Powers under Sections 241, 337, and 339 of the Companies Act cannot be used to attach the assets of a person who may be the head of another organization.

JUDGMENT :

ROHINTON FALI NARIMAN, J.

1. The present appeal is by Usha Anandhasubramanian - former MD & CEO of the Punjab National Bank. She was MD & CEO of the said Bank from 14.08.2015 to 05.05.2017.

2. A charge sheet has been filed by the CBI against several persons occupying positions in the Punjab National Bank as well as the Directors of Gitanjali Gems Ltd.

3. Mr. C.S. Vaidyanathan, learned Senior Advocate appearing on behalf of the appellant, points out that the charge sheet by the CBI itself makes it clear that at the highest even the criminal case against the appellant is only that she omitted to take precautions or preventive steps to prevent the fraud perpetrated by Nirav Modi and thereby committed misconduct and conspiracy with the other accused persons. After pointing out the aforesaid charge sheet, Mr. Vaidyanathan then pointed out orders that were passed by the NCLT in exercise of its jurisdiction under Section 241 of the Companies Act by which certain named individuals were injuncted from disposing movable and immovable properties/assets which belong to them and whose assets were frozen, making it clear that post-freeze only a sum of Rs. 1,00,000/- per month will be allowed to each of such persons for personal expenses. He further argued that in exercising powers under Section 241, powers may be exercised under various provisions of the Companies Act including Section 337 and 339 only insofar as the mismanagement of that very Company is concerned, which is obviously not relatable to any other corporate body, including the Punjab National Bank, of which the appellant is the CEO & MD. According to him, therefore, any order that freezes assets of the appellant in the exercise of jurisdiction under Section 241 of the Companies Act would be without jurisdiction. He read to us the relevant sections of the Companies Act and pointed out that however widely they are construed they can only be qua the Company in which acts of mismanagement are alleged and not qua any other person.

4. Mr. Sanjay Jain, learned Additional Solicitor General appearing for the respondent, on the other hand, supported the orders passed by the NCLT and the NCLAT in the appellant’s case by reading to us, in particular, Sections 337 and 339 of the Companies Act. According to him, where a person is liable for fraudulent conduct or business the jurisdiction under Section 339 if very wide and would include freezing the assets of any person who was knowingly a party to the carrying on of the fraudulent conduct of business.

5. Having heard learned counsel for both sides, we may first set out Section 241(2) and Sections 337 and 339 of the Companies Act, which read as follows:-

“241. Application to Tribunal for relief in cases of oppression, etc.

(1) xxx xxx xxx

(2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter:

Provided that the applications under this subsection, in respect of such company or class of companies, as may be prescribed, shall be made before the Principal Bench of the Tribunal which shall be dealt with by such Bench.

337. Penalty for frauds by officers - If any person, being at the time of the commission of the alleged offence an officer of a company which is subsequently ordered to be wound up by the Tribunal under this Act:-

(a) has, by false pretences or by means of any other fraud, induced any person to give credit to the company.

(b) with intent to defraud creditors of the company or any other person, has made or caused to be made any gift or transfer of, or charge on, or has caused or connived at the levying of any execution against, the property of the company.

(c) with intent to defraud creditors of the company, has concealed or removed any part of the property of the company since the date of any unsatisfied judgment or order for payment of money obtained against the company or wi