9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (9) TMI 678 - AT - Companies LawCompany affairs being conducted prejudicial to the public interest - Respondent Companies and their directors having caused wrongful loss of rupees above ₹ 11, 400 crores by fraudulent means - business of the Company is being conducted with intent to defraud its creditors, members etc. - Tribunal considering question of modification or vacating the interim order - Held that - In the present case, the Central Government by letter dated 17th February, 2018 has directed the SFIO to investigate into the affairs of the Respondent Company, among other 114 entities. The investigation is currently undergoing and as such, as on date, being satisfied if so required, it is always open to the Central Government to file application under Sections 241(2) read with Section 242 of the Companies Act, 2013 before the Tribunal. In the interest of regulating the conduct of the Company s affairs the interim order cannot be restrictive to any particular or individual person, including the Company/companies, existing or erstwhile Officers and employees of the Companies if investigation for alleged fraud is pending. For the purpose of passing interim order the Tribunal cannot fix the personal liability of delinquent Directors or Managers or Officers or other employees in absence of any specific evidence. Therefore, during the process of investigation and pendency of an application under Section 241(2) read with Section 242 of the Companies Act, 2013 and in view of powers conferred under Section 221, the Tribunal is not only empowered to pass appropriate interim order against the Company but also against any person or individual, including the order to desist. An application made by the Central Government alleging affairs of the Company are being conducted in a manner prejudicial to public interest, the Tribunal can pass any order in terms of Chapter XVI, which includes Section 242 and other provisions under the said Chapter. Section 246 is part of Chapter XVI, the provisions mentioned therein will be also covered by sub-section (2) of Section 241. Therefore, in an application made by the Central Government alleging conduct of the Company in a manner prejudicial to public interest, the provisions of Sections 337 to 341 will be also applicable mutatis mutandis to an application made to the Tribunal under Section 241 or Section 245. If sub-section (4) of Section 242 is read with Sections 339 & 340 and Section 221, it is clear that apart from freezing of assets of company on inquiry and investigation , it is also open to the Tribunal to freeze the assets of any person, including other companies and individuals, even during inquiry and investigation of fraud under Section 212 of the Companies Act, 2013. In so far as the order dated 2nd April, 2018 is concerned, we find that by the said order the Tribunal, while modified its earlier order dated 23rd February, 2018, practically exonerated Mr. Sujal Shah (Respondent No. 43); Mr. Gopal Krishnan Nair (Respondent No. 44); Mr. Suresh Senapathy (Respondent No. 51); Mr. Gautam Mukkavilli (Respondent No. 52) and Mr. Sanjay Rishi (Respondent No. 53) by holding that those Respondents had no complicity in the matter and they had no role to play in the financial fraud in question. The Tribunal failed to appreciate that it was dealing with the question of vacating the interim order passed under sub-section (4) of Section 242 read with Sections 221, 241(2), 339 and 340 of the Companies Act, 2013. While considering the question of modification or vacating the interim order, it was not open to the Tribunal to pass an order which is final in nature, amounting to exonerating one or other Respondent particularly, when the allegation of fraud of this nature is pending investigation by the SFIO. Though it was brought to the notice of the Tribunal that the Respondent Companies, individuals including existing and erstwhile Directors, partners, trustees, beneficiaries and their associates or subsidiaries and firms had exposure with the PNB and are prima facie found to be beneficiaries of the fraud, as noticed at paragraph no. 6 of this Judgment, without waiting for the report of the SFIO it was not open to the Tribunal to exonerate some of the Respondents from the charges. For the reasons aforesaid, we set aside the impugned order dated 2nd April, 2018, so far as it relates to Mr. Sujal Shah (Respondent No. 43); Mr. Gopal Krishnan Nair (Respondent No. 44); Mr. Suresh Senapathy (Respondent No. 51); Mr. Gautam Mukkavilli (Respondent No. 52) and Mr. Sanjay Rishi (Respondent No. 53). In so far as Mr. Anil Umesh Haldipur (Respondent No. 35) and Mrs. Nazura Yash Ajaney (Respondent no. 38) are concerned, the Tribunal has already held that a prima facie case has been made out against them but while giving such finding, the Tribunal has modified the order dated 23rd February, 2018 permitting Mr. Anil Umesh Haldipur (Respondent No. 35) to withdraw ₹ 2, 00, 000/- (Rupees Two Lakhs only) per month and Mrs. Nazura Yash Ajaney (Respondent no. 38) to withdraw an amount to the extent of ₹ 1, 00, 000/- (Rupees One Lakh only) per month from their Bank accounts. Rest part of the order dated 23rd February, 2018 restraining them and others from removal, transfer or disposal of funds, assets and properties of the entities and individuals until further orders is continuing.
Issues Involved:
1. Jurisdiction of Tribunal to injunct respondents and entities from removal, transfer, or disposal of funds, assets, and properties. 2. Legality of vacating the restraint order against specific respondents. Detailed Analysis: Issue 1: Jurisdiction of Tribunal to Injunct Respondents and Entities The Union of India, Ministry of Corporate Affairs, filed an application under multiple sections of the Companies Act, 2013, against ‘Geetanjali Gems Ltd. & Ors.’, alleging that the affairs of the company and its group entities were conducted prejudicial to public interest. The Union sought various interim reliefs, including serving respondents through multiple channels, disclosure of properties, restraint on transferring assets, and freezing of securities. The cause of action was based on a financial fraud of approximately ?11,400 crores perpetuated on Punjab National Bank (PNB) by certain individuals and entities. The Union argued that the fraudulent activities involved issuance of unauthorized Letters of Undertaking (LOUs) and manipulation of the Core Banking Service (CBS) system to avoid detection. The Tribunal, acknowledging the gravity of the allegations and the necessity to prevent asset dissipation, passed an ex-parte order on 23rd February 2018, restraining the respondents and associated entities from removing, transferring, or disposing of their funds, assets, and properties. The Tribunal justified the ex-parte order by emphasizing the need to prevent the dissipation of assets, which would render any subsequent orders ineffective. The Tribunal's jurisdiction under Sections 221, 222, 241, 242, 246, and 339 of the Companies Act, 2013, was affirmed, allowing it to freeze assets and issue restraint orders to protect public interest and ensure meaningful investigations. Issue 2: Legality of Vacating the Restraint Order Against Specific Respondents Several respondents filed applications to vacate the interim order. The Tribunal, on 2nd April 2018, vacated the restraint order against some respondents, namely Mr. Sujal Shah, Mr. Gopal Krishnan Nair, Mr. Suresh Senapathy, Mr. Gautam Mukkavilli, and Mr. Sanjay Rishi, citing lack of incriminating material against them. The Union of India challenged this order, arguing that the Tribunal was not competent to pass a final order exonerating the respondents at the interim stage, especially when the investigation by the Serious Fraud Investigation Office (SFIO) was ongoing. The Union contended that the Tribunal should not have vacated the restraint orders without waiting for the SFIO's report. The Tribunal's decision to vacate the restraint orders was based on the principle that innocent individuals should not be burdened by such orders. However, the Appellate Tribunal found that the Tribunal erred in passing what amounted to a final exoneration without sufficient evidence and while the investigation was still pending. The Appellate Tribunal set aside the order dated 2nd April 2018, reinstating the restraint orders against the aforementioned respondents. The Tribunal also allowed certain respondents to withdraw limited amounts from their bank accounts for subsistence, recognizing the need for a balance between restraint and the respondents' rights. Conclusion: The Appellate Tribunal upheld the Tribunal's jurisdiction to issue restraint orders under the Companies Act, 2013, to prevent asset dissipation during investigations. However, it found that the Tribunal prematurely vacated restraint orders against certain respondents without sufficient evidence and ongoing investigations. The restraint orders were reinstated, with allowances for limited withdrawals for subsistence, ensuring both the protection of public interest and the respondents' rights.
|
