advocate with appellant In person

Mr. Virendra Kumar Gupta, Company Secretary for Ms. Sushma Khemka

For Respondent: Mr. Krishnendu Datta and Mr. Rahul Maihotra, Advocates

JUDGEMENT

SUDHANSU JYOTI MUKHOPADHAYAJ.

This appeal has been preferred by appellant against order dated 171h

June 2016 passed by the National Company Law Tribunal, New Delhi Bench

in C.A. No. 01/2016 in C.P. No. 25/ 10/2014. By the impugned order the

Tribunal while extending the time in favour of the respondent

company/ applicant till 31St March 2017 for repayment of balance

outstanding amount of Rs. 1079.31 Crore (Rs. One Thousand Seventy-Nine Crore Thirty-One lakh only) plus interest thereof, kept the petition pending

for some report.

2. Section 74 of the Companies Act 2013 (hereinafter referred to as the

'kct 20131 mandates the companies' repayment of deposits, etc., accepted

before the commencement of the Act 2013, as quoted below.:

"74. Repayment of deposits, etc., accepted before commencement of this Act. - (1) Where in respect of any deposit accepted by a company before the commencement of this Act, the amount of such deposit or part thereof or any interest due thereon remains unpaid on such commencement or becomes due at any time thereafter, the company shall--

(a) file, within a period of three months from such commencement or from the date on which such payments, are due, with the Registrar a statement of all the deposits accepted by the company and sums remaining unpaid on such amount with the interest payable thereon along with the arrangements made for such repayment, notwithstanding anything contained in any other law for the time being in force or under the terms and conditions subject to which the deposit was accepted or any scheme framed under any law; and

(b) repay within one year from such commencement or from the date on which such payments are due, whichever is earlier.

(2) The Tribunal may on an application made by the company, after considering the financial condition of the company, the amount of deposit or part thereof and the interest payable thereon and such other matters, allow further time as considered reasonable to the company to repay the deposit.

(3) If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-

section (1) or such furt her time as may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees and every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both."

3. The provision of section 74 came into effect from 1 April .2014. As per

the provision, the respondent company was liable to pay the matured amount

with interest to the depositors which had matured prior to 18t April 2014. The

other deposits which were accepted by the company before 18t April 2014 but

matured later, under sub-section (1) of Section 74,. the company was liable to

pay such deposits along with interest within one year from the date of such

commencement, i.e. by 31st March 2015 or date on which such payment were

due, whichever was earlier.

Admittedly, the respondent company failed to pay the depositors the

amount received before the commencement of the Act within the prescribed

time. For the said reason, the Company filed a petition under sub-section (2)

of Section 74 before the erstwhile Company Law Board to allow further

reasonable time to repay the deposits with interest.

5. It is to be noticed that if a company fails to repay the deposit or part

thereof or any interest thereon within time specified in sub-section (1) or such

further time as may be allowed by the Tribunal under sub-section (2), the

company, in addition to the payment of the amount of deposit or part thereof

and the interest due, is liable for. 'punishment' with fine which shall not he

less than one crore rupees but which may extend to ten crore rupees and

every officer of the company who is in default is liable for punishment with

imprisonment which may extend to seven years or fine should not. .be less

than twenty-five lakh rupees but which may extend to two crore rupees, .or

with both, as per sub-section (3) of Section 74 of the Act 2013.

6. The appellant is . a depositor who invested in the Fixed Deposit

scheme(s) of the company on 12th June 2013. The respondent company was

liable to pay back the matured amount as per sub-section (1) of Section 74 of

the Act on its maturity or at best within a year i.e. by 31st March 2015 but

not paid.

7. Further grievance of the petitioner is that the Tribunal since filing of

the petition under sub-section (2) of Section 74, granting time after time to

the company since 2015. Now by the impugned. order, the Tribunal has extended the time up to 31st March 2017, to repay the dues with interest as

is payable to the depositors.

8. Learned counsel for the appellant submitted that there is no provision

made under Section 74 to constitute any Hardship Committee to assess the

payment situation, as the Tribunal is competent to extend time taking into

consideration the financial condition of the company, the amount of deposit

or part thereof and interest payable and such other matters which company

brought to the notice of the Tribunal, as provided under sub-section (2) of

Section 74 of the Act. Earlier, the then Company Law Board constituted a

'Hardship Committee' without taking into consideration the mandate of

repayment as prescribed under sub-section (1) of Section 74. Now by Interim

Order, the time has been extended up to 31st March 2017, without disposing

of the main Company Petition.

9. It is further submitted that there is no specific direction issued by the

Tribunal directing the company to utilize the sale proceeds of the ten cement

plants towards the payment to the depositors as per sub-section (1) of Section

74 of the Act. There is no such undertaking given by the company that it will

not utilize the fund for other purpose.

10. On 28th November 2016, the Court directed the company to file affidavit

providing mode of payment. Pursuant to the same an affidavit was filed by

the company which was noticed by this Court in its order on 8th December

2016, as quoted below: -

'Pursuant to this Court's Order dated 28th

November 2016, an affidavit has been flied by the

respondent, relevant portion of which reads as follows:-

"NAMES OF THE CEMENT PLANTS, PLACE AND CONSIDERATION

The Respondent is in process of selling its

business of manufacture and sale of cement

and clinker which comprises ofthefollowing

cement plants and, apart from transfer of

plants, the same constitutes transfer of

licenses, clearances, etc.

Baga Plant in the State of Himachal Pradesh,

Bagheri Plant in the State of Himachal Pradesh,

Roorkee Plant in the State of tJttarakhand,

Dalla Cement Factory in Uttar Pradesh,

JP Super Captive Power Plant in Dalla, Uttar Pradesh,

Tanda Plant in the State of Uttar Pradesh,

Sikandrabad Plant in the State of Uttar Pradesh,

Bela Plant in State of Madhya Pradesh, and

Sidhi Plant in the State of Madhya Pradesh

The parties have entered into the agreement

for sale of business with a consolidated

enterprise value of Es. 15,900 crores, which

value was subsequently increased to Es.

16,189 crores. No independent price

consideration his been assigned to

individual plants of the Respondent.

MODUS OPERANDI ADOPTED FOR SALE OF BUSINESS;

8. After the failed attempt to sell the two cement

plants due to change in law, there had been

another amendment in May, 2016 effected to

the Mines and Minerals (Development &

Regulation) Act, 2010 by way of which an

exception to the sale of only auctioned mines

had been inserted and now the captive mines

are also permitted to be transferred

9. In the wake of the said amendment as a result

of simultaneous ongoing efforts to reduce its

debts including repayment of outstanding fixed

deposits, the Company has entered into an

Implementation Agreement with UTCL on

31.3.2016 for sale of its identified business of

manufacture and sale of cement and clinker to

the transferor company at an enterprise value

of Rs. 15,900 crores, which EV was

subsequently increased to Rs. 16,189 crores.

The Respondent craves leave of this Hon'ble

Tribunal to produce the said agreement as and

when directed as the same is not being filed along with the present affidavit to preserve the

confidentiality thereof. The said transaction is

being effected between the respondent

Company Transferor-1 Company) along with

•a subsidiary viz. MIs Jaypee Cement

Corporation Limited (Transeror-2 Company),

and MIs Ultra Tech Cement Limited

(Transferee Company) and the business is

being sold as a going concern on a slump

exchange basis.

10 In the said arrangement with UTCL, the

Respondent Company (Transferor-i

Company) along with a subsidiary, viz. M/s

Jaypee Cement Corporation Limited

(Transferor-2 Company), is selling its

identified business of manufacture and sale of

cement and clinker at an Enterprise Value o Rs.

16,189 crores to the transferor company, M/s

Ultra Tech Cement Limited ((Transferee

Company as a going concern on a slump

exchange basis. The Transferor Company and

the Transferee Company cre public limited and

listed companies.

BANK DETAiLS FOR REPAYMENTS OF THE FIXED DEPOSITS

26 The bank details of the account in which the

sale proceeds will be deposited for the purpose

of repayment to the depositors is bank account

bearing no. 011125000000718 with IDBI

Bank, Red Cross Road, New Delhi-110001.

The repayment to the depositors shall be made

at one go upon receipt of the funds, save and

except the hardship cases which may arise.

PROPOSED DATE TO COMMENCE REPAYMENT OF FIXED DEPOSITS

27 The Respondent intends to start paying the

depositors as soon as the Respondent receives

funds from the Transferee Company pursuant

to the approval of the scheme and such

repayment is expected to commence around

25.03.2017 and the same is expected to

conclude by 30.03.2017.

28 The details of the outstanding payments, i.e.

principal as well as interest, have already been

submitted with the Registrar of Companies in•

terms of Rule 16 of the Companies (Acceptance

of Deposits) Rules, 2014."

In view of aforesaid stand taken by the respondent,

we allow the respondent to complete the sale of plant(s) as

identified at paragraph 6 and quoted above and to deposit

the amount in the bank account mentioned in paragraph 26

to the affidavit filed today.

We also direct the respondent not to withdraw any

amount in their favour or in favour of any other member or

person by transfer, RTGS, etc. from IDBI Bank, Red Cross

Road Branch, New Delhi-110001, Bank Account No.

011125000000718 except for releasing the dues to the

depositors including principal amount, interest and other

statutory dues if any. After payment of all the dues to the

depositors as required under Section 74(1), it will be open

to the respondent to withdraw the amount or transfer any

amount from the said account. Details of the payment

should be intimated to the Registrar of Companies, New

Delhi. This order should be brought to the notice of the

Branch Manager, IDBI Bank, Red Cross Road Branch, New

Delhi.

Post the matter on 215t February 2017 at 10.30A.M"

11 The impugned order was passed by Tribunal on 17,11, June 2016

allowing the Company time. till 31st March 2017 to pay the deposits with

•interest. Even after passing of the impugned order dated 17th June 2016 and

now more than eight months have passed but the company has not deposited any amount in its account, nor paid any amount to any of the depositors.

Now, the only ground taken by the Company is that a scheme is pending

consideration before the High Courts regarding selling of the plants.

12. We have heard learned counsel for the parties and perused the record.

Now, approximately three years have passed since 1St April 2014 when sub

section (1) of Section 74 came into effect but the deposits with interest have

not been paid to the depositors. Even after extension of time granted under

sub-section (2) of Section 74 there is no likely hood of payment. In the

circumstances, while we are not interfering with the impugned order

extended time granted by the Tribunal up to 3 Pt March 2017, but direct the

Tribunal to close the Company Petition as no ground has been shown by the

Company further extension of time under sub-section (2) of Section 74, after

three years of its commencement is not desirable. We make it clear that a

number of extensions of time cannot be granted under sub section (2) of

Section 74 without any ground, particularly when the company has not

shown any interest in paying part of the deposit with interest to depositors

either during the pendency of the Company Petition or this appeal. Learned

Counsel for the Respondents have also informed that they will pay the dues

by 31st March 2017.

13. We make it clear that if the dues of depositors with interest is not paid

by the Company by 31st March 2017, the Registrar of the Companies, NCR

and Haryana will take steps to file petition under sub-section (3) of Section

74 of the Act 2013 before the Special Judge to punish the company and its.

directors and members and every officer of the company, whoever is in 12

default. It will be. open to the appellant and other depositors to sue the

Company, its directors & officers for damages and fraud under Section 75 of

the Companies Act 2013.

14. Further if it comes to the notice of the Registrar of the Companies or

the Central Government, that the business of the company was being

conducted with intent to defraud its creditors or any other person or

otherwise for a fraudulent or unlawful purpose, they may investigate into the

affairs of the company either under Section 210 or 213 of the Companies Act

2013. It is also open to the appellant to move an application under clause

(b) of Section 213 of the Companies Act 2013, if the circumstances so suggest

that the. business of the company was being conducted with intent to defraud

its creditors and other persons.

15. Further it is noted that failure to repay the deposit accepted by the

company or to pay interest thereon is also disqualification, for appointment

of directors in terms of Section 164(2)(b) of the Companies Act, 2013 and any

director who incurs any of the disqualifications specified in section 164

vacates the office of the director. Registrar of Companies may examine this

aspect in case the Company fails to repay the dues by 3 1.03.2017 as already

allowed by the Tribunal.

16.. In view of the order above, the tribunal is directed to close the Company

Petition No. 25/10/2014. The appeal stands disposed of with the aforesaid

observations and directions. However, there shall be no order as to cost. 13

17 Let a copy of this order be forwarded to the National Company Law

Tribunal, New Delhi Bench.

Mr. Balvinder Singh) (Justice S.J. Mukhopadhaya Member (Technical) Chairperson

NEW DELHI 2ndMarch, 2017