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TMI Blog2025 (2) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... riefly, the Petitioners urge as follows: 2.1. Petitioner No. 1 - Sunair Hotels Ltd. ["SHL/Petitioner company"], is a closely held public company incorporated under the Companies Act, 1956, with 44 shareholders. Petitioner Nos. 2 (Mr. S.P. Gupta), 3 (Mr. Kaveen Gupta) and 4 (Mr. Vipul Gupta) are its Directors. The Petitioners have been falsely implicated by the SFIO in disregard of the factual and legal history of the case. 2.2 The SFIO failed to consider crucial background facts, despite these having been submitted both in writing and orally. Specifically, prior inspections into the affairs of Sunair Hotels Ltd. had already been conducted by the erstwhile Department of Corporate Affairs ["DCA"] (now Ministry of Corporate Affairs). Pursuant to those inspections, appropriate legal actions were initiated, and the alleged offences were either dropped, compounded, or quashed with judicial approval. Had the SFIO taken these facts into consideration, they would have arrived at the rightful conclusion that the affairs of the Petitioner company had already been investigated. 2.3 The MCA and VLS had, on multiple occasions, sought permission from courts and tribunals to conduct fresh inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of a total of 362. These statements were not recorded on oath, thereby diminishing their credibility. The selective reliance on an insignificant minority of shareholders, renders the findings unreliable. 2.8 One of the key findings of the impugned report is that the directors of the Petitioner company engaged in a criminal conspiracy with the directors of Bansal Estate Pvt. Ltd. and Trans Asia Consultant Pvt. Ltd. to derive wrongful gains at the expense of genuine shareholders. This finding is perverse and baseless since the shares of the Petitioner company were transferred to independent shareholders of Bansal Estate Pvt. Ltd. and later to Trans Asia Consultant Pvt. Ltd. Further, at the time of such transfer the directors of the Petitioner company already had majority control over the Petitioner company. The entire transfer of shares from Bansal Estate Pvt. Ltd. to Trans Asia Consultant Pvt. Ltd. was an independent transaction between two corporate entities and the Petitioner company or its directors had no role to play in such transfer but merely approving the same, as mandated by law. 2.9 Lastly, the prime responsibility of SFIO under the mandate of Section 212(c) of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns also stand disposed of." 6. The aforenoted observations clearly hold that the Court prima facie examined the impugned report and came to the conclusion that the affairs of the Petitioner company had been conducted in a manner prejudicial to public interest. Thus, in light of the findings of the SFIO, the Court was satisfied that the recommendations of the MCA in directing an investigation into the affairs of the Petitioner company was valid and the recommendations in the impugned report warranted prosecution for the offences under the relevant provisions of the Companies Act and Indian Penal Code, 1860 ["IPC"]. 7. Furthermore, when the Petitioner company assailed the above judgment dated 26th April, 2017, before the Division Bench of the Court in LPA No. 390/2017, the Court once again examined the impugned investigation report dated 31st October, 2016 and made the following observations: "65. The SFIO‟s report of 31st October 2016 is on the record. It details the various allegations levelled against Sunair, the charge sheet filed by the police with respect to allegations of forgery, conspiracy and fabrication of record and states that the funds of Sunair were siphoned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd place their additional evidence, is during trial, where they will have ample opportunity to establish their defence. 10. The test before this Court is not to reappreciate evidence or sit in appeal over the SFIO's findings. The primary consideration is whether the allegations made in the report, when read holistically, disclose a cognizable offence under the Companies Act and other applicable statutes. The impugned SFIO report meticulously details multiple financial irregularities, fraudulent misrepresentations, and corporate misconduct-all of which warranted prosecution under relevant provisions of the Companies Act and IPC. The relevant portions of the impugned investigation report are as follows: "17. It is clear from the investigation that SHL has issued duplicate shares to related parties, without any evidence that the said shares were destroyed or defaced or mutilated or torn or surrendered to the company. SHL had issued such duplicate shares in contavention of Section 84 (2) of Companies Act, 1956. It is revealed in the investigation that SHL had issued such duplicate shares with mala fide intention to avail loan from Axis Bank Limited by pledging these duplicate share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two parts (21,25,176 and 25,94,824) with issuance of fresh share certificates of 21,25,176 shares remaining with CTCL and 25,94,824 shares were allotted to VLS Finance Limited (Distinctive Nos.61750001-64344824). A combined reading of the documents were received from the Axis Bank Limited and the minutes of SHL dated 02nd Sept 2010 reveals that SHL had pledged 21,25,176 shares held by the CTCL bearing Certificate No.10113 (Distinctive Nos.64344825-66470000) with the Axis Bank. The Investigating Officer of Economic Offences Wing (EOW) of Delhi Police sent a letter dated 07.12.2012 to the Axis Bank requesting them to provide the details of shares pledged by SHL as mentioned in the list containing share certificate Nos. 10088, 10089, 10090,10108, 10109, 10110, 10087, 10104, 10105, 10106, 10107, 10100, 10101, 10102, 10103. 10111, 10086, 10096, 10097, 10098, 10099, 10092, 10093, 10094, 10095. 10085, 10084, 10091 totalling 47,20,000. The Axis Bank in its reply to the EOW, Delhi Police informed that the above certificates were not pledged with them because SHL had issued fresh duplicate certificates in place of shares seized by Income Tax Department. From above details, it is clear that S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of books of accounts. * Thus, the funds which were siphoned off from SHL were ploughed back into SHL for subscribing the additional equity shares through S.P. Gupta, his family members and group companies on the basis of large scale manipulations and fabrication of books of accounts etc. * Thus, each and every member of the said criminal conspiracy has wilfully and knowingly committed several acts of wilful omissions and commissions for the purpose of achieving the goals of the conspiracy. The summoning of the accused was challenged in the High Court of Delhi and the matter had gone up to the Hon'ble Supreme Court. The Hon'ble Supreme Court vide order dated 05.02.2016 has directed the trial court to commence its proceedings (Copy of the order enclosed as Annexure 12) Since the issue is sub-judice, no finding has been recorded by SFIO irrespect of these transactions. 29. From the perusal of Documents submitted by SHL, it is clear that Sh. S.K. Bindal hac signed the Annual Financial Statements of SHL during the years 1995 and subsequent years till date. It is the duty of the Auditor to plan and perform. an audit with professional skepticism recognizing that circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the general public had no knowledge about purchase or sale of shares purportedly owned by them. The Directors of Trans Asia Consultant Pvt. Ltd has very smartly got these shares transferred to themselves and thus became ultimate beneficiaries. Loans were secured from Axis Bank Ltd., which accepts deposits from general public, after using duplicate certificates or share certificates divided from the shares lying as seized property with the Income Tax Department. Thus, these loans were secured fraudulently 33. The records collected during investigation were voluminous and ran into about 40,000 pages which were difficult to be perused and scrutinised within such a short span of time. However, the investigation team made best efforts to look into various aspects of the functioning company. It shall be the privilege of the investigation team of SPIO to consider other relevant information if it comes into its knowledge and may submit supplementary report before the Hon'ble Court. In the backdrop of these developments it is necessary to proceed against SHL and the officers in default and co-conspirators and serve public interest by bringing to book persons who indulge in fraudulen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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