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TMI Blog2025 (5) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent in the Company Petition. The Adjudicating Authority by the impugned order although rejected the Section 9 application filed by the Respondent herein, however, while rejecting Section 9 application issued direction to forward the copy of the order to the Central Government through Ministry of Corporate Affairs and various other Central Authorities. Appellant aggrieved by the observations and certain directions contained in the impugned order has come up in this Appeal. 2. We have heard Shri Neeraj Malhotra, Learned Senior Counsel for the Appellant and Shri Abhijeet Sinha, Learned Senior Counsel who assisted the Court as Amicus Curiae. 3. While hearing the Appeal on 20.03.2025, we passed following order:- "20.03.2025: Shri Malhotra appearing for the Appellant submits that Adjudicating Authority while rejecting Section 9 application has issued directions in paragraph 65 and 66 which are as follows : - "65. It was also submitted that when the Corporate Debtor stopped receiving any further payment from VEDA, the Corporate Debtor on 31.03.2022 reversed entire sales transaction of Rs.387,67,30,440/- and Rs. 14,45,53,775/-. If sale was reversed the Corporate Debtor should al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in consonance with the Scheme of the Companies Act, 2013. It is submitted that even for directing investigation under Section 213 of the Companies Act, 2013, a reasonable opportunity of being heard is to be afforded to the company against whom investigation is sought to be directed whereas in the present case, no opportunity was given to the Appellant, hence, direction for investigation as is contained in paragraphs 64, 65 & 66 are beyond the jurisdiction of Adjudicating Authority. Adjudicating Authority although decided to reject Section 9 application but while rejecting issued various directions which was beyond the jurisdiction of Adjudicating Authority exercising jurisdiction under Section 9 of the IBC. Under Section 9, Adjudicating Authority was to consider as to whether application filed under Section 9 is in accordance with the provisions of the IBC and Operational Creditor has been able to prove debt and default. Any further directions or observations are beyond the scope of Section 9 application. Counsel for the Appellant in support of his submissions has placed reliance on various judgments of this Tribunal and the Hon'ble Supreme Court which we shall notice hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which making sales to Veda and receiving payments till December, 2021, it is inconceivable that the Corporate Debtor was innocent and unaware of the sham transactions and fraud being played on Government of India, in the name of Corporate Social Responsibility (CSR) obligations. We are of the considered view that Corporate Debtor was partner to this fraud being played on Gol and the principle of "in pari delico" would apply. As per the Corporate Debtor's own averment, it has entered into an illegal contract with Veda and made false sales to Veda for illegal purpose. 64. Therefore, much bigger scam is apprehended and which needs investigation into the affairs of Suumaya, Veda, Corporate Debtor and all vendors involved in this CSR scam. 65. It was also submitted that when the Corporate Debtor stopped receiving any further payment from VEDA, the Corporate Debtor on 31.03.2022 reversed entire sales transaction of Rs.387,67,30,440/. and Rs. 14,45,53,775/-. If sale was reversed the Corporate Debtor should also return the entire payment received from Veda. However, these contentions are left open for the appropriate authorities including ROC, Income Tax Department, EOW, SFIO to invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder 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, members or any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose; (ii) persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or (iii) the members of the company have not been given all the information with respect 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 Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 has made following observations:- "33. ........................If the application made under sub-section (2) is incomplete, the adjudicating authority, under the proviso to sub-section (5), may give a notice to the applicant to rectify defects within 7 days of the receipt of the notice from the adjudicating authority to make the application complete. Once this is done, and the adjudicating authority finds that either there is no repayment of the unpaid operational debt after the invoice [Section 9(5)(i)(b)] or the invoice or notice of payment to the corporate debtor has been delivered by the operational creditor [Section 9(5)(i)(c)], or that no notice of dispute has been received by the operational creditor from the corporate debtor or that there is no record of such dispute in the information utility [Section 9(5)(i)(d)], or that there is no disciplinary proceeding pending against any resolution professional proposed by the operational creditor [Section 9(5)(i)(e)], it shall admit the application within 14 days of the receipt of the application, after which the corporate insolvency resolution process gets triggered. On the other hand, the adjudicating authority shall, within 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. The satisfaction in regard to occurrence of default has to be drawn by the Adjudicating Authority either from the records of the information utility or other evidence provided by the 'Financial Creditor'. The Adjudicating Authority cannot direct a forensic audit and engage in a long drawn pre-admission exercise which will have the effect of defeating the object of the 'I&B Code'. If the 'Financial Creditor' fails to provide evidence as required, the Adjudicating Authority shall be at liberty to take an appropriate decision. If the application is incomplete, it can return the same to the 'Financial Creditor' for rectifying the defect. This has to be done within 7 days of the receipt of notice from the Adjudicating Authority. However, the 'I&B Code' does not envisage a pre-admission enquiry in regard to proof of default by directing a forensic audit of the accounts of the 'Financial Creditor', 'Corporate Debtor' or any 'financial institution'. Viewed thus, the impugned order cannot be supported. Application under Section 75 of the 'I&B Code' on behalf of the 'Corporate Debtors' cannot be permitted to frustrate the provisions of the 'I&B Code' when the matter is at the stage of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Section 212, the Central Government is empowered to cause to investigate into the affairs of the Company by SFIO, basing on the receipt of report of Registrar or inspector u/s 208 in public interest or on request from any department of the Central Government or a State Government. Section 213 also empowers the Tribunal to order investigation, if it is of the opinion that the business of the Company is being conducted with intent to defraud its Creditor, members, or any other person etc. Therefore, we are of the prima facie view that findings given in Forensic Audit Report only prima established the fraudulent transactions in question. Therefore, it is necessary to conduct further investigation by SFIO in the affairs of Company basing on the findings given in Forensic Audit Report, after affording proper opportunity to concern opposite parties to defend them. Hence, we are inclined to refer the matter to SFIO for further investigation by invoking powers conferred U/s 212/213 of the Companies Act, 2013 and thereafter, aggrieved party can take appropriate legal course of action. 19. In the result by exercising powers conferred on this Adjudicating Authority, which being NCLT, U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicating Authority to refer the matter to the Central Government for investigation by the 'Serious Fraud Investigation Office' even if it notices the affairs of the Company of defrauding the creditors and others." 20. This Tribunal has also held that the procedure laid down under Section 213 can be exercised by the Adjudicating Authority. In paragraphs 40, 41, 42 & 43, following was held:- "40. In view of the aforesaid position of law also, the procedure laid down under Section 213 of the Companies Act, 2013 can be exercised by the Tribunal/ Adjudicating Authority, as held above. 41. Further, after the investigation by the Inspector, if case is made out and the Central Government feels that the matter also requires investigation by the 'Serious Fraud Investigation Office' under Section 212 of the Companies Act, 2013, it is open to the Central Government to decide whether in such case the matter may be referred to the 'Serious Fraud Investigation Office' or not. This will depend on the gravity of 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 compete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 good reasons for seeking an order for conducting an investigation into the affairs of the company; or (iii) 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, members or any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose; (ii) persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or (iii) the members of the company have not been given all the information with respect 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Shrinivas Zanvar and Anr. Vs. Nagarjuna Agro Chemicals Private Limited and Ors.- 2021 SCC OnLine NCLAT 135" where the order passed by the NCLT directing the Registrar of Companies to investigate into the affairs of the company was challenged. After Adjudicating Authority has issued direction which was under challenged, it was held that direction issued by the NCLT to Registrar of Companies to investigate violates the provisions of Sections 212 and 213. In paragraphs 32 and 33, following was held:- "32. In the light of the above discussion, we are of the considered opinion that the Learned NCLT erred in directing the Registrar of Companies to investigate into affairs of Respondent No. 1 Company, as the said Directions violate the statutory provision of Section 210(2) and Section 213 of the Companies Act, 2013. 33. In the circumstances as stated above, we believe that the Appeal deserves to be partly allowed and impugned Order regarding the investigation into the affairs of the Respondent No. 1 Company by the Registrar of Companies deserve to be set aside." 24. Counsel for the Appellant has also relied upon the judgment of this Tribunal in "Subhash N Dawar vs. Nanjing Maohj Info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment of this Tribunal in "Lagadapati Ramesh" (supra) as well as "M. Srinivas" (supra) to support his submission that the Adjudicating Authority can refer or forward the order passed by the Central Government for investigation. From the scheme under Section 213 as noticed above, it is clear that the Adjudicating Authority while exercising jurisdiction of the NCLT can also issue direction for investigation but said direction has to be in accordance with the statutory scheme i.e. after giving a reasonable opportunity of being heard to the parties against whom investigation is ordered. 28. Present is not a case, as observed above, where Adjudicating Authority has directed any investigation under Section 213 rather has forwarded the copy of the order to the Central Government Ministry of Corporate Affairs for taking such steps as may be necessary. We have already held that direction issued by the Adjudicating Authority in paragraphs 65 and 66 cannot be read to mean any direction to Ministry of Corporate Affairs or any other statutory authorities to carry out the investigation. 29. Counsel for the Amicus Curiae has referred to the judgment of the Hon'ble Supreme Court in "Chief Elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue which has come up for consideration. Similarly, in paragraph 21 of "State of Rajasthan and Ors. Vs. Ramesh Chandra Mundra and Ors.- (2020) 20 SCC 163" has been relied in which Hon'ble Supreme Court was considering the proviso to Article 229(2) of the Constitution of India which have no bearing in the issue involved in the present case. 31. Counsel for the Amicus Curiae has relied on the judgment of the Hon'ble Supreme Court in "State Bank of India and Others vs. Consortium of Murari Lal Jalan and Florian Fritsch and Anr- 2024 SCC OnLine SC 3187" to support his submission that NCLT could exercise its inherent power under Rule 11 where extraordinary circumstances warranting such power to be exercised even if a procedure is prescribed to achieve the end. 32. After having noticed the relevant precedents relied by the Counsel for the parties, we arrive on following conclusion:- (i) The Adjudicating Authority while exercising jurisdiction under Section 9 of the IBC also exercise jurisdiction of NCLT under the Companies Act, 2013. (ii) Adjudicating Authority in exercise of powers under Section 213 of the Companies Act, 2013 can direct for investigation but the said investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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