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

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 filed. However, NCLAT set aside the perjury conviction and fine imposed by NCLT. The tribunal ruled that the incorrect declaration was not material to company-to-LLP conversion under Section 199 IPC, the declaration was made to ROC not NCLT, and NCLT lacked jurisdiction to convict under Section 236 IBC as special courts exist for such matters. The order permitting liquidator to file complaint under Section 340 CrPC was also set aside. Appeal allowed.

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ISSUES PRESENTED and CONSIDERED

The 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 ANALYSIS

1. Perjury Allegation Related to Form No. 18

Relevant 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 Perjury

Relevant 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 Proceedings

Relevant 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 Statements

Relevant 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 HOLDINGS

The 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.

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