9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (4) TMI 276 - AT - Companies LawPower of the tribunal to pass appropriate orders - Impleadment of the appellants(s) as party (including auditors) - IL FS Group Companies has suffered majority debt obligation of IL FS - Section 242 of the Companies Act 2013 - whether this Appellate Tribunal should interfere with the impugned order dated 9th August 2019 whereby the Appellants have been impleaded as party Respondents? HELD THAT - In similar case of UNION OF INDIA MINISTRY OF CORPORATE AFFAIRS VERSUS GITANJALI GEMS LTD. AND ORS. SURESH KUMAR BHUTANI PARESH PRAVIBHAI RATHOD HARESH V. RAJLAL SHAH KETAN CHANDRAKANT SOLANKI MANISH LALIT DANI SANKET BIPIN SHAH HIMANSHU PRAVINCHANDRA TRIVEDI JYOTI B VORA SUDHIR AMBALAL MEHTA AND CHANDRAKANT KANU KARKARE 2018 (9) TMI 678 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI while discussing wide powers of the Tribunal under Sections 241-242 of the Companies Act 2013 conjointly read with Section 246 and Sections 337 to 341 this Appellate Tribunal held that 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. The Tribunal is empowered to pass order under Section 242 of the Companies Act 2013 in a petition under Section 241(2) if it forms opinion that the affairs of the company have been conducted in a manner prejudicial to the public interest. Once such opinion is formed by the Tribunal it may pass any order as it deem fit and proper - The various acts prejudicial to public interest have been highlighted which has cascading impact on various sectors of economy - The Department of Economic Affairs which is responsible for the financial stability of economy and in the Country too has raised Red Signals of the likely collapse of IL FS and has expressed its deep concern on the impact of Indian Economy in its Confidential Note dated 30th September 2018. Before passing any appropriate order in public interest and to save the economy of the Country from collapse if the Tribunal is of the opinion that it requires to give appropriate hearing to the concerned parties including those who audited IL FS and/ or those who have managed or were concerned with IL FS or its Group Companies it cannot be held to be illegal - Appeal dismissed.
Issues Involved:
1. Impleadment of various parties including auditors and directors. 2. Maintainability of the Company Petition. 3. Jurisdiction under Sections 241-242 vis-à-vis past auditors. 4. Powers of the Tribunal under Sections 241-242 of the Companies Act, 2013. 5. Allegations of fraud and mismanagement against IL&FS and its group companies. 6. Role and responsibilities of auditors and directors under the Companies Act, 2013. 7. Public interest and economic stability concerns. Detailed Analysis: 1. Impleadment of Various Parties Including Auditors and Directors: - Appellants' Argument: The appellants, including 'Deloitte Haskins & Sells LLP' and its partners, argued that they were wrongly impleaded as party respondents in the Company Petition No. 3638 of 2018. They contended that they were neither necessary nor proper parties for adjudication of the said Company Petition as they had no control over the management and day-to-day affairs of 'IL&FS'. - Tribunal's Decision: The Tribunal allowed the impleadment of the appellants, citing the need for their presence to effectually and completely adjudicate the real controversy, which pertains to the management of the affairs of 'IFIN'. 2. Maintainability of the Company Petition: - Appellants' Challenge: 'Deloitte Haskins & Sells LLP' and its partners filed Miscellaneous Application No. 2258 of 2019 challenging the maintainability of the Company Petition. The Tribunal rejected the application, maintaining that the petition was valid and necessary for the investigation into the affairs of 'IL&FS'. 3. Jurisdiction under Sections 241-242 vis-à-vis Past Auditors: - Appellants' Argument: The appellants argued that the Tribunal has no jurisdiction to pass orders against past auditors under Sections 241-242 of the Companies Act, 2013. They contended that these sections pertain to oppression and mismanagement of the affairs of the company, which does not include auditors. - Tribunal's Decision: The Tribunal held that the provisions of Sections 241-242 are wide enough to include auditors if their actions are found to be prejudicial to public interest. The Tribunal emphasized that the presence of the appellants was necessary for a complete adjudication of the dispute. 4. Powers of the Tribunal under Sections 241-242 of the Companies Act, 2013: - Appellate Tribunal's Observation: The Tribunal has wide powers under Sections 241-242 to pass orders against any person, including auditors and directors, if it is found that the affairs of the company are being conducted in a manner prejudicial to public interest. This includes the power to freeze assets and pass interim orders during the investigation of fraud. 5. Allegations of Fraud and Mismanagement against IL&FS and its Group Companies: - Central Government's Submission: The Central Government highlighted various allegations of fraud and mismanagement against 'IL&FS' and its group companies, including the concealment of material information, non-reporting of fraudulent activities, and mismanagement of funds. These allegations were based on reports from the SFIO, RBI, and ICAI. - Tribunal's Decision: The Tribunal found that the allegations warranted further investigation and that the presence of the appellants was necessary for a thorough examination of the issues. 6. Role and Responsibilities of Auditors and Directors under the Companies Act, 2013: - Statutory Duties: The Tribunal emphasized the statutory duties of auditors and directors under Sections 143 and 149 of the Companies Act, 2013. Auditors are required to report any fraud involving accounts to the Central Government, and independent directors are obliged to report concerns about unethical behavior and suspected fraud. - Tribunal's Decision: The Tribunal held that the auditors and directors failed to fulfill their statutory duties, justifying their impleadment in the Company Petition. 7. Public Interest and Economic Stability Concerns: - Central Government's Concern: The Central Government argued that the mismanagement of 'IL&FS' posed a significant threat to public interest and economic stability. The potential collapse of 'IL&FS' could have a cascading impact on various sectors of the economy, including the financial market and public sector banks. - Tribunal's Decision: The Tribunal acknowledged the public interest concerns and the need to protect the economy from the potential collapse of 'IL&FS'. It justified the impleadment of the appellants to ensure a comprehensive investigation and appropriate remedial measures. Conclusion: The Tribunal dismissed the appeals, affirming the impleadment of the appellants as necessary for a complete and effective adjudication of the issues related to the management and affairs of 'IL&FS' and its group companies. The Tribunal emphasized the wide powers conferred under Sections 241-242 of the Companies Act, 2013, to address issues of public interest and economic stability.
|
