Vijay Kumar Arora vs Jaswant Rai Arora & Ors

Vijay Kumar Arora ... Appellant

Versus

Jaswant Rai Arora & Ors. ... Respondents

Present: For Appellant : Shri Kumar Sudeep and Shri Prasanna S., Advocates

For Respondents : Shri K. Datta and Shri Rohan Malik, Advocates

ORDER

25.10.2017 This appeal has been preferred by the appellant against

order dated 1st September, 2017 passed by the National Company Law

Tribunal, Kolkata Bench, Kolkata (hereinafter referred to as 'Tribunal') in

Company Petition No. 40 of 2013, whereby and whereunder the Tribunal

passed the following order:

"ORDER

"C.P. No. 40/2013 is allowed with costs. The

preliminary decree is being passed for an investigation

into the affairs of the company w.e.f. 8/9/2008, i.e., from

the date when R2 recovered back the possession of R1

company from the Official Liquidator by order of the

Hon'ble High Court.

-2-

Central Government is directed to take appropriate

steps for appointment of one or more persons as

Inspectors to investigate into the affairs of the company

and to call for report thereon in such manner as the

Central Government may direct within three months from

the date of order.

Cost and expenses of the investigation may be

provided by petitioner which shall be reimbursed from

R-1 Company's account.

Investigation report may be called for within three

months from the date of order.

Let a copy of the order be sent to the Regional

Director for compliance with above direction."

2. The brief fact of the case is that the respondents, Mr. Jaswant Rai

Arora (deceased) and others, preferred an application under Sections 397

and 398 read with Sections 402 and 403 of the Companies Act, 1956

complaining several causes of 'oppression and mismanagement'

precipitated by the respondents including 2nd Respondent (Appellant

herein). A declaration was sought for that the sale of moveable and

immoveable assets by the 2nd Respondent (Appellant herein) after 28th

August, 2008 is null and void and to appoint a retired High Court Judge -3-

as a Liquidator of the Respondent Company directing him to liquidate the

Respondent Company.

3. The Tribunal taking into consideration the submissions made by

the parties and the evidence on record, noticed that due to different

factors and the report under Section 15 of the Sick Industrial Companies

(Special Provisions) Act, 1985 (hereinafter referred to as 'SICA') submitted

before the Board for Industrial and Financial Reconstruction (BIFR), by

order dated 28th August, 1997, a direction was issued for winding up of

the Company and the report was sent to Hon'ble Patna High Court under

Section 20 of the SICA. Taking into account the fact that 1 st Petitioner

(deceased) had remained a silent spectator during his lifetime and

subsequent other factors and the resolution passed between the years

2008 and 2009 as also sale of assets took place between July and

November, 2009 and other relevant factors, the Tribunal thought it proper

to order for an investigation into the affairs of the Company with effect

from 8th September, 2008 i.e. the date from which the 2nd Respondent

(Appellant herein) recovered back the position of the Company from the

Official Liquidator by the order of the Hon'ble High Court.

4. Learned counsel appearing on behalf of the appellant submits that

the matter related to 8th September, 2008 and the Company Petition was

filed after long delay in the year 2013. He further submits that the alleged

act of 'oppression and mismanagement' relates to year 1995 and, -4-

therefore, petition under Sections 397 and 398 of the Companies Act,

1956 filed after long delay in the year 2013 was not maintainable. It is

also submitted that the laches and negligence on the part of the

respondents have also been noticed by the Tribunal.

5. Learned counsel for the respondents submits that there was no

laches as the Company was under liquidation and the assets were

surreptitiously sold in favour of the 2nd Respondent (Appellant herein) and

the investigation relates to the period from 8th September, 2009 onwards

i.e. till today has been ordered.

6. Having noticed the rival contentions made by the learned counsel of

the parties, we do not find any reason to interfere with the impugned order

as it is always open to the Tribunal, even suo motu, to order for

investigation into the affairs of the Company, in view of the powers

conferred upon it under clause (b) of Section 213 of the Companies Act,

2013, as quoted below :

"213. Investigation into company's affairs in other cases

The Tribunal may,--

(a) xxx xxx xxx

(b) on an application made to it by any other person or

otherwise, if it is satisfied that there are

circumstances suggesting that-- -5-

(i) the business of the company is being

conducted with intent to defraud its

creditors, members or any other person or

otherwise for a fraudulent or unlawful

purpose, or in a manner oppressive to any of

its members or that the company was formed

for any fraudulent or unlawful purpose;

(ii) persons concerned in the formation of the

company or the management of its affairs

have in connection therewith been guilty of

fraud, misfeasance or other misconduct

towards the company or towards any of its

members; or

(iii) the members of the company have not been

given all the information with respect to its

affairs which they might reasonably expect,

including information relating to the

calculation of the commission payable to a

managing or other director, or the manager,

of the company,

order, after giving a reasonable opportunity of

being heard to the parties concerned, that the -6-

affairs of the company ought to be investigated by

an inspector or inspectors appointed by the Central

Government and where such an order is passed,

the Central Government shall appoint one or more

competent persons as inspectors to investigate into

the affairs of the company in respect of such

matters and to report thereupon to it in such

manner as the Central Government may direct:

Provided that if after investigation it is

proved that--

(i) the business of the company is being

conducted with intent to defraud its

creditors, members or any other

persons or otherwise for a fraudulent

or unlawful purpose, or that the

company was formed for any

fraudulent or unlawful purpose; or

(ii) any person concerned in the formation

of the company or the management of

its affairs have in connection therewith

been guilty of fraud,

then, every officer of the company who is in default

and the person or persons concerned in the -7-

formation of the company or the management of its

affairs shall be punishable for fraud in the manner

as provided in section 447."

7. According to us, if an investigation into the affairs of the Company

is made and the appellant, who was 2nd Respondent before the Tribunal,

if otherwise not involved, he should not fear the investigation.

8. In so far as certain observations as made by the Tribunal with

regard to the 2nd Respondent (Appellant herein) are concerned, the same

are merely passing observations for the purpose of the investigation and

cannot be construed to be an allegation substantiated against the

appellant.

9. For the reasons aforesaid, we have no option but to dismiss the

appeal. It is accordingly dismissed. However, on the facts and in the

circumstances of the case, there shall be no order as to costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

/ng/