TaxTMI 
TaxTMI 
2023 (12) TMI 321
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....eedings pursuant to the impugned summons. 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 It is also contended that the provisions of the 1956 Act came to be repealed only upon the energization of Section 465 of the 2013 Act on 30 January 2019.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 petition....
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....ny, shall exercise all the powers available to them under the Companies Act, 1956. The Inspector shall complete 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 communi....
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....hereby authorize Director, Serious Fraud Investigation Office to nominate Inspector(s) under section 212 (1) of the Companies Act, 2013 in investigate into the affairs of the above mentioned companies. The said 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....
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....he said orders are also set aside. This would not preclude respondent no. 1 from directing investigation of the affairs of the petitioner company either on the report submitted by the Registrar or in Public Interest." 12. It appears that AIRL aggrieved by the observations entered by the learned 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 wit....
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....mist Healthcare asserting that the same clearly amounted to a wilful disobedience of the judgment passed by this Court instituted an action for contempt and which came to be numbered as Contempt Case (C) No. 610/2019. 17. In a related development, CM. APPL. 16956 of 2019 came to be disposed of on 31 July 2019 by the Division 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 app....
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.... any coercive steps in terms of order dated 18.03.2019 (Annexure A-1) and summons dated 20.03.2019 (Annexure A-2) issued by the respondents shall be kept in abeyance. However in case the respondent Nos. 1 to 4 wish to proceed strictly in accordance with the directions issued by us on 18.03.2019, they may do so." Assuming, the foregoing order dated 10.04.2019 passed by the Division Bench took into its scope Healthcare 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....
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.... report as under: 1. The company, Alchemist Infra Realty Limited, is incorporated with this office vide CIN U74120DL200BPLC17678 on 02.04.2008. 2. This office has received reference from Reserve Bank of India vide letter no. DNBS/2386/MI/20.02007-2010-11 dated 12.01.2012 with the subject "Raising of Deposits from Public" stating that a letter has been received from Shri D. Raja, Hon'ble Member of Parliament raising issues with regard to various companies and companies mentioned at S. no. 9 and 12, namely 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....
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.... format. Certificate of property, nontransfer of deposits receipts, pre-serialized application forms format of special Power of Attoney etc. circulated by the company. (Copies collectively enclosed marked as Annexure-A-5). c. RTI application from Sardar Atikurahman Arif, Balia, U.P. enclosing therewith the documents as stated in (b) above and also photo-copy of pamphlet offering immovable property and calling of deposits from the public signed by Dr. B. M. Mahajan, Director of the captioned company and also the broachers indicating the name of the group companies, group 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 ....
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....ompany furnished its part reply vide letter dated 26.06.2012 (Copy collectively marked as Annexure-A-20) and the company promised to furnish the reply on the remaining Paras within two weeks from thereof. 16. On examination of the partial reply of the company, it was felt that the reply of the company was incomplete/evasive on various vital points and it was also felt necessary that further information/explanation and record is required from the company. There were also preliminary doubts on the signatures and names of the directors shown to have signed the reply. Thus accordingly order u/s. 234 (3A) of the Act was issued to the company vide order dated 06.07.2012 (copy collectively 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 d....
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....ts 10.11 44.24 Fixed assets 0.21 0.44 Investments 0.25 7.86 Misc. Exp. Not yet written off 0.03 0.77 Grand Total 454.76 1102.45 c. Thus in nut shell the company has raised funds for public amounting to Rs. 449.41 crores as at 31.03.2010 which has swelled to a level of Rs. 1087.69 cores as at 31.03.2011. d. This office had raised a specific query on the nature and manner of funds raised by the company in order issued u/s. 234(1) of the Act vide para No. 14 of the order. However, the company has replied that it is real estate company engaged in the business of purchase and outright sale and purchase of developed land. However, no specific comments were given in reply to para No. 14 as it is stated the same is being complied and shall be submitted 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 tha....
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....P. g. The allegations that the company has printed and circulated huge number of such lecture and applications forms and has engaged agents finds its support from the fact that the company has incurred a sum of Rs. 5 crores as an advertisement and publicity during 2009-10 and Rs. 11.61 lacs during 2010-11. From the details given by the company, it is seen that the company is entered into agreement for publicity with Tontra. Entertainment Private Limited. whereas the company has no business of sale of products and services which required such a large scale of advertisement and publicity. Further, the company has incurred an expenditure of Rs 72.34 lacs on printing of stationery. The company is having gross business income only of Rs. 15.34 crores during 2009-10 and Rs. 18.23 crores during 2010-11, Apparently, such huge expenditure on account of printing and advertisement is for printing of above stated 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....
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....losed collectively marked as Annexure a-25: Name of the Director Name of the other Group Company From To Shri Brij Mohan Alchemist Holdings Limited 19.11.2004 08.03.2008 Mahajan Alchemist Capital Limited 03.04.2004 20.03.2009 Shri Sunil Kanti Alchemist Holdings Limited 06.12.2004 20.03.2009 Alchemist Capital Limited 03.04.2004 16.02.2009 Shri Narayan Madhav Kumar Alchemist Holdings Limited 20.01.2009 19.02.2009 Shri Balvir Singh Alchemist Holdings Limited 02.01.2005 Continuing Alchemist Capital Limited 05.06.2009 Continuing Shri Chandra Shekhar Chauan Alchemist Holdings Limited 19.02.2009 Continuing 26. Amount raised by the Group Companies: Out of the above the following group companies have also raised large scale public money by way of Preference Shares and possibility of contraventions of sections 67(3) r/w 73 of the Act and similar modus operani of engaging agents etc cannot be ruled out: a. Alchemist Capital Limited had raised Rs. 1652124900/- (165.22 Crores) consisting of 165212430 Preference Shares of Rs. 10/-each upto 30.10.2008 all during the pe....
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....or, Northern Region, Ministry of Corporate Affairs, New Delhi. Sub: - Presentation in the matter of Alchemist Group of Companies - regarding. Sir, I am to refer to the Directorate's letter No. Comp/ROC/D/2018/Alchemist Group/8427 dated 18-10-2018 and e-mail dated 22-10-2018 on the subject noted above and to state that this office have been received and forwarded numerous complaints in the matter of Alchemist Group of companies. Mainly complaints have been received in the matter of M/s Alchemist Township India Limited, Alchemist Infra Realty Limited and Alchemist Holding Limited. In view of such complaints, this office has recommended inspection of some companies and thereafter investigation of whole group. It is submitted that this office is still receiving or being forwarded complaints against the companies of Alchemist Group. As directed, a detailed examination in respect of companies under jurisdiction of this office has been made and submitted as under: 1. Alchemist Township India Limited This office is continuously receiving complaint against the company. As per Balance Sheet as at 31-03-2017, the Comp....
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....s Act, 2013 in the matter of Alchemist Holding Limited and its Group/Associate Companies. On examination of the latest filed Balance sheet of the Company, it is observed that the Company had collected 268 crores from public by way of issuance Preference Shares and failed to make payment on redemption. The company majorly diverted funds by way of giving loan to companies/ subsidiaries/ associates a sum of Rs. 223.20 Crores as interest free unsecured loan and made investments in Associate Companies amounting to Rs. 51.01 Crores. This fact is pointed out by the Statutory Auditors in their Report. It is an example of syphoning of funds by the Company. A detailed Sheet in the matter of the company has been prepared and enclosed herewith as Annexure-C. In view of above facts, 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 to whom funds have been diverted. 4. Alchemist Infra Realty Limited This office has received more than 140 complaints in the matter of the company, specifically regarding non-payment of deposits. The Ministry order....
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....company has been prepared and enclosed herewith as Annexure-F. 8. Optimum Constructors and Developers Limited The company is a small sized company and having assets & liabilities less than Rs. 2.00 crores but funds in the company have been majorly invested by Group/Associate companies. A detailed Sheet in the matter of the company has been prepared and enclosed herewith as Annexure-G. The above-mentioned companies of Alchemist Group are found under jurisdiction of this office. There is possibility of more companies under jurisdiction of this office but it is observed that the said Group have companies in Punjab, Chandigarh and Pondicherry. Summarily, it is observed that above companies of Alchemist Group have collected the following funds and make diversion: S.No. Name of the Company Mode of funds collection Amount (Rs.) in crores Ways by funds diverted Amount (Rs.) in crores. 1. Alchemist Township India Limited Advances from customers 1340 Advances given to Land Owning companies, Collaborators, joint venture Partners 1270 Long Term Borrowings 50 2. Alchemist Limited Net w....
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....t of the RoC as well as the disclosures which were sought from AIRL in that respect, the investigation against all companies in the group had commenced prior to Section 212 having come into force. 24. One may pause here and note that Section 212 of the 2013 Act came into force with effect from 01 April 2014 in terms of a Notification dated 26 March 2014. According to Mr. Chaudhri, since an investigation into all companies of the group had been initiated prior to the enforcement of Section 212, the investigation could have only been proceeded with in accordance with the provisions contained in the 1956 Act. This, according to Mr. Chaudhri would clearly flow from the provisions made in sub-section (16) of Section 212 of the 2013 Act. 25. Taking us through the orders that were passed in the original writ petitions as well as the LPA, it was contended by Mr. Chaudhari that the respondents were clearly bound by the orders passed in the course of those proceedings to resort to the provisions of Sections 234 and 235 of the 1956 Act alone. This submission was addressed by Mr. Chaudhri without prejudice to his principal contention that since the 1956 Act remained in force till 30 Janu....
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.... the contempt petition and which had categorically held that the group companies other than AIRL could not derive any benefit from the directions passed in the LPA which restrained the respondents from taking any action otherwise than in accordance with the 1956 Act. According to Mr. Singh, the aforesaid decision clearly binds the petitioners and must be read as having conclusively held that no entity forming part of the Alchemist Group except for AIRL could assert being covered by the 1956 Act. 31. Mr. Singh then submitted that as per the admission of the petitioners themselves some of the companies came to be incorporated only after investigation had commenced in 2012. He drew our attention to a Table which forms part of the written submissions filed by the petitioners themselves to drive home his contention that at least those companies cannot possibly assert being liable to be investigated only under Section 235 of the 1956 Act. 32. The Table which forms part of the written submissions tendered by the petitioners is extracted hereinbelow:- "S.no. Name of Petitioner Company Date of Incorporation 1 Alchemist Healthcare Limited January 29, 2016 2 ....
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....n is necessary ^759[with respect to any matter to which such document] purports to relate, he may, by a written order, call on the company submitting the document to furnish in writing such information or explanation, within such time as he may specify in the order. (2) On receipt by the company of an order under sub-section (1), it shall be the duty of the company, and of all persons who are officers of the company to furnish such information or explanation to the best of their power. (3) On receipt of a copy of an order under sub-section (1), it shall also be the duty of every person who has been an officer of the company to furnish such information or explanation to the best of his power. [(3-A) If no information or explanation is furnished within the time specified or if the information or explanation furnished is, in the opinion of the Registrar, inadequate, the Registrar may by another written order call on the company to produce before him for his inspection such books and papers as he considers necessary within such time as he may specify in the order; and it shall be the duty of the company, and of all persons who are officers of the company, to ....
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.... before him by any contributory or creditor or any other person interested that the business of a company is being carried on in fraud of its creditors or of persons dealing with the company or otherwise for a fraudulent or unlawful purpose, he may after giving the company an opportunity of being heard, by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order, within such time as he may specify therein; and the provisions of sub-sections (2), (3),767 (3-A)], (4) and (6) of this section shall apply to such order. If upon enquiry the Registrar is satisfied that any representation on which he took action under this sub-section was frivolous or vexatious, he shall disclose the identity of his informant to the company. (8) The provisions of this section shall apply mutatis mutandis to document which a liquidator, or a foreign company within the meaning of Section 591, is required to file under this Act." "235. Investigation of the affairs of a company.-(1) The Central Government may, where a report has been made by the Registrar under sub-section (6) of Section 234, or under subsection (7) o....
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....16/2003-Adm-I, dated 2nd July, 2003 shall be deemed to be the Serious Fraud Investigation Office for the purpose of this section. (2) The Serious Fraud Investigation Office shall be headed by a Director and consist of such number of experts from the following fields to be appointed by the Central Government from amongst persons of ability, integrity and experience in,- (i) banking; (ii) corporate affairs; (iii) taxation; (iv) forensic audit; (v) capital market; (vi) information technology; (vii) law; or (viii) such other fields as may be prescribed. (3) The Central Government shall, by notification, appoint a Director in the Serious Fraud Investigation Office, who shall be an officer not below the rank of a Joint Secretary to the Government of India having knowledge and experience in dealing with matters relating to corporate affairs. (4) The Central Government may appoint such experts and other officers and employees in the Serious Fraud Investigation Office as it considers necessary for the efficient discharge of its functions under this Act. (5) The terms and conditions of....
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....d its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation. (2) Where any case has been assigned by the Central Government to the Serious Fraud Investigation Office for investigation under this Act, no other investigating agency of Central Government or any State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceeded further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to Serious Fraud Investigation Office. (3) Where the investigation into the affairs of a company has been assigned by the Central Government to Serious Fraud Investigation Office, it shall conduct the investigation in the manner and follow the procedure provided in this Chapter; and submit its report to the Central Government within such period as may be specified in the order. (4) The Director, Serious Fraud Investigation Office shall cause the affairs of the company to be investigated by an Investigating Officer who sh....
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....order, along with the material in his possession, referred to in that sub-section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed and the Serious Fraud Investigation Office shall keep such order and material for such period as may be prescribed. (10) Every person arrested under sub-section (8) shall within twenty-four hours, be taken to a 330[Special Court or Judicial Magistrate] or a Metropolitan Magistrate, as the case may be, having jurisdiction: Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the 331[Special Court or Magistrate's court]. (11) The Central Government if so directs, the Serious Fraud Investigation Office shall submit an interim report to the Central Government. (12) On completion of the investigation, the Serious Fraud Investigation Office shall submit the investigation report to the Central Government. (13) Notwithstanding anything contained in this Act or in any other law for the time being in force, a copy of the investigation report may be obtained by any person concerned by making an a....
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....ment, police authority or income tax authorities in respect of any offence or matter being investigated or examined by it under any other law." 39. As would be evident from a reading of the said provisions, the Union Government in terms of the 2013 Act is now empowered to commence an investigation into the affairs of a company either on the receipt of a report of a Registrar or on intimation of a special resolution passed by a company or in public interest. The SFIO is a specialized body which has come to be established for the purposes of investigating frauds relating to companies. SFIO as an independent investigating arm was not even contemplated under Sections 234 or 235 of the 1956 Act. As is evident from a reading of those provisions, the power to investigate as embodied in Section 235 was one liable to be exercised only by the Union Government itself albeit acting through Inspectors that it may have appointed. It would therefore be wholly incorrect to accept the submission that an investigation by the SFIO under Section 212 or 213 of the Act could not have commenced prior to 30 January 2019. Since the SFIO itself came to be constituted only pursuant to the provisions of Se....
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.... it necessary for the purposes of his investigation to investigate also the affairs of- (a) any other body corporate which is, or has at any relevant time been the company's subsidiary or holding company, or a subsidiary of its holding company, or a holding company of its subsidiary; (b) any other body corporate which is, or has at any relevant time been managed by any person as managing director or as manager, who is, or was, at the relevant time, the managing director or the manager of the company, or (c) any other body corporate which is, or has at any relevant time been, managed by the company or whose Board of Directors comprises of nominees of the company or is accustomed to act in accordance with the directions or instructions of- (i) the company, or (ii) any of the directors of the company, or (iii) any company any of whose directonships is held by the employees or nominees of those having the control and management of the first mentioned company; or [(d) any person who is or has at any relevant time been the company's managing director or manager,] [the inspector shall, subject to the provisions of sub-....