The Commercial Court has reserved its decision in an application to make some of the directors of an Irish registered international animation company personally made liable for company debts of approximately €30 million.
Mr Justice Mark Sanfey has been asked to make various orders against some of the directors of DQ Entertainments Ireland Ltd (DQE), which he was told made payments in millions to other companies for assets that did not appear to exist.
The orders, which include an order winding up the firm, are being sought by the company’s receiver Mr Patrick Bance, who was appointed in October 2019.
Mr Bance, who is based in Singapore, and is represented in the proceedings by Kelley Smith SC was appointed by international investment company, QL Master Ltd.
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He is seeking various orders, including one making DQ’s India-based directors Rashida Adenwala, of SAI Sagar Heights, Hyderabad, Tapaas Chakravarti, of Jubilee Hills, Hyderabad, and Sanjay Choudhary, of Sri Gayatri Elegant Sy, Vasavi Naar, Secunderabad personally liable for €30 million of the firm’s debts.
The court has also been asked to make several declarations that the three directors knowingly carried on the business of the company in a reckless manner and with the intent to defraud the firm’s creditors.
Other declarations sought include that the three failed to keep adequate company records resulted in substantial uncertainty regarding the firm’s assets and liabilities, misapplied the company’s money, and are guilty of a breach of trust and duty in relation to the company.
The plaintiff’s action before the High Court’s big business division opened before Mr Justice Sanfey on Tuesday.
However, there was no appearance by the respondents and the application proceeded before the judge on an uncontested basis.
Following the conclusion of the plaintiff’s submissions, the judge said he was reserving his decision and hoped to be able to give his judgment shortly.
Had the case proceeded on a contested basis the hearing was expected to last several weeks.
The court also heard that the receiver has resolved proceeding against DQ’s two Irish-based directors Leo Condron, Killeely Beg, Kilcolgan, Co Galway and Dominic Poole, Furrymelia, West Barna in Co Galway.
The actions against those directors have been settled and the proceedings against the two Galway-based directors are to be struck out, with no order as to costs, the judge was informed.
In his action receiver claims that QL effectively loaned funds to DQE Ireland that following his appointment an estimated €42.3 million remained due and owing to the firm’s creditors.
The Irish company is a subsidiary of the India stock exchange-listed DQE (international) Ltd.
It is alleged that QL made loans through a bond purchase agreement with another DQE company in Mauritius which holds 75 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.
It is claimed that certain assets recorded in the Irish company’s accounts, including many intangible assets and trade receivables did not exist.
That had the effect of making security held by QL transpired to be worth far less than previously understood.
The court heard that assets worth €135 million were recorded in its audited accounts in 2018.
However, it is claimed by the receiver that this value was significantly and artificially inflated.
It is also alleged that the company made significant payments for the acquisition of assets that did not appear to exist.
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, the receiver claims.
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”.
However 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 to produce Peter Pan, but Galway did not have any rights to this either, it was further claimed.
There were several 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, it was claimed.
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, it is alleged.
The company had been trading insolvent since as early as March 2017, it is claimed.
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, it is further alleged.