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2024 (5) TMI 1003

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....ts arising out of the quashing of the aforesaid memorandum. 2. Before dealing with the rival submissions of the parties, we may note the brief factual matrix as is necessary for adjudication of the present petition. 3. The respondent, who was working as Registrar of Companies (RoC), Himachal Pradesh in the year 2017, was transferred as Regional Director, Northern Region (North Region) (hereinafter 'NR'), Ministry of Corporate Affairs, where he continued to serve from 30.08.2018 till 28.09.2022. During this period, while the respondent was serving as Regional Director (NR), the petitioner, upon receiving a complaint from the Prime Minister's Office, along with a letter dated 13.03.2019, issued by the Serious Fraud Investigation Office (SFIO), took a decision to get an inspection conducted in the books and papers of one M/s Carnoustie Management (India) Private Limited and 22 related companies (hereinafter 'Carnoustie group'), which were, allegedly, being used as a conduit by promoters of M/s Unitech Limited for siphoning of funds of home buyers. At this stage itself, it may be noted that as the Board of Directors of M/s Unitech Limited had already been suspended by the National Co....

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....se applications were filed and allowed in a tabular form, as noted by the learned Tribunal in its interim order dated 28.08.2023, for the sake of convenience, is reproduced hereinbelow:- S.No. Name of Company Date of Application Date of Order of shifting Date of uploading the order on MCA site Date of inspection Order Duration of Inspection as per inspection report dossier A B C E F G M/s Carnoustie Agro Pvt Ltd 29.01.2019 28.02.2019 28.02.2019 26.03.2019 July-Sep 2019 M/s Carnoustie Leisure Pvt Ltd 29.03.2019 13.05.2019 14.05.2019 26.03.2019 Aug-Sep 2019 M/s Carnoustie Security Pvt Ltd 09.04.2019 23.05.2019 03.06.2019 26.03.2019 Jul-Sep 2019 M/s Carnoustie International Pvt Ltd 03.04.2019 14.05.2019 03.06.2019 26.03.2019 Jun-Oct 2019 7. Upon completion of the inspection in respect of the 10 companies of the Carnoustie Group, the respondent submitted a report on 29.11.2019, pointing out gross mismanagement and large-scale fraud resulting in acquisition of assets worth Rs. 870 crores by these companies on account of siphoning off funds of M/s. Unitech Limited. In his report, the respondent made specific recommendations for disgorgement of propert....

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.... he had decided about 5000 applications of shifting of registered offices of companies and had in the year 2019-2020 itself, passed 4464 orders out of the total 8670 orders passed by the 6 Regional Directors taken together. This factual position has not been denied by the petitioner. 10. Thereafter, on 23.08.2022, when the respondent was still working as the Regional Director (NR), the petitioner for the first time issued a show cause notice calling upon him to give reasons as to why disciplinary action should not be initiated against him for permitting the shifting of the registered office of the 5 companies of the Carnoustie Group as the grant of this permission was stated to be in violation of Section 13 the Companies Act, 2013 (Act) read with Rule 30(9) of the Companies (Incorporation) 2014 Rules (Rules). In response, on 14.09.2022, the respondent submitted a reply, explaining that he had granted the permissions of shifting of registered offices of these 5 companies thereof on the basis of the reports of the concerned RoCs, as also the Processing Officer who had put up the file to him with a clear note that no enquiry, inspection or investigation was pending against these comp....

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....Director (NR) has approved the shifting of registered office of M/S Carnoustie Management (India) Private Limited (R67012617) from Noida (UP) to NCT of Delhi, effective from 06.11.2020 after about 9 months from the date of inspection follow up instructions issued by the Ministry (on 28.02.2020), despite knowing all the provisions of law and facts. The said shifting of office by RD (NR) is in violation of section 13 of the Companies Act, 2013 r/w Rule 30(9) of the Companies (Incorporation) Rules, 2014. By doing the aforesaid acts, Dr. Raj Singh, the then Regional Director, Northern Region (NR)) MCA [now Regional Director, Southern Region (SR), MCA] failed to maintain devotion to duty, failed to perform and discharge his duties with the highest degree of professionalism, acted in a manner which is highly unbecoming of a Government servant and also failed to take all possible steps to ensure the integrity and devotion to duty of all Government servants under his administrative control and authority, and has, thus, violated the provisions contained in sub-rules (1) (ii), (iii), (xix), (xxi) of Rule 3 and sub-rule (2) (1) of Rule 3 of the CCS (Conduct) Rules, 1964. Article of charge-....

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....ing Alert System provided any information regarding any pending inspections against any of the said 5 Companies. He urged that the grant of these permissions was a bona fide act in exercise of his quasi-judicial functions, which clearly would not fall within the ambit of 'misconduct' as envisaged under the Central Civil Service (Conduct) Rules (1964). Further, by relying on the decision of the Apex Court in Zunnajaro Bhikaji Nagarkar vs. Union of India [(1999) 7 SCC 409] he had contended that a quasi-judicial authority should not be subjected to disciplinary action, unless his action is found to be actuated by corrupt motives or is otherwise reckless. 16. The respondent had also urged that the memorandum against him was issued with malicious intent only to deprive him of his due promotion to the post of Deputy General, Corporate Affairs. This, he claimed, was evident from the fact that the memorandum was issued just a day before the DPC was scheduled for the said post, i.e on 14.03.2023. It was his plea that the charges against him were framed only on the basis of a note prepared by Mr. Juneja, while acting as the officiating DG, who was clearly biased against him. It was also his....

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....020, which was the subject matter of the first Charge, the inspections had already been completed, opined that the charge has been made without application of mind. 19. In respect of the second charge, the Tribunal held that the respondent had acted with due diligence as his opinion was based on the reports of the RoCs and other officers as also the update of the MCA-21 system. In these circumstances, by relying on the decision of the Apex Court in Zunnajaro Bikaji Nagarkar (Supra), the Tribunal held that while passing the orders for shifting of the registered offices of the 5 companies of the Carnoustie Group, the respondent was exercising quasi-judicial functions and since his orders could be subjected to judicial review, the passing of the same could not be the subject matter of disciplinary proceedings. 20. Consequently, vide its impugned order, the Tribunal quashed the charge memorandum issued against the respondent on 13.06.2023 and directed the petitioner to grant him all the consequential benefits flowing from setting aside of the charge memorandum. 21. It is in these circumstances, that the petitioner has approached this Court by way of the present writ petition. 22. B....

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....at this stage, when the respondent would have every opportunity to defend himself in the departmental inquiry. He, therefore, prays that the impugned order be set aside. 25. On the other hand, learned senior counsel for the respondent supports the impugned order and submits that not only was the issuance of the charge memorandum against the respondent actuated by bias on the part of Mr. Juneja, but even otherwise, the grant of permission of shifting the registered offices was as per the laid down procedure. By drawing our attention to Rule 30 of the Rules, which prescribes the procedure to be followed while allowing an application for shifting of registered office of a Company, he contends that since shifting orders are required to be passed after considering all relevant factors including objections which are called for from the general public in accordance with Rule 30(5) to Rule 30(8) as per the prescribed statutory procedure and it is not a policy decision. As per the learned senior counsel this grant of permission for shifting of the registered office is evidently a quasi-judicial function. 26. Further, he submits that the petitioner's plea that for a function of an authorit....

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....l Director was routinely passing. As action on the inspection order was initiated by Mr. Moorthy only after the shifting applications had been allowed, the respondent could not be expected to remember that any inspection had been directed against these companies. He, therefore, acted diligently as per the reports submitted to him as per the RoC as also the processing officers. Furthermore, even though the shifting orders were passed between 28.02.2019 to 23.05.2019, the inspection of these companies continued in the Northern Region and consequently a detailed report showing gross mismanagement and large-scale fraud by these companies on account of siphoning off of funds was submitted by the respondent on 29.11.2019 based on which, an application for disgorgement was filed in Delhi and an order of attachment passed by the NCLT, Delhi on 21.04.2022. He thus contends that proceedings against these companies were not hampered in any manner due to the shifting orders. He, therefore, prays that the writ petition be dismissed. 29. Having considered the rival submissions of the parties, we may begin by noting that the parties are ad idem as under that: (i) In compliance of the petitione....

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....ligence with these being no allegation of financial irregularity or corruption against him. (ix) Insofar as the first charge is concerned, the inspection qua M/s Carnoustie Management (India) Pvt. Ltd. was already concluded by the time the application for shifting of its registered office from Noida to Delhi was allowed by the respondent, with a specific endorsement by him thereon that this shifting would enable the petitioner to file a case disgorgement at Delhi itself. 30. Having summed up the undisputed facts on which the parties are not at variance, we may now refer to the relevant extracts of the impugned order, which read as under: - "6. As has already been noticed while granting interim stay on 28.08.2023, the first charge levelled against the applicant is that 'he shifted registered office of M/s Carnoustie Management (India) Private Limited from Noida (UP) to Delhi and the second charge is that the shifted other four companies from Delhi to Maharashtra'. 6.1 We have gone through the submissions made by learned counsel for the respondent in counter affidavit and sur-rejoinder filed on behalf of the respondents and find that no new material has been mentioned,....

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.... the companies mentioned in Article of charge II, the ROC Delhi, submitted in his report that no enquiry/ investigation/inspection has been initiated against these companies and no prosecution was pending. 3. Notings of the Dy. Director and the Asst who examined the compliance of all the provisions of law dealing before placing the matter before the regional Director have not mentioned about any enquiry/ investigation/inspection initiated against these companies. 4. Alerts in the electronic processing system-MCA-21. The processing and approval of applications for shifting of registered office is done in hybrid mode where applications are received in electronic mode but orders are passed in physical mode. In the instant case, the inspection of these companies were ordered by the office of DG Corp Affairs on 26.03.2019 but no entry was made by the Office of DG in the MCA-21 system and therefore, no alert message was generated by the system while processing the said applications by the by the office of RD and the office of ROC. Interestingly, in the instant case the Min has not initiated any action for filing prosecution against the company for declaring false information, no acti....

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....n appeal. We are also of the view that the applicant has exercised due diligence. Coupled with these facts, when there is no financial implication, we allow the present OA with the following directions:- i) Charge Memo No. C-14011/2/2023-Vigilance-MCA dated 13.06.2023 (Annexure A-1) is quashed and set aside; ii) The respondent is directed to grant the applicant all consequential benefits flowing from setting aside of the Charge Memo; and iii) The exercise, as ordained above, shall be completed by the respondents within a period of six weeks from the date of receipt of a certified copy of this Order." 31. Having noted the aforesaid extracts of the impugned order, we may now proceed to deal with the rival submissions of the parties. The primary ground on which the petitioner has assailed the findings of the learned Tribunal is that the respondent's action of approving the request of shifting of the registered offices of the 5 companies of the Carnoustie Group was not a quasi-judicial function but an executive act. It has therefore, been urged by the learned ASG that the very premise of the Tribunal's decision that since the respondent was discharging quasi-judicial function wh....

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....t, by relying on its earlier decision in Province of Bombay v. K N Advani & Ors. 1950 SCC OnLine SC 26, had observed as under:- "In Province of Bombay v. K. S. Advani and Others. Kania, C. J. with whom Patanjali Sastri, J. agreed, said: The respondent's argument that whenever there is a determination of a fact which affects the rights of parties, the decision is quasi-judicial, does not appear to be sound." Further on the learned Chief Justice said: "It is broadly stated that when the fact has to be determined by an objective test and when that decision affects rights of someone, the decision or act is quasi-judicial. This last statement overlooks the aspect that every decision of the executive generally is a decision of fact and in most cases affects the rights of someone or the other. Because an executive authority has to determine certain objective facts as a preliminary step in the discharge of an executive function, it does not follow that it must determine those facts judicially. When the executive authority has to form an opinion about an objective matter as a preliminary step to the exercise of a certain power conferred on it, the determination of the objective fa....

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....here is lis and prima facie and in the absence of anything in the statute to the contrary it is the duty of the authority to act judicially and the decision of the authority is a quasi-judicial act; and (ii) that if a statutory authority has power to do any act which will prejudicially affect the subject, then, although there are not two parties apart from the authority proposing to do the act and the subject opposing it, the final determination of the authority will yet be a quasi-judicial act provided the authority is required by the statute to act judicially." In other words, while the presence of two parties besides the deciding authority will prima facie and in the absence of any other factor impose upon the authority the duty to act judicially, the absence of two such parties is not decisive in taking the act of the authority out of the category of quasi-judicial act if the authority is nevertheless required by the statute to act judicially." xxx xxx xxx In Gullapalli Nageswara Rao and Others v. Andhra Pradesh State Board Transport Corporation and Another. Subba Rao, J., after referring to the various decisions on this subject held: "...... whether an administrati....

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....ng to the rules, whereas the authority which acts administratively is dictated by the policy and expediency." 59. From the above decisions, it emerges that: (a) The decision of an authority is prima facie, and in the absence of any other factor, a quasi-judicial act when there is a lis before it, with two parties with competing claims; (b)When the authority has the power to do something which will prejudicially affect the subject, the decision it takes is a quasi-judicial act even in the absence of a lis and two parties with competing claims, when the authority is required by the statute in question to act judicially. The express provisions of the statute, the nature of the right affected, the manner of disposal, the objective criterion (if any) to be adopted while deciding one way or the other, the effect of the decision, and other signs in the statute may be considered when evaluating whether there is a duty to act judicially; and (c)The decision of an authority is quasi-judicial when it is made in accordance with rules. The decision is administrative when it is dictated by policy and expediency. 60. Having laid down the above principles, it must be realised that the distinct....

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....fying the application; (f) the list of creditors and debenture holders entitled to object to the application; (g) an affidavit verifying the list of creditors; (h) the document relating to payment of application fee; (i) a copy of board resolution or Power of Attorney or the executed Vakalatnama, as the case may be. (2) There shall be attached to the application, a list of creditors and debenture holders, drawn up to the latest practicable date preceding the date of filing of application by not more than one month, setting forth the following details, namely:- (a) the names and address of every creditor and debenture holder of the company; (b) the nature and respective amounts due to them in respect of debts, claims or liabilities: Provided that the applicant company shall file an affidavit, signed by the Company Secretary of the company, if any and not less than two directors of the company, one of whom shall be a managing director, where there is one, to the effect that they have made a full enquiry into the affairs of the company and, having done so, have formed an opinion that the list of creditors is correct, and that the estimated value as given in the list o....

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....plication may be put up for orders without hearing. (9.) Before confirming the alteration, the Central Government shall ensure that, with respect to every creditor and debenture holder who, in the opinion of the Central government, is entitled to object to the alteration, and who signifies his objection in the manner directed by the Central government, either his consent to the alteration has been obtained or his debt or claim has been discharged or has determined, or has been secured to the satisfaction of the Central Government. (10.) The Central Government may make an order confirming the alteration on such terms and conditions, if any, as it thinks fit, and may make such order as to costs as it thinks proper: Provided that the shifting of registered office shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act." 38. From a bare perusal of the aforesaid, it is evident that before passing an order under Section 13, the competent authority is required to not only seek information regarding the creditors and debtors of the applicant company, but is also obliged to i....

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....ould, therefore, be apposite to refer to paragraph nos. 4, 11 & 16 of the said decision, which read as under:- "4. No doubt, there has to be zero tolerance for corruption and if there are allegations of corruption, misconduct or of acts unbecoming of a judicial officer, these must be dealt with strictly. However, if wrong orders are passed that should not lead to disciplinary action unless there is evidence that the wrong orders have been passed for extraneous reasons and not because of the reasons on the file. 11. The main ground to hold the appellant guilty of the first charge is that the appellant did not take notice of the orders of the High Court whereby the High Court had rejected the bail application of one of the accused vide order dated 26-11-2001 [Shivnath Rai v. State of Bihar, Criminal Misc. No. 30563 of 2001, order dated 26-11-2001 (Pat)]. It would be pertinent to mention that the High Court itself observed that after framing of charges, if the non-official witnesses are not examined, the prayer for bail could be removed, but after moving the lower court first. The officer may have been guilty of negligence in the sense that he did not carefully go through the case....

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....quasi-judicial function. 41. From the factual matrix noted herein above, it is evident that despite the respondent having allowed the applications for shifting of the registered offices of all the 5 companies of the Carnoustie Group, which action the petitioner contends constitutes misconduct, he continued with the inspection not only against these companies but against other companies of the said Group. It is based on this inspection that the respondent submitted a detailed report setting out the gross mismanagement and siphoning off of funds, not only by these 5 companies but also other companies of the same Group, There is no dispute about the fact that this report was promptly accepted by the petitioner and directions were issued to the respondent to take penal and other appropriate actions against the said companies. 42. Consequently, without stopping there and based on the directions issued by the petitioner, the respondent filed a disgorgement application before the NCLT, Delhi, where an order for attachment of assets of these companies worth Rs. 870 crores was passed on 21.04.2022. Interestingly, we may also, at this stage, note that in respect of companies, qua which shi....

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....tion, the action of the petitioner in entangling him in disciplinary proceedings and that too after postponing the DPC at the last minute, does lead credence to the respondent's plea that disciplinary proceedings have been initiated against him only on account of the vindictiveness of Mr. Juneja, who was officiating for almost two years as the DG and was nursing a grudge against him not only on account of the respondent's earlier challenge to his appointment as Joint Director but also because while Mr. Juneja had given a clean chit to as many as 13 companies of the Carnoustie Group, the respondent had reported about the fraud committed by the 10 companies of the very same Group. Moreover, since in the considered opinion of this Court, the said steps taken against the respondent were sheer after-thoughts as they were never taken before Mr. Juneja became active in the whole scheme of affairs of the companies of the Carnoustie Group. 45. At this stage, deflecting from the main issue, we are constrained to observe that pursuant to the directions of the petitioner, the respondent diligently carried out inspections in respect of 10 companies falling in the northern region and discovered....