ORDER
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. Shri C.R. Murali, Practising Chartered Accountant and authorised representative of the company has submitted that the deposits to the applicant are payable together with interest within 36 months from the date of maturity at the rate of 30 per cent of the principal amount in the first year, 35 per cent in the second year and balance in the third year. The first instalment has not become due as per the order of the CLB. Moreover, the petitioner has not surrendered the fixed deposit receipts. The petitioner has neither made any claim for considering his case under the hardship category. Shri Murali further reiterated that the applicant cannot seek any remedy under Section 634A in the matter relating to the alleged non-compliance of the order of the CLB passed under Section 58A(9). According to him, Section 58A is a self-contained one providing for all issues in connection with public deposits and hence question of invoking Section 634A does not arise. Shri Murali has, therefore, sought for dismissal of the application.
4.1 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 :
“11(a) The company shall pay interest at the contracted rate upto the date
of maturity and thereafter from the date of maturity till payment at
12.50% per annum. In the event of failure by the Company to make
repayment as per the Scheme approved by the CLB, over due interest
shall be payable at 14.50% per annum provided that it shall not exceed the
contracted rate of interest.
** ** **
(f) All deposits above Rs. 50,000 together with interest from the date of deposit till date of payment shall be paid within 36 (thirty-six) months from the date of maturity or date of the order of the CLB whichever is later at 30% of the principal amount with interest
thereon during the first year, 35% of the principal amount with interest thereon during the second year and balance of 35% of the principal amount with interest thereon during the third year.
** ** ** (h) The company shall pay periodical interest in respect of deposits under 'Non-cumulative Scheme' till date of maturity and thereafter the principal amount in accordance with the Scheme approved by the CLB. 12(i) All individual deposits shall be treated separately and not to be clubbed if any depositor holds more than one deposit for the purpose of arriving at the amount as fixed in the Scheme. (ii) All payments shall be made in the order of date of maturity. ** ** ** (iv) The payments shall be spread over all the months in each year. (vii) The company shall make repayment of deposits and interest in terms of the Scheme by Demand Draft and shall be sent by Registered Post to the last known address of the depositors. 13. The Managing Director of the company shall file an affidavit of undertaking with this Bench to keep up the repayment schedule with a copy to the Registrar of Companies, Andhra Pradesh, Hyderabad within 15 (fifteen) days from the date of receipt of this order. ** ** ** 15. The company and every of ficer including the Directors of the company shall be jointly and severally responsible for due compliance of this order. 16. Any failure to comply with this order on the part of the company, its Officers and Directors shall attract the penal provision contained in Sub-section (10) of Section 58A of the Act. ** ** **
19. The company shall send a copy of the operative portion of this order to the depositors together with schedule of payment in accordance with the Scheme approved by the CLB, within 5 (five) weeks from the date of receipt of this order and at its discretion may also publish operative portion in leading newspapers for the immediate knowledge of the depositors.”
5. A perusal of the operative portion of the order reproduced hereabove will show that the deposits of the applicant with the company ought to be repaid together with interest within 36 months from the date of maturity, i.e., 28-4-2001 at 30 per cent of the principal amount with interest thereon during the first year, ie., before 27-4-2002, 35 per cent of the principal amount with interest during the second year before 27-4-2003 and balance of the principal amount and interest before 27-4-2004. All pay-
ments should be in the order of date of maturity of deposits and should be spread over all the months in each year during 2002, 2003 and 2004. The company shall not wait till last date of the year. Accordingly, in the present case, the company cannot claim that the first instalment becomes due only on 27-4-2002. The company ought to have sent to the applicant schedule of payment in accordance with the scheme, which has not been substantiated. In the circumstances, the plea of the company that the first instalment has not become due is vague, and not supported by any document, especially when the company has not furnished any details in regard to the deposits of above Rs. 50,000, viz., date of maturity, schedule of payment as per the scheme including the deposits of the applicant. Shri K.S. Raju, promoter director of the company and group holding companies have filed affidavits ensuring due repayment of the deposits by the company in accordance with the scheme. The managing director of the company has filed an affidavit of undertaking to keep up the repayment schedule. The company and every officer including the directors of the company are jointly and severally responsible for due compliance of the order dated 29-2-2000 by the company.
6. In regard to the plea of Shri Murali that the provisions of Section 634A cannot be invoked by the applicant, it may be observed that this section is explicit which runs as follows :
“Enforcement of orders of Company Law Board–Any order made by the Company Law Board may be enforced by that Board in the same manner as if it were a decree made by a Court in a suit pending therein, and it shall be lawful for the Board to send, in the case of its inability to execute such order, to the Court within the local limits of whose jurisdiction,–
(a) in the caseof an order against a company, the registered office of the company is situated, or
(b) in the case of an order against any other person, the person concerned voluntarily resides, or carries on business or personally works for gain.”
Section 634A is clear that as in the case of a Court, the orders of the CLB can be enforced by it in the same manner as if it were a decree made by a Court. This section further permits the CLB, in case of its inability to execute the order, to seek the assistance of the Court having competent jurisdiction for execution of its order. In view of this there is no force in the argument of Shri Murali.
7. Taking into consideration the facts and circumstances of the case, the opportunity afforded to the company and the legal position stated hereabove, I hereby order that the company shall pay 30 per cent of the deposit amount together with interest at the contracted rate upto the date of maturity and thereafter till the date of payment at the rate of 14.5 per cent within 30 days of receipt of this order, failing which the applicant is at liberty to move the Court, within whose jurisdiction the registered office of the company is situated to execute the order of the CLB.