Transfer of funds from a public limited company to society

Querist : Anonymous (Querist) 20 July 2020 This query is : Resolved
A and B who were working in a public Ltd company as managers formed a housing coop. society in 2000 and apply for a plot to HUDA for construction of residential flats. HUDA allot a plot and sends demand notice to deposit one crore towards cost of land. B who was accounts head in the company and president of the society transfer one crore from company account to society account and from there he makes payment of plot. He transfers company funds without management and Board of directors approval. After eight months when society members paid their share he transfers one crore back to company account.

An employee complains to IT department in this regard after construction and allotment of flats to members i. e. five years

Can the transaction be called benami transaction?

What action IT department can take against the accounts head and the company?

What action company will take against the accounts head?

Will complainant get any reward from I T deptt.

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Quick Summary

This discussion examines the unauthorised transfer of a significant sum from a public limited company's account to a housing society's account by two managers. Although the funds were returned within the same fiscal year, questions arise about potential criminal liability for fraud and breach of trust, as well as actions the company might take against the managers. Experts suggest the transaction does not constitute a 'benami' transaction and that the IT department is unlikely to take action, though the company could pursue disciplinary measures against the employee responsible.

Dr J C Vashista (Expert) 21 July 2020
What is your concern / locus standi ?
The facts posted are vague and ambigous, which require professional consideration and consultation.

Hemant Agarwal (Expert) 21 July 2020
1. A & B, become criminally liable for offences like Cheating, Intimidation, Fraud, Breach of Trust, Mischief etc....

2. IF BOD was aware or become subsequently aware of such contra transactions, then the in-charge BOD members also become criminally liable, alongwith several counts of offences under the Companies Act.

3. There is no element of "benami transaction" or PMLA, in the describe events and neither does any offence emanate under the Income Tax laws against A & B, more so since money would have been deposited back in Co. account, within the same fiscal year.

Keep Smiling .... Hemant Agarwal
VISIT: www.chshelpforum.com

P. Venu (Expert) 21 July 2020
What is the stand of the company concerned?

Rajendra K Goyal (Expert) 21 July 2020
You said:
Can the transaction be called benami transaction?

Reply:

The money was transferred from company account and re-payed later. No benami Transaction.

You said:
What action IT department can take against the accounts head and the company?

Reply:

No Income Tax provisions seem to be violated; no action warranted by Income Tax Department.

Rajendra K Goyal (Expert) 21 July 2020
You said:
What action company will take against the accounts head?

Reply:

He can be terminated; FIR of fraud etc. can be lodged. Since the money has been received back, company may avoid.

You said:
Will complainant get any reward from I T deptt.

Reply:

No provisions of Income Tax violated, no tax evasion happened, no reward warranted for the complainant.

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