2018 (5) TMI 330 - Tri - Companies Law

Tribunal lifts restraint orders on respondents lacking evidence, balancing rights and investigation needs.

Union of India Versus Gitanjali Gems Ltd. And Others

The tribunal vacated or modified the restraint orders against respondents where no prima facie evidence of involvement in the fraud was found. Emphasizing ... Seeking vacation of restraint order passed against these Respondents not to remove, transfer or dispose funds, assets and properties of the entities and individuals until further orders - Held that:- It is the duty of this Court to see that innocent people are not burdened by this restraint order therefore as and when any innocent comes before this Bench saying that he has no involvement in the fraud spiraling from day-to-day, this Bench has to diligently respond to the reliefs sought by such people. Of course, it is true that this Bench cannot decide who is innocent and who is culprit, but to the extent order passed by this Bench, it should not become helpless to vacate that order if no material is found against whom this order is in force. For there being neither an averment nor any incriminating material placed against this applicant, this applicant deserves vacation of the restraint order in force against him, accordingly this MA is disposed of vacating the restraint order dated 23.02.2018 against this applicant. Need of an Independent Director in Gitanjali Group companies - Held that:- For this Respondent being suspected to be involved in this fraud, this Bench is of the view that modification of order to the extent that is required is be-fitting relief in the light of the discussion made in other applications. Henceforth, the restraint order dated 23.2.2018 is hereby modified permitting this applicant to withdraw ₹ 2,00,000 per month from his Bank accounts, as to other assets of this Respondent is concerned, the order dated 23.2.2018, except to the extent of exemption given above, will continue as before until further orders. Accordingly, his application is hereby disposed of. Issues Involved:1. Vacation of restraint order against various respondents.2. Involvement of Independent Directors in the alleged fraud.3. Legal provisions under Section 221 of the Companies Act, 2013.4. Examination of individual roles and responsibilities in the fraud.5. Impact of restraint orders on personal assets and livelihoods.Detailed Analysis:1. Vacation of Restraint Order Against Various Respondents:The judgment addresses multiple Miscellaneous Applications filed by respondents seeking vacation of a restraint order passed on 23.02.2018. The respondents argued that they were not involved in the alleged fraud related to Gitanjali Group Companies and faced undue hardship due to the restraint order.2. Involvement of Independent Directors in the Alleged Fraud:The respondents, primarily Independent Directors, contended that they had no role in the day-to-day management of the companies involved in the fraud. They emphasized their limited involvement, lack of knowledge of the fraudulent activities, and their resignation upon learning about the fraud. The judgment noted that no incriminating material was presented against these Independent Directors, and they were not named in the FIR by Punjab National Bank (PNB).3. Legal Provisions Under Section 221 of the Companies Act, 2013:The judgment elaborates on Section 221 of the Companies Act, 2013, which allows the tribunal to pass restraint orders to aid ongoing investigations. It was highlighted that such orders could be passed if there is a reasonable ground to believe that the removal, transfer, or disposal of funds, assets, or properties of the company is likely to be prejudicial to the interests of the company, its shareholders, creditors, or public interest.4. Examination of Individual Roles and Responsibilities in the Fraud:Each respondent's role and responsibilities were examined individually:- MA 182/2018 (R52): The applicant was a Non-Executive Independent Director of Firestar International Ltd., with no involvement in the fraud. The restraint order was vacated as no material evidence was found against him.- MA 180/2018 (R51): Similar to R52, the applicant was an Independent Director with no incriminating evidence against him, leading to the vacation of the restraint order.- MA 183/2018 (R44): The applicant resigned from Gitanjali Gems Ltd. in 2009 and had no association with the company since then. The restraint order was vacated.- MA 184/2018 (R53): The applicant was an Independent Director of Firestar and resigned upon learning about the fraud. The restraint order was vacated due to the lack of evidence against him.- MA 217/2018 (R43): The applicant resigned from Gitanjali Gems Ltd. in 2013 and had no connection with the company since then. The restraint order was vacated.- MA 218/2018 (R38): The applicant was an Independent Director with no expertise related to the company's business. Given her name in the FIR and ongoing investigation, the restraint order was modified, allowing her to withdraw Rs. 1,00,000 per month.- MA 219/2018 (R35): The applicant was an Independent Director and resigned shortly before the case was filed. Named as an accused in the FIR, the restraint order was modified to permit withdrawal of Rs. 2,00,000 per month.5. Impact of Restraint Orders on Personal Assets and Livelihoods:The judgment recognized the hardship faced by respondents due to the restraint order, which restricted their ability to access personal funds and manage their assets. The tribunal emphasized the need to balance the investigation's requirements with the respondents' rights and livelihoods, leading to the modification or vacation of restraint orders where no incriminating evidence was found.Conclusion:The tribunal vacated or modified the restraint orders against respondents where no prima facie evidence of involvement in the fraud was presented. The judgment stressed the importance of not burdening innocent individuals while ensuring effective investigation and recovery of fraudulently taken funds. The applications were disposed of with directions to vacate or modify the restraint orders as appropriate.