TaxTMI 
TaxTMI 
2025 (5) TMI 1147
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....ult by the Appellant who was arrayed as Respondent in the Company Petition. The Adjudicating Authority by the impugned order although rejected the Section 9 application filed by the Respondent herein, however, while rejecting Section 9 application issued direction to forward the copy of the order to the Central Government through Ministry of Corporate Affairs and various other Central Authorities. Appellant aggrieved by the observations and certain directions contained in the impugned order has come up in this Appeal. 2. We have heard Shri Neeraj Malhotra, Learned Senior Counsel for the Appellant and Shri Abhijeet Sinha, Learned Senior Counsel who assisted the Court as Amicus Curiae. 3. While hearing the Appeal on 20.03.2025, we passed following order:- "20.03.2025: Shri Malhotra appearing for the Appellant submits that Adjudicating Authority while rejecting Section 9 application has issued directions in paragraph 65 and 66 which are as follows : - "65. It was also submitted that when the Corporate Debtor stopped receiving any further payment from VEDA, the Corporate Debtor on 31.03.2022 reversed entire sales transaction of Rs.387,67,30,440/- and Rs. 14,45,5....
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....into an affairs of the company, there are specific provisions in the Companies Act, 2013 and direction in the impugned order not in consonance with the Scheme of the Companies Act, 2013. It is submitted that even for directing investigation under Section 213 of the Companies Act, 2013, a reasonable opportunity of being heard is to be afforded to the company against whom investigation is sought to be directed whereas in the present case, no opportunity was given to the Appellant, hence, direction for investigation as is contained in paragraphs 64, 65 & 66 are beyond the jurisdiction of Adjudicating Authority. Adjudicating Authority although decided to reject Section 9 application but while rejecting issued various directions which was beyond the jurisdiction of Adjudicating Authority exercising jurisdiction under Section 9 of the IBC. Under Section 9, Adjudicating Authority was to consider as to whether application filed under Section 9 is in accordance with the provisions of the IBC and Operational Creditor has been able to prove debt and default. Any further directions or observations are beyond the scope of Section 9 application. Counsel for the Appellant in support of his submis....
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....ntent on 11.08.2021 and Issuing Purchase Order 13.08.2021 Confirming the receipt of goods and invoices of the Operational Creditor based on which making sales to Veda and receiving payments till December, 2021, it is inconceivable that the Corporate Debtor was innocent and unaware of the sham transactions and fraud being played on Government of India, in the name of Corporate Social Responsibility (CSR) obligations. We are of the considered view that Corporate Debtor was partner to this fraud being played on Gol and the principle of "in pari delico" would apply. As per the Corporate Debtor's own averment, it has entered into an illegal contract with Veda and made false sales to Veda for illegal purpose. 64. Therefore, much bigger scam is apprehended and which needs investigation into the affairs of Suumaya, Veda, Corporate Debtor and all vendors involved in this CSR scam. 65. It was also submitted that when the Corporate Debtor stopped receiving any further payment from VEDA, the Corporate Debtor on 31.03.2022 reversed entire sales transaction of Rs.387,67,30,440/. and Rs. 14,45,53,775/-. If sale was reversed the Corporate Debtor should also return the entire payment received f....
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....having no share capital, and supported by such evidence as may be necessary for the purpose of showing that the applicants have good reasons for seeking an order for conducting an investigation into the affairs of the company; or (b) on an application made to it by any other person or otherwise, if it is satisfied that there are circumstances suggesting that- (i) the business of the company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose; (ii) persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or (iii) the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, or the manager, of the company, order, after....
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....ad occasion to consider the scheme under Section 8 & 9 of the IBC. Counsel for the Appellant has relied on paragraph 33 of the judgment where Hon'ble Supreme Court while considering the Scheme under Section 9 has made following observations:- "33. ........................If the application made under sub-section (2) is incomplete, the adjudicating authority, under the proviso to sub-section (5), may give a notice to the applicant to rectify defects within 7 days of the receipt of the notice from the adjudicating authority to make the application complete. Once this is done, and the adjudicating authority finds that either there is no repayment of the unpaid operational debt after the invoice [Section 9(5)(i)(b)] or the invoice or notice of payment to the corporate debtor has been delivered by the operational creditor [Section 9(5)(i)(c)], or that no notice of dispute has been received by the operational creditor from the corporate debtor or that there is no record of such dispute in the information utility [Section 9(5)(i)(d)], or that there is no disciplinary proceeding pending against any resolution professional proposed by the operational creditor [Section 9(5)(i)(e)], ....
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....de following observations:- "8. The dictum of law propounded by the Hon'ble Apex Court is loud and clear. The Adjudicating Authority cannot travel beyond the letter of law and the dictum of the Hon'ble Apex Court. The satisfaction in regard to occurrence of default has to be drawn by the Adjudicating Authority either from the records of the information utility or other evidence provided by the 'Financial Creditor'. The Adjudicating Authority cannot direct a forensic audit and engage in a long drawn pre-admission exercise which will have the effect of defeating the object of the 'I&B Code'. If the 'Financial Creditor' fails to provide evidence as required, the Adjudicating Authority shall be at liberty to take an appropriate decision. If the application is incomplete, it can return the same to the 'Financial Creditor' for rectifying the defect. This has to be done within 7 days of the receipt of notice from the Adjudicating Authority. However, the 'I&B Code' does not envisage a pre-admission enquiry in regard to proof of default by directing a forensic audit of the accounts of the 'Financial Creditor', 'Corporate Debtor' or any 'financial institution'. Viewed thus, ....
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....cate the issue by this Tribunal, it is necessary to refer to matter to SFIO, to test the veracity of allegations and counter allegations made by the parties. The Central Government established SFIO to investigate frauds relating to Company. As per Section 212, the Central Government is empowered to cause to investigate into the affairs of the Company by SFIO, basing on the receipt of report of Registrar or inspector u/s 208 in public interest or on request from any department of the Central Government or a State Government. Section 213 also empowers the Tribunal to order investigation, if it is of the opinion that the business of the Company is being conducted with intent to defraud its Creditor, members, or any other person etc. Therefore, we are of the prima facie view that findings given in Forensic Audit Report only prima established the fraudulent transactions in question. Therefore, it is necessary to conduct further investigation by SFIO in the affairs of Company basing on the findings given in Forensic Audit Report, after affording proper opportunity to concern opposite parties to defend them. Hence, we are inclined to refer the matter to SFIO for further investigation by i....
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.... or on intimation of a special resolution passed by a company that its affairs are required to be investigated; or in the public interest; or on request from any Department of the Central Government or a State Government. 32. Section 212 does not empower the National Company Law Tribunal or the Adjudicating Authority to refer the matter to the Central Government for investigation by the 'Serious Fraud Investigation Office' even if it notices the affairs of the Company of defrauding the creditors and others." 20. This Tribunal has also held that the procedure laid down under Section 213 can be exercised by the Adjudicating Authority. In paragraphs 40, 41, 42 & 43, following was held:- "40. In view of the aforesaid position of law also, the procedure laid down under Section 213 of the Companies Act, 2013 can be exercised by the Tribunal/ Adjudicating Authority, as held above. 41. Further, after the investigation by the Inspector, if case is made out and the Central Government feels that the matter also requires investigation by the 'Serious Fraud Investigation Office' under Section 212 of the Companies Act, 2013, it is open to the Central Government to d....
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.... "213. Investigation into company's affairs in other cases The Tribunal may,- (a) on an application made by- (i) not less than one hundred members or members holding not less than one-tenth of the total voting power, in the case of a company having a share capital; or (ii) not less than one-fifth of the persons on the company's register of members, in the case of a company having no share capital, and supported by such evidence as may be necessary for the purpose of showing that the applicants have good reasons for seeking an order for conducting an investigation into the affairs of the company; or (iii) on an application made to it by any other person or otherwise, if it is satisfied that there are circumstances suggesting that- (i) the business of the company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose; (ii) persons concerned in the formation of the company or the management of its affairs have in connection there....
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.... with respect to its affairs which they might reasonably expect, and that the affairs of the company ought to be investigated, after giving a reasonable opportunity of being heard to the parties concerned, the Tribunal/Adjudicating Authority has power to refer the matter to the Central government for investigation into the affairs of the company." 23. Another judgment relied by the Counsel for the Appellant is "Neeta Shrinivas Zanvar and Anr. Vs. Nagarjuna Agro Chemicals Private Limited and Ors.- 2021 SCC OnLine NCLAT 135" where the order passed by the NCLT directing the Registrar of Companies to investigate into the affairs of the company was challenged. After Adjudicating Authority has issued direction which was under challenged, it was held that direction issued by the NCLT to Registrar of Companies to investigate violates the provisions of Sections 212 and 213. In paragraphs 32 and 33, following was held:- "32. In the light of the above discussion, we are of the considered opinion that the Learned NCLT erred in directing the Registrar of Companies to investigate into affairs of Respondent No. 1 Company, as the said Directions violate the statutory provision of Secti....
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....IRP is provided by statutory scheme Appellate Tribunal ought not to have inherent power to withdraw the proceedings in the Appellate Tribunal. The above judgment was on its own fact and was considering the Scheme under Section 12A r/w Regulation 30A which issues are not attracted in the present case. 27. Now we look into the judgments which have been relied by the Counsel for the Amicus Curiae. Counsel for the Amicus Curiae has also relied on judgment of this Tribunal in "Lagadapati Ramesh" (supra) as well as "M. Srinivas" (supra) to support his submission that the Adjudicating Authority can refer or forward the order passed by the Central Government for investigation. From the scheme under Section 213 as noticed above, it is clear that the Adjudicating Authority while exercising jurisdiction of the NCLT can also issue direction for investigation but said direction has to be in accordance with the statutory scheme i.e. after giving a reasonable opportunity of being heard to the parties against whom investigation is ordered. 28. Present is not a case, as observed above, where Adjudicating Authority has directed any investigation under Section 213 rather has forwarded the copy ....
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....servations were made by the Hon'ble Supreme Court in reference to Article 19(1)(a) of the Constitution where it was held that the Court proceedings except in-camera proceedings including right to know the observations/remarks made by judges during course of hearing, not forming part of judgment or binding decision, which the media is free to report. The above observations are made by the Hon'ble Supreme Court in different context which does no through any light on the issue which has come up for consideration. Similarly, in paragraph 21 of "State of Rajasthan and Ors. Vs. Ramesh Chandra Mundra and Ors.- (2020) 20 SCC 163" has been relied in which Hon'ble Supreme Court was considering the proviso to Article 229(2) of the Constitution of India which have no bearing in the issue involved in the present case. 31. Counsel for the Amicus Curiae has relied on the judgment of the Hon'ble Supreme Court in "State Bank of India and Others vs. Consortium of Murari Lal Jalan and Florian Fritsch and Anr- 2024 SCC OnLine SC 3187" to support his submission that NCLT could exercise its inherent power under Rule 11 where extraordinary circumstances warranting such power to be exercised even if a ....