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TMI Blog2024 (9) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... of fraud or any other wrongful act has been brought out against the Appellant. Clearly the Appellant had not been identified as an accused in the same charge-sheet. The NCLT clearly committed an error in observing at para 23 of the impugned order dated 10.04.2024 that the Appellant has not been discharged so far from the matter by the criminal court also. Since it is a matter of fact and record that there are no criminal proceedings pending against the Appellant, there was no question arising of discharge from such non-existing proceedings. It is the contention of the Ld. Sr. Counsel for the Appellant that the NCLT had erroneously denied discharge on ground that the Appellant had made withdrawal of lookout circular as the only basis of his discharge - Withdrawal of lookout circular was only one other additional demonstrable proof that the Appellant was no longer a material or relevant party for impleadment. The mere ground of delay in conduct of any investigation by itself cannot constitute sufficient ground for any investigation to be brought to an abrupt end. The investigation process is nevertheless expected to proceed with reasonable and optimal dispatch and should not be inord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terim Investigation Report dated 30.11.2018 identified the coterie of individuals constituting the will and mind of the IL FS and its Group Companies whose fraudulent conduct led to a debt burden of IL FS group in excess of Rs 99,000 cr. According to the SFIO Interim Report, the Appellant was a part of this coterie. On an application filed by the UOI, basis the SFIO Interim Report, the NCLT in C.P. No. 3638 of 2018 vide order dated 03.12.2018 had interalia directed impleadment of the present Appellant-Shri Pradeep Puri as Respondent No.316. Vide the same orders, the NCLT had also restrained the Appellant from mortgaging or alienating movable and immovable properties owned by him including dealing with the securities in any Company. Following the passing of order dated 03.12.2018, the Appellant had moved I.A. No. 3138 of 2019 seeking permission to withdraw an amount of Rs 5 lakhs as one-time measure which was allowed on 27.09.2019. The Appellant vide a subsequent Application No. 3428 of 2019 sought modification of the order dated 27.09.2019 seeking permission for withdrawal of Rs 5 lakhs per month. On 18.12.2020, the NCLT allowed C.A. No. 3428 of 2019 filed by the present Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracted below: i. That it be taken on record that the Applicant was only a nonexecutive director of ITNL and the said order dated 18.12.2020 be deemed to stand modified accordingly to include reference to the said fact. ii. That it be taken on record that the Applicant was not a member of the Board of Director or in any manner the management of IL FS and the said Order dated 18.12.2020 be deemed to stand modified accordingly to include reference to the said fact. iii. That it be taken on record that the SFIO Final Report on IFIN dated 28.05.2019 does not name the Applicant as a member of the alleged coterie that controlled that affairs of IL FS and its group companies and the said order dated 18.12.2020 be deemed to stand modified accordingly to include reference to the said fact. iv. That it be taken on record that the SFIO Charge Sheet filed before the designated special court pursuant to the SFIO Final Report on IFIN dated May 28, 2019 does not name the Applicant as an accused and no prosecution proceedings have been initiated against the Applicant and the said order dated 18.12.2020 be deemed to stand modified accordingly to include reference to the said fact. v. That the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law Tribunal, Mumbai in C.A. No. 233/2021 in C.P. No. 3638/MB/2018 be set aside and prayers sought in the said application C.A. No. 233/2021 before Hon ble National Company Law Tribunal, Mumbai be allowed; and (b) That all restraints on the Appellant regarding dealing with his movable and immovable properties be removed; or (c) Pass such other and/or further orders against the Respondent and in favour of the Appellant as this Hon ble Appellate Tribunal deems fit in the facts and circumstances of the present case. 5. Making his submissions, the Ld. Sr. Counsel for the Appellant submitted that the order passed by the NCLT in CA No. 3428 of 2019 dated 18.12.2020 was fraught with factual inaccuracies which were proving prejudicial to the interest of the Appellant. Hence, the Appellant had sought modification of the NCLT order dated 18.12.2020 besides seeking removal of restraint against movable properties of the Appellant and for this purpose filed C.A. 233 of 2021 in CP No. 3638 of 2018 which has now been erroneously dismissed by the NCLT. It was vociferously contended that the NCLT order of 18.12.2020 had wrongly implicated the Appellant based on the SFIO Interim Report. The implead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-sheeted. It has also been pointed out that NCLT erroneously took a view while adjudicating in IA No. 176 of 2022 in CP No. 3638 of 2018 that the Appellant had made withdrawal of lookout circular against him as the basis of discharge while in fact several other convincing and persuasive grounds had been raised for discharge. 8. Refuting the submissions made by the Appellant, the Ld Counsel for the Respondent contended that the impleadment of the Appellant as party Respondent in C.P. No. 3638 of 2018 had been ordered by the NCLT as early as on 03.12.2018. The Appellant did not challenge the said order of 03.12.2018 and the same had attained finality. The Appellant therefore continues to remain a necessary and proper party in C.P. No. 3638 of 2018. It was further submitted that the NCLT had again considered the prayer of the Appellant in C.A. No. 3428 of 2018 to delete/discharge the Appellant from the array of parties. However, the NCLT had disposed of C.A. No. 3428 of 2018 on 18.12.2020 by disallowing the plea of the Appellant for deletion/discharge. The NCLT again disallowed the Appellant s plea for deletion/discharge while disposing of I.A. No. 1041 of 2020 on 24.12.2021. Yet the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not commit any error. 12. It has been further contended that in the guise of alleged factual inaccuracies, the Appellant in CA 233 of 2021 has tried to introduce new facts. It is the case of the Respondent that the Adjudicating Authority has correctly dismissed the prayers of the Appellant in CA No. 233 of 2021 since through this application the Appellant has essentially sought NCLT to exercise the power of review which is beyond its powers. It was submitted that though Section 420(2) of the Companies Act, 2013 empowers the NCLT to amend or modify its orders, it permits the same only for the purpose of rectifying any mistake apparent from the face of record. Furthermore, Rule 11 of the NCLT Rules confers inherent powers and Rule 154 confers powers to rectify clerical or arithmetical mistakes. However, the modifications/rectifications which were sought in CA 233 of 2021 were not merely clerical or arithmetical in nature. Instead, the Appellant had indirectly sought to interpret the SFIO Interim Report to suit its own interest in a manner which tantamount to deemed inclusion of new facts. Hence, it was asserted that the NCLT had correctly refrained from modifying its order of 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in subsequent proceedings. 17. It is the case of the Appellant that para 9 of the SFIO Interim Report identified the Executive Directors of IL FS and its main subsidiaries. However, the Appellant did not hold any position in the Board of Directors of IL FS. It has also been contended that the Appellant was only a non-executive Director of IL FS Transport Networks Ltd (ITNL). The SFIO Interim Report, therefore, created a wrong impression that the Appellant could have been an Executive Director basis which NCLT order of 18.12.2020 had wrongly implicated the Appellant causing severe prejudice to his interests. 18. It is further their case that there are no findings against the Appellant in the SFIO Final Report. The Appellant is not an accused in the SFIO Final Report. It is also their contention that para 1.10 of the SFIO Final Report for IFIN specifically identified the coterie of individuals who were controlling the affairs and decision making in the IL FS group which clearly excluded the Appellant. Moreover, in the charge-sheet filed in pursuance of the SFIO Final Report, the Appellant has not been identified as an accused. Till date no charge of fraud or any other wrongful act ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemently contended that any such action would cause grave harm and prejudice to larger public interest and therefore would not be in order. While investigation is ongoing and findings in respect of the Appellant are contained in the SFIO Report, there is sufficient reason for the Appellant to continue to remain as Respondent No. 316. It was also denied that the Appellant has been subjected to burdensome restraints or any hardship since he has been allowed to draw Rs 8 lakhs per month. 21. When we look at the sequence of events, we find that the present Respondent had filed C.P. No 3638 of 2018 under Sections 241 242 of the Companies Act, 2013 against IL FS and group companies. The Respondent had also ordered investigation into the affairs of IL FS and group companies by SFIO. Subsequently, SFIO in its Interim Investigation Report dated 30.11.2018 identified a coterie of individuals constituting the will and mind of the IL FS and its Group Companies who were responsible for fraudulent conduct and found the Appellant to be a part of this coterie. In the background of this Interim Report, on an application filed by the Respondent, the NCLT in C.P. No. 3638 of 2018 vide order dated 03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FS Financial Services Limited which is matter of record. 24. Given this backdrop, we hold that the NCLT clearly committed an error in observing at para 23 of the impugned order dated 10.04.2024 that the Appellant has not been discharged so far from the matter by the criminal court also. Since it is a matter of fact and record that there are no criminal proceedings pending against the Appellant, there was no question arising of discharge from such non-existing proceedings. 25. Now that we have satisfied ourselves that the Appellant has not been charge-sheeted so far nor any prosecution against him been initiated, we proceed to consider whether there is sufficient basis to continue with arraying of the Appellant as party Respondent No. 316 and subject him to restraint order freezing his assets. 26. At this stage, we may turn to the impugned orders dated 16.02.2024 and 10.04.2024 to see how it has treated the issues of deletion of the impleadment of the Appellant as party Respondent No.316 and vacating the restraint order on the Appellant with regard to his assets. The relevant extracts of the impugned orders are as follows: Impugned order dated 16.02.2024 4.1. On perusal of the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was no longer a material or relevant party for impleadment. Attention was also adverted to decision of the Hon ble Supreme Court in Neera Saggi Vs UOI 2021 SCC Online SC 239 wherein it was held that there should be due application of mind while impleading Independent Directors in IL FS proceedings before the NCLT. Following this judgement, the NCLT had discharged and deleted two erstwhile Independent Directors who were wrongly impleaded as Respondents in CP No. 3638 of 2018. In the present case too for the aforesaid reasons, it was asserted that the name of the Appellant ought to be deleted from the list of party Respondent and restraint on the assets be lifted. 28. It is the case of the Appellant that it was therefore erroneous for the NCLT to continue the restraints against the Appellant on the ground that the Appellant has not been discharged so far from the matter by the criminal court at a time when the Appellant has not been charged with any criminal proceedings. It was also stated that no explanation has been given as to why and how the Appellant, a senior citizen, could be restrained from dealing with his assets while those who were actually charge-sheeted and accused in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly 4 years since the last of the SFIO status note dated 06.10.2020 was placed before the NCLT in sealed envelope. It is going to be 6 years since the submission of SFIO Interim Report and more than 5 years since submission of SFIO Final Report. We are compelled in the given circumstances to take the view that sufficient time has elapsed in spite of which the investigations are still underway and yet to reach its logical conclusion. The latitude of time given to the Respondent to complete the investigations cannot continue endlessly, an observation which was made by the NCLT itself more than two years back. Further, prima-facie, there is force in the contention of the Appellant that such inordinately delayed investigation and consequential freeze of assets has prejudicially affected the rights and interests of the Appellant causing agony to a senior citizen, more so, when no adverse findings specifically against the Appellant has come on record so far. 33. Pertinently, except for stating that majority part of the investigation has been completed and the process of filing prosecutions has been initiated, no explanation or grounds have been put forth by the Respondent to explain the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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