TaxTMI 
TaxTMI 
2026 (8) TMI 528
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....ala, Adv., Ms. Yamini Mookherjee, Mr. Arjun Ray, Adv., Mr. Pujon Chatterjee, Adv. Advocates. For the Defendant No. 4: Mr. Anuj Singh, Adv., Mr. Pujan Chatterjee, Adv., Mr. Soumabho Ghosh, Adv., Mr. Sutosom Bhattacharyya, Adv. Advocates. For the Defendant No.5,6,7 and 8: Mr. Anindya Kumar Mitra, Sr. Adv., Mr. Soumya Majumder, Sr. Adv., Mr. Puspal Chakroborty, Adv., Mr. Victor Chatterjee, Adv., Ms. Sanjukta Dutta, Adv., Mr. Aman Agarwal, Adv. Advocates. For the Defendant No. 9: Mr. Jishnu Choudhury, Sr. Adv., Mr. Vikram Wadehra, Adv., Mr. Yubaraj Bhattacharyya, Adv. Advocates. For the SFIO: Mr. Dhiraj Kr. Trivedi, Ld. ASG, Ms. Aparna Banerjee, Adv., Mr. Tirtha Pati Acharyya, Adv., Mr. Pushpendra Kumar, Sr.P.P Ms. Anupriya Sengupta, Adv., Mr. Irshad Ahmed, Adv. Advocates. For the Respondents No. 13: Mr. Ritzu Ghoshal, Sr. Adv., Mr. Sankarsan Sarkar, Adv., Mr. Shayak Mitra, Adv., Ms. Shreyashi Maity, Adv. Advocates. For the Respondent no. 15: Ms. Parna Roy Choudhury, Adv. Mr. Suvendu Bandhopadhyay, Adv. Advocates. For the Respondent No. 19: Mr. Arnab Basu Mullick, Adv. Advocate. For Respondent no.31, SBI Funds Management Limited.: Mr. Debashis Saha, Adv., Mr. Av....
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....ions of Order 39 Rule 3 of the Code of Civil Procedure, 1908 (in short, 'CPC'). The order dated 16th June, 2026 was subsequently corrected by an order dated 18th June, 2026. 4. After service of the application, the defendant nos. 1 to 8 have appeared and opposed the continuance of the ad interim order dated 16th June, 2026 as corrected by the order dated 18th June, 2026. The defendant nos. 3 has filed an application for vacating the order dated 16th June, 2026 as corrected by the order dated 18th June, 2026 being G.A. 2 of 2026 intera lia taking several grounds for the same. Although, the defendant no. 3 claims to have filed this application but on a perusal of the same, it appears to have been made also on behalf of defendant no. 2 and 4. The defendants no. 5 to 8 have also taken out an application for vacating the order dated 16th June, 2026 as corrected by the order dated 18th June, 2026 being G.A. 3 of 2026. Submissions on behalf of defendant no. 1. i. It is submitted by the defendant no. 1 that no copy of the application or the plaint has been served on the said respondents. The plaintiff, according to the respondent No. 1, has failed to comply with the provisio....
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....15 of the application in Volume I in this regard. The Respondent No. 1, therefore, submitted that the ad interim order dated 16th June, 2026 as corrected by the Order dated 18th June, 2026 should be vacated. Submission by Respondent no. 2. a. It is submitted by the respondent no. 2 that the said respondent has been served with a copy of the application on 22nd June, 2026, but no copy of the plaint has been served. It is further submitted by the said respondent that even on merits the ex-parte ad interim order dated 16th June, 2026 as corrected by order dated 18th June, 2026 is required to be discharged and/or vacated. The learned senior advocate representing the said respondent has drawn the attention of the court to various documents including the advice said to have been given by the learned advocate for the plaintiff to his client for filing the suit to demonstrate that there is no allegation as against the said respondent contained either in the plaint or in the application. b. It is the case of the respondent No. 2 who is incidentally one of the promoter of the plaintiff company, its director till the change in management and also the trustee of the exempt....
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....-service of the plaint as one of the grounds for vacating the ad interim order dated 16th June, 2026 as corrected by order dated 18th June, 2026. The defendant no. 3 also objects to the supplementary affidavit filed by the plaintiff/petitioner being taken on record. It is the case of the said defendant that the issue of vacating or contriving of with the ad interim order shall be on the basis of the documents already on record and as such the supplementary affidavit of the plaintiff should not be considered at this stage. B. In course of argument, the learned Senior Advocate for the respondent no. 3 has referred to paragraph 10A at page 19 of the supplementary affidavit filed by the plaintiff and then had referred to pages 27 and 29 of the said supplementary affidavit. By relying upon these documents, it is submitted by that prior to filing of the suit a specific criminal complaint on the self-same allegations has been made on the basis whereof a First Information Report (in short, FIR) is said to have been registered. The complaint was made by one Rohit Agarwal, who has also verified the plaint and affirmed the instant application. The said Rohit Agarwal was aware of the ....
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.... It is also the case of respondent no. 3 that records reveal that the assets of the trust far exceed its liabilities. C. The respondent no.3 has further relied upon the resolution plan pursuant to which the order dated 14th August, 2025 was passed by NCLT. The said order is at page 190 (annexure-D - Volume-II of the application). Keeping side by side the resolution plan and the order dated 14th August, 2025, it was argued that the resolution plan submitted by the present management of the plaintiff company actually intended to extinguish the claims and/or dues of the employees, staff and workers of the plaintiff company, which on being approved becomes binding on the employees in view of the provisions of Section 31 of the IBC. The trigger date as contained in page 39 of the resolution plan has also been informed to the Court to give the date from which the present management has become liable for the PF dues. The suit has been filed to avoid any penal consequence against the present management of the plaintiff company for default in paying the statutory dues in the garb of allegations against the trust and the trustees which are untrue on the face of record. Referring to ....
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....dent as per a scheme of the plaintiff company by which a motor car was purchased and given to the respondent no. 4 as an employee. On repayment of the purchase price, the said car had become an asset of the respondent no. 4. The car was never a part of the asset of the plaintiff company or the trust and as such the question of taking away or retaining the same in an un-authorised manner cannot and does not arise. II. It is also the case of the respondent no. 4 that assuming without admitting that the amount was not repaid under the scheme then also such fact and figure ought to have been shown in the resolution plan. It was not shown in the resolution plan as nothing was due. The resolution plan is a conclusive one and cannot be reopened in this proceeding by the plaintiff alleging the car to be an asset of the plaintiff company wrongfully taken away by the respondent no. 4. It is also submitted by respondent no. 4 that the said respondent was absent in the meeting held on 12th December, 2023 wherein the management of the trust was altered which, according to the plaintiff, is in violation of the statutory provisions during the pendency of CIRP. The leave of absence was sp....
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.... as corrected by the Order dated 18th June, 2026 as a consequence thereof, should be vacated on this ground alone. 3. The respondent nos. 5 to 8 submit that the relief claimed in the suit cannot be granted to the plaintiff. Assuming without admitting that the plaintiff has a cause as against the defendant nos. 1 to 14 then also the relief(s) claimed in the suit cannot be granted. By referring to prayer (a) of the plaint appearing at page 933 of the application and paragraph 67 of the plaint at page 928 of the application, it is submitted that the money claimed by the plaintiff does not belong to the plaintiff. The genesis of the money is deduction from the employees added to the employer's contribution towards the provident fund which is kept in a trust fund. The trust is a separate entity. The money in the trust fund is that of the employees, staff and workers of the plaintiff company. Once the money is deducted from the employees and with the employer's contribution is deposited in the trust fund, it loses the character of the money belonging to the plaintiff. Since the plaintiff is not entitled to the money, no relief as in prayer (a) on the basis of the pleading as in paragr....
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....The appropriate government in the instant case is the central government who granted the exemption by issuing a notification. A notification dated 11th January 2011 is placed before the Court to demonstrate that the central government had given the exemption. It is also the case of the respondent nos. 5 to 8 that the exemption, if had to be cancelled, can only be done by the central government on issuing a further notification. The PF authorities or any other authority not being the central government can cancel the same. No such cancellation has taken place as yet and as such, the question of passing an order treating the exemption to have been cancelled, cannot be passed or be continued. 5. The respondent nos. 5 to 8 also submit that no suit at the instance of the plaintiff can or could be maintained inasmuch as the right to take any action against the trustees if at all, is with the PF authorities in case of defalcation or misappropriation of fund. The veracity of the allegation is required to be scrutinized by the PF authorities to find out whether the plaintiff as the employer had deposited the correct amount from time to time as per the statutory provision. Unless the asce....
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....aid respondent prays and further intends to make an application for expunging his name from the array of the defendants. Submission on behalf of respondent no. 13. On behalf of the respondent No. 13, it is submitted that the said respondent was engaged as the statutory auditor of the plaintiff company for the years 2018-19, 2019-20, 2021-22 and 2024-25. The statutory auditor (respondent No. 13) did not personally visit the office of the Provident Fund Authorities to scrutinise the records. The statutory auditor also did not personally go and scrutinise the accounts at the premises of the plaintiff but only acted on the basis of the particulars, documents and accounts provided by the plaintiff which was collected by his team and scrutinised at the office of the statutory auditor. The statutory auditor, therefore, claims to be neither a necessary nor a proper party to this proceeding. No order can or could be passed against the said statutory auditor. It is further submitted that the name of statutory auditor be deleted and/or expunged from the array of defendants. Submission on behalf of respondent no. 15. On behalf of the respondent No. 15 it is submitted that the said ....
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....vocate representing the PF authorities that the Hon'ble Supreme Court while considering the scheme of 1952 along with the amendments thereto did not hold that the scheme is ultra vires to any statutory provision. The only finding of the Hon'ble Supreme Court is that the amendments to the scheme are required to be notified which has been subsequently done by an order published by the concerned Ministry. The learned advocate for the PF Authorities has also placed before the court an order of the Government of India, Ministry of Labour and Employment dated 5th April, 2016 to contend that the exemption was extended in terms of paragraph 27A of the 1952 Scheme to the plaintiff company with effect from 04.02.2005. a copy of such order is taken on record. By referring to Dalmia Cement it is submitted by PF authorities that as late as in 2025 the Division Bench of the Bombay High Court did not find any infirmity or anomaly in the provisions of the scheme to hold that the same are not binding. It is further submitted by PF authorities that in view of such legal position clause 29 of Appendix A to the 1952 scheme is binding. Once there has been a transfer of any nature the exemption stand....
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....T under the provisions of Insolvency and Bankruptcy Code, 2016 will amount to acquisition or at least a transfer of any kind. This will automatically attract the provisions of clause 16 and 29 of Appendix A read with paragraph 27AA of the 1952 Scheme for which the funds lying with the trust are required to be transmitted to the Employees' Provident Fund Organisation (in short, EPFO) in terms of the statutory provisions. The money lying with the trust on having not been transmitted to the EPFO is clear in violation of the statutory provisions. It is the further case of the PF authorities that the employer is liable for any deficit or shortfall in the amount which was required to be deposited after deduction with such trust fund along with applicable interest and penalty co-extensively with the trustees and the trust. On behalf of PF authorities provisions of Sections 16, 17 and 18 of the PF Act has also been placed before this court to elucidate the responsibility of the employer and that of the trust apart from a writ petition filed by the plaintiff company before the High Court at Punjab and Haryana which has now been withdrawn by the present management of the plaintiff company....
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.... the same day the police complaint was lodged at around 4.30 pm with the police station which will be evident from the endorsement on the receipt copy annexed to the supplementary affidavit filed in this application. The police complaint and the FIR were made and registered after affirming the plaint. By referring to paragraph 61 it is submitted that a clear indication has been given in the plaint that the plaintiff shall rely upon the FIR or any complaint that may be made as the plaint was contemplating to make such complaint. There is, as such, no suppression of fact far less suppression of material fact. In course of argument, the plaintiff has further made the following submissions: The First Information Report (in short, 'FIR') in terms of the complaint made by the plaintiff on 8th June, 2026 was registered on 18th June, 2026 i.e. subsequent to institution of the suit by presenting the plaint and passing of the order dated 16th June 2026 and 18th June, 2026. In this regard the plaintiff has referred to page 63 of the supplementary affidavit in support of the date and time when the FIR was registered. The plaintiff says that neither the fact of making of the complaint nor....
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....2023. The said defendants, therefore, cannot absolve their responsibility and liability as trustees just by contending that there is no shortfall without giving the amount which is now lying with the trust fund or was there with the trust on the triggered date from which the Resolution Plan approved by the National Company Law Tribunal (in short, 'NCLT') in respect of the plaintiff company become operated. The pleadings in paragraphs 61, 63 and 64 of the plaint according to the plaintiff clearly disclose the reasons for which the plaintiff has come to Court. The respondent Nos. 1, 2, 3 and 5 to 8 according to the plaintiff in course of their submissions have not denied or disputed their involvement with the trust. They have also submitted that there has been no default in depositing the money with the trust fund but none of them have come forward to show the amount presently lying with the trust fund though the respondent Nos. 2 to 8 even after reconstitution of the trust in 2023 continued to remain to be the trustees. The balance-sheet of the trust which has been shown to contend that there is no shortfall in the trust fund and that the asset of the trust exceeds its liabilitie....
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....who were admittedly trustees during the financial years 2024-2025 and 2025-2026 or beneficiaries thereunder. This is plaintiff's cause of action which is clearly stated in the plaint. It is therefore, incorrect to allege that the plaintiff has no cause of action or the plaint discloses no cause of action. The plaintiff also says that the arguments advanced by the respondent nos. 1,2,3,4 and 5 to 8 are technical in nature to confuse the Court if possible in a desperate attempt to avoid the rigors of being proceeded with. The plaintiff also says that the order of appointing Serious Fraud Investing Office (in short, 'SFIO') is also justified in the facts and circumstances of the instant case. In this context the plaintiff has relied on a judgment reported in 2023 SCC OnLine Del 8197 (R.K. Gupta and Others-Versus-Union of India Through Ministry of Corporate Affairs and Another) to further contend that in an appropriate case even if it is not prayed the hands of the Court are not fettered to appoint SFIO since it can be appointed to investigate by the appropriate Government. The plaintiff further says that "affairs of the company" as provided under Section 212 of the Companies Act, 2013....
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....he reflection of true and correct fact. In this regard, the Respondent No. 1 has referred to an Order dated 14th August, 2025 passed by the NCLT in an application filed by the Provident Fund Authorities being IA/2002/2024. It is submitted by the plaintiff that although the first bank account is exclusively in the name of the defendant No. 1, the defendant No. 1 is the joint account holders of the other accounts. One of the accounts being overdraft account cannot also form part of the dispute. Unless specific particulars of the accounts are provided by way of an affidavit, the Court should not take cognizance of this part of the submissions made on behalf of the respondent nos.1 and 3. On behalf of the IndusInd Bank, the respondent No. 19 it is submitted that initially the account apart from that mentioned in Annexure 'AK' appearing at page 944 of the application was not frozen. The other accounts were frozen in view of letters issued to the bank. The bank has, however, not produced the letters to ascertain the background under which the other accounts were said to be implicated. These aspects will be considered at a subsequent stage when fuller and better particulars are availab....
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....d the grounds of challenge summarised in paragraph 24 of their application being GA 3 of 2026 it is apparent that there subsists no further point in the said vacating application which requires to be considered separately. The same is the situation with the vacating application made by the defendant no.3 being GA 2 of 2026 (paragraph 23 thereof) which has been noted hereinabove. The said application being GA 2 of 2026 can also be construed to have been made on behalf of the defendant nos. 2 and 4 from the statement made in paragraph 1 and the affidavit thereof. In the above facts and circumstances, on the completion of the arguments it was made clear to the learned Senior Advocates/Advocates representing the parties that the vacating applications will be considered to have been heard in course of hearing of the plaintiff's injunction application being GA 1 of 2026 in which the defendant nos.1 to 8 have opposed the continuance of the interim order. Analysis of point (i) On the issue of compliance and/or non-compliance of the provisions of Order XXXIX Rule 3 of CPC, there is no dispute that the said provisions are mandatory in nature. The judgments cited by defendant no. 1 i....
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....ne the ad interim order cannot be vacated when a copy of the application has been served much before the returnable date. It was open to the defendants to ask for a complete set of the plaint once they received the copy of the application with a copy of the pliant annexed thereto without annexures. None of the defendants have done so. On the contrary, the defendants no. 1 to 8 strenuously argued for vacating the order on that ground alone. Analysis of point no. (ii) and (iii) On the ground of cause of action the pivotal argument of the defendant nos. 1 to 8 is that the money of which defalcation has been alleged is not the money of the plaintiff and as such the plaintiff cannot file and maintain a suit for recovery of the same even if defalcation has taken place. The money lying with the Trust according to defendant nos. 1 to 8 is that of the employees, staff and workers of the plaintiff company. The misappropriation of such money if at all can only be raised by the employees, staff and workers of the plaintiff company as they will be the only sufferer. Apart from that the PF Authorities can haul up the defendant nos. 1 to 8 for having misappropriated the funds required to be....
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....esolution Plan as a consequence thereof the Resolution Plan approved by NCLT has no binding effect under the provisions of Section 31 of IBC. The present management pursuant to the order dated 14th August, 2025 passed by the NCLT took over the plaintiff company as per the approved Resolution Plan and thereafter appointed auditors to find out the money lying with the Trust fund from which the benefits to the employees, staff and workers of the plaintiff company are to defrayed. Since the Resolution plan did not take in account the money lying in the trust fund, there was no embargo on the plaintiff company carrying out such exercise. In course of such audit, the auditors reported shortfall and apprehended defalcation. This prompted the plaintiff to proceed further to collect particulars and institute the suit for realising such money from the defendants no. 1 to 8 who were charged with such allegation. The defendant nos.1 to 8 in course of their lengthy argument have time and again tried to point out the lacunae of the plaintiff's case and its flaws but themselves did not come with any account to show that the amount which was deposited by the plaintiff company with the Trust is lyi....
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....ablishment who has been granted the exemption and is required to comply with the statutory required. I am, therefore, unable to agree with the contention of the defendant nos. 1 to 8 that the plaintiff has no cause of action to file and maintain the suit or the plaint does not disclose any cause of action. Analysis on point no. (iv) The Provident Fund Authorities are authorized under Section 7A and 13 of the PF Act to conduct enquiry which shall be deemed to be a judicial proceeding within the meaning of Section 1963 and 228 and for the purpose of Section 196 of the Indian Penal Code. The authority is also given the powers under CPC and Code of Criminal Procedure for even conducting search and seizure. The scope of enquiry, however, gets restricted in view of the provisions of Section 7A(1) and Section 13(2) of the PF Act. The PF authority in a case where defalcation is alleged against the trustees of the exempted provident fund trust account conduct a full-fledged investigation like an investigating agency. It is also to be borne in mind that for the instant case, the plaintiff company has several units in different states in under the aegis of separate regional provident....
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....uppression. The test as to whether a suppression is of material fact it is to be seen that on such facts having been brought to the notice of the Court at the time of passing the order would have persuaded the Court from not granting such order. In the instant case the plaintiff has specifically pleaded in the plaint and the application that they intend to lodge a complaint regarding the defalcation of trust fund. The plaint and the petition were respectively verified and affirmed on 8th June, 2026 and were filed with the Central Filing Department of this Court as required on the same date. The complaint was lodged on the same date i.e., 8th June, 2026. The time endorsed in the document disclosed by the plaintiff in its supplementary affidavit gives an indication that the same was lodged after the plaint and the petition were affirmed and filed in the Central Filing Department of this Court. The FIR was lodged on 18th June, 2026 which is admittedly after the suit was instituted upon presentation and admission of the plaint and the orders dated 16th June, 2026 and 18th June, 2026 were passed. At the highest, the plaintiff can be accused of not bringing to the notice of the Court abo....
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....211 and 212 of the Companies Act, 2013 and that can be directed only by the Central Government. Assuming without admitting that there has been defalcation of the trust fund then also the same does not form part of the affairs of the plaintiff company for which investigation by SFIO could be directed. Moreover, a complaint before a competent authority to investigate has been made by the plaintiff in relation to the self-same set of allegations. An FIR has been registered and as such the investigation is in progress. At this stage SFIO cannot be invited to make investigation on the same issue. Furthermore, the PF Authorities under the provisions of Section 7A of the PF Act have wide powers to investigate and take appropriate measures against and erring establishment. The matter relates to defalcation of money of the provident fund trust. It is, therefore, well within the jurisdiction of the PF Authorities to investigate the same. While considering the arguments advanced by the defendant nos. 1 to 8 one cannot lose sight of the fact that the plaintiff is the "establishment" before the PF Authorities has six units spread over India. The exempted provident fund trust is where the statut....
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....not empowered to carry out a full fledged enquiry in case of alleged defalcation. If the PF authorities do not find any shortfall at the first instance they may not proceed for further enquiry unless non-payment is reported. The police authorities in West Bengal can investigate into the allegation of defalcation very conveniently within the State of West Bengal. However, there are five other units in different States the Police Authorities of this State may not find it convenient to investigate outside the State of West Bengal when the documents are spread over several States under the jurisdiction of the different regional provident fund commissions In the aforesaid facts and circumstances, an agency like SFIO is a more preferred agency for the purpose of investigation. So far as the contention of the defendant nos. 1 to 8 that investigation by SFIO can only be directed by the Central Government is also unacceptable. The powers of the High Court being a Court of record with the authority to exercise constitutional jurisdiction cannot be fettered by referring the provisions of Section 212 of the 2013 Act. In an appropriate case if the Court finds that an investigation is requ....
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....stitutional framework this Court feels to be in the facts of the case to direct investigation by SFIO for the ends of justice. Furthermore, the Court can appoint an expert under the provisions of Section 45 of the Evidence Act, 1872 (now Section 39 of Bharatiya Sakshya Adhiniyam, 2023) to come to a conclusive finding as to the variety of the allegations. Investigation by SFIO can in such a case be treated to be an expert today. Analysis of other issues: So far as the submissions made by the respondent no. 9 and 13 are concerned, on a plain reading of the plaint, it cannot be held at this stage that the said defendants are neither a necessary nor a proper party. The prayer for expunging their respective names made without any specific application, for such purpose are considered and rejected at this stage. This Court is also not required to clarify the scope of the interim order with regard to the bank accounts which the respondent no. 1 and 3 claimed to be not their accounts but the accounts maintained in the name of their family members as it appears from the accounts on which particulars are provided clearly shows that either the respondent no. 1 or the respondent no. 3a....