The court emphasized the importance of raising challenges to jurisdiction before the appropriate forum and the availability of alternate remedies and statutory forums for redressal of grievances.

JUDGMENT

Yogesh Khanna, J. - Both these petitions are taken up together as similar issues are being raised.

2. W.P.(CRL.)1823/2020 is filed for impugning the letter dated 29.06.2019 and the corrigendum issued on 29.11.2019 by the respondent no.1 directing the respondent no.2 to file complaint against the petitioners for the offences under the Companies Act, 2013 mentioned therein and secondly issuing directions to respondent no.2 to initiate the proceedings under Section 241/242/246 read with Section 339 of the Companies Act, before the NCLT.

3. It is submitted the letter dated 29.06.2019 calls for freezing and disgorgement of assets of 157 companies to be sold despite the fact such companies are functional. Following grounds have been taken to challenge the impugned order a) per Section 212(14) of the Companies Act if the final report is filed before the Central Government, it needs to be examined by it and after taking legal advice it may initiate the prosecution. Section 212(14) of the Companies Act runs as under:

“212. Investigation into affairs of Company by Serious Fraud Investigation Office (1) to (13) xxxxx.

(14) On receipt of the investigation report, the Central Government may, after examination of the report (and after taking such legal advice, as it may think fit), direct the Serious Fraud Investigation Office to initiate prosecution against the company and its officers or employees, who are or have been in employment of the company or any other person directly or indirectly connected with the affairs of the company. (15) to (17)

xxxxxx

It is submitted the officers of the Central Government were to examine and apply their mind on the report. It is alleged the final report dated 27.06.2019 was filed before the Central Government and it was humanly impossible to examine such report, consisting of lakhs of pages within two days and then pass the impugned order;

b) Section 212(14A) of the Companies Act came into effect w.e.f. 15.08.2019 wherein for the first time power of disgorgement of properties came into effect but whereas in the present case on dated 29.06.2019 the order for disgorgement was issued, hence it is a premature letter without any power Section 212(14A) is as under:

“(14A) Where the report under sub-section (11) or sub-section (12) states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability.”

c) Section 241, 242 of Companies Act deals with mismanagement of affairs of the company and it does not provide any power of attachment of property of the company or disgorgement;

d) the issue of jurisdiction cannot be decided by NCLT as it has no power to review the administrative order(s), hence the only remedy is filing of a Writ Petition and

e) Section 241, 242 of Companies Act since deal with affairs of the company there cannot be an onerous order of attachment and/or disgorgement of 157 companies. It was rather stated if the SFIO feels there is a problem with 2-3 companies they can deal with those companies separately and seek remedy under Section 241, 242 of Companies Act and lastly it was argued such power of disgorgement, even otherwise, can be ordered only after trial and not at filing of chargesheet. It is argued unless the State proves its case of disgorgement, no order can be passed by NCLT for such an action.

4. The learned senior counsel for the petitioner, to prove such penal provisions only have a retrospective effect, referred to Commissioner of Income Tax (Central)-I, New Delhi vs. Vatika Township