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TMI Blog2019 (9) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... hment for falsification of books of corporate debtor; Section 72 punishment for wilful and material omissions from statements relating to affairs of corporate debtor and Section 73 punishment for false representations to creditors, if found prove - No punishment for imprisonment can be imposed by the Adjudicating Authority (National Company Law Tribunal) except to pass order in terms of Section 66 of the I B Code. In terms of sub-section (1) of Section 60, the National Company Law Tribunal is the Adjudicating Authority for the purpose of I B Code. It is having concurrent jurisdiction as the National Company Law Tribunal under the Companies Act, as also as the Adjudicating Authority under the I B Code - From bare perusal of Section 212 of the Companies Act, 2013, it will be evident that such investigation into affairs of company can be made only on receipt of a report of the Registrar or Inspector under Section 208 of the Companies Act, 2013 or on intimation of a special resolution passed by a company that its affairs are required to be investigated; or in the public interest; or on request from any Department of the Central Government or a State Government. Section 212 does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench, the relevant facts thereof are quoted below: 1) The Corporate Debtor M/s. Bhuvana Infra Projects is incorporated in the year 2011 and it is the sub contracting Arm of its Group Companies and undertakes work contracts exclusively for its group Companies. The Group consists of M/s. Golden Gate Properties Ltd., (GGPL), M/s. Prisha Properties India Pvt. Ltd. (PPIL) and M/s. Commune Properties Pvt. Ltd., (CPIL) New Age Properties LLP and other Companies. This is visible from the complete Turnover of the Corporate Debtor with billing breakup of the Group is as below: Sr. No. Year Respondent 7 M/s. Prisha Properties India Pvt. Ltd. (Rs.) Respondent 6 M/s. Commune Properties (Rs.) Respondent 8 M/s. Golden Gate Properties (Rs.) Total as per Audited Financials (Rs.) 1. 2011-12 39,178,307 Nil Nil 39,178,307 2. 2012-13 177,757,510 Nil Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Commune Properties India Pvt. Ltd. (Respondent 6) 46,322,665 13,375,380 59,698,045 M/s. Golden Gate Properties Ltd. (Respondent 8) 41,804,526 1,801,180 43,605,706 M/s. Prisha Properties India Pvt. Ltd. (Respondent 7) 233,937,377 233,937,377 Total 322,064,568 15,176,560 337,241,128 10) Also, as per Audited results for 2017-18, the rest of the assets shown in the books have been distributed to the Group Companies to the extent of ₹ 1,51,76,560/- (₹ 1.52 Crores), duly confirmed by the Director of the Company and the rest of the assets worth ₹ 7,441,849 is not found physically. Also, as pointed out in the audit report 2017/18 and also confirmed in the forensic audit report, the inventory of amount ₹ 941,23,192/- have been written off without any revenue recognized/no invoice raised. Hence, the minimum amount due from the Group to the Corporate Debtor amounts to: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly denied the allegations made by the learned RP. However, in order to adjudicate the issue by this Tribunal, it is necessary to refer to matter to SFIO, to test the veracity of allegations and counter allegations made by the parties. The Central Government established SFIO to investigate frauds relating to Company. As per Section 212, the Central Government is empowered to cause to investigate into the affairs of the Company by SFIO, basing on the receipt of report of Registrar or inspector u/s 208 in public interest or on request from any department of the Central Government or a State Government. Section 213 also empowers the Tribunal to order investigation, if it is of the opinion that the business of the Company is being conducted with intent to defraud its Creditor, members, or any other person etc. Therefore, we are of the prima facie view that findings given in Forensic Audit Report only prima established the fraudulent transactions in question. Therefore, it is necessary to conduct further investigation by SFIO in the affairs of Company basing on the findings given in Forensic Audit Report, after affording proper opportunity to concern opposite parties to defend them. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellants- M/s. Commune Properties India Pvt. Ltd. Ors. details whereof have been recorded in paragraph 9 of the impugned order dated 16th April, 2019, as quoted above. 13. Learned counsel for the Appellants- M/s. Commune Properties India Pvt. Ltd. Ors. submits that the amount as has been referred to by the Resolution Professional is the retention money performed by the Corporate Debtor at the instance of three different Appellants Companies, which are subject to re-conciliation and final settlement. 14. Mrs. Ramanathan Bhuvaneshwari, the Resolution Professional argued, in person, and submitted that no record or assets of the Corporate Debtor has been handed over till date though application under Section 7 of the I B Code was admitted on 17th January, 2018. 15. It is further submitted by the Resolution Professional that different activities of the promoters, including fraud committed by them by diverting funds to the Group Companies having come to light through other records and accounting system, so prayer was made for investigating and punishment in terms of provisions of Section 66 read with Section 69 of the I B Code. 16. When the matter was initially take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is clear that if during the Corporate Insolvency Resolution Process or Liquidation Process, it is found that any business of the Corporate Debtor has been carried on with intent to defraud creditors of the Corporate Debtor or for any fraudulent purpose, it is always open to the Adjudicating Authority to pass appropriate orders in terms of the said provisions on the application filed by the Resolution Professional. 20. Part II, Chapter VII deals with offences and penalties. Section 68 deals with punishment for concealment of property by any officer of the Corporate Debtor, including the Promoters within the twelve months immediately preceding the insolvency commencement date, as follows: 68. Punishment for concealment of property.- Where any officer of the corporate debtor has,- (i) within the twelve months immediately preceding the insolvency commencement date, (a) wilfully concealed any property or part of such property of the corporate debtor or concealed any debt due to, or from, the corporate debtor, of the value of ten thousand rupees or more; or (b) fraudulently removed any part of the property of the corporate debtor of the value of ten thousand rupees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment, decree or order for payment of money obtained against the corporate debtor, such officer of the corporate debtor or the corporate debtor, as the case may be, shall be punishable with imprisonment for a term which shall not be less than one year, but which may extend to five years, or with fine, which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both: Provided that a person shall not be punishable under this section if the acts mentioned in clause (a) were committed more than five years before the insolvency commencement date; or if he proves that, at the time of commission of those acts, he had no intent to defraud the creditors of the corporate debtor. 22. During the Corporate Insolvency Resolution Process, if the Officer/ Promoter of the Corporate Debtor does not disclose to the Resolution Professional all the details of property of the Corporate Debtor and details of transactions thereof, or any such other information as the Resolution Professional may require and does not deliver to the Resolution Professional all or part of the property of the Corporate Debtor in his control or custody and does not deliver to the Resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if he proves that he had no intent to do so in relation to the state of affairs of the corporate debtor. (2) If an insolvency professional deliberately contravenes the provisions of this Part the shall be punishable with imprisonment for a term which may extend to six months, or with fine which shall not be less than one lakh rupees, but may extend to five lakhs rupees, or with both. 23. Section 71 while relates to punishment for falsification of books of corporate debtor whereas Section 72 deals with punishment for wilful and material omissions from statements relating to affairs of corporate debtor, as quoted below: 71. Punishment for falsification of books of corporate debtor.- On and after the insolvency commencement date, where any person destroys, mutilates, alters or falsifies any books, papers or securities, or makes or is in the knowledge of making of any false or fraudulent entry in any register, books of account or document belonging to the corporate debtor with intent to defraud or deceive any person, he shall be punishable with imprisonment for a term which shall not be less than three years, but which may extend to five years, or with fine which shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order in terms of Section 66 of the I B Code. 27. The offences and penalties as prescribed and dealt with in Chapter VII and appropriate order of punishment can be passed only by way of trial of offences by a Special Court in terms of Section 236 of the I B Code. However, no such Court can take cognizance of any offence punishable under the Act, save on a complaint made by the Insolvency and Bankruptcy Board of India (IBBI) or the Central Government or any person authorised by the Central Government in this behalf. This will be apparent from the relevant provisions of Section 236 as quoted below: 236. Trial of offences by Special Court.- (1) Notwithstanding anything in the Code of Criminal Procedure, 1973, offences under this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013. (2) No Court shall take cognizance of any offence punishable under this Act, save on a complaint made by the Board or the Central Government or any person authorised by the Central Government in this behalf. (3) The provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid company to the Serious Fraud Investigation Office and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation. (2) Where any case has been assigned by the Central Government to the Serious Fraud Investigation Office for investigation under this Act, no other investigating agency of Central Government or any State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceeded further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to Serious Fraud Investigation Office. (3) Where the investigation into the affairs of a company has been assigned by the Central Government to Serious Fraud Investigation Office, it shall conduct the investigation in the manner and follow the procedure provided in this Chapter; and submit its report to the Central Government within such period as may be specified in the order. (4) The Director, Serious Fraud Investigation Office shall cause the affairs of the company to be invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a copy of the order, along with the material in his possession, referred to in that sub-section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed and the Serious Fraud Investigation Office shall keep such order and material for such period as may be prescribed. (10) Every person arrested under sub-section (8) shall within twenty-four hours, be taken to a Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction: Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the Magistrate's court. (11) The Central Government if so directs, the Serious Fraud Investigation Office shall submit an interim report to the Central Government. (12) On completion of the investigation, the Serious Fraud Investigation Office shall submit the investigation report to the Central Government. (13) Notwithstanding anything contained in this Act or in any other law for the time being in force, a copy of the investigation report may be obtained by any person concerned by making an application in this regard to the court. (14) On receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Government for investigation by the Serious Fraud Investigation Office even if it notices the affairs of the Company of defrauding the creditors and others. 33. However, investigation into affairs of company at the instance of the Tribunal has been prescribed under Section 213 and reads as follows: 213. Investigation into companys affairs in other cases. The Tribunal may,- (a) on an application made by (i) not less than one hundred members or members holding not less than one-tenth of the total voting power, in the case of a company having a share capital; or (ii) not less than one-fifth of the persons on the companys register of members, in the case of a company having no share capital, and supported by such evidence as may be necessary for the purpose of showing that the applicants have good reasons for seeking an order for conducting an investigation into the affairs of the company; or (b) on an application made to it by any other person or otherwise, if it is satisfied that there are circumstances suggesting that (i) the business of the company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case and or by; (ii) persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members etc., (which is also the allegation made by the Resolution Professional), in such case, the Tribunal after giving a reasonable opportunity of being heard to the parties concerned, that the affairs of the company ought to be investigated by an Inspector or Inspectors appointed by the Central Government and where such an order is passed, in such case, the Central Government is bound to appoint one or more competent persons as Inspectors to investigate into the affairs of the company in respect of such matters and to report thereupon to it in such manner as the Central Government may direct. 35. If after investigation it is proved that (i) the business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose; or (ii) any person concerned in the formation of the company or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and subject to other provisions under the Companies Act, 2013 or the I B Code or any Rule made thereunder. The Tribunal and the Adjudicating Authority have also been empowered to regulate their own procedure. 40. In view of the aforesaid position of law also, the procedure laid down under Section 213 of the Companies Act, 2013 can be exercised by the Tribunal/ Adjudicating Authority, as held above. 41. Further, after the investigation by the Inspector, if case is made out and the Central Government feels that the matter also requires investigation by the Serious Fraud Investigation Office under Section 212 of the Companies Act, 2013, it is open to the Central Government to decide whether in such case the matter may be referred to the Serious Fraud Investigation Office or not. This will depend on the gravity of charges as may be found during the investigation by the Inspector. 42. In view of the aforesaid position of law, we are of the view that the Adjudicating Authority was not competent to straight away direct any investigation to be conducted by the Serious Fraud Investigation Office. However, the Adjudicating Authority (Tribunal) being competent to pass order under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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