CP No. 110 (ND)/2009. Case: Abinash Chander Mahajan and Ors. Vs Vikas Promoters Pvt. Ltd. and Ors.. Company Law Board
| Case Number | CP No. 110 (ND)/2009 |
| Counsel | For Appellant: K. Datta and Shantanu Parashar, Advocates and For Respondents: Deepak Vohra and Sunil Fernandes, Advocates |
| Judges | M.M. Kumar, C.J. (President) and S.K. Mohapatra, Member (T) |
| Issue | Company Law |
| Judgement Date | March 22, 2017 |
| Court | Company Law Board |
Order:
(Principal Bench, New Delhi)
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Petitioners have filed CA 58 of 2015 and the Respondent No. 3 to 5 have filed CA No. 294 of 2015 raising several objections against the valuation report dated 4th February, 2015 of Shri Pankaj Jain, Auditor cum Valuer, submitted pursuant to the order dated 16.01.2014 of Company Law Board passed in CP. No. 110 (ND)/2009.
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While disposing the Company Petition No. 110(ND)/2009, Company Law Board in its order dated 16.01.2014 raised the following issues:
a) Whether allotment of 1,42,200 shares made to the respondents themselves is valid.
b) Whether R 2-5 diverted the funds of the company taken as loan from UBI Bank to the other companies managed and owned by these respondents as interest free loans is oppressive and prejudicial to the petitioners.
c) Whether R 2-5 inflated project cost dealing transactions with some companies where the director's interest is lying and whether R 2-5 siphoned off the funds of the company in the name of advertisements.
d) Whether R 2-5 diverted the booking amounts in the form of cash without showing them in the books of the company.
e) Whether these respondents sold the assets of the company at under valuation.
f) Whether these respondents siphoned off the funds of the company.
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Company Law Board discussed all the aforesaid issues in its well - reasoned order dated 16.01.2014 and passed the following operative directions:
1. The allotment of 1,42,200 shares to the respondents is held invalid.
2. Mr. Pankaj Jain, Chartered Accountant, Mobile: 9810286606 is appointed as Auditor-cum-Valuer. I hereby direct the parties to pay remuneration as agreeable to him. The petitioner group and respondents group in proportion to their shareholding shall pay the remuneration to him.
3. This Bench has observed that these Respondents diverted the funds of the company interest free to other companies, and the persons close to them, therefore R 2-5 are directed to pay up the commercial interest accrued upon the loans given to the other companies until the loan amount is paid to the Bank by Respondent No. 1 company, as calculated by the auditor cum valuer appointed in this case. The Auditor, on inspecting the records, will calculate how much fund was given as interest free loan to other companies and others, then R 2-5 shall pay up interest over the said amount until the Bank loan of Respondent No. 1 company cleared.
4. I hereby direct the auditor-cum-valuer to inspect the records of the company to assess as to whether the respondents in the management sold or leased out the assets of the company at undervaluation, if so, calculate the same. I hereby direct R 2-5 to bring back the difference of amount undervalued to the till of the company.
5. I hereby direct the valuer to assess siphoning of the funds of the company by Respondents 2-5 in relation to the transactions and expenditure in development of the project.
8. I hereby direct the valuer to assess the value of the shares of the petitioner as on 31.3.2013 on asset-based valuation taking market value of the assets as on the dates the spaces sold out, as to remaining assets, assess the same as on 31.3.2013 taking the then market rates in the vicinity in to consideration, then provide exit to the petitioners.
9. I hereby direct the valuer to prepare valuation report within three months from the date order is made available.
10. I hereby direct the respondents 2-5 to pay up the value of the shares of the petitioners in two equal instalments, 1st instalment within 3 months and second instalment within six months from the date valuation report supplied to the parties.
11. I hereby reiterate the order dated December 23, 2011 passed by Honourable High Court of Delhi that the respondents shall not create third party rights over 20% of total saleable assets of Respondent No. 1 company until full payment is made to the shares of the petitioner.
12. The parties are liberty to apply.
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In compliance of the order dated 16th January, 2014 passed in CP No. 110 (ND)/2009, the appointed Auditor cum Valuer, Shri Pankaj Jain has submitted its report on 4th February, 2015. The report inter alia reveals that records and documents from petitioners and respondents were called for and meetings with petitioners and respondents were held on various occasions. The report also states that the appointed Chartered Accountant being not competent to value the tangible assets, the services of two independent property valuers namely M/s. Contex Associates and M/s. R.K. Singhal & Company Pvt. Ltd. were taken, in order to arrive at fair market selling price of the spaces booked/sold in Multiplex at different dates, and market value as on 31.03.2013 as directed by CLB. It is stated that the two experts are qualified registered valuers and are also on the panel of valuers maintained by the Official Liquidator attached to the High Court of Delhi and Chandigarh respectively. Copies of the valuation reports submitted by both the experts have been annexed. It is pertinent to note that the valuation of shares of the respondent company is based on the market value of assets/spaces valued by these expert valuers. The Auditor-cum-Valuer's report also indicates that the records of the company were inspected at the registered office and visits were also made at the Vikas Cinemall situated at 813/1, Radhu Cinema, G.T. Road, Shahdara, Delhi-110032. In the reasoned report the Auditor cum Valuer has arrived at the following conclusion, precisely, on the issues referred to him.
1) Total interest receivable as per bank rate on the interest free advances paid by Respondent No. 1 company to related/other parties comes to Rupees 1,33,95,471.60 Paise.
2) There does not appear inflation of the project cost by the company on construction of the project in question.
3) Allegation of siphoning off funds by way of bogus advertisement is not tenable.
4) There is a material difference between the estimated market value given by the valuers and the rate at which the spaces have been booked or sold by the respondents, which prima facie indicates that the respondents have siphoned off the funds of the company in transaction of booking of the spaces at undervalued rates and collection of cash in addition to the amount reflected in the books and hence siphoning off funds cannot be ruled out.
5) Value of one share as on 31.03.2003 on asset based valuation taking valuation of properties of Vikas Multiplex comes to Rupees 351.90 Paise. Consequently total value of 3,60,000 shares of petitioners in the Respondent No. 1 company has been shown as Rupees 12,66,84,000/-.
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It is pertinent to mention here that Petitioners have filed CA No. 189/2015 to execute the order dated 16.01.2014. It is the case of the petitioners that CLB had clearly directed the respondents 2 to 5 to pay up the value of the shares of the petitioners in two equal instalments, 1st instalment within 3 months and second instalment within six months from the date valuation report supplied to the parties. There has also been allegation of dilatory tactics by respondents in not adhering to the timely compliance of order dated 16th January, 2014. It is however seen that even though Auditor-cum-Valuer has filed its report pursuant to the order of CLB, both the parties have challenged the said valuation. Objections filed by both the parties against the report of the auditor are under consideration of this tribunal. It will suffice to say that the impugned report of the Auditor-cum-Valuer dated 4th February, 2015 is under consideration of this tribunal and has not yet attained finality.
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It is also pertinent to note that the respondents have preferred appeal before Hon'ble High Court of Delhi against the order dated 16.01.2014 of Company Law Board passed in Company Petition No. 110(ND)/2009. Hon'ble High Court disposed of the appeal vide order dated 10.02.2016 inter alia with the following directions.
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CLB, to first, dispose of the objections to the audit-cum-valuation report dated 4.2.2015 raised by the petitioner and the respondents vide their respective company applications i.e. CA 58 of 2015 and CA No. 294 of 2015.
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Once the CLB decides the tenability of the objections raised by both sides, it will then proceed to the next step, if necessary, which is, that, it would then deliberate upon the execution application CA 293/2015 filed by the respondents to enforce the order dated 16.01.2014.
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CLB is to take up all other pending applications filed in CP 110/2009 as well, after, it disposes of the aforesaid objections.
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It is relevant to note here that Company Law Board has since been dissolved w.e.f. 1st june, 2016. Under Section 434 of Companies Act, 2013 all matters, proceedings and cases pending before the Board have been transferred to concerned National Company Law Tribunal. In...
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