Tribunal Grants Interim Relief in Rs. 11,400 Crore Financial Fraud Case

The tribunal granted interim reliefs sought by the Union of India, including ex-parte restraint orders against respondents and related entities involved in financial fraud amounting to approximately Rs. 11,400 crores. The orders aimed to prevent asset dissipation and ensure effective investigation under relevant provisions of the Companies Act, 2013, and LLP Act, 2008. The matter was set for further hearing, emphasizing the tribunal's proactive stance in safeguarding public interest and addressing substantial financial misconduct.

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Issues Involved:
1. Allegations of financial fraud and misconduct.
2. Request for interim reliefs including restraint orders and disclosure of assets.
3. Examination of the involvement of various companies, LLPs, Trusts, and individuals.
4. Necessity of ex-parte orders to prevent asset dissipation.

Detailed Analysis:

1. Allegations of Financial Fraud and Misconduct:
The Union of India, through its Regional Director, Ministry of Corporate Affairs, filed a Company Petition under sections 221, 222, 241, 242, 246, and 339 of the Companies Act, 2013, alleging that the affairs of the respondent company and its group entities were conducted in a manner prejudicial to the public interest of India. The core of the allegation involves a financial fraud amounting to approximately Rs. 11,400 crores perpetuated on Punjab National Bank (PNB) by certain individuals and entities, primarily engaged in diamond trading. The fraudulent activities included the issuance of unauthorized Letters of Undertaking (LOUs) and manipulation of the Core Banking Service (CBS) system to avoid detection.

2. Request for Interim Reliefs Including Restraint Orders and Disclosure of Assets:
The petitioner sought multiple interim reliefs to prevent the dissipation of assets:
- Permission to serve notice to respondents through various means (post, publication, email, WhatsApp).
- Disclosure of movable and immovable properties/assets, including bank accounts, owned by the respondents globally.
- Restraint orders against the respondents from mortgaging, creating charges, or alienating their properties, and attachment of these properties.
- Directions to stock exchanges (BSE, NSE) and SEBI to restrain trading of securities of the primary respondent company.
- Freezing of securities owned by the respondents by CDSL and NSDL.
- Disclosure of assets by CBDT, CBEC, RBI, and IBA, and attachment of bank accounts and lockers.
- Identification and disclosure of immovable properties by State Governments and Union Territories.
- Permission for the petitioner to take possession of attached properties through Official Liquidators.
- Leave to enlarge the scope of reliefs and file additional documents or applications as necessary.
- Permission to file interim and final investigation reports by the Serious Fraud Investigation Office (SFIO).

3. Examination of the Involvement of Various Companies, LLPs, Trusts, and Individuals:
The petition detailed the involvement of various companies, LLPs, Trusts, and individuals linked to the alleged fraud. The entities included:
- Companies and LLPs under the Nirav Modi Group (Firestar) and their exposure to PNB.
- Related parties, subsidiaries, and step-down subsidiaries of Firestar International Ltd.
- Movable and immovable properties of these entities, including factories, stores, and other premises in India and abroad.

4. Necessity of Ex-Parte Orders to Prevent Asset Dissipation:
The tribunal acknowledged the urgency and public interest involved, noting the risk of asset dissipation if notice was given prior to hearing. Given the prima facie case established by the petitioner, the tribunal passed ex-parte orders to ensure the effectiveness of the investigation and prevent the assets from being frittered away. The tribunal invoked section 221 of the Companies Act, 2013, and section 43 of the LLP Act, 2008, to injunct the respondents and other entities from removing, transferring, or disposing of their funds, assets, and properties until further orders.

Conclusion:
The tribunal granted the interim reliefs sought by the petitioner, including ex-parte restraint orders against the respondents and related entities. The matter was listed for further hearing on 26.03.2018, with directions for the petitioner to serve notice to all respondents within 15 days. This judgment underscores the tribunal's proactive approach in addressing significant financial fraud and protecting public interest by preventing asset dissipation during the investigation.

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