NCLT Delhi Cancels 9.84 lakh Neel Padam Shares After Finding Company Used Own Funds For Allotment

The National Company Law Tribunal (NCLT) at Delhi has cancelled 9.84 lakh shares and restored promoter control of Neel Padam Builders after finding that the company used its own money to create a false impression of fresh share subscriptions. A coram of Judicial Member Ashok Kumar Bhardwaj and Technical Member Reena Sinha Puri held that Neel Padam Builders withdrew Rs 45 lakh from its own bank account in late November 2009 and redeposited the same amount days later to match the consideration shown for a share allotment. The tribunal found that this did not reflect any real investment and observed that the transaction only created an “artificial trail” rather than a genuine infusion of capital. "The said statement(reply) reflects a recurring pattern of withdrawal and immediate redeposit, which prima facie indicates the absence of genuine consideration, the recycling of the Company's own funds, and the creation of an artificial trail intended to lend legitimacy to a premeditated and pre-planned allotment.", it said. The findings came in a pending oppression and mismanagement case filed by promoter-family members Neelamber Agrawal and Meenakshi Agrawal, who along with other consenting shareholders held 82.9% of the company's equity before two disputed allotments in 2009 reduced them to a minority. The tribunal set aside both allotments, totalling 9.84 lakh equity shares, and directed restoration of the shareholding and capital structure to the position existing prior to November 2009, thereby reinstating the promoters' majority. The petitioner-Agarwals said they controlled the company and its board until Ashok Kumar Agrawal, a relative, unlawfully assumed control. They argued that his directorship had automatically lapsed due to non-attendance at board meetings, yet he continued to act as a director, increased the authorised share capital and allotted shares to himself and associates without notice to the majority shareholders. Ashok Agarwal and others denied wrongdoing and claimed the petitioners had voluntarily resigned after financial irregularities, including unauthorised withdrawals of over Rs 3 crore. They maintained that the share allotments were approved through valid board and shareholder resolutions and that the subscription amounts were duly paid. After examining bank records, the tribunal rejected this defence. It noted that Rs 45 lakh was withdrawn on November 26 and 27, 2009, and redeposited on December 9, 2009, the very date on which the second allotment was shown as paid for. The bench held that the allotment was "recycling of the company's own funds" and was therefore a sham. The tribunal also found that the company's board had been unlawfully reconstituted. It held that Narendra Singh, who filed statutory forms before the Registrar of Companies, was never validly appointed as a director. Despite this, he filed Form 32 showing his own appointment and that of others. The bench ruled that a person who is not a lawful director cannot assume authority to file statutory forms or alter the board structure of a company The tribunal held that all sale deeds, lease deeds and agreements to sell executed after September 17, 2009 were non-est (void) in law, as they were signed by an unauthorised board. It ordered reversal of all such instruments and appointed a forensic auditor to examine every transaction. The restored board was empowered to either recover the land and refund buyers with 12% interest or revalidate deeds where purchasers were found to be bona fide and had paid fair market value.Case Title: Shri Neelamber Agrawal and Anr. v. Neel Padam Builders Pvt. Ltd. and Ors. Case Number: Company Petition No. 120/(ND)/2009For Applicant: Advocates Abhishek Anand, Pawan Sharma, and Anuja ShahClick Here To Read/Download Order

NCLT Delhi Cancels 9.84 lakh Neel Padam Shares After Finding Company Used Own Funds For Allotment

Shivangi Bhardwaj

Tags