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TMI Blog2018 (5) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... i Group companies - Held that:- For this Respondent being suspected to be involved in this fraud, this Bench is of the view that modification of order to the extent that is required is be-fitting relief in the light of the discussion made in other applications. Henceforth, the restraint order dated 23.2.2018 is hereby modified permitting this applicant to withdraw ₹ 2,00,000 per month from his Bank accounts, as to other assets of this Respondent is concerned, the order dated 23.2.2018, except to the extent of exemption given above, will continue as before until further orders. Accordingly, his application is hereby disposed of. - MA 180/2018, 182/2018, 183/2018, 184/2018, 217/2018, 218/2018 and 219/2018 C.P. No. 277/241-242/NCLT/MB/MAH/2018 - - - Dated:- 2-4-2018 - MR. B. S. V. PRAKASH KUMAR AND MR. RAVIKUMAR DURAISAMY, JJ. For The Petitioner : Shri Sanjay Shorey, Shri A. K. Sethi, Shri Meghav Gupta, Shri M. V. Chakranarayan, Shri Vinod Sharma, shri S. Ramakantha, Shri R. S. Meena, Shri P. Naikwadi, shri A. Patwegan, Ms. Trupti Sharma, Shri Noor Shergill, Shri Sanjay Rai. For The Applicants/Respondents : Mr. Iqbal Chaggla, Naval Agarwal, Ashish Prasad, Jehan Meht ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith any of the concerns, Trusts, LLPs linked with Mr. Nirav Modi, despite being so, this restraint order was passed against him. 6. This applicant submits that the present proceedings against him are grossly misconceived; because this order was taken out without putting it to this Bench that he was a Non-Executive Independent Director and had no role to play in the affairs and management of Firestar. He has learnt that alleged fraud has primarily been committed by three firms, namely. M/s. Diamond RUS (R6), M/s. Solar Exports (R4) and M/s. Stellar Diamond (R5) in conspiracy with Mr. Nirav Modi (R11), Mr. Nishal Modi (R12), Mrs. Ami Nirav Modi (R13) and Mr. Mehul Choksi (R14). 7. He says he has no connection with any of these persons except continuing as an Independent Director in Firestar until before his resignation, even while continuing as Independent Director, he did not come across any suspicious transactions warranting his interference, moreover, his appointment letter categorically stated that his commitment would be limited to 4-5 days a quarter and he had no authority to operate bank accounts. He says, he has come to know of this fraud like any other person only afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date to examine as to whether violation has occurred with his knowledge attributable through the process, with his consent or connivance and whether he acted diligently or not. Consistent with the above proposition, RBI through its Circular dated 1.7.2015 (Master Circular on Wilful defaulters) has clearly stated that normally a Non-Whole Time Director should not be considered as wilful defaulter unless it is conclusively established that fraud has taken place in connivance with the Independent Director. The Counsel says inclusion of the name of the applicant in the proceedings amounts to abuse of process of law and travesty of justice therefore, respectfully submitted that restraint order shall be vacated. 10. The Counsel further says, the applicant is a retired individual meeting his day-to-day expenditure from his investment and hard earned savings earned over his professional career of more than 25 years, because of this order, now this applicant is not in a position to liquidate his investments for his day-to-day expenses also. He says that he has dependent wife and two children pursuing their professional careers abroad and he needs to pay taxes in view of the contractual c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by an inbuilt procedure which is present under Chapter XIV of this Companies Act. As to investigation in the chapter, under sections 212-220 of the Companies Act, 2013 a procedure has been laid out almost analogous to the procedure to conduct investigation under Criminal Procedure Code, and to file final report u/s 212(15) of the Companies Act, 2013 as investigating officer (police) files charge sheet against the accused u/s 173 of Criminal Procedure Code. 15. This Bench is conscious of the fact that it is not conferred with any magisterial powers as conferred under CrPC, but when Companies Act has conferred jurisdiction upon this Bench to pass such an order which can be passed by Criminal Court while investigation is in progress, this Bench is bound to pass an order as directed by the section provided facts constitute elements of the section. 16. It appears that CBI already examined this applicant but so far no proceeding has been initiated against him and not given any further directions to initiate proceedings against this applicant. The idea behind passing restraint order is, the culprits involved in the fraud do not run away with the booty drained off from Punjab Nati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany, though company is an independent entity equivalent to any other natural person, it will not get any momentum on its own for short of life in it, impetus will come into it only when it is driven by a natural person, so to the company, driver is a Board constituted with natural persons. Therefore, whenever company is involved in fraud, it will always point at the persons managing the affairs of the company. In this scenario, unless the persons (Directors and other key Managerial Personnel) involved are curtailed from dealing with not only the assets of the company but also the assets lying with the persons involved in committing fraud, it is next to impossible to claw back the proceeds of the fraud from the persons running the affairs of the companies. I need not say that fraud vitiates everything; therefore, to get off the hook, such persons cannot veil the situation with the doctrine of separate entity, because in a situation like this, hands of law are long enough to pierce the corporate veil and catch the culprits. Here money being secreted out by colluding with some Bank officials, Competent Authority is conferred with powers to search and seize them; this section is nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever principles applicable to conducting investigation under CrPC are equally applicable to the extent mentioned in this Act. For this, we have to read section 221 along with sections 212-220 of the Act. 23. Of course, the Petitioner filed this case under Sections 241-242, but this Bench having noticed that this petitioner is short of information and material for constituting prima facie case under Sections 241 and 242, this Bench has passed impugned restraint order u/s 221 of Companies Act, 2013. 24. But at the same time, it is the duty of this Court to see that innocent people are not burdened by this restraint order therefore as and when any innocent comes before this Bench saying that he has no involvement in the fraud spiraling from day-to-day, this Bench has to diligently respond to the reliefs sought by such people. Of course, it is true that this Bench cannot decide who is innocent and who is culprit, but to the extent order passed by this Bench, it should not become helpless to vacate that order if no material is found against whom this order is in force. In view of the same, for there being neither an averment nor any incriminating material placed against this appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso an Independent Director like in the case above and there being no averment or incriminating material against this Respondent except continuing as Independent Director until before 5.2.2018. This case being similar to Case in MA 182/2018, applying the same discussion and observations to this application, the restraint order dated 23.2.2018 is hereby vacated against this Respondent as well. 28. As to MA 183/2018 , it is an MA filed by a person called Gopal Krishnan Nair (R44), who is a qualified Chartered Accountant and former Executive Director in R1 and a Director of Respondent during the period 1999 to 2009, thereafter on 13.11.2009/23.12.2009 resigned as Executive Director of Gitanjali Gems Ltd. (Rl). Ever since, he has never worked as director of any of the Companies which are Respondents before this Bench. He says that he ceased to have any association directly or indirectly with Rl or other group companies with effect from 13.11.2009/23.12.2009 because he tendered his resignation from the board with effect from 13.11.2009. In support of this statement, this applicant filed Form-32 in respect to resigning from Gitanjali Gems Ltd. and its Group companies. 29. On ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeting on 12.10.2016. This was the first time, the applicant met Mr. Modi. Since he was said that Modi was interested to create India first luxury Jewellery Brand that would compete with the best in the world and interested to strengthen its Board for such expansion, after being shared with the names of Mr. Suresh Senapathy and Mr. Gautham Mukkavilli as Independent Directors, he agreed for joining as Non-Executive Independent Director. In furtherance of it, he was informed that he was appointed as Independent Director on 6.12.2016. He says that during this assignment, he did not come across any suspicious transaction. He says that he also, like everybody heard the news of the alleged fraud played by Mr. Nirav Modi on 5.2.2018, as soon as such news came out, he tendered his resignation as Independent Director in R8 company on 7.2.2018. 32. On filing this application, as to this person when we looked at the Company petition, nothing has been said except that R53, i.e. the applicant herein is one of the Directors of R8, since the Petitioner has not placed any incriminating material against this Respondent to strengthen the order passed by this Bench on 23.2.2018, by adopting the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Bench negating the statement and the papers filed by this R43, this Bench hereby vacates the restraint order dated 23.2.2018 passed against R43. Accordingly, this application is hereby disposed of. 36. As to MA 218/2018 filed by Mrs. Nazura Yash Ajaney (R38), she submits that she is a Commerce graduate with 20 years' experience in the field of early childhood education and parent child relationship. As she has worked with Non-Government Organisation called Helix Aids Foundation, her husband is a management consultant providing consultation to the company based in Kolhapur, through some known person, she was invited to join on the Board of Rl to focus on its corporate social responsibility programmes. According to her, she was appointed as Independent Director of Rl on 29.9.2014 thereafter she was appointed as Independent Director in two more companies of this Group, i.e. Nakshatra World Ltd. on 15.12.2016 and in R2 on 16.12.2016 with the purpose of focusing on the corporate social responsibility programmes. Thereafter, her name was included in an FIR filed by PNB on 15.2.2018 in respect of the fraud committed. She submits that on seeing in the media she noticed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By seeing her track record and the business of these companies, it appears it is not believable that she has been taken as Independent Director by looking at her expertise in child care. Besides this, an FIR has been filed against this R38 along with others on 13.2.2018 u/s 120 r/w Section 420 IPC and also Section 13(2) r/w 13(1)(d) of Prevention of Corruption Act. She being shown as an accused and she has already been examined by CBI, if the restraint order is totally lifted against her, it would become an impediment if at all CBI found that any money or part of the money swindled from the Bank has gone to this Respondent. 40. By looking at the application filed by her, prima facie we believe that there was no occasion to make her directly as an Independent Director in a listed company without having any expertise either on financial side or in the business which this company is doing. It is a fact that no material has been supplied by the Petitioner except mentioning her as one of the Respondents on the ground that this Respondent continued as Director in Rl as well as R2. But this cannot become a reason to vacate this order when this Bench believes that there is a prima faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the respective companies. Though this Petition was filed against 64 persons, only 16 persons were shown as accused in the FIR filed by PNB. Out of those 16, this Respondent is one. 45. For this Respondent being suspected to be involved in this fraud, this Bench is of the view that modification of order to the extent that is required is be-fitting relief in the light of the discussion made in other applications. Henceforth, the restraint order dated 23.2.2018 is hereby modified permitting this applicant to withdraw ₹ 2,00,000 per month from his Bank accounts, as to other assets of this Respondent is concerned, the order dated 23.2.2018, except to the extent of exemption given above, will continue as before until further orders. Accordingly, his application is hereby disposed of. 46. It is hereby held that if the Petitioner finds any incriminating material against any of the Respondents against whom this order has been vacated, the Petitioner is at liberty to seek revocation of this order. 47. Accordingly, MA 180/2018, 182/2018, 183/2018, 184/2018, 217/2018, 218/2018 and 219/2018 are hereby disposed of with the directions as mentioned above. - - TaxTMI - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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