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TMI Blog2020 (6) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... C, or against any action, proposed to be taken against the applicant pursuant thereto. It is not possible for this Court, therefore, to hold that, at this stage, any proceeding , civil or criminal, is pending against the applicant, as could be stayed under Section 391 (6) of the Act. It is deemed appropriate to express any final opinion thereon, as the complaint, of NSDC, is presently under consideration with the EOW, which would, doubtless, take a view thereon. In the opinion of this Court, no proceeding , as could be stayed under Section 391 (6) of the Companies Act, 1956, initiated by the NSDC, can be said to be presently pending against the applicant - Petition dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... the efforts at rehabilitation/restructuring of the applicant-Company were not jeopardised, and the applicant was in a position to generate requisite cash flow, so that its dues could be settled. With the said directions, C.A. 3677/2016 was disposed of. 6. Subsequent thereto, it is not in dispute that serious efforts are under way, to rehabilitate the applicant-Company. In the interregnum, this Court has, vide orders dated 22nd May, 2018, 17th July, 2018, 31st July, 2018 and 21st October, 2019, granted interim protection, to the applicant-Company, against various proceedings, initiated against it. Admittedly, all such proceedings were civil in nature. Protection was granted, to the applicant, under Section 391 (6) of the Act. Section 391 dealt with the "power to compromise or make arrangements with creditors and members", and sub-section (6), thereof, empowers the Company Court as under: "(6) The Court may, at any time after an application has been made to it under this section, stay the commencement of continuation of any suit or proceeding against the company on such terms as the Court thinks fit, until the application is finally disposed of." (Emphasis supplied) 7. At this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Party shall be entitled to initiate appropriate legal proceedings including suspension to access the Grant Amount or recover the Grant Amount or to access the Grant Amount by the Second Party and/or termination along with damages, interests and expenses without prejudice to any other right or remedy which the First Party may have under this MoU or otherwise in law. However, it is clarified that this clause shall not be applicable in the event of First Party not releasing the Grant Amount or part thereof not for the reasons attributable to the Second Party, in which event, the obligations of the Second Party under this MoU shall remain suspended and in the event First Party is unable to release the Grant Amount or part thereof within ninety (90) days from the date of suspension, both Parties shall mutually agree to terminate this MoU on such terms which as may be mutually agreed." The Utilisation Certificate was required to be submitted, by the applicant, in the Form prescribed in Schedule V to the MoU. (iii) Sub- clause (xiii) of Clause 2.1 of the MoU entitled the applicant to reimbursement, at the rate of ₹ 50,000/-, per student/participant with the applicant who, obta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , till the date of the legal notice, were pending, evidencing utilisation, by the applicant, of the Grant amount of ₹ 2,88,03,600/-, released to the applicant by NSDC. This, Para 11 of the legal notice alleged, amounted to "to a breach of contract", resulting in financial loss, to NSDC and the public exchequer, of the Grant amount of ₹ 2,88,03,600/-. Thereafter, the concluding paras of the legal notice went on to read thus: "12. That in terms of Clause 2.1 (xiv) of the MoU, iYogi is required to rectify the default stipulated in the notice within 45 days from the date thereof. Our client has not received any communication/revert from your entity (i.e. iYogi) in response to the aforesaid Show Cause Notice till date as the said Show Cause Notice was returned undelivered to Our Client due to a change in address of iYogi. It is submitted that as a responsible entity and being the principal party to the MoU, iYogi was supposed to intimate any change in its communication addressed to Our Client; which it has failed to do so. Accordingly, in the circumstances, the issuance of the Show Cause Notice dated 30.01 to 2018 to the last known address of iYogi would be deemed to be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... colluded and illegally siphoned off the money it had received under the scheme Udaan and deliberately avoiding service of the notices sent by and on behalf of the complainant. 6. As on date the Utilisation Reports for the period starting from the year 2013 till date remain pending on the part of the Accused towards utilisation of the Total Grant amount of ₹ 2,88,03,600/- that has been released by the Complainant to the Accused under the MoU. ***** 8. The Complainant take strong exception to the wilful non-performance of the obligations by the Accused under the MoU and also the non-submission of the quarterly and annual Utilisation Reports which clearly demonstrates the unilateral and wilful default by the Accused and places the strong possibility of misappropriation and siphoning-off of the Grant Amount i.e. ₹ 2,88,03,600/- released by the Complainant under the Scheme Udaan. 9. In the light of the fact that the Accused has illegally and wrongfully failed to comply with the terms of MoU despite receiving an amount of ₹ 2,88,03,600/- released by the Complainant under the Scheme Udaan and thereafter willfully failing to file the Utilisation Report and the Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,44,60,180/-, to the Udaan monitoring team of NSDC, duly signed by the empanelled Chartered Accountant of NSDC. The applicant had also submitted a claim, for reimbursement of ₹ 50,000/- (per student), which was pending. The applicant informed NSDC that, while it would complete the obligations of the first part of the Udaan scheme, it was not interested in continuing with the scheme, as involved considerable financial loss to the applicant, and was not effective and in accordance with the objectives of the applicant. The allegation, of NSDC, that utilisation reports had not been submitted by the applicant was, it was pointed out, completely false, and indicated that NSDC was not aware of its own records. In the light of the submissions, the applicant requested the EOW, vide the above reply dated 12th June, 2019, to "review the complaint". (x) Mr. Gaurav Duggal, learned counsel appearing for the applicant, submits that all details, sought by the EOW, have been provided by the applicant, and that the applicant is hopeful that the proceedings would be dropped by the EOW, as, in his submission, no case, for initiating any criminal proceedings, could be said to arise. (xi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 28th April, 2020, categorically denying all allegations of NSDC. Castigating the email, dated 14th April, 2020, as "maligning, disparaging, malicious", "defamatory and derogatory", the applicant pointed out that the report, uploaded by NSDC on its own website reflected the number of people hired, trained and deployed by the applicant, under the Udaan scheme, thereby belying the allegation, of NSDC, that the applicant had not hired anyone and had misappropriated the grant advanced to it under the said scheme. It was also submitted that, in a report, on the website of NSDC, which referred to the recruitment drives conducted in Jammu and Kashmir by Udaan partners, the first name, referenced therein, was that of the applicant. The applicant, therefore, categorically denied the allegation that a criminal offence could have been committed by it, and alleged, per contra, that NSDC was attempting to malign the reputation of the applicant. 8. Apparently sensing that matters were getting out of hand, the applicant has moved the present application, before this Court, invoking Section 391 (6) of the Act, seeking interim protection against the proceedings pending/proposed against the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, pending before this Court, subject to the plea of limitation, available to his client. He points out that, consequent to orders passed by this Court, the next meeting of employees, scheduled and unscheduled creditors of the applicant, was to take place on 15th July, 2020. Mr. Duggal points out, further, that, in that notices dated 4th April, 2018 supra and 18th December, 2018 supra, addressed by NSDC to the applicant, civil action alone was proposed, and the liability of the applicant, to which reference was made thereon, was civil in nature. 13. The facts of Krishna Texport, submits Mr. Duggal, were clearly distinguishable from those of the present case. Inter alia, Mr. Duggal points out that the petitioner, in Krishna Texport, had availed two civil remedies. 14. Responding to the submissions of Mr. Duggal, Mr. Rohit Aggarwal, appearing for NSDC, places reliance on paras 26, 33 and 34 of the report in Krishna Texport. He submits that Krishna Texport was categorical in holding that civil proceedings, alone, could be stayed under Section 391 (6) of the Act. The communication, dated 15th February, 2019, addressed by his client to the EOW, he submits, was analogous to informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Duggal also placed reliance on the well-known judgment of the Supreme Court in Lalita Kumari v. Govt. of UP AIR 2014 SC 187; (2014) 2 SCC 1, to contend that the criminal law was set in motion only on registration of FIR and, prior thereto, the proceedings could not be treated as criminal in nature. Mr. Duggal places especial reliance on para 8 of Krishna Texport which, in his submission, completely demolished the case of NSDC. Analysis Krishna Texport, and its sequelae 18. It is obviously necessary, in the first instance, to analyse Krishna Texport, and the law enunciated therein. If Krishna Texport covers the issue, the matter must rest there, as the wheel, already forged by a Division Bench, can hardly be reinvented by me. 19. The issue before the Division Bench of this Court, in Krishna Texport, is thus delineated, in the very opening para of the judgment: "A conflict of judicial review between the Bombay High Court in the Gujarat High Court in respect of the power of the company court u/s 391 (6) of the Companies Act, 1956 (hereinafter referred to as the said Act) to stay criminal proceedings has given rise to the present appeal." (Emphasis supplied) 20. A brief allusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as provisional liquidator, no suit or other legal proceeding shall be commenced. or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose. (2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being, in force, have jurisdiction to entertain, or dispose of - (a) any suit or proceeding by or against the company;" 24. Reading the expression "other legal proceeding", in Section 446(1), and the expression "proceeding" in Section 446(2)(a), of the Act, ejusdem generis with the word "suit", the Division Bench held, in D. K. Kapur, that the "proceeding", to which reference was made, in the said provisions, was analogous to a suit, and could not include criminal prosecution. One of the considerations, which guided this view, was the fact that Section 446(2)(a) required the Court, dealing with the winding the proceedings, to entertain, or dispose of, the "suit and the proceeding". This Court, therefore, held that the word "proceeding" had necessarily to refer to a litigation which the "winding up court" w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not envisage bar to any criminal proceedings or payment of any actual amount in the given facts of the case as discussed at the inception of this judgment, but only seeks to extinguish the liability of the appellant on the ground that the respondent is liable to pay a lesser amount, the interest not running, and the claim is alleged to have been extinguished by payment to a third party at the behest of the appellant for which there is no written document. 34. We are, thus, unequivocal of the view that Section 391(6) of the said Act does not envisage either quashing or stay of criminal cases against the company or its Directors and, thus, the proceedings against the respondents u/s 138 of the NI act instituted by the appellant could not have been stayed." (Emphasis supplied) 27. On facts, it is clear that the decision in Krishna Texport is not similar to the case at hand. Krishna Texport involved a complaint, filed before the competent criminal court, under Section 138 of the Negotiable Instruments Act. There could be no manner of doubt, therefore, that criminal proceedings actually stood instituted, in that case. In the present case, per contra, no FIR has, as of date, been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression would have to be understood in the manner in which it was defined in Section 132 of the Indian Evidence Act, 1872, and would include, therefore, the criminal trial process, and not the investigation. In R. v. Bow Street Magistrate (1999) 1 All ER 98 (QBD), the expression "criminal proceeding" was understood to mean the proceedings before the Court of magistrate. 33. In Lalita Kumari, on which Mr. Aggarwal sought to rely, it is specifically held that "the FIR is pertinent document in the criminal law procedure of our country and its main object from the point of view of the informant is to set the criminal law in motion and from the point of view of the investigating authorities is to obtain information about the alleged criminal activity so as to be able to take suitable steps to trace and to bring to book the guilty". Re-emphasising the point in para 38 of the report, it was held that the objective of placing Section 154, prior to Section 156 in the Code of Criminal Procedure, 1898, was "to ensure that the recording of the first information should be the starting point of any investigation by the police". Para 120.6 of the report, yet again, impliedly treats reporting of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y but also to a mere procedural step that is part of a larger action or special proceeding. Rooney v. Vermont Investment Corp. 10 Cal. 3d 351, 110 Cal. Rptr. 353, 365, 515 P. 2d. 297. A "proceeding" includes action and special proceedings before a judicial tribunals as well as proceedings pending before quasi-judicial officers and boards. State ex. rel. Johnson v. Independents School Dist. No. 80, Wabasha County, 260 Minn. 237, 109 N. W 2d 596, 602. In a more particular sense, any application to a court of justice, however made, for aid in the enforcement of rights, for relief, for redress of injuries, for damages, or for any remedial object." (Emphasis supplied) 37. In Babu Lal v. Hazari Lal Kishori Lal (1982) 1 SCC 525, it was held that the term "proceeding", while flexible and requiring interpretation keeping in mind the context in which it was employed, "indicates a prescribed mode in which judicial business is conducted". In Ram Chandra Aggarwal v. State of U.P. AIR 1966 SC 1888, it was held thus: "The term "proceeding" indicates something in which business is conducted according to a prescribed mode it would be only right to give it, a comprehensive meaning so as to inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed by NSDC (through counsel) to the applicant, while referring to the Show Cause Notice dated 30th January, 2018 supra, addressed by NSDC to the applicant, clearly stated that the proposal, in the said Show Cause Notice, was of refund, by the applicant, of the disbursed grant amount, to NSDC. Para-13 of the said legal notice, it was pointed out by Mr. Duggal, specifically stated that the notice was being issued to the applicant "to submit the Utilisation Report within 45 days of the receipt of this notice failing which (NSDC) in exercise of the rights stipulated in the MoU will (a) terminate the MoU as well as the rights of (the applicant) to access the grant amount under the MoU; and (b) call upon (the applicant) to pay/return the grant amount ₹ 2,88,03,600/- along with interest @ 18% p.a." The subsequent legal notice, dated 18th December, 2018, from NSDC to the applicant, it was pointed out, was in identical terms. Mr. Duggal also referred me to the contention of the complaint, dated 15th February, 2019, from NSDC to the EOU, which alleged, essentially, that, by failing to submit Utilisation Reports, demonstrating utilisation of the amount granted to it by NSDC, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication, too, points out Mr. Duggal, requested the EOU to "instruct iYogi, its Director and authorised representative to refund the amount of grant disbursed by NSDC and not utilised by iYogi as per the MoU executed between the parties under the project Udaan." 42. These communications, contends Mr. Duggal, clearly indicate that the grievance of NSDC, against the applicant, was only that (i) it had not furnished the original utilisation certificate, evidencing utilisation of ₹1,44,60,180/-, but had provided only a soft copy thereof, and (ii) it had not provided proof of utilisation of the balance amount of ₹1,43,43,420/-. The action contemplated, against the applicant, by NSDC, as reflected in the afore referred communications, was only to obtain refund of the unutilised amount of grant. The issue, therefore, Mr. Duggal would submit, was purely civil in nature, involving refund of money, and the allegation of siphoning off, by the applicant, of the grant, extended to it by NSDC, was merely made in terrorem, so as to impart, to a purely civil cause, a criminal hue. 43. The submissions are weighty and, on the face of the material on record, merit serious consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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