TaxTMI 
TaxTMI 
2024 (9) TMI 8
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....2024 it dismissed C.A. No. 233 of 2021. Aggrieved by the impugned orders, the present appeals have been preferred by the Appellant. 2. The factual matrix of both the appeals primarily stems out of CP (IB) No. 3638 of 2018, the salient points of which are as outlined below:- The Respondent-Union of India (UOI) had filed C.P. No 3638 of 2018 under Sections 241 & 242 of the Companies Act, 2013 against IL&FS and group companies alleging mismanagement in the company leading to indebtedness of IL&FS. The Serious Fraud Investigation Office ('SFIO' in short) in its Interim Investigation Report dated 30.11.2018 identified the coterie of individuals constituting the 'will and mind' of the IL&FS and its Group Companies whose fraudulent conduct led to a debt burden of IL&FS group in excess of Rs 99,000 cr. According to the SFIO Interim Report, the Appellant was a part of this coterie. On an application filed by the UOI, basis the SFIO Interim Report, the NCLT in C.P. No. 3638 of 2018 vide order dated 03.12.2018 had interalia directed impleadment of the present Appellant-Shri Pradeep Puri as Respondent No.316. Vide the same orders, the NCLT had also restrained the ....
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....th w.e.f. 05.08.2020. On 09.11.2022, the Appellant filed I.A. No. 176 of 2022 in CA No. 3428 of 2018 in C.P. No. 3638 of 2018 before NCLT The prayers contained in I.A. 176 of 2022 reads as under: "a. Discharge the Applicant-Respondent as a respondent in the present proceedings of Company Application 3638 of 2018 before this Hon'ble Tribunal; b. Pass any other order(s) as deemed fit and proper under the circumstances by the Hon'ble Tribunal." On 16.02.2024, the NCLT dismissed I.A. No. 176 of 2022 as premature. CA No. 233 of 2021 in CP No. 3638 of 2018 filed by the Appellant on 03.02.2021 was also dismissed on 10.04.2024. The prayers contained in C.A. 233 of 2021 are as extracted below: i. That it be taken on record that the Applicant was only a nonexecutive director of ITNL and the said order dated 18.12.2020 be deemed to stand modified accordingly to include reference to the said fact. ii. That it be taken on record that the Applicant was not a member of the Board of Director or in any manner the management of IL&FS and the said Order dated 18.12.2020 be deemed to stand modified accordingly to include reference to the s....
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.... all restraints on the Appellant dealing with his movable and immovable properties be removed; (d) That the Appellant in the present facts cannot be considered to be part of any "cabal" or "coterie" that governed the "will and mind" of IL&FS and its group of companies as the Appellant was not a director of IL&FS and was only a non-executive director in ITNL, the only major subsidiary holding company for vertical identified by SFIO in its 2018 Interim Report and had ceased to be a non-executive director of ITNL on 20.11.2017 itself; (e) Pass such other and/or further orders against the Respondent and in favour of the Appellant as this Hon'ble Appellate Tribunal deems fit in the facts and circumstances of the present case. CA (AT)(Ins) No. 182 of 2024 (a) That the Impugned Order dated 10.04.2024 of the Hon'ble National Company Law Tribunal, Mumbai in C.A. No. 233/2021 in C.P. No. 3638/MB/2018 be set aside and prayers sought in the said application C.A. No. 233/2021 before Hon'ble National Company Law Tribunal, Mumbai be allowed; and (b) That all restraints on the Appellant regarding dealing with his movable and immovable properties be remo....
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.... further submitted that the very basis of impleadment of the Appellant as Respondent No.316 in CP No. 3638 of 2018 had already been negated by the SFIO Final Report of 28.05.2019 which had dropped the Appellant from being considered as part of the controlling coterie. It was also contended that the patently wrong submission made by the present Respondent that SFIO had initiated prosecution against the Appellant in a designated Special Court following the SFIO Final Report is recorded in the NCLT order of 18.12.2020. The SFIO Final Report and the subsequent chargesheet related to ITNL did not contain any adverse finding against the Appellant. The NCLT had, therefore, wrongly failed to vacate the order of restraint against the Appellant by taking a misplaced view that the Appellant has not been discharged so far in the matter by the criminal court at a time when the Appellant had not been charge-sheeted. It has also been pointed out that NCLT erroneously took a view while adjudicating in IA No. 176 of 2022 in CP No. 3638 of 2018 that the Appellant had made withdrawal of lookout circular against him as the basis of discharge while in fact several other convincing and persuasive ground....
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.... Director on the Board of six other companies in the IL&FS group during different timeperiods. It was also contended that it is settled law that dismissal of a proceeding or deletion of defendant from a proceeding amounts to a decree/final order. Thus, while investigation is on-going and there are findings on record against the Appellant before the NCLT, discharge/dismissal of the Appellant would tantamount to exoneration of the Appellant from the liability. 11. It was also stated that the majority part of the investigation into the affairs of IL&FS Ltd. and its subsidiaries have been completed by SFIO and that the process of filing prosecution has been initiated and likely to be completed soon. Moreover, since the restraint order on the Appellant had been passed to protect public interest and that of the creditors, the same needs to continue. Hence, the NCLT by refraining from discharging the Appellant did not commit any error. 12. It has been further contended that in the guise of alleged factual inaccuracies, the Appellant in CA 233 of 2021 has tried to introduce new facts. It is the case of the Respondent that the Adjudicating Authority has correctly dismissed the prayers....
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....n of the Companies Act, 2013 and the NCLT rule position, we are cognisant that NCLT has limited jurisdiction in this regard which is restricted to correction of mistakes or errors arising out of accidental slip or omission. The NCLT can at best only recall its order but does not have the power of review as no such power has been conferred expressly by the statutes. When we look at the impugned order of 10.04.2024, we find that the NCLT without accepting or discounting the facts referred to by the Appellant has merely observed at para 22 therein that "the facts as pleaded are matter of record and can always be pleaded in subsequent proceeding with preciseness." Given the fact that SFIO investigations are still underway, we find that no infirmity has been committed by NCLT in refraining from adjudicating on the correctness or validity of the facts put forth by the Appellant in CA 233 of 2021 and leaving it open for pleading in subsequent proceedings. 17. It is the case of the Appellant that para 9 of the SFIO Interim Report identified the Executive Directors of IL&FS and its main subsidiaries. However, the Appellant did not hold any position in the Board of Directors of IL&FS. It ....
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....resent Appellant. 20. It was further submitted by the Ld Counsel for the Respondent that SFIO is still conducting an investigation into the affairs of IL&FS and its subsidiaries which includes a number of companies and covers a number of complex transactions. It was also pointed out that the Appellant was a Director on the Board of a number of subsidiaries of IL&FS. The SFIO Interim Report had highlighted the illegalities and fraudulent conduct of business by the IL&FS entities and in para 12 of the Report already named the Appellant as part of the coterie controlling the "mind and will" of the company which perpetrated the fraud. Given the Appellant's position in the company, the removal of his name from the list of party Respondents at this stage, pending completion of SFIO investigation, would tantamount to exonerating the Appellant. Objecting to the removal of his name in a summary manner in spite of being a relevant party, it was vehemently contended that any such action would cause grave harm and prejudice to larger public interest and therefore would not be in order. While investigation is ongoing and findings in respect of the Appellant are contained in the SFIO Report, ....
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....of the Appellant. There is also no dispute that in pursuance of the Final Report, charge-sheet was filed and prosecution proceedings commenced thereafter. However, no charge of fraud or any other wrongful act has been brought out against the Appellant. Clearly the Appellant had not been identified as an accused in the same charge-sheet. 23. We also notice that the Respondent has failed to disclose the details of any prosecution initiated against the Appellant. We also find that it has been rightly contended by the Appellant that the Respondent in their reply to C.A. No. 233 of 2021 at para 7 had admitted that no prosecution has been initiated against the Appellant. The relevant para is as reproduced below: 7. Keeping the above in mind, with regard to the third sentence of paragraph 8 of the December 18 Order, it is submitted that the SFIO has not initiated prosecution against the Applicant in the matter of investigation report dated 28.05.2019 of IL&FS Financial Services Limited which is matter of record. 24. Given this backdrop, we hold that the NCLT clearly committed an error in observing at para 23 of the impugned order dated 10.04.2024 that the Appellant "has not....
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..... Since the restraint order was passed to protect the interest of the Creditors and public at large, and the applicant has not been discharged so far from the matter by the criminal court also, we do not find any merit in prayer for vacating the restraint order in place." 27. It is the contention of the Ld. Sr. Counsel for the Appellant that the NCLT had erroneously denied discharge on ground that the Appellant had made withdrawal of lookout circular as the only basis of his discharge. Assailing the impugned order, it is contended by the Ld. Sr. Counsel for the Appellant that there were several other substantive grounds which justified the deletion of the Appellant as party Respondent No.316 in CP3638 of 2018 which the NCLT did not take due cognisance of. These grounds include the absence of any findings in SFIO Final Report against the Appellant besides no chargesheet having been framed or criminal proceedings initiated against him. Withdrawal of lookout circular was only one other additional demonstrable proof that the Appellant was no longer a material or relevant party for impleadment. Attention was also adverted to decision of the Hon'ble Supreme Court in Neera Saggi Vs UOI....
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....Appellant for all times to come in seeking redressal. 31. Infact the NCLT on 24.12.2021 had itself taken adverse notice that three years had elapsed since the investigation had commenced and that the investigation cannot continue endlessly. It would be relevant to reproduce the observations made by the NCLT on 24.12.2021 which reads as below: "This state of affairs cannot continue endlessly. Already over 3 years have elapsed and the report is still awaited and status report cannot form the basis to continue freezer endlessly looking at the age and hardships being faced by the applicant. Therefore SFIO is directed to complete the investigation of IL&FS expeditiously, especially the investigation of ITNL be completed in next four months." 32. The NCLT after noting the inordinate delay had directed the investigation to be completed expeditiously within four months. It is an undisputed fact that the investigation is yet to reach its logical end. It has been nearly three years since then and the investigations have not yet been concluded. It is nearly 4 years since the last of the SFIO status note dated 06.10.2020 was placed before the NCLT in sealed envelope. It is going....