TaxTMI 
TaxTMI 
2018 (9) TMI 678
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...., and Mr. Meghav Gupta, CP, MCA. , Mr. Sumesh Dhawan and Ms. Tannya Baranwal, Advocates, Mr. Mudir Jain, Advocate, Mr. Vijay Aggarwal, Advocate, Mr. Ashul Agarwal, Advocate, Ms. Tannya Mehta, Advocate, Mr. Abhimanyu Bhandari, Advocate And Mr. Sumesh Dhawan and Ms. Tannya Baranwal, Advocates For The Respondents : Mr. Arpan Behl and Mr. Priyank Mangal, Advocates for R-35 & R-38. Mr. Upinder Singh and Mr. Ramanjit Singh, Advocate for R-42. Mr. Arunubh Chowdhary, Mr. Abhay Jadeja and Mr. Vaibhav Tomer, Advocates for R-43 Mr. Dheeraj Nair, Mr. Mohit Bakshi and Mr. Kumar Kislay, Advocates for R-44, 51 & 53. Ms. Charu Sharma, Advocate for R-64. Mr. Vijay Aggarwal and Mr. Akhil Agarwal, Advocates JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. In all these appeals as common question of law is involved and common orders are under challenge, they were heard together and disposed of by this common judgment. 2. The Union of India, Ministry of Corporate Affairs, filed an application under Sections 221, 222, 241, 242, 246 read with Section 339 of the Companies Act, 2013, being Company Petition No. 277 of 2018 against 'Geetanjali Gems Ltd. & Ors. ', including the Companies and partnership....
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....f the Petitioner. i) That the State Governments and Administrators or Union Territories be directed to identify and disclose all details of immoveable properties owned/held by the Respondents. j) That the Petitioner be permitted to take possession, after due inventory, of all moveable and immoveable properties of the Respondents that have been attached as per the orders of this Hon'ble Tribunal, though Official Liquidators. k) The Petitioner seeks the leave of the Hon'ble Tribunal to enlarge the scope of the reliefs sought and prayers made in this petition by filing any other documents or applications in view of the extraordinary nature of the circumstances pertaining to the present petition. l) That the Petitioner may be permitted to file copies of the interim and/or final investigation reports of the Serious Fraud Investigation Office (SFIO), as and when the same are submitted by the concerned inspectors to the Central Government, in order to supplement/enlarge/amend/modify the present petition, based on the findings of the interim/final report, including addition to the array of Respondents, as per the NCLT Rules. 3. The cause of action for....
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....t is essential to obtain restraint orders against the assets lying with various companies, LLPs, Trusts and individuals, in the backdrop of the factual scenario, it has become imperative upon this Bench to pass restraint orders before going into the technicalities and the procedural aspects in respect to the Company Petition, because the fact of the matter is, fraud has taken place, money of the bank has gone out. It was pleaded that if the Tribunal waits for details of each and every transaction, the liquid assets and other assets lying with these entities will be frittered away. Once that happened, the whole exercise of passing orders will become redundant. 5. The Petition were based on the events, which were noticed by the Tribunal, as quoted below: - "on the events surrounding certain First Information Reports (FIR) filed by the Punjab National Bank (PNB), a public sector nationalized bank. FIR No. RCBSM2018E0001 dated 31/01//2018 filed with CBI, BS&FC, Mumbai, inter alia, states that Mr. Nirav Modi (Respondent No. 11), Mr. Nishal Modi (Respondent No. 12), Mrs. Ami Nirav Modi (Respondent No. 13), Mr. Mehul Chinubhai Choksi (Respondent No. 14), all partners of M/s Di....
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....Group/ Associates/ Subsidiaries/ firms having exposure with PNB: Name Directors/Partners/Trustees/Beneficiaries Firestar International Ltd. Mr. Nirav Deepak Modi (Promoter) Mr. Haresh Vrajlal Shah, Professional Mr. Suresh Chandra Senapaty, Professional Mr. Gautam Mukkavilli, Professional Mr. Sanjay Rishi, Professional Mrs. Angelina Nguyen, Professional Firestar Diamond International (P. ) Ltd. Mr. Nirav Deepak Modi (Promoter) Mr. Haresh Vrajlal Shah, Professional Mr. Suresh Chandra Senapaty, Professional Firestar Diamond FZE (Dealing with DIFC Dubai) Mr. Nirav Deepak Modi (Ultimate Beneficiary Owner) Mr. Bankim Mehta, Professional Director Firestar Diamond Ltd. (Dealing with BO : Hong Kong) Mr. Bankim Mehta, Professional Director ii) Nirav Modi Group/ Associates/ Subsidiaries/firms where suspected fraud has taken place: Name Partners M/s. Stellar Diamonds Nirav Family Trust* Nirav Modi Family Trust* M/s. Solar Exports Nirav Family Trust* Nirav Modi Family Trust* M/s. Diamond R US Sh. Nirav De....
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....restar Diamond International P. Ltd. Mr. Nirav Deepak Modi (Promoter) Mr. HareshVrajlal Shah, Professional Mr. Suresh Chandra Senapty, Professional Bently Properties P. Ltd. Mr. Ramesh Madhavdas Assar Mr. KetanChandrakant Solanki MAk Business Enterprises Pvt. Ltd. Mr. Ramesh Madhavdas Assar Mr. Manish Lalit Dani Mr. PareshPravinbhaiRathod Paundra Enterprises Private Limited Mr. Ramesh Madhavdas Assar (Formerly Knoen as Aimeka Developers Pvt. Ltd. ) Mr. Manish Lalit Dani Mr. PareshPravinbhaiRathod ANM Enterprises P. Ltd. Mr. Ramesh Madhavdas Assar Mr. KetanChandrakant Solanki NDM Enterprises P. Ltd. Hemant Dahyalal Bhat Ramesh Madhavdas Assar Details of guarantors in the account Firestar Diamond International P Ltd. (FDIPL) Name of Guarantor Relationship with borrower Nirav Modi Promoter Director Firestar International Ltd. Group Company Details of guarantors in the account Firestar Diamond FZE, Dubai: Name of Guarantor Relation-ship with borrower M/s. Firestar Holdings Ltd. (formerly Firestone Hol....
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.... Carpet Area Firestar international Pvt. Ltd. 4 No. 16, 4th Flr, Nagindas Mansion CHSL, J. S. S. Rd. , Opera House, Mumbai 04 846 Sq/Ft. Carpet Area Firestar international Pvt. Ltd. 5 Flat No. 4, 2nd Flr, Grosvenor House, Peddar Rd. , Mumbai-26 2590 Sq. Ft. Carpet Area Mr. Nirav Modi 6 Unit Nos. 518, 520, 522, 524, 526, 528 at 5th Floor, Belgium Towers, Surat 2861 Sq. Ft. Carpet Area Firestar international Pvt. Ltd. 7 6th floor, 238, Block-III, Mafatlal Centre, Nariman Point, Mumbai 400 021 15645 Sq. Ft. Firestar international Pvt. Ltd. 8 Unit Nos. 2001 & 2002, 20th Floor, Tower 'B' Peninsula Business Park, C. S. No. 243 Of Lower Parel Division, Ganpatrao kadam Marg, Lower Parel, Mumbai - 400 013 Unit No. 2001 : 15, 071 Sq. Ft. Unit No. 2002: 15, 387 Sq. Ft. Attached with Car Parking Unit No. 2001: 14 Nos. Unit No. 2002: 15 Nos. MAK Business Enterprises Pvt. Ltd. 9 HCL House Basement + Ground + 4 upper floors of the Building along with Land bearing C. S. No. 360 of Vile Parle Division, Village Marol, Opp. Sugun Hospital, Old Military Road, Andheri (East), Mumbai 400 059 Documented Plot Area : 30, 127 Sq....
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....e : D-33, Varun Marg, Shiniwas Puri, Block D, Defence Colony, New Delhi - 110024. 5. Andheri : Army Navy Press Bldg. , Plot No. 118, Road 18, MIDC, Andheri East, Mumbai 400093, India. 6. Unit No. 26, Ground Floor, Tower No. 2, Kohinoor City Mall, Kirol Road, Off : LBS Marg, Kurla West, Mumbai - 400070 Firestar International Limited 1 518-522, 5th floor, Belgium Tower, Opp : Linear Bus Stand, Ring Road, Surat 395003, India 2. G-1-181, SEZ-II, Sitapura Indl. Area, Jaipur - 302022 3. 2nd Floor, Trade Point Building Kamala Mills Compound, Lower Parel (West), Mumbai - 400093. 4. Army Navy Press Building, Plot No. 118, Road No. 18, MIDC, Andheri (East), Mumbai - 400093. 5. Plot no. 26, Road 13, Surat SEZ Sachin, Surat, Gujarat 394230 6. Bharat Diamond Bourse, Tower A (East) - 4050, BKC, Bandra East, Mumbai - 400 051. 7. Kurla - Unit No. 23 & 24, Tower II, Wing B, Kohinoor City, Kirol Road, Off : LBS Marg, Kurla West, Mumbai - 400070. In addition to above, covered under insurance are listed below: 8. 2nd Floor, Trade Point Building, Kamala Mills Compound, Lower Parel (West), Mumbai - 400013 ....
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....isposal of funds, assets and properties of the entities and individuals mentioned above until further orders. 10. As to other reliefs and for appearance of the Respondents, list this matter for hearing on 26. 03. 2018 with a direction to the Petitioner to serve notice to all Respondents within 15 days of this order. " 8. The order dated 23rd February, 2018 is under challenge in Company Appeal (AT) No. 119 of 2018 and other appeals except Company Appeal (AT) No. 103 of 2018. 9. The appeal preferred by Union of India (Company Appeal (AT) No. 119 of 2018) against order dated 23rd February, 2018 having been filed after delay of seven days, a petition for condonation of delay has been filed, which was opposed by the Respondents. However, taking into consideration the facts that the same order dated 23rd February, 2018 is under challenge in other analogous appeals and the Union of India has explained the ground for condonation of delay and being satisfied, we condone the delay of seven days in preferring Company Appeal (AT) No. 119 of 2018. 10. Some of the contesting Respondents to the Company Petition, including individuals against whom the interim order was passed on ....
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....; xxx xxx 45. 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 befitting relief in the light of the discussion made in other applications. Henceforth, the restraint order dated 23. 02. 2018 is hereby modified permitting this applicant to withdraw Rs. 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. " 13. The Union of India has challenged the order dated 2n....
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.... and thereby vacated the order of restraint dated 23rd February, 2018 against the said Respondent. 18. Challenging the maintainability of the Petition filed by the Union of India and restraint order passed on 23rd February, 2018, learned counsel appearing on behalf of 4th Respondent submitted that no interim order can be passed against the Respondent in a petition under Sections 241/242 of the Companies Act, 2013. 19. According to learned counsel appearing on behalf of 4th Respondent, Section 241(2) of the Companies Act, 2013 enables Central Government to file a Petition, only if it is of the opinion that the affairs of the company are conducted in a manner prejudicial to public interest. In the present case, the Central Government has miserably failed to demonstrate any material for it to form an opinion to trigger Section 241 of the Companies Act, 2013. 20. It was further submitted that the Central Government vide its letter dated 17th February, 2018, directed SFIO to investigate into the affairs of FDIPL and FIL, among other 114 entities. The investigation is currently undergoing. As such, as on date there is no basis either for the Central Government to file an applica....
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..... 28. Almost similar plea has been taken by the other contesting Respondents, including the Appellants who have challenged the order dated 23rd February, 2018. 29. The questions arise for consideration are as follows: i. Whether in a petition under Sections 221, 222, 241, 242, 246 & 339 of the Companies Act, 2013, the Tribunal has jurisdiction to injunct the Respondents and other Companies, LLPs, Trusts and individuals' from removal, transfer or disposal of funds, assets and properties of the entities and individuals until further orders, as has been ordered on 23rd February, 2018? and; ii. Whether the impugned order dated 2nd April, 2018 vacating the order(s) of restraint dated 23rd February, 2018 in respect of Mr. Sujal Shah (Respondent No. 43); Mr. Gopal Krishnan Nair (Respondent No. 44); Mr. Suresh Senapathy (Respondent No. 51); Mr. Gautam Mukkavilli (Respondent No. 52) and Mr. Sanjay Rishi (Respondent No. 53) on the ground that there is no material to negate the statement made by the Respondents is legal or not? 30. Chapter XIV of the Companies Act, 2013 relates to "Inspection, Inquiry and Investigation". Section 210 empowers the Central Governmen....
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....p; xxx xxx (b) on an application made to it by any other person or otherwise, if it is satisfied that there are circumstances suggesting that─ (i) the business of the company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose; (ii) persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members;or (iii) the members of the....
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....or any other person having a reasonable ground to believe that the removal, transfer or disposal of funds, assets, properties of the company is likely to take place in a manner that is prejudicial to the interests of the company or its shareholders or creditors or in public interest, it may by order direct that such transfer, removal or disposal shall not take place during such period not exceeding three years as may be specified in the order or may take place subject to such conditions and restrictions as the Tribunal may deem fit. (2) In case of any removal, transfer or disposal of funds, assets, or properties of the company in contravention of the order of the Tribunal under sub-section (1), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. " 34. From the aforesaid provision, it is clear that the Tribunal has power to direct that the tr....
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....ng on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Tribunal may direct: Provided that on the hearing of an application under this sub-section, the Official Liquidator or the Company Liquidator, as the case may be, may himself give evidence or call witnesses. (2) Where the Tribunal makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration and, in particular, - (a) make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf; (b) make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section. (3) Where any business of a company is carried on....
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.... the order to desist. 40. Chapter XVI relates to "Prevention of Oppression and Mismanagement". An application to the Tribunal for relief in cases of oppression, etc. can be made by any eligible member(s) of the company under sub-section (1) of Section 241 of the Companies Act, 2013, who complains about the oppression and mismanagement as stipulated in clause (a) & (b) of sub-section (1). 41. On the other hand, the Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal under sub-section (2) of Section 241 for an order under Chapter XVI of the Companies Act, 2013. 42. The power of Tribunal is wide enough as is evident from sub-section (1) of Section 242 in terms of which 'it may make such order as it thinks fit', with a view to bringing to an end the matters complained of. 43. Sub-section (2) of Section 242 is inclusive power without prejudice to the generality of the powers under sub-section (1), which includes regulation of conduct of affairs of the company in future; the purchase of shares or interests; restrictions on the transfer or allotment of th....
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....terms of Section 341. 50. Therefore, on an application under sub-section (2) of Section 241, the Tribunal can pass not only any order under Chapter XVI and if it is read with Section 246, it will be evident that Sections 339, 340 and 341 being applicable mutatis mutandis, in relation to an application made to the Tribunal under Section 241, the Tribunal can pass order in terms of those extended provisions. 51. This apart under Section 420, the Tribunal is empowered to pass such orders as it thinks fit after giving the parties to any proceeding before it, a reasonable opportunity of being heard. The Tribunal has also inherent powers to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal under Rule 11 of the NCLT Rules, 2016. 52. Therefore, if sub-section (4) of Section 242 is read with Sections 339 & 340 and Section 221, it is clear that apart from 'freezing of assets of company on inquiry and investigation', it is also open to the Tribunal to freeze the assets of any person, including other companies and individuals, even during inquiry and investigation of fraud under Section 212 of the Companies Act, 201....
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....Lakh only) per month from their Bank accounts. Rest part of the order dated 23rd February, 2018 restraining them and others from removal, transfer or disposal of funds, assets and properties of the entities and individuals until further orders is continuing. 57. As aforesaid persons are entitled to withdraw certain amounts for their subsistence and of their families, we find no ground to interfere with the impugned order of modification dated 2nd April, 2018, so far it relates to Mr. Anil Umesh Haldipur (Respondent No. 35) and Mrs. Nazura Yash Ajaney (Respondent No. 38). 58. In so far as Mr. Sujal Shah (Respondent No. 43); Mr. Gopal Krishnan Nair (Respondent No. 44); Mr. Suresh Senapathy (Respondent No. 51); Mr. Gautam Mukkavilli (Respondent No. 52); Mr. Sanjay Rishi (Respondent No. 53); Mr. Suresh Kumar Bhutani (Appellant in Company Appeal (AT) No. 124 of 2018), Mr. Paresh Pravinbhai Rathod (Appellant in Company Appeal (AT) No. 125 of 2018), Mr. Haresh V. Rajlal Shah (Appellant in Company Appeal (AT) No. 126 of 2018), Mr. Ketan Chandrakant Solanki (Appellant in Company Appeal (AT) No. 127 of 2018), Mr. Manish Lalit Dani (Appellant in Company Appeal (AT) No. 128 of 2018), Mr.....