TaxTMI 
TaxTMI 
2025 (11) TMI 1566
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....nts under Section 213 of the Companies Act, 2013 read with Rule 11 of the NCLT Rules, 2016, seeking investigation qua the affairs of the Appellant No. 1 viz. Exclusive Capital Ltd. requesting to pass an order directing investigation into the affairs of the company by the Serious Fraud Investigation Office (SFIO) in CP No. 48/ND/2024 filed under Section 241-242 read with Section 244 of the Companies Act, 2013 whereby the Ld. NCLT has ordered an investigation in to the affairs of Exclusive Capital Ltd. (Appellant No. 1) under Section 213 of the Companies Act. 2. The case of the appellant as is evident from the Memo of appeal appears to be that appellant no.1 formerly known as UT Leasing Ltd. and was incorporated on 08.04.1994 under the provisions of the Companies Act, 1956 and appellant no. 2 took over the management of appellant no.1 in the year 2021 by purchasing its equity shares and thereafter on 13.10.2021 appellant no. 2 and 3 were appointed as directors of appellant no.1. 3. It is also stated that it was on 16.12.2021 the appellant no.1 was issued an amended incorporation certificate by the Ministry of Corporate Affairs under its new registered name i.e. 'Exclusive Capit....
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....ging 'oppression and mismanagement' on the parts of the appellants, claiming relief pertaining to the removal of the appellant no. 2 and 3 as managing director and director of the appellant no. 1 and also the removal of Johnson K. A. as its Director and also to set aside purchase of a luxus luxury car made by appellant no.1 and to further direct the appellant No. 1 to apply to the RBI to extend the validity of the RBI approval and to take all other actions in order to allot 28,83,506 shares to Respondent no. 1 against an infusion of Rs. 5,00,00,000/- by Respondent No. 1. 9. It is further stated that on 15.05.2024 Ld. NCLT disposed of the Company Petition and arrived at a finding that the allegations raised in the Company Petition constitute an act of Oppression and mismanagement under Section 241 and 242 of the Companies Act and also appointed a former Judge of the Hon'ble High Court of Delhi as an Administrator of the appellant no. 1 to manage its affairs and the board of directors of appellant no. 1 were also suspended and CCPS were also cancelled. 10. It is also stated that the aforesaid order passed by Ld. NCLT was challenged by the appellant no. 2 and 3 before th....
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....e extent of including suspension of the Board of Directors of the company and to direct Ld. observer to act as an administrator in place of Board of Directors. 16. On 23.10.2024, the Hon'ble High Court of Delhi passed various directions with regard to the suspension of the board of directors with immediate effect and appointing interim committee of administrators headed by Hon'ble Justice R.K. Gauba till RBI appoints director of the company with a consequential direction to the said interim committee of administrator and RBI to file a report of the actions taken by them. Appellant No. 2 feeling aggrieved by the aforesaid order filed a letters patent appeal bearing LPA No. 1081 of 2024 before the Division Bench of the Hon'ble High Court of Delhi and ultimately on 12.02.2025 the aforesaid LPA was dismissed and the order dated 23.10.2024 passed by the Ld. Single Judge of Hon'ble High Court of Delhi was upheld and various directions were issued including the suspension of the Board of Directors and appointment of an interim administrative committee. 17. The appellant no. 2 and 3 challenged the aforesaid order passed by the Hon'ble Division Bench of Delhi High Court before Hon'ble....
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....its day-to-day business activities. However, it shall not enter into any financial transaction exceeding Rs.10,00,000/- (Rupees Ten Lakhs only) without prior notice to the Observer. If the Observer deems it appropriate, he may bring the details of such transaction to the notice of the NCLT, where proceedings under Section 242 of the Companies Act, 2013, are pending. The NCLT may, thereupon, pass appropriate orders. (iv) The proceedings before the RBI, pursuant to its show- cause notice and in view of the liberty granted by this Court, vide order dated 17.02.2025, shall continue and appropriate orders shall be passed, preferably within a period of four weeks from today. (v) The observations recorded in the order passed by the learned single Judge and in the impugned judgment will not influence the RBI when it takes a decision. The RBI shall also not be influenced by this order, granting stay. It shall take an independent decision on the merits of the matter and proceed in accordance with law. (vi) Liberty is granted to the writ petitioner and the shareholders, who have moved the NCLT, to move an application before the NCLT/NCLAT seeking appropriate directi....
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....t Ld. NCLT to refrain from passing any direction in any application including IA No. 115 and IA No. 130 of 2025. In the meantime, a Civil Appeal bearing CA No. 7396 of 2025 was also filed in the Hon'ble Supreme Court under Section 423 of the Companies Act against the order dated 13.05.2025 passed by this Appellate Tribunal. It is on 16.07.2025, Ld. NCLT has passed the impugned order directing an investigation into affairs of the (Exclusive Capital Ltd.) under Section 213 of the Companies Act and aggrieved by the same appellants have preferred instant appeal. 22. It is further stated that the application before the Ld. NCLT has been moved by suppressing relevant facts and the reply filed by the appellants have not been properly appreciated. 23. Respondents has appeared before this Tribunal and have chosen not file any reply and after the matter was heard at length, a statement was made by their counsel on 07.10.2025, when the arguments were concluded, that they will not file any reply to the appeal however they be permitted to file written submissions and all grounds would be taken by them in the written submissions and these written submissions may be treated as their reply. ....
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.... Ld. Observer was pending before this appellate tribunal for adjudication is totally irrelevant as Section 213(a) of the Companies Act does not contemplate forming of a final opinion in relation to the allegations of fraudulent conduct. The adjudicating authority was thus only required to be satisfied of the existence of "good reasons to warrant an investigation" in terms of Section 213(a) of the Companies Act, 2013. It is highlighted that in this case there was ample material before the adjudicating authority to pass the impugned order. 31. It is further stated that the adjudicating authority for the purpose of passing impugned order has taken into consideration the reports submitted by Ld. Observer who is a retired judge of the high court and was appointed for that purpose by the adjudicating authority and his appointment has not been disturbed by any higher forum. 32. It is further stated that the law laid down in 'Rohtas Industries vs. S.D. Agarwala and Ors.' (1969) 1 SCC 325 and Barium Chemicals Ltd. and Anr. vs. Company Law Board and Ors. (1966) 36 Comp Cas 639 are not applicable to the facts of the instant case. 33. It is further stated that the impugned order has s....
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....on under Section 213 of the Companies Act, while these proceedings are not having any correction whatsoever with the ECL or its business and the impugned order has been passed in utter disregard and patent misreading of the order of the Hon'ble Supreme Court dated 24.02.2025. 38. It is vehemently submitted that the impugned order is a non-speaking order and has been passed without giving any reasons, clearly reflecting sheer non-application of mind and without recording any good reason or circumstances, suggesting that the affairs of the company are being carried with the intent of defrauding its creditors/members as required under Section 213 of the Companies Act. 39. It is also submitted that Section 213 of the Companies Act has to be read as a whole and it is the duty on the applicant to establish prima facie ingredients of Section 213 (b) (i), (ii) and (iii) regardless of the fact whether the application has been filed under Section 213 (a) or 213 (b) of the Companies Act. Reliance in this regard has been laid on the law laid down by a coordinate bench of this tribunal in 'RS India Wind Energy Pvt. Ltd. Vs PTC India financial services', 2016 SCC Online NCLAT 10 and it is ....
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....Reliance in this regard has been placed on 'Rajeev Suri vs. DDA' (2022) 11 SCC 1. 43. It is also submitted that NCLT has erroneously relied upon the observer's reports in arriving at decision to order investigation without realizing that the reports of the observer stand on the same footing as a commissioner's report and therefore no evidentiary finality could be attached with it and it may not be treated as conclusive and the same would be read along with the objections filed by the appellants. In this regard reliance has been placed by the Ld. Sr. Counsel for the appellant on 'M.P. Rajya Tilhan Utpadak Sahakari Sangh Maryadit vs. Modi Transport Service', (2022) 14 SCC 345 as well as the law laid down by the Hon'ble Bombay High Court in 'Kishor vs. Preeti', 2007 SCC Online Bom 102. 44. It is also submitted that the exclusive jurisdiction to investigate into the affairs of the company is with the reserve Bank of India, which is an expert body and in this regard Chapter III B of the RBI Act is a complete Code in itself and has been given an overriding effect over all other laws including companies act by incorporating Section 45 Q. In this regard the law laid down by the Hon'b....
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....he appellant has relied on 'AR Antulay vs. R S Nayak', (1988) 2 SCC 602 and 'Rajasthan SRTC vs. Zakir Hussain', (2005) 7 SCC 447 and it is submitted that the impugned order with stand the test of law as laid down in the aforesaid case laws and is liable to be dismissed. 49. We have already discussed the written submissions filed by respondents no. 1 and 2 at the appropriate place. However, we are very briefly mentioning here the submissions made by Ld. Counsel for the respondents. It has been submitted that Section 213(a) of the Companies Act contemplates showing of only "good reasons". The allegations against the appellants are concerning siphoning of funds and related-party dealings. Respondents collectively hold at least 10% voting rights, satisfying Section 213(a) threshold. Lower threshold of only "good reasons" is kept for insider's/minority shareholders. Observer, who is retired High Court judge, has found transactions showing directors siphoned funds via related entities, extended loans of huge amount and bought luxury cars at inflated prices through related parties, fabrication of board resolutions/minutes, amounting to an offence under Section 447. 50. It is further....
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....t, appears to be satisfied. 55. It is also reflected that Respondents have filed a company petition bearing CP No. 48/PB/2024 under Section 241-242 of the Companies Act in NCLT New Delhi Bench -II with the allegations against the appellant of committing oppression and mismanagement with regard to the affairs of the appellant company including violations of directions and guidelines issued by the RBI, siphoning of funds by the board of the appellant company, causing resignations of key managerial personnel's by intimidation and harassment, failure in disclosing material information to the board, misuse of funds of the company purchase of luxury car at high price for personal use from the funds of appellant company and various other acts of corporate mis governance etc. including illegal conversion of OCD's to CCPS's without approval of the RBI, misappropriation of funds taking from Respondents. Various reliefs were claimed by the Respondents(Petitioners) including directions to appellant no. 1 to apply to the RBI to extend the validity of the RBI approval and to take all other actions in order to allot 2883506 shares to the Respondents against infusion of Rs. 5,00,00,000/- (five ....
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.... Key Managerial Persons and skilled professionals to assist him in managing the affairs of the company (Respondent No.1) and to ensure that the provisions of Non-Banking Financial Company-Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 as also the letter dated 30.05.2023 issued by RBI are complied with and no defiance thereof persist. G. For a period of 180 days, the Board of Directors would remain in suspended position. Nevertheless, the Respondent Nos.2 to 4 would be paid the same pay and allowances as they are drawing as on date. H. On expiry of the period of 150 days the Ld. Administrator would evolve a scheme regarding composition of fresh Board of Directors and running the affairs of the company. While doing so, the Ld. Administrator would consult all stakeholders. In the meantime, the Ld. Administrator will file a monthly report regarding the affairs of the Respondent No.1 before this Tribunal, by way of IAs. I. An appropriate application for approval of the scheme/plan to be evolved by Ld. Administrator (as above) shall be filed before this Tribunal by way of an IA, before expiry of 180 days. Nevertheless, if ....
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....the Ld. Observor. 6. Ld. Observor shall be entitled to pay and allowances and facilities as admissible to the CEO/Managing Director of Respondent No.2. 7. The Ld. Observor shall be at liberty to approach this Tribunal for any clarifications or directions. 8. List the appeal on 3rd and 5th July, 2024 for further hearing". 59. On 24.05.2024, Evaan Holdings Pvt. Ltd. send a detailed complaint to RBI with regard to the alleged misappropriation of funds and mismanagement in the appellant company. In the meantime, a writ petition bearing WP (C) 9877 of 2024 was filed in Hon'ble Delhi High Court by Evaan Holdings Pvt. Ltd. (Evaan) praying amongst other, directions to RBI to enquire into the affairs of the appellant company, directions to do special audit and also of removal of the board and other consequential directions. A contempt petition was also filed by the Respondents and an application to recall order dated 31.05.2024, was also filed by the appellants on which this appellate tribunal had passed an order on 23.07.2024, operative part of which is reproduced as under: "4. We have gone through the order dated 31.05.2024. The Ld. counsel for the a....
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.... of Section 45ID of the RBI Act; (iii) In view of above (ii), the present Board of Directors shall submit all the records including the books of accounts besides all movable and immovable properties at the disposal of the Interim Committee of Administrator forthwith; (iv) Further, as an interim measure Sabadra & Associates, Chartered Accountant firm (IBA no. 120 in the list) is appointed a statutory auditor to conduct special audit under Section 45MA of the RBI Act and conduct statutory audit under the Companies Act, 2013 to finalize the accounts of respondent No.2 company within a period of four weeks; (v) The said statutory audit of respondent No.2 company shall be conducted for the financial years 2022-23 & 2023-24; (vi) It is also provided that the respondent No.1/RBI shall be at liberty to appoint any competent person on its own in the interim committee of the Administrators. (vii) A detailed report with regard to action taken by the Interim Committee of Administrators and respondent No.1/RBI shall be placed before this Court within five weeks from the date of this order; (viii) Hon'ble Mr. Justice R.K. Gauba (Retired) ....
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....ated to me. There has been a stoic silence till date and further information/ records/ documents have not been forthcoming, without which the responsibility cast upon me cannot be completed. In light thereof, the company, its Directors and all concerned may be directed by the Ld. NCLAT to comply with the information/records/ documents requisitioned by me, at the earliest". 64. The record would further reflect that on 02.12.2024, Ld. Observer has filed his second status report wherein again complaint was made pertaining to the reluctance of management of appellant company to share necessary information. It was also complained that the management of ECL is installing requests of Ld. Observer for sharing of information or records and also that some information has been provided. So far a siphoning of funds and other allegations qua financial transaction is concerned Ld. Observer stated as under:-(As mentioned by the NCLT in Impugned order and has not been disputed so far as contents are concerned) "I. Sulojay Realty Private Limited ('SRPL') 16. SRPL is a related party. The material available confirms that Mr. SP Bagla and Mr. Achal Jindal, Directors in ECL....
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....'EMPL'). A perusal of the financial statements of SRPL, as downloaded from the website of MCA, by the CA, reflect that the company does not have any ongoing operations/ businesses and therefore it is questionable as to how the loan which was secured on the asset of SRPL was used or expected to be repaid. It is further questionable as to how ECL could have given a loan to SRPL on unsecured terms at such concessional rates of interest. The purpose of loans extended by ECL to SRPL seems to be other than what has been projected. III. Mr. Satya Prakash Bagla 25. As per the material shared, ECL disbursed a loan of Rs. 4.90 crores to Mr. Satya Prakash Bagla, serving as Managing Director of ECL, against loan agreement/ sanction letter dated 14.06.2022. There is virtually no documentation shown, no loan application or business proof or audited financial or end use of funds or source of re- payment of loan etc. taken at least for the record. In the disclosures, there is a vague reference made to some policy adopted on 23.12.2022. What was the said policy or how it is relevant for this transaction has not been explained. Assuming that it was necessary to abide by suc....
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.... appears to have resulted in actual losses for ECL in as much as the books of account show no repayment till 31.07.2024. 33. The ledger for the period 01.04.2022 to 31.07.2024, against the disbursal of Rs. 2.05 crores, the borrower had repaid Rs. 1 crore till August 2022, the balance principal amount being Rs. 1.05 crores transferred as interest bearing loan on 25.05.2022, on which interest and instalments were made applicable. The said balance was not paid nor any interest recovered. By letter dated 25.05.2022, the amount of Rs. 1 crore was made interest free. There is no interest charged on the principal sum from the date of loan. Such terms are too benevolent and exposing ECL to loss. 34. ECL appears to have been too indulgent towards Mr. Mirani since the disclosed material reveals a further loan of Rs. 9.32 lacs having been extended to him on 07.09.2023 even while he was in default against the previous transaction. VIII. Other questionable acts of commission/ omission: 44. As per the data provided by ECL, its assets include 3 vehicles, viz. Bentley Bentayga (value Rs. 6.65 crores), BMW X5 (value Rs. 1.11 crores) and Mulsanne (value Rs. 9 cror....
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....notice to the Observer. If the Observer deems it appropriate, he may bring the details of such transaction to the notice of the NCLT, where proceedings under Section 242 of the Companies Act, 2013, are pending. The NCLT may, thereupon, pass appropriate orders. (iv) The proceedings before the RBI, pursuant to its show- cause notice and in view of the liberty granted by this Court, vide order dated 17.02.2025, shall continue and appropriate orders shall be passed, preferably within a period of four weeks from today. (v) The observations recorded in the order passed by the learned single Judge and in the impugned judgment will not influence the RBI when it takes a decision. The RBI shall also not be influenced by this order, granting stay. It shall take an independent decision on the merits of the matter and proceed in accordance with law. (vi) Liberty is granted to the writ petitioner and the shareholders, who have moved the NCLT, to move an application before the NCLT/NCLAT seeking appropriate directions. If any such application is filed, the same will be considered and decided in accordance with law, without being influenced by the impugned judgment, incl....
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....A (AT) 119 of 2025 was filed against the order whereby a show cause notice was issued to the appellant company. 72. It is also reflected that the appellants again moved Hon'ble Supreme Court by filing IA No. 143368 of 2025 in SLP No. 4534 of 2025 requesting to restrain Ld. NCLT from passing any order in IA No. 115 of 2025 and IA No. 130 of 2025 in CP No. 48/ND/2024 and on 15.07.2025, Hon'ble Supreme Court passed an order in the aforesaid IA as well as in Civil Appeal No. 7396 of 2025 and contempt petition no. 433 of 2025. "1. Having regard to the fact that there are four connected matters, it would be appropriate that brief written submissions dealing the facts of each case be provided by counsel representing both the sides. Such brief submissions may be filed by 23.07.2025. 2. List on 28.07.2025". 73. Hon'ble Supreme Court on 08.08.2025 disposed of the Civil Appeal No. 7396 of 2025 moved by the appellants filed under Section 423 of the companies act by passing the following order: "We have heard learned Senior Counsel for the appellants as well as learned senior counsel for the respondents at length. 2. We dispose of this Civil Appeal by o....
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....order has been passed without any prima facie evidence without recording any satisfaction with regard to existence of good reasons or circumstances suggesting that the affairs of the company are being carried on with the intent of defrauding its creditors/ members as required under Section 213 (b), (i), (ii) & (iii) of the companies act and the tribunal has mechanically relied on the pleadings of the Respondents. It is highlighted that the ingredients provided under Section 213(b), (i), (ii) and (iii) regardless of whether the application is filed under Section 213(a) or 213 (b) are necessary to be satisfied and the tribunal must express explicit satisfaction that circumstances suggest that the companies affairs are being conducted with intent to defraud creditors/members or for unlawful purposes or in a manner oppressive to members and this satisfaction must be based on material/evidence available on record and no such order could be passed on mere conjecture or suspicion. In this regard reliance has been placed on the law laid down in RS India wind energy Pvt. Ltd., Barium Chemicals, Devdas Multimedia, Lagadapati Ramesh, Capt. Valdamanatti Jayapushpakumar, Jaswant Sugar Mills Ltd....
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....dients mentioned in sub-clause (i) to (iii) of clause (b) of Section 213, and (iii) whether the ingredients as referred in sub-clause (i) to (iii) of clause (b) of Section 213 only can be looked into on an application made to the Tribunal by 'any other person' i.e. other than members or 'otherwise' even if the circumstances so suggest. In other words, whether the Tribunal can rely on the ingredients as mentioned in sub-clause (i) to (iii) of clause (b) of Section 213 in an application made by the members under clause (a) of Section 213? 46. Following the principle aforesaid if Section 213 is read as a whole in its context, we find as follows: - A. Under Section 213 the Tribunal can entertain an application only if it is made by- (a) (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 ....
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....mentioned in clause (b) of Section 213 is applicable to all cases, irrespective of the category to which the applicants) belong i.e. clause (a) or clause (b) of Section 213 of the Act. 51. The provision requires the Tribunal to form opinion in regard to ingredients as mentioned in sub-clause (i), (i) and (li) of clause (b) of Section 213. But the Tribunal is not required to form opinion objectively, and is only required to satisfy itself on the basis of materials/evidence on record that there are good grounds to order investigation. The material/evidence taken on consideration should reflect the satisfaction of the Tribunal to order investigation. Detailed evidence etc., thereafter, required to be collected by the inspectors) during the investigation to hold an accused guilty for one or other offence i.e. fraud. 52. The Tribunal is not expected to refer all the evidence to form opinion about the malpractice or for fraud mentioned in sub-clause (i), (ii) and (iii). It is the job of the Inspecting Authority (Inspector) to go through the evidence before coming to a conclusion and forming opinion that malpractice or fraud mentioned under sub-clause (i) or (ii) or (il)....
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....part of the persons engaged in the formation or conduct of the affairs of the company, though not listed as some of the circumstances under Section 433 of the 1956 Act, were still available for the winding up of the company, even under the 1956 Act. But there were 3 requirements to be satisfied. They are: (i) the perpetration of one or the other types of fraud mentioned above are reflected in a report of investigation; (ii) the petition under these provisions is to be filed only by a person authorised by the Central Government; and (iii) the petition should be premised on the ground that it is just and equitable to wind up the company". 83. Similarly, in Lagadapati Ramesh (supra) a coordinate Bench of this appellate tribunal in the context of Section 213 (b) of the Companies Act, held as under: "34. In terms of clause (b) of section 213, on an application made to it by any other person ("resolution professional") or otherwise (suo motu), if the National Company Law Tribunal 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 fraud....
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....uthority/Tribunal to give a notice with regard to the aforesaid charges to the promoters and others, including the appellants herein and after following the procedure as laid down in section 213, if prima facie case was made out, it could refer the matter to the Central Government for investigation by the Inspector or Inspectors and on such investigation, if any, actionable material is made out and if the Central Government feels that the matter requires investigation through the "Serious Fraud Investigation", it can proceed in accordance with the provisions as discussed above. Impugned order shows parties have been heard on the charges claimed by the "resolution professional". The above mentioned case would reveal that the tribunal had straight away directed investigation to be conducted by SFIO and the order was passed on an application moved by Resolution Professional of a Corporate Debtor i.e. M/s Bhuvana Infra Projects Pvt. Ltd. and it is in this background this tribunal has stated that a decision with regard to the forum which may conduct the investigation is to be taken by the central government. It is to be remembered that this case pertaining to a case wherein an applic....
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.... in para 193, 194 and 196 of the report. "193. Another dimension to be kept in mind is the factum of subjective satisfaction of the executive. The law regarding the involvement of constitutional courts in public interest in cases involving subjective satisfaction is well settled. The interference of courts is neither warranted to look into the quality of material relied upon by the Government to approach a decision nor to adjudicate upon the sufficiency of such material. These matters are of a subjective character and if legislature permits subjective powers on one organ of the State, the other (in the name of judicial review) is not expected to substitute its own subjective relevancy of the material relied upon to take a decision in order to see that the decision is not devoid of application of mind. It is based on the basic idea that the structure of a subjective decision stands on the foundation of objective reasons. The Court may interfere when a decision is devoid of any reason or affected by mala fides or when the decision is reached in the aftermath of statutory violations. 194. In Barium Chemicals, the Court while dealing with an order in the exercise of s....
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....stigation and also that the material/evidence which has been taken into consideration by the tribunal must reflect the satisfaction of the tribunal to order such investigation, keeping in view the requirement of sub section (i), (ii) and (iii) of sub section (2), however the meticulous exercise of appreciation of facts and evidence and recording of objective satisfaction with regard to the allegations is not required at this stage as the allegations are yet to be investigated by the officer appointed by the central government. Thus it is on the basis of these principles the Tribunal was required to appreciate the material/evidence placed by the parties in order to arrive at the decision of referring the matter for investigation into the affairs of the company. We will discuss the factual aspect with regard to the potency of material, later on in this judgment, which was placed before the tribunal. 89. The other submission which has been made by Ld. Sr. Counsel appearing for the appellant is in terms that Ld. NCLT has erroneously relied upon the reports submitted by Ld. Observer the evidentiary value of which is analogous to that of a commissioner's report which may be submitted ....
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.... him and the reports submitted by the observer would clearly demonstrate that the appellants were extremely non-cooperative and they did not comply the directions given by Ld. Observer and it is to be noted that Ld. Observer was inquiring into the allegations of siphoning of funds under directions of this tribunal and it has been clearly observed by Ld. Observer that appellants no. 2 and 3 are working to denude the company of its assets through siphoning of funds with a clear intent to defraud the members and the creditors of the company by the specific acts mentioned therein i.e. by granting favorable loans to entities owned and controlled by the them and taking no steps for the recovery for such outstanding loans and also purchasing luxury cars at inflated prices and it was also highlighted by Ld. Observer that these related party loans were granted without any documentation and were largely unsecured which supports the allegations levelled by the Respondents in their application moved before Ld. NCLT. 93. Keeping in view the rival submissions made by Ld. Counsel for the parties we have looked into the case laws submitted by Ld. Sr. counsel appearing for the appellant. 94. ....
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....rawing a finding of conclusive nature then there will not be requirement of any investigation. The investigation is to be done to investigate the truthfulness or otherwise of the allegations. Therefore, in every such case having regard to the allegations levelled, a question is to be asked by the tribunal to itself as to why the investigation is necessary and if the answer to this query is in affirmative the tribunal may pass the order of investigation into the affairs of the company. However, answer to the query must also reflect in its order. Thus in our considered opinion above placed submission of Ld. Sr. Counsel appearing for the appellant that the reports of the observer could not be taken into consideration by the tribunal, in our considered opinion, is not sustainable. 96. It is also submitted by Ld. Sr. Counsel for the appellant that the Respondents are indulging in forum shopping and it is argued that on this score the impugned order is bad. We do not want to discuss this submission meticulously as it is an admitted fact that Ld. NCLT is having jurisdiction to entertain the application moved by a party under Section 213 of the Companies Act and it has also surfaced tha....
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....vil appeal no. 7396 of 2025, wherein the Hon'ble Supreme Court passed an order dated 08.08.2025 whereby liberty was granted to all parties to advance arguments on their respective contention before this appellate tribunal and thus IA No. 115 of 2025 and any other application which was filed before the NCLT in respect of the appeals pending before this appellate tribunal were transferred to this appellate tribunal and the Hon'ble supreme Court did not modify its order dated 24.02.2025, despite a modification application was moved by the appellants. 99. Perusal of the impugned Judgment in the background of the aforesaid submissions would reveal that this argument has been dealt with by Ld. NCLT in para no. 25 and 26 of the impugned judgment and it was stated therein that the tribunal had not given quietus to the issue and was to monitor the affairs of the administrator (observer) of the company and it is only because this appellate tribunal is seized of the appeal preferred against the order dated 15.05.2024 there was no question of compliance of aforementioned directions and when the Hon'ble Supreme Court has passed an order (dated 24.02.2025 in SLP (C) No. 4534 of 2025). It ....
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....sdiction to investigate into the affairs of the company is bestowed upon the RBI and also that when the matter was being enquired by the RBI on the complaints made by the Respondents there was no opportunity for the Ld. NCLT to have passed the impugned order, encroaching upon the jurisdiction of the RBI and in this way the NCLT has violated the principle of regulatory supremacy of expert statutory bodies. In this regard the law laid down by the Hon'ble Supreme Court Akshay N. Patel (Supra), Nedumpillai finance company, integrated finance company ltd. (supra) and Section 45 N as well as Section 45Q of the RBI Act has been highlighted in order to canvass that Section 45 Q of the RBI Act provides that Chapter III-B overrides all other laws and Section 45 N provides for inspection to be carried out of NBFC under the directions of the RBI and thus the investigation of such nature was under the exclusive domain of the RBI, which has been already done by the RBI. 104. Contrary to this Ld. Counsel for the Respondents submits that any proceedings before the RBI concerning the company does not bar the proceedings under Section 213 of the Companies Act especially when the allegations are p....
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.... according to the appellants before the Hon'ble Supreme Court, was already covered by chapter III-B of the Reserve Bank of India Act 1934 and it is in this background Hon'ble Supreme Court has made observations in para no. 55 of the judgement that no NBFC can commence or carry on business without obtaining the certificate of registration under the RBI Act and also that the supervision and regulation of NBFC is to be performed by the RBI from the time of its birth till the time of death of the NBFC. There may not be any quarrel with the proposition that the day to day business of NBFC is to supervised by the RBI so far as the interest of depositor and NBFC is concerned and no NBFC can commence its business in violation of provisions contained under Chapter III-B of the RBI Act. However, we have perused whole of the chapter III-B of the RBI Act and could not find any provision in this chapter which may be pertaining to any investigation which may be done by the Reserve Bank of India with regard to the allegations of Fraud and siphoning of funds by a NBFC or wherein provision for prosecution of offenders of such offence has been provided. In other words, Chapter III-B of the R....
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...., 47 and 48 of Integrated Finance Company Ltd vs RBI and others, (2015) 13 SCC 772 in order to canvass that Chapter III-B of the RBI Act is a complete code in itself and has been given an overriding effect over all other laws including Companies Act in view of section 45 Q of the RBI Act. The appellant in this case was an NBFC and RBI inspected the books of accounts of it under Section 45 N of the same and the inspection report disclosed various violations of the provisions of the RBI Act. Appellant company in order to overcome problems being faced by it proposed a scheme of compromise with its creditors i.e. depositors and bond holders, which was approved by the Board of directors of the appellant company. It was this compromise which was presented under Section 391 of the Companies Act 2013 to the High court wherein the direction was given to convene the meeting of deposit holders. The meeting was accordingly held and the report was filed before the Hon'ble High Court and the Scheme of the appellant was approved. This order was challenged before the Division bench of the Same High Court in Intra Court appeal and the Judgment was set aside and in this way the matter came befor....
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....ntral government and when such an order is made the central government would be bound to appoint one or more competent persons as inspectors to investigate into the affairs of the company in respect of such matters and to report thereupon to it in such manner as the central government may direct. It is also held there in that if after investigation it is proved that the business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose or any person concerned in the formation of the company or the management of its affairs have any connection there with being guilty of fraud then every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punishable for fraud in the manner as provided in section 447 of the Companies Act 2013. 113. It is also highlighted that for the purpose of punishment for a fraud in the manner as prescribed in Section 447 of the Companies Act 2013 the matter is required to be tried by a special court as....
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.... Reserve Bank of India and the investigation which has been directed by Ld. NCLT are with regard to achieve distinct results by such inquiry or investigation, as the case may be. For the reasons mentioned herein before we do not have any reason to disbelieve the contention of Reserve Bank of India as projected in their affidavit filed before the Hon'ble Supreme Court of India in the above mentioned proceedings between the same parties and accordingly we do not find any illegality in the order impugned, on this score. 116. In Hari Sankaran ( Supra) Hon'ble Supreme Court has opined that the three provisions i.e. 130, 211/212 and Sections 241/242 of the Companies Act are required to be considered conjointly and also that while passing order in a particular provision the endeavour should be to see that the orders passed other provisions of the Companies Act are given effect to or passed in furtherance of the order passed under other Sections and on this basis it is submitted by Ld. Counsel for the respondents that the earlier orders passed by the Tribunal with regard to oppression mismanagement and pertaining to other illegalities going on in the management of affairs of the....