TMI Blog2018 (9) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 before the Tribunal. In the interest of regulating the conduct of the Company’s affairs the interim order cannot be restrictive to any particular or individual person, including the Company/companies, existing or erstwhile Officers and employees of the Companies if investigation for alleged fraud is pending. For the purpose of passing interim order the Tribunal cannot fix the personal liability of delinquent Directors or Managers or Officers or other employees in absence of any specific evidence. Therefore, during the process of investigation and pendency of an application under Section 241(2) read with Section 242 of the Companies Act, 2013 and in view of powers conferred under Section 221, the Tribunal is not only empowered to pass appropriate interim order against the Company but also against any person or individual, including the order to desist. An application made by the Central Government alleging affairs of the Company are being conducted in a manner prejudicial to public interest, the Tribunal can pass any order in terms of Chapter XVI, which includes Section 242 and other provisions under the said Chapter. Section 246 is part of Chapter XVI, the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent No. 43); Mr. Gopal Krishnan Nair (Respondent No. 44); Mr. Suresh Senapathy (Respondent No. 51); Mr. Gautam Mukkavilli (Respondent No. 52) and Mr. Sanjay Rishi (Respondent No. 53). In so far as Mr. Anil Umesh Haldipur (Respondent No. 35) and Mrs. Nazura Yash Ajaney (Respondent no. 38) are concerned, the Tribunal has already held that a prima facie case has been made out against them but while giving such finding, the Tribunal has modified the order dated 23rd February, 2018 permitting Mr. Anil Umesh Haldipur (Respondent No. 35) to withdraw ₹ 2, 00, 000/- (Rupees Two Lakhs only) per month and Mrs. Nazura Yash Ajaney (Respondent no. 38) to withdraw an amount to the extent of ₹ 1, 00, 000/- (Rupees One Lakh only) per month from their Bank accounts. Rest part of the order dated 23rd February, 2018 restraining them and others from removal, transfer or disposal of funds, assets and properties of the entities and individuals until further orders is continuing. - Company Appeal (AT) No. 103 of 2018 With Company Appeal (AT) No. 119 of 2018 With Company Appeal (AT) No. 124 of 2018 With Company Appeal (AT) No. 125 of 2018 with Company Appeal (AT) No. 126 of 2018 And Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding bank accounts, owned by them in India or anywhere in the world. c) That the Respondents be restrained from mortgaging or creating charge or lien or third-party interest or in any way alienating, the movable or immovable properties owned by them and further, direct attachment of the all said properties and hand them over to the Petitioner. Petitioner be allowed to execute such orders through the Indian Missions, stationed overseas, for the immoveable and moveable properties in existence abroad. d) That the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Securities and Exchange Board of India (SEBI) be directed to restrain the trading of securities of Respondent No. 1. e) That the Respondent Nos. 2, 3, 7, 8, 9, 22 and 23 be restrained from mortgaging or creating charge or lien or third-party interest or in any way alienating the securities issued by the said Respondents. f) That Central Depository Services Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) be directed that securities owned/held by the respondents in any company be freezed and details thereof be shared with the Petitioner. g) That the Central Board of Direct Taxes (CBDT) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness, according to the Union of India, committed mega fraud by conniving with some of the Officers of PNB routing money of a public sector Bank through issuance of letter of undertakings to their benefit without making any entries in the trade finance module of the Banks, i. e. Core Banking Service (CBS) system to avoid detection. The Union of India submits that the funds received under Buyer s credit from overseas banks were credited to Nostro Account of the Bank and subsequently utilized as per direction given by the conniving officer to repay imports/earlier Buyer s credit used by the firms. For issuance of fraudulent LCs, the conniving officer issued LCs by entering a small amount in trade module of Core Banking Service (CBS) system and generated the reference number and SWIFT messages were sent for the amount. Subsequently, without making any change in Trade Finance Module of CBS system, the conniving officer sent modified SWIFT message for the same reference to the beneficiary bank for enhanced amount unauthorizedly. By sending modified SWIFT message with the reference given for smaller amount, this enhancement would not come to the notice of CBS system. By doing so, accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k officials Mr . Gokulnath Shetty (Respondent No . 15), Deputy Manager (retd . ) , PNB, Mr . Manoj Hanumant Kharat (Respondent No . 16), SWO PNB in connivance with the accused companies represented by its Directors and unknown others during 2017-18 defrauded PNB to the tune of an aggregate amount of USD 754 . 92 Million (equivalent to Rs . 4886 . 72 Crores @ Rs . 64 . 00 per USD) in the matter of issuance of unauthorised and fraudulent Letters of Undertaking in favour of Foreign Branches of different Indian-based Banks and purported Foreign Branches of different Indian-based Banks and purported Foreign Letters of Credits (FLCs) in favour of foreign suppliers of the accused companies . The FIR dated 15/02/2018 states that the accused companies . The FIR dated 15/02/2018 states that the accused include the companies belonging to the Gitanjali Group promoted by Mr . Mehul Choksi (Respondent No . 14) . A copy of the FIRs dated 31/01/2018 and 15/02/2018 as shown in Annexure P-2 (collectively) filed by the petitioner . 6. The Union of India had given description of various companies to which money has gone through modus operandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Diamond R US Sh. Nirav Deepak Modi M/s. NDM Enterprises Pvt. Ltd. # M/s. ANM Enterprises Pvt. Ltd. # * Details of Trustees are as under: Nirav Family Trust Nirav Modi Family Trust Settler Purvi Mayank Mehta Deepak Keshavlal Modi Trustees - Nirav Deepak Modi - Nirav Deepak Modi - Ami Nirav Modi - Ami Nirav Modi - Neeshal - Neeshal - Deepak Modi - Deepak Modi Beneficiaries - Deepak Keshavlal Modi - Purvi Mayank Mehta - Ami Nirav Modi - Ami Nirav Modi - Neeshal Deepak Modi - Neeshal Deepak Modi - N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Firestone Trading Pvt. Ltd. Mr. HemantDahyalal Bhat Mr. PareshPravinbhai Rathod Neeshal Trading (P) Ltd. Mr. HemantDahyalal Bhat Mr. Ramesh Madhavdas Assar Firestar Diamond International P. Ltd. Mr. Nirav Deepak Modi (Promoter) Mr. HareshVrajlal Shah, Professional Mr. Suresh Chandra Senapty, Professional Bently Properties P. Ltd. Mr. Ramesh Madhavdas Assar Mr. KetanChandrakant Solanki MAk Business Enterprises Pvt. Ltd. Mr. Ramesh Madhavdas Assar Mr. Manish Lalit Dani Mr. PareshPravinbhaiRathod Paundra Enterprises Private Limited Mr. Ramesh Madhavdas Assar (Formerly Knoen as Aimeka Developers Pvt. Ltd. ) Mr. Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PTE Limited, Singapore - Firestar Diamond and Jewelry FZCO, UAE - Firestar Diamond Ltd, Russia - Synergies Corporation - Camelot Enterprises Private Limited - Rohin Trust - A Jaffe INC . , USA - Nipur BVBA - Islington International Holdings PTE Ltd . Some of the properties movable including immovable properties details available with us:- Firestar international Ltd :- A . Movable: First pari-passu charge by way of hypothecation of stocks lying at factory premises as well as outside on job-order basis, Receivables and other current assets (present and future of the Company) and receivable with other consortium banks . B . Immovable: ( Mortgaged to the Consortium on pari passu basis) S. N. Security Description Area in Sq. M. or Sq. Ft. Ownership 1 1110, 11th floor, Prasad Chambers, Opera House, Mumbai 04 630 Sq. ft. Carpet Area Firestar international Pvt. Ltd. 2 111 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exclusive Security with the PNB : S. N. Security Description Area in Sq. M. or Sq. Ft. Ownership 1 Office Premises No. AE4050 on 4th floor at Bharat Diamond Bourse Complex, C-28, G Block, Bandra Kurla Complex, Bandra East, Mumbai-400051 2058 sq. ft. Firestar International Pvt. Ltd. 2 Land and building at Plot No. 26 located in SURSEZ, Sachin, dist, Surat-26 1000 sq. m. land and 12900 sq. ft. building Firestar International Pvt. Ltd. Firestar diamond International Pvt . Ltd . ( FDIPL) :- A . Movable: First pari-passu charge by way of hypothecation of stocks lying at factory premises as well as outside on job-order basis, Receivables and other current assets (present and future of the Company) and receivable with other consortium banks . B . Immovable: ( Mortgaged to the Consortium on pari passu basis) Security Description ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 . 2nd Floor, Trade Point Building, Kamala Mills Compound, Lower Parel (West), Mumbai 400013 (bound warehouse) . 9 . 1110, Prasad Chambers, Opera House, Mumbai 400004 10 . 8, 5, 16, 15-B Nagindas Mansion, 61, JS Road, Opera House, Mumbai 400004 . 11 . 15/A 4th floor, Bansilal Building, C/o Sangeeta Kala Bhawan, J S S Road, Mumbai 400004 . 12 . AE-4042, B Tower, Bharat Diamond Bourse, G Block, Bandra Kurla Complex, Bandra East, Mumbai 400051 . 13 . PBW, Part B, Unit No . 24, 4th floor, Tower II, Wing B, Kohinoor City Mall, Kirol Road, Opp . LBS Marg (West), Mumbai 400070 (bound warehouse) . 7. The Tribunal while allowing the Union of India to file additional affidavit supporting the case mentioned in the Company Petition, passed the following orders on 23rd February, 2018: 6. In the list given above, though Trusts and individuals are not being covered either u/s 221 of the Companies Act, 2013 or Section 43 of LLP Act, 2008, since there is a categorical statement from Union of India that funds were routed to those individuals and Trusts through the companies mentioned above, to make investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Respondents to the Company Petition, including individuals against whom the interim order was passed on 23rd February, 2018, preferred different Miscellaneous Applications to vacate the interim order passed on 23rd February, 2018. Those Miscellaneous Applications were taken up by the Tribunal and on hearing the other common impugned order dated 2nd April, 2018 was passed. By the said order, interim order of stay passed against following persons, namely- Mr. Sujal Shah (Respondent No. 43); Mr. Gopal Krishnan Nair (Respondent No. 44); Mr. Suresh Senapathy (Respondent No. 51); Mr. Gautam Mukkavilli (Respondent No. 52) and Mr. Sanjay Rishi (Respondent No. 53) were vacated. 11. The following reason was shown to pass restraint order: 24. But at the same time, it is the duty of this Court to see that innocent people are not burdened by this restraint order therefore as and when any innocent comes before this Bench saying that he has no involvement in the fraud spiralling from day to day, this Bench has to diligently respond to the reliefs sought by such people. Of course, it is true that this Bench cannot decide who is innocent and who is culprit, but to the extent order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 43); Mr. Gopal Krishnan Nair (Respondent No. 44); Mr. Suresh Senapathy (Respondent No. 51); Mr. Gautam Mukkavilli (Respondent No. 52) and Mr. Sanjay Rishi (Respondent No. 53). 15. The petition relates to FIR and complaints lodged by the PNB with the CBI alleging financial fraud by various Companies and Firms forming part of the Nirav Modi Group Choksi Group ; the value of the fraud exceeds ₹ 14, 000 Crores. The promoters of the two Groups have already absconded from the Country and have not joined investigation either before the CBI or the Enforcement Directorate in proceedings under PMLA. 16. It appears that the Central Government has already ordered SFIO to investigate under Section 212 read with Section 216 of the Companies Act, 2013. The promoters of both Groups have not joined investigation before the SFIO. The PNB has complained to the Department of Company Affairs that the Respondents are diverting their assets. It is in these circumstances that injunctive Orders were sought inter alia for restraining Respondents from diverting, transferring or alienating assets. 17. Learned counsel appearing on behalf of Mr. Gopal Krishna Karunakaran Nair (Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for conducting company s affairs and not any other individuals, who were not even associated with the Company during the period of alleged fraud. 22. It was further submitted that the said Section 221 does not vest the Tribunal with jurisdiction to freeze the personal assets of individuals. Under Section 221, the assets of the company can be frozen and not of an individual. 23. It was further submitted that Section 339 of the Companies Act, 2013 is not applicable in the present case as the Central Government has failed to bring to the notice of the Tribunal any facts constituting knowledge of the alleged fraud and not given any declaration under Section 339. 24. According to learned counsel for the Respondents, Section 339 fixes liability of such officers under whose direction a company is accustomed to act. Therefore, no liability can be fixed upon the Respondent in question as he ceased to have any association with Gilli India Pvt. Ltd. . 25. It was submitted that once the investigation is initiated by the Central Government, it was bound to await and rely upon the report of investigation before proceeding under Sections 241 or 339 as the very purpose of an inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y direct. The SFIO has been established under Section 211 of the Companies Act, 2013, which has jurisdiction to investigate into the Company/ (Companies), where the Central Government is of the opinion that it is necessary to investigate into the affairs of a Company by the SFIO for different reasons, including the public interest. Where any case has been assigned by the Central Government to the SFIO for investigation under the Act, no other investigating agency of the Central Government or any State Government can proceed with investigation in such case in respect of any offence under the Companies Act and other cases before such agency are required to transfer the relevant documents and records in respect of such offences under the Companies Act to the SFIO. Sub-section (8) of Section 211 empowers certain Officers of the SFIO to arrest any person, if on the basis of material in his possession there is reason to believe, which is to be recorded in writing, that any person has been guilty of any offence punishable under sub-section (6) of Section 212 of the Companies Act, 2013. 31. Investigation into Company s affairs in other cases can also be done under section 213 on an appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . 32. From the aforesaid provisions, it is clear that the Tribunal on an application made to it or otherwise , if satisfied that there are circumstances suggesting that the business of the Company is being conducted with intent to defraud its creditors, members etc. as mentioned in clause (b) of Section 213, after giving a reasonable opportunity of being heard to the parties, direct the Central Government to investigate. 33. Section 221 relates to Freezing of assets of company on inquiry and investigation , which reads as follows: 221 . Freezing of assets of company on inquiry and investigation . ─ ( 1) Where it appears to the Tribunal, on a reference made to it by the Central Government or in connection with any inquiry or investigation into the affairs of a company under this Chapter or on any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade any gift or transfer of, or charge on, or has caused or connived at the levying of any execution against, the property of the company; or ( c) with intent to defraud creditors of the company, has concealed or removed any part of the property of the company since the date of any unsatisfied judgment or order for payment of money obtained against the company or within two months before that date, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees . 36. Liability for fraudulent conduct of business is punishable under Section 339 of the Companies Act, 2013, as quoted below: Liability for fraudulent conduct of business . 339 . ( 1) If in the course of the winding up of a company, it appears that any business of the company has been carried on with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Tribunal, on the application of the Official Liquidator, or the Company Liquidator or any creditor or contributory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny person in accordance with whose directions or instructions the directors of the company have been accustomed to act . 37. In the present case, the Central Government by letter dated 17th February, 2018 has directed the SFIO to investigate into the affairs of the Respondent Company, among other 114 entities. The investigation is currently undergoing and as such, as on date, being satisfied if so required, it is always open to the Central Government to file application under Sections 241(2) read with Section 242 of the Companies Act, 2013 before the Tribunal. 38. In the interest of regulating the conduct of the Company s affairs the interim order cannot be restrictive to any particular or individual person, including the Company/companies, existing or erstwhile Officers and employees of the Companies if investigation for alleged fraud is pending. 39. For the purpose of passing interim order the Tribunal cannot fix the personal liability of delinquent Directors or Managers or Officers or other employees in absence of any specific evidence. Therefore, during the process of investigation and pendency of an application under Section 241(2) read with Section 242 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Sections 337 to 341 will be also applicable mutatis mutandis to an application made to the Tribunal under Section 241 or Section 245. 47. We have noticed that Section 337 deals with Penalty for frauds by officers whereas Section 338 relates to Liability where proper accounts not kept . On the other hand, Section 339 relates to the Liability for fraudulent conduct of business . As per sub-Section (2) of Section 339, if any business of the company has been carried on with intent as mentioned in sub-section (1), any person who is or were parties carrying on of the business are also liable for action under Section 447 of the Companies Act, 2013. 48. Section 340 empowers the Tribunal to assess damages against delinquent Directors or any other person who has taken part in the promotion or formation of the company, or any person, who is or has been a Director, Manager, Company Liquidator or officer of the Company and has misapplied, or retained, or become liable or accountable for, any money or property of the company if found to be guilty of any misfeasance or breach of trust in relation to the company. The Tribunal, after inquiry into the conduct of such per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articularly, when the allegation of fraud of this nature is pending investigation by the SFIO. 55. Though it was brought to the notice of the Tribunal that the Respondent Companies, individuals including existing and erstwhile Directors, partners, trustees, beneficiaries and their associates or subsidiaries and firms had exposure with the PNB and are prima facie found to be beneficiaries of the fraud, as noticed at paragraph no. 6 of this Judgment, without waiting for the report of the SFIO it was not open to the Tribunal to exonerate some of the Respondents from the charges. 56. For the reasons aforesaid, we set aside the impugned order dated 2nd April, 2018, so far as it relates to Mr. Sujal Shah (Respondent No. 43); Mr. Gopal Krishnan Nair (Respondent No. 44); Mr. Suresh Senapathy (Respondent No. 51); Mr. Gautam Mukkavilli (Respondent No. 52) and Mr. Sanjay Rishi (Respondent No. 53). In so far as Mr. Anil Umesh Haldipur (Respondent No. 35) and Mrs. Nazura Yash Ajaney (Respondent no. 38) are concerned, the Tribunal has already held that a prima facie case has been made out against them but while giving such finding, the Tribunal has modified the order dated 23rd Februar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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