Delhi HC orders investigation into Three C Shelters for fraudulent fund siphoning under Companies Act Section 206-210

Delhi HC directed regulatory authorities to investigate Three C Shelters Private Limited and its group companies for fraudulent fund siphoning to shell companies in Kolkata. The court found it unacceptable that despite evidence of financial irregularities and manipulation of records, no action was taken under Chapter XIV of the Companies Act, 2013. Respondents were ordered to initiate investigations under Sections 206-210, inspect company affairs, and submit an inspection report within four weeks to protect stakeholder interests.

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Issues Involved:
1. Application for filing uncertified and dim/untyped annexures.
2. Invocation of extraordinary jurisdiction under Article 226 and 227 of the Constitution of India.
3. Allegations of fund siphoning and manipulation by the management of Three C Shelters Private Limited.
4. Investigation and legal action against the promoters and ex-directors.
5. Compliance with statutory duties under Chapter XIV of the Companies Act, 2013.
6. Interim directions to safeguard the interests of homebuyers and creditors.

Detailed Analysis:

1. Application for Filing Uncertified and Dim/Untyped Annexures:
The petitioner sought permission to file uncertified and dim/untyped annexures. The court granted the petitioner exemption from filing certified copies for now, directing them to place the same on record at the earliest, preferably before the next date of hearing. The application was disposed of accordingly.

2. Invocation of Extraordinary Jurisdiction under Article 226 and 227 of the Constitution of India:
The petitioner invoked the extraordinary jurisdiction of the court under Article 226 read with Article 227 of the Constitution, seeking directions in the nature of mandamus to the Registrar of Companies and the Union of India, through the Ministry of Corporate Affairs. The petitioner prayed for inquiries and investigations against the management of Three C Shelters Private Limited and its sister companies for alleged manipulation of records and siphoning off funds to shell companies.

3. Allegations of Fund Siphoning and Manipulation by the Management of Three C Shelters Private Limited:
The petitioner, a homebuyer, alleged that the management of Three C Shelters Private Limited had raised funds from investors but siphoned off the money to various shell companies. The petitioner claimed that the project was never intended to be completed, causing financial loss to the investors. The court noted that 138 investors/homebuyers had lodged 498 claims before the Interim Resolution Professional (IRP) in proceedings under the Insolvency and Bankruptcy Code (IBC).

4. Investigation and Legal Action Against the Promoters and Ex-Directors:
The petitioner argued that the promoters and ex-directors of Three C Shelters Private Limited were involved in fraudulent activities, including collusive insolvency proceedings to benefit from the moratorium under Section 14 of the IBC. The court referred to the IRP's reports, which highlighted dubious transactions, including the transfer of Rs. 200 crores to shell companies. The court noted the commonality between the promoters of Three C Group and Ace Group, with funds being diverted to projects like Ace Palms Floors, Gurgaon.

5. Compliance with Statutory Duties under Chapter XIV of the Companies Act, 2013:
The court found it surprising that despite the damning information, no action had been taken by the Registrar of Companies and the Ministry of Corporate Affairs. The court emphasized the statutory duties under Chapter XIV of the Companies Act, 2013, which provides mechanisms for inspecting, inquiring, and investigating the financial affairs of companies. The court directed the authorities to initiate action and ensure compliance with Sections 206 to 210 of the Companies Act, 2013.

6. Interim Directions to Safeguard the Interests of Homebuyers and Creditors:
The court issued several interim directions to protect the interests of the petitioner and similarly placed investors:
- Respondents Nos. 1 and 2 were directed to initiate action and submit an inspection report within four weeks.
- Legal action was to be initiated against respondents Nos. 6, 7, and 8 to explain the diversion of funds.
- The authorities were directed to seize the books of accounts of related companies and trace further fund transfers.
- Actions were to be taken under Sections 209 and 221 of the Companies Act, 2013, to freeze the assets of the companies involved.
- Necessary measures were to be undertaken to preserve the assets of the respondent company in liquidation and its sister concerns.

The court set the next hearing for 14th March 2024 and directed immediate compliance with the interim orders. Notices were issued to all parties, and a copy of the order was provided to the petitioner for necessary compliance.

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