Receiver tells court directors should be made personally liable for firm
Posted on 8th February 2021 at 21:05
Two Galway-based directors of an Irish registered international animation company are among five directors who should be made personally liable for the company’s debts of some €42m, it has been claimed in Commercial Court proceedings.
DQ Entertainments Ireland Ltd (DQE) made payments in millions to other companies for assets that did not appear to exist, it is alleged.
Leo Condron, Killeely Beg, Kilcolgan, and Dominic Poole, Furrymelia, West Barna, were directors of the firm over which Patrick Bance was appointed receiver in October 2019.
The others were India-based Rashida Adenwala, of Sai Sagar Heights, Hyderabad, Tapaas Chakravarti, of Jubilee Hills, Hyderabad, and Sanjay Choudhary, of Sri Gayatri Elegant Sy, Vasavi Naar, Secunderabad.
Mr Bance, who is based in Singapore, claims the five directors, or any one of them, were knowingly party to carrying on the business of the company in a reckless manner and with intent to defraud creditors.
He is seeking declarations and orders including that they be made personally liable for its debts and be made to repay or restore the value of assets which had been transferred without valid cause.
The five deny the claims and will be vigorously defending the action, the court heard.
The action is brought by the receiver and international investment company, QL Master Ltd, which appointed Mr Bance.
It is claimed QL effectively loaned funds to DQE Ireland and as of September 30, 2019, some €42.3 million remained due and owing. The Irish company is a subsidiary of the India stock exchange-listed DQE(international) Ltd.
QL made what it says were effectively loans through a bond purchase agreement with another DQE company in Mauritius which holds 75 per per cent of shares of the Indian DQE company. In 2014, DQE Ireland provided a charge over all its assets and security in consideration for the obligations of DQE in Mauritius.
Mr Bance, in an affidavit seeking admission of the case to the Commercial Court, said certain assets recorded in the Irish company’s accounts, including many intangible assets and trade receivables “did not exist”. As a result, the security held by QL transpired to be worth far less than previously understood.
It had recorded the acquisition of intangible assets worth €135 million in its audited accounts in 2018 — but this value was “significantly and artificially inflated”, Mr Bance said.
It made significant payments for the acquisition of assets that did not appear to exist, he said.
These included a €26.2 million to the “Jungle Book” franchise based on an agreement with a connected company called Entertainment Bay BV, but the agreement did not appear to be valid or genuine.
There was a payment of €3.84 million to a firm in the UAE called Pink Feather Production LLC. This was for the purpose of making the Irish company distributor of “The New Adventures of Lassie”. Mr Bance said Pink Feather does not have any rights to the Lassie intellectual property rights and this also was not valid.
There was a €7.4 million payment to a firm called Galaway Films for the production of Peter Pan, but Galaway did not have any rights to this either, he said.
There were a number of co-production agreements with a company called Method Animation SAS but which appear to have been falsified and were concocted to, among other things, artificially inflate DQE’s intangible assets by €4.1 million
More than €61 million was transferred out of the company to DQE India and to13 specific payees between 2010 and 2016, transactions which have no, or inadequate, supporting documentation, he said.
The company had been trading insolvently since as early as March 2017, he said. Even though it had been operating at a loss since 2015, and receiving support from DQE India, it continued to acquire intangible assets and make substantial payments.
Mr Bance said the five respondents have refused his request for access to all relevant books and records. Those that were made available were grossly inadequate and incomplete, he said.
On Monday, Mr Justice David Barniville admitted the case, on consent between the parties, to the Commercial Court.
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