Prithvi Tea Co. Pvt. Ltd vs Regional Director, Eastern Region, ...

[Arising out of Order dated 24th April 2019 passed by NCLT, Kolkata Bench in C.P. (CAA) No. 1099/KB/2018 under C.A. (CAA) No. 86/KB/2018]

IN THE MATTER OF:

Prithvi Tea Co. Pvt. Ltd. & Anr. ...Appellants Versus Regional Director, Eastern Region, Registrar of Companies ...Respondent Present: For Appellant: Mr. Goutham Shivshankar, Ms. Nitu Poddar, Mr Bunny Sehgal, PCS and Mr. Shantanu Singh, Advocates. For Respondent: Ms. Muktar Singh, Joint Director of RD (E/R) Kolkata.

JUDGMENT

[Per; V. P. Singh, Member (T) ]

This appeal has been preferred against the order 24th April 2019

passed by the National Company Law Tribunal, Kolkata Bench, in C.A.

(CCA) No. 86/KB/2018 whereby the Tribunal 'National Company Law

Tribunal', has rejected the request of the Appellant / Petitioner to approve

the proposed scheme of demerger without compliance of the provisions of

the Companies Act, 2013.

The counsel for the Appellants contends that National Company Law

Tribunal, Kolkata Bench earlier passed an order in C.P. (CAA) No.

1099/KB/2018 on 24th January 2019 directing the Appellant / Petitioner to

comply with the provisions of Section 131 read with Section 128(1) of the

[Type here] 2 Companies Act, 2013 by order dated 24th January 2019. The Appellant /

Petitioner, however, was directed to submit the revised financial statements

on 18th March 2019. The Appellant / Petitioner instead of complying with

the order(s) of the Tribunal, sought leave to file Supplementary Affidavit

seeking to incorporate certain facts and documents, which according to the

petitioner could not be produced at the time of hearing and therefore

claimed that the Tribunal did not have the advantage of considering those

facts and documents before passing of the order dated 24th January 2019.

According to the Appellant / Petitioner those facts were "crucial and

necessary" for the fair consideration of the petition, and in the absence of

those facts the Tribunal was prevented from framing correct observations

about the lost assets in issue.

The Tribunal held that the reconsideration of the earlier order dated

24th January 2019 would amount to review of the earlier order whereby

direction was given to the Appellant / Petitioner to comply with the

provisions of Section 131 read with Section 128(1) of the Companies Act,

2013. The Tribunal rejected the application on the premise that the Tribunal

not being a Civil Court, has no power or authority to review its earlier order,

even if the new facts pleaded in the Supplementary Affidavit was not

brought to the notice of the Tribunal.

The relevant portion of the order dated 24th January 2019 is as

under: -

4. Upon hearing the arguments on both sides and reading

the Memorandum of Understanding executed in between the

Company Appeal (AT) No. 146 of 2019 3

Prithvi Tea Company Private Limited, Doloo Tea Company

(India) Limited, Eastern Tea Estates Limited and Asharam

Leasing and Finance Private Limited, it is understood that the

Transferor Company, namely, Prithvi Tea Company Private

Limited reserves its right to claim Rs. 7.58 Crores against

Doloo Tea Company (India) Limited by stepping into the shoes

of original lender Asharam Leasing and Finance Private

Limited. It is good to read the clause, which reads as follows :-

"It is also agreed by and between the parties that

Prithvi is only taking over the liability of Doloo

towards Asharam for a sum of Rs. 1.14 Crore

without prejudice to the fact that Prithvi after

stepping into the shoes of Asharam will continue to

have a claim of Rs. 7.58 Crore against Doloo in

respect of the outstanding loan"

5. The above being the clause applicable to the applicant

Company/Transferor Company the Balance Sheet of Transfer

Company should have shown the realisable value of the

assets. The realisable value to the loan being Rs. 7.58 Crores,

it appears to me that same should be shown in the Balance

Sheet of the Transferor Company, that has not been done. It is

contrary to Section 128(1) of the Companies Act, 2013.

'Prithvi Tea Company Pvt. Ltd. (hereinafter referred to as Transferor

Company) and 'Cachar Tea and Industries Private Limited' (Transferee

Company Appeal (AT) No. 146 of 2019 4

Company) filed a Scheme of Arrangement before the National Company Law

Tribunal, Kolkata Bench for demerger of Investment undertaking of the

Transferor Company under Section 230(1) read with Section 232 of the

Companies Act, 2013 and Rule 15 and other applicable rules of the

Companies (Compromise, Arrangements and Amalgamations) Rules, 2016.

The application for the first motion, bearing C.A. (CAA) NO. 86/KB/2018,

praying for dispensation of convening meeting of the members and creditors

of the Transferor Company and the Reporting Company was disposed off by

order of the National Company Law Tribunal, Kolkata Bench vide its order

dated 10th May 2018. The Resulting Company did not have any creditors as

on the date of filing of the petition. After that the second motion petition

bearing C.P. (CAA) No. 1099/KB/2018 has been filed for sanction of the said

Scheme. During the pendency of this Company Petition, objection was

raised by the Central Government that Transferor Company (Prithvi Tea

Company Private Limited) has not shown its balance sheet as to the

realisable value of the loan, which comes to Rs. 7.58 Crores, and not to Rs.

1.14 Crores, as shown in the balance sheet, and therefore, Appellant was

directed to submit revised balance sheet in compliance of the Companies

Act, 2013. It is further observed by the Kolkata Bench that in its order dated

24th January 2019 that the Transferor Company should have shown the

realisable value of the assets. But the balance sheet of the Transferor

Company is contrary to provisions of Section 128(1) of the Companies Act

2013. The financial statement of the Transferor Company as given is not

true and fare view state of the affairs of the Company.

Company Appeal (AT) No. 146 of 2019 5

In the circumstances, the Tribunal by the order dated 24th January

2019 directed the Appellant to comply with the provisions of Section 131

read with Section 128(1) of the Companies Act, 2013 and asked for

submission of revised financial statements.

It is pertinent to mention that order dated 24th January, 2019 is not

under-challenge in this appeal. The Appellant has filed this Appeal only

against the order dated 24th April 2019, whereby the National Company Law

Tribunal, Kolkata Bench refuses to review the detailed order passed on 24th

January, 2019 based on Supplementary Affidavit filed on 25th March, 2019.

The Tribunal rejected the review application on the ground that the Tribunal

has power and authority to review its order or to amend the order, if any,

mistake is brought to the notice by the parties. But by the impugned order

the Appellant wants to review the detailed order dated 24th January, 2019

which is not permissible under the law; hence Tribunal rejected the

application filed by the Appellant.

It is important to point out that Section 420(2) provides that "The

Tribunal may, at any time within two years from the date of the order, with a

view to rectifying any mistake apparent from the record, amend any

order passed by it, and shall make such amendment, if the mistake is

brought to its notice by the parties".

Admittedly, no apparent error or mistake has been pointed out in the

order dated 24th January, 2019.

Company Appeal (AT) No. 146 of 2019 6

Apart from above it is also clear that Section 128(1) of the Companies

Act, 2013 was rightly referred which for ready reference is given below: -

"Every company shall prepare and keep at its

registered office books of account and other relevant

books and papers and financial statement for every

financial year which give a true and fair view of

the state of the affairs of the company, including that

of its branch office or offices, if any, and explain the

transaction effected both at the registered office and its

branches and such books shall be kept on accrual

basis and according to the double-entry system of

accounting:

Provided that all or any of the books of account

aforesaid and other relevant papers may be kept at such

other place in India as the Board of Directors may decide

and where such a decision is taken, the company shall,

within seven days thereof, file with the registrar a notice

in writing giving the full address of that other place:

Provided further that the company may keep such books

of account or other relevant papers in electronic mode in

such manner as may be prescribed."

Company Appeal (AT) No. 146 of 2019 7

Every Company must keep relevant Books or Papers and Financial

Statements for every Financial year which give a true and fair value of the

state of the affairs of the Company.

The National Company Law Tribunal found discrepancies, in the

statements of balance sheet of the Transferor Company, wherein realisable

value to the loan is shown as 1.14 Crores instead of 7.58 Crores, which was

to be received from 'Doloo Tea Company (India) Limited.

However, the order of the Tribunal dated 24th January 2019 was

appealable order, but no appeal is preferred against that order. But the

Appellant intends to challenge the order dated 24th January 2019 by filing

the review application under the guise of Section 420(2) of the Companies

Act, 2013, which is not permissible under Law.

In the circumstances, we are of the view that there is no error in the

impugned Order passed by the National Company Law Tribunal, Kolkata

Bench. Accordingly, Appeal is dismissed. No costs.

[Justice A.I.S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical)

[V. P. Singh] Member (Technical) NEW DELHI 5th December, 2019 RN

Company Appeal (AT) No. 146 of 2019