2024 (7) TMI 1463 - HC - Companies Law

Fraudulent siphoning/diversion of funds - Initiating and carrying out appropriate inquiries and investigation against the management of Three C Shelters Private Limited , i.e., respondent No.3 and sister group of companies - manipulating of records and siphoning off funds of the said company to certain shell companies based in Kolkata - HELD THAT - This Courts finds it unfathomable that the information about the state of affairs of respondent No.3 and its group of companies have not reached the ears of respondent No.1 2, and yet shockingly no action has been taken in terms of Chapter XIV of the Companies Act, 2013. It is but imperative that they must exercise their statutory and public duties in arresting pilferage, siphoning off of the assets of respondent company (in liquidation)/respondent No.3 and its group of companies and safeguard the legitimate interests and rights of the petitioner and those similarly placed. It is surprising that despite issuance of advance notice and having a battery of lawyers on their panel, no one has bothered to even appear for respondent No.1 and 2 today during the hearing. There is no gainsaying that Chapter XIV of the Act provides for a detailed mechanism to inspect, call for the accounts and record of the company, inquire and investigate into the financial affairs of the company. Further, where the Registrar or inspector has reasonable grounds to believe that the books or documents with regard to the company under investigation are likely to to be destroyed, mutilated, altered, falsified or secreted, an order can be prayed for from the Special Court for the seizure of such books and papers in the manner provided vide section 209 of the Act and proceed for freezing of the accounts of the company under investigation. Considering the prayer made in the interim application moved on behalf of the petitioner, unhesitatingly there are compelling and justifiable grounds to pass certain directions so as to safeguard the paramount interests of the petitioner and those who are similarly placed in larger public interest . Respondent Nos. 1 and 2, are hereby conjointly directed to initiate action and ensure step-wise compliance in terms of Section 206 to 210 of the Companies Act, 2013 and other analogous provisions in Chapter XIV of the Companies Act, 2013, and thereby inspect the affairs of Three C Shelters and the related companies of Three C Shelters in terms of the Status Reports of the IRP before the NCLT as brought out in his reports dated 9th August, 2023 and submit an Inspection Report within four weeks from today before this Court. Re-notify for hearing on 14th March, 2024.

Summary

Issues Involved:
1. Application for filing uncertified and dim/untyped annexures.
2. Invocation of extraordinary jurisdiction under Article 226 and 227 of the Constitution of India.
3. Allegations of fund siphoning and manipulation by the management of Three C Shelters Private Limited.
4. Investigation and legal action against the promoters and ex-directors.
5. Compliance with statutory duties under Chapter XIV of the Companies Act, 2013.
6. Interim directions to safeguard the interests of homebuyers and creditors.

Detailed Analysis:

1. Application for Filing Uncertified and Dim/Untyped Annexures:
The petitioner sought permission to file uncertified and dim/untyped annexures. The court granted the petitioner exemption from filing certified copies for now, directing them to place the same on record at the earliest, preferably before the next date of hearing. The application was disposed of accordingly.

2. Invocation of Extraordinary Jurisdiction under Article 226 and 227 of the Constitution of India:
The petitioner invoked the extraordinary jurisdiction of the court under Article 226 read with Article 227 of the Constitution, seeking directions in the nature of mandamus to the Registrar of Companies and the Union of India, through the Ministry of Corporate Affairs. The petitioner prayed for inquiries and investigations against the management of Three C Shelters Private Limited and its sister companies for alleged manipulation of records and siphoning off funds to shell companies.

3. Allegations of Fund Siphoning and Manipulation by the Management of Three C Shelters Private Limited:
The petitioner, a homebuyer, alleged that the management of Three C Shelters Private Limited had raised funds from investors but siphoned off the money to various shell companies. The petitioner claimed that the project was never intended to be completed, causing financial loss to the investors. The court noted that 138 investors/homebuyers had lodged 498 claims before the Interim Resolution Professional (IRP) in proceedings under the Insolvency and Bankruptcy Code (IBC).

4. Investigation and Legal Action Against the Promoters and Ex-Directors:
The petitioner argued that the promoters and ex-directors of Three C Shelters Private Limited were involved in fraudulent activities, including collusive insolvency proceedings to benefit from the moratorium under Section 14 of the IBC. The court referred to the IRP's reports, which highlighted dubious transactions, including the transfer of Rs. 200 crores to shell companies. The court noted the commonality between the promoters of Three C Group and Ace Group, with funds being diverted to projects like Ace Palms Floors, Gurgaon.

5. Compliance with Statutory Duties under Chapter XIV of the Companies Act, 2013:
The court found it surprising that despite the damning information, no action had been taken by the Registrar of Companies and the Ministry of Corporate Affairs. The court emphasized the statutory duties under Chapter XIV of the Companies Act, 2013, which provides mechanisms for inspecting, inquiring, and investigating the financial affairs of companies. The court directed the authorities to initiate action and ensure compliance with Sections 206 to 210 of the Companies Act, 2013.

6. Interim Directions to Safeguard the Interests of Homebuyers and Creditors:
The court issued several interim directions to protect the interests of the petitioner and similarly placed investors:
- Respondents Nos. 1 and 2 were directed to initiate action and submit an inspection report within four weeks.
- Legal action was to be initiated against respondents Nos. 6, 7, and 8 to explain the diversion of funds.
- The authorities were directed to seize the books of accounts of related companies and trace further fund transfers.
- Actions were to be taken under Sections 209 and 221 of the Companies Act, 2013, to freeze the assets of the companies involved.
- Necessary measures were to be undertaken to preserve the assets of the respondent company in liquidation and its sister concerns.

The court set the next hearing for 14th March 2024 and directed immediate compliance with the interim orders. Notices were issued to all parties, and a copy of the order was provided to the petitioner for necessary compliance.