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Report No. 143

2.7.1. M/s. Ambalal Sarabhai Enterprises Ltd., Wadi Wadi, Baroda-390 007.-

This company is engaged in the manufacture of basic and essential drugs vitally important of the health care. The company has been inviting fixed deposits from the public to raise its capital. The Commission received 14 complaints from the depositors against this company for not making repayment of their deposits even after the expiry of the date of maturity. One of these complaints pertains to a deposit of Rs. 12,000 whereas all remaining deposits are of less than Rs. 6,000. As usual, all these complaints of the depositors were sent to the company for making early repayment to the depositors.

In response to the communication of the Commission, the company, vide its letter dated 26th February, 1991, admitted that there was delay in repayment of deposits and added that it was making sincere efforts to repay fixed deposits at the earliest. The company informed the Commission vide letter of 26th February, 1991 (Annexure 'B' to Appendix 'D') that only Rs. 71.96 lakhs remained unrefunded to 1312 depositors as on 31st January, 1991. However, the company did not furnish any particulars regarding details and data showing names of depositors, deposited amount and the date of maturity.

The Commission sent a telegram on 19th March, 1991 to the company to furnish the same quickly. The telegram sent to the company is as per Appendix 'CC'. This telegram was followed by another letter of the Commission dated March 22, 1991. (Annexure 'C' to Appendix 'D') showing its concern for repayment of these deposits. The company was requested to repay 25% of the deposits within 15 days of the receipts of this communication and make payment to further 25% within 15 days thereafter. The remaining 50% deposits was required to be refunded within one month thereafter.

It was also suggested to the company that one who has been suffering the longest should be the one to be refunded his dues at the earliest. The company vide its letter dated April 16, 1991 sent a detailed list of deposits claimed and remaining outstanding for a period of 60 days from the date of maturity as on 31st March, 1991. As per this letter there were 1373 depositors remaining unrefunded as on 31st March, 1991 and the total amount due for repayment was Rs. 73.15 lakhs. Out of 1373 depositors, 1337 were small depositors whose investments were less than Rs. 11,000.

Further, there were 1259 deposits ranging upto Rs. 6,000, 918 deposits ranging upto Rs. 5,000. The analysis of the statistics furthers more disclosed that out of the aggregate amount of Rs. 73.15 lakhs the amount repayable to small depositors (less that Rs. 11,000 per individual) was of the order of 64.93 lakhs out of a total amount of Rs. 73.15 lakhs representing a staggering 89% of the total outstanding dues in respect of matured deposits. In other words, the sum due to the big depositors constituted only 11% of the total dues.

2.7.2. The company however did not show its willingness to make repayment to the depositors in any of the responses made by it to the Commission. It failed to do so notwithstanding the fact that it had recently obtained a fresh loan from a Nationalised Bank viz., Punjab National Bank as disclosed by the minutes of the meeting of the officers of the company with the J.S. & L.O. (Annexure 'D' to Appendix 'D').

2.7.3. It was in this backdrop that the Commission thought it appropriate to request the Company Law Board for exercising its suo moto powers under sub-section (9) of section 58(A) of the Company Act, 1956. The Chairman of the Commission addressed two letters dated April 19, 1991 and May 6, 1991 (Appendix 'D' and 'E') to the Chairman, Company Law Board, in this regard by pointing out that this company which has assets worth Rs. 186.66 crores and has made net profit of Rs. 61.54 lakhs in 1989-90 should not have adopted an unedifying attitude which causes untold hardship to hundreds of poor depositors for having placed trust in the company.

The Chairman of the CLB vide his letter dated 6th May, 1991 addressed to the Chairman of the Law Commission, informed that the representatives of the company had been called for a hearing on 16th May, 1991 at Bombay. The Chairman of the CLB alongwith their letter dated 6th May, 1991 (Appendix 'F') also sent a copy of the communication addressed to the company for making appearance on 16th May, 1991.

The company appeared before the regional bench of the CLB at Bombay on 16-5-1991. In pursuance of the order of the CLB, the company submitted its written submission vide its letter dated May 25, 1991 (Appendix 'G'), a copy of which was sent to the Commission by the Secretary of the CLB. The company vide its letter, dated May 25, 1991 supplied a summary regarding the fixed deposits which is being reproduced as under:-

Total Deposits as on 1st April

Fresh Deposits accepted

Repaid during the year

Balance Deposits

Current

Matured and remaining unpaid

Total

1-4-87 to 31-3-88

627.37

..

125.93

115.49

385.95

501.44

1-4-88 to 31-3-89

501.44

24.46

161.47

54.3

312.13

366.43

1-4-89 to 31-3-90

366.43

104.71

223.12

131.81

116.21

248.02

1-4-90 to 31-3-91

248.02

57.08

112.22

115.77

77.11

192.88

2.7.4. It is a matter of serious concern that though the company had defaulted in making repayments of the matured deposits to the tune of Rs 3.86 crores it accepted fresh deposits to the tune of Rs. 1.86 crores during the time bracket of 1st April, 1988 to 31st March, 1991. It is a matter of equal concern that fresh deposits were utilised in repayments made during these years.

2.7.5. The Company Law Board in its order (Appendix 'H') dated 4th June, 1991 passed orders for making the repayment of the deposits by the company. The company was ordered to make payment of deposits which matured upto December, 1986 before 30th June, 1991, and the deposits which matured during 1987 to be repaid on or before 31st August, 1991 and deposits which matured from 1988 to 31st March, 1991 would be repaid on or before 31st March, 1992.

The company Law Board also ordered that the interest due on the said deposits till the date of repayment shall be paid within four months from the date thereafter, as mentioned for making the repayment. It also ordered that the company will ensure to send the depositors post-dated cheques towards over due interest. The company was directed to file affidavits in compliance with the orders of the Company Law Board. The order of the Company Law Board provides relief to 1486 deposits involving deposit of Rs. 77.11 lakhs.



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