Company Law Board
S. Swamiyappan And K. Krishnaswamy vs Andipalayam Common Effluent Treatment ... on 14 March, 2002
ORDER
S. Balasubramanian, Vice-Chairman
1. M/s Andipalayam Common Effluent Treatment Plant Private Limited was incorporated on 29.9.94 with the main object to establish, acquire, own and develop common effluent treatment plant, more particularly for treating effluent generated by dyeing units in and around Tirupur. The project cost was to be met out of the subsidy amount of the government loans from credit agencies and contribution made by the industrial undertakings on the basis of quantum of effluent generated by each undertaking. On the basis of the contribution made by the undertakings, the shares were to be issued/allotted and till the allotment, the contributions made by the units were to be kept as share application money. The effluent treatment plant is to cater to the needs of 21 industries and individuals. The petitioners are the subscribers to the Memorandum and Articles and also first the directors and they had agreed to subscribe for 1,000 shares each. The first petitioner being the Managing Director was looking after the implementation of the project. In July, 1997, seven more persons were co-opted as directors of the Company. The petitioners have filed this petition alleging that these persons who were co-opted as directors had failed to acquire qualification shares; that without being elected as regular directors in the AGM, have continued to be directors of the Company; that the authorization for the operation of the bank accounts by the petitioners has been cancelled; that the first petitioner has been removed as a director; that they had allotted 11,98,000 shares illegally etc. Accordingly, the petitioners have prayed for appointment of an administrator and also for restraining the respondents 2 to 10 from acting as directors of the Company and also for declaration that the allotment of shares is null and void.
2. During the hearing, the learned counsel for the petitioners submitted that even though the petitioner has contributed fully his entire dues to the Company, yet the respondents, without taking into consideration the amount of about Rs. 36 lakhs contributed by the first petitioner are asking him to contribute further amount on the ground that the first petitioner has contributed only Rs. 7.35 lakhs. Accordingly, the learned counsel submitted that if the issue relating to his client's contribution is settled and decided by the CLB and shares are allotted to that extent, he would not press for any other relief sought for in the petition. Accordingly, with the consent of the parties, it was decided to have accounts of the Company checked to determine the quantum of the contribution of the first petitioner. Since there was huge difference between the claim of the first petitioner that he had contributed 36.38 lakhs and the claim of the Company that he had contributed only Rs. 7.35 lakhs, the parties agreed that the contribution made by the first petitioner could be verified by M/s M.S. Jagannathan & Visvanathan, Chartered Accountants. The Chartered Accountants submitted their report on 22nd November, 1999 recording therein that the details given by the first petitioner in regard to his contribution as follows:-
(i) Contribution by cheques - Rs. 12,85,000 (ii) Cash deposited in the Bank Accounts on various dates - Rs. 2,62,500
(iii) Cash paid to meet Company's expenses - Rs. 12,88,213
(iv) Cash paid through Mr. Kulandaisamy for payment to workers - Rs. 3,02,000
(v) Cash paid to suppliers after 17.4.98 - Rs. 5,00,000
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Total - Rs. 36,38,113
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3. After going through the accounts and details furnished by the petitioners and the Company, the Chartered Accountants came to the conclusion that there was very clear evidence to cheque payments by the petitioners to the extent of Rs. 12,85,000, cash payment to the extent of Rs. 3,00,000 and cash deposit in Company Account of Rs. 2,62,500 totalling to 18,47,500. In regard to other payments they have expressed their inability to certify the same for want of relevant documents.
4. Since this Bench found that the amount certified by these auditors was on the basis of non-availability of vouchers, receipts etc., it was decided to work back from the project cost and find out what could have been the contribution of the petitioners. Accordingly, the same Chartered Accountants were asked to work out the probable amount of contribution made by the petitioners from the project cost. Accordingly, they submitted another report dated 19.07.2001. As per this report, the petitioners had furnished a certificate from V. Sivananda Prabhu, Chartered Accountant, indicating the cost of the project as on 10.11.98 as 227.55 lakhs and also a letter written by the Company on 9.5.99 indicating the project cost as 328.74 lakhs and that the Company had furnished a statement of the project cost at Rs. 2,71,00,226/-. After going through all these reports, the Chartered Accountants concluded that the project cost could be taken as Rs. 2,26,44,060/-, which is also stated as subject to certain addition and deletion. In other words, this report is not conclusive as to the extent of the project cost.
5. According to the petitioners, they have contributed Rs. 36 lakhs, while according to the Company, they had contributed only Rs. 7.35 lakhs as against their due contribution of Rs. 28.91 lakhs (as per para 9 of the Counter). The Chartered Accountants appointed by us have verified the various details furnished by the petitioner and came to the conclusion that the petitioners have established their contribution to the extent of only Rs. 18,47,500/-. In view of the differences, our attempts to compute the contribution made by the petitioners either from the accounts of the Company or from the project cost have not succeeded. Therefore, on the basis of materials available, we have to form an opinion as to what could have been the contribution by the petitioners. It is an admitted fact that the Company wrote a letter to the Environment Ministry of the Government of India on 9.5.99, wherein, it had given full details, under various heads, of the amount spent so far on the project of Rs. 300.06 lakhs and also bills pending to the extent of Rs. 26.68 lakhs. These figures are also corroborated by the Company at paragraph 8 of the counter filed by them. In the memo filed on 8.11.2001, the petitioners have estimated, giving various details, the cost of the project as Rs. 3,09,26,000/-. In counter to this memo the respondents have submitted that even without certain adjustments as observed by the auditors, the project cost could be only Rs. 2,70,46,600 as against the total amount received towards of the cost of the project of Rs. 2,92,95,000 (excluding contribution by the petitioners) and as such they have alleged that the petitioner has siphoned of over Rs. 22 lakhs. It is a peculiar case wherein, instead of quantifying the project cost as per the books of accounts maintained in the Company, the parties have made their own assessment of the cost, to substantiate their respective stands. We find contradictions in the stand of the respondents. Originally it was submitted that the petitioners had contributed only Rs. 7,35,000/-, in their written submissions the respondents have stated that the contribution made by the petitioners could be taken as Rs. 12.85 lakhs being the amount paid by cheques. But now they take a stand that the petitioners had not contributed any money but have siphoned of Rs. 22 lakhs. The Chartered Accountants appointed by us have certified that the petitioners produced documents to substantiate their contribution to the extent of Rs. 18,47,500/- as against their claim of contribution of Rs. 36.38 lakhs. Thus, there is no substance in the stand of the respondents that the petitioner has siphoned of any money or that they have not made any contribution. Since the Company has taken a stand with the Government of India that the Company had incurred a sum of Rs. 326 lakhs and as per the written submissions filed by the respondents dated 20.11.2001 that the total money received from the shareholders and subsidies from the State and Central Governments was of the order of 2,92,95,000 (excluding the contribution by the petitioners), the difference between the receipt and project cost comes to roughly Rs. 34 lakhs which according to us should be taken as contribution by the petitioner. While coming to this conclusion, we have also noted that under the heading "Share Application Money" in the audited balance sheet as on 31st March, 1998, the following entries appear: S.S. Textiles Processing-Rs. 5,79,837; Shri Rajaganapathy Processing-Rs. 6,32,358; Ganagadurga Processing-Rs. 6,73,660; Gemini Dyeing-Rs. 6,33,268, totaling to Rs. 25.17 lakhs. Since these accounts have been audited, the petitioners' contribution cannot be taken anything less than Rs. 25.17 lakhs. We also find that in respect of all the above units, the petitioner has furnished further details of investment after 31st March, 1998 a certified by the auditors of these units, showing a cumulative investment of these four units to the extent of Rs. 36.38 lakhs. Since this amount is found to be more than the contribution due from the petitioners of Rs. 28,91,000, we feel it equitable to both the sides to conclude that the petitioners have paid their entire dues and no refund would be due to the petitioners on account of any excess payment made. Accordingly we hold so. The Company will issue shares to the total extent of Rs. 28,91,000 within one month from the date of this order.
6. We have not considered other allegations in the petition in view of the submissions of the Counsel for the petitioners as noted in paragraph 2 ante.
7. Petition is disposed of in the above terms with no order as to cost.