Upload
vumien
View
213
Download
0
Embed Size (px)
Citation preview
Page1of7
Law Tryst 2018 – National Moot Court Competition
1. Indiva is a Democratic Sovereign Republic with a Quasi-Federal system of
Governance with laws which are identical to the laws of India. Bambai, is the
financial capital of Indiva with laws which are identical to Mumbai where many
big Corporate Houses have their Headquarters established.
2. Naresh Agarwal is the Executive Chairman and his wife is the director of Axcel
Group of Companies, which has been incorporated as per Companies Act of
2013, and is among the leading lights of the Indian Industries who has
revolutionized the Television industry by launching the country’s first private
satellite Hindi Channel Axcel TV in 1992 and later the first private news
Channel, Axcel News.
3. Kamlesh Bhatia is the Managing Director of Leaf House Education and
Accessories Limited (“LEHEAL”) and his wife is the whole-time director.
LEHEAL is carrying on the business of running pre-schools in India. The shares
of LEHEAL are listed on Bombay Stock Exchange (BSE), National Stock
Exchange (NSE) and MCX, and LEHEAL is incorporated as per Companies Act
of 2013.
4. Kamlesh Bhatia with his wife jointly and severally held 30% preference
shareholding in LEHEAL.
5. Axcel Learn Ltd (“ALL”) relying upon the representation made by Kamlesh
Bhatia’s audited/ limited reviewed financial statements made available by
Page2of7
Kamlesh Bhatia and the general information on LEHEAL activities available,
agreed to the idea of merger of LEHEAL and ALL.
6. LEHEAL included the fact that the limited reviewed Balance Sheet dated
September, 2015 showed (a) cash of around Rs.150 Crores; (b) excellent
business results during the first half (April-September) of the Financial year
2015-16. The results made available by Kamlesh Bhatia looked consistent with
the past results of LEHEAL and the same were showing a growth trajectory for
the 6 months period ending on September, 2015 of the financial year ending on
March, 2016. The said quarterly financials for the quarters ending April’15 –
June’15, July’15 to September’15, October’15 to December’15 and January’16
to March’16 for the FY 15-16.
7. Thereafter, in 2016, ALL and LEHEAL jointly announced about their merger.
The Draft Scheme of Amalgamation inter alia provided that all liabilities
including all secured and unsecured debts, sundry, creditors, duties, obligations
and undertakings of LEHEAL would be transferred to and borne by ALL.
Further all loans raised and used, liabilities and obligations incurred or which
arose or accrued to LEHEAL on or after the appointed date till the effective date
shall be deemed to be and shall become debts, loans raised, duties, liabilities and
obligations incurred by ALL. Naresh Agarwal and his wife and Kamlesh Bhatia
and his wife became the directors of the amalgamated Company.
8. On February 2016, after the filing of documents and making requisite disclosures
with the Stock Exchanges, LEHEAL announced their third quarterly results in
Financial Year 2016. To the utter shock of ALL, the said results showed
Page3of7
downward trend on profits for the first time in the history of the amalgamating
Company.
9. In subsequent general body meeting ALL was informed by the Kamlesh Bhatia
and his wife that during the period of October, 2015 to February, 2016 the cash
balance of LEHEAL declined drastically from Rs.150 crores to around Rs.25
crores which completely shocked ALL. ALL was taken aback by this and
moreover of the fact that they were kept in the dark regarding this by LEHEAL
and Kamlesh Bhatia and his wife for about 2 months. A complaint with SEBI
was filed by a whistle - blower working with ALL stating that the directors were
aware of the fraud in securities and the Financials of the amalgamated company
were fudged to cheat the ordinary shareholders. The CBI initiated an
investigation against the amalgamated company.
10. When the fourth quarterly results were announced, it was found that the revenues
of LEHEAL were showing shocking and further drastic downfall (approximately
half in comparison to the comparative quarter of the earlier year 2015) and
announced losses amounting to Rs.30 Crores for the quarter. Upon being
questioned, Kamlesh Bhatia informed the CBI and ALL that from 720 pre-
school centres held by LEHEAL in December, 2015 only about 650 pre-schools
were functioning during February, 2016 which subsequently became 636 by end
of March, 2016. The CBI intensified its investigations and came to following
conclusions:-
i. Kamlesh Bhatia had also through the share market to raised funds to the
tune of Rs. 400 Crores using valuations based upon the dubious financial
statements.
Page4of7
ii. ALL became victim of the fraudulent scheme devised and employed by
the directors wherein Kamlesh Bhatia borrowed cash just for building
the amalgamated company and kept them as fixed deposit receipts
(FDRs).
iii. Assets were siphoned off from the balance sheet of LEHEAL and sold
with the approval of the board without any reduction on the liability side,
coupled with the closure of number of schools thereby reducing its
revenue generating capabilities, the intrinsic value of LEHEAL’s equity
shares eroded considerably. This was done under the instructions of the
board members.
iv. Kamlesh Bhatia had provided various interest free loans/ deposits/
receivables to the tune of approximately Rs.225 Crores to various Trusts/
Societies.
v. Accounts of the Company had shown capital expenditure at pre-school
cent, on account of interiors / furniture & fixture/ play school
equipment’s in the books of LEHEAL, at almost Rs.50 lakhs per centres,
whereas the actual cost was not more than Rs.10-15 lakhs per centre.
vi. Information by market sources led to the search for monies lying with
Kamlesh Bhatia which he would pocket which was approximately 80%
of this extra money by taking cash back from various vendors. There
were around 500 pre-schools that had been created and the total amount
Page5of7
at stake here could easily be Rs.200 crores that was being siphoned off.
The actual existence of these Pre – Schools are still being discovered.
vii. On 14th and 15th December, 2016 various news reports came out that
LEHEAL has shut down more than 100 centres due to non-availability of
funds to pay salaries to the staff, resulting in students being left in the
lurch. This has been also noted by the CBI and arrangements are in
progress to re- direct students to other schools in the area.
viii. The CBI filed a report before the Court of First instance and charge -
sheeted all the 4 directors of the amalgamated company for fraud and
cheating in commodities, securities and real estate in addition to
embezzlement and siphoning of funds, money laundering and fraudulent
fabrication of financial records of the amalgamated company. Further
charges included running a Ponzi scheme by taking monies from
investors and share – holders and promising large returns to the investors
and shareholders.
11. Kamlesh Bhatia has filed a Complaint and has registered the F.I.R. vide Crime
No. 6 of 2017 on 18/05/2017 for the offences punishable Sections 403, 406,415,
120-B and 34 of the Indian Penal Code 2000 r/w Section 3 and 4 of the
Prevention of Money Laundering Act, 2002 along with Section 43 read with
Section 66 of the Information and Technology Act, 2000 against Naresh
Agarwal and his wife under Section 156 (3) of Cr.P.C before the Learned
Magistrate, who had directed the Police to file and FIR against the Naresh
Agarwal and his wife, this complaint was sent to the Economic Offences Wing
Page6of7
of Bambai Police who after investigation filed a charge sheet against Naresh
Agarwal and his wife accusing them of cheating and money laundering.
12. Naresh Agarwal and his wife has made allegations in the media and in a press
conference that the Kamlesh Bhatia and his wife is a part of a larger conspiracy
and with the malafide intention to falsely implicate the Naresh Agarwal and his
wife and to shift the focus of misappropriation of funds and mismanagement of
the affairs of LEHEAL carried out by Kamlesh Bhatia and his wife, in an
attempt to falsely blame Naresh Agarwal and his wife and with this intention
Kamlesh Bhatia and his wife have filed the above Complaint.
13. Kamlesh Bhatia and his wife on the other hand have in a press conference
revealed that ALL has traded with the them through shell companies one of
them being Hamlet Media Pvt. Ltd and that it acquired 9% of stake in Hamlet
Media Pvt. Ltd through shell companies and furthermore, that when that when
they had refused to show Fixed Deposit Receipts, Naresh Agarwal and his wife
had threatened them. Kamlesh Bhatia further revealed that “ALL” compelled
them to invest in Hamlet Media Pvt Ltd, which became a subsidiary company of
ALL and Kamlesh Bhatia subsequently a guarantee of Rs.100 crores was given
to LEHEAL for transferring liability of Hamlet Media Pvt Ltd onto LEHEAL.
14. Kamlesh Bhatia has informed the CBI and revealed in the said press conference
that in the next 3-4 days after transferring the liability of Hamlet Media Pvt. Ltd
Naresh Agarwal and his wife forcefully took signatures of the Kamlesh Bhatia
and his wife on various bank signature changing forms, resolutions of the
company for change in the signatory of the bank accounts, to open bogus
depository accounts in Stock Holding Corporation of India Ltd., Blank
Page7of7
Depository receipts, pledge forms etc. Furthermore, that Naresh Agarwal and his
wife had engaged in circular trading in order to inflate the prices of LEHEAL so
that it creates a good image of their company in eyes of the public and later on
crash down their share prices in order to acquire the shares at low price. There
were investigations of SEBI pending against Naresh Agarwal and his wife for
such circular trading.
15. Naresh Agarwal and his wife being unhappy with the progress in the CBI and
EOW investigations have sought to invoke extra ordinary and supervisory writ
jurisdiction of the Honourable Court making the state investigation authorities
respondents for reliefs including quashing of the complaints against them and
for stricter investigation against Kamlesh Bhatia and his wife and that the CBI
and EOW investigations be held under the aegis of the Hon’ble High Court of
Bambai. The Writ Petition was placed before the Bench of the Hon’ble Chief
Justice of Hon’ble High Court of Bambai who issued notice to the CBI and
EOW and to the other Respondents to file their replies. The filing of pleadings
being complete, the petition has now been placed for final arguments at the stage
of Admission.
[Students are supposed to frame relevant issues for the above problem.
Minimum 3 issues and Maximum 5 issues.]