TMI Blog2020 (4) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Corporate Debtor - Before the Adjudicating Authority the Applicant/Resolution Professional in the application had averred that directions (in suspension) of the Corporate Debtor had not deliberately disclosed the affairs of the 'Corporate Debtor' from time to time to the Applicant / Resolution Professional and indulged in falsification and determination of Books and 12 Records of the Corporate Debtor and made wilful and material omissions relating to its affairs and further defrauded its creditors. In the present case it is to be pointed out that the term Adjudicating Authority, as defined in Section 5(1) of IBC cannot come within the ambit of court as defined in Section 2(29) of the Companies Act, 2013. In fact, Section 2(29)(i) of the Companies Act defines Court the High Court having jurisdiction in relation to the place at which the registered office of the Company concerned is situated etc. Section 2(29)(ii) of the Act speaks of District Court and Section 29(iii) deals with the Court of Session, Section 29(iv) pertains to the Special Court constituted u/s 435 and Section 29(5) is concerned with any Metropolitan Magistrate or Judicial Magistrate of the 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in support of their contentions. The proceedings before this Tribunal are summary in nature and it is not possible for us to conduct an indepth investigation and examine the veracity of these documents and averments. Without an in-depth investigation, it is not possible to arrive at a correct appraisal of the State of Affairs of the Corporate Debtor and to adjudicate upon the allegations made by the RP. Accordingly, we take recourse to 3 provisions of Section 210 (2) of the Companies Act, 2013 which read as follows: Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation. 8.2.3. We therefore, order that the affairs of the Corporate Debtor ought to be investigated. Accordingly, the Central Government is directed to order an investigation into the affairs of the Corporate Debtor under Section 210 (2) of the Companies Act, 2013. 8.3.2 Accordingly, the Respondents impleaded in the instant application, namely, the Suspended Directors of the Corporate Debtor and the Operational Creditor on whose necessary, refer their grievances against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 210(2) of the Companies Act, 2013. In fact, the contention of the Learned Counsel for the Appellants is that the Adjudicating Authority ( National Company Law Tribunal ) New Delhi Bench-II had exceeded its jurisdiction by passing an order as per Section 210(2) of the Companies Act, 2013. 8. The Learned Counsel for the Appellants refers to the judgment of this Tribunal in Company Appeal (AT)(Insol.) No. 574 of 2019 in the matte of Mr. Lagadapati Ramesh Vs. Mrs. Ramanathan Bhuvaneshwari, dated 20.09.2019 wherein it is held that the Adjudicating Authority is not competent to straightway direct any investigation to be conducted by the Serious Fraud Investigation Office without giving notice with regard to the same to the Promoters and others and after following the procedure prescribed under the Companies Act and that too after forming a prima facie opinion that the matter 6 requires investigation and contends that in the absence of the same the impugned order is legally untenable. 9. The Learned Counsel for the Appellants submits that the aforesaid judgement in Mr. Lagadapati Ramesh s case is clearly distinguishable on facts of the present case in as much as the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f justice. 14. Repelling the contention of the Appellants, the Learned Counsel for the Respondent submits that it is not correct on the part of Appellants to contend that the Appellate Authority has no jurisdiction in directing the Central Government to conduct an investigation into the affairs of the Corporate Debtor as per Section 210(2) of the Companies Act, 2013 and this plea is not tenable one because of the reason that Section 210(2) of the Companies Act, 2013 clearly 8 mandates the Central Government to order an investigation into the affairs of the Company, when an order is passed by the Court or the Tribunal in any proceedings before it that the affairs of the Company ought to be investigated. Furthermore, the Learned Adjudicating Authority had suo moto came to the conclusion that the affairs of the Corporate Debor ought to be investigated and, therefore, a direction was rightly issued in this regard. 15. It is the stand of the Respondent that Section 210(2) of the Companies Act, 2013 does not refer to formation of any opinion of the Central Government and in fact, it imposes a mandatory obligation on the part of Central Government to conduct an investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can among other things, sue and be sued in its name, till it is dissolved in accordance with law. 20. At this juncture, the Learned Counsel for Respondent brings to the notice 10 of this Tribunal that in the instant case, no order of dissolution has been passed in respect of the 'Corporate Debtor' so far and further that, the numerous fraudulent/wrongful action and mentioned in the Application filed by the Respondent related to the period prior to the 'Corporate Insolvency Resolution Process' of the 'Corporate Debtor'. 21. The Learned Counsel for Respondent projects an argument that the Adjudicating Authority has inherent powers under Rule 11 of 'NCLT' Rules, 2016 to make such orders as may be necessary for meeting the ends of justice or to prevent an abuse of the process of the Tribunal and in public interest, it is open to the Adjudicating Authority after giving the parties a reasonable opportunity of being heard, to refer the matter to Central Government for investigation, if this is of a prima facie opinion that acts of fraud have been committed by the 'Corporate Debtor' or its Directors. In pith and substance, the submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecords of the Corporate Debtor and made wilful and material omissions relating to its affairs and further defrauded its creditors. In reality, the Applicant/Resolution Professional filed the application before the Adjudicating Authority in terms of Sections 60(5), 66, 67, 70, 71, 72, 73 and 235A of the I B Code and sought the undermentioned reliefs which run as under:- a. allow the present application under Sections 60(5), 65, 66 and 67 of the Insolvency and Bankruptcy Code, 2016; b. grant leave to the Applicant/RP to approach the Insolvency and Bankruptcy Board of India for taking appropriate action under Sections 70,71,72,73 and Section 235A of the Insolvency and Bankruptcy Code, 2016; c. direct the Suspended Directors of the Corporate Debtor, jointly and / or severally, to pay the entire debt amounting to approx. ₹ 512 Crores owed to the financial creditors of the Corporate Debtor; d. direct the Suspended Directors of the Corporate Debtor, jointly and/or severally, to contribute ₹ 191 Crores to the assets of the Corporate Debtor so that the creditors of the Corporate Debtor can be paid their dues; e. Direct the Suspended Directors and the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the handy work of the suspended Directors with a view to evade investigation and prosecution in respect of their actions. In regard to the Fire incident a complaint was lodged in FIR No. 0138/2018, registered by the police authorities u/s 435 and 452 of Indian Penal Code and according to the First Information Report the window of the Office was unbroken by removing the Grill . 29. The Resolution Professional/Applicant recovered from the Corporate Office of the Corporate Debtor a show cause notice of the Office of the Commissioner Central Excise Rohtak, in regard to the availing of Cenvat credit by the Corporate Debtor resting upon on fake invoices given by the respective dealers. Apart from this, as against the Corporate Debtor the Income Tax Department passed an order on 29.12.2011 as per Section 143(3) of the Income Tax Act, 1961 15 relating to the Accounting year 2010-2011 and also that the Commissioner of Income Tax (Appeals) passed an order on 31.8.2012, in respect to an Appeal preferred by the Corporate Debtor. 30. The Resolution Professional/Applicant before the Adjudicating Authority had also in the application had mentioned about the fabrication of the Books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 36. 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. 37. In view of the aforesaid position of law, we hold that the Tribunal/ Adjudicating Authority, on receipt of application/complain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges as may be found during the investigation by the Inspector. 42. 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 20 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 . 43. We, accordingly, modify the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to decided the disputes /controversies (of course judicial power of the state being conferred in it. The procedure of a Court of Law and Tribunal will differ but they function in their own field. However, a court of Law and the Tribunal act judicially in both senses. To put it lucidly, a Tribunal does not have the trappings of a court . 35. An Administrator is to exercise a prudent skill and care in dealing with property affairs, duly entrusted to him. Further, the Adjudicating Authority is to subjectively satisfy itself that a complete and comprehensive probe into the affairs of company is very much required, in the interest of Company because of maladministration and poor governance. 36. A Resolution Professional is a creation of I B Code is quite competent to prefer an application before an Adjudicating Authority by pointing out the Hardships/obstacles which he came across/comes across during the Resolution process. 37. Be it noted, in the case on hand, an order of dissolution was not passed in regard to the Corporate Debtor so far. To put it precisely, the fraudulent/wrongful actions mentioned in the application projected by the Resolution Professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of books of Corporate Debtor and Section 72 of the Code speaks of punishment for wilful and material omission committed by the Officer of the Corporate Debtor in statements relating to its affairs. Section 73 is concerned with the punishment of fraud and false representations to the Creditors subject to the proof of the same. 41. As per Section 210(c) of the Companies Act, 2013, the Central Government without resorting to an investigation can order for an appropriate action being taken, based on its discretion. Further, as per Section 210(1)(b) of the Act, the Central Government can direct an investigation on its own accord. If need be, or on a special resolution passed by the shareholders of the Company. As per Section 210(3) of the Companies Act the Central Government has no option but to direct an investigation and appoint an inspector and to obtain his Report. The inspectors are empowered to scrutinise the materials gathered from a company and prepare the report. Section 212 of the Act, 2013 specifies a procedure for an investigation by SFIO taken up in the teeth of Section 212(1) of the Act. 42. As per Section 60(1) of I B Code the National Company Law Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are attendant circumstances pointing out fraudulent/wrongful trading etc. was / which has been committed then, it is well within jurisdiction to refer the matter to Central Government for an investigation by Inspector(s) to be appointed by the Central Government. If an investigating authority after completion of investigation comes to a conclusion that any offence punishable in terms of Section 213 read with 447 of Companies Act or under Section 68,69,70,71,72,73 of the IBC Code is/are made out then, the Central Government, may refer the matter to the Special Court itself or may even require the Insolvency and Bankruptcy Board of India or to authorise any person as per Section 236(2) of the I B Code to file a complaint. Viewed in that perspective this Tribunal varies the impugned order dated 19.07.2019 passed by the Adjudicating Authority and refer the matter to the Central Government for investigation through any inspector. Accordingly, 27 this Tribunal refers the matter to the Secretary, Ministry of Corporate Affairs, Government of India in carrying out an investigation by the Inspector or Inspectors by following the due procedure as per Section 213 of the Companies Act, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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