2025 (2) TMI 906 - HC - Companies Law

Public Interest Litigation or not - alleged role irregularities and misconduct on the part of the IRP - Siphoning of funds by the ex-promoters and directors of Three C Shelters Pvt. Ltd. - whether the submissions on the part of the learned counsels for the parties should at all be considered by this Court sitting in writ jurisdiction under section 226 of the Constitution of India 1950? - HELD THAT - Unhesitatingly this Court finds no ground to recall the order dated 02.02.2024. The issues relating to the genuineness of the IRP report dated 09.08.2023 which has been espoused on behalf of the petitioner respondent No. 11/Orris and respondent No. 4/Greenopolis Welfare Confederation on one side and contested by applicants/respondents No. 12 and 13 along with respondent No. 5/Greenopolis Welfare Association on the other side are complex set of facts which need to be addressed by the NCLT in view of the directions of the Supreme Court. There is no gainsaying that the NCLT is seized of the matter with regard to the CIRP proceedings pertaining to respondent No. 3/TCSPL which will invariably delve into all the relevant aspects of the matter. At the cost of repetition a Monitoring Committee has already been constituted by the NCLT which will naturally examine the complex factual issues and facts raised by the parties including the successive reports by the three IRPs appointed including the present one besides the revival of respondent No. 3/ TCSPL so as to provide some relief to the petitioner and homebuyers. The bottom line is that the petitioner is espousing her personal cause and in doing so has also espoused the cause of the similarly placed investors/claimants/homebuyers who form a distinct class and whose long-promised dream of owning residential flats remains unfulfilled as construction has been stalled for over thirteen years now - The modus operandi adopted by them in defrauding the homebuyers has been exposed even in the above referred directions by the Allahabad High Court the foot prints of which are evidently visible in the instant matter too. This Court is not by-passing the jurisdiction of the NCLT to determine the fate of the respondent no. 3/TCSPL which is involved in CIRP nor is it usurping any power under Section 63 of the IBC. However it is undeniable that the investigation by respondents No. 1 and 2 is progressing at a snail s pace qua respondent No. 3/TCSPL and its ex-promoters directors marked by tardiness and a lack of urgency which is unacceptable in law and prejudicial to the interests of the homebuyers. Section 212(3) of the Companies Act 2013 provides that the Central Government has the power to order investigation in respect of any company which it deems necessary and also to order special investigations in respect of other concerns related to corporate law. The Central Government may appoint any authority officer or agency to conduct the investigations and to report its findings to the Central Government with the primary objective of investigating frauds and offences relating to a company under section 447 of the Act. The entire setting of the present matter compels this Court to direct the Central Government to entrust the investigation to the SFIO as regards the role of the ex-promoters and directors of respondent no. 3/TCSPL is concerned - in the instant matter the entire facts and circumstances presented go beyond mere assumptions surmises or conjectures. The stark fact is that the Greenopolis project has been abandoned by the respondent Nos. 6-10/ex-promoters and directors after siphoning of funds generated directly through respondent no. 3/TCSPL and the petitioner as well as those who are similarly placed investors/claimants/homebuyers are the victims at their hands which is an undisputed proposition. Conclusion - i) The investigation into the affairs of TCSPL and its ex-promoters is necessary to protect the interests of the homebuyers and ascertain the extent of the fraudulent activities. ii) The ACE Group is not to be investigated by the SFIO but the Registrar of Companies will continue to examine their transactions with TCSPL. iii) The interim order remains in effect with modifications to exclude certain parties from the SFIO investigation. iv) The NCLT will continue to handle the CIRP with the Monitoring Committee overseeing the process. Application disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the petitioner's claims regarding the siphoning of funds by the ex-promoters and directors of Three C Shelters Pvt. Ltd. (TCSPL) warrant an investigation under the Companies Act, 2013.
• Whether the ACE Group of Companies, represented by respondents No. 12 and 13, is connected to the alleged fraudulent activities of TCSPL.
• Whether the interim order dated 02.02.2024, directing an investigation into TCSPL and its related entities, should be recalled or modified.
• The role of Orris Infrastructure Pvt. Ltd. (respondent No. 11) in the alleged siphoning of funds and its relationship with TCSPL.
• The legitimacy of the IRP report dated 09.08.2023, which forms the basis of the investigation.
• The jurisdiction of the NCLT and the role of the Monitoring Committee in overseeing the CIRP proceedings of TCSPL.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Investigation into TCSPL

• Legal Framework: The investigation is directed under Sections 206 to 210 of the Companies Act, 2013, which allows for inquiries into the affairs of a company if there are circumstances suggesting fraudulent activities.
• Court's Interpretation: The Court found prima facie evidence suggesting that the ex-promoters and directors of TCSPL siphoned funds from homebuyers, warranting an investigation by the SFIO.
• Key Evidence: The IRP report dated 09.08.2023 highlighted suspicious transactions and fund diversion by TCSPL to shell companies.
• Application of Law to Facts: The Court applied the provisions of the Companies Act to direct an investigation into the affairs of TCSPL and its ex-promoters.
• Conclusions: The investigation is necessary to protect the interests of the homebuyers and ascertain the extent of the fraudulent activities.

Issue 2: Connection of ACE Group to TCSPL

• Legal Framework: The Companies Act allows for investigations into related companies if there is evidence of fraudulent transactions.
• Court's Interpretation: The Court found no direct evidence linking the ACE Group to the fraudulent activities of TCSPL, thus excluding them from the SFIO investigation.
• Key Evidence: The ACE Group's acquisition of certain companies was argued to be at arm's length, with no direct connection to the fraud.
• Application of Law to Facts: The Court considered the evidence of the ACE Group's business practices and acquisitions and found no basis for including them in the SFIO investigation.
• Conclusions: The ACE Group is not to be investigated by the SFIO, but the Registrar of Companies will continue to examine their transactions with TCSPL.

Issue 3: Recall/Modification of the Interim Order

• Legal Framework: The power to recall or modify orders is inherent in the Court's jurisdiction under Article 226 of the Constitution of India.
• Court's Interpretation: The Court found no grounds to recall the order dated 02.02.2024, as the investigation serves the interests of justice.
• Key Evidence: The IRP report and subsequent findings by various authorities supported the need for an investigation.
• Application of Law to Facts: The Court upheld the interim order, emphasizing the need to investigate the alleged fraud comprehensively.
• Conclusions: The interim order remains in effect, with modifications to exclude certain parties from the SFIO investigation.

Issue 4: Role of Orris Infrastructure Pvt. Ltd.

• Legal Framework: The Companies Act provisions apply to Orris as a related entity involved in the Greenopolis project.
• Court's Interpretation: Orris is not included in the SFIO investigation but will be subject to scrutiny by the Registrar of Companies.
• Key Evidence: Orris's involvement in the Greenopolis project and its transactions with TCSPL were examined.
• Application of Law to Facts: The Court found that Orris's role requires further investigation to determine any wrongdoing.
• Conclusions: Orris will be investigated by the Registrar of Companies, respecting previous judicial orders.

Issue 5: Legitimacy of the IRP Report

• Legal Framework: The IRP report is a crucial document in insolvency proceedings, subject to scrutiny by the NCLT.
• Court's Interpretation: The Court did not pass a final verdict on the IRP report, leaving it to the NCLT to assess its credibility.
• Key Evidence: Allegations of collusion and inaccuracies in the IRP report were raised.
• Application of Law to Facts: The Court deferred to the NCLT's jurisdiction to evaluate the IRP report.
• Conclusions: The IRP report remains a contentious issue, to be resolved by the NCLT.

Issue 6: Jurisdiction of NCLT and Monitoring Committee

• Legal Framework: The Insolvency and Bankruptcy Code provides the NCLT with jurisdiction over insolvency proceedings.
• Court's Interpretation: The NCLT is the appropriate forum to oversee the CIRP of TCSPL, with a Monitoring Committee in place.
• Key Evidence: The NCLT's orders and the Supreme Court's directions were considered.
• Application of Law to Facts: The Court acknowledged the NCLT's role in resolving the insolvency proceedings and related disputes.
• Conclusions: The NCLT will continue to handle the CIRP, with the Monitoring Committee overseeing the process.

3. SIGNIFICANT HOLDINGS

• "The investigation into the affairs of TCSPL and its ex-promoters is necessary to protect the interests of the homebuyers and ascertain the extent of the fraudulent activities."
• "The ACE Group is not to be investigated by the SFIO, but the Registrar of Companies will continue to examine their transactions with TCSPL."
• "The interim order remains in effect, with modifications to exclude certain parties from the SFIO investigation."
• "Orris will be investigated by the Registrar of Companies, respecting previous judicial orders."
• "The IRP report remains a contentious issue, to be resolved by the NCLT."
• "The NCLT will continue to handle the CIRP, with the Monitoring Committee overseeing the process."