TaxTMI 
TaxTMI 
2021 (10) TMI 895
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....India) on the file of the 'National Company Law Tribunal', Court No.1, Mumbai Bench, Mumbai have preferred these two 'Appeals' before this 'Tribunal' as 'Aggrieved persons' being dissatisfied with the impugned order dated 31.08.2021 passed in CP No.294/MB/2021 by the 'National Company Law Tribunal', Mumbai Bench. 2. Earlier, the 'National Company Law Tribunal', Mumbai Bench by means of an impugned order in CP No.294/MB/2021 (filed by the First Respondent /Union of India) had attached and froze the moveable and immoveable properties of the Appellants including Bank Accounts, Lockers, Demat Accounts including the jointly held properties. Appellants' Submissions 3. Challenging an 'Ex-parte' interim order passed by the 'Tribunal' ('National Company Law Tribunal', Mumbai Bench) dated 31.08.2021 in CP No.294/MB/2021, the Learned Counsel for the Appellant/11th Respondent submits that the order of the 'Tribunal' in directing the Freezing of Assets and 'Bank Accounts' of the Appellant without providing a single 'Opportunity of Hearing' is per se an illegal one, because of the fact that the said ''order'' had affected the livelihood of the 'Appellants' and brought their families into a 'p....
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....el for the Appellants comes out with a plea that even in the instant Company Petition No.294/MB/2021 as well as in the ''Application'' for arraying the ''Appellants'' as 'Party Respondents', there is no averment/allegation that any business of the Second Respondent was conducted wrongfully, within the knowledge of the ''Appellants'' and as such, there was no justification on the part of the 'Tribunal' to pass an 'impugned'' order against the 'Appellants'. 10. The Learned Counsel for the Appellants contends that the ''Appellants'' had demitted the office of the Second Respondent w.e.f. 31.03.2017 and later, had no control in respect of ''Affairs of the Second Respondent''. Apart from this, it is projected on the side of the ''Appellants'' that the whole issue revolves around the ''Writing Off from the Net Receivable'' of INR 21.18 crores from the Books of the Accounts of ''Corporate Debtor'' which was supposedly effected on 31.05.2018 (vide Note of Approval). Moreover, it is brought to the notice of this 'Tribunal' that the Appellants had resigned from the employment of the Second Respondent on 31.03.2017. Therefore, a plea is raised on behalf of the Appellants, that no inference c....
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.... At this juncture, the Learned Counsel for the Appellants points out that the Appellants' case is squarely covered by an order dated 13.11.2018 passed by the Hon'ble Supreme Court of India in the matter of Gopal Krishna Karunakar Nair Vs Union of India (vide Civil Appeal No. 7282-83 of 2018) and connected matters wherein likewise orders of the 'Tribunal' was stayed, in so far as the 'Officers' who had resigned from the Company in issue. 16. The Learned Counsel for the Appellants refers to the order of the Hon'ble Supreme Court dated 14.9.2018 in Sujal Anil Shah Vs Union of India (Civil Appeal No.8731-8732 of 2018) wherein, while admitting the 'Civil Appeal', in the meanwhile, an 'order of stay' of operation of the impugned judgement and order of the 'National Company Law Tribunal', New Delhi was granted and the matter was directed to be tagged with C.A. No.7282-7283 of 2018. 17. The other argument raised by the Learned Counsel for the Appellants is that the impugned order is like an order of 'Attachment Before Judgement' as per 'Order 38 Rule 5 of Civil Procedure Code'. Furthermore, the conditions precedent for passing an order under Order 38 Rule 5 of C.P.C. are not even pleaded....
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....rs) we admitted the petition and stayed the operation of the impugned judgment and order of the NCLT, New Delhi. We clarify that this stay order will operate only in the case of Sujal Anil Shah." 21. The Learned Counsel for the Appellants refers to the order dated 02.08.2021 of the Hon'ble High Court of Delhi in B D Pawar V Union of India through the Ministry of Corporate Affairs & Anr. wherein it is observed as under: "1. Learned senior counsel for the petitioner states that the question of law, which arises in the present petition is still pending consideration before the Hon'ble Supreme Court of India. 2. At request, list on 18th November, 2021. 3. Interim order to continue." 22. The learned Counsel for the Appellants refers to the judgment of this Tribunal in Union of India, Ministry of Corporate Affairs vs. Gitanjali Gems Ltd. and Ors. reported in (2018) SCC Online NCLAT 307 wherein at paragraph 11 it is observed as under: 11. "The following reason was shown to pass restraint order: 24. But at the same time, it is the duty of this Court to see that innocent people are not burdened by this restraint order therefore as and when any innocent comes before this Bench ....
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....nd Reserve Bank grants approval, if it is in order, on considering their financial position and other related facts as stated above." First Respondent's Contentions: 24. According to the First Respondent/ Union of India, the Applicant/ State Bank of India, preferred a petition in terms of Section 7 of the 'I&B' Code, 2016 against the 'Videocon Telecommunication Ltd.', which was admitted by the 'Adjudicating Authority' in which an 'Interim Resolution Professional' was appointed. Moreover, a 'Group Insolvency' order dated 08.08.2019 was passed in respect of the 'Videocon Group'. 25. It is represented on behalf of the First Respondent that a reading of the 'Avoidance Transactions' pointed out in the 'Transaction Audit Reports' conducted during 'CIRP' of 'Videocon Telecommunications Ltd.' and other Group Companies exhibit and 'Avoidance Transactions', amounting to INR 5991 crores. Besides this, in terms of the 'Approved Resolution Plan' the total realization of the 'Financial Creditors' is INR 200 crores upfront cash plus INR 2700 crores in 'Non-Convertible Debentures' and cash with company after deduction of expenses. In addition to this, the lenders who received 8% equity holding ....
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....cer' and 'Chief Financial Officer' and they were the 'Key Managerial Personnel' as per definition of Section 2(51) of the Companies Act, 2013, which reads as under: Section (51) "Key managerial personnel", in relation to a company, means - (i) the Chief Executive Officer or the managing director or the manager; (ii) the company secretary; (iii) the whole-time director; (iv) the Chief Financial Officer; and (v) such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and (vi) such other officer as may be prescribed." 30. It is the contention of the First Respondent that a Company/ an artificial person can act/ function through natural persons like (i) 'promoters', (ii) Board of Directors, (iii) Manager or Key Managerial Personnel and these individuals, are the 'mind and will of the company'. Furthermore, an argument is raised on behalf of the First Respondent that in case, if any 'Fraudulent Transaction' occurs in a 'Company' then, such a decision could have been taken only by the natural persons who had applied 'their mind' and 'will' to that act. Also that, the 'Chief Execut....
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....t of the period of 'Audit Review' and they resigned on 31.03.2021 i.e. during the period of 'Transaction Audit Review' and hence they are necessary and proper party to the litigation before the Tribunal because of the 'inadvertent error' the Appellants (in two Appeals) were left out and this was sought to be corrected by filing of CA No. 275/2021, to array them as 'Respondents', by the First Respondent/ Applicant, before the 'Tribunal'. 34. The Learned Counsel for the First Respondent adverts to the order of the 'Tribunal' dated 08.08.2019 in the matter of State Bank of India vs. Videocon Industries Limited. (vide C.P. 02 of 2018) wherein at paragraph No.17, the learned Counsel had inter-alia stated as under: "The Ld. Counsel for SBI Mr. Ravi Kadam submits that since the Corporate Debtor have been running their business and operations as if they were a single entity and a single economic unit and all the lendings have been done on such basis, therefore, the entire line of credit by Banks and Financial Institutions to the Corporate Debtor was extended relying upon their unity in business and operations. So the loans were extended with the understanding that the Corporate Debtors ....
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....ated 1st June, 2016 issued by the Central Government under sub-section(1) of Section 419 and Rule 64 of NCLT Rule it is clear the Benches, including Principal Bench have territorial jurisdiction on the companies exclusively on the basis of location of the registered office of such company. In fact, this law is also being followed by the Principal Bench of NCLT, New Delhi for placing all the petitioners before one or other Bench and that Section 488-B of Act, 1956, cannot be exception of the same. 26. For the reasons aforesaid we set aside the impugned order dated 6th December 2016 passed by the "Principal Bench" of NCLT, New Delhi in C.P. No.01/2015 with the direction to the Registry, if the Principal Bench, NCLT, New Delhi to transfer the C.P. No.01/2015 to the NCLT Bench at Chennai, where registered office of the appellant company is situated." 38. The Learned Counsel for the First Respondent contends that the 'principles of natural justice' are 'paramount' but the same cannot be 'sacrosanct' when it becomes an 'impediment to justice'. First Respondent's Decisions (in Both Appeals) 39. On behalf of the First Respondent judgment of the Hon'ble Supreme Court in the matter of U....
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....ing under the Union of India holds his office at the pleasure of the President as provided in Article 310 of the Constitution. But this "pleasure" doctrine is subject to the rules of or law made under Article 309 as well as to the conditions prescribed under this Article 311. Rules of natural justice are not embodied rules nor can they be elevated to the position of fundamental rights. As observed by this Court in Krapak and Ors. V. Union of India MANU/Sc/0427/1969: [1970]1SCR457 "the aim of rules of natural justice is to secure justice or to put negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law but supplement it. "It is true that if a statutory provision can be read consistently with the principles of natural justice, the courts should do so because it must be presumed that the legislatures and the statutory authorities intend to act in accordance with the principles of natural justice. But if on the other hand a statutory provision either specifically or by necessary implication excludes the application of any or all the principles of natural justice then the court ....
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....y Tribunal." 43. It is represented on behalf of the First Respondent/ Union of India that on 27.09.2021 the Hon'ble High Court of Bombay in W.P. No.21058 of 2021 between Chandrashekhar Ashok Nagarkar v. Union of India and in Major General Sudhir Chintamani Nilakanth Jathar v. Union of India in W.P. No.20882 of 2021 had sustained the interim order dated 31.08.2021 of the 'Tribunal'. Second Respondent's Decision (in Both Appeals) 44. On behalf of the Second Respondent, a reference to the order of the Hon'ble High Court of Bombay dated 27.09.2021 in the matter of Major General Sudhir Chintamani Milkanth Jatar & Ors. V. Union of India & Ors. in W.P.(L) No. 20882 of 2021 is made wherein at paragraph 12 to 21 it is observed as under: - 12. "We have already noted the reliefs claimed by Union of India in the Petitions filed before the Tribunal and the order passed by the Tribunal on 31/08/2021 under sections 241 and 242 of the Companies Act, 2013. 13. At the outset we would like to extract a portion from the order dated 31/08/2021 which deals with service of notice and hearing of the Respondents. The said portion reads as under: - "Before we proceed to discuss the merits of the Pe....
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....at the Petitioners were entitled to a fair hearing which they have complained they were not afforded. In such circumstances relegating the Petitioners to the forum of alternative remedy of appeal would not be just and proper. 21. Consequently and having regard to fact that the order dated 31/08/2021 is interim in nature, we direct the Tribunal to hear the Petitioners afresh and thereafter pass appropriate order (s) in accordance with law. Order dated 31/08/2021 qua the Petitioners would be subject to such decision that the Tribunal may arrive at after hearing the Petitioners. As stated above, all contentions are kept open. Tribunal shall pass appropriate order (s) after hearing the Petitioners within a period of four weeks from the date of receipt of a copy of this order." Natural Justice 45. It must be borne in mind that the 'Rules of Natural Justice' are not the edicts of a statute. As a matter of fact, the rudimentary requirement is that (i) Fair play (ii) a Determination/An Adjudication is to be made after ascribing necessary reasons in a fair, just, and objective manner of course, based on the relevant facts/materials in a given case. 46. In reality, an opportunity of hea....
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....llate stage', a proper party can be arrayed as a Respondent, in the considered opinion of this Tribunal. The Government's power (To notify) 52. The Government's power to notify any other individual in the category of 'Key Managerial Personnel' rests with the Government. In fact, Section 170 of the Companies Act, 2013 requires that every Company shall keep at its registered office of the Company, a register containing such particulars of its Directors and 'Key Managerial Personnel' as may be prescribed. 53. In terms of Section 189(2) of the Companies Act, 2013, the 'Key Managerial Personnel' within a period of 30 days of his appointment or relinquishment of his Office are required to disclose to the Company the particulars of contracts were or arrangements in which they are directly or indirectly concerned or interested and particulars of which are required to be included in the register of 'Contracts' or 'Arrangements'. Evaluation 54. At the outset, this Tribunal, relevantly points out that in CA 275 of 2021 in C.P. 294/MB/2021 (filed by the First Respondent/Union of India/Applicant), at paragraph 2 to 4 it is averred as follows: - "2. That a Company Petition no. 294 of 2021....
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....ations. Rule 45 deals with 'rights of a party to appear before the Tribunal'. Rule 49 speaks of Ex parte hearing and disposal. Rule 51 refers to 'Power to regulate the procedure'. Rule 55 says that 'No pleadings subsequent to the reply, shall be presented except by the leave of the Tribunal upon such terms as the Tribunal may think fit. 59. There is no two opinion of a primordial fact that the 'Tribunal' in a given case is not to pass an order in a flurry manner and of course, it is to pass an order with utmost care, caution and circumspection. Ordinarily, no man shall be condemned without being heard. 'Notice' is the initial element and integral part of the principle of natural justice. 60. In this connection, it is worthwhile for this Tribunal to refer to Section 424(1) of the Companies Act, 2013 which reads as under: - "The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908(5 of 1908), but shall be guided by the principles of natural justice, and, subject to the other provisions of this Act (or of the Insolvency and Ban....
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....r the impleadment of the Appellants as Respondent No. 11 and 12, in main CP 294/MB/2021 on the file of the National Company Law Tribunal, Mumbai, they are necessarily to be permitted to file the Reply/Response/Counter, in the considered opinion of this Tribunal. 66. In the main CP 294/MB/2021 (filed u/s 241(2) r/w 242(2)(m) r/w Section 246 r/w 339 of the Companies Act, 2013) by the First Respondent/Union of India, against the Videocon Telecommunications Ltd., Aurangabad, Maharashtra & Ors., as main relief, an attachment of moveable and immoveable properties of Respondent No. 2 to 10 therein is sought for an encashment and that the Petitioner (Union of India/ First Respondent) may be allowed to pay the victims of the fraud. 67. Continuing further, the First Respondent / Petitioner / Union of India in the main CP 294/MB/2021 had sought the following interim reliefs: - 1. "That the Petitioner be permitted to serve the Respondents through post, publication in the newspapers, email, WhatsApp messaging wherever required, in order to ensure due service of notice to all Respondents present in India and overseas; II. That the Respondent Nos. 2 to 10 be immediately directed to disclose....