AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1480
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....is the Petitioner to the company petition. 2. The Respondent No. 1/Petitioner, happens to be the estranged wife of Appellant No.3/Respondent No. 3. What has been attempted to be impressed upon by the Ld. Counsel for the Appellant is, as if the entire controversy arisen from the personal matrimonial dispute between the Appellant No. 3 and Respondent No. 1, which the parties to the proceedings were harbouring against one another owing to their matrimonial discord. 3. But at this stage itself, we make it very clear that, any such type of an impression, which is being attempted to be created regards personal dispute, will not be having any bearing, nor would be influencing, the actual controversy, which requires consideration in the instant company appeal, and this Appellate Tribunal will be confining itself to the judicial and procedural propriety of the impugned order of 30.06.2022. 4. To be precise, the Ld. Tribunal, while exercising its inherent powers, and taking into consideration, the fact that since the inter-se controversy was pertaining to the shares and its transfers, which were alleged to be based upon fraudulent documents, which has been relied upon by the parties....
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....al may be that, it is revolving around a multifarious bundle of facts, based upon which independent interpretation that, had been given by the respective parties to the proceedings; to the documents that, had been filed by them in support of their rival contentions, while putting a contest to the allegations that had been levelled in the company petition in context for the relief claimed therein. But ultimately, the controversy, which boils down herein, for our consideration and which is the precipitative grievance, as it had been agitated by the Appellant, is that as to, "whether at all, the powers under Rule 43 of the NCLT Rules, 2016, could be expanded to be exercised by the Ld. Tribunal under the given set of circumstances: (i) For the purposes to appoint an independent auditor (ii) For the purposes of carrying out an investigative audit and to cull out the details pertaining to the fraudulent transfer of shares and the alleged allegations of fraudulent acts committed, while preparing the reports for the financial year, which has been ending on 31.03.2019". 9. The Ld. Counsel for the Appellant, while questioning the impugned order dated 30.06.2022, had made....
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....#39; to justify the passing of an order for issuing a direction for conducting a forensic investigation. Though not relevant, the Ld. Counsel for the Appellant has submitted that the entire proceedings apparently seem to be vitiated because of a certain hidden inclination of the Registrar of Companies, having submitted the reports to one of the lawyers only, without serving the same on the Appellant's lawyer. (vi) Ld. Counsel further contends that, the reports, which have been submitted pertaining to the financial status of the company, up to the financial year ending on 31.03.2019, since being false and a fabricated document, the entire proceedings, as it has been observed to be determined by way of conducting a forensic investigative audit, is without any rationale. (vii) And lastly, he even questioned the propriety of the Ld. Tribunals' order with regard to the 'authority of Ld. Tribunal for fixation of the fee to be paid to the Auditor', who was appointed by the Ld. Tribunal for conducting the Forensic Audit. 10. The summary of facts, that had been referred in the impugned order, the dispute, it has its birth from the pleadings that were rai....
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....ppellant No.1 company. She contended that Respondent No. 2 to the company petition, who happens to be the managing director and the promoter of the Appellant No.1/Respondent No.1 company, and Respondent No.3 to the company petition who is yet another promoter director of the Appellant No.1/Respondent No.1 company had acted in connivance with Respondent No. 4 and 5, who are the directors of the Appellant No.1/Respondent No.1 company, had acted in conspiracy with the statutory Auditor i.e., Respondent No. 6 to the company petition, who is shown to have audited the balance sheet and profit and loss accounts of the company for the financial year ending on 31.03.2019, submits that, owing to the object as it was contained in the memorandum of association of the company. It was found that, under the compelling circumstances, because the balance sheet and the profit and loss account of the Appellant No.1/Respondent No.1 company, for the aforesaid accounting period was not reflecting the correct balances. Besides that, since the list of shareholders as shown in the register too was not in conformity with the actual shares, which was being held by them. 13. The Respondent No. 1/Petitioner....
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....sion. 16. Further, the Petitioner/Respondent No.1 by invocation of the provisions contained under Section 447 and 448 of the Companies Act, 2013, has sought a relief in the nature of declaration as against Respondent No. 2, 3, 4 and 5 of company petition who have intentionally committed a fraud in respect to the documents filed with the Registrar of Companies, Kerala and to direct the Registrar of Companies, to initiate a prosecution for the said offences by invoking the provisions contained under Section 439 of the Companies Act, 2013, besides imposition of cost. 17. The Respondent No. 1/Petitioner in this petition has projected before the Ld. Tribunal, that at the stage when the impugned order was being passed, she had submitted that as against the set of allegations that, were levelled towards her, she had issued a legal notice on 18.07.2020, to the Board of Directors of the Respondent company with reference to her shareholding in the company. In the absence of there being any clarification given by the opposite party to the company petition, she contended that the allegation levelled by her and the shareholding as given by her in the notice of 18.07.2020, should have been....
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.... exercised by a company only in a general meeting and not otherwise. Hence, the allotment of 16,500 shares which were held to be made on 29.03.2008, when the company did not have adequate authorised capital is illegal and was done with an ulterior motive. 20. Besides, that an allegation was also raised by the Respondent No.1/Petitioner in the company petition, that the annual returns, which were made up to 29.09.2018, wherein the list of shareholders has been attached, it was carrying a note that the entries made therein was having certain errors because of the clerical mistake which occurred in the previous year's filing of MGT 7, and the number of shares that were actually held by the three shareholders had been wrongly entered into, and the same deserves to be rectified while exercising powers given for rectification of Registrar of Members provided under Section 59 of the Companies Act, 2016. 21. Based upon the aforesaid fact, ultimately the Respondent No.1/Petitioner, analysed the controversy, contending thereof, that because of the fraud apparently having been committed by the Respondents to the company petition, had amounted to an act of oppression and mismanagemen....
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....dent (or any of the parties to the proceedings), making a request for sending the documents for conducting of a Forensic Investigative Audit, the entire proceedings under Rule 43 of Rules would be vitiated, and no such order could have been passed in the absence of there being a prior request by way of an application. 25. In order to better appreciate the aforesaid argument, as it has been extended by the Ld. Counsel for the Appellant, a reference to Rule 43 of the NCLT Rules, 2016, becomes inevitable for this Appellate Tribunal. The NCLT Rules, 2016, had been framed by the Government of India, while exercising its powers as vested in it under Section 469 of the Companies Act, 2013. Rule 43 of the NCLT Rules, 2016, reads as under: "43. Power of the Bench to call for further information or evidence. - (1) The Bench may, before passing orders on the petition or application, require the parties or any one or more of them, to produce such further documentary or other evidence as it may consider necessary:- (a) for the purpose of satisfying itself as to the truth of the allegations made in the petition or application; or (b) for ascertaining any in....
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.... of the Bench', the reference of the language power of the bench therein itself in the title head, is an answer to the question raised by the Ld. Counsel for the Appellant, that it is a self-ordained power, which has been vested with the Ld. Tribunal to ensure an effective dispensation of justice and particularly, the objective that has been widely contained under Section 424 of the Companies Act, 2013. 28. Even otherwise, if we scrutinize the entire provision of Rule 43 of NCLT Rules, 2016, it nowhere stipulates or prescribes for that, there has had to be a specific application which is required to be preferred by any party to the proceedings for the purposes of invocation of the provision contained under Rule 43 of the NCLT Rules, 2016. In that eventuality, when the provision itself doesn't contemplate filing of any specific application, that in itself can be explicitly inferred that, even if a party to the proceedings intends to invoke the aforesaid provision contained under Rule 43 of the NCLT Rules, 2016, requiring for collection of the information or any evidence there is no specific bar which has been created under law as such for any of the parties to the proceed....
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....n for soliciting an order for conduct of the forensic examination by the Central Forensic Science Laboratory, where the right of a party has been reserved where, a latitude has been granted by the aforesaid provision by using of the word "liberty" as it has been reserved for the party to the proceedings to get a statutory record tested through a forensic investigation. Liberty granted therein is not to be read as a restriction for exercise of powers by the Ld. Tribunal under Rule 43(1) of NCLT Rules, 2016. 31. Yet again, it will be a reiteration of the observation, which has been made by this Appellate Tribunal that even if this provision is taken into consideration, the word "liberty", which has been left open to be exercised by the parties, is not to be read in a restrictive manner, as a restraint for the Ld. Tribunal to exercise its inherent powers to call for a document for its scientific examination, which it feels to be just for an effective adjudication, so as to rule over the plea of fraud. And particularly, when the aforesaid process only contemplates and rather when it facilitates the Ld. Tribunal, which is an adjudicatory body, to arrive at a logical conclusion before....
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.... any time during the pendency of any suit, to order the production by any party thereto, upon oath, of such of the documents in his possession or power, relating to any matter in question in such suit, as the Court shall think right; and the Court may deal with such documents, when produced, in such manner as shall appear just. " 35. The aforesaid provision itself provides for that under Order XI, Rule 14 of the Code of Civil Procedure (CPC), it would be the court who can exercise its powers during the pendency of the proceedings of the suit (herein would be company petition), to call for a party to the proceedings to produce a document and further the court may send the documents for its verification through an investigating agency. Apart from the aforesaid object of the provisions contained under Rule 43 of the NCLT Rules, 2016, to be read with, Order XI, Rule 14 of the Code of Civil Procedure (CPC), to be read with Section 30 of the of the Code of Civil Procedure (CPC). 36. We are of the view that, the procedures to be followed before the court, are handmade of justice. They are not to be rigidly construed to lead to deprivation and is not to be followed in a straight-jack....
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....tained under Rule 43 of the NCLT Rules, 2016, is taken into consideration, which is restricted to for the purposes of calling for the information or evidence, the aspects pertaining to calling for an information or an evidence is altogether distinct in its application, than to the powers which are contemplated to be exercised by the Ld. Tribunal in accordance with the provisions contained under Rule 45 of the NCLT Rules, 2016, which independently pertains to conferring of a right upon every party to the proceedings for his entitlement to appear before the Ld. Tribunal in person or through an authorized representative. For the purposes of substantiating his case, 'appearance in person' and 'calling for an information or an evidence', are entirely two distinct aspects, as information pertains to seeking or soliciting of an information, which is otherwise outside the domain or knowledge of the party to the proceedings or outside the records of the case, or if they are within the domain or knowledge of the parties to the proceedings if they are controverted by an adversary to the proceedings, these documents or information may be required to be tested in accordance with....
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....all be confused to be read, as if the provisions contained under Rule 43 of the NCLT Rules, 2016, has been adopted by the Respondent, as a measure to facilitate to collect evidence. That may not be the situation herein for the reason being that, the documents which were being sent for its examination were the documents that are already available, only question which fell for consideration was that, the propriety and genuineness of the said document and its fraudulent creation, that was a question which was required to be decided after making a reference of these documents in a proceeding, to be tested by the Independent Auditor. If this recourse is adopted by the Ld. Tribunal, it cannot be taken that, as if any report, which is thus to be submitted by the Independent Auditor in compliance with the directions issued by the Ld. Tribunal under Rule 43 of the NCLT Rules, 2016, will amount to collection of an evidence in favor of either of the parties to the proceedings. 40. This argument could also be answered from yet another perspective, that may not be a logical inference, which could be drawn at this premature stage particularly when the need for the documents to have been refer....
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....s in the shape of an inherent exercise of powers, where the court records its findings, only prima facie justifying the necessity to test a document is sufficient, because detailed deliberation for testing of documents, which may have a bearing on the merits of the matter. For the aforesaid purpose, a detailed analysis or a scrutiny is not required to be assigned by the Ld. Tribunal at that initial stage, to justify the passing of an order appointing an Independent Auditor to test documents, particularly when the contents of the same have been denied. Prima facie deliberative satisfaction required to be recorded by the Ld. Tribunal may not be even the intention of the law also, because the provisions under Rule 43 of the NCLT Rules, 2016, under which the documents had been directed to be tested by the Independent Auditor, in itself do not prescribe any mandatory provision, which is necessarily required to be complied with by the Ld. Tribunal, prior to sending a document to be tested by an Independent Auditor. The prima facie satisfaction could at times in a judicial proceedings be a self-ordained powers, which are required to be exercised by the Ld. Tribunal or the courts with self....
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....the Ld. Tribunal to direct the Registrar to furnish the report, as it had been furnished to the counsel for the other side which is complaint of, to them also, so that, they may also avail an equitable relief of scrutinizing the report and then presentation of their case in correlation to the Investigative Audit report as submitted by the Independent Auditor in context of the documents, which had been directed to be tested, which were alleged to have been fraudulently procured or fraudulently manufactured. 46. It needs no special reference that procedures are handmade to justice and should never be made as a weapon to be utilized with fatality to deny justice or to perpetuate any justice. At every stage of the proceedings the procedural defects or irregularities would not incapacitate a party to the proceedings to be denied with an effective opportunity. As such fatalities would always be curable and it ought not to be utilized to defeat the substantive right or to cause an injustice to a party to the proceedings. 47. Ultimately and very vaguely too, the Ld. Counsel for the Appellant had tried to attach a bias to the impugned order, on the ground that under law, the Ld. Tribu....