nagarjuna finance director given jail term

8/10/2019 Nagarjuna Finance Director Given Jail Term

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Company Law Board

Edpuganti Bapanaiah vs Nagarjuna Finance Ltd. on 21 August, 21

E!uiva"ent citations# 22 111 CompCas $%& CLB

'()E(

1. *his is an app"ication +i"ed under ection &-$A o+ the Companies Act, 1%& /0the Act0to en+orce the order dated 2%22 o+ the CLB directing Nagarjuna Finance Ltd, /0the

company0 to repay the deposits together with interest within the repayment schedu"e

speci+ied therein. *he app"ication came up +or hearing +rom time to time and +ina""y on

2&321.

2. hri B. 4anta (ao, advocate appearing on 5eha"+ o+ the app"icant reiterating the

averments made in the app"ication has su5mitted that the app"icant had 6ept eight

deposits o+ each (s. "a6hs on 2731%%3 +or a period o+ $ months. *hough the

deposits were matured on 27$21, the company +ai"ed to pay the interest and repay

the principa" amount in terms o+ the order dated 2%22. hri 4anta (ao pointed outthat the company ought to have paid interest at the contracted rate upto the date o+

maturity and therea+ter overdue interest at 1$. per cent per annum. *he deposits 5eing

a5ove (s. , are paya5"e within -& months +rom the date o+ maturity at - per cent

o+ the principa" amount with interest thereon during the +irst year, - per cent o+ the

principa" amount with interest thereon during the second year and 5a"ance - per cent o+

the principa" amount with interest thereon during the third year. *he payments shou"d 5e

made in month"y insta"ments in the order o+ date o+ maturity o+ deposits. *hough the

order o+ the CLB is speci+ic, the company +ai"ed to ma6e any payment in accordance

with the order dated 2%22. *he company and every o++icer inc"uding the directors

o+ the company are joint"y and severa""y responsi5"e +or due comp"iance o+ the order,+ai"ure o+ which attracts the pena" provisions contained in u5section /1 o+ ection

7A o+ the Act. *he company de"i5erate"y vio"ated the order o+ CLB and the (egistrar o+

Companies /(oC may 5e ordered to proceed against the company +or noncomp"iance

o+ the order. *hough the company deducted ta8 at source under *) and remitted ta8 to

the 9overnment o+ :ndia on 5eha"+ o+ the app"icant, it +ai"ed to pay 5a"ance o+ the

amount. :n view o+ the de+au"t on the part o+ the company, a decree shou"d 5e passed

against the company as we"" as hri 4.. (aju, ;romoter director +or the outstanding

deposit amount. *hough the company is ta6en over 5y a third party and hri 4.. (aju

as we"" as hri L.


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(egu"ations, 1%%1, the Bench o+ the CLB constituted under ection 1E is given

inherent powers. *he term 0any order0 re+erred to in ection &-$A is a word o+ wide

meaning and prima +acie the use o+ 0any0 e8c"udes "imitation or !ua"i+ication. *he order

under ection 7A 5y the CLB has 5een made in the interest o+ depositors and in the

pu5"ic interest. *he said order is a decree to 5e en+orced and +ai"ure to comp"y attracts

ection &-$A and empowers the CLB to trans+er its order dated 2%22 to City Civi"Court, >ydera5ad, where the company is situated.

-. hri C.(. =ura"i, ;ractising Chartered Accountant and authorised representative o+

the company has su5mitted that the deposits to the app"icant are paya5"e together with

interest within -& months +rom the date o+ maturity at the rate o+ - per cent o+ the

principa" amount in the +irst year, - per cent in the second year and 5a"ance in the third

year. *he +irst insta"ment has not 5ecome due as per the order o+ the CLB. =oreover, the

petitioner has not surrendered the +i8ed deposit receipts. *he petitioner has neither made

any c"aim +or considering his case under the hardship category. hri =ura"i +urther

reiterated that the app"icant cannot see6 any remedy under ection &-$A in the matter

re"ating to the a""eged noncomp"iance o+ the order o+ the CLB passed under ection

7A/%. According to him, ection 7A is a se"+contained one providing +or a"" issues in

connection with pu5"ic deposits and hence !uestion o+ invo6ing ection &-$A does not

arise. hri =ura"i has, there+ore, sought +or dismissa" o+ the app"ication.

$.1 have considered the su5missions 5oth ora" and written o+ the "earned counse" +or the

app"icant and the authorised representative o+ the company. *he +acts not in dispute are

that the app"icant had deposited eight deposits o+ each (s. "a6hs with the company on

2731%%3 which were matured on 27$21. *he company has not made payment to

the app"icant. :n view o+ the de+au"t committed 5y the company in +avour o+ a "arge

num5er o+ depositors, the CLB in e8ercise o+ its powers under ection 7A/% suo motu

ordered the company on 2%22 to repay a"" the deposits over a period o+ +ive months

to -& months. *he re"evant operative portion o+ the order is as under #

?11/a *he company sha"" pay interest at the contracted rate upto the date o+ maturity

and therea+ter +rom the date o+ maturity ti"" payment at 12.@ per annum. :n the event

o+ +ai"ure 5y the Company to ma6e repayment as per the cheme approved 5y the CLB,

over due interest sha"" 5e paya5"e at 1$.@ per annum provided that it sha"" not e8ceed

the contracted rate o+ interest.

/+ A"" deposits a5ove (s. , together with interest +rom the date o+ deposit ti"" date

o+ payment sha"" 5e paid within -& /thirtysi8 months +rom the date o+ maturity or date

o+ the order o+ the CLB whichever is "ater at -@ o+ the principa" amount with interest

thereon during the +irst year, -@ o+ the principa" amount with interest thereon during

the second year and 5a"ance o+ -@ o+ the principa" amount with interest thereon during

the third year.

** ** **


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(h) The company shall pay periodical interest in respect of deposits under 'Non-

cumulative Scheme' till date of maturity and thereafter the principal amount in

accordance with the Scheme approved by the CL!

"#(i) $ll individual deposits shall be treated separately and not to be clubbed if

any depositor holds more than one deposit for the purpose of arrivin% at the amountas fi&ed in the Scheme!

(ii) $ll payments shall be made in the order of date of maturity!

** ** **

(iv) The payments shall be spread over all the months in each year!

(vii) The company shall mae repayment of deposits and interest in terms of the

Scheme by emand raft and shall be sent by e%istered ost to the last nown

address of the depositors!

"+! The ,ana%in% irector of the company shall file an affidavit of

undertain% with this ench to eep up the repayment schedule with a

copy to the e%istrar of Companies $ndhra radesh .yderabad within

"/ (fifteen) days from the date of receipt of this order!

** ** **

"/! The company and every of ficer includin% the irectors of the company shall be

0ointly and severally responsible for due compliance of this order!

"1! $ny failure to comply with this order on the part of the company its 2fficersand irectors shall attract the penal provision contained in Sub-section ("3) of

Section /4$ of the $ct!

** ** **

1%. *he company sha"" send a copy o+ the operative portion o+ this order to the

depositors together with schedu"e o+ payment in accordance with the cheme approved

5y the CLB, within /+ive wee6s +rom the date o+ receipt o+ this order and at its

discretion may a"so pu5"ish operative portion in "eading newspapers +or the immediate

6now"edge o+ the depositors.?. A perusa" o+ the operative portion o+ the order reproduced herea5ove wi"" show that

the deposits o+ the app"icant with the company ought to 5e repaid together with interest

within -& months +rom the date o+ maturity, i.e., 27$21 at - per cent o+ the

principa" amount with interest thereon during the +irst year, ie., 5e+ore 23$22, - per

cent o+ the principa" amount with interest during the second year 5e+ore 23$2- and

5a"ance o+ the principa" amount and interest 5e+ore 23$2$. A"" pay


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ments shou"d 5e in the order o+ date o+ maturity o+ deposits and shou"d 5e spread over

a"" the months in each year during 22, 2- and 2$. *he company sha"" not wait ti""

"ast date o+ the year. According"y, in the present case, the company cannot c"aim that the

+irst insta"ment 5ecomes due on"y on 23$22. *he company ought to have sent to the

app"icant schedu"e o+ payment in accordance with the scheme, which has not 5een

su5stantiated. :n the circumstances, the p"ea o+ the company that the +irst insta"ment hasnot 5ecome due is vague, and not supported 5y any document, especia""y when the

company has not +urnished any detai"s in regard to the deposits o+ a5ove (s. ,,

vi., date o+ maturity, schedu"e o+ payment as per the scheme inc"uding the deposits o+

the app"icant. hri 4.. (aju, promoter director o+ the company and group ho"ding

companies have +i"ed a++idavits ensuring due repayment o+ the deposits 5y the company

in accordance with the scheme. *he managing director o+ the company has +i"ed an

a++idavit o+ underta6ing to 6eep up the repayment schedu"e. *he company and every

o++icer inc"uding the directors o+ the company are joint"y and severa""y responsi5"e +or

due comp"iance o+ the order dated 2%22 5y the company.

&. :n regard to the p"ea o+ hri =ura"i that the provisions o+ ection &-$A cannot 5e

invo6ed 5y the app"icant, it may 5e o5served that this section is e8p"icit which runs as

+o""ows #

?En+orcement o+ orders o+ Company Law BoardAny order made 5y the Company Law

Board may 5e en+orced 5y that Board in the same manner as i+ it were a decree made 5y

a Court in a suit pending therein, and it sha"" 5e "aw+u" +or the Board to send, in the case

o+ its ina5i"ity to e8ecute such order, to the Court within the "oca" "imits o+ whose

jurisdiction,

/a in the caseo+ an order against a company, the registered o++ice o+ the company issituated, or

/5 in the case o+ an order against any other person, the person concerned vo"untari"y

resides, or carries on 5usiness or persona""y wor6s +or gain.?

ection &-$A is c"ear that as in the case o+ a Court, the orders o+ the CLB can 5e

en+orced 5y it in the same manner as i+ it were a decree made 5y a Court. *his section

+urther permits the CLB, in case o+ its ina5i"ity to e8ecute the order, to see6 the

assistance o+ the Court having competent jurisdiction +or e8ecution o+ its order. :n view

o+ this there is no +orce in the argument o+ hri =ura"i.

3. *a6ing into consideration the +acts and circumstances o+ the case, the opportunity

a++orded to the company and the "ega" position stated herea5ove, : here5y order that the

company sha"" pay - per cent o+ the deposit amount together with interest at the

contracted rate upto the date o+ maturity and therea+ter ti"" the date o+ payment at the rate

o+ 1$. per cent within - days o+ receipt o+ this order, +ai"ing which the app"icant is at

"i5erty to move the Court, within whose jurisdiction the registered o++ice o+ the company

is situated to e8ecute the order o+ the CLB.


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nagarjuna finance director given jail term

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