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TMI Blog2019 (9) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... onsible 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: Sr. No. Year Respondent 7 M/s. Prisha Properties India Pvt. Ltd. (Rs.) Respondent 6 M/s. Commune Properties (Rs.) Respondent 8 M/s. Golden Gate Properties (Rs.) Total as per Audited Financials (Rs.) 1. 2011-12 39,178,307 Nil Nil 39,178,307 2. 2012-13 177,757,510 Nil Nil 177,757,510 3. 2013-14 368,183,037 43,211,743 46,021,782 457,416,562 4. 2014-15 500,076,670 155,746, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itten off without any revenue recognized/no invoice raised. Hence, the minimum amount due from the Group to the Corporate Debtor amounts to: Sl. No. Details Amount overdue from Group (Rs.) To be recovered from the Directors of CD (Rs.) Total amount due (Rs.) 1. Receivables overdue 322,064,568 322,064,568 2. Assets with Group 15,176,560 15,176,560 3. Assets not found 7,441,849 7,441,849 4. WDV of Assets sold to scrap dealers and money siphoned off 22,357,233 22,357,233 5. Inventory consumed, not invoiced 94,123,192 94,123,192 Total dues from Group 337,241,128 123,922,274 461,163,403 5. The application was opposed by Mr. Sanjay Raj, one of the Promoters, on the ground that the application was not maintainable either on law or on facts. It was denied that the company was a Shell Company and asserted that the Applicant is the New Age Properties LLP and is not a Group Company. 6. Mr. Srinivas, another Promoter also opposed the application on the ground that the application filed by the Resolution Professional was hit by the doctrine of res-judicata and certain orders were passed by the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IB) No. 122/BB/2017 is disposed with following directions: 1) Learned Resolution Professional is directed to forward all material documents, which is connected to the present case including the Forensic Audit Report dated 14.12.2018, the Central Government, within a period of three weeks from the receipt of the copy of the order. 2) Learned Resolution Professional is also directed to furnish all the documents forwarded to the Central Government, to all parties/ other side duly following principles of natural justice. 3) The Central Government is directed to refer the matter to the SFIO for further investigation into the Affairs of the Corporate Debtor, Bank of Maharashtra and other related Companies including Director of Companies of Corporate Debtor & related Companies and officials of Bank of Maharashtra basing on the Report of Forensic Audit Report, as expeditiously as possible. 4) Bank of Maharashtra is also directed to extend full assistance to the SFIO to complete the investigation as expeditiously as possible. 5) The parties are at liberty to take appropriate legal course of action basing on the ultimate findings given by the SFIO in the case. 6) The prayer as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent as well as perused the record. 18. Section 66 of the I&B Code relates to fraudulent trading or wrongful trading, if found during the Resolution Process or Liquidation Process in regard to the business of the Corporate Debtor, which reads as under: " 66. Fraudulent trading or wrongful trading.- (1) If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit. (2) On an application made by a resolution professional during the corporate insolvency resolution process, the Adjudicating Authority may by an order direct that a director or partner of the corporate debtor, as the case may be, shall be liable to make such contribution to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any omission in any document affecting or relating to the property of the corporate debtor or its affairs; or (f) wilfully created any security interest over, transferred or disposed of any property of the corporate debtor which has been obtained on credit and has not been paid for unless such creation, transfer or disposal was in the ordinary course of the business of the corporate debtor; or (g) wilfully concealed the knowledge of the doing by others of any of the acts mentioned in clauses (c), (d) or clause (e); or (ii) at any time after the insolvency commencement date, committed any of the acts mentioned in sub-clause (a) to (f) of clause (i) or has the knowledge of the doing by others of any of the things mentioned in sub-clauses (c) to (e) of clause (i); or (iii) at any time after the insolvency commencement date, taken in pawn or pledge, or otherwise received the property knowing it to be so secured, transferred or disposed, such officer shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to five years, or with fine, which shall not be less than one lakh rupees, but may extend to one crore rupees, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Corporate Debtor etc., such person is punishable with imprisonment for a term which shall not be less than three years, but which may extend to five years, or with fine, which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both, which is apparent from Section 70 and reads as follows: "70. Punishment for misconduct in course of corporate insolvency resolution process.- (1) On or after the insolvency commencement date, where an officer of the corporate debtor- (a) does not disclose to the resolution professional all the details of property of the corporate debtor, and details of transactions thereof, or any such other information as the resolution professional may require; or (b) does not deliver to the resolution professional all or part of the property of the corporate debtor in his control or custody and which he is required to deliver; or (c) does not deliver to the resolution professional all books and papers in his control or custody belonging to the corporate debtor and which he is required to deliver; or (d) fails to inform the resolution professional the information in his knowledge that a debt has been falsely proved b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h shall not be less than three years but which may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both. 24. On the other hand, Section 73 prescribes for punishment for false representations to creditors by any officer of the Corporate Debtor, including the Promoters on or after the insolvency commencement date, as quoted below: "73. Punishment for false representation to creditors.- Where any officer of the corporate debtor- (a) on or after the insolvency commencement date, makes a false representation or commits any fraud for the purpose of obtaining the consent of the creditors of the corporate debtor or any of them to an agreement with reference to the affairs of the corporate debtor, during the corporate insolvency resolution process, or the liquidation process; (b) prior to the insolvency commencement date, has made any false representation, or committed any fraud, for that purpose, he shall be punishable with imprisonment for a term which shall not be less than three years, but may extend to five years or with fine which shall not be less than one lakh rupees, but may extend to one crore ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the offences shall not be necessary unless the Court requires his personal attendance at the trial." 28. Normally, the IBBI or the Central Government are not party to a Corporate Insolvency Resolution Process. Even if the matter is referred to IBBI, it cannot file straightaway a compliant before the Special Court without any investigation and only if a prima facie case is made out. Therefore, the question arises as to how in such cases the matter can be referred to by the Adjudicating Authority to the IBBI or the Central Government for trial of offences by Special Court under Section 236 of the I&B Code. 29. In terms of sub-section (1) of Section 60, the National Company Law Tribunal is the Adjudicating Authority for the purpose of I&B Code. It is having concurrent jurisdiction as the National Company Law Tribunal under the Companies Act, as also as the Adjudicating Authority under the I&B Code. 30. Section 212 of the Companies Act, 2013 though relates to investigation into the affairs of company by Serious Fraud Investigation Office and such investigation can be made only if the Central Government is of the opinion that it is necessary to investigate into the affairs of a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cedure, 1973 (2 of 1974), [offence covered under section 447] of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence referred to this subsection except upon a complaint in writing made (i) the Director, Serious Fraud Investigation Office; or (ii) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government. (7) The limitation on granting of bail specified in sub- section (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this Act or in any other law for the time being in force, the investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by a police officer under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974). (16) Notwithstanding anything contained in this Act, any investigation or other action taken or initiated by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 (1 of 1956) shall continue to be proceeded with under that Act as if this Act had not been passed. (17) (a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Government, police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the Serious Fraud Investigation Office; (b) The Serious Fraud Investigation Office shall share any information or documents available with it, with any investigating agency, State Government, police authority or income-tax authorities, which may be relevant or useful for such investigating agency, State Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, or the manager, of the company, order, 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, the Central Government shall 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: Provided that 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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. 37. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral 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. 43. 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. 44. As we have heard learned counsel for the parties and prima facie we are of the view that the matter requires investigation to find out whether one or other promoter or the company as referred to in paragraph 9 and quoted above to find if they have violated any of the provisions of Sections 68, 69, 70, 71, 72 & 73 of the I&B Code, we modify the impugned order dated 16th April, 2019 and refer the matter to the Secretary, Ministry of Corporate Affairs, Government of India, to get the matter investigated by Inspector or Inspectors and following the procedure in terms of Section 213 of the Companies Act, 2013 and/ or on such report after investigation by the Inspector, the Central Government feels that the matter is further required to be investi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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