TaxTMI 
TaxTMI 
2020 (6) TMI 360
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....of proceedings, against it, consequent on the aforesaid complaint, dated 15th February, 2019, of NSDC, pending culmination of the revival proceedings. 2. NSDC essentially contends, per contra, that the proceedings, of which stay is being sought by the applicant, are criminal proceedings, which cannot be stayed under Section 391 (6) of the Act, in view of the law laid down by a Division Bench of this Court in Krishna Texport Industries Ltd v. D.C.M. Ltd 2008 (104) DRJ 101 (DB). 3. The issue in controversy having thus been set out in conspectus, I proceed to allude, in somewhat greater detail, to the facts, leading to the filing of the present application. Facts 4. Co. Appl. (M) 135/2016 was filed, by the applicant-Company iYogi Technical Services Pvt. Ltd., as a first motion application, under Section 391 of the Act, in order to obtain the sanction of this Court, to a Scheme of Arrangement, whereby the applicant could defray its debts to its creditors. Along with the petition, the applicant also preferred C.A. 3677/2016, for restraining the creditors, of the applicant, from taking any coercive action against the applicant, pending implementation of the proposed revival s....
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....bility by imparting special industry/Sector-specific skills. This program came to be known as "Udaan'. The National Skill Development Corporation (NSDC) was retained, by the MHA, for implementing the said scheme, whereby employment to 40,000 youth, from Jammu and Kashmir, was envisioned, over a period of five years, in key high growth sectors. (ii) The involvement, of the applicant, in the Udaan scheme, commenced from Memorandum of Understanding (MoU), dated 22nd May, 2013, entered into, between NSDC and the applicant. Under the said MoU, the applicant was required to identify trainable unemployed graduates, residing in Jammu and Kashmir, between the ages of 18 and 40, and groom them to be more employable. The MoU noted that the applicant had, for implementing the said project, submitted a proposal, dated 22nd February, 2013, to NSDC, for financial assistance, to the tune of Rs. 72,69,48,000/- as a grant, to be utilised by the applicant for meeting the project cost, in the manner set out in Schedule III to the MoU. NSDC agreed to the proposal and, vide the aforesaid MoU, undertook to provide up to Rs. 72,69,48,000/-, as a grant, to the applicant, to be used solely for impl....
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.... 447 students who had completed 90 days full-time employment post-completion of training, with the applicant. (iv) The spate of communications which, ultimately, has necessitated the filing of the present application by the applicant-Company, commenced, essentially, with a letter, dated 30th January, 2018, drafted in the form of a show cause notice, addressed to the applicant by NSDC. The said "show cause notice" alleged non-compliance, by the applicant, with the requirement of submission of utilisation reports, evidencing utilisation of the grant provided by NSDC under the Udaan scheme, within 15 days of the close of the financial year and, accordingly, called upon the applicant to show cause "as to why the above said mandatory condition of submission utilisation reports has not complied with and why the disbursed Grant amount should not be refunded by you, Second Party, to NSDC along with interest". (v) The above "show cause notice", dated 30th January, 2018, was followed by a legal notice, dated 4th April, 2018, and a subsequent "reminder legal notice", dated 18th December, 2018, from NSDC (through Counsel), to the applicant, with the latter notice being a near....
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....will: a. terminate the MoU as well as the rights of iYogi to access the Grant Amount under the MoU; and b. call upon iYogi to pay/return the Grant Amount of Rs. 2,88,03,600/- (that was released by Our Client to iYogi under the MoU) along with interest @ 18% p.a. The said action would also be without prejudice to the right to initiate appropriate civil and criminal against you (i.e. iYogi and also its officers, directors and personnel in joint and several capacity) for your deliberate breach and omission of your contractual obligations and misappropriation of public funds; all of which shall be at your risk, cost and consequence. This notice is being issued without prejudice to the rights of Our Client under the MoU (including termination of the MoU along with the right to claim compensation) against you for loss or damage caused to Our Client on account of breach of contract on your part." (vi) On 15th February, 2019, NSDC wrote to the Economic Offence Wing (EOW), New Delhi, requesting the EOW to register an FIR, against the applicant, under Sections 403, 405406, 415-417, 420, 424, 463 and 465, read with 120-B of the Indian Penal Code, 1....
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....atter and determine the exact quantum of loss caused to the Complainant and hold the responsible guilty for the offences committed under Section 120B, 403, 405, 406, 415, 417, 420, 424, 463, 465 of the Indian Penal Code, 1860 and under any other act/statute as you may deem fit." (vii) Following the submission of the above complaint, by NSDC, against the applicant, the EOW addressed communications, dated 18th April, 2019 and 18th September, 2019, to NSDC, informing NSDC that its complaint was being enquired into, and directing Mr. Ravi Verma, who had addressed the complaint, to the EOW on behalf of NSDC, to appear, in person, before the Inspector, EOW, with certain documents, and to answer certain queries. (viii) On 23rd April, 2019, the EOW also wrote to the applicant, informing the applicant that the complaint, of NSDC, was being looked into, and requesting the applicant to appear, in person, before the Inspector of the EOW on 26th April, 2019. (ix) On 12th June, 2019, the applicant replied to the EOW, in response to the complaint of NSDC. It was emphasised, in the said reply, that the applicant had, consequent to the grant of Rs. 2,88,03,600/- (which wa....
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....of Rs. 1,44,60,180/-, out of the total grant provided by NSDC under the Udaan scheme. However, stated the letter, the MoU, between the applicant and NSDC, cast a "specific obligation to furnish Original Utilisation Certificate duly certified by CAG empanelled auditor", representing the financial assistance utilised by the applicant. For want of the Original Utilisation Certificate, the soft copy thereof, dated 7th August, 2015, it was stated, could not be accepted by NSDC. The applicant was, therefore, requested to furnish the Original Utilisation Certificate, dated 7th August, 2015, representing utilisation of an amount of Rs. 1,44,60,180/-, duly certified by CAG empanelled auditor, as well as Original Utilisation Certificate for the balance amount of Rs. 1,43,43,420/-. (xii) On 14th April, 2020, NSDC addressed, to the applicant, yet another email, which has provoked the filing of the present application. The email read thus: "Dear Mr. Tamang and Mr. Yogendra, This is with reference to non-receipt of the original utilisation certificates by iYogi Technical Service Private Limited (iYogi) for utilisation of the grant amount disbursed by NSDC under the pro....
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....or NSDC, to the effect that criminal proceedings could not be stayed under Section 391 (6) of the Act, in view of the judgment of the Division Bench of this Court in Krishna Texport. I had also expressed my view - which I maintain - that the correctness of the allegation, of NSDC, that the applicant had contravened the provisions of the Udaan scheme, being in seisin before the EOW, it would not be appropriate for this Court to opine thereon, at this stage. 10. Arguments, before me were, therefore, restricted to the aspect of whether Section 391 (6) of the Act empowered this Court to interdict the process, set in motion by the complaint, dated 15th February, 2019, addressed by NSDC to the EOW. Rival contentions 11. Arguing on behalf of the applicant, Mr. Gaurav Duggal, learned counsel, submits that the request, by NSDC, to the EOW, to take criminal action against his client, was merely a red herring, as there was no justification, whatsoever, therefor. He points out that, out of the sanctioned grant of Rs. 72,69,48,000/-, under the Udaan scheme, the applicant had availed only Rs. 2,88,03,600/-, of which it had utilised Rs. 1,44,60,180/-, and forwarded the requisite utilisat....
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....nder Section 391 (6) of the Act invites my attention, in this context, to para 14 of the said judgment. Mr. Aggarwal presents two alternative arguments, by contending that the cause of action, set in motion by the complaint, addressed by NSDC to the EOW, could not be regarded as "proceedings" and, if they were proceedings, they were certainly not "civil proceedings" and were, if anything, criminal proceedings, which could not be stayed under Section 391 (6) of the Act. Reliance is placed, by Mr. Agarwal, on the definition of "proceeding", as contained in Black's Law Dictionary, to which I would be alluding later in the course of this judgment. Mr. Aggarwal also places reliance on the judgment of the High Court of Bombay in State of Tamil Nadu v. Uma Investments Pvt Ltd (1977) 47 Comp Cas 242 (Bom). 16. The prayer of the applicant was, therefore, according to Mr. Rohit Aggarwal, misconceived, and sought a remedy which the law did not contemplate. 17. Advancing submissions by way of rejoinder to the contentions of Mr. Rohit Aggarwal, Mr. Duggal took me through the various communications, between the applicant and NSDC, to reiterate his contention that the liability of his clien....
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....eferred to as "DCM"). The deposit was by way of two separate cheques, of Rs. 1.25 crores each, which were duly encashed. The ICDs were for a period of 120 days, and DCM was liable to repay the amount before the expiry thereof, along with interest. Alleged default, on the part of DCM, to effect such repayment, gave rise to two sets of separate proceedings. One set of proceedings arose out of cheques, issued by DCM, which were dishonoured on account of paucity of funds, resulting in complaints being filed, by KTIL, under Section 138 of the Negotiable Instruments Act, 1881. The second set of proceedings were initiated by KTIL for winding up of DCM, which does not really concern us. Proceedings, for quashing of the complaint, filed by KTIL against it under Section 138 of the Negotiable Instruments Act, were preferred, by DCM, before this Court, but were withdrawn. 21. As a scheme, for restructuring of DCM, was under consideration before this Court, an interim order was passed, by the learned Company Judge, on 25th April, 2005, staying all the above proceedings. This order was challenged, by KTIL, before this Court, contending that criminal proceedings, initiated by KTIL against DCM ....
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....R 1972 SC 878. 25. Having digested the earlier applicable on the point, the Division Bench went on, in para 23 of the report in Krishna Texport¸ proceeded to hold that the object of Section 391 of the Act was "to prevent vexatious litigation and cost on the company during the period of time when a scheme is being propounded", which "object is not sub-served by stay of the criminal proceedings". Further, in the same para, this Court goes on to observe that, had the intention of the legislature been to include criminal prosecution, in Section 391 (6), the legislature would have specifically said so. Para 26 of the report, thereafter, goes on to pronounce thus, in terms which are clear, unequivocal and unambiguous: "We are in agreement with the view that the words used in all the aforesaid provisions of "proceedings" or "other proceedings" must be construed ejusdem generis with the expression "suit' used aforesaid and clearly implies civil proceedings. It is only such construction which is in conformity with the intent of the legislature introducing these provisions in the said Act." (Emphasis supplied) 26. Paras 32 to 34 of the report, with which the judgment ....
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....he EOW, to file FIR is against the applicant, may, ultimately, not be entertained at all. That, ball, so to speak, is, however, presently in the court of the EOW, and not in this Court. 28. Krishna Texport was followed by another Division Bench of this Court in R. B. I. v. C. R. B. Capital Markets Ltd 195 (2012) DLT 204, which went a step further, and held thus: "From the foregoing discussion it is clear that the quasijudicial orders passed by a statutory authority like SEBI orders passed by the RBI and the income tax authorities under special enactments cannot be set aside while sanctioning a scheme under Section 391 of the Companies Act. It is also clear that no stay of any criminal or income tax proceedings can be ordered by the company court while considering an application under Sections 391/392 of the Companies Act, 1956. Therefore, the scheme which entails a direction to SEBI to revoke the order is passed under Section 11B of the SEBI Act could not have been sanctioned in law. Similarly, directions regarding "vacation of stay sine die" of all criminal cases could not have been given by the company court." 29. That criminal proceedings, instituted under Section....
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....g the EOW. Applying the principles laid down in the decisions cited hereinabove, therefore, it cannot be stated that "criminal proceedings" have been initiated against the applicant, as yet. Have any proceedings be initiated against the applicant, at the instance of NSDC? 35. As a fallback argument, Mr. Aggarwal has sought to contend that, if no "criminal proceedings" were pending against the applicant, then, certainly, no civil proceedings can be said to pending, either. In that case, submits Mr. Aggarwal, no proceedings, of any kind, are pending against the applicant, at the instance of the NSDC, and the application, under Section 391 (6) of the Act, is itself not maintainable. 36. Both sides have placed reliance on the definition of "proceeding", as contained in Black's Law Dictionary. I may reproduce the entire definition, as contained in Black's Law Dictionary, as it is, in my view, practically exhaustive, regarding the scope and ambit of the expression "proceeding", as understood in law: "Proceeding. In a general sense, the form and manner of conducting juridical business before a court of judicial officer. Regular and orderly progress in form of law, includ....
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....hasis supplied) 38. In Garikapati Veeraiya v. N. Subbiah Choudhry AIR 1957 SC 540, it was held that "the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceedings." 39. In the present case, pursuant to the complaint, dated 15th February, 2019, addressed by NSDC to the EOW, the record reveals that the EOW is merely looking into the matter, for which purpose it had called the applicant, to appear before it, vide the notice dated 23^rd April, 2019 supra. The said notice cannot even be termed a "show cause notice", as it merely states that the complaint of NSDC was being looked into, and requested the applicants to appear, before it, in that regard. No action, prejudicial to the applicant, has been proposed in the said communication. The EOW has not called upon the applicant to show cause, with respect to any of the allegations of NSDC, or against any action, proposed to be taken against the applicant pursuant thereto. It is not possible for this Court, therefore, to hold that, at this stage, any "proceeding", civil or criminal, is pending against th....
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....uent and succeeding paras, to recite that the Show Cause Notice, dated 30th January, 2018, from NSDC to the applicant, sought an explanation, from the applicant, as to why it had failed to fulfil the mandatory condition, under the MoU, to submit periodical Utilisation Reports, and why the disbursed grant amount should not be refunded, by the applicant to NSDC. The complaint, thereafter, refers to the next notice, dated 4^th April, 2018, by NSDC to the applicant, "calling upon the (applicant) to submit the Utilisation Report within 45 days of the receipt of the notice failing which the complainant (i.e. NSDC) would terminate the MoU and call upon the (applicant) to return the grant amount of Rs. 2,88,03,600/- along with interest @ 18% p.a." In any event, submits Mr. Duggal, the email, dated 18th June, 2019 supra, from NSDC to the applicant, acknowledged the fact that the soft copy of the Utilisation Certificate, dated 7th August, 2015, evidencing utilisation, by the applicant, of an amount of Rs. 1, 44,60,180/-, out of the total amount of grant, extended to it by NSDC, had been received by NSDC. The grievance of NSDC, as voiced in the said communication, was that the applicant had n....