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2019 (7) TMI 1737 - Tri - Companies LawOppression and Mismanagement - Seeking suspension of the then Board of Directors of Respondent No. 1 and further seeking restraint on alienation of moveable and immoveable properties of the respondents named therein during the pendency of investigation into the affairs of Respondent No. 1 and its subsidiaries - liability arising out of fraudulent conduct of business as such conduct can be past or present - siphoning of public money - HELD THAT:- Order 1 Rule 10(4) provides that Where defendant is added, plaint to be amended. Where a defendant is added, the plaint shall, unless the Court otherwise directs, be amended in such manner as may be necessary, and amended copies of the summons and of the plaint shall be served on the new defendant and, if the Court thinks fit, on the original defendant - thus, it is clear that Order 1 Rule 10(2) gives discretion to the court to struck out any of the parties of the case or to add any of the party whose impleadment is necessary in order to enable the court to effectually and completely to adjudicate upon and settle all the questions involved in the suit. After passing such order by the court, Rule 10(4) provides that plaint should be amended and copy of the amended plaint to be served. In the present matter, Union of India has sought impleadment of the proposed Respondents mainly on the ground that in the 2nd SFIO report the role of proposed respondents has been found conniving, colluding with coterie to conceal material information/facts and in fraudulently falsifying the books of accounts and thereby financial statements from FY 2011-12 to 2017-18 - Director (Prosecution) appearing on behalf of Union of India has emphasized that the entire exercise of initiating this public interest petition will be useless unless action is not initiated against the persons who have siphoned of the public money. It is pertinent to mention that IL&FS (R1) procured funds from the market through short term instruments and invested in its group companies by way of giving long term loans and advances, which was prejudicial to the interest of the group and therefore the financial markets at large. Based on its bogus and fictitious but good credit rating and financial statements, Respondent No. 1 and its key subsidiaries such as IL&FS Financial Services Ltd. (IFIN) and IL&FS Transportation Networks Ltd. (ITNL) raised short term market funding through commercial papers /inter corporate deposits and passed the same to their project SPVs/ group companies (which were unable to raise funds externally), for helping them service their debt obligations. The CoD being fully aware, thereby hid and avoided possible defaults resulting into increasing indebtedness on a standalone basis. This is virtually an act of fraud leading to a spiraling debt of over ₹ 91,000 crores of the IL&FS group. It is pertinent to mention that in 2nd SFIO Report, no role of Independent director has been specified. Therefore, their impleadment in the case is not justified, at this stage - It is important to point out that on perusal of the facts of the case of Shanta Prasad Chakravarty, it is clear that in that case, some error was pointed out in audit work which was ratified later on, therefore, auditor’s name from the array of parties were struck of by NCLT, Guwahati Bench. That case was based on error committed by auditors and the error was committed by auditors and their bonafide were also verified from the Report which was submitted after the annual financial report. Therefore, the court allowed the application to struck of their name from the array of the parties. It is pertinent to mention that Order 1, Rule 10 (2) of CPC authorizes the court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added - It is also important to point out that in the 2nd SFIO Report, no role of Independent director has been specified. It is observed from the record that even though Mr. Surinder Singh Kohli, Ms. Subhalakshmi Panse were the Independent Directors, they were also the part of Audit Committee of IFIN. The petitioner are directed to implead the names of Proposed additional Respondent Nos. 321 to 343 to the Company Petition No.3638/2018 - application allowed.
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