2025 (3) TMI 67 - AT - IBC

Company directors escape perjury conviction for false ROC declaration during IBC proceedings under Section 199 IPC

Ajay Vij Ex-Director M/s Solutions Business Centre Pvt Ltd, Parul Khurana Versus Mr Abhishek Dutta Official Liquidator M/s Solutions Business Centre Pvt Ltd And Pankaj Gambir Ex-Partner M/s Solutions Business Centre Pvt Ltd, Naveen Gambhir Ex-Partner M/s Solutions Business Centre Pvt Ltd, Neeraj Gambhir, Shaloo Gambir, Lovleen Gambhir, Geeta Gambhir Versus Mr Abhishek Dutta Official Liquidator M/s Solutions Business Centre Pvt Ltd

NCLAT held that appellants wrongly declared in Form 18 to ROC that no proceedings were pending against the company, when an IBC application was already ... Challenge to impugned order by which appellant was held guilty of perjury and have been imposed a fine - appellants have given wrong information to the ROC in Form No.18 required for converting a company into LLP - appellants had filed an affidavit wherein the appellants had deposed the units were handed over to the parties way back in December, 2016 but whereas their learned counsel stated the units will be handed over to the parties - HELD THAT:- Admittedly the impugned order dated 17.05.2021 has held the appellants guilty of act of perjury only on account of a declaration in Form 18 filed before the ROC (see Page 194 of the Appeal Paper Book). In the said declaration, against point No.15 viz whether any proceedings by or against the company is pending in any court or tribunal or any authority, the answer given by one Mr Ajay Vij, i.e. the appellant No.1 was NO. It is fairly conceded by the learned counsel for the appellant that declaration/Form 18 dated 03.11.2018 was incorrect since by that time i.e. on 25.04.2018 an application under Section 9 IBC stood filed against Corporate Debtor. Further CIRP commenced later on 14.3.2019. A wrong declaration in Form 18 allegedly made inadvertently before the ROC cannot be said to be material in the context of conversion from a Company into LLP so as to fall within the definition of perjury u/s 199 IPC. Thus holding the Appellants guilty of an act of perjury deserves to be set aside on this ground alone; and consequential impugned order dated 04.08.2021 permitting the Liquidator to file complaint u/s 340 Cr.P.C also deserves to be set aside - Admittedly such declaration in Form 18 was never made/filed before the Ld. NCLT but before the ROC; therefore, it was not for the Ld. NCLT/Liquidator to move u/s 195 Cr.P.C for initiating action on such account. Thus, no act of perjury has been committed by the Appellants. But even if it is presumed just for the arguments’ sake that an offence of perjury stands committed, then also the impugned order dated 04.08.2021 r/w impugned order dated 17.05.2021 permitting the Liquidator to file complaint u/s 340 Cr.P.C is not sustainable there being admittedly no finding recoded to the effect “that it is expedient in the interest of justice a complaint should be filed. In the absence of a finding to the above effect which is a sine qua non under S. 340(1)(a) Cr.P.C, the impugned order dated 04.08.2021 is not sustainable in law. Ld. NCLT has no jurisdiction to convict a person for an offence under Section 68 under Chapter VII of Part II IBC in view of the express provision contained in S. 236(1) IBC. Conclusion - There exists a Special Court per Section 236 of the Companies Act, 2013, hence the Ld. NCLT has no power to convict the appellants and impose a fine and as such the conviction and the fine imposed by Ld. Adjudicating Authority is hereby set aside. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the appellants were guilty of perjury due to incorrect information provided in Form No. 18 during the conversion of a company to a Limited Liability Partnership (LLP).Whether the National Company Law Tribunal (NCLT) had the jurisdiction to convict the appellants for perjury and impose fines under Section 68 of the Insolvency and Bankruptcy Code (IBC).Whether the conversion of the corporate debtor from a private limited company to an LLP was intended to evade insolvency proceedings.Whether the discrepancies in the affidavit and statements made by the appellants constituted perjury.ISSUE-WISE DETAILED ANALYSIS1. Perjury Allegation Related to Form No. 18Relevant Legal Framework and Precedents: The allegation of perjury was based on the incorrect declaration in Form No. 18 submitted to the Registrar of Companies (ROC), where it was stated that no proceedings were pending against the company. The relevant legal provisions include Section 199 of the Indian Penal Code (IPC) concerning perjury and Section 68 of the IBC regarding offenses related to insolvency proceedings.Court's Interpretation and Reasoning: The Tribunal found that the incorrect declaration in Form No. 18 was not material to the conversion process from a company to an LLP. The conversion did not affect the pending insolvency proceedings, as per Section 58(4)(b) of the LLP Act, 2008, which ensures the continuity of liabilities and obligations post-conversion.Key Evidence and Findings: The Tribunal noted that the declaration in Form No. 18 was incorrect, as an insolvency application was pending at the time of filing. However, this incorrect statement was deemed immaterial to the conversion process.Application of Law to Facts: The Tribunal held that the incorrect declaration did not constitute perjury under Section 199 IPC, as it did not materially affect the legal status change from a company to an LLP.Treatment of Competing Arguments: The appellants argued that the incorrect declaration was inadvertent and immaterial. The Tribunal agreed, noting that the conversion process did not impact the pending insolvency proceedings.Conclusions: The Tribunal concluded that the perjury charge based on the Form No. 18 declaration was unfounded, and the related orders were set aside.2. Jurisdiction of NCLT to Convict for PerjuryRelevant Legal Framework and Precedents: The jurisdiction of the NCLT under Section 68 of the IBC was questioned, with reference to Section 236 of the IBC and the Companies Act, 2013, which designate Special Courts for such matters.Court's Interpretation and Reasoning: The Tribunal emphasized that the NCLT lacks jurisdiction to convict individuals for offenses under Chapter VII of Part II of the IBC, which are to be tried by Special Courts.Key Evidence and Findings: The Tribunal referenced the notification designating Special Courts and the absence of jurisdictional authority for the NCLT to impose fines for perjury.Application of Law to Facts: The Tribunal found that the NCLT's actions exceeded its jurisdiction, as the power to convict and impose fines lies with the Special Courts.Treatment of Competing Arguments: The appellants' argument that the NCLT lacked jurisdiction was upheld, leading to the setting aside of the conviction and fines.Conclusions: The Tribunal set aside the NCLT's orders convicting the appellants and imposing fines, citing lack of jurisdiction.3. Intent to Evade Insolvency ProceedingsRelevant Legal Framework and Precedents: The NCLT had alleged that the conversion to an LLP was intended to evade insolvency proceedings, referencing the IBC and the LLP Act.Court's Interpretation and Reasoning: The Tribunal found no evidence that the conversion was intended to evade insolvency proceedings, as liabilities and obligations continued post-conversion under the LLP Act.Key Evidence and Findings: The Tribunal noted that the conversion did not affect the insolvency proceedings, as per statutory provisions ensuring continuity of obligations.Application of Law to Facts: The Tribunal determined that the conversion process did not constitute an attempt to evade insolvency proceedings.Treatment of Competing Arguments: The Tribunal rejected the NCLT's view that the conversion was an attempt to evade insolvency obligations.Conclusions: The Tribunal concluded that the conversion was not intended to evade insolvency proceedings, and the related findings were set aside.4. Discrepancies in Affidavit and StatementsRelevant Legal Framework and Precedents: The alleged discrepancies in statements were examined under the context of perjury laws.Court's Interpretation and Reasoning: The Tribunal found no material conflict between the statements in the affidavit and those made in court, noting that the expressions used did not constitute perjury.Key Evidence and Findings: The Tribunal highlighted that the expressions 'already vacated' and 'will be handed over' were not contradictory in the context presented.Application of Law to Facts: The Tribunal determined that the statements did not amount to perjury, as they were not materially conflicting.Treatment of Competing Arguments: The Tribunal sided with the appellants, finding no basis for perjury charges based on the statements.Conclusions: The Tribunal set aside the findings of perjury related to the affidavit and statements.SIGNIFICANT HOLDINGSThe Tribunal's significant holdings include:'A wrong declaration in Form 18 allegedly made inadvertently before the ROC cannot be said to be material in the context of conversion from a Company into LLP so as to fall within the definition of perjury u/s 199 IPC.''The NCLT has no jurisdiction to convict a person for an offense under Section 68 under Chapter VII of Part II IBC in view of the express provision contained in S. 236(1) IBC.''The conversion of the corporate debtor from a private limited company to LLP was not intended to evade the rigors of insolvency code.''There was no conflict between the expressions 'already vacated' and 'will be handed over' used respectively by Mr. Pankaj Gambhir in his affidavit and the counsel appearing for the LLP.'The Tribunal set aside the NCLT's orders convicting the appellants of perjury and imposing fines, citing lack of jurisdiction and immateriality of the alleged false statements.