Shri Lalit Aggarwal vs Shree Bihari Forgings Pvt. Ltd. & Ors

1. Shri Lalit Aggarwal S/o Late Shri Prabhu Aggarwal, A-50, Sector 2, Noida. 1st Petitioner 1st Appellant

2. Lalit Aggarwal HUF Through its Karta, Shri Lalit Aggarwal A-50, Sector 2, Noida. 2nd Petitioner 2nd Appellant

Vs

1. Shree Bihari Forgings Pvt Ltd 3/56, Ram Gali, Vishwas Nagar, Shahdara. 1st Respondent 1st Respondent

2. Pramod Goil S/o Late Shri Sohan Lal Goil 6 Navyug Market, Ghaziabad. 2nd Respondent 2nd Respondent

3. Ritesh Goyal, S/o Shri Pramod Goil, 6 Navyug Market Ghaziabad 201301 3rd Respondent 3rd Respondent

4. Udit Goyal S/o Shri Pramod Goil 6 Navyug Market, Ghaziabad. 4th Respondent 4th Respondent

5. Ruchi Goyal, W/o Shri Ritesh Goyal, 6 Navyug Market Ghaziabad 5th Respondent 5th Respondent

6. Registrar of Companies, 4th Floor, IFCI Tower, 61, Nehru Place, New Delhi-110019. - 6th Respondent 2

7. The Chief Manager, Canara Bank, Mayur Vihar Branch, Delhi. 6th Respondent 7th Respondent

8. The Chairman & Managing Director, Canara Bank, 112, J.C. Road, Bangalore. 7th Respondent 8th Respondent

For Appellant:-Mr Karan Luthra and Niyati Kohli, Advocates. For Respondents: - Mr.Ankur, Proxy counsel for R1 to R5. Mr. PS Singh, Advocate, Sr. Panel counsel for ROC.

And COMPANY APPEAL(AT) NO.23/2019

(ARISING OUT OF JUDGEMENT DATED 4TH SEPTEMBER, 2008 IN C.P. NO.15/2018 AND CP NO.47/2008 BY NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI, BENCH III)

IN THE MATTER OF

1. Shri Pramod Kumar Goil, Director, 6 Navyug Market, Ghaziabad 1st Petitioner Appellant

Vs

1. Shri Bihari Forging Pvt Ltd, 3/56, Ram Gali, Pandav Nagar, Shahdara, Delhi. 1st Respondent 1st Respondent

2. Lalit Aggarwal, A-50, Sector 2, Noida. 2nd Respondent 2nd Respondent

3. Mr. Mahesh Gupta M/s Gupta Mahesh & Company, Statutory Auditor, Shri Bihari Forgings Pvt Ltd, C-26B, Basement, Kalkaj, New Delhi 3rd Respondent 3rd Respondent

Mr Ankur, Proxy counsel for appellants. 3

Mr. Karan Luthra and Mr. Niyati Kohli, Advocates for R2. Mr PS Singh, Advocate for ROC, Delhi.

JUDGEMENT

(22nd January, 2020)

MR. BALVINDER SINGH, MEMBER (TECHNICAL)

This appeal has been preferred by the appellant under Section 421 of

the Companies Act, 2013 against the order dated 4.9.2018 passed by the

National Company Law Tribunal, Bench III, New Delhi in Company Petition

No.47(ND) of 2008 filed under Section 397, 398, 402 and 403 read with

Section 408 of the Companies Act, 1956 whereby the Company Petition was

dismissed and the Respondent company was ordered to be wound up. Vide

the same impugned order dated 4.9.2018, NCLT, New Delhi has also

dismissed the Company Petition No.15(ND)/2008 filed by the Respondent

No.2 against the appellant No.1.

Company Appeal (AT) No.380 of 2018

2. The appellants submit that their petition has been dismissed on the

sole ground of alleged suppression on part of the Appellants with regard to

non-disclosure of allotment of equity shares of Respondent company by

Appellant No.1 to various persons including the appellant No.1 himself on

17.12.2007, 28.12.2007 and 27.02. 2008 and the irregularities in the

allotment of shares.

3. The appellants submit that the Respondent No.2 has handled the

affairs of Respondent Company in a 'dishonest manner' and the same has

been accepted by the Tribunal.

4

4. The appellants submit that the Hon'ble High Court of Delhi vide order

dated 13.5.2013 (Page 362 of appeal) directed that the Auditor appointed by

Company Law Board will undertake a comprehensive audit of accounts of

Respondent No.1 company from the year 2007-08 to 2012-13. The

appellants submits that the Respondent No.2 did not produce any record but

filed a police complaint No.1727/2013 dated 6.7.2013 (Page 470) that during

the shifting of office of Shahdara, Delhi to Ashok Nagar, Delhi one bundle

containing various documents were not found and lost in transit. The

appellants submits that Respondent No.2 intimated the Administrator that

his son who was carrying the record in his car and all the records of the

company in the car burns out (Page 528 of Appeal).

5. The appellant submits that the assets of the Respondent No.1 company

has been illegally dissipated under the watch of Respondent No.2 as recorded

by the Administrator. The appellant submitted that on the basis of the final

report of the Administrator, the Hon'ble High Court initiated suo moto

contempt proceedings against the Respondent No.2.

6. We have heard the parties and perused the record.

7. Learned counsel for the appellant argued that the allotment of equity

shares on 17.12.2007, 28.12.2007 and 27.02.2008 were legal and were

allotted with the consent of Respondent No.2. Form No.2 filed with the ROC

for the allotment of equity shares on these dates was digitally signed by

Respondent No.2 alongwith the Chartered Accountant of Respondent No1

company.

8. Learned counsel for the Respondent argued that the shares were

allotted by the appellants illegally, therefore, the allotment of shares be set 5

aside. Learned counsel argued that the appellant in connivance with the

Chartered Accountant allotted shares to his own HUF and even to his wife

and friends in order to fraudulently increase his share holdings in the

company. The said allotment was without any corresponding authorization

by the Board of Director and/or without Respondent's consent as per Articles

of Association of the company.

9. We find that no Board Resolution has been placed before the NCLT or

before this Appellate Tribunal to establish that the shares were allotted as

per law and the Respondent No.2 has also contradicted that the allotment

were made with his consent. The appellant has himself admitted in

C.P.No.47/2008 that no board meetings were held in SBF and that no board

meeting was held for the allotment of shares. Further the appellant's wife

has also made a statement that she had never consented to issue of shares

to her against the unsecured loan advanced by her to Respondent No.1. All

these facts point towards suppression of facts and false clais being made by

the appellant. Therefore, we are in agreement with the findings of the NCLT

on this issue.

10. We have heard the parties on the issue of producing of record before

the Administrator. We find that in the year 2013, Respondent No.2 lodged

police complaint stating the during the shifting of office, the statutory record

was not found and lost in transit. We also note that in the year 2015

Respondent No.2 is stating that the record of the company which was carried

by his son, has been burn out due to fire in the car. On this issue we doubt

that two instances cannot happen again and again. Thus there was an

attempt not to produce the record by the Respondent. 6

11 We have perused the proceedings dated 18.11.2015 (Page 532) of

Administrator and noted that the Administrator has clearly stated that all

the tangible assets of the Company had been removed from the said premises

at Pilukhawa, Hapur, We also note that the Hon'ble High Court of Delhi vide

its orders dated 11.3.2016 (Page 545) has ordered to initiate suo moto

proceedings for contempt against the Respondent No.2 for disobeying the

order of Hon'ble High Court and Company Law Board. On these basis we

find that the conduct of the Respondent No.2 is not upto the mark.

12. We also note that a complaint was filed against the Chartered

Accountants by Respondent No.2 which was dismiss vide order dated

10.2.2014 (Page 394) and this order was finally upheld all the way upto the

Hon'ble Supreme Court (Page 409). On the basis of these we are of the view

that the Respondent No.2 has filed false cases against the Chartered

Accountant.

Company Appeal (AT) No.23 of 2019

13. The appellant submitted that the impugned order is liable to be set

aside, being a non-speaking, non-reasoned order. The appellant submitted

that the following nine issues were framed on the basis of pleadings in both

the petitions:-

a) The jurisdiction under Section 397/398 of the Companies Act, 1956 being

that of an equitable jurisdiction whether the parties have approached this

Tribunal invoking the equitable jurisdiction with clean hands and if not,

whether the petitions are liable to be dismissed on this ground? 7

b) Whether R2 illegally issued 3,66,750 equity shares of R1 in violation of the

provisions of the Companies Act, 2013 and behind the back of the PG to

himself, to his HUF, wife and other friends and business associates?

c) Whether R2 and R3 have misused the digital signature of the PG for

illegally allotting the above shares?

d) Whether allotment of shares alleged to be made by R2 were in violation of

the terms imposed by Canara Bank in its term loan?

e) Whether R2 siphoned off money from R1's bank account?

f) Whether R2 replaced his Gurgaon property mortgaged with Canara Bank

with property of BSL Buildcon for which the PG also paid Rs.15 lac?

g) Whether the PG has siphoned off sums of R1?

h) Whether the PG has manipulated the books of accounts, financial

statements and other records of R1?

i) Whether the enhancement of the cash credit limit from Rs.85 lacs to 200

lacs by Canara Bank in favour of R1 was in violation of specified procedure?

The appellant submitted that both the petitions were dismissed

summarily, while deciding only one issue under the cover of Equity.

14. The appellant submitted that once the Tribunal has framed issues, it

is for the Court to decide all the issues and giving its findings on each issue.

The appellant submitted that he has filed the petition on the arbitrary and

illegal allotment of shares by Respondent No.2 to himself and to his friends

and relatives.

15. The appellant submitted that no Board Meeting took place for the

allotment of shares by Respondent No.2. The appellant submitted that the 8

said allotment is rightly set aside and shareholding is liable to be restored to

its original position and pattern as on 30.09.2007.

16. The appellant submitted that the records were actually burnt in car

accident and the appellant approached various authorities for reconstruction

of documents but the same were denied by the authorities. The appellant

submitted that ultimately the appellant informed the Arbitrator to pass

directions in this respect to procure the entire record. The appellant

submitted that the Respondent No.2 opposed the request of the appellant.

17. The appellant submitted that the Respondent No.2 in connivance with

the Chartered Accountant allotted shares to his own HUF and even to his

wife and friends in order to fraudulently increase his shareholding in the

Company. The said allotment was without any Board Meeting. The appellant

stated that the Respondent No.2 with Chartered Accountant did the

fraudulent acts of illegal allotment by misusing the digital signatures of

appellant (contained in pen drive) which used to be in the possession of

Chartered Accountant.

18. The appellant submitted that the Respondent No.2 committed fraud

on the company and withdrew crores of rupees from company's account for

his own gratification and for satisfying debts, which were in no way related

with the Company's affairs and thereby siphoned off huge funds of the

company. The appellant submitted that the encashment of cheques and

transfers fo funds of the company to other accounts was not related to

company's affairs and Respondent No.2 did not give any explanation.

19. The appellant stated that the Respondent No.2 filed counter petition

No.47(ND)/2008 before Company Law Board against the appellant to avoid 9

penal consequences and also filed various false complaints before various

authorities with the sole object to obstruct the growth and day to day

functioning of the company and to bring the company at the brink of closure.

20. The appellant stated that the Respondent No.2 has filed affidavit before

the Police Authorities wherein he has falsely stated on oath that all

transactions and dealings of the company are illegal and unlawful and that

the appellant has been opening various bank accounts by fabricating board

resolutions without any substance.

21. The appellant submitted that the Respondent No.2 did not cooperate

with the Auditors and Administrator.

22. On the other hand Respondent No.2 submitted that appellant failed to

abide by the orders of the Hon'ble NCLT, Hon'ble High Court and Learned

Arbitrator with regard to directions to produce the books of accounts and

records of Respondent No.1 company.

23. Respondent No.2 submitted that the appellant has avoided furnishing

the documents of the Respondent No.1 company and then claimed that the

documents were accidently destroyed and thereafter failed to reconstruct the

same.

24. Respondent No.2 submitted that the appellant was in exclusive control

of the Respondent No.1 company since the year 2008 and the appellant is

responsible for the state of affairs of the Respondent NO.1 company.

25. Respondent No.2 submitted that the appellant did not cooperate with

the Auditor and did not produce the documents of Respondent No.1 company

though they were directed to produce by the Hon'ble High Court. 24. 10

Respondent No.2 submitted that the appellant filed a false complaint

with the Police that the statutory record has been lost.

26. Respondent No.2 submitted that the appellant undertook to produce

the record on 16.9.2015 before the Administrator but he did not produce

the same and later on informed the Administrator that the record has been

burnt.

27. Respondent No.2 submitted that due to non-cooperation extended to

Administrator by the appellant, the Hon'ble High Court initiated suo moto

contempt proceedings against the appellant.

28. We have heard the parties and perused the record.

29. Learned counsel for the appellant argued that the allotment of equity

shares on 17.12.2007, 28.12.2007 and 27.02.2008 were illegal. Learned

counsel for the Respondent No.2 argued that the shares were legally allotted.

We find that no Board Resolution has been placed before the NCLT or before

this Appellate Tribunal to establish that the shares were allotted as per law.

Therefore, we have no material that the findings of the NCLT on this issue

are not reasonable.

30. We have heard the parties on the issue of producing of record before

the Administrator. We find that in the year 2013, Respondent No.2 lodged

police complaint stating that during the shifting of office, the statutory record

was not found and lost in transit. We also note that the appellant undertook

to produce the record before the Administrator but did not produce and

informed the Administrator that the record has been burnt in car. As stated

above we doubt that two instances cannot happen again and again. This

was a clever attempt not to produce the record by the appellant. Admitted 11

the record was in his custody and it was also his duty to take adequate care

of the record so that the statutory record preserved to be produced before the

Administrator. Apparently he has not taken due care of the record while

shifting and hindering the work of administrator for which he cannot avoid

his responsibility for the same.

31. We have perused the proceedings dated 18.11.2015 (Page 532) of

Administrator and noted that the Administrator has clearly stated that all

the tangible assets of the Company had been removed from the said premises

at Pilukhawa, Hapur, We also note that the Hon'ble High Court of Delhi vide

its orders dated 11.3.2016 (Page 545) has ordered to initiate suo moto

proceedings for contempt against the appellant for disobeying the order of

Hon'ble High Court and Company Law Board. On these basis we find that

the conduct of the Respondent No.2 is not upto the mark and he has

siphoned off the assets of Respondent No.1 company.

32. Section 242(1)(b) provides as under:

"(b) that to wind up the company would unfairly prejudice such member

or members, but that otherwise the facts would justify the making of a

winding up order on the ground that it was just and equitable that the

company should be wound up.

the Tribunal may, with a view to brining to an end the matters complained of,

make such order as it thinks fit.

33. It is apparent that there is dispute between the two directors regarding

their shareholding of the company. Whenever any one of the director has

been in control of the company admittedly before 2008 by Lalit Agarwal and

after 2008 by Pramod Goil, both of them have taken action in such a manner 12

that the company has been mismanaged to the extent that it has lost its

substratum. Once the company has lost its substratum that itself is a valid

ground for winding up of company on just and equitable ground. However,

when the substratum is lost and both directors have been in destruction

mode whenever they were in control of the company and having dubiously

destroyed the company, the winding up of the company would not unfairly

prejudice its members thus the winding up will be just and proper order.

34. As to the averment made by the appellant that there were 9 issues

framed but only one issued has been decided. Looking at the issues framed

and in absence of any record and destruction of the company we are of the

considered opinion even if these issues are decided separately it will not bring

back the substratum of the company. Hence the arguments that these issues

have not been decided by the Tribunal are not material to the decision made.

35. We also note that a complaint was filed against the Chartered

Accountants by appellant which was dismissed vide order dated 10.2.2014

(Page 394) and this order was finally upheld all the way upto the Hon'ble

Supreme Court (Page 409). On the basis of these we are of the view that the

appellant has filed false cases against the Chartered Accountant.

CONCLUSION

36. On the basis of the pleadings and arguments we have come to the

conclusion that allotment of shares has been done without getting it

approved in any Board Meeting. Mr. Parmod Kumar Goil, appellant in

Company Appeal (AT) No.23/2019, has not cooperated with the Auditor and

Administrator to produce the statutory documents and one hand he is

admitting that the documents have been lost while shifting the premises and 13

second time he is admitting that the statutory records has been burnt in car

accident. This is clever attempt to disobey the orders of Hon'ble High Court

for which the Hon'ble High Court has rightly initiated contempt proceeding

against him. The appellant in Company Appeal (AT) No.23/2019 has also

siphoned off the assets of the Respondent No.1 company. The order of

winding up of the company is also justified. In the absence of any record

available to be produced by either of the parties and non-existence of the

assets of the company, it will be futile exercise to make any order except

winding up of the company in the circumstances.

37. In view of the above discussions and observations we are of the view

that the NCLT has passed a speaking and well reasoned order and there is

no merit in the appeals to interfere with the impugned order. The impugned

order is upheld. The appeals are accordingly dismissed. 1st appellant in both

the appeals are imposed a cost of Rs.5 lakh each to be deposited with

National Defence Fund within one month from the date of this order. Proof

of depositing the cost with the National Defence Fund will be submitted

before the Registrar of this Tribunal within fifteen days thereafter.

(Justice Jarat Kumar Jain) Member(Judicial)

((Mr. Balvinder Singh) Member (Technical)

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