Vishwas Lakras & Anr. vs Dharmendra Pal & Ors.

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

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)

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

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;

vi) until the year 2015, the Respondent No. 3 Company complied with all the mandatory statutory compliances and timely filed their Balance 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 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;

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.

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, even before project approvals, but despite these funds, the Appellants failed to complete the project on time or provide valid reasons for the delay.

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: -

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.

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 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:-

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

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 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.

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.

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.

It was vehemently argued since the entire documents have not been supplied till date to the Respondents, hence they could not start the 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.

With these observations above, appeal is disposed of. Pending applications are also closed.