TaxTMI 
TaxTMI 
2021 (9) TMI 670
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.... with Mr.Syed Hussain Adil Taqvi and Mr.Abhigyan, Advocates. YOGESH KHANNA, J. (Through Video Conferencing) 1. Both these petitions are taken up together as similar issues are being raised. 2. W.P.(CRL.)1823/2020 is filed for impugning the letter dated 29.06.2019 and the corrigendum issued on 29.11.2019 by the respondent no.1 directing the respondent no.2 to file complaint against the petitioners for the offences under the Companies Act, 2013 mentioned therein and secondly issuing directions to respondent no.2 to initiate the proceedings under Section 241/242/246 read with Section 339 of the Companies Act, before the NCLT. 3. It is submitted the letter dated 29.06.2019 calls for freezing and disgorgement of assets of 157 companies to be sold despite the fact such companies are functional. Following grounds have been taken to challenge the impugned order a) per Section 212(14) of the Companies Act if the final report is filed before the Central Government, it needs to be examined by it and after taking legal advice it may initiate the prosecution. Section 212(14) of the Companies Act runs as under: "212. Investigation into affairs of Company by Serious ....
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....ed if the SFIO feels there is a problem with 2-3 companies they can deal with those companies separately and seek remedy under Section 241, 242 of Companies Act and lastly it was argued such power of disgorgement, even otherwise, can be ordered only after trial and not at filing of chargesheet. It is argued unless the State proves its case of disgorgement, no order can be passed by NCLT for such an action. 4. The learned senior counsel for the petitioner, to prove such penal provisions only have a retrospective effect, referred to Commissioner of Income Tax (Central)-I, New Delhi vs. Vatika Township Private Limited (2015) 1 SCC (1), a Constitutional Bench judgment, wherein the Court held as under: "31. In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operat....
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....ities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication." 6. Heard. 7. Before proceeding let me first examine the issue of jurisdiction. It is a settled law the challenge to the jurisdiction of NCLT ought to have been raised before NCLT itself. Once the proceedings have been initiated before NCLT and if the NCLT is seized with the company petition, all contentions including power of the respondent to initiate such proceedings before NCLT must be raised before such forum and be determined in those proceedings. The petitioner herein in fact is seeking quashing of impugned order/letter dated 29.06.2019 which is in effect challenging the jurisdiction of NCLT. Since the petition has already been filed under Section 241, 242 of the Companies Act; notice having been issued; the contention raised before this Court on the point of jurisdiction of NCLT can very well be raised before the NCLT. Companies Act is a complete code hence statutory mechanism under it cannot be bypassed. Section 430 of the Act provides the jurisdiction of all Civil Courts is barred in respect of the matter which the NCLT or the NCLAT is em....
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....the process of the court. In the present case, the facts are not in dispute. The discretionary jurisdiction Under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal Rule is that a writ petition Under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well defined exceptions as observed in Commissioner of Income Tax and Ors. v. Chhabil Dass Agarwal, MANU/SC/0802/2013 : 2014 (1) SCC 603, as follows: 15. Thus, while it can be said that this Court has recognised some exceptions to the Rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, Titaghur Paper Mills case and other similar judgments that the High Court will not entertain a petition Under Article 226....
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....h were implemented shall give rise to civil or evil consequences to the petitioner. A writ court, it is well settled would not determine a constitutional question in vacuum. 22. The court must have the requisite territorial jurisdiction. An order passed on writ petition questioning the constitutionality of a Parliamentary Act whether interim or final keeping in view the provisions contained in Clause (2) of Article 226 of the Constitution of India, will have effect throughout the territory of India subject of course to the applicability of the Act. Situs of office of the Respondents - whether relevant? 23. A writ petition, however, questioning the constitutionality of a Parliamentary Act shall not be maintainable in the High Court of Delhi only because the seat of the Union of India is in Delhi. (See Abdul Kafi Khan v. Union of India and Ors., MANU/WB/0086/1979 : AIR 1979 Cal 354 ). 24. Learned counsel for the appellant in support of his argument would contend that situs of framing law or rule would give jurisdiction to Delhi High Court and in support of the said contention relied upon the decisions of this Court in Nasiruddin v. State Transport ....
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....now. The Court will find out in each case whether the jurisdiction of the Court is rightly attracted by the alleged cause of action". 16. This Court does not exercise supervisory jurisdiction under Article 227 over NCLT at Allahabad and such jurisdiction vests solely with High Court of Judicature at Allahabad. 17. The Hon'ble Supreme Court in various judgments have held Section 430 of the Companies Act has to be construed strictly and the NCLT has been given inherent powers to decide the matters of the companies and should not be interfered with lightly. In SAS Hospitality Pvt. Ltd. vs. Surya Constructions Pvt. Ltd. 2018 SCC Online Delhi 11909 the Court held: ".... 10. Before going into the question as to whether this Court has the jurisdiction to entertain and try the present suit and grant reliefs prayed for, it is necessary to analyze the scheme of the Companies Act, 2013, along with the constitution of the NCLT. The NCLT has been vested with powers that are far reaching in respect of management and administration of companies. The said powers of the NCLT include powers as broad as * '(regulation of conduct of affairs of the company) under Section 242(2)(a), a....
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....onducted in a manner prejudicial to public interest, the Central Government then may itself apply for an order under this Chapter XVI of the Companies Act. The Act has to be read in consonance and uniformity to further the effect of the legislative intent. 22. The reliefs for disgorgement can even be sought under section 241 and 242(1)(l)(m) de hors Section 212 (14A) amendment. The Central Government can authorize initiation of proceedings and the relief of freezing assets and disgorgement of property under Section 241, Section 242 r/w Sec.246, and Section 339/447 of the Companies Act inasmuch as disgorgement is a civil action in nature of an equitable relief and not a penal action. In Karvy Stock Broking Ltd. v. Securities and Exchange Board of India, MANU/SB/0064 /2008 it has been held that: "...Disgorgement is a monetary equitable remedy that is designed to prevent a wrongdoer from unjustly enriching himself as a result of his illegal conduct. It is not a punishment nor is it concerned with the damages sustained by the victims of the unlawful conduct. Disgorgement of illgotten gains may be ordered against one who has violated the securities laws/regulations but it is....