Madras High Court
Chirag Gupta vs The Regional Director on 16 September, 2022
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
C.P.Nos.453 to 456 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 16.09.2022
CORAM
THE HONOURABLE MR.JUSTICE SENTHILKUMAR
RAMAMOORTHY
C.P.Nos.453 to 456 of 2015
and Comp.A.Nos.1079 to 1082 of 2015
Chirag Gupta
Old No.16, New No.6
Parthasarathy Garden
Alwarpet, Chennai - 600 018. ... Petitioner in C.P.453 of 2015
Sawan Gupta
Old No.16, New No.6
Parthasarathy Garden
Alwarpet, Chennai - 600 018. ... Petitioner in C.P.454 of 2015
Puneet Gupta
Old No.16, New No.6
Parthasarathy Garden
Alwarpet, Chennai - 600 018. ... Petitioner in C.P.455 of 2015
S.H.Bhandari & Co.,
Chartered Accountants
No.824, E.V.R. Periyar Road
Kilpauk, Chennai - 600 010
Represented by its Partner
Mr.Divyang Bhandari ... Petitioner in C.P.456 of 2015
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https://www.mhc.tn.gov.in/judis
C.P.Nos.453 to 456 of 2015
vs.
1.The Regional Director
Southern Region
Ministry of Corporate Affairs
Office of Regional Director
Shastri Bhavan, Block - 1, 5th Floor
No.26, Haddows Road,
Chennai - 600 006.
2.The Registrar of Companies
Tamilnadu, Chennai,
Shastri Bhavan, II Floor,
No.26, Haddows Road,
Chennai - 600 006. ... Respondent in all CP's
COMMON PRAYER: Company Petitions filed under Section 463(2) of
the Companies Act, 2013 pleased to relieve the petitioner wholly from the
alleged liabilities pursuant to the show cause notices No.F.No.18/RD/ROC-
Chn/Sec.628(b) & 227/2014 dated 09.10.2015.
For Petitioner : Mr.Kumarpal Chopra
in all CP's
For Respondent : M/s.T.V.Krishnamachari,
in all CP's Sr. Panel counsel, Central Government
**********
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C.P.Nos.453 to 456 of 2015
COMMON ORDER
These four petitions are presented by three directors and the auditor of Spero Hotels Private Limited.
2. The above mentioned company received a sum of Rs.8 crore from its holding company, Spero Holdings Private Limited, as share application money. In relation thereto, a show cause notice was issued by the Regional Director on 08.09.2014 calling upon the company to show cause as to why prosecution should not be instituted. Learned counsel for the petitioner in all these petitions refers to a communication dated 18.09.2014 from the company to the Regional Director and points out that it was made clear that the share application money was not put to use for allotment of shares on account of the inability of the company to obtain approvals for its business of constructing hotels. Therefore, by the said communication, the Regional Director was informed that the money received as share application money was refunded in four installments of Rs.2 crore each to the holding company in the month of November 2013. Learned counsel also refers to the details 3/8 https://www.mhc.tn.gov.in/judis C.P.Nos.453 to 456 of 2015 of repayment, which are set out at paragraph 9 of each petition. By adverting to the balance sheet for the company as of 31.03.2013, he points out that the share application money was duly reflected therein and, upon refund thereof, the share application money is not reflected in the balance sheet for the year ended 31.03.2014. Thus, he submits that the company did not violate Section 74 of the Companies Act, 2013. He further submits that no stake holder of the company was prejudiced by the transaction called into question by the Regional Director. In spite of the reply referred to above and the subsequent reply dated 23.09.2015 by which all clarifications were provided, prosecution was threatened by issuing show cause dated 09.10.2015. In the facts and circumstances, he contended that the respective petitioner may be relieved of liability.
3. The respondents are represented through counsel. A counter affidavit has been filed on behalf of the first respondent and paragraph 10 thereof is pertinent. The said paragraph reads as under:
"10. It is further stated that on examination of the subsequent year Balance Sheet of the Company it is noted that no amount is pending towards "Share Application 4/8 https://www.mhc.tn.gov.in/judis C.P.Nos.453 to 456 of 2015 Money" pending for allotment. Accordingly the lapses pointed out by the office of the first respondent appears to be not continued in the following year and the Subject Company had logically concluded the matter."
4. The balance sheets for the year ended 31.03.2013 and 31.03.2014 are on record. While the balance sheet for the year ended 31.03.2013 reflects the receipt of Rs.8 crore as share application money, the balance sheet for the year ended 31.03.2014 shows that no share application money is available and share allotment was also not made. This corroborates the submission of the respective petitioner that these monies were refunded by issuing four cheques for a sum of Rs.2 crore each to the holding company in November 2013. By replies dated 18.09.2014 and 23.09.2015, the information and explanation called for by the Regional Director was provided. In the counter affidavit of the first respondent, the first respondent has stated that the subsequent balance sheet was examined and that it was noted that no amount is pending as share application money. 5/8 https://www.mhc.tn.gov.in/judis C.P.Nos.453 to 456 of 2015
5. When the above facts and circumstances are taken into consideration, it appears that a technical breach was committed to the extent that share application money in excess of the authorized capital was received. However, the threatened prosecution for alleged contravention of Section 628 of the Companies Act 1956 is misplaced. It should also be noticed that no stakeholder of the company, such as share holder, creditor or any other person, was affected or prejudiced by this transaction. As stated earlier, the breach is purely technical and occurred owing to negligence in receiving share application money in excess of the authorized capital. Therefore, a case is made out for the grant of discretionary relief under Section 463(2) of the Companies Act 2013. In the facts and circumstances, the respective petitioner is entitled to be relieved from liability in respect of the threatened prosecution.
6. In the result, all these petitions are allowed as prayed for by relieving the respective petitioner from the alleged liabilities pursuant to 6/8 https://www.mhc.tn.gov.in/judis C.P.Nos.453 to 456 of 2015 show cause notice No.F.No.18/RD/ROC-Chn/Sec.628(b) & 227/2014 dated 09.10.2015. Consequently, Comp.A.Nos.1079 to 1082 of 2015 are closed.
16.09.2022 rna Index : Yes / No Internet : Yes / No 7/8 https://www.mhc.tn.gov.in/judis C.P.Nos.453 to 456 of 2015 SENTHILKUMAR RAMAMOORTHY, J.
rna C.P.Nos.453 to 456 of 2015 and Comp.A.Nos.1079 to 1082 of 2015 16.09.2022 8/8 https://www.mhc.tn.gov.in/judis