Vishwas Lakras & Anr vs Dharmendra Pal & Ors

(Arising out of judgement and order dated 10.03.2023 passed by the National Company Law Tribunal, Indore Bench in TP No.195/2019 in CP No.91/2019)

In the matter of:

1. Vishwas Lakras 469/25, Nanda Nagar, Indore 452008

2. Deepti 469/25, Nanda Nagar, Indore 452008

Vs

1. Dharmendra Pal, Flat No.417, Bicholi, Mardana Agarwal Public School, Indore (MP) 452016

2. Hansraj Pal, Flat No.417, Bicholi, Mardana Agarwal Public School, Indore (MP) 452016

3. Lakras Infrastructure Pvt Ltd, 469/25, Nanda Nagar, Indore (MP) 452001

4. Registrar of Companies, A Block, Sanjay Complex, Jayendra Ganj, 2

Gwalior 474009

5. Regional Director, North Western Region, ROC, Bhawan, Opp. Rupal Park Society, Behind Ankur Bus Stop, Narapura, Ahmedabad 380013

6. Madhya Pradesh Financial Corporation, Indore Finance House, A-22/2 Agra Bombay Road, South Tukoganj, Indore 452001 Respondent

For Appellant: Mr Gaurav Gupta, Ms Rupal Gupta, Advocates.

For Respondent: Mr Shivansh Soni, Advocate and PCS Mr Anmol Jha.

JUDGEMENT

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

1. The present appeal has been filed by the appellant against an order dated

10.03.2023 passed by the National Company Law Tribunal, Indore Bench in TP

No.195/2019 in CP No.91/2019)

2. Before proceeding further let us note the facts as under: -

i) respondents No.1 and 2 (hereinafter referred to as "Respondents"), along

with Appellant No.1 & 2 (hereinafter referred to as "Appellants") with the

objective to expand their business in the field of construction and

infrastructure development on 06.05.2009 had founded Respondent No.3 3

company, i.e. M/s. Lakras Infrastructure Pvt. Ltd. (hereinafter referred to

as the "Company");

ii) both Parties had equal equity shareholding of 50% each. The registered

address of the Company was situated at the residential address of the

Appellants and thus most managerial work was under the control of the

Appellants;

iii) respondent No. 3 company purchased a plot of 12,600 sq.ft. partly on

14.10.2011 and on 30.03.2012 for the purpose of constructing a multi-

storied building consisting of 28 flats under the name of 'Nilaya Avenue'

(hereinafter referred to as subject project);

iv) for the construction of the residential multistory building on the

aforesaid plot, the Respondent No. 3 Company applied for and was

sanctioned a term loan of Rs. 1,09,65,000 by Madhya Pradesh Financial

Corporation i.e. Respondent No. 6 on 05.02.2015 on equitable mortgage of

the aforesaid plot and personal guarantees of the Appellants and

Respondent No. 1 & 2;

v) the Company entered into sale deed for sale of one flat out of 28 flats

and the sale deed was executed by the Appellant No. 1 and Respondent

No. I on behalf of the Company on 15.08.2015;

vi) until the year 2015, the Respondent No. 3 Company complied with all

the mandatory statutory compliances and timely filed their Balance 4

Sheets, Annual Returns and other documents, which were signed, by the

Appellant No.1 and the Respondent No.1;

vii) however after 2015, the Appellants had stopped including the

Respondents in the daily affairs of the company. On 24/10/2017, MPFC

issued a default notice to the Company for initiating action under the State

Financial Corporations Act, 1951 for non-payment of the EMI's. which

served as the Cause of Action/ starting point where Respondents allegedly

realised irregularities in the functioning of the Company;

viii) consequently, it is alleged the Respondents were constrained to

intervene and check the functioning of the Company affairs, upon which

they realised the Appellants had diverted funds received as a loan from

MPFC to other bank accounts without the Respondents' permission.

Additionally, the Respondent also realised the Appellant had

misappropriated the funds through payments made to alleged creditors

and suppliers from whom the company had never received any materials

to date; these creditors and suppliers had never contacted the Company;

ix) further, out of 28 flats, one flat was sold with the consent of the parties,

however the remaining 27 flats were shown to be allotted to the alleged

buyers (but Ld. NCLT designated them investors) by the Appellants

without proper documentation, allegedly involving advances received by

Appellants and deliberately correlated with figures mentioned in the

advances part of the balance sheet of the Company which was noted for 5

some other purpose. Moreover, the alleged sale of 27 flats was never a part

of the initial pleadings of the Appellants before Ld. NCLT and nor

mentioned in the initial communication/notices exchanged between the

two parties. It is alleged the Appellants presented story for the so-called

alleged buyer-investors of 27 flats at the end of the final pleadings, which

was never part of the pleadings but rather a part of the settlement offers,

as observed by the Learned NCLT;

x) realising the aforesaid facts, Respondents requested the Appellants to

furnish the requisite documents pertaining to the functioning of the

Company, however the Appellants denied to share any information or

document, as a result of which Respondent inspected company records

with the MCA and realised irregularities as under: -

a) since the Company's incorporation, M/s. SBA & Company served as auditors, appointed until 30.09.2019. However, without informing the Respondents, the Appellants appointed M/s. Pankaj Rathi & Associates from 01.04.2015, who resigned on 01.01.2016. The reasons for both resignations are absent from MCA records. An alleged EOGM on 05.02.2016 appointed M/s. Tanmay V Rajurkar & Co.

for 2015-16 and reappointed them until 31.03.2021, again without notifying Respondents. The E-Form ADT- 1 filings were only made in 2018;

b) the returns for the year 2015-16 and 2016-17 were submitted without informing the Respondents as evident from the facts there exists no signature of the Respondent No.1;

c) there existed discrepancy in the amounts paid to creditors compared to the amounts reflected in the books of account. The scrutiny report dated 27.08.2022 6

by the Chartered Accountant identifying the discrepancy is also on record.

d) the respondents reported alleged fraudulent activities to MPFC and the D.I.G. police while also warning against purchasing flats from Appellants to the general public by publication in newspaper "Agni Ban"; information was also provided to the Sub-Registrar, Department of Stamps intimating about the activities of the Respondents as without approval of Board and without authority were trying to sell few flats. Lastly a legal notice dated 30/03/2018 was issued to the Appellants regarding misappropriation, mismanagement and demand supply of relevant papers of the Company.

3. Subsequently, the Respondents also filed a complaint u/s 206 of the

Companies Act, 2013 against Appellant with Registrar of Companies & Regional

Director. In response, Registrar of Companies sent a notice to Appellants for

their reply to the complaint. However, upon receiving an unsatisfactory reply

from the Appellants, Registrar of Companies again sent a notice dated

17.07.2019 under Section 206 of the Act with directions to provide certain

information and documents. However, the Appellants failed to reply to the said

notice even after getting directions from the Ld. NCLT, Indore Bench vide interim

order dated 31.01.2020.

4. It is the Appellant's own case before Ld. NCLT that the total project cost

was Rs. 3.98 crores (Rs. 4.78 crores including land). The Appellants admittedly

raised Rs. 4.43 crores, including a loan from Respondent No.6. of Rs. 1.09 crore,

leaving Rs. 3.34 crores with the Company. Along with Rs. 4.85 crores receivable

from buyers of 27 flats, the company had Rs. 8.19 crores total. Further the

Appellants raised an amount of Rs. 83 lakhs from investors since the year 2011, 7

even before project approvals, but despite these funds, the Appellants failed to

complete the project on time or provide valid reasons for the delay.

5. Against this background and considering the Appellants' acts seriously

prejudicing the company's functioning and project completion, the impugned

order was passed by the learned NCLT, as under: -

11. xxxxxxxx Thus based on the calculation of the respondent No.2 &3, company will incur loss even after completion and selling of the flats. On the other hands, the petitioners contends that the company will generate profits and even otherwise if at all there is loss then the petitioners are ready to bear the entire loss and pay off the liability of MPFC subject to non-interference of the respondent No.2 & 3 in the management and working of the company.

12. It is also noted that this Hon'ble Tribunal vide order dated 31.01.2020 directed to maintain status quo with respect to the assets and shareholding of the company and therefore MPFC i.e respondent No.6 is unable to exercise its rights over the assets mortgaged to it and has filed IA 165 of 2020. Further this hon'ble Tribunal has in the said order asked the respondent No.2 & 3 to explain follow up action taken in compliance of the letter dated 17.07.2019 of the ROC. The relevant part of the order dated 31.01.2020 is reproduced as under:

Meanwhile, in order to ensure the transparency and equilibrium in corporate governance an Interim direction is issued that the Respondent shall maintain status quo as of today in respect of the movable/immovable properties and fixed assets of the Respondent Company and not to make change its shareholdings pattern. Further, the Respondent Company is required to explain about the follow up action took in compliance of the letter of the ROC dated 17.07.2019.

13. We also note that based upon the calculation of the respondent No.2 & 3, even after receiving an amount of Rs.4,85,00,000/- from the 6 allottees of 27 flats and thereafter paying the liabilities thereof to MPFC amounting to Rs.3,45,14,852/-, incurring expenses for construction of the 8

project amounting to Rs.2,50,00,000/- and other liabilities amounting to Rs.73,00,000/-, the net result of the company will still be loss of Rs.1,83,14,852/- whereas the petitioners contends that they are capable of generating profits from the company.

14. We also note that the respondent No.2 & 3 has taken advances from the allottees of 27 flats amounting to Rs.83,35,000/- for the construction purpose even before the construction of the project sarted. Based upon the advances taken and the amount yet to be received from the said allottees, the total sale consideration amounts to Rs.5,68,35,000/-

(Rs.83,35,000/- + Rs.4,85,00,000/-) and it shows that the amount received as advances by the respondent No.2 & 3 was just around 14% of the total amount of the sale consideration of the 27 flats. As per the details, the respondent No.2 & 3 have allotted 5 flats to Aradhya Enterprises for an advance amount of Rs.10,00,000/-; 11 flats to Shashi Sharma on receipt of advance amount of Rs.22,00,000/-; 7 flats to VikasKavishwar for an advance amount of Rs.43,35,000/-; 2 flats to Rash Bihari for an advance amount of Rs.4,00,000/- and remaining 2 flats to Prakash Tembe & Tolaram for an advance amount of Rs.2,00,000/- each respectively.

It is evident that only Rs.2,00,000/- per flat were received as advance from all such allottees except Vikas Kavishwar and it also appears that these allottees are not the home buyers but the investors in those flats.

15. Hence, we fail to understand that even after taking loan from MPFC and advances from the said 6 allottees what prevented the respondent No.2 & 3 to demand/raise further advances progressively from such allottees for the smooth functioning of the company and for the completion of the project. This shows the mismanagement on the part of the respondent No.2 & 3. Moreover at one instance the respondent No.2 was personally present before the Tribunal and he submitted that he does not have money to repay the loan of MPFC and therefore stated to auction the properties mortgaged with MPFC. This also shows that the respondent No.2 & 3 have run the business of the company in the manner prejudicial to the interest of the company.

16. We find that there is mismanagement in the company on the part of respondent No.2 & 3 and Section 242 of the Companies Act, 2013 empowers the Tribunal to remove the director of the company if the affairs of the company have been 9

or are being conducted in a manner prejudicial to the interest of the company. The relevant part of section 242 of the Companies Act, 2013 is reproduced hereunder:

242 (1) If, on any application made under section 241, the Tribunal is of the opinion--

(a) that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company;

.......... the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.

(2) Without prejudice to the generality of the powers under subsection (1), an order under that subsection may provide for-- ........

(h) removal of the managing director, manager or any of the directors of the company;

17. Hence in the interest and furtherance of the company, we find it appropriate to give the control over the company to the petitioners and remove the respondent No.2 & 3 as directors of the company for next three years with the following orders:

i. The control over the company- M/s Lakras Infrastructure Private Limited be solely with the petitioners. The respondent No.2 & 3 are directed to handover all the books of accounts & documents including the minutes of the meetings held for the year 2015 and onwards; documents relating to the sale/allotment in respect of 27 flats to the said 6 allottees, in their possession to the petitioners.

ii. In view of Section 242(2)(h) of the Companies Act 2013, we remove the respondent No.2 & 3 from the Board of Directors of the company for next three years.

Consequently they shall not remain the directors or reappointed as director during the period of next three years. However they will continue to be the shareholders of the company. We also direct the respondent No.2 & 3 to cooperate with the petitioners as shareholders and not to interfere in the day-today functioning.

10 iii. Since the registered office of the company is the residence of the respondent No.2 & 3, the petitioners are at liberty to shift the registered office of the company to elsewhere in case they face any difficulty in the present registered office of the company.

iv. The petitioners to extend a proposal to the MPFC for repayment of loan and take due steps thereon.

6. Though it is the submission of the learned counsel for the appellant the

company petition was time barred since the oppression and mismanagement as

alleged was of the year 2015 but we are not inclined to accept this argument

since such acts continued and the company suffered losses. The Ld. NCLT had

rather noted that nothing has worked out for bringing the company out of losses

or to revive the company, hence the Ld. NCLT had intervened and had exercised

its powers under Section 242 of the Companies Act, 2013 and had given a chance

to the respondents herein to run it for three years.

7. We have gone through the record of the Ld. NCLT especially the reply to

this appeal. As stated above, it duly notes the total project cost to the

construction of building was Rs.3.98 crore (Rs. 4 crores 78 lacs including land

cost) and that the appellant admitted in their reply to the main petition the

company had raised an amount of Rs.4.43 crores which included the loan from

Respondent No.6. The company had only used Rs.1 Crore 09 lacs out of Rs.2

crores loan as sanctioned by Respondent No.6, so remaining amount in hands

of the Respondent No.3 Company at such time may be Rs.3.34 crores alongwith

a balance amount of Rs.4 crores 85 lacs viz receivable from the buyers of the 27

flats, which makes a total of Rs. 8.19 crores. In that scenario the Respondent 11

No.3 company was not even required to approach Respondent No.6 for loan

amount and should have completed the construction of the building by receiving

installments from alleged buyers on progressive basis. As per the loan appraisal

report submitted to Respondent No.6 on 21.01.2015, the construction had

reached at the first floor roof stage even before the Respondent No.6 took up the

loan application. The Respondents vehemently claim the appellant needed

Rs.2.50 crores for completion of the project by their own admission before the

Ld. NCLT, Indore Bench and the total cost of the Project was Rs.6.70 crores.

Further more than 60% of the project was complete, then why not a single

installment was paid on progressive basis by any of the buyer(s). Learned

counsel for the Respondent had also referred to the reply to the main appeal,

more specifically para 6.6 wherein company deposit details as per company

statement and details in the Audited Balance were given as follows:-

Sr.No. Name of the Buyer Deposit date Deposit Total amount amount 1 Aradhya Enterprises 27.06.2014 5,00,000.00 10,00,000.00 27.06.2014 5,00,000.00 2 Prakash Tambe 23.08.2014 2,00,000.00 2,00,000.00 3 Raash Bihari 26.12.2012 4,00,000.00 4,00,000.00 4 Shashi Sharma 18.06.2012 4,000.00 20,50,000.00

18.06.2012 3,00,000.00 20.06.2012 2,00,000.00 20.06.2012 4,50,000.00 23.06.2012 1,46,000.00 20.07.2012 2,00,000.00 21.07.2012 1,00,000.00 26.07.2012 60,000.00 27.07.2012 90,000.00 22.08.2012 3,00,000.00 23.08.2012 2,00,000.00 5 Tolaram 28.03.2014 1,00,000.00 2,00,000.00 28.03.2014 1,00,000.00 12

6 VikasKavishwar 2010-11 8,00,000.00 43,35,000.00 2011-12 4,35,000.00 15.01.2014 10,00,000.00 07.11.2014 10,00,000.00 02.12.2014 11,00,000.00

8. Learned counsel for the Respondent also referred to complaint dated 03rd

August, 2018 of the Respondent to ROC, wherein they referred to the malicious

activities being carried out by the appellants and in lieu thereof, a letter was

written by ROC on dated 17.07.2019 requiring the appellant to allow

Respondents the inspection of the record as well comply with the provisions of

Section 128(3) of the Companies Act, 2013 read with Rule 4 of Companies

(Accounts) Rules, 2014, and that the company had not filed its Balance Sheet

and Annual Return for the FY 2017-18 on MCA portal; thus there being violation

of Section 92(4) and 137(1) of the Companies Act, 2013 and further the Board

Meetings and the AGMs were not convened in accordance with the Companies

Act, 2013 and rules made thereunder.

9. Thus all these facts reveal the company was not being run in a proper

manner and with violations as above, hence there existed a prima facie case

against the appellants and in such circumstances and in the interest of the

company, the management was handed over to Respondents No.1 and 2.

However, two years had lapsed since the management has been handed over to

the Respondents but still the respondents are alleging the entire record of the

company has not been handed over to them. It is also the submission of the 13

learned counsel for Respondents No.1 and 2 they have already filed an

undertaking before the Ld. NCLT they shall pay off the loan to Respondent No.6

to clear of the mortgage upon the company's land so as to complete the construction

from the arrears to be recovered from the allottees.

10. Thus considering the above facts, we are not inclined to accept the appeal,

more specifically seeing the conduct of the appellant where they accepted money

from the allottees between 2010 to 2014 but failed to complete the construction

till 2018 and even failed to pay of the loans and did not show any enthusiasm to

complete the project.

11. However, as is alleged by the Respondents that the entire record is not

supplied to them hence let Ms Rohina, Advocate, Mobile No. 9717876102 be

appointed as a Local Commissioner to obtain the list from the respondents of the

record not supplied yet and would endeavour to obtain it from the appellants

within two weeks of providing such list of unsupplied record to her. The record

so obtained be handed over to the respondents and a status report be filed before

the Ld. NCLT within a week thereof. The fee of Local Commissioner shall be

Rs.1.50 lac, payable in advance, excluding all other expenses, to and fro, which

shall be borne by the respondents, of course, chargeable to the company's

account.

12. It was vehemently argued since the entire documents have not been

supplied till date to the Respondents, hence they could not start the 14

construction, thus the respondents shall be at liberty to move an application for

extension of time to complete construction per para 17 of the impugned order.

13. With these observations above, appeal is disposed of. Pending applications

are also closed.

(Justice Yogesh Khanna) Member (Judicial)

(Mr. Indevar Pandey) Member (Technical) Dated: 21.07.2025