Km Abdulla & Ors vs Kerala Chamber Of Commerce & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL AT CHENNAI (APPELLATE JURISDICTION) Company Appeal (AT) (CH) No. 57/2021 In the matter of: Sri. K.M. Abdulla S/o. late B.H. Mammi, Rahathmanzil, Puthiya Road, Vennala P.O, Ernakulam - 682 028. ... Appellant V Kerala Chamber of Commerce & Industry CIN: U91110KL1957NPL001763 Reg: Off: XXXVII/801, Shanmugam Road, Ernakulam, Kochi - 682 031. ...Respondent Present : For Appellant : Mr. Aravind Sreekumar, Advocate For Respondent : Mr. Akhil Suresh, Advocate ORDER

(Hybrid Mode) [Oral Judgment: Justice Sharad Kumar Sharma, Member (Judicial)]:

02.06.2026:

The instant Company Appeal has been preferred by the Appellant by

invoking the provisions contained under Section 421 of the Companies Act, 2013.

This Company Appeal has been preferred as against order passed by Learned

NCLT, Kochi Bench in CP/30/KOB/2020. The said company petition that was

preferred by the Appellant invoking the provisions contained under Section 73(4)

of the Companies Act, 2013, which has been rejected, by the impugned order.

2. Following are the brief facts, as it has been argued, though it may not be

of much relevance to be considered at this stage, owing to the subsequent

developments that have taken place. It is submitted by the Appellant that the

Comp App (AT) (CH) No. 57/2021 Page 1 of 7 Respondent Company, along with another company had floated a special purpose

vehicle for the construction of a building called as Kerala Trade Centre and since

the Respondent Company was facing certain financial crisis, it requested the

Appellant to deposit a certain amount, on which interest at the rate of 18% was

offered. However, when the deposit along with the interest was demanded to be

remitted back, there was a refusal on part of Respondent, on the ground that the

said amount advanced was towards the booking of the space in Kerala Trade

Centre, plus a reference was also made to a declaration made by the Respondent

in compliance with the Rule 2(1)(c)(viii) of the Companies Act (Acceptance of

Deposit Rules), 2014.

3. The petition was disposed of by the impugned order dated 06.10.2021,

observing thereof that looking to the nature of the transaction, the money

advanced by the Appellant was to the account of the Kerala Trade Centre, which

is a separate entity altogether and not to the Respondent Company and hence the

money advanced will not fall to be within the provisions of Section 73(4) of the

Companies Act, 2013, as a deposit given to the Respondent Company. Hence the

petition was dismissed, leaving it open for the Appellant to resort to an

appropriate recourse as available to him against the Kerala Trade Centre, as per

the procedure known tender law.

4. The provisions of Section 73 of the Companies Act, 2013, contemplates

a prohibition on acceptance of deposits from public and Sub-Section (4)

contemplates a situation where in case a company fails to repay the deposit or

Comp App (AT) (CH) No. 57/2021 Page 2 of 7 part thereof, which is to be paid back along with the interest as intended by Sub-

Section (3) of Section 73 of the Companies Act, it is left open for the depositor

to apply to the Tribunal for issue of appropriate the directions to the company to

pay the amount due or for the loss or damages incurred and henceforth. The

provisions contained under Sub-Section (3) and Sub-Section (4) of Section 73 of

the Companies Act, 2013, read as under: -

"(3) Every deposit accepted by a company under sub-section (2) shall be repaid with interest in accordance with the terms and conditions of the agreement referred to in that sub-section.

(4) Where a company fails to repay the deposit or part thereof or any interest thereon under sub-section (3), the depositor concerned may apply to the Tribunal for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other orders as the Tribunal may deem fit."

5. Brief facts of the case as recorded in the impugned order are that the

petitioner of the Company Petition, i.e., the Appellant herein, was a shareholder

in the Respondent company, i.e., "Kerala Chamber of Commerce and Industry,"

and that the Respondent company was a Section 8 company, and no shares were

issued to the petitioner. Further, on the request made by the Board of Directors

of the Respondent Company, he had deposited an amount of Rs. 30,00,000/-, with

the Respondent company and the payments thereof were made in five instalments

through cheques as detailed in the impugned order. However, when the Appellant

demanded return of the said deposit with interest promised, the same was not

remitted, consequent to which the notice in that regard was issued by the

Comp App (AT) (CH) No. 57/2021 Page 3 of 7 Appellant on 12.06.2019 to the Chairman and the Board of Directors of the

Respondent company.

6. The reply to the notice dated 12.06.2019 as given by the Respondent

reveal that the petitioner himself was on the Board of Directors from 2000

onwards till 2019 and was the chairman during 2009-2011 and during his tenure

as chairman, when the company was altered into Section 8 non-profit, charity-

oriented company with the aim to protect and promote the welfare of the traders.

Further, during his tenure only, the joint venture project was started in association

with Cherupushpam Films Pvt. Ltd. to construct a multi-storied building under

the name and style of "Kerala Trade Centre" at Marine Drive, Kochi, that all the

advances including the advance paid by the Appellant have been diverted to be

utilized in the two projects i.e., (i) Kerala Trade Centre and (ii) M/s. Middle East

Broadcasting Network Pvt. Ltd. As these projects incurred heavy financial loses

to the Company, and the net worth of the Respondent has been completely eroded.

7. The Respondent Company had further contended that, the deposits taken

from the petitioner was for the purpose for purchase of space in the Kerala Trade

Centre, the joint venture project and that the accounts of the Respondent company

were duly audited. When the Appellant remained as a director, that the chairman

of Kerala Trade Centre and the petitioner had colluded with each other, and made

the fraudulent claim by falsifying and altering the documents to show the amount

paid by the Appellant as a deposit to the company. He has further stated that as

per the audited accounts of Kerala Trade Centre for FY 2013-14, a sum of Rs.25

Comp App (AT) (CH) No. 57/2021 Page 4 of 7 lakhs is shown under the heading of advance for space (booking charges) against

the name of the Appellant which was later on claimed to be deposits given to the

company.

8. The Learned Tribunal considered the issue and observed that: -

(i) When the Appellant was raising a financial claim of the alleged

advances extended by him, the onus of proof was on the Appellant to show that

it was an advance extended by the Appellant owing to the financial difficulties

being faced by the company, which was not discharged by the Appellant.

(ii) There was no proof on record placed by the Appellant that the so-called

advances made by the Appellant were ever credited into the account of the

Respondent company, Kerala Chamber of Commerce and Industry.

(iii) Upon scrutiny of bank account details produced by the Respondent,

the said amount of Rs.25 lakhs was shown to have been credited into the account

of the Kerala Trade Centre, which happens to be a separate entity to Respondent

No.1.

(iv) Since the Company Petition has been exclusively preferred against the

Kerala Chamber of Commerce and Industry, which did not receive the amount,

the petition against the said company will not stand scrutiny with these

observations, Learned NCLT passed the impugned order, dismissing the

company petition while leaving all other avenues open for the Appellant to pursue

his remedies in accordance with law.

Comp App (AT) (CH) No. 57/2021 Page 5 of 7

9. In order to substantiate his arguments, the Learned Counsel for the

Appellant had made reference to an independent branch auditor's report, which

shows that the maintenance of the books of account and preparation of the trial

balances, was the responsibility of the sub-committee formed by the Kerala

Chamber of Commerce and Industry for the construction of a multi-storied

building, Kerala Trade Centre and therefore KTC was only a project of Kerala

Chamber of Commerce and Industry. But however, there was no specific denial

by the Appellant as to in whose books the amount was deposited. Owing to the

fact that the extension of the financial benefit and the deposit of the amount with

Kerala Chamber of Commerce and Industry were the necessary facts, which were

not established by the Appellant and that, the issuance of Form TM-1, under the

Trade Marks Act, 1999, shows the Kerala Trade Centre as to be an independent

entity, though it is owned by Kerala Chamber of Commerce and Industry, the

claim that advance amount of Rs.25 lakhs has placed with Kerala Chamber of

Commerce and Industry, has not been conclusively proved by the Appellant. In

that view, the petition was rightly dismissed, with recourse left open for the

Appellant to resort to an appropriate remedy as against the Kerala Trade Centre

for recovery of the amount.

10. Even otherwise also if we see the receipt of 14.09.2013, it was rather

the Kerala Trade Centre who had issued the receipt of the advances made by the

Appellant. Be that as it may. The Respondent in his counter affidavit, has

disclosed the fact that Kerala Chamber of Commerce and Industry has been

admitted into CIRP vide order dated 21.02.2022 as per the orders passed in

Comp App (AT) (CH) No. 57/2021 Page 6 of 7 CP(IB)/33/KOB/2021 and the moratorium under Section 14 of the I & B Code,

2016, has been declared by the Learned NCLT, which prohibits the initiation or

continuance of any legal proceedings. Owing to the effect of Section 14 of the I

& B Code, 2016, coupled with the implications of Section 238 of the I & B Code,

2016, which has an overriding effect, for all practical purposes, the Company

Appeal has been rendered infructuous, for the reason being that the rights of the

Appellant has still been reserved, as he could raise the claim under Section 30(2)

to be read with Section 53(1) of the I & B Code, 2016. Owing to the aforesaid,

apart from the fact that the Company Appeal lacks merit, but owing to the

subsequent development of Kerala Chamber of Commerce and Industry having

been admitted to the CIRP process, the Comp App (AT) (CH) No.57/2021 has

been rendered infructuous. Ordered accordingly.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Jatindranath Swain] Member (Technical) VG/MS/AK

Comp App (AT) (CH) No. 57/2021 Page 7 of 7