TaxTMI 
TaxTMI 
2024 (5) TMI 1003
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....titioners to grant him consequential benefits 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 Limite....
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.... on 06.11.2020. The details of the dates on which these 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 sipho....
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....at during his 4 years tenure as Regional Director (NR), before being transferred as Regional Director (South Region) on 29.09.2022, 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....
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.... during the period from 30.08.2018 to 28.09.2022, committed misconduct by not observing due diligence in discharge of his official duties. Regional 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 pro....
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....oC Kanpur with respect to shifting of registered offices, acted bona fidely. Further, neither the Dealing Assistant or the Processing Officer nor the MCA-21 Electronic Processing 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 tha....
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....after observing that when the order of approving the shifting of the registered office of M/s Carnoustie Management (India) Private Limited from Noida to Delhi was passed on 06.11.2020, 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 b....
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....ial implications, if any, will be clear only after the disgorgement application is finally decided by the NCLT. In these circumstances, the learned Tribunal ought not to have interfered with the Charge Memorandum 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 t....
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....on 12.04.2019, directed the Joint Director(NR), Mr. Moorthy to carry inspections qua the 10 companies of the said Group, this order for inspection was one of the many inspection orders, which the respondent as the Regional 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. H....
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....iated on the basis of a confidential report prepared by Mr. Juneja on 19.01.2022, when he was functioning as officiating DG, which report was forwarded by the Joint Director on 15.02.2022. (viii) Both the charges levelled against the respondent pertain to lack of due diligence 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 s....
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.... shifting of a registered a office of any company, the RD seeks a report from the ROC of the concerned state and there has to be a special mention about the initiation of enquiry/investigation/inspection against any such company and also to report about any pending prosecution against the applicant company. In all the reports of 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 b....
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....y the Hon'ble Supreme Court in ZunnajaroBhikajiNagarkar (supra). 6.7 In the conspectus of the facts and circumstances brought out above, we are of the considered opinion that the respondent has erred in issuing the impugned Charge Memo to the applicant for the act exercised by him as a quasi-judicial officer, without subjecting him to judicial supervision in 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 t....
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....f this plea, the learned ASG has relied on the decision in State of Andhra Pradesh (supra). On a perusal of the said decision, we are, however, unable to agree with the petitioner and, in fact we find no such proposition of law has been laid down in this decision. In this regard, it would be apposite to refer to the relevant extracts from paragraph no. 3 of the said decision wherein the Apex Court, 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 righ....
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....ct judicially. What are the principles to be deduced from the two lines of cases I have referred to? The principles, as I apprehend them, are: (i) that if a statute empowers an authority, not being a Court in the ordinary sense, to decide disputes arising out of a claim made by one party under the statute which claim is opposed by another party and to determine the respective rights of the contesting parties who are opposed to each other, there 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 t....
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.... is quasi-judicial or administrative, is not always well defined and has to be determined after considering several factors, including the nature of the rights affected. The relevant extracts of the said decision as contained in paragraph nos. 57, 59 & 60 read as under:- 57. In Indian National Congress (I) (supra), this Court held that: "29. ... another test which distinguishes administrative function from quasi-judicial function is, the authority who acts quasi-judicially is required to act according 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 ....
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....long with the fee and shall be accompanied by the following documents, namely:- (a) a copy of the memorandum and articles of association; (b) a copy of the notice convening the general meeting along with relevant Explanatory Statement; (c) a copy of the special resolution sanctioning the alteration by the members of the company; (d) a copy of the minutes of the general meeting at which the resolution authorizing such alteration was passed, giving details of the number of votes cast in favor or against the resolution; (e) an affidavit verifying 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:-....
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....reditor of the company; and (c) serve, by registered post with acknowledgement due, a notice together with the copy of the application to the Registrar and to the Securities and Exchange Board of India, in the case of listed companies and to the regulatory body, if the company is regulated under any special Act or law for the time being in force. (7) Where any objection of any person whose interest is likely to be affected by the proposed application has been received by the applicant, it shall serve a copy thereof to the Central Government on or before the date of hearing. (8) Where no objection has been received from any of the parties, who have been duly served, the application 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 se....
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....lessness or financial impropriety against the respondent, the initiation of disciplinary proceedings against him was unjustified. This question as to when disciplinary action can be taken against an officer qua exercise of judicial or quasi-judicial function by him has been considered by the Apex Court in a number of decisions, including that in a recent decision in Krishna Prasad Verma (Dead) Through LRs v. State of Bihar & Ors. (2019) 10 SCC 640, wherein the Apex Court, while dealing with a case of disciplinary action against a judicial officer emphasized that unless there are clear allegations in the nature of misconduct, extraneous influence or gratification, etc, no disciplinary action should be initiated. It would, 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 r....
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....." 40. In the light of the aforesaid, it is evident that disciplinary action should not be initiated against an authority exercising quasi-judicial or judicial function merely on the strength of the order passed by him being wrong or erroneous or there has been negligence on his part in passing the order. De hors that, if the allegations against him include any financial irregularity, exercise of any undue influence or any such conduct which reflects extraneous consideration, disciplinary proceeding may be justified even in respect of quasi-judicial or judicial orders. So there has to be something other than merely a bald suspension before any disciplinary proceedings can be initiated against an employee in exercise of his judicial or 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 r....
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....er, knowing well that the actions of the respondent had helped in discovering the fraud committed by the companies of the Carnoustie Group, the petitioner has sought to level allegation of only lack of due diligence against him with no charge of any financial impropriety or undue favour. 44. In the light of the aforesaid, it clearly emerges that the respondent has been carrying out his duties in a most diligent manner as it is based on his report that the fraud committed by 10 companies of the Carnoustie Group being unearthed and an attachment order passed against a number of companies of the said Group, which were being used as a conduit by promoters of M/s. Unitech Limited for siphoning of funds of innocent Home Buyers. In this factual situation, 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 ....
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....a that the learned Tribunal has erred in presuming that just because the RoC and the Dealing Assistant as also Processing Officer did not bring to the notice of the respondent any pending inspection against these companies of the Carnoustie Group and since the system MCA 21 did not generate an alert in this regard, he was unaware of this fact and consequently, it could not be held of the respondent being guilty of violating Rule 30(9) of the Rules. Though, taking into account that the respondent had, himself, vide order dated 12.04.2019 directed the Joint Director (NR) Mr. Moorthy to carry out inspections as per directions issued by the petitioner on 26.03.2019 and further allowed the shifting of the registered office of the 5 companies of the Carnoustie Group around the same time, appears to be attractive on the first blush, however, upon a closer scrutiny of the dates on which these applications for shifting registered offices of the companies were received in the office of the respondent coupled with the dates on which the inspections actually commenced, which were after July, by which date application for transfer of the registered office of the 4 companies had been allowed and....