2016 (7) TMI 1617 - HC - Money Laundering

Failure on the part of Geodesic to redeem an amount on maturity date of Zero Coupon Bonds - siphoning of funds - amount misappropriated and / or siphoned off by the Respondent Company through its Directors - false statement had been made to this Court that the amount in excess of 1, 000 Crores was available as deposited in the accounts of overseas subsidiaries - HELD THAT - Today this Court in Chamber initially in the presence of all Advocates explained the importance of the role of these responsible high ranking officers in a matter of this magnitude which borrowing the words of the Hon ble Supreme Court needs to be viewed seriously and is considered as a grave offence affecting the economy of the country as a whole thereby posing a serious threat to the financial health of the country. This Court also pointed out to the Officers (of the ED EOW) that though the Court appreciates the efforts made by the Agencies headed by them in tracing the funds the creditors of the Company have till date been unable to even see a ray of hope as far as receiving the amounts which Geodesic (now under provisional liquidation) had promised to return to them. The Officers present before this Court informed the Court that they were extending their best efforts towards achieving this end and as set out in their Confidential Reports were making all efforts to trace the funds which have been siphoned off / misappropriated by the Directors of the Company. The Officers once again assured the Court that they would do their best in the matter and would endeavor to bring back into the coffers of the Official Liquidator appointed by this Court as the Provisional Liquidator of Geodesic the huge sums of money belonging to the Company and at present lying abroad. They submitted that they would submit their further report within a period of two weeks from today to this Court. Since the present Order was required to be dictated and signed the papers in the matter were retained in the Chamber - Stand over to 11th August 2016.

Summary

Issues Involved:
1. Failure to redeem Foreign Currency Convertible Bonds (FCCBs).
2. False statements and misrepresentation by Geodesic and its Directors.
3. Non-compliance with court orders by Geodesic and its Directors.
4. Investigation and recovery of funds by SEBI, EOW, and Enforcement Directorate.
5. Legal consequences and actions against Geodesic and its Directors.

Issue-wise Detailed Analysis:

1. Failure to redeem Foreign Currency Convertible Bonds (FCCBs):
The Petitioner, acting as a Trustee for bondholders, filed a Company Petition against Geodesic Limited for failing to redeem FCCBs worth over ?1,000 Crores due in 2013. The failure to redeem US$ 157,064,251 on the maturity date of 18th January 2013 was a primary issue, leading to the filing of the petition.

2. False statements and misrepresentation by Geodesic and its Directors:
Geodesic's Directors initially claimed that funds were deposited in overseas subsidiaries' accounts. However, it was later revealed that these funds were invested elsewhere, contradicting their earlier statements. The court noted that false information was provided, particularly by Director Prashant Mulekar, who misled the court regarding the status of the funds.

3. Non-compliance with court orders by Geodesic and its Directors:
Geodesic and its Directors repeatedly failed to comply with court orders to provide necessary documents and information. Despite multiple opportunities and undertakings, they did not furnish the required details, leading to the court's conclusion that they were dishonest with both their creditors and the court.

4. Investigation and recovery of funds by SEBI, EOW, and Enforcement Directorate:
Due to the non-cooperation of Geodesic's Directors, the court ordered SEBI to investigate the status of the investments/loans of the overseas subsidiaries. SEBI's investigation suggested misappropriation and siphoning off of FCCB proceeds. Subsequently, the court directed the EOW to ascertain whether a prima facie case of cognizable offences was made out. The EOW's investigation revealed a criminal conspiracy by Geodesic's Directors to siphon off funds through fictitious dealings, leading to the registration of a criminal complaint.

5. Legal consequences and actions against Geodesic and its Directors:
The court took stringent actions, including appointing the Official Liquidator as the Provisional Liquidator of Geodesic. Further, SEBI and the Enforcement Directorate were directed to take action against the Directors under relevant legal provisions. The court emphasized the gravity of economic offences and the need for strict measures to protect the interests of bondholders and maintain the integrity of court orders.

Conclusion:
The judgment highlights the severe consequences of non-compliance with court orders and misrepresentation by corporate entities. The court's directives to various investigative agencies underscore the importance of thorough investigations in cases involving significant financial misconduct. The proactive measures taken by the court aim to ensure accountability and recovery of misappropriated funds, reflecting the judiciary's role in upholding financial integrity and protecting stakeholders' interests.