Company Law Board
Icici Bank Ltd. vs International Industries Limited on 25 September, 2007
ORDER
S. Balasubramanian, Chairman
1. M/s. ICICI Bank Limited ("the Petitioner") has filed a petition under Section 141 of the Companies Act, 1956 ("the Act") for condonation of delay and extension of time for filing with the Registrar of Companies, West Bengal ("the ROC, West Bengal"), in the prescribed format, the particulars of charge created on 28.6.02, by M/s. International Industries Limited ("the Company") in favour of the petitioner to secure the repayment of Rupee Term Loan of Rs. 450.00 lacs (Rupees four hundred fifty lacs) only (Annexurer P.5 to petition). The said charge relates to providing Collateral Security Agreement dated 28.6.02, entered into by and between the company and the petitioner. The said charge ought to have been filed with the ROC, West Bengal, in terms of Section 125 of the Act within a period of 30(thirty) days after the dale of its creation. Admittedly, the said particulars of charge, in the prescribed Form No. 8 & 13 signed by both the petitioner and the company, have not been filed with the ROC, West Bengal. The company has also been made a respondent to the present petition.
2. Background facts, in nutshell, as per the petition, are that in November, 2001, one Minerva Telelinks Ltd. (MTL) and Minerva Holding Ltd. (MHL) had applied for sanction of a loan from the petitioner for a sum of Rs. 3,00,00,000/-. An equipment loan cum hypothecation agreement dated 30.11.01 was executed by and between the petitioner and MIL and MHL pursuant to which the loan amount was disbursed. In June, 2002, the said MTL and MHL again approached the petitioner for a term loan of Rs. 4,50,00,000/-. One more equipment loan cum hypothecation agreement dated 28.6.02 was executed by and between the petitioner and MTL and MHL towards the second loan. The respondent company which holds 49.19% shares in MIL also mortgaged its office in Mumbai by deposit of title deeds, by way of collateral security. Thus, the company has created a charge. After passing a resolution under Section 293(1)(a) of the Act on 25.6.02, for the purpose of creating the charge over the property of the company, an undertaking dated 26.6.02, was also given by the company (the respondent herein) through one of its directors, namely, Ajeet Mathur, recording the fact of creation of the mortgage. It was also provided in the said resolution that the company was to file the requisite particulars of charge/modification of charge in connection with the said mortgage by deposit of the deeds in favour of the petitioner with the ROC, West Bengal, within the time prescribed by law. Form Nos.8 and 13 were handed over to the petitioner by the director of the company and after signing the said forms, it was handed back to one of the directors of the company. The equipment purchased by MTL, was hypothecated with the petitioner as per terms of the agreement. First charge on the equipments in favour of the petitioner was created and was duly registered in the register of charges? maintained by the ROC, Delhi and Haryana on 26.7.02. The petitioner in good faith relied on the company to lake steps for the registration of the charge in respect of the said property within the period as provided for under the Act. MTL defaulted and the aggregate amount payable to the petitioner was a sum of Rs. 4,20,97,018/-, including interest. The petitioner filed an application in O.A. No. 68/2003 under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 before the Debts Recovery Tribunal, New Delhi, inter alia, against MTL, MHL and the company as well as the other guarantors. The petitioner also asked for sale of the mortgage property being the said property and for proceeds of the sale to be applied in payment of the petitioner's dues. The petitioner came to know from the opposition Filed to the application by the company in November, 2003 that the documents by which the mortgage of the said properly was created had not been registered. Same stand was reiterated also in the written statement filed on April, 2004 by the company. Equitable mortgage has been created by the company by deposit of title deeds with the petitioner and the petitioner has a paramount charge over the said property for the satisfaction of its dues. The title deeds of the said property still he deposited with the petitioner for satisfaction of the dues of the petitioner. In March, 2005, one Bonanza Trading Company Pvt. Ltd. claiming to be a shareholder of the company has Filed a suit being C.S. No. 56 of 2005, before the Calcutta High Court, inter alia, alleging that the resolutions passed by the shareholders of the company and the Board of Directors of the company in connection with creation of the mortgage and/or furnishing of security, are illegal, null and void. The petitioner slates that the said suit is misconceived mala Fide and has been instituted by suppression of material facts and is a clear abuse of the process of Court which is liable to be dismissed. Although an application had also been moved, no interim reliefs have been pressed for. The said interlocutory application is still pending before the Calcutta High Court. The claim of the petitioner is n substantial claim. Despite making efforts, the petitioner was unable to lake immediate steps for registering the charge with the ROC. West Bengal, after coming to know that the charge has not been registered. The petitioner has also been actively pursuing and defending the proceeding in connection with the said loan transaction which has also prevented the petitioner from taking immediate steps to register the charge. The petitioner was not aware that the company has deliberately not registered the charge which they were under an obligation to do under the provisions of the Act. By its advocate's letter dated 13.3.06, the petitioner has forwarded copies of Form No. 8 & 13 to the ROC, West Bengal, with an intimation that the petitioner is filing the instant application before this Bench for obtaining an extension. The petitioner states that the omission to file with the ROC, West Bengal, the particulars of charge created by the company and to register the charge was due to the deliberate act of the company. The petitioner was prevented by sufficient cause for registering the charge itself. It is due to inadvertence on the part of the company the charge was not registered. The petitioner asserted that non-registration of charge is not of a nature so as to prejudice the position of the creditors and shareholders of the company. One of the shareholders of the company is presently disputing such charge by filing a civil suit before the Calcutta High Court. The acts and conduct of the company and MTL and MHL and other people in control of the aforesaid entities clearly show that they want to act against the interest of the petitioner and cause harm and injury to the right of the petitioner. Unless such charge is registered, the petitioner will be seriously affected and its right may be prejudiced. It is also just and equitable that the charge should be registered to protect the rights of the petitioner and also for the benefit of any other persons dealing with the company. The grounds made out by the petitioner are just and equitable to grant relief in the instant application. The petitioner prayed for extension of time for registration of the charge of the petition in respect of the said property. If the charge is not registered, the petitioner will be deprived of its valuable rights. The company and its shareholders is estopped from contending that the charge should not be registered.
3. Contesting the present petition, the company has filed its reply. Shri S.N. Mookerjce, learned Counsel appearing for the company, while denying all the allegations made in the petition, has contended that the company entered into an agreement with Supreme Premises Pvt. Ltd. on 26.2.81, for purchasing and/or acquiring an office space being 11 at No. 115 in a building known as "Maker Chambers-VT at Nariman Point, Mumbai ("the said property"). The company has paid the entire purchase consideration and has obtained possession of the said property. The company has an investment of 34,43,300 shares in MTL which constitutes about 49% shares in MTL. One Ajay Shankar Bhartia ("ASB") held 2,96,900 equity shares in the company. ASB also held 1,12,100 shares in MTL. Although it has been alleged by the petitioner that it had granted certain loans and/or advances to MTL and MHL, the company has not received any loan from the petitioner. ASB who was in a position to exercise substantial control over the affairs of the company, caused induction of one Ajeet Mathur as a director of the company. ASB in collusion and conspiracy with the said Ajeet Mathur and Sharad Vaid purported to create a board resolution for allegedly mortgaging the said property with the petitioner for securing repayment of the loan allegedly granted by the petitioner to MTL and MHL. The said Sharad Vaid ceased to be a director of the company on 21.10.03. The company has also initiated criminal proceeding against the said Ajeet Mathur which is pending. The alleged mortgage is clearly unauthorized, fraudulent and consequently illegal and not binding upon the company and its shareholders. The alleged mortgage was not in the benefit or interest of the company in any manner whatsoever. Subsequent to death of ASB on 22.1.03, the present management of the company learnt about the purported mortgage. The company has not received any consideration whatsoever for creating the purported mortgage which is illegal, null and void. The petitioner has filed recovery proceeding before the Debt Recovery Tribunal, New Delhi ("DRT") against MTL and MIIL and others and the company has been made defendant No. 3 in the said proceeding. The company has denied and disputed the legality and validity of the alleged mortgage. Bonanza Trading Co. Pvt. Ltd. ("BONANZA"), one of the shareholders of the company, has filed a suit being C.S. No. 56 of 2005 before the Calcutta High Court against the company and others. The petitioner is defendant No. 3 in the said suit. In the said suit BONANZA has stated that the purported mortgage is illegal and violative of mandatory provisions of (he Act and has claimed cancellation of various documents relating to the purported mortgage and for permanent injunction against the company and the petitioner. The said suit is still pending. The creation of the purported mortgage requires previous approval of the Central Government under Section 295 of the Act. Neither the company nor the petitioner has obtained approval of the Central Government under Section 295 of the Act. The purported mortgage being illegal, null and void, the question of registration thereof with the ROC, West Bengal or for condonation of alleged delay in filing of the same docs not arise at all. The company is not in any way concerned with the alleged dealings between the petitioner and MTL and MHL. MTL is not a subsidiary of the company and as such the company had no right, authority or competence to mortgage any part or portion of its property in favour of the petitioner without obtaining previous approval of the Central Government in terms of Section 295 of the Act. Consequently, the alleged undertaking of Ajeet Mathur is wholly unauthorized, illegal and of no consequence. The alleged board resolution is not a resolution within the meaning of Section 293(1)(a) of the Act. The company did not borrow any money from the petitioner and the question of the alleged financial assistance being within the borrowing limit does not arise at all. The purported form Nos. 8 and 13 are wholly wrongful, illegal, null and void and of no consequence. The execution of the alleged forms cannot create any right or interest whatsoever in favour of the petitioner. The company continues to be the lawful owner of the said property and the said property continues to be free from all charges and encumbrances. The company in its written statement, filed before the DRT, has clearly stated that the alleged mortgage is wholly unauthorized, illegal, null and void. It is denied that the petitioner learnt about non-registration of the alleged charged from the opposition filed by the company. The company has denied that the title deeds of the said property have been deposited with the petitioner and no sale deed relating to the said property has been obtained by the company from the vendor and the question of the company depositing original title deeds of the said property with the petitioner docs not arise at all. Since the said properly has not been lawfully mortgaged or charged in favour of the petitioner, the company was under no obligation to register the alleged charge. The company has not lawfully created any charge in favour of the petitioner. The petitioner has not acquired any right in the said property of the company. The present application under Section 141 of the Act is wholly misconceived, non-maintainable, frivolous, speculative and is liable lo be dismissed in limine with costs.
4. Controverting all the contentions contained in the reply of the company, the petitioner has reiterated what has been stated in the petition. The petitioner asserted that the property being Flat No. 115, 11th Floor, Maker Chamber-VI has been mortgaged by the respondent company as security in connection with financial assistance obtained by MTL. The mortgage was validly created and the charge created by deposit of title deeds as security for loan provided by the petitioner to MTL, ought to have been registered with the RGC, West Bengal. The company had charged and given the said property by way of security for the financial facilities which have been granted to MTL and it has been represented to the petitioner by the company that necessary resolution under Section 293(1)(a) of the Act has been passed in a board meeting of the company held on 25.6.02 for the purpose of creating charge in respect of the property of the company. The petitioner has provided financial facilities to MTL relying on the representations made by the company and believing the same to be true. Moreover, the Directors of the company have represented the company and at no point of time their authority was withdrawn. The criminal proceedings against Ajeet Mathur are sham proceedings and must have been initiated to try and dispute the charge and security created by the company in favour of the petitioner. The petitioner in the creation of the mortgage and charge of the property of the company was contracting in god faith with the company and the petitioner was entitled to assume that the acts of the director in creating the mortgage by deposit of title deeds were within the scope of their powers conferred upon them by the shareholders of the company. The transaction on the face of it was clone in the regular manner and the petitioner has acted bona fide and in good faith and without any notice of the alleged deficiencies now being contended by (he company. The company should be estopped from denying and disputing the legality or validity of the mortgage. Upon the failure of MTL to make payment of its clues, the petitioner has filed the proceedings before the DRT. The BONANZA has filed the suit by suppressing material facts and by making untrue statement on oath. Mr. Sharad Vaid is a director of both BONANZA and the company and was a party to board resolution of 25.6.02. The suit has been filed by BONANZA only after the petitioner instituted proceedings before the DR.T for recovery of its debts and also for enforcement of a charge in respect of the Hat. The suit has been filed by BONANZA with ulterior purpose and mala fide motive and is in collusion and conspiracy between BONANZA, MTL and the company. The issue sought to be raised are not relevant for the purpose of granting relief in the instant application.
5. Reiterating the pleadings, Shri Ratnanko Banerjee, learned Counsel, appearing for the petitioner, has submitted that the delay in filing with the ROC, West Bengal, in the prescribed Form Nos. 8 and 13, the particulars of charge created by the company on 28.6.02 in favour of the petitioner vide Collateral Security Agreement dated 28.6.02 entered into by and between the petitioner and the company to secure the repayment of Rupee Term Loan of Rs. 4,50,00,000/-, was due to inadvertence on the part of the company. Both the Form Nos. 8 and 13 (Annexure P. 5 to petition) have been signed by the petitioner and the company and the mortgaged properly belonging lo the company have been described in Schedule-I annexed to the Form Nos.8 and 13, signed by both the parties. Shri Banerjee also drew the attention of this Bench to the provisions of Section 134 of the Act, which provides that it shall he the duty of a company to file with the ROC for registration of the particulars of every charge created by the company, but, at the same time registration of charge may also be effected on the application of any person interested therein. The interested person is entitled to recover from the company the amount of any fees paid by him to the ROC on the registration. The petitioner has complied with the requirements of Section 134. Shri Banerjee also submitted that as per present practice and procedure, newly introduced e-form No. 8 has replaced all the old forms and before filing the e-form No. 8, through electronic mode, it should be digitally signed by both the parties, as indicated in the said Form No. 8 (Form No. 13 has since been deleted). But, as the company is contesting the present petition, the petitioner could not be able to get the newly introduced c-form No. 8 digitally signed by the company through its Director who is holding digital signature certificate, as per changed procedural practice. Nevertheless, the petitioner should not be made to suffer on account of non-cooperation of the company. By virtue of non-cooperation of the company, the huge public money is at slake and public interest is affected. Shri Banerjee urged this Bench to extend the time for filing the e-form No. 8 as per the provisions of Section 141 of the Act, directing the ROC, West Bengal, to accept and take the c-form No. 8 (to be digitally signed by the petitioner) on record without the e-form No. 8 being signed on behalf of the company.
6. I have considered the pleadings and arguments of the counsel. This is petition filed under Section 141 of the Act seeking for condonation of the delay in filing the particulars of charge created on 28.6.2002. In terms of Section 134 of the Act, it is the duly of the company to file with the Registrar for registration the particulars of every charge created by the company. In the present case, obviously, the company had not registered the charge and accordingly the lender, namely, the bank had elected to file the documents for registration. The powers of this Board, in terms of this Section, are discretionary. If it is established that the delay in filing was due to sufficient cause, in the exercise of the discretionary powers, this Board can condone the delay. According to the petitioner, it came to know of the non registration of the charges only in November, 2003 whereafter due to other proceedings in connection with the said loan transaction, it was not in a position to take immediate steps to register the charge. I am satisfied that the delay on the part of the petitioner was due to causes beyond its control and that the petitioner has shown sufficient cause for the delay. Therefore, the prayer of the petitioner for condonation of delay deserves to be granted.
7. However, the company has raised certain disputes with regard to the validity of the documents creating charge by one of its directors and has contended that in view of this challenge on the validity of the charges, the prayer of the petitioner should not be granted. In a proceeding under Section 141 of the Act, the power of this Board is limited and does not extend to adjudicate or look into the validity or otherwise of the charges created. The respondent company has neither in its reply to the petition nor during the arguments has taken any objection or has resisted the prayer for condonation. In this connection, I may refer to the judgment of Madhya Pradesh High Court in Choudhary Builders Pvt. Ltd. v. Shanti Bros. (Indore) Ltd. 107 CC 466 wherein the Court has considered a case of similar nature. In thai case, the CLB had condoned the delay in spite of the objections raised by the company that the deed of assignment did not create any charge. When the company went on appeal to the High Court, the High Court dismissed the appeal observing "It appears that the appellant company had missed to resist the condonation issue and had more concentrated on issues revolving around the validity or otherwise of the terms of assignment deed dated Feb. 15, 1990. There is nothing to show that the company has taken any serious objection to condonation of delay on the ground that the Board order suffers from some infirmity or perverse in any way".
8. In Mangalore Chemicals & Fertilizers Ltd. v. Co. Law Board 126 CC 261 Kar, the Court observed "The provisions of Clause (a) of Sub-section (1) of Section 141 make it clear that the powers vested in CLB under Section 141 is a discretionary power and that discretion has to he exercised by the CLB judiciously and having due regard to facts and circumstances of each case am the explanation offered before it by a company and then to form an opinion on the question whether the company has made out that it could not file intimation within the stipulated time due to inadvertence or some other sufficient cause. We do not think that the provisions of Section 141 on the CLB to go into the merits of the charge or satisfaction of the charge in part or in full". Thus, it is amply clear that this Hoard has no powers to adjudicate or look into the validity or otherwise of a charge while considering a petition under Section 141 of the Act. Since the company has not raised any serious objection on condoning the delay nor has contested that the bank has not shown any sufficient cause for condoning the delay, the prayer of the petitioner for condonation of delay deserves to be granted, The petitioner has sought for a direction to the ROC to accept and take e-form No. 8 on record without the e-form No. 8 being signed on behalf of the company. As I have observed earlier, the powers of this Board under Section 141 is limited only to the extent of condoning the delay or allow rectification. The powers do not extend to giving directions as sought for by the petitioner and as such this prayer cannot be granted. Therefore, I only extend the time upto 30(thirty) days from the date of this order, for filing e-form 8 as per the provisions of Section 141. The petitioner shall file with the Registrar of Companies, West Bengal, a certified copy of this order, along with the aforesaid documents, within the period as fixed by this order. In case the ROC lakes on record the documents without the e-form being signed on behalf of the company, then the petitioner shall pay a sum of Rs. 5,000/- (Rupees live thousand only) towards costs payable to the said Registrar of Companies.
9. The petition is disposed of in the above terms.