Mr. Lagadapati Ramesh Vs Mrs. Ramanathan Bhuvaneshwari (NCLAT Delhi)
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.
However, investigation into affairs of company at the instance of the Tribunal has been prescribed under Section 213.
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 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 as alleged by the ‘Resolution Professional’ in the present case and or by; (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 etc., (which is also the allegation made by the ‘Resolution Professional’), in such case, the Tribunal after giving a “reasonable opportunity” of being heard to the parties concerned, that the affairs of the company ought to be investigated by an ‘Inspector’ or ‘Inspectors’ appointed by the Central Government and where such an order is passed, in such case, the Central Government is 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.
If after investigation it is proved that (i) 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 (ii) any person concerned in the formation of the company or the management of its affairs have in connection therewith been 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.
For punishment of fraud in a manner as prescribed in Section 447 of the Companies Act, 2013, the matter is required to be tried by a Special Court as established under Section 435 which requires speedy trial for offences under the Companies Act, 2013. The same Court i.e. Special Court established under Section 435 is the Court empowered under Section 236 of the ‘I&B Code’ for trial of such offence under the ‘I&B Code’ also.
In view of the aforesaid position of law, we hold that the Tribunal/ Adjudicating Authority, on receipt of application/complaint of alleged violation of the aforesaid provisions and on such consideration and being satisfied that there are circumstances suggesting that defraud etc. has been committed, may refer the matter to the Central Government for investigation by an Inspector or Inspectors as may be appointed by the Central Government. On such investigation, if the investigating authority reports that a person has committed any offence punishable under Section 213 read with Section 447 of the Companies Act, 2013 or Sections 68, 69, 70, 71, 72 and 73 of the ‘I&B Code’, in such case, the Central Government is competent to refer the matter to the Special Court itself or may ask the Insolvency and Bankruptcy Board of India or may authorise any person in terms of sub-section (2) of Section 236 of the ‘I&B Code’ to file complaint.
The National Company Law Tribunal is the Adjudicating Authority under Part-II of the ‘I&B Code’ in terms of sub-section (1) of Section 60.
The Civil Procedure Code is not applicable for any proceeding before the Tribunal and in terms of Section 424, the Tribunal is guided by principle of natural justice and subject to other provisions under the Companies Act, 2013 or the ‘I&B Code’ or any Rule made thereunder. The Tribunal and the Adjudicating Authority have also been empowered to regulate their own procedure.
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.
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 decide whether in such case the matter may be referred to the ‘Serious Fraud Investigation Office’ or not. This will depend on the gravity of charges as may be found during the investigation by the Inspector.
In view of the aforesaid position of law, we are of the view that the Adjudicating Authority was not competent to straight away direct any investigation to be conducted by the ‘Serious Fraud Investigation Office’. However, the Adjudicating Authority (Tribunal) being competent to pass order under Section 213 of the Companies Act, 2013, it was always open to the Adjudicating Authority/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’.
We, accordingly, modify the impugned order dated 16th April, 2019 and refer the matter to the Central Government for investigation through any Inspector or Inspectors.
FULL TEXT OF ORDER OF NATIONAL COMPANY LAW APPELLATE TRIBUNAL
In a ‘Corporate Insolvency Resolution Process’ against ‘M/s. Bhuvana Infra Projects Private Limited’ (‘Corporate Debtor’), the ‘Resolution Professional’ filed Interlocutory Application under Section 66 read with Sections 25(2), 69, 70 and other applicable Sections of the Insolvency and Bankruptcy Code, 2016 (“I&B Code” for short), inter alia seeking to attach the personal assets of Mr. Pratap Kunda, Mr. Sanjay Raj and Mr. Srinivas, who are responsible for defrauding the creditors, in order to recover the total dues of Rs.461,163,402/-. The ‘Resolution Professional’ brought it to the notice of the Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench, the relevant facts thereof are quoted below:
“1) The Corporate Debtor M/s. Bhuvana Infra Projects is incorporated in the year 2011 and it is the sub – contracting Arm of its Group Companies and undertakes work contracts exclusively for its group Companies. The Group consists of M/s. Golden Gate Properties Ltd., (GGPL), M/s. Prisha Properties India Pvt. Ltd. (PPIL) and M/s. Commune Properties Pvt. Ltd., (CPIL) New Age Properties LLP and other Companies.
This is visible from the complete Turnover of the Corporate Debtor with billing breakup of the Group is as below:
