TaxTMI 
TaxTMI 
2023 (12) TMI 321
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2. The challenge is essentially based on the contention of the petitioners that since proceedings under the erstwhile Companies Act, 1956 [The 2013 Act] had been initiated prior to the enforcement of Section 212 of the 2013 Act, the respondents stand denuded of jurisdiction to initiate proceedings afresh under Section 212. It is also contended that the provisions of the 1956 Act came to be repealed only upon the energization of Section 465 of the 2013 Act on 30 January 2019. It is in that light that it was urged that since the provisions of the 1956 Act prevailed till at least 30 January 2019, no proceedings under Section 212 of the 2013 Act could have been initiated. The challenge is additionally founded upon the judgment and orders passed in an earlier round of litigation which was instituted by Alchemist Infra Reality Limited [AIRL], and the contention of the petitioners that by virtue of the orders passed on those writ petitions and the Letters Patent Appeal [LPA] filed in connection therewith, the respondents stand restrained from initiating any proceedings under the 2013 Act not just against AIRL but also against the other petitioners in the present Writ Petition. 3. For t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....their investigation and submit the report to the Central Government within a period of three (3) months from the date of issue of this order. 5. This order is issued for and on behalf of the Central Government. (R.K. Bakshi) Deputy Director Copy forwarded for necessary action to:- 1. Director, SFIO, New Delhi 2. Shri P.R. Lakra, Addl. Director 3. Shri R.K. Mishra, Sr. Asstt. Director 4. Shri Prem Sunder Singh, Asstt. Director" 6. AIRL in the meanwhile instituted W.P.(C) 7529 of 2012 before this Court impugning the communication of the RoC dated 27 March 2012. While entertaining the said petition, the Court on 04 December 2012 provided that while it would be open to the AIRL to file a reply to the Show Cause Notice and for the RoC to proceed thereon, no final orders would be passed. Thereafter and on 14 December 2012, the Inspector proceeding on the basis of the order of the Union Government dated 05 November 2012 issued a notice to AIRL summoning all records for the purposes of investigation. 7. The communication dated 14 December 2012 came to be challenged by way of a separate petition being W.P.(C) 8065 of 2012. The Court, while issuing notice on the aforesaid wri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....investigation shall be carried out by officers of the as nominated by Director, SFIO. 5. That the Inspector(s) so appointed shall exercise all the powers available to him under section 217 of the Companies Act, 2013 including power conferred under section 219 of the Companies Act, 2013 after seeking approval of Central Government where ever required. The inspector(s) complete the investigation and submit the report to the Central Government within a period of 03 (three) Months. 6. This order is issued for and on behalf of the Central Government. Sd/- (V.R. Sheth) Assistant Director To: 1. Director, Serious Fraud Investigation Office, 2nd Floor Deendayal Antyodaya Bhawan, CGO Complex, Lodhi Road, New Delhi - 110003 2. ROC, Delhi 3. RD (NR) 4. Guard File." 10. Pursuant to the aforesaid order, the SFIO on 14 December 2018 appointed four of its officers to undertake the requisite investigation. Subsequently and on 21 December 2018, summons came to be issued to the petitioner nos. 2 to 9. 11. The writ petitions in the meanwhile came to be allowed by a common order on 07 February 2019 in the following terms:- "9. Having stated the above, this Court cannot be oblivious....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Judge in the final judgement according liberty to the respondents to initiate penal proceedings either in accordance with the 1956 Act or alternatively under the 2013 Act, it assailed the said directions as contained in the final judgment by way of LPA 189 of 2019. The aforesaid LPA came to be disposed of on 18 March 2019 with the Division Bench holding as follows:- "According to Mr. Rajiv Nayar, learned Senior Advocate, by virtue of the aforesaid provision the inquiry or investigation into the matter has to be in accordance with the provisions of Sections 234 and 235 of the Companies Act, 1956 and not in accordance to the rules or procedure prescribed in the Companies Act, 2013. We see much force in the aforesaid contention. We, therefore, clarify and direct that an inquiry be held in pursuance to the direction issued by the learned writ Court strictly in compliance with the provisions contemplated under the Companies Act, 1956. The parties may raise all objections as may be permissible with the statutory authority causing an inquiry into the matter under the Companies Act, 1956 in pursuance to the communication or the complaints received." 13. While things rested here, on 18....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vision Bench while continuing the interim order that had been passed and which was directed to remain operative during the pendency of the contempt case. 18. The contempt action as initiated by Alchemist Healthcare ultimately came to be dismissed by a learned Single Judge of the Court with costs in the following terms:- "10. Quite strangely, after the disposal of the LPA in the foregoing terms, a CM No. 16956/2015 came to be filed before the Division Bench on account of summons issued by SFIO to Alchemist Ltd. and Alchemist Hotels & Resorts Ltd. under the provisions of the Act 2013 which application the applicants did not press and was disposed of as such by the Division Bench vide its order dated 31.07.2019. In other words, the filing of such application was inconsequential but for distracting the court proceedings inasmuch as on the filing of such application and the issuance of notice thereof by the Division Bench on 10.04.2019, the following order was passed: "CM No. 16956/2019 (for directions) Issue Notice. Mr. Jasmeet Singh, CGSC for respondent No. 1 to 4 accepts notice. Prima facie a perusal of the summons issued vide Annexure A-2 with this application dated 20.0....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as a group company of Infra Realty, though, it is not so, the restraint order was to apply against taking any coercive steps, which, mere issuance of summons would not imply. 11. Seen from any angle, not even an iota of substance emerges from the record to say that any act of the respondent Nos. 1 to 3 invites any order prayed for. The judgments relied upon by the petitioners are of no avail. It would suffice to say, the initiation of contempt proceedings depends on the facts and circumstances of a given case and that, it is to be exercised in the discretion of the court where required, founded on the well established principles of law. 12. There is no doubt in the mind of the court that the instant petition preferred by Healthcare and one of its Directors is a calculative attempt to involve the respondent No. 1 to 3 in unnecessary litigation in an overt attempt to overawe them in discharge of their statutory obligations and thereby, draw an undue advantage. Suffice it would be to observe, the serious allegations for the business of Infra Realty being carried on in fraud of its creditors, or otherwise for fraudulent or unlawful purpose - which were sought to be initiated way b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Alchemist Infra Realty Limited and Basil International Limited are registered with the ROC, Delhi. These companies are not NBFC registered with RBI and this are being sent for appropriate action at the end of this office (ROC Delhi). A similar letter from RBI dated 09.01.2012 was also enclosed to the above referred letter received on the same date (copies of both are letters are enclosed as Annexure A-1and A-2 respectively). 3. However, it is was seen that the enclosures as mentioned in the said letter i.e. the complaint received from the Hon'ble Member of the Parliament with enclosures thereto was not found enclosed to either of the said letters received from RBL Accordingly, the same were called from RBI vide this office letter no. COMP/13545 dated 10.02.2012. The RBI sent the said enclosures vide letter dated DNBS. ND. No. 2857/10.01.007-MI-2007/2011-12 dated 13.02.2012 (Copy enclosed as collectively marked as Annexure-A-3). 4. On perusal of the complaint received from the Hon'ble MP, which was originally addressed to Hon'ble Governor, RBI with the subject "Raising of Deposits from Public", That in total 13 companies have been named which are inviting deposits from public by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p head office, group chairman, blanked duly serialized application forms and group chairman, blanked duly serialized application forms and either documents (Copy collectively marked as Annexure-A-6). d. RTI application from Mumtaj Ahmed enclosing similar documents. (Copy collectively marked as Annexure-A-7). e. RTI application from Rajesh Prajapati, Gorakhpur and Shri BK Singh enclosing similar documents. (Copy collectively marked as Annexure-A-8). f. RTI application received in the Ministry and forwarded to this office U/s. 6(3) of the RTI Act, 2005, as received from Shri Nand Lal Mourya, Village Puranpur, enclosing therewith the above said documents. (Copy collectively marked as Annexure-A-9). g. Recently this office has received a copy of the reference on from Shri Rajeshwar Prasad Singh received through to the Prime Minister Office (Copy collectively marked as Annexure-A-10). h. Complaint from Shri Chandan Kumar, addressed to the Hon'ble Secretary, MCA and copy to this office. (Copy collectively marked as Annexure-A11). i. Kindly also find enclosed herewith the material down loaded from the internet indicating the manner in which the public fund are raised and also ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ollectively marked as Annexure-A-21). 17. In response to the said order, the company again filed very short reply vide letter dated 11.07.2012 prima-facie in a attempt to clarify the primarily doubts and confirmed the name of the directors who has signed the reply and further promised to submit the reply on or before 20.07.2012 (copy collectively marked as annexure-A-27). 18. However, again the company vide letter dated 23.07.2012 submitted that it is not in a position to file the reply due to computer break down and requested for one month time to file the reply. The company also informed this by e-mail dated 24.07.2012. This office informed the company in reply to the said e-mail that the company had already taken extensions at multiple times and further time cannot be granted. The company has already been contravened the provisions of section 234(1) and 234(3A) of the Act. Any further delay s in the matter at the risk of the company. (Copy of the letter and e-mail exchanged are enclosed collectively marked as Annexure A-23). 19. In any case, even the one month time sought by the company vide letter dated 23.07.2012 is also over. Thus, the company and its officers in defaul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itted which has yet been submitted despite of issued multiple notice u/s. 234(3A) of the Act. e. It is pertinent to mention here that the company has very meager land as stock in trade as per details given in reply to para 13 of the reply with value of closing stock as at 31.03.2011 only at RS. 43.19 crores. It is unimaginable that against this land the company has collected Rs. 203.11 crores as advances against land and a sky rocketing amount of Rs. 884.58 crores as "advances against development charges" as at 31.03.2011. 21. The modus operandi of the company in collecting of public funds: On examination of the Balance Sheets, partial reply submitted by the company, complaints and references received, the following modus operandi of the company is identified in raising such public deposits. a. The company is circulating brochures, application forms, copies of agreements etc. apparently through agents for the purpose of raising deposits from the public. In the said literature/brochures, the company has given details of the group companies and is offering immovable property with support for development thereof by itself or is associates over for tenure of 3 years, 4 years, 6 y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d brochures etc. and huge publicity on this above for collection of public funds. h. The grave mis-match of development charges received and advance against land amounting to over Rs. 1087.69 crores as at 31.03.2009. In comparison the actual land holding by the company "Rs. 43 crores", sale of land Rs. 18.28 crores is dearly indicating that the company not having any land assets and the company has simply collected public funds on false promises, given fictitious certificate on the basis of non-existing land and shall not in a position to deliver the said property to the depositors. The company has made false promises and there is every possibility that alternatively the public is shall not get due returns on maturity. i. The company was confronted with a direct query to either confirm or deny the above manner and the copies of "certificates of property" and other material attached to the complaint were enclosed to the order issued under Section 234(3A) dated 06.07.2012 (refer Annexure A-21). The company has failed to submit reply to the same as reported above. 22. Diversion of funds by the company: The Company has diverted such said funds received from the public by way of g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al Limited had raised Rs. 1652124900/- (165.22 Crores) consisting of 165212430 Preference Shares of Rs. 10/-each upto 30.10.2008 all during the period when Shri Brij Mohan Mahajan and Shri Sunil Kanti Ker and Shri Balvir Singh, all directors of the Captioned company were the Directors on the Board of his company. In some form 2's for Preference shares, the attachments for list of allottees run up to 1369 Pages and 1439 Pages (SRNA14413447 and AI49393326) b. Alchemist Holdings Limited had raised Rs.4440728000/-(Rs.444.67 crores) i.e. 444672800 Preference Shares of Rs. 10/- Each up 21.11.2009 all during the period When Shri Brij Mohan Mahajan director of the Captioned company was the Director on the Board of this company and Shri Sunil Kar remained up to 08.03.2008 and Shri Balvir Singh is still the director on the Board of this company in so form 2's for Preference shares, the attachments for list of allottees run up to 1250 Pages (A18949164) , 1240 pages (A29827540), 1374 pages ( A36828242) and 1625 Pages (A49718067) 27. Shareholding pattern of the company; List of Shareholders as taken from the latest Annual return Filed for 2011 is attached (Annexure A- 26) In view of above, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eet as at 31-03-2017, the Company had collected approx. Rs. 1340 crores from its customers and given as advances of Rs. 1270 crores. These Loans and Advances have been given to Land Owning companies, Collaborators, Joint Venture partners, Project of for purchase of Land and consolidation of Land. It is observed from the complaints received against the company that the Company launched Housing Scheme and collected money from public during the years 2013-14 and thereafter but failed to make its commitments. The Company also collected funds of Rs. 50 Crores by way of Long term Borrowings. A detailed Sheet in the matter of the company has been prepared and enclosed herewith as Annexure-A. Looking to the above facts, it is stated that the Company had collected huge money from public and diverted to Land Owning companies, Collaborators, Joint Venture partners and its Associate Companies. Even it failed to recover the amount given to its debtors. Therefore, a detailed investigation under Section 210 of the Companies Act, 2013 is required not only in case of this company but also in the matter of it holding company namely Alchemist Infra Ventures Limited and other Group/Associate compani....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the affairs of the Company vide its letter No. 4/59/2012CL.II dated 05-11-2012 on recommendation of this office but the company filed Writ Petition (WP(C) 8065/2012) before the High Court of Delhi and which is still pending. A further report with proposal of Inspection under Section 206(5) of the Companies Act, 2013 was also submitted to the Directorate vide this office letter dated 22-12-2015 and followed by reminders 05-10-2016 and 09-10-2018. 5. Alchemist Realty Limited On examination of latest filed Balance Sheet as at 31-032017 of the Company, it is observed that the Company had shown funds of from public by issuance Shares and Loans from Banks (Net worth Rs. 24 Crores + Long Term Borrowings Rs. 305 Crores), which were later on diverted as advances etc. (including to subsidiary companies) and not recovered, so far as per terms & conditions. No significant recovery has been found in matter of Trade Receivables. It is also an example of diversion of funds, therefore it is proposed that a detailed Investigation under Section 210 of the Companies Act, 2013 is required not only in case of this company but also in the matter of Group/Associate companies. A detailed Sheet in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lding Limited Issuance of Preference shares failed to make redemption 268 Loans to Companies/ Subsidiaries/ Associate Cos. Investment in Associate Co. 22351 4. Alchemist Realty Limited Net Worth 24 Long Term Loans & advances 61 Long term Borrowings 305 Trade Receivables (Old) 152 5. Alchemist Life Sciences Limited Long-Term Borrowing from Related Parties 51 Negative Net Worth 50 6. NetedgeTechosoft Private Limited Long Term Borrowings 44 Non-current investments 26 Loans and advances 12 Note 1. Alchemist Infra Realty Limited is not included in above list as it has already been order for investigation by the Ministry. 2. Figures in above table has been taken from last filed Financial Statements of the Companies. In view of above facts, it is stated that inquiry/inspection of one or two companies will not serve any purpose because this Group has diverted funds in many companies and irrecoverable Trade Receivables, which require macro level examination and investigation. Therefore, looking to the size of funds collection & diversion and involv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....actment. 26. Mr. Kirtiman Singh, learned counsel appearing for the SFIO, while controverting the aforesaid submissions firstly drew our attention to the report of the RoC dated 27 March 2012 to submit that a plain reading of that report would indicate that the investigation at that stage stood initiated only against AIRL. This position, according to Mr. Singh, is further fortified from a reading of the recommendation of the RoC dated 24 August 2012, which too was restricted to the "captioned company" namely, AIRL. 27. According to Mr. Singh, the aforesaid position is also manifest from a reading of the ultimate order which the Union Government framed on 05 November 2012 and where the investigation was specifically confined to AIRL. According to Mr. Singh, it would therefore be wholly incorrect for the petitioners to contend that the investigation initiated prior to the submission of the commencement of proceedings on 06 December 2018 could be recognized as being one aimed against the Alchemist Group of Companies as a whole. 28. Mr. Singh also took us in detail through the order of 06 December 2018, and which according to him, represented the first instance when an investigation i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; March 03, 1983 7 NetedgeTechnosoft Private Limited January 29, 2016 8 Alchemist Capital Limited December 13, 2000 9 Alchemist Hotels & Resorts Limited May 06, 2008 33. Having noticed the submissions addressed by learned counsels for respective sides, we propose to firstly deal with the legal challenge as canvassed for our consideration by Mr. Chaudhri and which turned upon the commencement of certain provisions of the 2013 Act and the enforcement of Section 465 itself. Section 1(3) of the 2013 Act stipulates that the said Section as well as the remaining provisions of the 2013 Act would come into force on such dates as the Union Government may appoint by way of publication of a notification of the Official Gazette. Section 1(3) further empowered the Union Government to prescribe different dates from which various provisions of the 2013 Act may come into force. 34. Admittedly, Sections 211 and 212 came to be enforced with effect from 01 April 2014 consequent to a notification which came to be published on 26 March 2014. Section 465 and which contemplated the repeal of the 1956 Act, however, came to be enforced only on 30 January 2019 cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pers],- [(a) the company and each such person shall be punishable with fine which may extend to five [thousand] rupees and in the case of a continuing offence, with an additional fine which may extend to [five hundred] rupees for every day after the first during which the offence continues; and (b) the Court trying the offence may, on the application of the Registrar and after notice to the company, make an order on the company for production before the Registrar of such books and papers as in the opinion of the Court, may reasonably be required by the Registrar for the purpose referred to in sub-section (1).] [(5) On receipt of any writing containing the information or explanation referred to in sub-section (1), or of any book or paper produced whether in pursuance of an order of the Registrar under sub-section (3-A) or of an order of the Court under sub-section (4), the Registrar may annex that writing, book or paper, or where that book or paper is required by the company, any copy or extract thereof, to the document referred to in sub-section (1); and any writing or any book or paper or copy or extract thereof so annexed shall be subject to the like provisions as to inspec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lding not less than one-tenth of the total voting power therein, and (b) in the case of a company having no share capital, an application has been received from not less than one-fifth of the persons on the company's register of members, the [Tribunal] may, after giving the parties an opportunity of being heard by order, declare that the affairs of the company ought to be investigated by an inspector or inspectors, and on such a declaration being made, the Central Government shall appoint one or more competent persons as inspectors to investigate the affairs of the company and to report thereon in such manner as the Central Government may direct.]" 36. The powers conferred upon the Central Government to direct an investigation into the affairs of a company was predicated upon the submission of a report by the RoC in terms as contemplated under Section 234(6). On the receipt of such a report, the Union Government stood empowered to commence an investigation into the affairs of a company and to appoint Inspectors in connection therewith. The investigation under Section 212 of the 2013 Act, on the other hand, is not by the Union Government but by the SFIO. It becomes pertinent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of companies. Regard must be had to the fact that while the erstwhile provisions empowered the Union to investigate into the affairs of a company through investigators, the new regime saw the constitution of the SFIO and an investigation being undertaken by it in accordance with Sections 212 and 213 of the 2013 Act. The Court thus finds itself unable to sustain the submission that an investigation initiated by the SFIO under Section 213 of the 2013 Act would stand eclipsed by Sections 234 and 235 of the 1956 Ac. In fact and as noticed hereinabove, the SFIO as an investigating arm of the Union was not even envisaged or contemplated under the 1956 Act. The continuance of Sections 234 and 235 till their ultimate repeal would thus be liable to be viewed as regulating the investigating power of the Union Government through Investigators only. 38. The Court notes that the power to commence an investigation by the Union Government which was otherwise dependent upon the receipt of a report from the RoC was also widened, as would be evident from a reading of Section 212 which is extracted hereunder:- "212. Investigation into affairs of Company by Serious Fraud Investigation Office.-(1)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eleased on bail or on his own bond unless- (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by- (i) the Director, Serious Fraud Investigation Office; or (ii) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government. (7) The limitation on granting of bail specified in sub-section (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail. (8) [If any officer not below the rank of Assistant Director] of Serious Fraud Invest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability.] (15) Notwithstanding anything contained in this Act or in any other law for the time being in force, the investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by a police officer under Section 173 of the Code of Criminal Procedure, 1973 (2 of 1974). (16) Notwithstanding anything contained in this Act, any investigation or other action taken or initiated by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 (1 of 1956) shall continue to be proceeded with under that Act as if this Act had not been passed. (17)(a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Governmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....well as the ultimate order that was passed by the Union Government commencing investigation. A holistic reading of the aforesaid communications and reports leaves us in no doubt that the investigation stood confined to AIRL alone. We may note that a mere passing reference to some of the activities undertaken by the group companies or the offices which some of the Directors held in related entities does not convince us to hold that the investigation is liable to be understood as extending to the group entities also. Since the initiation of an investigation under Section 235 of the 1956 Act is to be strictly construed, we find ourselves unable to read the reports of the RoC as being indicative of an intent to either commence or undertake an investigation against all entities forming part of the Alchemist Group. 42. As noticed hereinabove, the ultimate order that came to be framed by the Union Government dated 05 November 2012 also stood confined to the "captioned company". The aforesaid order had accepted a recommendation submitted by the RoC for investigation into the affairs of AIRL alone. 43. It also becomes pertinent to note that in terms of Section 239 of the 1956 Act, an Insp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l should not be accorded.]" 44. However, and undisputedly no such power was exercised nor a decision taken by any of the Inspectors appointed by the Union Government to extend the investigation to any of the related companies. 45. The Court also finds itself unable to countenance the submission of Mr. Chaudhari and which rested on the judgments and orders which were rendered in the previous rounds of litigation as being liable to be read as extending to the group companies either. 46. We may note that the solitary petitioner in W.P(C) 7529/2012 and W.P(C) 8065/2012 was AIRL and hence the directions as ultimately framed by the Court cannot possibly be read as extending to the group companies. Any doubt that may have been harboured in this context in any case stood laid to rest in light of the judgment rendered on the contempt petition. While dismissing that petition, the Court noted that merely because those companies may have been arrayed as pro forma respondents, the same cannot be construed as a challenge laid by those entities to the initiation of an investigation under the 1956 Act. 47. The submission advanced in this respect is rendered further untenable when one bears in ....