Ravikumar Duraisamy, Member -
(1.)The Application was initially filed before Hon
ble Company Law Board, Chennai Bench, Chennai. Since the National Company Law Tribunal (NCLT), Hyderabad Bench has been constituted for the cases pertaining to the states of Andhra Pradesh and Telangana, the case is transferred to the Hyderabad Bench of NCLT. Hence, we have taken the case on records of NCLT, Hyderabad Bench and deciding the case.
(2.)This is an Application filed under Section 297 read with Section 621A of the Companies Act, 1956 by seeking a direction to permit the Applicants to compound the offence committed under the said Act and also praying to take a lenient view of the technical contravention occurred by them.
(3.)The brief facts of the case as averred in the application and are material to decide the issue in question are as follows:
a. Sreepathi Pharmaceuticals Limited was incorporated on 29.12.1983 vide CIN: U24239AP1983PLC004356 as a private limited company under the Companies Act, 1956 and later converted into limited company on 13th May, 1992.
b. The registered office of the Applicant Company is situated at Plot No. 22B, H. No. 8-2-293/82/A/22/B, Road No. 2, Jubilee Hills, Hyderabad - 500033, Telangana.
c. The Authorized Share Capital of the Applicant Company as on 31st March, 2015 is Rs. 4,20,00,000/- (Rupees Four Crores Twenty Lakhs Only) divided into 4,20,000 (Four Lakhs Twenty Thousand) Equity shares of Rs. 100/- (Rupees Hundred) each. The Paid up Capital of the Applicant Company as on 31st March, 2015 is Rs. 3,69,63,900/- (Rupees Three Crores Sixty Nine Lakhs Sixty Three Thousand Nine Hundred Only) divided into 3,69,639 (Three Lakhs Sixty Nine Thousand Six Hundred Thirty Nine only) Equity shares of Rs. 100/- (Rupees Hundred) each.
d. The main objects of the Company are to carry on the manufacture, research, design and dealership of organic and inorganic chemicals, intermediaries, pharmaceuticals, drugs, dye stuff and other intermediaries, etc.
e. On scrutiny of the Balance Sheet of the Applicant Company for its Financial Years 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14, it was observed that the Applicant Company entered into related party transactions which are as follows:
f. As per Section 297 of the Companies Act, 1956, Except with the consent of the Board of directors of a company, a director of the company or his relative, a firm in which such a director or relative is a partner, any other partner in such a firm, or a private company of which the director is a member or director, shall not enter into any contract with the company-
a. for the sale, purchase or supply of any goods, materials or services; or
b. after the commencement of this Act, for underwriting the subscription of any shares in, or debentures of, the company.
(Provided that in the case of a company having a paid-up share capital of not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government).
2. Nothing contained in clause (a) of sub-section (1) shall affect-
a. the purchase of goods and materials from the company or the sale of goods and materials to the company, by any director, relative, firm, partner or private company as aforesaid for cash at prevailing market prices; or
b. any contract or contracts between the company on one side and any such director, relative, firm, partner or private company on the other for sale, purchase or supply of any goods, materials and services in which either the company, or the director, relative, firm, partner or private company, as the case may be, regularly trades or does business: Provided that such contract or contracts do not relate to goods and materials the value of which, or services the cost which, exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts;
c. in the case of a banking or insurance company any transaction in the ordinary course of business of such company with any director, relative, firm, partner or private company as aforesaid.
3. Notwithstanding anything contained in sub-sections (1) and (2), a director, relative, firm, partner or private company as aforesaid may, in circumstances of urgent necessity, enter, without obtaining the consent of the Board, into any contract with the company for the sale, purchase or supply of any goods, materials or services even if the value of such goods or cost of such services exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract; but in, such a case, the consent of the Board shall be obtained at a meeting within three months of the date on which the contract was entered into.
4. Every consent of the Board required under this section shall be accorded by a resolution passed at a meeting of the Board and not otherwise; and the consent of the Board required under sub-section (1) shall not be deemed to have been given within the meaning of that sub-section unless the consent is accorded before the contract is entered into within three months of the date on which it was entered into.
5. If consent is not accorded to any contract under this section, anything done in pursuance of the contract shall be voidable at the option of the Board.
6. Nothing in this section shall apply to any case where the consent has been accorded to the contract before the commencement of the Companies Amendment Act 1960.
g. It is stated that the Applicant Company did not obtain the necessary prior approval of the Central Government for carrying out the above-mentioned transactions with the related parties, which is in contravention to Section 297 of the Companies Act, 1956 in respect of such transactions.
h. It is submitted that though the Directors were interested in the transactions carried out between the Applicant Company and the Related Parties; but the transactions have been made at prevailing market prices and they are not prejudicial to the interest of the Applicant Company or its members.
i. It is further submitted that though it is a public limited Company but majority shareholding are with the promoters of the Company, therefore such act of the Company have not caused any harm neither to the members nor to the public at large.
j. The Applicant Company submits that the Application is filed suo-motu under Section 621. A of the Act for the compounding of default committed under Section 297 of the Companies Act, 1956.