WHY NCLT HAS NOT USED ITS POWER TO SAFEGUARD THE INTEREST OF DEPOSITORS IN UNITECH CASE?

WHY NCLT HAS NOT USED ITS POWER TO SAFEGUARD THE INTEREST OF DEPOSITORS IN UNITECH CASE?

The National Company Law Tribunal (NCLT), the new avatar of Company Law Board (CLB), while dismissing petition filed by Unitech Ltd, has asked "depositors to pursue their remedies as per the law". The NCLT also suggested the concerned Registrar of Companies (RoC) to take appropriate action against the company under section 74(3) of the Companies Act, 2013. Action under this section includes fine of at least Rs1 crore (maximum Rs10 crore) and imprisonment for up to seven years for company official or a fine between Rs25 lakh to Rs2 crore. However, as per section 47 of the Company Law Board Regulations, 1991, the Bench is deemed as a Court or lawful authority for prosecution or punishment of a person who wilfully disobeys any direction or order of such Bench. Therefore, the question here is why the Bench did not use its powers to act against Unitech.

In an order on 4 July 2016, BSV Prakash Kumar, Member (Judicial) of the NCLT said, "When this petitioner company could not repay Rs30 crore of money in the time given by this Bench as asked by the company on 11 January 2016, it could not be possible for the company to clear Rs550 crore dues payable to the depositors in near future."

"Seeing the developments so far taken place in this case, this Bench is of the opinion that this company could not be in a position to repay the depositors even if further time is extended; therefore this Bench, for having the company defaulted complying with the order dated 11 March 2016, dismissed the petition (CP (T) 10/18/2015) leaving it open to the depositors to pursue their remedies as per law. Accordingly, this Bench hereby suggests RoC concerned to take appropriate action against the company u/s 74(3) of the Companies Act, 2013," the Bench added.

Earlier on 11 March 2016, the NCLT had passed an order directing Unitech to repay Rs30 crore of depositor's money on or before 30 June 2016 in three instalments. The company's managing director (MD) had given an undertaking through an affidavit, to repay Rs30 crore between 1st February to 30 September 2016 to depositors who have invested up to Rs25,000, Rs50,000 and Rs1 lakh and whose deposits have matured up to 31 March 2016 as per the original date of maturity. However, the Bench did not agree with the proposal.

The MD of Unitech then filed another affidavit on 11 March 2016 undertaking to repay Rs30 crore in three monthly instalments till 30 June 2016. But Unitech did not pay any money.

Since 14 May 2015, the Bench said, it has given several adjournments in this matter hoping that the company wold repay money to the depositors at least as per the undertaking given by the company. "But, till date, no undertaking has been complied with. In the past, this Bench even appointed a Sale Committee on 15 July 2015 to generate funds by selling the properties of the company, but no progress has taken place in selling the properties of the company," the Bench noted.

It then dismissed the petition filed by Unitech and asked depositors to pursue other legal remedies to recover their invested money. The Bench also suggested the RoC to take appropriate action against Unitech under section 74(3) of the Companies Act, 2013. 

Here is what section 74(3) of the Companies Act, 2013 says...

Section 74- Repayment of deposits, etc., accepted before commencement of this Act. 

(3) If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than Rs1 crore rupees but which may extend to Rs10 crore and every officer of the company, who is in default, shall be punishable with imprisonment, which may extend to seven years or with fine which shall not be less than Rs25 lakh but which may extend to Rs2 crore, or with both.

It is really perplexing why the bench has asked the depositors to use other Remedies and advised the roc to take action under section 74. But why the bench has not used its own power given under regulation 47?

What depositors of Unitech can do now?

As per Section 10F of the Companies Act, any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order.

Depositors can request the concerned RoC to initiate action against Unitech under section 74(3) of the Companies Act, 2013.

The depositors can also demand for the review of the above NCLT decision in Form No 9 final order not being an interlocutory order, to the Tribunal under Regulation 47 (2) of NCLT .

Regulation 47 of NCLT- Review of decision

(1) The Tribunal may at any time within two years from the date of the order, with a view to rectifying any mistake apparent from the record amend any order passed by it, and shall make such amendment suo motu, or if the mistake is brought to its  notice by the parties in terms of sub-section (2) of section 420:

Provided that no such amendment shall be made in respect of any order against which an appeal has been preferred under the Act.

(2) Any person considering himself aggrieved by any order of the Tribunal from which no appeal is allowed or from which appeal is allowed, but has not been preferred and who on account of some mistake or error apparent on the face of the record, or for any other sufficient reason, desires to obtain a review of the order made against him, may apply in Form No. 9 of these rules or review of a final order not being an interlocutory order, to the Tribunal.

(3) Where it appears to the Tribunal that there is not sufficient ground for a review, it shall reject the petition or application.

(4) Where Tribunal is of the opinion that the petition or application for review should  be granted, it shall grant the same: Provided that no such petition or application shall be granted without previous notice to the opposite party to enable him to appear and be heard in support of the  order, a review of which is applied for.

COURTESY – Money Life India