SFIO to probe “fraudulent activites” by directors of Binny Limited
The Hindu
Madras High Court refers Binny Limited funds misappropriation case to SFIO, imposes costs on independent director, and dismisses collusive litigation.
The Madras High Court has referred to the Serious Fraud Investigation Office (SFIO) the allegations of misappropriation of funds of Binny Limited, one of India’s oldest surviving companies, by its directors. Originally incorporated as Buckingham and Carnatic Company in the 19th century, it became a public limited company in 1969 after various amalgamations and demergers over the years.
Justice C.V. Karthikeyan directed the Madras High Court Registry to mark a copy of his judgement in a civil case to the SFIO for conducting an inquiry into the “fraudulent activities” of the company’s directors as well as independent directors to the detriment of the general public. The order copy was marked to the Registrar of Companies and the Bombay Stock Exchange too for information.
The judge, further, imposed costs of ₹5 lakh on the company’s independent director Rajiv Bakshi for having instituted a vexatious litigation and directed him to pay the amount to the Dean of Rajiv Gandhi Government General Hospital in Chennai for being used to treat needy patients. He also said, the plaintiff lacked bonafide and had approached the court by suppressing vital information.
Further, holding that an independent director could not institute a civil suit regarding company affairs, the judge said, the plaintiff ought to have approached the National Company Law Tribunal (NCLT) under Section 213 of the Companies Act of 2013. When the NCLT was empowered to investigate the affairs of a company on a complaint made by any person, the jurisdiction of civil courts would stand ousted, he said.
“Probably, the plaintiff and all the defendants (company’s major shareholder M. Nandagopal, his daughter Sumathi Ramesh Babu, sons Nate Nandha and Arvind Nandagopal, financial director T. Krishnamurthy and another independent director Jamuna Sounderam) want to avoid such investigation and therefore have filed the present suit,” the judge said while disposing of a batch of interim applications in the suit.
He went on to state: “It is clear that they have indulged in shadow boxing and though the real intention is not decipherable, it is clear that the plaintiff lacks bona fide... He who seeks equity must do equity. Unfortunately, the plaintiff’s hands are tainted and smeared... I hold that the litigation is a collusive litigation launched by the plaintiff with all the defendants. There is no iota of credibility in the plaint.”
The judge pointed out the company had practically stopped its original business of manufacturing cloth and was now into multiple other businesses including real estate. Mr. Nandagopal, aged 85 and suffering from cancer, holds 44.86% of the shares and his second son Mr. Arvind holds 3.58% shares. Independent of this, they both jointly held 26.24% of the shares through their other companies.