M/s Helios & Matheson Information Technology Limited - Liquidation order

Liquidation Order

1. M/s Helios & Matheson Information Technology Limited [for short, 'the Company'] having its Registered Office at Mahindra World City carrying on the business of developing, producing and selling computer, communication software, hardware and other related products for clients in India and carrying on the business of providing training, technical, manpower and other consultancy related to information technology to both Indian and overseas clients, has the authorized share capital of Rs. 50,00,00,000/- consisting of 4,00,00,000 equity share of Rs.10/-.

2. From the materials available on record, it is seen that the Company had engaged the services of financial brokers such as Bajaj Capital, Mahavir Group, Almondz Global Securities Limited, Western Securities for mobilising fixed deposits from the public on commission basis. In such transaction, the Company, through its agents as well as directly from the public, had received a total amount of Rs.55,25,70,000/- as deposits from 6540 depositors all over the country.

3.      While so, lot of complaints started pouring in regarding non-refund of the moneys invested by the depositors. Despite the statutory notice issued by the depositors and issuance of notice under the provisions of the Negotiable Instruments Act demanding payment, the amounts remain unpaid. Hence, some of the aggrieved depositors have approached this Court with the present petitions invoking Section 433 (e) and 434(1)(a) read with Section 433(f) of the Companies Act, 1956 for ordering winding up of the Company and for appointment of Official Liquidator to take charge of the assets thereof.

4. Pending proceedings, on 01.4.2015, Economic Offences Wing – II, Chennai, registered a case against the Company in Crime No. 5 of 2015 under Section 5 of the TNPID Act and 420 IPC. On investigation, the authorities, finding that the Company failed to honour the promises made to the depositors and defaulted without repaying the deposit amount and interest and also finding that it has liabilities with Banks and depositors to the tune of Rs.245,02,03,434.82, froze the accounts of the Company. The authorities also found that the company is having business with a turnover

of Rs.448.95 Crores.

5. In such circumstance, the Company filed petition under Section 482 Cr.P.C. in Criminal Original Petition No. 11760 of 2015 seeking for a direction to the authorities to de-freeze its accounts with various Banks and also the accounts of the other petitioners and in such proceeding, the said petition was clubbed with the main Company Petitions.

6.      On 27.4.2015, this Court directed the respondent Company to submit a statement or scheme of repayment for the depositors. Accordingly, the respondent filed a memo on 29.4.2015 along with a repayment scheme to show the bona fide in settling all legitimate dues of stakeholders and also to show that it has never been its intention to defraud any person. Significantly, the said Scheme was subsequently revised by the respondent Company by its affidavit dated 25.7.2015 in line with the new provisions of the Companies Act, 2013.

7.      Meanwhile, the Company filed an application being C.A. No. 561 of 2015 seeking to accept the schedule of re-payment under a Scheme drawn by them and this Court, by order dated 03.6.2015, directed for publication in All India Edition of Times with regard to the Scheme besides directing the Company to furnish copy of the Scheme to the depositors on request. In view of the above proposal made by the Company for settling the depositors, this Court also directed the Police to proceed with further investigation into the complaints without affecting the personal liberty of the individuals and adjourned the case to 13.7.2015. Pending, another application was taken out by the Company in C.A. No. 624 of 2015 seeking for a direction to the Crime Branch, EOW – I, Division – VII of State of Maharashtra, not to harass its directors and to abide by and follow the directions of this Court in

the earlier order. Considering the facts and circumstances of the case and taking into consideration the fact that the earlier order passed on 03.6.2015, restrained the Police from proceeding against the personal liberty of the individuals of the Company, this Court, vide order dated 23.6.2015, clarified that the said order does not confine to Tamil Nadu alone but it applies throughout the State wherever the depositors make a complaint.

8. In the interregnum, the Company invoked writ jurisdiction under Article 226 of the Constitution of India in W.P. No. 14664 of 2015 for declaration that registration of the above FIR was without jurisdiction and the same was dismissed by order dated 06.8.2015. The challenge made in W.A. No. 1227 of 2015 before the Division Bench also met the same fate on 28.8.2015.

9.      When the matter stood thus, serendipitously, even before the Hon'ble Supreme Court, the Company in liquidation had obtained an order of protection on 24.9.2015 in Special Leave to Appeal (Crl.) No. 7961 of 2015 by making a statement to the effect that it is working out for a scheme to revive the Company to its original shape. Again, the respondent tried its luck before the Hon'ble Supreme Court in Criminal Appeal No. 1270 of 2015 wherein, Their Lordships, on 01.10.2015, passed a conditional order to the effect that a sum of Rs.10 Crores should be deposited within four weeks and the balance amount of Rs. 38 Crores within one year from the date of order, in equal installments failing which proceedings could be revived for taking coercive action. By virtue of the said order, with a view to enable the investors to deposit money, certain accounts of the Company in liquidation, were directed to be de-freezed by this Court vide order dated 09.10.2015, with further observation that weekly statement of account should be furnished. Again, the matter was called in the Hon'ble Supreme Court on 30.10.2015 and because the Company had not yet met the deadline as mandated by its earlier order, the Criminal Appeal itself was dismissed.

10.    Since the above direction of the Hon'ble Supreme Court dated 01.10.2015 was not complied with, this Court, after hearing the Company Petitions extensively, reserved orders on 30.10.2015. Thereafter, it is only at the instance of the respondent company, based on the letter dated 04.11.2015 circulated by the learned counsel, the matter was posted for clarification on 06.11.2015. On that day, learned counsel for the respondent Company, besides expressing hope in honouring the debts, with a view to show his bona fide, produced two Demand Drafts for a sum of Rs.5 Crores and Rs.50 Lakhs, which are lying in the credit of C.P. Nos. 143 to 145 of 2015 and the matter stood adjourned to 20.11.2015 for further clarification. After payment of the said amount of Rs.5,50,00,000/- as against the conditional order to deposit Rs. 10 Crores, the respondent Company, somehow or other, managed to drag on the matter. In fact, learned counsel for the respondent company repeatedly requested for time representing across the bar that the Management is willing to settle the dues of the depositors but the promises made were not kept up by paying the amounts as per the earlier direction.

11.     While so, on 18.12.2015, the respondent Company has filed a memo stating that properties, which are secured assets, standing in the names of the wives of the Directors were sold by them and the proceeds, after settlement with the concerned Banks, were deposited to this Court.

12.    Simultaneously, the Investigating Officer, viz., the Deputy Superintendent of Police, EOW – II, has filed Status Report on 18.12.2015 to the effect that the respondent Company received a sum of Rs.55,25,70,000/- as deposit from 6540 depositors all over India of which, 1046 depositors have lodged complaints against the Company before EOW to the tune of Rs.46,04,42,000/- throughout the country and the interest defaulted by the company is totally to the tune of Rs.72,81,667/- to the depositors. It is further stated in the report that by virtue of the orders of this Court dated 03.6.2015 and 23.6.2015 in C.A. No. 561 of 2015 not to arrest the Directors, some of the Directors, who are A.4 to A.6, have not appeared for interrogation and not co-operated for investigation. For effective investigation to protect the interest of the depositors, the Investigating Officer also sought for setting aside the above orders dated 03.6.2015 and 23.6.2015 passed in C.A. No. 561 of 2015.

13.      At this juncture, this Court finds it necessary to mention that during the course of proceedings, the learned counsel for the respondent Company also submitted that the Management could generate funds from the subsidiary Company functioning in New York but not even a whisper is made regarding the details of the same. The respondent Company, on more than one occasion, though promised to repay the depositors in a phased manner, has not so far disclosed the full details regarding the source of funds for such repayment. Nor the whereabouts of the deposits received is exposed.  On the other hand, the respondent only attempted to deviate and confuse the entire issue by submitting a revised scheme, which is clearly unworkable. The attitude of the respondent Company by repeatedly making representations and requesting time before this Court as well as the Hon'ble Supreme Court reveals that the Management has acted in a surreptitious manner so as to purchase breathing time to sell the properties. It is also pertinent to note that the respondent Company, undaunted by the pendency of several proceedings before various Courts across the country, has gone to the extent of selling the properties clandestinely subsequent to the orders, ie., on 24.11.2015 and 06.11.2015. The said act of selling the properties shows that the respondent Company has no respect for the Court orders and it is not only flagrant violation of the orders of this Court but is also contumacious. At the worst, they ought to have deposited the entire amount to the credit of the petition. The reason given by the learned counsel that the said properties were secured assets, does not seem to be genuine. No one can be allowed to play hide and seek with the Court.

14.     Paragraphs 4 and 5 of the Status Report filed by the Investigation Officer speak about the sale of the two properties and disbursement of the sale proceeds. It is seen that the property standing in the name of Tmt. Annapurna, W/o A-2 G. Muralikrishna, was sold for Rs. 11 Crores whereas a sum of Rs. 1 Crore only was paid to the credit of this case. The break-up of the disbursement would show that a sum of Rs. 1,45,00,000/- was paid towards Advance Tax and it has been shown as if some repayment of loans was paid for which no proof is produced. Likewise, the other property belonging to one Tmt. Padmaja, W/o A-7 V. Ramachandran, has been sold for Rs.15 Crores of which, an amount of Rs. 5 Crores alone was paid to the credit of the petition. In that sale also, a sum of Rs.1,50,00,000/- has been paid towards Advance Tax. In both the sales, an amount of Rs. 14 Lakhs and Rs. 54 Lakhs respectively is shown as balance and the same stands undisputed.

15.     It cannot be denied that payment of Advance Tax is statutory. But, in the circumstances of the given case, this Court is of the opinion that the payment of Advance Tax of Rs. 2,95,00,000/- could have been deferred. Further more, the balance amount of Rs.68 Lakhs has not been brought to the knowledge of this Court by the respondent. Going by the records, it is seen that had the above amount of Rs. 3,63,00,000/- been pumped in, some of the depositors could have been cleared. Therefore, it is clear that there is no bona fide in the attitude of the respondent.

16.    The failure of the respondent Company to refund the deposits made with them, has, indeed, led to public outcry against the scam on account of the huge amount that was collected by the respondent by defrauding a very large section of the public. From the status report, it is clear that the problem is extremely complex. But inspite of long rope given to them, the company in liquidation, though consistently defending to be a growing concern, has not arrived at any settlement.

17.    Therefore, it is construed from the available facts and circumstances and the documents produced before this Court that the respondent Company has become commercially insolvent and it is unable to clear its dues to the petitioners herein and other depositors. Obviously, in the considered opinion of this Court, the Company has siphoned off the funds and it appears that the respondent company is unreliable and it cannot be believed any further.

18.    Insofar as the appointment of Official Liquidator is concerned, indisputably, it is clear that the Company does not own any tangible assets and even the intellectual properties such as books and papers, have already been taken by the EOW. However, it is seen that despite several coercive proceedings, the Company has been functioning and the employees are said to be paid by their clients. But the continuous assurances by the respondent Company before the Court of law is a clear indication that the Management continues to indulge in prevarication and is using technical jargons to defeat the rights of the depositors. Therefore, to meet the ends of justice, this Court is of the view that it is inevitable to appoint Official Liquidator to take over the affairs of the respondent Company so that monies which are truly realizable are not frittered away by further siphoning of the funds.

19.    In view of the veracity involved in the case, I am of the opinion that the petitioners have made out a prima facie case for admission of the Company Petitions. In such circumstance, this Court is left with no other option but to pass the following common order in all the above Company Petitions:-

Admit.

(i)  Notice on the Court Notice Board / Company.

(ii)  Notice to the respondent.

(iii)  Notice to the Registrar of Companies, Chennai

(iv)  Affixture of notice at the premises of the Registered Office of the respondent Company.

(v) The petitioners are directed to publish the Company Petitions in the National Editions of “THE HINDU” and  “NEW INDIAN EXPRESS”, and in the Central (Tamil Nadu) Government Gazette fixing the date of hearing on 18.03.2016.

(vi) The petitioners are directed to publish the Company Petitions giving at least 21 days clear advance notice.

(vii)  The Official Liquidator, High Court, Madras, is appointed as Provisional Liquidator and is directed to take charge of the assets of the respondent Company. The Ex-Directors of the respondent Company are directed to file their statement of affairs before the Official Liquidator within a period of 21 days.

20.    Promises are like crying babies in a theater, they should be carried out at once. The Scheme sought to be proposed, in the instant case, seems to be an eyewash and the attempt of the respondent Company to conceal, swallow its words and representations cannot be permitted since it is a deliberate attempt to hoodwink and bypass the Court orders. This Court is also of the opinion that vast amount may have been stashed away. Keeping in view the seriousness in the allegations and having regard to the nature of fraud involved and the investigation, its slow pace so far, and also the non-seriousness on the part of the respondent Company, this Court is of the considered opinion that there is a need to entrust this matter to the Serious Fraud Investigation.

21.    Accordingly, this Court suo motu directs the Ministry of Corporate Affairs to direct the Serious Fraud Investigating Office to inquire into the affairs of the respondent Company and the Serious Fraud Investigating Office is directed to file a report before this Court on or before 18.3.2016.

22.    Consequent upon passing of such order as above in all the above Company Petitions, the remaining applications pending in these petitions are closed.

C.P. Nos. 143 to 145 of 2015, 414 to 416 of 2015

So Now SFIO is investigating the fraud done by company

Official liquidator attached to High Court of Chennai appointed

Thanks & Regards

Dr. Zulfiqar Ali Khan, M.A., M.L.,M.Phil(Law),Ph.D

Advocate & Commissioner of Oaths

No. 462,  Addl law Chambers

High Court of Madras

Chennai- 600 104

Blog: http://zulfiqarlegal.blogspot.com

MB: 9884102961 / 9444412961