Legal Aspects of Business

Under the guidance of

Professor K M Baharul Islam

Submitted by

Group 09

S. No. Member Name Roll Number

1. Abhilash Reddy Singireddy MBAA20033

2. Deshmaa R T MBAA20007

3. Harini Krishnan MBAA20008

4. Manali Marathe MBAA20064

5. Nitesh Kumar Singh MBA20234

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 Table of contents

Introduction 3
Facts of the Case 4
Laws Involved in the case 8
Case Analysis 9
Conclusion 10

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 Introduction
The case “Mrs Nagappan Swarnalatha vs Ms Colour Books Associated Pvt Ltd” revolves
around Indian Companies Act 2013. The Act governs the incorporation of a company, the breakup
of a company, Indian company law, dissolution of a company, its responsibilities, and directors.

The Petitioner of the case - Mrs. NagappanSwarnalatha

Respondents:
“M/s. Colour Book Associates Private Limited”- Respondent 1
Shri Sundaram Chockalingam - Respondent 2
Shri R. Madesh Nayak, A.C.A, Chartered Accountant - Respondent 3
The Registrar of Companies - Respondent 4

The Petitioner, Mrs NagappanSwarnalatha, filed a case against Respondent 1, “M/s. Colour Book
Associates Private Limited” and other 3 respondents under section 7(5), (6) and (7) of the Indian
Companies Act, 2013 seeking for removal of Respondent 1 Company from the Register of
Registrar of companies and cancel the certificate of Incorporation. The case was also directed to
Respondent 4 - Registrar of companies to launch a criminal investigation against other respondents
2 and 3 for fraud pursuant to Section 447 of the Companies Act, 2013.

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 Facts of the Case
● Colour Books Associates Private Limited was incorporated under Companies act 2013, on
14/05/2018 whose first directors, shareholders are the petitioner and the 1st respondent
who were also wife and husband.
● Their relationship later became strained and the petitioner submitted a legal notice to the
respondent dated 16/11/2017 requesting, among other things, that the marriage be
dissolved on the grounds of cruelty under the Hindu Marriage Act, which is still pending.
● After the petitioner left her matrimonial home on 14/06/2017, respondent 1 has forged and
fabricated the petitioner’s signature opening various bank accounts in her name. A spate of
cheque cases was filed against her from Respondent 2’s friends and relatives alleging she
has borrowed money from them. Notices of negotiable instruments act were issued against
her.
● The petitioner also received 3 notices of negotiable instruments from the clients of
Respondent 1 company alleging that she borrowed money from them and the produced
cheques bounced. She replied to the notice saying she doesn’t hold any accounts in the
mentioned banks. The respondent was arrested on the charges filed by the petitioner and is
now out on bail.
● One day the petitioner got a Whatsapp image from respondent 2 in the name of Colours
Books Associates Private Limited, showing a copy of the PAN card. She discovered after
verification that the company was founded on 14/05/2018.
● While they were separated from July 2017 and the court proceedings are still on, she
learned the estranged defendant 2 fraud on her by adding her name as the first director
without her knowledge. It was humanly difficult for her to consent on this given all the
cases that were put against her by respondent 1.
● It states that she never gave her consent nor was physically present during the process. All
her documents, IDs were forged. She added respondent 2 has obtained a Digital signature
certificate which he misused and also manipulated the 4th level respondent.
● It is also reported that respondent 2 and respondent 3 used the DSC fraud and other
documents to mislead respondent 4 to physically and psychologically deceive and threaten
the petitioner, cheat and take revenge against her.

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 Arguments
Arguments by Plaintiff/Petitioner
● The petitioner claimed that Respondent 2 invented and forged her signatures, merged her
name as Canara Bank's Joint Account holder, and opened individual bank accounts with
HDFC bank as well.
● The petitioner also disproved the complaint made by her husband on the borrowing of
money from her clients and not repaying them with evidence proving that she doesn’t hold
an account in the said HDFC bank in any place in India.
● The petitioner alleged that by adding her name without her permission, Respondent 2
committed a fraud on her and made her the First Director of R1.
● The complainant claimed that without her knowledge, the 1st respondent company engaged
in rank forgery by misleading the authorities, exploiting and misusing her records.
● Petitioner argued that respondent 2 has manipulated respondent 4 by incorporating her
name as the 1st Director of a fraudulent company.
● Petitioner also argued that Respondent 2 has colluded with respondent 3 for the forging of
documents and has also misled Respondent 4 - Registrar of companies for approving those
documents through illegal means.

Arguments by Respondents
(1) Respondent2
● Respondent 2 argued that the petition could not be upheld in law or on the evidence and
was lodged by the petitioner's father, who was ill-disposed to respondent 2 and intended to
annoy and humiliate him.
● He also argued that the Petitioner deliberately gave the wrong address to mislead the
tribunal.
● Respondent 2 also refuted the claims that the petitioner and the child were thrown out of
the wedding house by him. The claims of persistent dowry abuse, physical and mental
torture were also turned down.
● Respondent 2 claimed that he was not aware of a spate of cases of cheque dishonor brought
before the Magistrate Courts against the applicant.

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● He also argued that he was arrested by All Women police Station due to the false complaint
made by the petitioner by making false and baseless allegations and therefore respondent
2 denied all the accusations.
● The charges concerning the application form for a digital signature and the forgery
committed by the use of the digital signature certificate were also rejected.
● Respondent 2 also refuted the petitioner's allegations that her signature was not affixed in
the presence of a third respondent.

(2) Respondent3
● Respondent 3 alleged that the petitioner approached the Tribunal with unclean hands and
was not only guilty of suppressing the material facts in order to tailor the argument, but
also of the "suppressio veri suggestio falsi" theory. And on those grounds, respondent 2
requested that the present petition be denied.
● Respondent 3 submitted that it was only after checking the correctness of the documents
and the proof of identity of the proposed directors that the incorporation documents were
uploaded to the MCA portal and only after the approval of the MCA authorities that the
company was incorporated.
● Also, he stated that he did not collude with Respondent 2 and acted in good faith, and
showed humanitarian consideration towards the Petitioner.
● Respondent 3 also claimed that the petitioner had requested and received the DSC on his
own and that he was in no way a party to the request for a DSC lodged by the petitioner
with the certifying authorities.
● Respondent 3 also denied the claim of harassing the Petitioner both physically and
psychologically as false. He argued that the claim was misleading and was aimed at
defaming the professional (Respondent 3).
● Respondent 3 argued that without mala fide motive he had discharged his professional duty
and the claims raised by the plaintiff were baseless and untenable.

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(3) Respondent 4
● Respondent 4 (Registrar of Companies) argued that he was not the contesting respondent
and he was only confined to the approval of incorporation of Respondent 1 (The company:
Colour Books Associates Private Ltd).
● Respondent 4 confirmed that the company was incorporated on 14/05/2018 in Karnataka
with Respondent 2 and petitioner being the subscribers and Respondent 3 as the witness
according to the MOA and AOA which was confirmed with their digital signs. He also
confirmed that the subscribers have submitted the INC 9 and DIR 2 forms for incorporation
and for claiming to be the directors respectively.
● He also confirmed the father of the petitioner (Shree. S . Nagappan) to be the owner of the
company.
● Respondent 4 argued that it was unclear, in compliance with Section 7(5), whether the
petitioner's signature had been obtained fraudulently and that it was also told that it lacked
technical expertise to check the authenticity of the documents.
● Respondent 4 also explained that the affidavit had the right details in Form INC 9 and was
accurate to the best of his understanding.

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 Laws Involved in the case
● Sections 7(5), 6 & 7 of the Companies Act 2013 the incorporation process of corporations
is provided for in the Act.
● Section 447 of the Companies Act 2013 states that If a person found guilty of fraud is
punishable by prison, not just under 6months but up to 10 years, and therefore not below
that of the amount of the fraud, but three times the total number, except in case of bias to
blame, including the recovery of debts under that Act and other laws.
● Sections 294(b), 506(1), 498(A), 294(b), 406, 506(1) & 354D of the Indian penal code
1860
● Sections 66D & 66E of Information Technology (Amendment) Act 2008 INF C
● Section 4 of TN Prohibition of Harassment of Women Act, 2002
● 138 of the Negotiable Instrument Act
● Section 7 R/w Companies (Incorporation) Rules 2014 regarding the registration fee of the
company.
● Section 152(5) R/w Rule 8 of the Companies (Appointment and Qualification of Director
Rule 2014) says that when a first manager is not nominated, the memorandum subscriber
shall become the first manager before the manager has been appointed, and the actual
manager shall be nominated as the director in case of a sole proprietorship until the
manager has been appointed.
● Rule 14 of the Companies Incorporation Rule 2014
● Section 7(1)(b) of the Companies Act 2013
● Section 448 of the Companies Act 2013 says that any person giving the needed document
is inaccurate. The person is liable for punishment under this section.

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 Case Analysis

● From this case, we got a deep dive into Section 7 of Companies Act 2013 and Sections
447, 448 of Companies Act 2013 and as well as some section of Indian Penal code 1860
and TN Prohibition of Harassment of Women Act, 2002
● In compliance with Sections 7(5), 6 & 7 of the Company Act 2013, the petitioner brought
the case against intimidator 1 to exclude the name of the intimate 1 company from the
registry of the company's registrar and to cancel the registration certificate.
● In compliance with the rules of Section 477 of the Companies Act 2013, petitioners lodged
a lawsuit against the respondents Second and Third for criminal fraud investigations.
● Section 7 (5) responds that maybe the respondent does not know if the digital signature of
the applicant was obtained through fraud. By misusing his ID and falsifying his signature
as stated by the petitioner without the permission of the petitioner, the first respondent
company is incorporated.

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 Conclusion
The case was disposed of with the following directions:
1. The incorporation of Respondent 1 Company “M/s. Colour Books Associates Private
Limited” is vitiated by fraud and the Certificate of Incorporation issued by the Government
of India, Ministry of Corporate Affairs on 14th May 2018, was declared invalid with
immediate effect
2. Respondent 2, Shri Sundaram Chockalingam, was directed to discharge all liabilities done
in the course of business on behalf of Respondent 1, M/s. Colour Book Associates Private
Limited.
3. The other reliefs referred to by the petitioner were refused and the petitioner was granted
the right to seek other available remedies in lieu of the complaints referred to in the petition
under the current provisions of the Law on Indian Companies, 2013
4. No party was awarded any costs payable by the other parties.

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