TaxTMI 
TaxTMI 
2025 (3) TMI 131
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....ells LLP, CA No. 117 of 2024 filed by Kalpesh Mehta and CA No.118 of 2024 filed by Udayan Sen were rejected. Aggrieved by the said order, these appeals have been filed. These Appeals arises out of the similar facts and sequence of the events, it shall be sufficient to refer to facts and pleadings in Company Appeal (AT) No.255 of 2024 for deciding these Appeals. 2. Brief background facts giving rise to these Appeals need to be noticed: 2.1. Ministry of Corporate Affairs (MCA) in exercise of powers under Section 212 of the Companies Act, 2013 directed the Serious Fraud Investigation Office (SFIO) to investigate the affairs of the IL&FS and its subsidiaries. A Company Petition No.3638 of 2018 was filed by the MCA under Sections 241 and 242 of the Companies Act, 2013 against ILFS and its then existing Board of Directors before NCLT, Mumbai. On 01.10.2018, NCLT Mumbai passed an order superseding the existing director of the ILFS with new Board of Directors. On 30.11.2018, SFIO submitted its 1st Interim Report. On 28.05.2019, SFIO submitted its 2nd Investigation Report to the Central Government in respect of investigation into IFIN. On the basis of 2nd SFIO Report, direction was is....
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....ent. NCLT heard both, the appellants and respondents on the above IAs and by impugned order dated 22.07.2024 has rejected the IAs filed by the Appellant holding that 2nd interim SFIO Report or compilation of documents consisting of extract from SFIO Report can be considered by the Tribunal for adjudication of interim relief as well as final declaration. Aggrieved by the above judgment, these Appeals have been filed. 3. We have heard Shri Neeraj Kishan Kaul, Learned Senior Counsel and Shri Arun Kathpalia, Learned Senior Counsel appearing for the Appellants and Shri Aditya Sikka, Learned Counsel appearing for the Union of India. 4. Learned Senior Counsel appearing for the Appellant in support of the appeals contends that the 2nd SFIO Report having been equated as report prepared under Section 173 of the Code of Criminal Procedure (CrPC) 1973, as per Section 212(15) of the Companies Act, 2013, the 2nd SFIO Report is not admissible as legal evidence. A report under Section 173 of the CrPC has been expressly made inadmissible as legal evidence and has been considered only to be an opinion of the police officer who conducts the police investigation. By virtue of deeming fiction cre....
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....ced before the NCLT, the said document cannot be looked into on this ground alone. The procedure before the NCLT being summary in nature, it is necessary that the appellant has notice of the case i.e. require to be met by it before NCLT. It is submitted that the admissibility of 2nd SFIO Report has not attained finality in the proceeding where impleadment application was allowed and order of impleading the appellant has been affirmed by this Tribunal in appeal. The issues which sought to be raised in this appeal have never been adjudicated nor any finality can be attached on the issue regarding admissibility of 2nd SFIO Report on the basis of order passed in the impleadment application. No finding having been rendered in earlier proceeding with regard to admissibility of 2nd SFIO Report, there is no question of applicability of even principle of constructive res judicata. NCLT has failed to consider that a combined reading of Sections 212 and 223(5) of the Companies Act would mean that such a report is not admissible in evidence. The judgment rendered by the NCLT is not in conformity with the principle of interpretation which has been laid down by the Hon'ble Supreme Court. The dee....
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....tendment of statutory scheme of Section 212. Coming to the provision of Section 223(5), it is contended that sub-section (5) of Section 223 only provides that nothing in Section 223 shall apply to Section 212 that the object was to not make SFIO Report; Under Section 212 subject to any authentication as contemplated under Section 223 for inspector's report, sub-section (5) of Section 223 cannot mean any more. Apart from not confining the report under Section 212 with the procedure as contemplated under Section 223, Civil and Criminal proceeding can simultaneously proceed. Coming to the submission of the appellant that there are no pleadings with respect to compilation of documents which are sought to be introduced before the NCLT, it is submitted that MA No.2070 of 2019 is an application for interim relief only and there are sufficient pleadings with reference to document being relied on. The 2nd SFIO Report having been served on the appellant in the year 2019 itself, appellants cannot be heard to contend that they are not aware of the documents which was part of the report. It is thus submitted that the submission that the compilation of document cannot be accepted deserve rejecti....
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....cluding the order issued by the MCA under Section 212(1)(a) & (c) of the Companies Act, 2013, details of 1st interim report dated 30.11.2018 as well as 2nd SFIO Report dated 28.05.2019. Paragraph 12 of the application gives brief the investigation report. Paragraph 12 is as follows:- "12. That in brief the investigation report reveals as under, however, details of transactions are mentioned in the annexures to the report which are not reproduced here for the sake of brevity: I. Infrastructure Leasing and Financial Services Limited (hereinafter referred to as "IL&FS") is an infrastructure development and finance company. IL&FS have number of subsidiaries, associated and Joint Ventures in India and abroad. There were a series of media reports on the defaults made by IL&FS and its subsidiary companies in meeting their obligations to repay their Commercial Papers, short term borrowings and issues on the liquidity crunch, corporate governance, irregularities/complacency in risk assessment, etc. It was also reported that there had been a spate of resignations by nominee and key managerial personnel in recent past. II. Taking on the basis of the payment crisis i....
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....ed 08.06.2019 remain pending due to various litigation and was listed on 07.02.2024 for arguments. Union of India tendered a compilation of documents after handing over the same to the Counsel appearing for the Appellant, CA Nos. 65 of 2024, 117 of 2024 and 118 of 2024 have been filed subsequent to the Union of India having filed the compilation of documents which compilation of documents were part of the 2nd SFIO Report submitted on 28.05.2019. Counsel for the Respondent submitted that the 2nd SFIO Report dated 28.05.2019 which was also served in soft copy to all the appellants after they were impleaded in the proceedings. Annexure 18 to the Appeal is copy of the compilation documents filed by Respondent No.1 on 07.02.2024 before the NCLT. When we look into the said compilation, it contains the note of investigation report and some documents which were part of the 2nd SFIO Report. CA No.65 of 2024 was filed by Deloitte Haskins and Sells LLP which was dated 16.02.2024. In C.A. No.65 of 2024, following prayers were made in paragraph 10 of the application:- "10. PRAYERS : In light of the aforesaid circumstances, the Applicant herein is approaching this Hon'ble T....
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....gy; (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 service of Director, experts, and other officers and employees of the Serious Fraud Investigation Office shall be such as may be prescribed." 13. Section 212 provides for investigation into affairs of Company by Serious Fraud Investigation Office and contains detailed provisions pertaining to investigation to be carried out by the SFIO. Section 212(1) provides that where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company by the Serious Fraud Investigation Office by order, assign the inves....
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....so seeks to provide that the person so arrested may be taken to a Special Court or Judicial Magistrate or Metropolitan Magistrate within twenty four hours of his arrest. Further, the clause also seeks to provide that where an investigation report submitted by SFIO states that a fraud has taken place and any director, key managerial personnel or officer has taken undue advantage or benefit, then the Central Government may file an application before Tribunal with regard to disgorgement and such director, key managerial personnel or officer may be held personally liable without any limitation of liability." 17. The 'notes on clauses' throw considerable light on the proposed amendment in Section 212 by sub-clause (14A) was sought to be inserted. Sub-section (14A) of Section 212 which is founded on report under sub- sections (11) and (12) of Section 212, the Central Government is authorised to file an application before the Tribunal for appropriate orders with regard to disgorgement of the said property when a report under sub-sections (11) and (12) states that a fraud has taken place in a company and due to such fraud any director, key managerial personnel or officer of the company ....
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.... "Union of India vs. Ranjit Kumar Saha and Anr.- (2019) 7 SCC 505" and judgment of the Hon'ble Supreme Court in "Department of Customs vs. Sharad Gandhi- (2020) 13 SCC 521". Hon'ble Supreme Court in "Union of India vs. Ranjit Kumar Saha" (supra) had occasion to consider the provisions of the Corruption Act, 1988 and the Assam Rifles Act, 2006. The Hon'ble Supreme Court in the above case laid down that the legislature while enacting a law has complete knowledge of the existing laws on the same subject-matter. In paragraph 16, following was laid down:- "16. There is a presumption against repeal by implication and the reason for this rule is based on the theory that the legislature while enacting a law has complete knowledge of the existing laws on the same subject-matter, and therefore, when it does not provide a repealing provision, the intention is clear not to repeal the existing legislation. [State of M.P. v. Kedia Leather & Liquor Ltd., (2003) 7 SCC 389, para 13 : 2003 SCC (Cri) 1642; See: Municipal Council, Palai v. T.J. Joseph, (1964) 2 SCR 87 : AIR 1963 SC 1561; Northern India Caterers (P) Ltd. v. State of Punjab, (1967) 3 SCR 399 : AIR 1967 SC 1581; MCD v. Shiv Shan....
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.... following was laid down:- "33. The purpose and object of creating a legal fiction in the statute is well known. When a legal fiction is created, it must be given its full effect. In East End Dwellings Co. Ltd. v. Finsbury Borough Council [(1951) 2 All ER 587 : 1952 AC 109 (HL)] Lord Asquith, J. stated the law in the following terms: (All ER p. 599 B-D) If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. The said principle has been reiterated by this Court in M. Venugopal v. Divisional Manager, LIC of India [(1994) 2 SCC 323 : 1994 SCC (L&S) 664 : (1994) 27 ATC 84] . See also Indian Oil Corpn. Ltd. v. Chief Inspector of Factories [(1998) ....
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.... Aneeta Hada v. Godfather Travels and Tours [Aneeta Hada v. Godfather Travels and Tours, (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] , a three-Judge Bench has ruled thus : (SCC p. 681, paras 37-38) "37. In State of T.N. v. Arooran Sugars Ltd. [State of T.N. v. Arooran Sugars Ltd., (1997) 1 SCC 326] the Constitution Bench, while dealing with the deeming provision in a statute, ruled that the role of a provision in a statute creating legal fiction is well settled. Reference was made to Chief Inspector of Mines v. Karam Chand Thapar [Chief Inspector of Mines v. Karam Chand Thapar, AIR 1961 SC 838 : (1961) 2 Cri LJ 1] , J.K. Cotton Spg. and Wvg. Mills Ltd. v. Union of India [J.K. Cotton Spg. and Wvg. Mills Ltd. v. Union of India, 1987 Supp SCC 350 : 1988 SCC (Tax) 26] , M. Venugopal v. LIC [M. Venugopal v. LIC, (1994) 2 SCC 323 : 1994 SCC (L&S) 664] and Harish Tandon v. ADM, Allahabad [Harish Tandon v. ADM, Allahabad, (1995) 1 SCC 537] and eventually, it was held that when a statute creates a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, the Court has to examine and ascertain as to for w....
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....ante clause can be of any assistance to the appellants on the facts of the present cases. All that the non obstante clause means to convey is to the effect that even though a mortgagee-in-possession might have suffered a judgment or decree against him which might have become final so long as his status as mortgagee-in- possession has survived even pending execution proceedings and by that time if on 1-1-1970 the section gets attracted then such a mortgagee-in- possession even though having an adverse judgment or decree against him can get the benefit of Section 4- A if the relevant conditions of the said section are fulfilled by him and in such an eventuality merely because such a mortgagee-in-possession is covered by the sweep of any final judgment or decree for redemption the same will not come in his way. On the facts of the present cases, however, as we have seen, not only the appellants were covered by a final decree for redemption but they had lost the status of mortgagees-in-possession almost 9 months prior to the coming into force of Section 4-A. Therefore, on the date on which the section operated they were no longer mortgagees-in-possession. Consequently the non obstante ....
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....cted by the legislature must be restricted by the plain terms of the statute. " In another case reported in the same volume at page 870, namely, CIT v. Moon Mills Ltd. [AIR 1966 SC 870 : (1966) 59 ITR 574] another three-Judge Bench of this Court speaking through Subba Rao, J., observed in paragraph 8 of the Report in connection with the provision creating such legal fictions as under: "The fiction is an indivisible one. It cannot be enlarged by importing another fiction...." In the present cases fiction created by Section 4-A is circumscribed by its express words. Before such a deemed tenancy can arise it must be shown by the beneficiary concerned of the said provision that he was a mortgagee-in-possession for a continuous period of not less than fifty years immediately preceding the commencement of the said section. The words "immediately preceding the commencement" must necessarily be given their ordinary and full meaning. They necessarily point out the legislative intent that the fiction is created only for covering such type of cases where the mortgagee-in-possession not only exists on the land as mortgagee on 1-1-1970 but also continuously existed as....
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....rriding effect over any other provisions in the very Act or any other law for the time being in force, though for enforcement of other remedies or even similar remedies under the provisions other than Chapter VIII, altogether different procedure has been provided for. It is unnecessary to once again refer to the special procedure provided for in Chapter VIII, but the various provisions under Chapter VIII unmistakably indicate that the competent authority constituted thereunder is not "court" and the mere fact that such authority is deemed to be court only for limited and specific purposes, cannot make it a court for all or any other purpose and at any rate for the purpose of either making the provisions of the Limitation Act, 1963 attracted to proceedings before such competent authority or clothe such authority with any power to be exercised under the Limitation Act. It is by now well settled by innumerable judgments of various courts including this Court, that when a statute enacts that anything shall be deemed to be some other thing the only meaning possible is that whereas the said thing is not in reality that something, the legislative enactment requires it to be treated as if ....
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....ccasion to consider Section 173(2) of the CrPC and it was observed that report under Section 173(2) is an opinion of the investigating officer and details of the offence are required to be proved to bring home the guilt to the accused at a later stage i.e. in the course of the trial of the case "adducing acceptable evidence. In paragraph 76, following was laid down:- "76. The charge-sheet is nothing but a final report of police officer under Section 173(2) of the CrPC. The Section 173(2) provides that on completion of the investigation the police officer investigating into a cognizable offence shall submit a report. The report must be in the form prescribed by the State Government and stating therein (a) the names of the parties; (b) the nature of the information; (c) the names of the persons who appear to be acquainted with the circumstances of the case; (d) whether any offence appears to have been committed and, if so, by whom (e) whether the accused has been arrested; (f) whether he had been released on his bond and, if so, whether with or without sureties; and (g) whether he has been forwarded in custody under Section 170. As observed by this Court in Satya Narain Musa....
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....ing the court to take cognizance of the offence under Section 190 CrPC and his duty comes to an end. Therefore, there are well- defined and well-demarcated functions in the field of crime detection and their subsequent adjudication by the court. Lastly, the term "investigation" under Section 173(2) of the Criminal Procedure Code includes opinion of the officer in charge of the police station as to whether there is sufficient evidence or reasonable ground of suspicion to justify the forwarding of the case to the court concerned or not. This opinion is not legal evidence. At the stage of Section 173(2) the question of interpretation of legal evidence does not arise. In any event, that function is that of the courts." 28. There can be no quarrel to the proposition that the police report is not legal evidence. The present is a case where we are required to examine the purpose and object of Section 212 and whether the statutory scheme indicate that the SFIO Report which is submitted after the investigation as directed by the Central Government is not to be looked into in any material or evidence for any purpose as contemplated under the Act apart from framing of charges and legal fic....
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....rposes of Companies Act, 2013. 31. Now we come to Section 223 which is another section of the Companies Act, 2013 which need to be considered. Reliance has been placed on Section 223(5) for the submission that the inspector's report which has been made a piece of evidence applicability of which section has been expressly excluded report under Section 212. Section 223 provides for inspector's report and various sub-section(s) and sub-section (4) which are relevant are as follows:- "223. Inspector's Report.- (4) The report of any inspector appointed under this Chapter shall be authenticated either- (a) 1[by the seal, if any] of the company whose affairs have been investigated; or (b) by a certificate of a public officer having the custody of the report, as provided under section 76 of the Indian Evidence Act, 1872, and such report shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report." 32. The inspector's report under sub-section (4) becomes admissible in legal proceeding subject to compliance of sub-section (4). When we look into sub-sections (1), (2) and (3), the said provisions are provisions whic....
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....proceedings under sub-section (14A) on the basis of SFIO Report, submission cannot be accepted that the said report is irrelevant or inadmissible for the very proceeding for which the statutory scheme contemplates under sub-section (14A). Interpretation put by the Appellant shall make sub-section (14A) meaningless and otiose. 35. It is well settled principle of interpretation that provisions of statute have to be interpreted in a manner to give full effect to every provision of the statute. We may refer to the judgment of the Hon'ble Supreme Court in "Hardeep Singh vs. State of Punjab and Ors.- (2014) 3 SCC 92" wherein it was held that full effect is to be given to the language used therein, giving reference to the context and other provisions of the statute. In paragraph 44 of the judgment, following was held:- "44. No word in a statute has to be construed as surplusage. No word can be rendered ineffective or purposeless. Courts are required to carry out the legislative intent fully and completely. While construing a provision, full effect is to be given to the language used therein, giving reference to the context and other provisions of the statute. By construction, ....
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....n "Bachhaj Nahar vs. Nilima Mandal and Anr.- (2008) 17 SCC 491" where Hon'ble Supreme Court held that no amount of evidence, on a plea that is not put forward in the pleadings, can be looked into to grant any relief. In the said judgment, in paragraphs 12 and 13, following has been laid down:- "12. The object and purpose of pleadings and issues is to ensure that the litigants come to trial with all issues clearly defined and to prevent cases being expanded or grounds being shifted during trial. Its object is also to ensure that each side is fully alive to the questions that are likely to be raised or considered so that they may have an opportunity of placing the relevant evidence appropriate to the issues before the court for its consideration. This Court has repeatedly held that the pleadings are meant to give to each side intimation of the case of the other so that it may be met, to enable courts to determine what is really at issue between the parties, and to prevent any deviation from the course which litigation on particular causes must take. 13. The object of issues is to identify from the pleadings the questions or points required to be decided by the court....