TMI Blog2022 (4) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... subject matter of litigation with numerous legal proceedings before the City Civil Court, Chennai. Conveyance to and in favor of DLF - HELD THAT:- The same, according to the 1st Respondent/Club is a private transaction between the Club and another entity. As far as Madras School of Equitation is concerned, it is the stand of the 1st Respondent/Club that it is a part and parcel of the 1st Respondent/Club and the issue of Sub-Lease may not arise. Income Tax dues and the GST dues - HELD THAT:- The Appellant/Petitioner being an alien under stranger to the 1st Respondent/Club has no Locus Standi to question the same. And in this regard, the Income Tax and GST Authorities are to take such action as they deem fit and proper, in the considered opinion of this Tribunal. By no stretch of imagination, these dues cannot be prudently considered as a basis praying for an Investigation, as per the ingredients of Section 213 of the Companies Act, 2013. A cursory perusal of the relevant Provisions of the Companies Act, 2013 point out that there are prescribed procedures to deal with a contingency like Mismanagement of a Affairs of Company - there is no two opinion of a premodial fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 185 of 2022 - - - Dated:- 30-3-2022 - [Justice M. Venugopal] Member (Judicial) And [Kanthi Narahari] Member (Technical) For the Appellant : Mr. Rohan Rajasekaran Mr. Chirag Gupta, Advocates For the Respondents 1 2 : Mr. P.H. Arvindh Pandian, Senior Advocate For Mr. R.S. Murari, Senior Advocate JUDGMENT (Virtual Mode) JUSTICE M. VENUGOPAL, MEMBER (JUDICIAL) PREAMBLE: 1. The Appellant / Petitioner / Applicant has preferred the instant Company Appeal (AT) (CH) No.17 of 2022 as an affected person being dissatisfied with the Impugned Order dated 17.11.2021, passed by the National Company Law Tribunal, Division Bench-II, Chennai in CP/46(CHE)/2021. 2. The National Company Law Tribunal, Division Bench-II, Chennai while passing the Impugned Order dated 17.11.2021 in CP/46(CHE)/2021 (filed by the Appellant / Applicant / Petitioner inter alia at Paragraph 10 to 22 had observed the following: 10. It was submitted that the petitioner herein is a legal heir and grandson of the owner of 12.53 acres of land in S.No.76/2 77 and the 1st Respondent Club had admittedly entered into a lease agreement with the late grandfather of the Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual facts has been shown to the vendors of the apartments and represented to be the title document of the said land. It is averred in the petition that, the 1st Respondent claims of still being in possession of the land and rights over it in several petitions/documents filed in the Hon ble High Court and Civil Court as per their written statements in CS No. 366 of 2004. 13. It was submitted that there is a portion of land wherein the 1st Respondent appears to have unlawfully sub-leased and / or leased the same to M/s. Madras School of Equitation and is deriving an income from the same. The said act of refusing to pay lease rentals to the actual owners of the properties and simultaneously sub-leasing/ leasing the said property to drive income, is contrary to the rule of law and public property. 14. It was further submitted that the modus operandi of the 1st Respondent is to alienate the lands over which they possess only lease hold rights and by creating and forging documents and fraudulently profiting from such alienation and that, they have actively involved in land grabbing from the Government of Tamil Nadu and private parties by fabricating title documents and collu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Senior Counsel for R1 and R2 and also the Counsel for R12. The present Petition has been filed under Section 213 of the Companies Act, 2013 by the Petitioner seeking inter alia to appoint an Inspector to carry out the Investigation into the affairs of the 1st Respondent Company. Section 213 of the Companies Act, 2013 read as follows: 213. Investigation into Company s Affairs in other cases The Tribunal may, -- (a) On an application made by- (i) not less than one hundred members or members holding not less than one-tenth of the total voting power, in the case of a company having a share capital; or (ii) not less than one-fifth of the persons on the company s register of members, in the case of a company having no share capital, and supported by such evidence as may be necessary for the purpose of showing that the applicants have god reasons for seeking an order for conducting an investigation into the affairs of the company; or (b) On an application made to it by any other person or otherwise, if it is satisfied that there are circumstances suggesting that-- (i) the business of the company is being conducted with intent to defraud its creditors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. In the present case, we have gone through the averments made in the Petition. All the averments made in the Petition by the Petitioners are not supported by any material documents in order to substantiate such allegations. The documents filed by the Petitioner and listed in para 17 supra and a perusal of the said documents filed along with the Petition would show that the allegations made by the Petitioner are not corroborated with the documents filed therewith. Prima facie, the Petitioner has miserably failed to make out a case under Section 213(b) of the Companies Act, 2013 and ahs also failed to satisfy this Tribunal that the affairs of the 1st Respondent Company have been conducted in a fraudulent manner or unlawful purpose and on the said count itself this Petition is liable to be dismissed. 21. It is pertinent to note here that the trigger for the Petitioner filing the present Petition is with respect to the findings given by the Hon ble Apex Court in the matter of Dr. K.R. Lakshmanan (supra) whereby, the Hon ble Apex Court held that there are no materials on record to show that any inquiry or investigation had been conducted by the State Government prior to pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government Land , its market value is ₹ 11,500 Crores and the Government Value is ₹ 5000 Crores, for which also, Lease Rentals were not paid. 4. As on date, the Lease Rentals due to the State Government is estimated to be at a sum of ₹ 1386.13 Crores and the Lease Rentals due to the Appellant by virtue of being the Legal Heir of the Owner/Lessor is approximately a sum of ₹ 55 Crores. 5. The Learned Counsel for the Appellant contends that the Impugned Order passed by the National Company Law Tribunal, Division Bench-II, Chennai in CP/46/CHE/2021 is an incorrect and invalid one because of the fact that the same was passed in a Summary Fashion without the detailed Hearing, thereby negating the Principles of Natural Justice . 6. The Learned Counsel for the Appellant puts forward a plea that the Tribunal had committed an error in failing to appreciate and consider that Fraud vitiates everything, (including the Timeline and Limitation ). 7. According to the Learned Counsel for the Appellant that the Impugned Order was passed by the Tribunal without issuing Notice to the Respondents or permitted them to file the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contends that in Block No.16 T.S. No.7 Old S. No. 77, 1.36 Acres of Land was in illegal possession of the 1st Respondent/Club and the same was alienated to the Developers without following the Due Process Of Law . 16. The Learned Counsel for the Appellant submits that in Block NO.15, T.S. No.24/1, Old S. No.77, 2.06 Acres of Land was grabbed by the 1st Respondent/Club and kept under lock illegally by the 1st Respondent/Club without any Documentation or Legal Right over the said property. 17. The Learned Counsel for the Appellant advances an Argument that the Tribunal had failed to consider that there was a Lease Deed between the 1st Respondent/Club and DLF Retail Pvt. Ltd. for a period of three years and later another Memorandum of Understanding for Leas Rentals by which the 1st Respondent/Club had collected Lease Rentals to the tune of ₹ 200 Crores for which Stamp Duty was not paid to the Government . Therefore, a contention is projected on the side of the Appellant that the fraudulent nature of the Business of the 1st Respondent/Club is quite apparent. 18. It is the emphatic plea of the Appellant that the Tribunal had failed to consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to claim the Arrears no supporting documents were filed by the Appellant . 24. It is projected on the side of the Respondents No.1 and 2 that the Title to the Lands measuring 12.53 Acres is a subject matter of litigation with various legal Proceedings pending before the City Civil Court, Chennai, which had the Appellant been a Legal Heir as it claims to be, would have had knowledge of and being made a Party to. In respect of the Land Conveyance made in favour of DLF is concerned, the same is a Private transaction between the Club and another entity, carried out in accordance with law and it is not known as to on what basis it was alleged by the Appellant that the same warrants an enquiry into the conduct of the affairs of the Club . 25. In regard to the issue of Mangolia Park is concerned, the 1st Respondent/Club has no nexus with the said transaction whatsoever, and this cannot form the basis for seeking an Investigation into the 1st Respondent/Club s Affairs. 26. In so far as the allegations of sub lease to the Madras School of Equitation is concerned, it is the stand of the Respondents No.1 to 2 that M/s. Madras School of Equitation is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and it will be useful to make a mention of them here in a tabular form:- (a) that the business is being conducted with intent to defraud (i) creditors of the company, or (ii) members, or (iii) any other person; (b) that the business is being conducted (i) for a fraudulent purpose or (ii) for an unlawful purpose; (c) (d) Since the existence of circumstances is a condition fundamental to the making of an opinion, the existence of the circumstances, if questioned, has to be proved at least prima facie. It is not sufficient to assert that the circumstances exist and give no clue to what they are because the circumstances must be such as to lead the conclusions of certain definiteness. The conclusions must relate to an intent to defraud, a fraudulent or unlawful purpose, fraud or misconduct of the withholding of information of a particular kind. 29. The Learned Counsel for the Respondents No.1 and 2 contends that the Investigation Of Companies in Law means that the Existence Of Circumstances relevant to the inference must be of a Sine qua non for the exercise of jurisdiction. Besides these, the observations made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the 1st Respondent/Club for the unpaid Lease Rentals to an extent of ₹ 1386 Crores for 2015-16. However, no action was taken against the 1st Respondent / Club either towards eviction or recovery and that the fraudulent and unlawful operations of the 1st Respondent/Club had caused several losses to the Government Exchequer and the general public. 35. The stand of the Appellant / Petitioner in the main Company Petition before the Tribunal is that the Government of Tamil Nadu had formed a prima facie opinion of the various illegalities and mismanagement of the 1st Respondent/Club as early as in the year 1986. Further, it is the version of the Appellant that just because an Investigation was not conducted and the procedure established under the Companies Act, 1956 was not followed, the Hon ble Supreme Court had struck down the 1986 Act. 36. The Appellant / Petitioner in the main Company Petition in CP/46(CHE)/2021 had prayed for the relief of (i) appointing one or more competent persons as Inspectors to investigate the affairs of the 1st Respondent/Company thoroughly report thereon in such manner prescribed under Law and to punish the persons guilty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne in mind that if a person with an absolute knowledge of facts takes a long time to prefer an action before the Tribunal , the Tribunal will not assist him i.e. Law will not come to a rescue of an individual who sleep on his rights. LIMITATION: 42. It is to be remembered that Section 433 of the Companies Act, 2013 enjoins that the Provisions of the Limitation Act, 1963 shall as far as may be apply to the Proceedings or Appeals before the Tribunal or Appellate Tribunal as the case may be. The words occurring in Section 433 of the Companies Act, 2013 as far as may be means to the extent applicable in the proceedings under the Act. LATCHES: 43. The term Latches in law means a failure to do something at the proper time. Further, it points out an undue delay in asserting a Legal Rights or privilege . It cannot be brushed aside that the Delay and Latches will come into operative play and commence from the date of knowledge as per decision Nirmla Thakkar (Dr. Mrs.) v Bluebird Enterprises, reported in 2012 72 Company Cases Page 28 (CLB). The plea of Limitation is a mixed question of Law and fact. Equitable Consideration: 44. The Doctr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be into Company s Affairs is palatable/desirable, in the interest of Company under the Companies Act, 2013. PURVIEW OF SECTION 210 AND 213 OF THE COMPANIES ACT 51. Section 210 of the Companies Act deals with an investigation into the Affairs of a Company . Section 212 of the Act, 2013 deals with an investigation into the Affairs of a Company by the Serious Fraud Investigation Office . The words employed in Section 210(2) of the Companies Act, 2013 Shall Order connotes that when an Order is passed by a Court / Tribunal , it is mandatory for the Central Government to order an Investigation . 52. Section 212 of the Act 2013 concerns with a different situation than the situations caused by Section 210 of the Act. In the case of an Investigation by the Serious Fraud Investigation Office the Central Government forms an opinion that it is necessary to order an Investigation by SFIO . 53. Section 212(1) of the Companies Act, 2013 refers to the opinion being formed that it is necessary to investigate into the affairs of the Company by Serious Fraud Investigation Office , as per decision of the Hon ble High Court of Andhra Pradesh in The Medak Dio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to consider . EXPERT AGENCY: 57. It is to be pointed out that the Department of the Central Government deals with Companies is an Expert Body in Company Law related matters. The standard required must be of an Expert . An order of investigation is only a means to ascertain the full facts of act complained with reference to the facts. An investigation under Section 210 of the Companies Act is not an investigation in respect of a Criminal Case . The aim of investigation under the Companies Act, 2013 is only to streamline the working of a Company . SECTION 213 OF THE COMPANIES ACT Investigation into Companies Affairs in other cases 58. It is to be borne in mind that materials are to be placed before the Tribunal to arrive at a subjective satisfaction that a deeper probe into the affairs of a Company is desirable in the Company itself. ANY PERSON AGGRIEVED: 59. The words seen in Section 421(1) of the Companies Act, 2013 mean only a person who has suffered a legal grievance. APPELLATE TRIBUNAL S ORDER: 60. Be it noted, that in the Order of this Tribunal dated 02.12.2019 (National Company Law Appellate Tribunal, New D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 company by the Serious Fraud Investigation Office , as detailed below: 212. Investigation into affairs of Company by Serious Fraud Investigation Office.- (1) Without prejudice to the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleased 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 by- (i) the Director, Serious Fraud Investigation Office; or (ii) (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 subsection (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail. (8) If the Director, Additional Director or Assistant Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 Government, police authority or income-tax authorities in respect of any offence or matter being investigated or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 persons concerned in the formation of the company or the management of its affairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 38. The National Company Law Tribunal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment 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. EVALUATION: 61. As far as the present case is concerned, the Appellant / Applicant is not a shareholder or a Creditor or a person related in any manner to the 1st Respondent / Club . As regards, the Title , in respect of the lands measuring 12.53 Acres is concerned, the same is a subject matter of litigation with numerous legal proceedings before the City Civil Court, Chennai. 62. In respect of the conveyance to and in favor of DLF is concerned, the same, according to the 1st Respondent/Club is a private transaction between the Club and another entity. As far as Madras School of Equitation is concerned, it is the stand of the 1st Respondent/Club that it is a part and parcel of the 1st Respondent/Club and the is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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