The formation of an opinion under Section 212(1)(c) of the Companies Act, 2013 must be demonstrably based on established circumstances, failing which the investigation order is invalid.

JUDGMENT :

SACHIN DATTA, J.

1. The present petition has been filed by the petitioner, an ex/suspended director of Moser Baer India Ltd. (hereinafter “MBIL”), assailing the order dated 05.09.2024 issued by the Ministry of Corporate Affairs, Government of India, under Section 212(1)(c) of the COMPANIES ACT , 2013 (hereinafter “Act, 2013”), directing the Serious Fraud Investigation Office (hereinafter “SFIO”) to conduct an investigation into the affairs of MBIL, and its “subsidiaries including joint venture and associate companies as on date”.

2. MBIL, stated to have been incorporated in 1983 by the petitioner’s late husband, was engaged in the manufacture of CDs, DVDs, and other optical media. In 2012, MBIL sought relief under the Corporate Debt Restructuring (“CDR”) Scheme of the Reserve Bank of India. Pursuant thereto, the Corporate Debt Restructuring Empowered Group (“CDR-EG”), comprising a consortium of lender banks, commissioned a Stock Audit and a Techno-Economic Viability (“TEV”) study. Based on the findings of the Stock Audit report dated 16.06.2012 prepared by M/s RRCA & Associates and the TEV Report dated 09.06.2012 prepared by M/s Ernst & Young, MBIL was classified as a “Class B” borrower and formally admitted into the CDR framework. Notably, MBIL was not categorized as “Class C” or “Class D,” which are typically assigned to entities suspected of fraud, misfeasance, or other financial irregularities.

3. In 2017, MBIL was admitted into insolvency proceedings before the National Company Law Tribunal, New Delhi. Subsequently, the Interim Resolution Professional (“IRP”), acting at the instance of the Committee of Creditors (“CoC”), commissioned a Forensic/Special Purpose Audit of MBIL, covering the financial years 2015–2016, 2016–2017 and 2017–2018 (up to the insolvency commencement date, i.e., 14.11.2017). The said Forensic/Special Purpose Audit, conducted by Kashyap Sikdar & Co. (hereinafter “Sikdar Report), aimed to ascertain instances of financial irregularities, including diversion of funds, siphoning of assets, or fraudulent transactions. The Sikdar Report revealed no adverse findings.

4. During the CoC meeting held on 05.05.2018, pursuant to the presentation of findings of the Sikdar Report by the auditor, the CoC accepted the said audit report, affirming that no evidence of Preferential, Undervalued, Fraudulent and Extortionate (PUFE) transactions on the part of MBIL was found. In the same meeting, the CoC approved the engagement of M/s GSA & Associates to conduct a Forensic Audit of the MBIL for the period between 01.04.2012 and 31.03.2015. The audit report prepared by M/s GSA & Associates (hereinafter “GSA Report”) was submitted to the Liquidator on 03.06.2019.

5. Meanwhile, Bank of Baroda, one of the financial creditors of MBIL, issued a Show Cause Notice dated 13.03.2020 to the erstwhile directors of MBIL, calling upon them to explain why they should not be declared wilful defaulters. It is pointed out that the said Show Cause Notice was primarily based on the findings contained in the GSA Report.

6. Thereafter, on 19.08.2022, the Identification Committee of Bank of Baroda declared Mrs. Nita Puri and Mr. Ratul Puri, (the ex-directors of MBIL), ‘Wilful Defaulters’. The said declaration was affirmed by the Review Committee of the Bank vide order dated 23.03.2023.

7. The said declaration was challenged before this Court in W.P.(C) No. 4