Baver Suspension Private Limited vs Ashok Kumar Verma

Ch. Mohd. Sharief Tariq, J

Under consideration is an Application No. 658/C-III/ND/2019 filed by the Applicants/Respondents against the non-Applicant/Petitioner for seeking modification of Order dated 13.06.2019 wherein inter alia it has been directed that no money will be withdrawn from the Bank Account of Respondent No. 1 Company viz., M/s. Bauer Suspension Private Limited (herein referred as the company) till further orders.

The Ld. Counsel for the Applicants/Respondents submitted that the order dated 13.06.2019 was on the basis of false submissions of the non-applicant/Petitioner, as it was given to understand to this Bench that he has been removed as Director. The Ld. Counsel for the Applicants/Respondents has referred to the resignation letter placed at page 68, which goes to show that the non-applicant/Petitioner viz., Mr. Ashok Kumar Verma has resigned from the Board of Directors on 18.08.2000 and the same was uploaded on the Company's Master Data. The Ld. Counsel for the Applicants/Respondents has also referred to the written submissions filed on behalf of the non-applicant/Petitioner, wherein at page 57, internal page 3, it is noted that the non-applicant/Petitioner has resigned from the Directorship of the Company in the Year 2000.

It is submitted by the Ld. Counsel for the Applicants/Respondents that Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest(hereinafter referred as "SARFAESI") proceedings were initiated against M/s. Baver Suspension Private Limited, (herein referred as the Company) by issuing notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred as "Act, 2002"), wherein a demand of Rs. 92,39,696/- plus interest was made by Central Bank of India. The said notice was given on 08.07.2013. The Ld. Counsel for the Applicants/Respondents has referred to the NoC dated 18.03.2015 which provides that the dues have been paid. The Counsel has further referred to the Extra ordinary General Meeting(hereinafter referred as "EoGM") held on 12.06.2015, wherein the resolution was passed to sell/lease out or otherwise dispose of the whole or substantially the land of the Company under Section 180(1)(a) of the Companies Act, 2013. The attendance sheet shows that the non-applicant/Petitioner was present in the EoGM being the shareholder and the Form MGT-14 was uploaded on 18.05.2015. Besides this, it is demonstrated by the Counsel for the Applicants/Respondents that the Company has been suffering losses during the years 2005-06 to 2013-14 and the reason stated for the losses is that the non-applicant/Petitioner was having a business in Dubai and the consideration received by him was not accounted for in the accounts of the Company. In relation to the sale of land of the Company, the non-applicant/Petitioner has also filed criminal proceedings before the competent authorities. It is further submitted that the non-applicant/Petitioner has denied his signatures on the attendance sheet attached with the said resolution dated 12.06.2018 which was sent to the forensic expert who has opined that the signatures on the attendance sheet resemble with the original signatures when compared. On this ground, it is further brought to the notice of this Bench that vide order dated 23.06.2018, this Bench has recorded that the Application IA/106/C-III/2017 will be taken along with the main Company Petition. In other words, in the said IA an interim prayer sought was for seeking a direction against the Respondents to deposit Rs. 9 cores with the Bench and to restrain the Applicants/Respondents from altering changes/removing and selling plant and machinery of the Company along with restraining order against operating the bank accounts of the Company. Thereafter, another I.A. 337/2018 was filed for the similar kind of reliefs. In short non-applicant/Petitioner has been making efforts to seek the restraining order against the Company in relation to the operations of the Bank Accounts, sale of land, the plant and machinery. On this ground, Counsel for the Applicants/Respondents has submitted that order dated 13.06.2018 be modified as the same is creating hindrances in running the day-to-day affairs of the Company. The Counsel has also placed on record the receipt of the payment of Tax dated 31.03.2019 amounting to Rs. 1,99,04,550/-

The Ld. Counsel for the non-applicant/Petitioner submitted that order dated 13.6.2019 was passed in the presence of the Applicants/Respondents as the attendance is recorded in the said order. It is further submitted that against the said order an Appeal was filed before the Hon'ble NCLAT under CA (AT) No. 208/2019 which was withdrawn. However, liberty was given to the Applicants/Respondents to seek relief from this Tribunal for modification or variance of the order dated 13.06.2019. The Ld. Counsel for the non-applicant/Petitioner submitted that two reliefs are sought in the Application - one is for dismissal of the impugned order dated 13.06.2019 and second is to modify the impugned order dated 13.06.2018 passed by this bench.

The Ld. Counsel for the non-applicant/Petitioner has referred to interim order dated 30.10.2019 whereby the Applicants/Respondents was directed to place on record the details of the expenditure for the month of June, July and August, 2019 along with Certificate of Auditor in the shape of an affidavit with relevant records including the last Audited Balance Sheet. The Counsel while referring to the said order has submitted that on 6.11.2019 an affidavit was submitted by Applicants/Respondents along with audited balance sheet for the years 2017-18. For the sake of convenience relevant portion of the affidavit is reproduced as follows: -

"3. That I say that I have gone through the bank account statement of the Respondent company for the current financial year and the details of expenditure is as under:

Period Detail Expenditure

June to August, 2019 -Nil-

Note: There is no expenditure for the period June 2019 to August 2019, however Rs. 328600 for Audit fees, Professional fees, Advocate fees including RoC fees of earlier years have been paid through bank during the period from April, 2019 to May, 2019.

That I say that the last audited Balance Sheet is for the Financial Year 2017-18 and is marked as Annexure-I."

Based on the above, it is submitted by the Counsel for the non-applicant/Petitioner that the copy of the Application for the modification of the order dated 13.06.2019 has further been narrowed down in respect of the expenditure of the Company as per the Affidavit filed; but the company is not carrying on any business. It is further submitted that the industrial land has been sold as agricultural land and the registered office of the Company is being used as a residence by the Applicants/Respondents. The Counsel for the non-applicant/Petitioner has referred to the statement of profit and loss account for the year ended 31.03.2018, in which under the head income from operations is 'nil' and under the head Other Income an amount of Rs. 8,51,00,128/- is shown. It is submitted that the land was sold in April, 2017 for a consideration of Rs. 9,00,00,000/- which is reflected from the sale deed. However, the Applicants/Respondents have deposited Rs. 8,51,00128/-only in the accounts of the Company.

The Ld. Counsel for the non-applicant/Petitioner has referred to page 8 of the affidavit which provides that by ending 31.03.2018 the applicant has been holding shares against an amount of Rs. 42,50,000/- i.e. 50% of the issued share capital and Ms. Chandana Bawa has been holding 42,49,900 shares worth Rs. 42,49,000/- having 49.998% and the rest of the shares are held by Mr. Rajender Bawa, the other Director. It has been stated that non-applicant/Petitioner is holding 50% stake in the Company and the decision for the sale of Industrial land and use of the registered office of the Company for residential purpose is done without having any consultation with the non-applicant/Petitioner. The Counsel for the non-applicant/Petitioner has also referred to page 9 of the Affidavit, wherein description about the long term borrowings is given under the heading Unsecured Loan and advances to the extent of Rs. 4,63,12,372/- ending 31.03.2017 and the loan from Directors is shown as Rs. 64,33,356/- as on 31.03.2017. The Counsel for the non-applicant/Petitioner has referred to these figures in order to demonstrate that it is not the non-applicant/Petitioner due to which the Company has faced the financial crises but the Applicants/Respondents.

It is alleged that the Applicants/Respondents have siphoned off the money from the Company and a recovery suit has also been filed before the Hon'ble High Court of Delhi. The Ld. Counsel for the non-applicant/Petitioner tried to demolish the contention of the Counsel for the Applicants/Respondents with regard to arrangement of money by Applicants/Respondents for payment to the Bank to satisfy the liability of the Bank. The Ld. Counsel for the non-applicant/Petitioner has also disputed the payment of tax for which additional provision has been made ending 31.03.2018 amounting to Rs. 70,87,836/- which as per the Ld. Counsel for the Applicants/Respondents is payment of tax on the sale of the land and an advance amounting to Rs. 30.00 lakhs was received on 13.03.2017. The Ld. Counsel for the non-applicant/Petitioner contended that the land was sold, by categorizing it as agricultural land. Therefore, there is no question of payment of tax on account of Capital Gains. The Ld. Counsel for the non-applicant/Petitioner further referred to Balance Sheet wherein under Note No. 2.8 - Long Term Loans and Advances ending 31.03.2018 under the category 'Other' is mentioned as Rs. 1,99,55,113/-, and submitted that since the Company is not in operation and the advancing of loans and advances is not connected with any business activity, the amount seems to have been siphoned off by the Directors of the Company. Reference is made to Note No. 2.11 of the Balance Sheet by the Ld. Counsel for the non-applicant/Petitioner that provides under the heading- Cash and Cash Equivalents in Bank is Rs. 31,95,353, as on 31.03.2017, whereas for the period ending 31.03.2018, an amount of Rs. 4,71,47,030 is mentioned and in case the amount is taken away by the Applicants/Respondents, there will be irreparable loss to the non-applicant/Petitioner, who is holding 50% of the paid up capital in the Company, as no assets will be left with the Company. Based on this, it is submitted that the non-applicant/Petitioner will have to suffer heavy loss; as the company would become a worthless entity, if the interim order dated 13.06.2019 is vacated.

The Ld. Counsel for the non-applicant/Petitioner has also referred to the Profit and Loss Account, where it has been recorded that since the Company is neither trading nor manufacturing Company, therefore, additional information pursuance to the provisions of paragraph 3, 4C, 4D Part II of Schedule VI of the Companies Act, 1956 is not applicable. He has also referred to the entry relating to other services, remuneration to Directors, sales, interest and finance charges, debtors, which is shown as 'nil' for the years ending 31.03.2017 and 31.03.2018. The Counsel for the non-applicant/Petitioner demonstrated that when the Company is not carrying on any business, there is no need to make provisions for expenditure for day to day activities and the order dated 13.06.2019 is not required to be modified. In order to support the arguments, the Counsel for the non-applicant/Petitioner has referred to the Auditors Report dated 3.9.2018, wherein under para (c)it is stated that the Balance Sheet, Statement of Profit and Loss are in concurrence with the books of account, subject to balance of sundry debtors, creditors, borrowings and loans and advances, which are subject to confirmation as documentary evidence has not been provided. It is further recorded in the report that stock has not been verified physically and statutory dues have not been paid by the Company on time.

Besides the above, the Ld. Counsel for the non-applicant/Petitioner has submitted that the fact that the non-applicant/Petitioner has resigned from the Directorship is not correct. As per the record the signature of the non-applicant/Petitioner has been misused, which was put on blank paper obtained by the Applicants/Respondents for obtaining loan from the Bank. It is further alleged that the Applicants/Respondents have forged the signature of the non-applicant/Petitioner in relation to EoGM held on 12.06.2015 and the land which was the only asset of the Company has been sold as agricultural land, whereas the same is industrial land and they have purchased three cars, the cost of which is more than Rs. 1.00 crore, due to which liability has been saddle on the Company by Applicants/Respondents. In the premise, it has been suggested by the counsel for non-applicant/petitioner that Applicants/Respondents and non-applicant/Petitioner may be directed to be joint signatories of the Bank Account(s) of the Company and whatsoever could be the genuine expenses, non-applicant/Petitioner will be ready to sign the cheques for the same, without prejudice to his right and claims.

In rebuttal, the Counsel for the Applicants/Respondents submitted that the issue of resignation and misusing of his signatures is raised at a belated stage. The signature of the non-applicant/Petitioner was not misused and the registration of Sale Deed has not been challenged by the non-applicant/Petitioner. The Ld. Counsel for the Applicants/Respondents did not agree with the suggestion given by the counsel for non-applicant/Petitioner for joint signatories for operating Bank Account (s) of the Company for the reason that the non-applicant/Petitioner is likely to misuse the authority, because he has filed many other cases and lodged a police complaint.

The ground taken by the Applicants/Respondents for modification of the Interim Order dated 13.06.2018 is that to the extent of day to day expenses including professional fees and compliance to the statutory provisions be allowed to be withdrawn from the account of the Company. In view of the prayer made by the Applicants/Respondents, they were directed to place on record the details of the expenditure for the month of June, July and August, 2019 along with Certificate of Auditor in the shape of an affidavit with relevant records including the last Audited Balance Sheet. Pursuant to which on 6.11.2019 an affidavit was submitted by them along with audited balance sheet for the years 2017-18. The detail of which has already been recorded under para number 5 herein above, the expenditure for the period from June to August, 2019 is "Nil"

It is noted that the company is not carrying on any business. The only asset of the company i.e., Industrial land has been sold as Agricultural land and the registered office of the Company is being used as a residence by the Applicants/Respondents. The statement of profit and loss account of the company for the year ending 31.03.2018 records under the head Income from operations as 'nil'. However, under the head Other Income an amount of Rs. 8,51,00,128/- is shown. The land was sold in April, 2017 for a consideration of Rs. 9,00,00,000/- as reflects from the sale deed, but the Applicants/Respondents have deposited Rs. 8,51,00128/- in the accounts of the Company.

Besides the above, the Balance Sheet in Note No. 2.8, under the heading - Long Term Loans and Advances ending 31.03.2018 for category, i.e., 'Other' an amount of Rs. 1,99,55,113/-, is shown that is not connected with any of the business activities of the company, which is alleged to have been siphoned off by the Directors of the Company. It is also alleged that the Applicants/Respondents have purchased three cars for an amount of Rs. 1.00 crore, which has no connection with the business activities of the company.

In view of the factual position noted above, there is no force in the arguments submitted by the Ld. counsel for the applicants/respondents. The plea taken by the counsel for the applicants/respondents is not tenable as the company is not engaged in any of the business activities, so there is no requirement of any expense as prayed. Therefore, the interim Order dated 13.06.2019 needs no modification, the same shall be continued till the main petition is disposed of. In view of it, the CA-658/C-III/ND/19 filed in CP -365/ND/17 stands dismissed. However, this order will have no bearing on the merits of the main case.

The order is pronounced.