Case Law Details

Case Name : Pravin Jain Vs Diastar Jewellery (P.) Ltd. (Company Law Board, Mumbai)
Appeal Number : CP NO. 79 OF 2010
Date of Judgement/Order : 30/11/2012
Related Assessment Year :
Courts : Company Law Board (19)

COMPANY LAW BOARD, MUMBAI BENCH

Pravin Jain

versus

Diastar Jewellery (P.) Ltd.

Smt. Vimla yadav, MEMBER

CP NO. 79 OF 2010

NOVEMBER 30, 2012

ORDER

1. In this order I am considering CP No. 79 of 2010 which has been filed under sections 397, 398, 402, and 111 of the Companies Act, 1956 (hereinafter referred to as ‘the Act’).

2. The R- I Company was incorporated in the year 1987. The R-I Company is primarily into manufacturing and export of gold and diamond jewellery and for the said purpose was allotted Gala No. G- 5 admeasuring 9500 square feet on rental basis in SEEPZ SEZ, Andheri (East), Mumbai. The Petitioner No. 1 and his father, Late Shri Kishanlal Jain were the founder Directors of the R-I Company. The issued and paid-up capital of the R-I Company is Rs. 12,24,00,000/- divided into 1,22,40,000 equity shares of the R-1 Company. The R-2 is the Citizen of United States of America.

3. The Petitioners’ case is that in or around the year 2007, P-I’s father, late Shri Kishanlal Jain desired to transfer his shareholding in the R-I Company to the Petitioner Nos. 2 and 3.Accordingly, Shri Kishanlal Jain executed a Gift Deed dated 16-10-2007 and handed over his 40,77,600 equity shares (i.e. 33.31% shares) in the R-I Company to the Petitioner Nos. 2 and 3. The Petitioner Nos. 2 and 3 accordingly, executed relevant transfer deeds and lodged the said gifted shares to be transferred into their name with the R-I Company. The R-I Company passed a Resolution dated 16-10-2007 authorizing the transfer of shares in the names of the Petitioner Nos. 2 and 3. However, till date, the names of the Petitioner Nos. 2 and 3 have not been updated in the records of the R-I Company. The petitioners claim to hold 52.94% Shares of the R-I Company. The alleged Gift Deed dated 10.12.2002 and the transfer deed dated 24 04 2003 were cancelled which have been suppressed by the Respondents and which clearly shows the mala fide and dishonest intention of the Respondents. No RBI approval is produced by the Respondents. The alleged MOU dated 12.02.2002 has not been signed by the petitioners and at that time. Petitioner was not involved into the business and affairs of the R-I, therefore, the allegations of the Respondents that the Petitioners signed the same is totally and intentionally false and fabricated. Since the year 2001 (after resignation of the Petitioner No. 1), the R-2 and 3 continued the operation of the R-I Company. During his lifetime, Shri. Kishanlal Jain repeatedly assured the Petitioners that he would amicably resolve all disputes and settle the same between the brothers (Petitioner No. 1 and R-2) and persuaded the Petitioners not to precipitate the matters and unnecessarily drag the disputes to Court of law.

4. Petitioners’ case is that in or around 2008-2009, the Petitioners became aware of the acts of oppression and mismanagement viz: (a) The R- 2 and 3 had floated a company called Diastar Inc., USA. The said company was also involved in the sale and trading of jewellery. Diastar Inc. would place orders on the R-I Company to manufacture the jewellery which the R-I in turn would manufacture and reexport the same to be sold by Diastar Inc. USA. Till about 2008-2009, as per the details furnished by the auditors of the R-I Company a gross sum of Rs. 1822.64 lakh still remained to be remitted by Diastar Inc. USA to the R-I Company. The proceeds for the aforesaid exports were required to be remitted into the Country since long back. However, till date Diastar Inc. USA has failed and neglected to remit the export proceeds. This act on part of the R-2 and 3 has exposed the Respondents to various civil and criminal liabilities. The R-I Company, due to the conduct of the R-2 and 3 has consequently suffered losses. The Balance Sheets of the R-I company since the year 2001 show a steady and consistent decline in the profits which was never the case when the Petitioner No. 1 was incharge of the R-I Company. Respondents clearly breached all applicable laws of India and also completely mismanaged the affairs of the R-I Company, (b) The absolute mismanagement of the R-l Company further became evident as the R-I company failed to meet its statutory commitments and pay the provident fund, gratuity, professional tax and income tax. To the best of the knowledge of the Petitioners as on filing of the Petition a sum of Rs. 10,08,968/- was due and payable towards Provident fund dues, a sum of Rs. 7,53,784/- towards ESIC, a sum of Rs. 4,05,170/-towards Professional tax and a sum of Rs. 35,83,083/- Income and Wealth tax dues by the R-I Company.(c) Suffering of higher loss. The higher expenditure charged to the company include the personal expenses of the R- 2 and 3 Despite the company not being able to recover its dues from Diastar Inc. USA R-2 being the common director of the R-I Company and Diastar Inc. USA are imposing their personal travel expenses including that of the family members on the R-I Company. The result being the net loss of the R-I Company after tax for the year ending 31st March, 2008 stood at Rs. 969.96 lacs, (d) The extent of mismanagement with respect to the affairs of the R-I company is also evident as R-2 and 3 have not only defrauded the shareholders but have also defrauded the Government and the Revenue authorities. As the export remittances for the jewellery exported from the SEZ have not been remitted and accounted for, the same is clearly in violation of the provisions of FEMA and also the rules applicable to a SEZ.

5. It was pointed out that Diastar Inc. USA has already suffered huge losses and have sought protection under the applicable Bankruptcy laws of USA. The Petitioners do not have the actual details of the nature of the investigation, if any, initiated against Diastar Inc. USA. The R-I Company without initiating any recovery proceedings has written off all its receivables from Diastar Inc. USA. It has failed and neglected to comply with its export remittances contrary to the rules and regulations of the RBI and the FEMA.

6. In view of the eminent bankruptcy of Diastar Inc. USA and in order to protect the same, the Respondents have misused the machinery of the R-I Company and are seeking to utilize the assets of the R-I Company to pay off and/ or discharge the liabilities of Diastar Inc. USA. In order to achieve the same, the Respondents have indulged in various malpractices and acts of oppression and have deliberately acted contrary to the interest of the Petitioners and the R-I company: (a) R-2 and 3 have systematically proceeded to exclude the Petitioners from the management and affairs of the R-I company despite the petitioners collectively holding more than 50% of shares in the R-I Company. As long as the petitioner’s father viz. Shri. Kishanlal Jain was present and the Petitioner No. l was director, the affairs of the R-I Company were carried out in a systematic and an organized manner. The Petitioners reposed utmost faith in Shri. Kishanlal Jain who was residing with the Petitioners and due to the nature of relationship, the Petitioners had no reasons to suspect any wrongdoing in the affairs of the R-I Company. The Balance Sheets of the R-I Company showed the factum of the company being operated as per law and in the interest of all the shareholders, (b) After the death of Shri. Kishanlal Jain, R-2 and 3 completely failed to act in the best interest of the R-I Company despite the fact that the R-I company resolved to make Petitioner Nos.2 and 3 the members in its records, shares of Petitioner Nos.2 and 3 were deliberately not transferred in their respective names in the register of members, (c) De horse the same, the Petitioners were still the owners of shares in their own right. No notice of any meeting of any nature whatsoever were served on the petitioners in their capacity as the shareholders. The Petitioners presently being 52.94% shareholder in the R-I company are entitled to proportional representation on the board of directors of the R-I company. However, the notice for the Annual General Meeting has not been served on the Petitioners and, therefore, a possibility cannot be ruled out that the R-2 and 3 have not called for any meeting of the shareholders since long back, (d) The R-2 despite holding only 19.60% shares in the R-I company continued to be the Director of R-I company and R-2 with R-3 are acting detrimental to the interest of the R-I company.

7. M/s. Diastar inc. USA, to the knowledge of the Petitioners, was never been an equity shareholder of the R-I company. As per the agreement dated 9th December, 1987, Diastar Inc. USA is the R-2’s concern and there is provision for Arbitration in case of dispute with R-I. As per R-I’s balance sheet for the year 2008 and 2009, huge amounts recoverable from Diastar Inc. USA have been written off without showing as to what steps, if at all, the R-I has taken to recover the same. M/s. Diastar Inc. USA was treated as a sole selling agent of the R-I.

8. R-3 was appointed as Director of R-I company on 21-02-2004 and she is continued to be a Director but, as admitted by the Respondents, she is not having Din No. which clearly shows the dishonest intention and illegalities of the R-3 to continue to hold the position as the Director of the R-I company.

9. The Petitioners apprehended that R-2 and 3 would sell the immovable properties more particularly the valuable factory/office of the R-I company in order to recover the heavy losses in Diastar Inc. USA. The application dated 04.02.2011 filed by the Respondents seeking permission to dispose of the assets and properties of the R-I company clearly proves and confirms the apprehension of the petitioners. It was pointed out that the Petitioners were denied access to record and the information sought was not provided. No financial details were furnished, no explanation was given as to how the Company suddenly suffered heavy losses.

10. The Petitioners in exercise of their legal rights issued a Notice under Section 169 of the Companies Act, 1956 calling for the EOGM of the R-I Company. The requisite statutory period for the said meeting was over on 10-10-2010. Pursuant to the issuance of the Notice, the Respondents suddenly increased their endeavour to dispose of the immovable properties.

11. It was argued that R-2 and 3 have destroyed the very mutual trust and faith on the basis of which the affairs of the R-I Company ought to have been conducted. The actions of the R-2 and 3 reflect a complete lack of probity and vitiate the basic understanding between the parties. Despite the oppressive approach adopted by the R-2 and 3, the Petitioners have made complete efforts to try and amicably resolve all matters but to no avail. The sole motive of the R-2 and 3 is to exclusively take over the R-I Company and its management with the ultimate aim and objective of converting the R-I Company into their personal fiefdom for their personal benefit and aggrandizement. Hence, the petitioner’s prayers for removal of R-2 & 3 as directors and appointment of a Commissioner to take charge of the A/C books and affairs of the R-I Company and enquire into the losses and require R-2 & R-3 to reimburse the same to the R-I Company and the Petitioners.

12. The Respondents’ Case is that the petition is wholly misconceived and filed for an ulterior purpose. The company was new in the field of Jewellery and hence all technology for mechanised jewellery manufacturing and required plant and machinery was supplied to DJPL under a collaboration agreement executed by P-I Mr Pravin Jain as Joint Managing Director of DJPL. Diastar Inc. a, company incorporated in USA. Under agreement Diastar Inc. USA supplied machines and contributed 40% towards equity share capital. The Collaboration agreement was also registered with the Reserve Bank of India, vide its letter no. EC/BY/SEEPZ/452/3 (134) 87- 88 dated 9th December, 1987. R-2 was residing at USA and frequently visiting India for consulting and advising the affairs of the company, mostly on production side from time to time without charging any fees or consultation fees. Mr. Pravin Jain (P-I) was entrusted with all administration and matters of the company and over all in charge of the company as Joint Managing Director since incorporation up to June 2004 with a gap of three years (2001 to 2004). Mr. Pravin Jain (P-I) was having all administrative powers and supported by Mrs. Bharati Jain (P-2) as Director and wife of P-I and Shri. Kishanlal Jain (father of P-I and R-2) Chairman of the R-I company. However, around end of June 2004, Mr. Pravin Jain, was suffering from serious illness of brain strokes and mental imbalance. Mr Pravin Jain also made car accident and fought with workers of the factory during the period. Sh. Kishanlal Jain, the then Chairman called upon R-2 to look after the business as P-I was relieved /suspended from Managing Directorship at the Extraordinary General Meeting and he was admitted to Maseena Hospital at Mumbai and Mental Hospital at Pune for nearly eight to ten months for treatment by late Shri Kishanlal Jain. After the demise of Shri Kishanlal Jain, on 7th April 2009, P-I started writing nasty letters and e-mails to the Respondent company as well as R-2 In view of P-I’s mental condition and at the request of P-2, R-2 remained quiet and appealed for peaceful and fruitful discussions of all, problems of R-I company. However, P-I took it wrongly and got more angry, and wrote further e-mails, letters.

13. It was argued that the R-I Company had never denied their rights as shareholders to inspect and to have access to the documents of the R-I company. Inspection was given to the Petitioner on 10th January, 2011, however, without recording inspection he walked away from the factor premises. P-I jointly with P-2 with late Shri Kishanlal Jain, Chairman were incharge of day-to-day affairs of the Company including maintenance of the Statutory Registers of the company since its incorporation. P-I and 2 have signed several documents attended several meetings during their tenure as Joint Managing Director and Director respectively. In fact, not a single Notice had been received by the company from the petitioner for requisitioning Extraordinary General Meeting, the requisition Notice was given by the petitioner on 10th January, 2011 by hand delivery to the office of the company at the time of inspection. The allegations made in the petition are vague, devoid of material particulars and per se not sufficient to constitute a case under sections 397 and 398 of the Companies Act, 1956, hence prayer for dismissal of the Petition with cost.

14. It was argued that all Hypothecation and Mortgage documents were executed by P-I and 2 as Managing Director and Director of the company during their management. Respondents had informed that Bank of India and other consortium bank to declare company accounts as “Non Performing assets” (NPA) as per the Norms Prescribed by Reserve Bank of India. Petitioners by conspiracy withdraw their Personal guarantees from the Bank in exchange of the personal guarantee executed by the R-2. All five flats and factory building were mortgaged to consortium banks, led by Bank of India, SEEPZ Branch as security for term loan given to the company.

15. Respondents’ case is that Shri Kishanlal Jain already executed a Gift deed of 40,77,600 Equity shares of the company being 33% in favour of Mr Pramod Jain and Mrs. Anita Jain on 10th December, 2002 and shares were transferred in Joint name of Pramod Jain and Mrs. Anita Jain as per Board minutes dated 26th April, 2003. A memorandum of understanding (MOU) was also executed by Late Shri. Kishanlal Jain and Mr. Pramod Jain, to end family disputes and settlement dated 2nd December, 2002 and as follow-up measures the said shares have been gifted to Mr. Pramod Jain and Mrs. Anita Jain Gift deed and transfer of shares in favour of P-2 and 3 are illegal and baseless The original share certificates were stolen from the Factory premises by Petitioners or their agents. The documents of 2007 are never recorded in the minute books or company’s Registers. The main disputes of the 40,77,600 Equity shares between P-I and R-2 is dragged into Company Law Board Bench under the pretext of Oppression and Mismanagement. R-2 is holding 19.60% shares in the company and 33.31% shares i.e. 40,77,600 shares have been transmitted, by deletion of name of late Shri. Kishanlal Jain together with 19.60% shares held by Mr. Pradeep Jain, 3rd brother, therefore, total holding by respondent group is 72.51% which is much more than total 19.63% shares held by Petitioners’ group.

16. It was argued that there was no financial irregularity in the company. In the Year 2008-09 in the diamond and jewellery market there was worldwide depression and as a result company suffered a loss. There were many companies in the Seepz area also suffered with losses. None of the audit report of the company spelled about fraud, financial mismanagement, syphoning off money from the company. The Company is recovering from the debt crunch and it will be on online in next two years. The bankers of the Company are keeping their vigilant eyes on each and every transaction of the company since R-2 took over the management. R-2 also contributed unsecured loans to R-I company from time to time.

17. It was contended that the Petitioner is trying to drag Diastar Inc. in the petition which has no relation of whatsoever nature under the provisions of section 397/398 of the Companies Act 1956. Diastar Inc., USA is governed by laws enacted in USA.

18. It was argued that the stay of the company’s activities would affect about 130 skilled qualified workers of the factory and staff members of the office. This will also affect export commitment already made by the company. As a result it will further increase the losses.

19. In this matter it is noted that on the Respondents’ Application seeking variation of CLB’s order dated 12.11.2010 regarding status quo on immovable assets, CLB passed two orders. CLB’s order dated 31/3/2011 in this matter reads as under:

“Order

The respondents have filed an application seeking directions from the Bench to modify the order dated 12.11.2010 passed by this Bench stating that the Bank of India issued notice dated 1.2.2011 under Sec. 13(2) of SARFAESI Act, 2002, wherein it is stated that the Company defaulted in payment of dues to the Bank and classified account of the Company as NPA w.e.f. 31.12.2010 in accordance with the Guidelines issued by the RBI. The Learned Counsel for the petitioner submitted that they received offer letter from Alif Estate Consultants to purchase the flats of the Company. It is also state that if the petitioners get customers who can offer more than the offer placed by Alif Estate, they do not have any objection to sell the flats. If the dues are not paid to the Bank, the assets of the Company will be taken over by the Bank. Hence he requested the Bench to modify the order enabling the respondents to sell the properties of the Company The Learned Counsel for the petitioners submitted that once notice is issued under SARFAESI Act, the Company has to intimate the Bank and take permission from the Bank to deal with the properties and requested the Bench to grant time to file counter. Since the issue is in relation to the immovable properties of the Company the petitioners must be given opportunity to file counter. The petitioners may file counter to the application within a period of one week and serve copies on the other side. The CA is posted on 12th April, 2011 at 10.30 AM for hearing.”

Further, CLB’s order dated 12/4/2011 reads as under:

“Order

The present application is filed by the Respondent No. 1 Company seeking directions from this Bench to modify the order dated 12.11.2010 Shri BS.Parekh, Learned Counsel for the Applicant/Respondent submitted that the Bank of India issued notice dated 01.02.2011 under section 13(2) of Securitisation Act, 2002. The Company availed’ various credit facilities for an amount of Rs. 1730.00/- lacs. The Bank of India being the lead Bank issued the notice demanding repayment of amount Rs. 19,28,09,622.83/- failing which the Bank of India will proceed against the Company by filing proceedings before the D.R.T. It is submitted that if the account is not serviced and if the outstanding interest is not paid the creditors likely to take over the assets of Company. It is submitted that by this application the Company seek to modify the order to sell the flats on the condition that the entire consideration will be paid to the Banks directly. The Respondent Company obtained offer from Alif Estate Consultations on 9th March, 2011 and proposed it to arrange the sale of flats. If the petitioners are interested in purchasing the flats at the price quoted in the quotation the Respondents have no objection. However, the sale amount should be paid directly to the Banks.

Shri Ashok, Learned Counsel for the Petitioner submitted that the notice of the Bank is dated 01.02.2011 and the Respondents filed this application in the month of March, 2011 and there is no explanation for the delay in approaching this Bench. Even otherwise as per section 13(13) the borrower shall not transfer by way of sale, lease any of secured assets without prior written consent of the secured creditors, after receipt of notice under section 13(2) of the Act. It is an admitted fact that the notice was issued under section 13(2) of the Act and the borrower has to discharge liabilities to the secured creditor within 60 days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section 4. The 60 days time was expired and the present status is not known. Moreover the Company has not obtained any written permission from the Bank as it is mandatory as per the law. In view of the clear provision of the Law the Respondents can not sell the properties without the prior permission of the Banks. The application does not survive and liable to be dismissed. Heard the Learned Counsel appeared for the parties. This Bench vide its order dated 11.11.2010 directed the parties not to deal with the immovable property of the Company until further orders. It is an admitted fact that the Bank has issued notice under section 13(2) of the Act. As per the said provision, the borrower i.e. the Company has to discharge its liabilities to the Banks within 60 days. The 60 days period is over and the Company did not state the present position of the notice. Whatever be the position, the borrower after receipt of notice under section 13(2) shall not transfer by way of sale, lease any of secured assets referred to in the notice without written consent of the secured creditor. In the present case the Respondent produced a copy of the letter 26th March, 2011 addressed to the Banks where from it is clear that they have sent the copy of this application to them. No one is represented on behalf of the Bank before this Bench, when the application was taken up for hearing. The Respondent did not produce any letter of written consent from the Banks to sell the property. The Company being the secured creditor must obtain written consent from the Bank to sell the property as mandated by the provision of Law. If the Respondents obtains written consent from the Banks to sell the flats as stated in the notice, the Company may proceed with the sale of flats and the sale proceeds received shall pay to the Banks. If the petitioners are willing to purchase the flats, the Company shall consider the same however the sale proceeds shall be paid to the Banks. With the above directions the C.A. 42/2011 is disposed of and the order of this Bench dated 12.11.2010 is modified accordingly.”

20. Considering the rival Submissions, I find that the R-2 has failed to meet the allegations of the petitioners in this matter. R-3, however, has chosen not to file any Counter-Affidavit. Despite the CLB’s Specific order on 12/6/2012 to provide Status Report on the Assets of the R-I Company, only an incomplete Status report (as reproduced below) in respect of liabilities only has been filed in the Registry:

21. It is noted that P-I and R-2’s father Late Shri. Kishanlal Jain was alive when the Board Resolution as per the Minutes of the Board Meeting held on 16.10.2007 (as reproduced below) was passed:

“Minutes of the meeting of the Board of Directors of the company held on the 16th October, 2007 at Flat no. 5, 3rd floor, Kalpataru apartment 39, Peddar Road, Mumbai – 400 026, residence of Director at 11.30 A.M.

Directors present : Shri Kishanlal Jain Director

Smt Rachna Srimal Director

1. Chairman of the meeting;

Shri Kishanlal Jain, was appointed Chairman of the meeting.

2. Confirmation of Minutes:

Minutes of the previous meeting were read confirmed and signed by the Chairman.

3. Transfer of shares:

Smt. Rachna Srimal, Director placed before the Board following documents received by the company from Shri Kishanlal Jain, Director and promoter shareholder of the company.

(a) Copy of Note sent to Mr. Pravin Kumar Jain, Pramod Kumar Jain and Pradeep Kumar Jain.

(b) Note regarding revocation of the Gift of shares made to Mr. Pramod Kumar Jain and Mrs. Anita Pramod Kumar Jain (U.S. citizen)

(c) Copy of the Gift deed and affidavit executed by Shri Kishanlal Jain in favour of Mrs. Bharati Pravin Kumar Jain and Master Anuj Pravin Kumar Jain for the share held by him in the company.

(d) Transfer deed duly signed by him in favour of himself jointly with Mrs. Bharati P. Jain and Master Pravin Kumar Jain (though his father and natural guardian Mr. Pravin Kumar Jain)

He further explained the board that in view of non-arrival of family settlement among the three sons he decided as per his personal wish to have the shares transferred jointly in the name of Mrs. Bharati Pravin Kumar Jain and Master Anuj Pravin Kumar Jain. He also informed that he will continue as first shareholder till his lifetime and after his demise the shares will be given to Master Anuj Pravin Kumar Jain, Grandson. Since Mr. Pramod Kumar Jain and Mr. Pradeep Kumar Jain, both have opted for US citizenship, shares could not be transferred or gifted under Foreign Exchange Management Act, (FEMA).

He further explained that the company is now a Private Limited family company and therefore he intend to keep the shares within family members who are staying with him in India. The board after considering the details and representation made by Shri Kishanlal Jain passed the following resolution:

RESOLVED THAT the share transfer deed for 40,77,600 equity shares of the company duly signed by the existing shareholders placed before the Board along with copy of the Gift deed and affidavit and other documents for addition of the name of Mrs. Bharati Pravin Kumar Jain and Master Anuj Pravin Kumar Jain in the said equity shares be and are hereby approved and Smt Rachna Srimal Director of the company is hereby authorized to sign the transfer register and endorsement on the share certificate for and on behalf of the company.

No of Equity shares: 40,77,600 Folio no 51/65

Name of transferor: Shri Kishanlal Jain

Name of transferee: Shri Kishanlal Jain

Smt Bharati Pravin Kumar Jain

Master Anuj Pravin Kumar Jain”

In view of the Board Resolution dated 16.10.2007, there being no FIR for the Respondents’ allegation of the petitioners or their agents of stealing the shares, there being no conclusive evidence including RBI’s permission for earlier transfer of shares to the Respondents, the petitioners have succeeded ,in making out a prima facie case of their Shareholding of 52.94% in the R-1 Company. No refusal from R-I Company has been produced to implement the Board Resolution dated 16.10.2007.

22. Non-transparent functioning of the R-I Company is evident from the correspondence produced by the petitioners who have been denied access to the statutory Records and the A/c books despite holding 52.94%, shares in the R-I Company.

23. Huge amounts owed by Diastar Inc. USA to the R-I Company, admittedly a concern of R-2 & R-3, have been written off without any efforts for ascertaining actual dues, if any, and without any efforts for recovery and without following due procedure.

24. The Meetings requisitioned u/s 169 are not held. There is no evidence of any regular Meetings in the absence of any notice to 52.94% Shareholders who also have legitimate expectation to be on the Board of the R-I Company.

25. The petitioners’ apprehension have come true. However, the Bankers had to be allowed to recover their dues. Even Statutory liabilities have not been paid. The Company has suffered heavy losses, but how it has suffered such heavy losses is required to be ascertained by proper verification of the records of the R-I Company. Majority shareholders have been kept in the dark, even requisite information has not been provided to them despite CLB’s order allowing them inspection.

26. To do substantial justice between the parties, I hereby appoint Shri Hari Sankar Acharya, Ex-Chief Commissioner of Income Tax, Ministry of Finance, Govt, of India, who has put in 34 years of valuable service in key areas like company-tax assessment, investigation into company accounts/affairs and company-audit, successfully having handled special assignment of Investigating of tax-frauds of big corporate houses in cases in Central Charges of the Deptt, having been in direct charge of raids/search operations for several years, who was a Member of Regional Economic Intelligence Committee, was ex-officio Member, Committee for Approval of SEZs, was a Member of Regional Tax Advisory Committee, and who has a keen understanding of corporate affairs, who has kindly consented (his Mobile No. is 09423964091, e-mail is hsacharya50@gmaii.com) to help the R-l Company tide over the situation in a competent manner with his varied and vast experience, with immediate effect, as the Facilitiator-cum-observer of the R-l Company. His term shall come to an end on disposal of the Company Petition No. 79 of 2010. Shri Acharya is required to join his assignment at the earliest possible. Both the parties, i.e. the Petitioners and the Respondents shall fully co-operate with Shri H. S. Acharya in smooth discharge of his functions as the Facilitator sorting out the allegations of the Petitioners and grievances of the Respondents. He shall ensure smooth functioning of the R-I Company till further orders. Shri H. S. Acharya is hereby granted complete immunity from any kind of civil and criminal proceedings already launched or to be launched anywhere in the Country against the Company and its Directors for all acts done prior to and subsequent to the date of appointment as the Facilitator with an additional personal, immunity and protection during all such legal proceedings for and against the Company. None of the State or Central Government agencies, in exercise of their regulatory enforcement or like such powers initiate any action, civil, criminal, punitive or coercive actions against Shri Acharya for the acts of commission and omission the Company without the prior approval of the Company Law Board. Shri Acharya shall be entitled to a fixed remuneration of Rs. 2 lakh per month besides other facilities to which the Directors at present are entitled In this Company which shall be payable by the R-I Company regularly.

27. Shri Hari Sankar Acharya shall ascertain through an independent Company Secretary to be appointed by him for the specific purpose to whether or not there has been proper compliance of the provisions of the Act and the AOA of the R-I Company in increasing of the Shareholding of the Respondents to 72.51% of the issued and subscribed capital of the R-I Company. Shri. Acharya shall also engage an independent Chartered Accountant to verify and ascertain the huge losses and siphoning off R-I’s funds. Search Report be submitted at the earliest possible to enable the CLB to pass further orders in this regard and dispose of the CP. Meanwhile Shri Hari Sankar Acharua shall ensure that the Meetings of the R-I Company are held at regular intervals and the Statutory Compliances are made on scheduled dates.

28. Shri Acharya shall periodically apprise the CLB regarding the smooth functioning of the R-I Company for which he shall take all necessary step. He is also at liberty to mention the matter before the CLB for seeking further necessary directions/ clarifications in the matter.

NF

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