Registrar Of Companies vs Touchstone Holdings Private Limited

Ch. Mohd. Sharief Tariq, J

The present Petition has been filed by the Registrar of Companies/Petitioner under Section 272 r/w 271(c), with the prayers, to order for winding up of the Respondent Company viz. Touchstone Holding Pvt. Ltd. in public interest, appoint liquidator for taking over the assets of the Respondent Company, issue directions to file statement of affairs showing the assets and liabilities, to maintain status quo in respect of properties of the Company so that the Company should not deal with the fund thereof and the assets including the bank accounts.

In corporated as a private limited company by shares on 17.11.1994 with the Registrar of Companies, NCT of Delhi (RoC) and Haryana bearing CIN No. U70100DL1994PTC062795 under the provisions of Companies Act, 1956. It is further noted that the authorized share capital of the Company is Rs. 100,000,000/- divided into 10,000,000 equity shares of Rs.10/- each and the issued, subscribed and paid up share capital of the Company is Rs.50,870,200/- divided into 5,087,020 equity shares of Rs.10/- each.

The main object of the Company subject to the approval of the securities and exchange board of India and other authorities were required to carry on the business of stock share, broking and its allied matters such as acting as underwriters, sub-writers, brokers to issue of securities, buying, selling, transferring and holding of shares, debentures and securities of all kind.

It is alleged by the concerned Registrar of Companies that the Companies have come under the lens of the Ministry of Corporate Affairs (MCA) which have through concerted action had managed to rotate funds within the bank accounts of the group, leading to generation of Rs. 1,000 Crores of credits and debits in each of the respective bank accounts and the credits in the bank account of NKS was in fact the result of subscription to shares of NKS by other entities in the group at a huge premium, which was immediately used for subscription in shares of other sets of companies in the group again at huge premium. Further, it is submitted that there appears cross holding of investment in a set of companies at huge premium without any justification, as there were no business activities in the companies except infusion of share capital and the consequent investment. Consequently, MCA in exercise of the powers conferred under Section 235 of the Companies Act, 1956 ordered an investigation into the affairs of the NKS Holdings Private Limited and its 10 other related companies by Serious Fraud Investigation Office (SFIO). The names of the companies which were name of the Respondent Company viz. Touchstone Holdings Pvt. Ltd. is not reflected.

However, it is submitted that the SFIO conducted an investigation of the Companies mentioned in para 10 of the Petition and during the investigation the primary record revealed that the entities were incorporated by Jain Brothers and expenses associated with the running of the companies were also incurred by Jain Brothers, who were having the personal custody of blank signed cheques signed by the authorized signatories of many entities, blank signed share transfer forms of some of the companies were also found in the custody of Jain Brothers. The evidence collected cumulatively proved that Jain Brothers were the controlling persons behind the operations of all the 49 companies/entities whose combined record was found in the personal custody of Jain Brothers. The name of the Respondent Company has figured in the category of 49 companies/entities whose combined record was found in the custody of Jain Brothers. It is further submitted by the Ld. Counsel for the RoC that during the investigation into the affairs of the Companies, the SFIO team learnt that RBI had conducted inspection in some of the Companies Under Investigation (CUI) and observed that most of these companies were carrying on Non-Bank Financial Institution (NBFI) kind of activities without obtaining valid Certificate of Registration (CoR). It is further added that the Income Tax Department had conducted search and seizure operations at the business premises of some of the companies including the residential premises of Mr. S.K.Jain & Virendra Jain and numerous incriminating documents were seized.

Based on investigation of the companies conducted by SFIO vide order file No.04/181/2013-CL.II(NR) dated 28.10.2013, the present Petition has been filed against Touchstone Holdings Pvt. Ltd., seeking prayers as mentioned herein above.

31.03.2016, submitted by the SFIO. He would contend that during the investigation, it has been established by the investigation agency that Jain Brothers were the directing mind and will' behind the functioning of all group companies indulging in the organized crime of money laundering and to cheat the national exchequer by causing wrongful loss of revenue and making wrongful gain. It is further recorded in the report that in furtherance of their criminal conspiracy, Jain Brothers with a group of beneficiaries, the original owners of unaccounted money and a group of professionals working as mediators were carrying on the business in violation of the Prevention of Money Laundering Act, 2002 (PMLA).

As per the averments made in the Petition, the SFIO has filed report on 31.03.2016 recommending for initiating the winding up proceedings against the 49 companies allegedly involved in the violation of the provisions of the PMLA. It is stated that report of SFIO is very voluminous; therefore the same has not been filed along with the petition. A query was raised by this Bench to the Ld. Counsel for the RoC to disclose specific allegations of fraud, if any, against the Respondent Company. The Ld. Counsel for the RoC submitted that the name of the Respondent Company is shown in Annexure-'E' to the report of SFIO against which an amount of Rs. 15,00,000/- is mentioned, which allegedly was given to the beneficiaries. The MCA has granted sanction under the proviso to sub-Section (3) of Section 272 of the Companies Act, 2013 on 21.04.2017 for filing the Petition under Section 272 r/w Section 271 for winding up of the companies including the Respondent Company, pursuant to which the present Petition came to be filed by the RoC concerned.

The Respondent Company viz. Touchstone Holdings Private Ltd., has filed reply denying the allegations levelled in the present Petition. It is further contended that the procedure prescribed for filing the petition has not been followed. The Ld. Counsel for the Respondent Company has referred to second proviso to sub-section (3) of Section 272 of the Companies given a reasonable opportunity to the company for making representation against the report filed by the SFIO, as mandated under the proviso.

The Ld. Counsel for the Respondent Company has referred to Para 4 of the application filed under rule 11 of the NCLT Rules 2016 seeking dismissal of the petition and submitted that sanction from the Central Government, as provided in Section 272(3) of the Companies Act, 2013, is a mandatory requirement to file the present petition. Further, the Ld. Counsel referred to Para 5 of the application and submitted that prior to the filing of the petition under Section 272, the concerned Regional Director has been under legal obligation to authorize the Registrar of Company (RoC). The RoC is relying on letter dated 21.04.2017, which cannot be considered as a valid sanction from the Regional Director, as the letter is prior to issuance of show cause notice to the Respondent Company. The show cause notice is dated 05.07.2017 which has been issued by Regional Director. Also letter dated 21.04.2017 is not issued by Mr. M.P.Shah (Regional Director) exercising the power of the Central Government, as delegated by the Central Government vide Notification dated 19.12.2016. It is submitted by the counsel for the Respondent Company that the decision was to be taken by the Regional Director as a delegate of Central Government in terms of Notification dated 19.12.2016 in full compliance of principal of natural justice and complete application of mind to the fact and circumstances of each case. Further, it is submitted that there is no decision taken by Mr. M.P. Shah (RD), or correspondence made to the Company regarding the reply letter dated 26.07.2017 sent by the company in pursuance of the show cause issued on 05.07.2017. The reply was duly received by the Ministry of Corporate Affairs on 28.07.2017, wherein the respondent sought certain documents as well as an opportunity for furnishing detailed reply after receipt of the documents.

Allegations levelled against it. The Ld. Counsel for the Respondent Company further submitted that neither the Reserve Bank of India nor the Income Tax Department has taken any action against the Respondent Company for the alleged illegal activities. Therefore, there is nothing on record to suggest that any of these authorities have initiated or even given notice for any of the illegal activities as alleged by the Counsel for the RoC.

It reveals from the record that there is no compliance with the provisions of Section 272(3) of the Companies Act, 2013. For the sake of convenience, sub-Section (3) of Section 272 is extracted below:

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(3) The Registrar shall he entitled to present a petition for winding up under Section 271, except on the grounds specified in clause (a) or clause (e) of that sub-section:

Provided that the Registrar shall obtain the previous sanction of the Central Government to the presentation of a petition:

Provided further that the Central Government shall not accord its sanction unless the company has been given a reasonable opportunity of making representations.

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As can be seen from the second proviso, it appears mandatory that no sanction can be granted against a Company for initiating the liquidation process unless the Company is given a reasonable opportunity of making a representation. The Respondent Company has vehemently opposed the maintainability of the Petition on this ground and prayed to dismiss the Petition in limine for non-compliance of the mandatory procedure.

The Communication dated 21.04.2017 sent to RoC by the Joint Director of the MCA indicates that permission was granted to file the basis of the SFIO Report. However, there is nothing on record to suggest that before granting the permission/sanction for filing the instant Petition, compliance with second proviso to sub-Section (3) of Section 272 of the Companies Act, 2013 was made. The Counsel for the Respondent Company further submitted that the communication dated 29.08.2017 placed at page 111 of the Petition, was sent to the Director SFIO, giving direction to forward copies of complete files to the RoC Delhi and the Inspecting Officer was directed to coordinate to assist the RoC for filing the winding up petitions before NCLT, Delhi. It is stated by the Ld. Counsel for the Respondents that the communication dated 29.8.2017 cannot be construed as permission for filing present Petition. In short, there is nothing on record to establish that the MCA has complied with second proviso to Sub-Section (3) of Section 272 of the Companies Act, 2013 before filing the Petition through the RoC concerned.

It is worthwhile to mention that CP No.179/271-272/ND/2018 was filed against M/s. Apoorva Leasing Finance and Investment Company Limited before the NCLT, Delhi, Bench-II, on the same set off acts and circumstances. In the said matter the issue about the grant of sanction and compliance with respect to second proviso to sub-Section (3) of Section 272 of the Companies Act, 2013 was considered and observed as follows:

"the only communication to the ROC was letter dated, 21.04.2017 issued prior to the alleged show cause notice dated 07.07.2017, which cannot he sustained as the show cause notice".

Based on the said observation, the Division Bench of NCLT, Delhi vide its order dated 18.01.2019 has dismissed the Petition with cost. It is worthwhile to mention that RoC has filed an Appeal No.88/2019 against the NCLAT, which was dismissed vide order dated 04.12.2019.

In view of the facts and circumstances, and legal position stated herein above, the present Petition is devoid of merits and stands dismissed on two counts:

i. that there is no compliance with the second proviso to sub-Section (3) of Section 272 of the Companies Act, 2013; and

ii. that there is no specific allegation against the Respondent Company and the single transaction mentioned in the SFIO Report pertains to the past, which is concluded.

In the light of the above, interim order, if any, is vacated. All other connected CAs stand dismissed. However, there is no order as to cost.

The order is pronounced in open court.