EDPUGANTI BAPANAIAH Vs. NAGARJUNA FINANCE LTD

JUDGEMENT

(1.) THIS is an application filed under Section 634A of the Companies Act, 1956 ('the Act') to enforce the order dated 29-2-2000 of the CLB directing Nagarjuna Finance Ltd, ('the company') to repay the deposits together with interest within the repayment schedule specified therein. The application came up for hearing from time to time and finally on 26-7-2001.

(2.) Shri B. Kanta Rao, advocate appearing on behalf of the applicant reiterating the averments made in the application has submitted that the applicant had kept eight deposits of each Rs. 5 lakhs on 28-7-1997 for a period of 45 months. Though the deposits were matured on 28-4-2001, the company failed to pay the interest and repay the principal amount in terms of the order dated 29-2-2000. Shri Kanta Rao pointed out that the company ought to have paid interest at the contracted rate upto the date of maturity and thereafter overdue interest at 14.50 per cent per annum. The deposits being above Rs. 50,000 are payable within 36 months from the date of maturity at 30 per cent of the principal amount with interest thereon during the first year, 35 per cent of the principal amount with interest thereon during the second year and balance 35 per cent of the principal amount with interest thereon during the third year. The payments should be made in monthly instalments in the order of date of maturity of deposits. Though the order of the CLB is specific, the company failed to make any payment in accordance with the order dated 29-2-2000. The company and every officer including the directors of the company are jointly and severally responsible for due compliance of the order, failure of which attracts the penal provisions contained in Sub-section (10) of Section 58A of the Act. The company deliberately violated the order of CLB and the Registrar of Companies (RoC) may be ordered to proceed against the company for non-compliance of the order. Though the company deducted tax at source under TDS and remitted tax to the Government of India on behalf of the applicant, it failed to pay balance of the amount. In view of the default on the part of the company, a decree should be passed against the company as well as Shri K.S. Raju, Promoter director for the outstanding deposit amount. Though the company is taken over by a third party and Shri K.S. Raju as well as Shri L.V.V. Iyer had resigned from the Board, their liability do not cease till repayment of the deposits. Shri Kanta Rao urged that every Bench constituted under Section 10E of the Act is a civil as well as criminal court and every order made by a Bench in exercise of its powers shall be deemed to be its order, enforceable under Section 634A by the Board. Every Bench shall have powers which are vested in a Court under the Code of Civil Procedure, 1908. Accordingly, every Bench shallbe deemed to be civil court and every proceeding before the Bench shall be deemed to be judicial proceedings. Moreover, by virtue of Regulations 44 and 47 of the Company Law Board Regulations, 1991, the Bench of the CLB constituted under Section 10E is given inherent powers. The term 'any order' referred to in Section 634A is a word of wide meaning and prima facie the use of 'any' excludes limitation or qualification. The order under Section 58A by the CLB has been made in the interest of depositors and in the public interest. The said order is a decree to be enforced and failure to comply attracts Section 634A and empowers the CLB to transfer its order dated 29-2-2000 to City Civil Court, Hyderabad, where the company is situated.

(3.) 1 have considered the submissions both oral and written of the learned counsel for the applicant and the authorised representative of the company. The facts not in dispute are that the applicant had deposited eight deposits of each Rs. 5 lakhs with the company on 28-7-1997 which were matured on 28-4-2001. The company has not made payment to the applicant. In view of the default committed by the company in favour of a large number of depositors, the CLB in exercise of its powers under Section 58A(9) suo motu ordered the company on 29-2-2000 to repay all the deposits over a period of five months to 36 months. The relevant operative portion of the order is as under :