TMI Blog2020 (6) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, to hold that, at this stage, any proceeding , civil or criminal, is pending against the applicant, as could be stayed under Section 391 (6) of the Act. It is deemed appropriate to express any final opinion thereon, as the complaint, of NSDC, is presently under consideration with the EOW, which would, doubtless, take a view thereon. In the opinion of this Court, no proceeding , as could be stayed under Section 391 (6) of the Companies Act, 1956, initiated by the NSDC, can be said to be presently pending against the applicant - Petition dismissed. - C.A. No. 221/2020 in CO. APPL.(M)135/2016 - - - Dated:- 15-6-2020 - HON BLE MR. JUSTICE C. HARI SHANKAR Petitioner Through: Mr. Gaurav Duggal and Ms. Aakansha Kaul, Advocates. Mr. Rohit Kumar Aggarwal and Ms. Gunjan, Advs. for Non Applicants/Respondents. J U D G M E N T 1. This application, under Rules 6 and 9 of the Company (Courts) Rules, 1959, has been preferred by iYogi Technical Services Pvt. Ltd. (the applicant in Company Application (M) 135/2016), seeking ad interim stay of the proceedings, against the applicant, consequent on complaint, dated 15th February, 2019, by the National Skill D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fforts at rehabilitation/restructuring of the applicant-Company were not jeopardised, and the applicant was in a position to generate requisite cash flow, so that its dues could be settled. With the said directions, C.A. 3677/2016 was disposed of. 6. Subsequent thereto, it is not in dispute that serious efforts are under way, to rehabilitate the applicant-Company. In the interregnum, this Court has, vide orders dated 22nd May, 2018, 17th July, 2018, 31st July, 2018 and 21st October, 2019, granted interim protection, to the applicant-Company, against various proceedings, initiated against it. Admittedly, all such proceedings were civil in nature. Protection was granted, to the applicant, under Section 391 (6) of the Act. Section 391 dealt with the power to compromise or make arrangements with creditors and members , and sub-section (6), thereof, empowers the Company Court as under: (6) The Court may, at any time after an application has been made to it under this section, stay the commencement of continuation of any suit or proceeding against the company on such terms as the Court thinks fit, until the application is finally disposed of. (Emphasis supplied) 7. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the First Party shall be entitled to initiate appropriate legal proceedings including suspension to access the Grant Amount or recover the Grant Amount or to access the Grant Amount by the Second Party and/or termination along with damages, interests and expenses without prejudice to any other right or remedy which the First Party may have under this MoU or otherwise in law. However, it is clarified that this clause shall not be applicable in the event of First Party not releasing the Grant Amount or part thereof not for the reasons attributable to the Second Party, in which event, the obligations of the Second Party under this MoU shall remain suspended and in the event First Party is unable to release the Grant Amount or part thereof within ninety (90) days from the date of suspension, both Parties shall mutually agree to terminate this MoU on such terms which as may be mutually agreed. The Utilisation Certificate was required to be submitted, by the applicant, in the Form prescribed in Schedule V to the MoU. (iii) Sub- clause (xiii) of Clause 2.1 of the MoU entitled the applicant to reimbursement, at the rate of ₹ 50,000/ , per student/participant with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts, starting 2013, till the date of the legal notice, were pending, evidencing utilisation, by the applicant, of the Grant amount of ₹ 2,88,03,600/ , released to the applicant by NSDC. This, Para 11 of the legal notice alleged, amounted to to a breach of contract , resulting in financial loss, to NSDC and the public exchequer, of the Grant amount of ₹ 2,88,03,600/ . Thereafter, the concluding paras of the legal notice went on to read thus: 12. That in terms of Clause 2.1 (xiv) of the MoU, iYogi is required to rectify the default stipulated in the notice within 45 days from the date thereof. Our client has not received any communication/revert from your entity (i.e. iYogi) in response to the aforesaid Show Cause Notice till date as the said Show Cause Notice was returned undelivered to Our Client due to a change in address of iYogi. It is submitted that as a responsible entity and being the principal party to the MoU, iYogi was supposed to intimate any change in its communication addressed to Our Client; which it has failed to do so. Accordingly, in the circumstances, the issuance of the Show Cause Notice dated 30.01 to 2018 to the last known address of iYogi wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the Accused and its Directors have colluded and illegally siphoned off the money it had received under the scheme Udaan and deliberately avoiding service of the notices sent by and on behalf of the complainant. 6. As on date the Utilisation Reports for the period starting from the year 2013 till date remain pending on the part of the Accused towards utilisation of the Total Grant amount of ₹ 2,88,03,600/ that has been released by the Complainant to the Accused under the MoU. ***** 8. The Complainant take strong exception to the wilful non-performance of the obligations by the Accused under the MoU and also the non-submission of the quarterly and annual Utilisation Reports which clearly demonstrates the unilateral and wilful default by the Accused and places the strong possibility of misappropriation and siphoning-off of the Grant Amount i.e. ₹ 2,88,03,600/ released by the Complainant under the Scheme Udaan. 9. In the light of the fact that the Accused has illegally and wrongfully failed to comply with the terms of MoU despite receiving an amount of ₹ 2,88,03,600/ released by the Complainant under the Scheme Udaan and thereafter willfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, the applicant had submitted a part utilisation report, ₹ 1,44,60,180/ , to the Udaan monitoring team of NSDC, duly signed by the empanelled Chartered Accountant of NSDC. The applicant had also submitted a claim, for reimbursement of ₹ 50,000/ (per student), which was pending. The applicant informed NSDC that, while it would complete the obligations of the first part of the Udaan scheme, it was not interested in continuing with the scheme, as involved considerable financial loss to the applicant, and was not effective and in accordance with the objectives of the applicant. The allegation, of NSDC, that utilisation reports had not been submitted by the applicant was, it was pointed out, completely false, and indicated that NSDC was not aware of its own records. In the light of the submissions, the applicant requested the EOW, vide the above reply dated 12th June, 2019, to review the complaint . (x) Mr. Gaurav Duggal, learned counsel appearing for the applicant, submits that all details, sought by the EOW, have been provided by the applicant, and that the applicant is hopeful that the proceedings would be dropped by the EOW, as, in his submission, no case, for in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 14th April, 2020, addressed by NSDC to the EOW, the applicant responded, vide email dated 28th April, 2020, categorically denying all allegations of NSDC. Castigating the email, dated 14th April, 2020, as maligning, disparaging, malicious , defamatory and derogatory , the applicant pointed out that the report, uploaded by NSDC on its own website reflected the number of people hired, trained and deployed by the applicant, under the Udaan scheme, thereby belying the allegation, of NSDC, that the applicant had not hired anyone and had misappropriated the grant advanced to it under the said scheme. It was also submitted that, in a report, on the website of NSDC, which referred to the recruitment drives conducted in Jammu and Kashmir by Udaan partners, the first name, referenced therein, was that of the applicant. The applicant, therefore, categorically denied the allegation that a criminal offence could have been committed by it, and alleged, per contra, that NSDC was attempting to malign the reputation of the applicant. 8. Apparently sensing that matters were getting out of hand, the applicant has moved the present application, before this Court, invoking Section 391 (6) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That apart, Mr. Duggal points out that NSDC could join as a creditor in the proceedings for revival of the applicant, pending before this Court, subject to the plea of limitation, available to his client. He points out that, consequent to orders passed by this Court, the next meeting of employees, scheduled and unscheduled creditors of the applicant, was to take place on 15th July, 2020. Mr. Duggal points out, further, that, in that notices dated 4th April, 2018 supra and 18th December, 2018 supra, addressed by NSDC to the applicant, civil action alone was proposed, and the liability of the applicant, to which reference was made thereon, was civil in nature. 13. The facts of Krishna Texport, submits Mr. Duggal, were clearly distinguishable from those of the present case. Inter alia, Mr. Duggal points out that the petitioner, in Krishna Texport , had availed two civil remedies. 14. Responding to the submissions of Mr. Duggal, Mr. Rohit Aggarwal, appearing for NSDC, places reliance on paras 26, 33 and 34 of the report in Krishna Texport. He submits that Krishna Texport was categorical in holding that civil proceedings, alone, could be stayed under Section 391 (6) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant. Significantly, submits Mr. Duggal, the MoU, between the applicant and NSDC, did not contain any provision for initiation of criminal action. Mr. Duggal also placed reliance on the well-known judgment of the Supreme Court in Lalita Kumari v. Govt. of UP AIR 2014 SC 187; (2014) 2 SCC 1, to contend that the criminal law was set in motion only on registration of FIR and, prior thereto, the proceedings could not be treated as criminal in nature. Mr. Duggal places especial reliance on para 8 of Krishna Texport which, in his submission, completely demolished the case of NSDC. Analysis Krishna Texport , and its sequelae 18. It is obviously necessary, in the first instance, to analyse Krishna Texport , and the law enunciated therein. If Krishna Texport covers the issue, the matter must rest there, as the wheel, already forged by a Division Bench, can hardly be reinvented by me. 19. The issue before the Division Bench of this Court, in Krishna Texport , is thus delineated, in the very opening para of the judgment: A conflict of judicial review between the Bombay High Court in the Gujarat High Court in respect of the power of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context of Section 446 of the Act. Section 446(1) and (2)(a), of the Act, read thus: 446. Suits stayed on winding up order. (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced. or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose. (2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being, in force, have jurisdiction to entertain, or dispose of (a) any suit or proceeding by or against the company; 24. Reading the expression other legal proceeding , in Section 446(1), and the expression proceeding in Section 446(2)(a), of the Act, ejusdem generis with the word suit , the Division Bench held, in D. K. Kapur , that the proceeding , to which reference was made, in the said provisions, was analogous to a suit, and could not include criminal prosecution. One of the considerations, which guided this view, was the fact that Section 446(2)(a) requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to an end a prosecution arising from Income Tax Act or Foreign Exchange Control Act. The proceedings are clearly not of a pecuniary nature involving recovery of money. Interestingly, even the scheme stated to be approved at the behest of the respondent company does not envisage bar to any criminal proceedings or payment of any actual amount in the given facts of the case as discussed at the inception of this judgment, but only seeks to extinguish the liability of the appellant on the ground that the respondent is liable to pay a lesser amount, the interest not running, and the claim is alleged to have been extinguished by payment to a third party at the behest of the appellant for which there is no written document. 34. We are, thus, unequivocal of the view that Section 391(6) of the said Act does not envisage either quashing or stay of criminal cases against the company or its Directors and, thus, the proceedings against the respondents u/s 138 of the NI act instituted by the appellant could not have been stayed. (Emphasis supplied) 27. On facts, it is clear that the decision in Krishna Texport is not similar to the case at hand. Krishna Texport involved a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that criminal proceedings had been instituted against the company in question and had, to employ a colloquialism, taken off. 32. Laxmipat Choraria v. State of Maharashtra AIR 1968 SC 938, analysing the expression criminal proceeding , as employed in Section 5 of the Indian Oaths Act, 1873, held that the expression would have to be understood in the manner in which it was defined in Section 132 of the Indian Evidence Act, 1872, and would include, therefore, the criminal trial process, and not the investigation. In R. v. Bow Street Magistrate (1999) 1 All ER 98 (QBD), the expression criminal proceeding was understood to mean the proceedings before the Court of magistrate. 33. In Lalita Kumari , on which Mr. Aggarwal sought to rely, it is specifically held that the FIR is pertinent document in the criminal law procedure of our country and its main object from the point of view of the informant is to set the criminal law in motion and from the point of view of the investigating authorities is to obtain information about the alleged criminal activity so as to be able to take suitable steps to trace and to bring to book the guilty . Re-emphasising the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issuance of the writ or filing of the complaint until the entry of a final judgment, or may be used to describe any act done by authority of a court of law and a three-step required to be taken in any cause by either party. The proceedings of the suit embrace all matters that, in its process judicially. Term proceeding may refer not only to a complete remedy but also to a mere procedural step that is part of a larger action or special proceeding. Rooney v. Vermont Investment Corp. 10 Cal. 3d 351, 110 Cal. Rptr. 353, 365, 515 P. 2d. 297 . A proceeding includes action and special proceedings before a judicial tribunals as well as proceedings pending before quasi-judicial officers and boards. State ex. rel. Johnson v. Independents School Dist. No. 80, Wabasha County, 260 Minn. 237, 109 N. W 2d 596, 602. In a more particular sense, any application to a court of justice, however made, for aid in the enforcement of rights, for relief, for redress of injuries, for damages, or for any remedial object. (Emphasis supplied) 37. In Babu Lal v. Hazari Lal Kishori Lal (1982) 1 SCC 525, it was held that the term proceeding , while flexible and requiring interpreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the complaint, dated 15th February, 2019, addressed by NSDC to the EOW. He pointed out that there is no provision, in the MoU, dated 22nd May, 2013, contemplating initiation of criminal proceedings against the applicant. Mr. Duggal took me through the various communications, between NSDC and the applicant, to bring home his point. It was pointed out that, in para 8 of the legal notice, dated 4th April, 2018, addressed by NSDC (through counsel) to the applicant, while referring to the Show Cause Notice dated 30th January, 2018 supra, addressed by NSDC to the applicant, clearly stated that the proposal, in the said Show Cause Notice, was of refund, by the applicant, of the disbursed grant amount, to NSDC. Para-13 of the said legal notice, it was pointed out by Mr. Duggal, specifically stated that the notice was being issued to the applicant to submit the Utilisation Report within 45 days of the receipt of this notice failing which (NSDC) in exercise of the rights stipulated in the MoU will (a) terminate the MoU as well as the rights of (the applicant) to access the grant amount under the MoU; and (b) call upon (the applicant) to pay/return the grant amount ₹ 2,88,03,600/ a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for an amount of ₹ 1,43,43,420 [i.e., balance of (a) total disbursed amount of ₹ 2,88,03,600 less (b) UC for an amount of ₹ 1,44,60,180 sent by email] duly certified by CAG empanelled auditor thereby certifying utilisation of the rest of the financial assistance disbursed to iYogi. The email, dated 14th April, 2020 supra, addressed by NSDC to the applicant, which provoked the filing of the present application, too, points out Mr. Duggal, requested the EOU to instruct iYogi, its Director and authorised representative to refund the amount of grant disbursed by NSDC and not utilised by iYogi as per the MoU executed between the parties under the project Udaan. 42. These communications, contends Mr. Duggal, clearly indicate that the grievance of NSDC, against the applicant, was only that (i) it had not furnished the original utilisation certificate, evidencing utilisation of ₹1,44,60,180/ , but had provided only a soft copy thereof, and (ii) it had not provided proof of utilisation of the balance amount of ₹1,43,43,420/ . The action contemplated, against the applicant, by NSDC, as reflected in the afore referred communications, was only to obt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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