TaxTMI 
TaxTMI 
2026 (7) TMI 467
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....d finally. 2. The above Writ Petition is filed seeking to challenge the impugned order dated 11th August 2025 (Exhibit "A" to the Petition) issued by Respondent No.1 declaring the account of the Petitioner as "fraud". Further, a Mandamus is sought to restrain Respondent No.1 from issuing any direction or providing any information to any agency pertaining to the impugned order or classification of the Petitioner's account as "fraud", and in the event that any such information/direction has already been issued, be forthwith withdrawn and/or recalled. 3. It is the case of the Petitioner that he was a director of a company called Paramshakti Steels Limited (for short "PSL") which was incorporated on 31st May 1995. The Petitioner ceased to....
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....pires that before the FAR, a successful resolution plan for the revival of PSL was approved by the NCLT in February 2019. 5. Be that as it may, on the basis of the FAR dated 20th June 2020 and nearly 4 years thereafter, the 1st Respondent issued a Show Cause Notice dated 4th May 2024 to the Petitioner calling upon him to show cause why he should not be declared as "fraud". On 18th May 2024, the Petitioner's Advocates replied to the Show Cause Notice inter alia pointing out that- (a) the Petitioner ceased to be a director on 26th May 2014; (b) the account of PSL had turned NPA on 30th September 2016 when the Petitioner was not a director; and (c) the FAR of M/s. Garg Brothers and Associates was not furnished to ....
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....unsel appearing on behalf of the Petitioner, took us through the impugned order, which is found from pages 38 to 44 of the paperbook. Mr. Narichania submitted that in the facts of the present case, the FAR is mechanically accepted when the FAR itself states that it is not conclusive. It appears that there is a complete non-application of mind at the time of passing the impugned order, was the submission. He further submitted that there is no finding in the FAR on any transaction attributable to the Petitioner during 1 month and 25 days when he was director of the company, and he has never been the director of the company after his resignation on 26th May 2014. In fact, it was the submission of Mr. Narichania that the impugned order is nothi....
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....l 2014 to 4th December 2018. For all these reasons, the learned Counsel submitted that there was no merit in this Writ Petition and the same ought to be dismissed. 10. We have heard the learned Counsel for the parties at length. We have also perused the papers and proceedings in the above Writ Petition. 11. The first ground on which the impugned order is assailed that it is unreasoned. To substantiate the argument that the order classifying a person as a "fraud" should be a reasoned order, reliance was placed on clause 2.1.1.4 of Fraud Master Circular of 2024. For the sake of convenience, the said provision is reproduced hereunder:- "2.1.1.4 A reasoned Order shall be served on the Persons/Entities conveying the decision of th....
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....ing, concludes in paragraphs 7 and 8 that the account of the Petitioner is declared as "fraud". 14. After going through the impugned order, we have no hesitation in holding that it is wholly unreasoned. Apart from being bereft of any reasons, the impugned order does not even advert to the defences raised by the Petitioner (albeit and brief) and why they were not acceptable. We agree with Mr. Narichania that on comparing the impugned order with the Show Cause Notice, it appears that two are almost identical and the impugned order is nothing but a reproduction of the Show Cause Notice, barring the conclusions given in paragraphs 7 and 8 of the impugned order. Once this is the case, we find that the impugned order is wholly unsustainable. ....