NCLT Orders Winding Up Of Netwealth Agrotech Over Fraudulent Deposit Schemes

The National Company Law Tribunal (NCLT) at Mumbai has ordered the winding up of Netwealth Agrotech India Ltd, holding that the company's affairs were conducted in a fraudulent manner through unauthorised deposit-like schemes that resulted in large-scale cheating of the public.

“The findings of the investigation conducted by Regional Director (Western Region), Mumbai, under the Ministry of Corporate Affairs, Government of India, reveal that the Company had floated and operated unauthorised depositlike schemes under the guise of plot allotment and assured returns, and that its affairs were conducted in a fraudulent manner, resulting in large-scale cheating of the public through acts of commission and omission by the Company and its Directors;,” the tribunal observed.

A coram of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar allowed a petition filed by the Union of India through the Registrar of Companies, Pune, seeking the winding up of the company.

The proceedings stemmed from inspections ordered by the Ministry of Corporate Affairs following complaints alleging fraudulent activities. Netwealth Agrotech, a public limited company incorporated on June 1, 2011, is engaged in agriculture-based activities.

An inspection ordered on July 8, 2016, followed by an inspection report in 2017 and a supplementary inspection report in 2019, revealed that the company had floated schemes promising inflated returns and plot allotments, which were found to be deposit schemes in disguise.

As per the material placed on record by the Registrar of Companies, the company mobilised approximately Rs. 3.5 crore from around 2,400 investors, out of which more than Rs. 2.08 crore remained unpaid to nearly 700 investors.

The tribunal noted that the company had suspended its business since 2014, failed to maintain books of account, and uploaded balance sheets for the financial years ending March 31, 2013, to March 31, 2017 only on April 30, 2018.

The tribunal found that the balance sheets appeared to have been forged or fabricated and also were not supported by records, auditor reports, or statutory compliances.

The plea also pointed to serious lapses by the statutory auditor, including the preparation of multiple sets of financial statements without examining records or adhering to prescribed auditing standards. This had led to separate proceedings being initiated for the auditor's removal.

During the hearings, some present and former directors appeared and stated that they had no objection to the company being admitted to winding-up proceedings. They also clarified that this was without prejudice to their rights and contentions in relation to the allegations made against them.

Accordingly, the tribunal held, “we have no hesitation to hold that it is a fit case for ordering the winding up of the Company in terms of Section 271 of the Companies Act, 2013.”

Holding that the material on record established a prima facie case of fraud and mismanagement, the tribunal ordered the winding up of the company and appointed the Official Liquidator attached to the Bombay High Court to take charge of its assets and affairs.

It also directed the directors and officers of the company to submit the statutory report within thirty days of the order, and directed the Official Liquidator to submit a report in accordance with law within the prescribed period.