Case Law Details
Rajesh Kumar Yaduvanshi Vs. Serious Fraud Investigation Office (SFIO) & Anr. (Delhi High Court)
The petitioner has filed the present petition impugning a summoning order dated 16.08.2019 issued by the learned ASJ in Complaint Case No. 770/2019 captioned “Serious Fraud Investigation Office (SFIO) v. Bhushan Steel Limited and Ors.”, to the limited extent that it directs issuance of summons to the petitioner. The learned Court had found that there was sufficient material placed on record against the petitioner for him to face prosecution in respect of offences under Sections 128, 129, 448 read with Section 447 of the Companies Act, 2013 (hereinafter referred as ‘Companies Act’). The petitioner is one of the 287 persons/entities that are accused in the said complaint and against whom summons have been directed to be issued in terms of the impugned summoning order. However, the scope of the present petition is confined in the direction to issue summons to the petitioner.
2. The petitioner was Punjab National Bank Limited’s nominee on the Board of Directors of Bhushan Steel Limited (hereinafter referred as ‘BSL’) at the material time. The principal issue that arises for consideration in this case is whether the petitioner can be prosecuted for the alleged fraud committed by BSL and/or promoters solely for the reason that the petitioner was a director of BSL and, whether there is any material on record to indicate that the petitioner was complicit in the commission of the alleged offence.
3. The summoning order was issued pursuant to Criminal Complaint No. 770/2019 (hereinafter referred as ‘complaint’) filed by the Serious Fraud Investigation Office (hereinafter referred as ‘SFIO’). The said complaint was filed pursuant to the investigation carried out by SFIO into the affairs of BSL and other companies. The Government of India had by an order dated 03.05.2016 issued directions to SFIO under Section 212(1) of the Companies Act to investigate into the affairs of certain companies (fifteen in number) including BSL. Subsequently, approval was also granted to SFIO to investigate the affairs of other companies based on the material that was collected during the investigation.
4. SFIO submitted its investigation report into the affairs of BSL and one hundred and fifty six other companies (hereinafter referred as ‘Investigation Report’) to the Government of India on 27.06.2019. Thereafter, on 29.06.2019, Ministry of Corporate Affairs, Government of India issued directions to the SFIO to initiate prosecution against the accused persons for the offences mentioned in the complaint. In all, two hundred and eighty seven persons/entities have been arrayed as accused in the said complaint. The petitioner is arrayed as accused no. 175 (A-175). SFIO alleges that during the course of investigation, it found that ex-promoters of BSL [Brij Bhushan Singal (A-158) and Neeraj Singal (A-159)] were directly or indirectly controlling one hundred and fifty seven companies including BSL. SFIO categorised these accused companies into four categories, namely, A, B, C and D. Category A comprises of two companies – BSL and Bhushan Energy Limited (hereinafter referred as ‘BEL’). It is alleged that the said category of companies had generated funds, which were diverted to various other companies controlled by Brij Bhushan Singal and Neeraj Singal – (hereinafter collectively referred as ‘Promoters’). Category B companies comprises of sixty-two companies and it is alleged that these companies were incorporated by the Promoters and they were either initial subscribers to the Memorandum of Association or directors in the said companies. SFIO alleges that the funds received in these companies were diverted to purchase properties in the name of the companies or invested as promoter’s equity in the form of preference shares in BSL. The third category of companies, namely C category, comprises of eighty-five companies. These companies were in turn divided into sixteen groups where employees of BSL were appointed as directors from time to time. It is alleged that some of these companies were used for providing manpower while the remaining companies were used for diversion of funds from BSL. Category D comprises of eight companies, which were allegedly managed by entry operators primarily engaged in providing accommodation entries. These were used as a conduit for diversion of funds from BSL and other associated companies of the Promoters. It is alleged that these companies were managed by dummy directors for the benefit of the Promoters.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
In this way all the Independent Directors also can tell the same excuse.
Then where is the role of Board ? Is it only for attending the meeting ?
Even for Listed Companies, along with agenda, all the documents are supposed to be given.