1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION rpa COMPANY PETITION NO. 175 OF 2007 In the matter of Section 433 and 434 of the Companies Act, 1956; And In the matter of Winding up of the Company of M/s. Manubhai Mangaldas Securities Pvt. Ltd. Having its office at Rajbahadur, Mansion 14, Ambala Doshi Marg, Mumbai 400 023 and also situated at Heritage Plaza, 4th Floor, Opp. Indian Oil Nagar, J. P. Road, Andheri (W), Mumbai 400 053. Smt. Sangeeta W/o. Mahavir Sarawagi .. Petitioner. V/s. M/s. Manubhai Mangaldas Securities Pvt. Ltd. .. Respondents .... Mr. Tushar Bhavsar i/b. Mr. Ashok Sarogi for the Petitioner. Ms. Jerestine Sidhwa, Ms. Sowmya Shrikrishnan, Mr. Vinod Solanki, Mrs. Anila V. Acharya, Ms. Shilpa Baria i/b. Tijoriwala & Co. for the Respondents. .... CORAM : S. J. KATHAWALLA, J. DATE : FEBRUARY 18, 2010. P.C. By this Company Petition, the Petitioner is seeking winding up of the Respondent Company M/s. Manubhai 2 Mangaldas Securities Pvt. Ltd., (the Company). 2. As stated in the Petition, the Petitioner is carrying on her business as a sole proprietress in the firm name and style of M/s. Shree Salaser Securities and Investment and had been recognized as a stock broker by the Securities and Exchange Board of India for the purpose of dealing in shares. According to the Petitioner, the Company had accepted the Petitioner to be a sub- broker to deal in the shares with respective customers of the Petitioner and as such the Petitioner had been entering into necessary transactions with her customers through the Company. 3. According to the Petitioner, in the normal course the Petitioner had been making transactions through the Company and as such on account of various such transactions being made, a huge amount always remained due and payable by the Company to the firm of the Petitioner. According to the Petitioner, the Company suddenly stopped the arrangements between the Petitioner and the Company which resulted in huge financial loss to the firm of the Petitioner. Since the said act on the part of the Directors of the Company amounted to an offence, the Petitioner 3 filed a private complaint before the Judicial Magistrate First Class, Third Court, Kalyan being Criminal Case No. 81 of 2004. On the basis of the order of the Magistrate, an FIR dated 21st March, 2004 has been registered by the Dombivli Police Station against the Company under the provisions of Section 420, 406, 504, 468, 471 and 506 read with section 34 of the Indian Penal Code. 4. According to the Petitioner, during the pendency of the said Criminal proceeding the Company and its Directors came forward to settle the matter. They represented to the Petitioner that the Company have to collect a sum of Rs. 95,23,705.13 paise from Shree Balaji Enterprises and as such instead of receiving the amounts from the said firm of Shree Balaji Enterprises the Company has authorized the said Shree Balaji Enterprises to make the payment in respect of the said amounts directly to the firm of the Petitioner. Accordingly, Shree Balaji Enterprises issued a cross bearer cheque in favour of the Company being cheque dated 17th June, 2004 bearing No. 628559 for Rs. 95,23,705.13 paise which in turn came to be handed over by the Company to the Petitioner. According to the Petitioner when the said cheque was presented for encashment, the same was returned by the Bankers of Shree 4 Balaji Enterprises for "want of sufficient funds" 5. According to the Petitioner, the aforesaid facts are sufficient enough to show that the Company has accepted the liability to the tune of Rs. 95,23,705.13 paise and had accordingly got a cheque issued to the Petitioner by Shree Balaji Enterprises which got dishonoured upon presentation. The Petitioner issued a statutory notice to the Company dated 2nd July, 2004 which was replied on 5th August, 2004 by the Advocate for the Company wherein the liability to make payments to the Petitioner was wrongly denied. The Petitioner has, therefore, submitted that the Company is liable to pay a sum of Rs. 95,23,705.13 paise to the Petitioner. The Petitioner has submitted that it is therefore just, necessary and equitable that the Company be ordered to be wound up under the provisions of the Companies Act, 1956. 6. The Company has, in its affidavit-in-reply dated 1st August, 2007, pointed out that though the above Company Petition was filed by the Petitioner on 28th August, 2006, the same was served on the Company ten months thereafter i.e. on 26th June, 2007. It is contended that the Petitioner has filed the 5 petition with ulterior motives and malafide intentions and the petition does not disclose any facts that any debt is due by the Company to the Petitioner. It is pointed out that a perusal of Exhibit F i.e. the particulars of claim annexed at page 39 of the Petition shows that the alleged claim of the Petitioner is in the nature of damages. The amounts allegedly due to the Petitioner are "expected earnings for 2004" which are imaginary and fanciful. It is submitted that the alleged cheque issued by Shree Balaji Enterprises is a brought-up document prepared in collusion by and between the Petitioner and one Anoop K. Sanganeria, Proprietor of Shree Balaji Enterprises, who is the drawer of the said cheque. The drawee of the cheque is not the Petitioner, but, some fictitious Company having its name similar to that of the Company i.e. Manubhai Mangaldas Securities. It is submitted that the entire exercise has been undertaken by the Petitioner to foist a non-existent liability on the Company. 7. The Company has, in its affidavit-in-reply, further submitted that the Company is the authorized member of the Stock Exchange, Mumbai (BSE) and also the member of the National Stock Exchange (NSE). The Company has been issued 6 the main broker card and the Company is in the business since the year 1986. The Petitioner approached the Company to act under them, as a sub-broker. By letters dated 3rd May, 2002, the Company accepted her as its sub-broker. The Proprietor of the Petitioner applied to the SEBI which allotted Sub-Broker’s Certificate to her. The Sub-Brokers are registered with the main broker and are bound by a Sub-Broker Agreement. Under the rules all transactions for purchase and sale of equity shares done by the Sub-broker are through the main broker. The Petitioner started doing business of her clients on the bolt allotted to her. All the transactions regarding her business were noted and accounted for in a ledger maintained by both the parties. At the end of the settlement period, the Company used to carry out the settlement of account as per the Rules and Regulations of BSE, NSE and SEBI. 8. According to the Company, the Petitioner initially started its business and functioned as sub-broker at Kalbadevi and thereafter shifted her business to Dombivili, District-Thane. Initially there were no complaints against the Petitioner. However, subsequently the working of the Petitioner became irregular, improper and in breach of the SEBI rules and other guidelines. In 7 October 2002 Mr. Mahavir Saraogi, the husband and Power of Attorney holder of the Petitioner, opened an account with the Company and one such account was account No. M-13 in Future & Optiion (“F & O”) Segment. It was his personal account. The said Mahavir Saraogi joined hands with his wife i.e. the proprietor of the Petitioner firm, and in collusion and conspiracy with her, misused the funds of their clients while trading through the said personal account. The said fraudulent trading on their part resulted into outstanding balance in the Petitioners firm and its clients’ account. 9. As per the Rules of SEBI, the main broker is responsible for all lapses, wrongdoings and omissions of the sub- broker. Not only this, in the event of any shortfall in any clients’ account, the main broker has to make good the shortfall with the clearing house. 10. According to the Company several complaints were received against the Petitioner from clients, particulars of which are set out in paragraph 14 of the affidavit-in-reply and copies of the complaints are annexed as Exhibits 1 to 4A to the said reply. 8 After receiving several complaints, the Company realised the seriousness of the entire matter and thereafter appointed an independent auditor to ascertain the wrongdoing and to carry out internal audit of the transactions done by the Petitioner. During the course of audit, the auditor found severe irregularities and lapses in the funding of the Petitioner which were enlisted by the Auditor vide their report dated 12th June, 2003. In view thereof, the Company was constrained to discontinue the Petitioner as a sub-broker and informed the Petitioner by the letter dated 18th October, 2003. The Company also published in the newspaper the fact relating to the discontinuation of the sub-brokership of the Petitioner as can be seen from Exhibits-8 and 9 annexed to the reply. 11. According to the Company, the aforesaid action taken by the Company unnerved the Petitioner and her husband, who started filing false and frivolous complaints against the Company including a complaint for alleged abduction. The Directors of the Company had to obtain anticipatory bail in the said false and frivolous complaint, lodged by the Petitioner with a particular police station. The Petitioner further plotted against the company 9 and its Directors to fraudulently accuse them of a crime pertaining to the dishonour of cheque. After filing several complaints wherein the Respondents have taken out several proceedings for quashing of the same, the Petitioner has filed the present winding up Petition which is one more totally fraudulent action against the Company to extort pressure on its Directors. It is, therefore, submitted that the above Company Petition deserves to be dismissed with costs. 12. I have considered the submissions advanced by the learned Advocates for the parties. The particulars of the claims annexed at Exhibit-F to the Petition shows that the Petitioner has just claimed certain amounts without giving any particulars. For example, the first item/entry in the particulars of claim pertains to “Trading & Delivery of shares March, 2003”. As against the said item/entry the Petitioner has claimed an amount of Rs. 76,71,03,527.17 paise, without giving any particulars as regards the trading and delivery of shares in March, 2003. Against the entry/item "Expect Trading & Delivery turnover March 2004” an amount of Rs. 8,28,00,000,00, is shown which appears to be in the nature of damages. Even in item No. 5, the amount of Rs. 10 85,53,240/- claimed for “Profit Ratio as per last year 10.33 percent per crore not earned by part of the Deficiency negligence of company” is in the nature of damages. None of the amounts claimed are supported by any particulars/documents. A winding up petition certainly cannot be maintained on such claims which are lacking in particulars and not supported by any documents and are in the nature of damages. 13. Again the cheque of Rs. 95,23,705.13 paise issued by the said Shree Balaji Enterprises in the name of M/s. Manubhai Mangaldas Securities appears to be a instrument which is not issued by the Company. It is difficult to accept that the amount of Rs. 95,23,705.13 paise allegedly due and payable by the Company to the Petitioner was exactly the same amount which was due and payable by the said Shree Balaji Enterprises to the Company. Again, if the arrangement as alleged, was that the said Shree Balaji Enterprises would directly pay the Petitioner the amount which was to be paid by Shree Balaji Enterprises to the Company, the said Balaji Enterprises would have issued a cheque directly in the name of the Petitioner and would not have issued a cross cheque in the name of the Company and asked the Petitioner to 11 deposit the same in its account. From the memo issued by the bank of Indore dated 18th June, 2004, it appears that the cheque was also rejected on the ground “cross cheque not permitted”. Prima facie the Company appears to be correct in its contention that the cheque of Rs. 95,23,705.13 is prepared by Shree Balaji Enterprises in the name of M/s. Manubhai Mangaldas Securities in collusion with the Petitioner and deposited in the account of the Petitioner to make out a false case against the Company alleging that the Company admittedly owned Rs. 95,23,705.13 paise to the Petitioner. 14. In the above circumstances, I am of the view that the Claims of the Petitioner are devoid of any particulars, are in the nature of damages, and lacking in merits. The defence put up by the Respondent Company is substantial and bonafide. The Company Petition for winding up of the Company, therefore, cannot be entertained and is dismissed. [ S. J. KATHAWALLA, J. ]