TaxTMI 
TaxTMI 
2023 (2) TMI 1299
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....respect of an investigation of a company by the name M/s Shilpi Cable Technologies Ltd (hereinafter, "Shilpi Cables"). He had accordingly appeared before the SFIO, cooperated and given answers to all the questions which were raised. The Petitioner submits that the issuance of the LOC in this manner curtails his freedom to travel and accordingly prays for quashing of the same. 4. Mr. Subramaniam, ld. Counsel appearing for the Petitioner submits that the Petitioner was merely a whole time director of Shilpi Cable between the period 2013-17 and is not related to the family and promoters of the company in any manner. The various allegations against Shilpi Cable and its group companies of siphoning of funds, etc. cannot be saddled as being the Petitioner's responsibility as he was only a professional earning a salary from the said company. He submits that the highest case that can be argued against the Petitioner is that the Petitioner having been a member of the audit committee of Shilpi Cable did not alert authorities to the company's transactions. It is further submitted that since the time of the first summon, the Petitioner had appeared on 11 occasions and had his statemen....
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....ing to approximately Rs. 1452 crores. Out of the said charges, 10 charges amounting over Rs. 1400 crores are outstanding qua scheduled banks. These figures are also verifiable from the MCA portal and the accounts of Shilpi Cable which are uploaded therein. 8. Mr. Ahluwalia, ld. CGSC submits that though the Petitioner has appeared before the SFIO for recording of statement, he has blatantly not disclosed various facts which were well within his knowledge. Reliance is placed on the facts that the Petitioner was the CEO of Shilpi Cable Technologies from 2006-12, a whole time Director of the company from 2013-17 and was a member of the audit committee from 2011-17. In addition, it is argued that the Petitioner was also the head of the operations of the Abu Dhabi based company-Winston Metal Industries LLC from 2013-16. Mr. Ahluwalia, ld. CGSC submits that this is a case where though the Petitioner may not be the promoter but, he has been actively conniving with the promoters in order to defraud the public institutions in India of a large sum of monies. In addition, it is submitted that out of the two promoters of Shilpi Cables, Mr. Mukesh Kumar Gupta has passed away and Mr. Manish Goel....
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....s where there is no cognizable offence under IPC or other penal laws, the LOC subject cannot be detained/arrested or prevented from leaving the country. The originating agency can only request that they be informed about the arrival/departure of the subject in such cases. i) The LOC will be valid for a period of one year from the date of issue and name of the subject shall be automatically removed from the LOC thereafter unless the concerned agency requests for its renewal within a period of one year. With effect from 1.1.2011, all LOCs with more than one year validity shall be deemed to have lapsed unless the agencies concerned specifically request BoI for continuation of the names in the LOC. However, this provision for automatic deletion after one year shall not be applicable in following cases: a. Ban-entry LOCs issued for watching arrival of wanted persons (which have a specific duration); b. loss of passport LOCs (which ordinarily continue till the validity of the document); c. LOCs regarding impounding of passports; d. LOCs issued at behest of Courts and Interpol j) In exceptional cases. LOCs can be issued without complete parameters and/or case details against C....
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....the investigation by the SFIO itself commenced some time in 2020-2021 and no FIR has been registered against the Petitioner till date. Thus, in the absence of any cognizable office, the LOC cannot be continued against the Petitioner specially for an indefinite period. 15. From the facts which have been presented it is seen that Shilpi Cables was a company against whom Corporate Insolvency Resolution Process (CIRP) proceeding were initiated by one M/s Macquarie Bank Limited before the NCLT. The NCLT, vide order dated 1st May, 2019 ordered liquidation of Shilpi Cables. In the said proceedings an audit was conducted in which it was discovered that there were several preferential and fraudulent transactions causing unlawful loss to the secured creditors of Shilpi Cables. The said secured creditors involved public sector banks as also other financial institutions. The liquidator, made a presentation to the Ministry of Corporate Affairs, Union of India. It was, thereafter, unearthed that a large amount of funds which were lent to Shilpi Cables by banks and public financial institutions were routed through group companies which were located abroad and were siphoned through the said compa....
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....mpany, has been placed on record. The said charges are all created in the period between 2008 to 2017. The names of the charge holders are as under: 1. Canara Bank 2. Bank of India 3. Central Bank 4. Syndicate Bank 5. IDBI Bank 6. Punjab National Bank 7. Indian Bank 8. Andhra Bank 9. State Bank of Hyderabad 10. State Bank of India 11. UCO Bank 12. Axis Bank Ltd. 13. Union Bank of India 14. Oriental Bank of Commerce 15. Bank of Baroda 16. Karur Vysya Bank Ltd. 17. Bank of India 18. Hero FinCorp Limited 19. Siemens Financial Services Private Ltd. 20. State bank of Hyderabad 21. Oriental bank of Commerce 22. 3i Infotech Trusteeship Services Limited 17. The charges against each of these banks/financial institutions runs into crores of rupees. The affidavit filed by the SFIO has computed the same. The relevant part of the affidavit filed by the SFIO is as under: "9. It is submitted that SCTL had taken loans from banks and collected large sums of money as security premium through public issues even when it was facing losses. It is further submitted that these monies were given as loans and advances to group companies, many of which are situa....
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....ilpi Cables, its various group companies both in India and abroad. The role of promoters/management/employees of Shilpi Cables relating to the said is also being investigated. 20. At this stage, it is crucial to discuss the role of the Petitioner. The Petitioner was the CEO of Shilpi Cables between 2006 to 2012. Thereafter, he was a whole time director of Shilpi Cables from 2013 to 2017. He was also a member of the audit committee from 2011 to 2016-2017. It is during this very period that the transactions claimed by the SFIO to be fraudulent transactions have occurred. Apart from the role that the Petitioner played in Shilpi Cables, he was also the head of operations of M/s Winston Metals LLC between 2013 to 2016 and was stationed in Dubai. The said company is stated to be a step-down subsidiary of Shilpi Cables and a subsidiary of Shilpi Worldwide DMCC, Dubai. It is not disputed that the Petitioner was stationed in Abu Dhabi for several years and also operated a bank account in Abu Dhabi. 21. The above facts insofar as the positions occupied by the Petitioner is concerned, is not in dispute. This Court is thus of the opinion that the Petitioner is not merely a professional direc....
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.... a flight risk and adversely affect the investigation would have to be considered. From the submissions made by the ld. Counsel for the SFIO, it is clear that the Petitioner would still be required for the purposes of investigation. Until the conclusion of the investigation it cannot be presumed that the Petitioner would not be charged with a cognizable offence. It is observed if fraud is established qua the Petitioner, the same would be a cognizable offence under Section 212 (6) read with Section 447 of the Companies Act, 2013. The definition of fraud is broad enough to involve persons such as the Petitioner. The relevant part of the said provision read as under: 447. Punishment for fraud.- Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud: Provided that where the fraud i....
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..... Directorate of Enforcement, (2018) 11 SCC 46 and State of Gujarat v. Mohanlal Jitamalji Porwal & Anr., (1987) 2 SCC 364 passed by the Hon'ble Supreme Court to submit as to what constitutes economic interest. Recently in Vijay Madanlal Choudhary and Others v. Union of India and Others, 2022 SCC OnLine SC 929 the said two decisions have been reiterated by the Supreme Court as under: "396. In Mohanlal Jitamalji Porwal, while explaining the impact of economic offences on the community, the Court observed that usually the community view the economic offender with a permissive eye, although the impact of the offence is way greater than that of offence of murder. The Court held thus: "5.....The entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to books. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to....