2018 (2) TMI 1771 - Tri - Companies Law

Fraud by Gitanjali Gems Ltd. - affairs being conducted prejudicial to the public interest of India - restraint order passed - serving of notice by all means - Held that - Though Trusts and individuals are not being covered either u/s. 221 of the Companies Act, 2013 or Section 43 of LLP Act, 2008, since there is a categorical statement from Union of India that funds were routed to those individuals and Trusts through the companies mentioned above, to make investigations meaningful to crack this fraud, restraint order is very much necessary against the assets lying with the individual and Trusts in addition to the companies and LLPs mentioned above. Since the Petitioner having said that the funds of the Bank have been routed through the companies and LLPs to the Trusts and individuals as well, investigation against other entities being incidental to the investigation ordered against the companies and LLPs, the whole exercise of Investigation and passing orders by this Bench will become futile unless restraint order Is passed against these individuals and Trusts thereof. If any further particulars come into existence, the Petitioner is directed to file additional affidavit supporting the case mentioned in this Company Petition. It goes without saying that the rigmarole of CPC not being applicable and this order being an aid to make investigation effective, though many of them against whom orders passed are not made as parties, this Bench has passed this order as an aid to investigation. The Petitioner has candidly said that if notice has been given to the parties prior to hearing then there is every possibility of consuming time for effecting service in view of the exigency involved in this case, the Petitioner in view of the public interest has sought for ex-parte orders, for this Bench having noticed that the Petitioner has established prima facie case for asking ex-parte orders, this Bench has passed this ex-parte order. This Bench, by invoking section 221 of the Companies Act, 2013 and section 43 of LLP Act, 2008, hereby injunct the Respondents and other companies, LLPs, Trusts and individuals mentioned above from removal, transfer or disposal of funds, assets and properties of the entities and individuals mentioned above until further orders. To other reliefs and for appearance of the Respondents, list this matter for hearing on 26.03.2018 with a direction to the Petitioner to serve notice to all Respondents within 15 days of this order.

Summary

Issues Involved:
1. Allegations of financial fraud and misconduct.
2. Request for interim reliefs including restraint orders and disclosure of assets.
3. Examination of the involvement of various companies, LLPs, Trusts, and individuals.
4. Necessity of ex-parte orders to prevent asset dissipation.

Detailed Analysis:

1. Allegations of Financial Fraud and Misconduct:
The Union of India, through its Regional Director, Ministry of Corporate Affairs, filed a Company Petition under sections 221, 222, 241, 242, 246, and 339 of the Companies Act, 2013, alleging that the affairs of the respondent company and its group entities were conducted in a manner prejudicial to the public interest of India. The core of the allegation involves a financial fraud amounting to approximately ?11,400 crores perpetuated on Punjab National Bank (PNB) by certain individuals and entities, primarily engaged in diamond trading. The fraudulent activities included the issuance of unauthorized Letters of Undertaking (LOUs) and manipulation of the Core Banking Service (CBS) system to avoid detection.

2. Request for Interim Reliefs Including Restraint Orders and Disclosure of Assets:
The petitioner sought multiple interim reliefs to prevent the dissipation of assets:
- Permission to serve notice to respondents through various means (post, publication, email, WhatsApp).
- Disclosure of movable and immovable properties/assets, including bank accounts, owned by the respondents globally.
- Restraint orders against the respondents from mortgaging, creating charges, or alienating their properties, and attachment of these properties.
- Directions to stock exchanges (BSE, NSE) and SEBI to restrain trading of securities of the primary respondent company.
- Freezing of securities owned by the respondents by CDSL and NSDL.
- Disclosure of assets by CBDT, CBEC, RBI, and IBA, and attachment of bank accounts and lockers.
- Identification and disclosure of immovable properties by State Governments and Union Territories.
- Permission for the petitioner to take possession of attached properties through Official Liquidators.
- Leave to enlarge the scope of reliefs and file additional documents or applications as necessary.
- Permission to file interim and final investigation reports by the Serious Fraud Investigation Office (SFIO).

3. Examination of the Involvement of Various Companies, LLPs, Trusts, and Individuals:
The petition detailed the involvement of various companies, LLPs, Trusts, and individuals linked to the alleged fraud. The entities included:
- Companies and LLPs under the Nirav Modi Group (Firestar) and their exposure to PNB.
- Related parties, subsidiaries, and step-down subsidiaries of Firestar International Ltd.
- Movable and immovable properties of these entities, including factories, stores, and other premises in India and abroad.

4. Necessity of Ex-Parte Orders to Prevent Asset Dissipation:
The tribunal acknowledged the urgency and public interest involved, noting the risk of asset dissipation if notice was given prior to hearing. Given the prima facie case established by the petitioner, the tribunal passed ex-parte orders to ensure the effectiveness of the investigation and prevent the assets from being frittered away. The tribunal invoked section 221 of the Companies Act, 2013, and section 43 of the LLP Act, 2008, to injunct the respondents and other entities from removing, transferring, or disposing of their funds, assets, and properties until further orders.

Conclusion:
The tribunal granted the interim reliefs sought by the petitioner, including ex-parte restraint orders against the respondents and related entities. The matter was listed for further hearing on 26.03.2018, with directions for the petitioner to serve notice to all respondents within 15 days. This judgment underscores the tribunal's proactive approach in addressing significant financial fraud and protecting public interest by preventing asset dissipation during the investigation.