Judgment:
1. M/s. Nuchem Limited which has collected public deposits under Section 58A of the Companies Act, 1956 has defaulted in the repayment of deposits on maturity and as such the Company Law Board started receiving applications from aggrieved depositors in terms of Section 58A(9) of the Companies Act, 1956. While considering these application it is transpired that the company had defaulted in repayment of deposits since May, 1996.
2. The company is accepting deposits since last several years and majority of depositors are small depositors i.e. deposits between Rs. 5000 to Rs. 25,000/-. The company had accepted Rs. 1031 lakhs from 7100 depositors.
3. The Company Law Board, Northern Bench, New Delhi started receiving applications from the aggrieved depositors u/d. 58A(9) of the Companies Act, 1956.
It is evidently clear that the most of the public deposits had been collected from small depositors and in view of provisions of Section 58AA of the Companies Act, 1956, it was decided to invoke the suo moto powers of Section 58A(9) and 58AA(3) of the Companies Act, 1956 in order to protect the interest of the small depositors and other depositors for all deposits matured and to be matured in the future.
4. Keeping in view the objective of safeguarding the interest of depositors, the public interest and the interest of the Company, the scheme of repayment was sanctioned by this Board vide its order dated 20.5.1997 directing the company to repay deposits as under:---------------------------------------------------------------------------------Particulars of deposits Schedule of Repayment--------------------------------------------------------------------------------(i) Deposits upto Rs. 5,000 - Rs. 1500 during 1.4.1997 to 31.12.1997.
- Balance by 31.3.1998-------------------------------------------------------------------------------(ii)Deposits in the range of Rs. 5001- - Rs. 1500 during 1.4.1997 to 31.12.1997 Rs. 10,000 - Rs. 2500 during 1.1.98 to 30.9.1998 - Balance by 31.3.1999--------------------------------------------------------------------------------(iii)Deposits in the range of Rs. - Rs. 2500 during 1.4.1997 to 31.12.1997 10,001- Rs. 15,000 - Rs. 3000 during 1.1.98 to 30.9.1998 - Balance by 30.6.1999.--------------------------------------------------------------------------------(iv)Deposits in the range of Rs. - Rs. 2500 during 1.4.1997 to 1.12.1997 15,001 - Rs. 20,000 - Rs. 4000 during 1.1.98 to 30.9.1998 - Balance by 30.6.1999--------------------------------------------------------------------------------(v)Deposits in the range of Rs. - Rs. 3000 during 1.4.1997 to31.12.1997 20,001- Rs. 25,000 - Rs. 5000 during 1.1.98 to 30.9.1998 - Balance by 30.6.1999--------------------------------------------------------------------------------(vi)Deposits above Rs. 25,000 - Rs. 3500 during 1.4.1997 to 1.12.1997 - Rs. 8000 during 1.1.98 to 30.9.1998 5. The company could not make the payment according to the scheme sanctioned on 20.5.1997 and now company has filed an application C.A.No. 9 of 2005-CLB duly supported by an affidavit seeking approval of this bench for extension of time of repayment as approved by the Company Law Board vide order dated 20.5.1997.
6. The company in its application has stated that as per scheme sanctioned by the Hon'ble Company Law Board, a sum of Rs. 758.56 lakhs was paid till February 2005 out of total deposits of Rs. 1031 lakhs which comes to around 75% of the total amount. The balance amount of Rs. 272.84 lakhs and interest thereon remains to be paid. The. above balance of Rs. 272.8-1 lakhs and interest thereon could not be paid as approved by Company Law Board on the following grounds:- (i) That the company started incurring losses due to recession in the industry and also due to force majure i.e. the flood for which the factory including building, plant and machinery got heavily damaged for which there was no insurance as the area was not at all flood prone area.
(ii) Due to financial constraints and loss of business, the company could not make the payment to its depositors in time.
(iii) The main product constituting approximately 70-75% of the Companies sales is medium density fibre Board (hereinafter referred to as MDF) continued to suffer a slow down in off take because of very severe recessionary trend that has been plugging the building material industry (As per NCAER figures, wood product based industry had negative growth of (-ve) 26% during 97-98). This alongwith other reasons affected the Additional sales budgeted by the company.
(iv) Due to loss in the earlier 18 months, cash loss of Rs. 10 crore, the company had been facing acute shortage of working funds, this got further aggravated due to compulsory payments to the depositors under Section 138 of the N.I. Act and in compassionate grounds that is sickness, marriages, old age etc.
(v) That the fact that depreciating currency of South East Asian Countries made there products cheaper in the Indian marked by 30-35% due to which the company had tough competition to MDF material.
7. It is further stated by the learned counsel of the company that the company as per earlier sanctioned scheme has paid to its various depositors from April 1997 to February 2005 a sum of Rs. 758.56 lakhs to 5229 depositors out of Rs. 1031 lakhs due to 7100 depositors.
As on 28.2.2005 the outstanding depositors (category-wise) are as under:--------------------------------------------------------------------------------Category No. of Principal amount Interest Total-------------------------------------------------------------------------------0 - 5000 255 10.23 5.29 15.52-------------------------------------------------------------------------------5001 - 10,000 798 65.28 34.40 99.68-------------------------------------------------------------------------------10,001 - 15,000 581 64.28 37.32 101.60-------------------------------------------------------------------------------15,001 - 20,000 141 20.28 10.95 31.77-------------------------------------------------------------------------------20,001 - 25,000 8 1.27 0.54 1.81-------------------------------------------------------------------------------25,001 and above 88 110.56 61.37 172.93-------------------------------------------------------------------------------Total 1871 272.44 149.87 422.31------------------------------------------------------------------------------- 8. It is stated in the petition that now having survived through difficult phase and having established a brand image to reckon with and also with an understanding that the margins are going to be under pressure but with firm signs of upswing in economy the volume of sales will definitely go up, thus, there are strong chances of restructure the debt so as to financially and operationally revitalize to serve all stakeholders including the depositors on sustained basis. That due to better management and favourable market conditions the business of the applicant company has improved in terms of sales. The applicant company has also considerably reduced the loss incurred by the company and the future targets prospects of the applicant company is forward looking one and the applicant company hopes to be a profit making company in near future.
9. That in order to make the timely payment to its depositors the applicant company has entered into a further agreement of One Time Settlement (OTS) with ICICI Bank and as per the terms and conditions of the OTS the applicant company will be in a position to pay to its depositors. The OTS will provide for payment by the applicant company to its depositors beginning from 1.4.2005 till 31.3.2010.
10. That the applicant company is a going concern and has all the intentions to profitably and effectively run the applicant company and also to pay to its depositors. The applicant company as per its future prospects is willing to pay to its depositors in full.
(a) The interest due on the date of maturity of the FD till date of sanction for the scheme by the Hon'ble Company Law Board shall be @ 3% p.a. subject to the approval of this Hon'ble Board.
(b) The repayment shall commence w.e.f. 1.10.2005 and shall be payable in 10 six(6) monthly instalments.
(c) The future interest from the date of maturity till the date of payment shall be @ 3% p.a. on the reducing balance.
(d) The company will hold hardship committee meeting every quarter and to keep a sum of Rs. 2 lac per quarter for repayment of deposits in hardship cases like old age, marriage, sickness etc.
(e) The payment shall be made in the order of the date of maturity i.e. deposits which have matured earlier shall be paid before the deposits maturing at a later date.------------------------------------------------------------------------------------CATEGORY 6M 12M 18M 24 M 30 M 36 M 42 M 48 M 54 M 60 M TOTAL------------------------------------------------------------------------------------1000-5000 100% 15.525001-10000 15% 15% 15% 15% 15% 15% 10% 99.681001- 15% 15% 15% 15% 15% 15% 10% 101.615000 15.24 15.24 15.24 15.24 15.24 15.24 10.1615001- 10% 10% 10% 10% 15% 15% 15% 15% 31.7720000 3.17 3.17 3.18 3.18 4.76 4.76 4.77 4.7820001- 10% 10% 10% 10% 15% 15% 15% 15% 1.8125000 0.18 0.18 0.18 0.18 0.27 0.27 0.27 0.2825001- 10% 10% 10% 10% 15% 15% 15% 15% 11.3450000 1.13 1.13 1.13 1.14 1.70 1.70 1.70 1.7150001- 5% 5% 10% 10% 10% 10% 10% 10% 15% 15% 30.04100000 1.50 1.50 3.00 3.00 3.00 3.00 3.00 3.00 4.52 4.52100001- 5% 5% 10% 10% 10% 10% 10% 10% 15% 15% 130.551000000 6.52 6.53 13.05 13.05 13.05 13.05 13.05 13.05 19.60 19.60 58.21 42.70 50.73 50.74 52.97 52.97 42.93 22.82 24.12 24.12 422.31------------------------------------------------------------------------------------ 12. A hearing was held on 10.5.2005 and the scheme submitted by the company was discussed. Ms. Ranjana Roy Gawai, Advocate on behalf of the company explained the position and have stated that the company have so far been able to pay a sum of Rs. 758.56 lakhs to the investors till February, 2005. The total principle amount to be paid to the depositors as on 28.2.2005 is Rs. 272.84 lakhs. After hearing the counsel for the company the following directions were given:- 1. The payment schedule shall be reduced from 5 years to 4 years (48 months) with six monthly instalments.
2. There will be only five categories of depositors and the payment will be made as follows:-------------------------------------------------------------------------------------Category Within Within Within Within Within Within Within Within 6 mths. 12mths. 18 mths. 24 mths. 30 mths. 36 mths. 42 mths. 48 mths.-------------------------------------------------------------------------------------0-5000 100% - - - - - - --------------------------------------------------------------------------------------5001-10,000 20% 20% 15% 15% 10% 10% 10% --------------------------------------------------------------------------------------10,001-20,000 15% 15% 15% 15% 10% 10% 10% 10%-------------------------------------------------------------------------------------20,001-50,000 10% 10% 10% 10% 15% 15% 15% 15%-------------------------------------------------------------------------------------50,001 and 10% 10% 10% 10% 10% 15% 15% 20above------------------------------------------------------------------------------------- 3. The interest upto the date of maturity will be the contracted rate and thereafter @ 4% p.a. on reducing balance as against 3% p.a.
suggested by the company.
4. The repayment shall commence from 1710/2005 and shall be paid in eight (8) six-monthly instalments.
5. A sum of Rs. 1 lakh per month will be kept for hardship cases like old-age, marriage, sickness etc. The hardship meeting will be held every month and first meeting to be held latest by 30/7/2005.
6. Any shortfall in the implementation of the scheme shall be borne by the directors of the company and an affidavit to this effect will be submitted by the Joint Managing Director/ Managing Director of the company before the next date of hearing.
7. The gist of the scheme will be published in two leading Newspapers, one in English and one in Hindi circulating in the district of Faridabad mentioning the next date of hearing. The objections/suggestions of the depositors should reach at the registered office of the company within fifteen days from the date of publication in the Newspaper and copy thereof to the Bench Officer. Company Law Board, Northern Region Bench, Shasiri Bhawan.
Dr. Rajender Prasad Road, New Delhi.
8. A copy of this order be sent to the Registrar of Company. NCT of Delhi & Haryana for filing his objection/suggestion/status report, if any, within fifteen days from the date of this order.
9. The next hearing in the above matter will be held on 3^rd June.
2005 at 2.30 p.m. in Company Law; Board, Shastri Bhawan, Room No. 511, Shastri Bhawan, Dr. Rajender Prasad Road. New Delhi.
13. In compliance to the order dated 10.5.2005. Shri Arun Brar, Joint Managing Director of the company filed an affidavit stating that the notices have been published in two newspapers i.e. "The Statesman" in English language dated 16.5.2005 and in "Veerarjun" in Hindi language dated 16.5.2005. It is further stated in the affidavit that the copy of the order dated 11.5.2005 alongwith revised scheme has been served upon the Registrar of Companies, NCT of Delhi & Haryana. The Registrar of Companies, Delhi & Haryana has also sent his status report.
14. The case was fixed for hearing on 3/6/2005. At the time of hearing Joint Managing Director of the company, Representative of Registrar of Companies, Delhi & Haryana and one depositor was present. The scheme was discussed at length. Shri Ashok Kumar, depositor present in the hearing submitted that he has received some amount and Company Law Board should ensure that the revised scheme published in the news papers is implemented and no further extention be given. The learned counsel for the company submitted that Advertisement have been given in two newspapers and copy of the order was also served on the Registrar of Companies, NCT of Delhi & Haryana. The learned counsel further submitted that the company has further paid a sum of Rs. 12 lacs approximately to the depositors after filing of the revised scheme before the Hon'ble Bench. The company has also paid to the depositors who approached the Registrar of Companies, NCT of Delhi & Haryana.
15. The Registrar of Companies, NCT of Delhi & Haryana in his report has stated that he had filed a prosecution under Section 58A(10) of the Companies Act, 1956 against the company and its directors for non-compliance of Company Law Board order dated 20.5.1997 passed under Section 58A(9) of the Companies Act, 1956 in the Court of Chief Judicial Magistrate, Faridabad, Haryana and further submitted that this fact be considered on merits and the company will not claim any right or privilege before any Court for withdrawal/ dismissal of pending cases.
16. The learned counsel further submitted that the Registrar of Companies, NCT of Delhi & Haryana be directed to withdraw the case filed under Section 58A(10) in the court of Chief Metropolitan Magistrate, Faridabad, Haryana and if it is not possible, the Registrar of Companies, NCT of Delhi & Haryana be directed to request the Hon'ble Court of Chief Metropolitan Magistrate, Faridabad to keep the case in abeyance till the revised scheme is in implementation and the depositors are paid according to the revised scheme passed by the Hon'ble Company Law Board.
17. It is observed that the prosecution filed by the Registrar of Companies, NCT of Delhi & Haryana under Section 58A(10) of the Companies Act, 1956 before the Hon'ble Court of Chief Judicial Magistrate, Faridabad, Haryana is of criminal nature. This Bench cannot give any directions for withdrawal of the cases. It is open to the company to approach the courts for appropriate orders on the basis of revised sanctioned scheme.
18. The representative of the company agreed to implement the scheme w.e.f. 1^st October, 2005 and keep a sum of Rs. 1.00 lakhs per month for hardship cases like old age, marriage, medical etc. The rate of interest after the date of maturity Will be 4% instead of 3% suggested by the company.
19. I have gone through the record of this case and the report of Registrar of Companies and heard the representative of the Registrar of companies, NCT of Delhi & Haryana and the learned counsel for the company. Having regard to the interest of the depositors and also in public interest at large, I hereby revise the scheme and order as follows:- (i) The interest payable will be the contracted rate upto the date of maturity and thereafter @ 4% per annum simple after the date of maturity till the date of actual payment on reducing balance.
(ii) All deposits up to Rs. 5000/- payment will be made within six months from the date of commencement of the scheme alongwith the interest at the contracted rate till the date of maturiy and thereafter @ 4% till the date of actual payment.
(iii) All deposits from Rs. 5001/- to 10,000/- shall be paid within three and half year from the dale of commencement of the scheme in seven half yearly instalments i.e. 20% within 6 months, 20% within 12 months, 15% within 18 months, 15% within 24 months, 10% within 30 months, 10% within 36 months, 10% within 42 months. The interest for both pre and post maturity period will be paid along with last instalment.
(iv) All deposits from Rs. 10,001/- to 20,000/- shall be paid within four years from the dale of commencement of the scheme in eight half yearly instalments i.e. 15% within 6 months, 15% within 12 months, 15% within 18 months, 15% within 36%, 10% within 30 months, 10% within 36 months, 10% within 42 months and 10% within 48 months. The interest for both pre and post maturity period will be paid along with last instalment.
(v) All deposits from Rs. 20,001/- to 50,000/- shall be paid within four years from the date of commencement of the scheme in eight half yearly instalments i.e. 10% within 6 months, 10% within 12 months, 10% within 18 months, 10% within 24 months, 15% within 30 months, 15% within 36 months, 15% within 42 months, 15% within 48 months.
The interest for both pre and post maturity period will be paid along with last instalments.
(vi) All deposits from Rs. 50,001/- and above shall be paid within four years from the date of commencement of the scheme in eight half-yearly instalments i.e. 10% within 6 months, 10% within 12 months, 10% within 18 months, 10% within 24 months, 10% within 30 mounts, 15% within 36 months, 15% within 42 months and d20% within 48 months. The interest for both pre and post maturity period will be paid along with last instalment.
(viii) The scheme shall be effective from the 1^st day of October, 2005.
20. The Company will adhere 10 the following guidelines in implementing the scheme:- a) While repaying the deposits as per the scheme above, all individual deposits will be treated as such and shall not be clubbed if any depositor holds more than one deposit for the purpose of arriving at the amount as fixed in the scheme.
b) The payment shall be made in the order of date of maturity i.e.
deposits which have matured earlier shall be paid before deposits maturing at a later date.
d) Notwithstanding the aforesaid scheme, the company will be at liberty to make repayment of deposits along with the interest thereon before the stipulated time, if funds are available.
e) The Company shall make repayment of deposit and interest according to the above scheme by cheque/demand draft/pay order, which shall be sent by registered post/couriers/speed post to the respective depositors.
f) The Company will file an affidavit once in six months on the stale of repayment deposits, the first on 1^st January 2006 with Company Law Board, Northern Bench. New Delhi with copy to the Registrar of Companies. NCT of Delhi & Haryana and also Department of Company Affairs (I.P. Cell), Shastri Bhawan, New Delhi.
21. During the hearing, the Company had undertaken to keep a sum of Rs. 1.00 lakh per month for payment towards hardship cases like old age, senior citizen, medical, marriage etc. in addition to the amount needed for repayment as per the schedule of repayment. The hardship committee consisting of Sh. Arun Barar, Jt. Managing Director of the company or his nominee. Sh. K.L. Mangtani, Bench Officer, Company Law Board and Ms. Ranjana Roy Gawai, Advocate will consider applications, received from depositors expressing hardships. This committee will meet every calendar month to consider such cases and the amount so decided by the Committee shall be disbursed within 21 days thereafter. The first meeting will be held in the month of July, 2005.
22. To ensure that this payment schedule is kept up, Sh. Arun Barar, Jt. Managing Director shall file an affidavit of undertaking that the above scheme shall be implemented without fail, with a copy to the Registrar of Companies, NCT of Delhi & Haryana and Department of Company Affairs (I.P. Cell), New Delhi within fifteen days from the receipt of this order.
23. Any failure to comply with this order shall attract penal provisions contained in Section 58A (10) of the Companies Act, 1956 and Section 274 (1) (g) of the Companies Act, 1956.
24. The Company shall within three weeks, of release of this order send a copy of the operative portion of this order to all the depositors and file an affidavit of compliance within one month.
25. A copy of this order shall be sent by the Bench Officer to the Secretary, Department of Company Affairs, New Delhi and I.P. Cell, Department of Company Affairs, New Delhi for information and necessary action.
26. A copy of this order shall also be sent to the Registrar of Companies, NCT of Delhi & Haryana for taking necessary action in case of non-compliance of this order.