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IN THE HIGH COURT OF MADHYA PRADESH
Sushrut Arvind Dharmadhikari and Gajendra Singh, J.
Madanlal Juharmal Goyal & Another v. Union of India
& Another
Writ Petition No. 7170 of 2024 (Indore);
Decided on 3.5.2024
(1) Companies Act, 2013 -- S. 212 -- Insolvency and Bankruptcy Code, 2016 -- S.66 -- investigation into affairs of company under Companies Act -- once liquidator and authorities have taken action against company for alleged transactions u/s. 66 of Code, there is no question of carrying out investigation with respect to the same transactions and same cause of action -- more particularly on ground of public interest -- it will amount to double jeopardy. (2023) 7 SCR 476, 1969 1 SCC 325, 2016 SCC Online Bom. 9276 confirmed in SLP (Civil) Diary No. 38664 of 2017 decided on 19.1.2018 and 2021 SCC Online Mad. 2585 referred to. [Paras 23, 24 & 40]
(2) Companies Act, 2013 -- S. 212 (1)(c) -- public interest -- factual existence of public purpose and interest is a condition precedent to order investigation. [Para 24]
(3) Companies Act, 2013 -- S. 212 (1)(c) -- public interest -- default in repayment of loan -- company a private limited entity -- transaction between company and bank is a private and commercial transaction -- company has already settled all accounts with bank -- held -- no element of public interest and/or fraud in entire transaction. [Paras 25 & 41]
(4) Constitution of India -- Art. 226 -- Companies Act, 2013 -- S. 212 (1)(c) -- scope of judicial review -- sanction for investigation into affairs of company -- cannot be subjected to judicial review in writ jurisdiction, except on two counts -- A) on existence of opinion of Central Government as mandated u/s. 212 of Companies Act -- B) on existence of material and circumstances to indicate that company’s affairs are causing prejudice to public interest. [Para 30]
(5) Companies Act, 2013 -- S. 212 -- scope of powers -- these powers cannot be used ordinarily or in normal circumstances or in mechanical way -- there have to be extraordinary circumstances made out, an opinion of Central Government based on material and relevant documents and circumstances of such extraordinary circumstances, and an opinion that investigation by SFIO is required against company -- such unbridled power necessarily ought to be exercised with great responsibility. [Para 31]
(6) Companies Act, 2013 -- S. 212 -- scope of powers -- these discretionary powers must not be exercised in a manner that will defeat object of statute -- in order to exercise discretion reasonably and lawfully, Central Government is required to form opinion that investigation is necessary into affairs of company -- opinion must be honest, rendered after bestowing sufficient attention to relevant material and circumstances. [Para 32]
(7) Companies Act, 2013 -- S. 212 -- sanction for investigation into affairs of company -- impugned sanction without any reason and non-speaking -- no application of mind -- passed in mechanical manner -- no independent opinion formed by Central Government that in public interest, investigation is required into affairs of company -- merely ordering investigation in routinely fashion and in mechanical way, would not qualify as forming of opinion for purposes of S. 212 -- sanction perverse, bad in law and vitiated -- set aside. [Paras 33, 34 & 42]
(8) Companies Act, 2013 -- S. 212 -- sanction for investigation into affairs of company -- opinion formed by Central Government must not be based on wholly irrelevant or extraneous consideration -- material and circumstances based on which the opinion has been rendered will have to prima facie show that inferences drawn from facts in material and circumstances led to conclusions of certain definiteness. 2016 SCC OnLine Bom. 9276 confirmed in SLP (Civil) Diary No. 38664 of 2017 decided on 19.1.2018 relied on. [Para 36]
(9) Companies Act, 2013 -- S. 212 -- sanction for investigation into affairs of company -- to commence investigation u/s. 212, opinion of Central Government is necessary -- opinion of liquidator will be completely irrelevant. [Paras 37 & 38]
¼1½ daiuh vf/kfu;e] 2013 & /kkjk 212 & fnokyk vkSj 'kks/ku v{kerk lafgrk] 2016 & /kkjk 66 & daiuh vf/kfu;e ds v/khu daiuh ds dk;Zdykiksa dk vUos"k.k & vfHkdfFkr laO;ogkjksa ds fy, ifjlekid vkSj çkf/kdkfj;ksa }kjk daiuh ds fo:) lafgrk dh /kkjk 66 ds v/khu dkjZokbZ dj fn, tkus ij] mUgha laO;ogkjksa vkSj mlh okn gsrqd ds laca/k esa vUos"k.k djus dk ç'u ugha mBrk & fof'k"Vr% yksd fgr ds vk/kkj ij & ;g nksgjs ifjladV dh dksfV esa vk,xkA ¼2023½ 7 ,llhvkj 476] 1969 1 ,llhlh 325] fo'ks"k btktr ;kfpdk ¼flfoy½ Mk;jh Ø- 38664 lu~ 2017 fu.khZr fnukad 19-1-2018 esa iq"V 2016 ,llhlh v‚uykbu cacbZ 9276] rFkk 2021 ,llhlh v‚uykbu eækl 2585 fufnZ"VA ¼iSjk 23] 24 ,oa 40½
¼2½ daiuh vf/kfu;e] 2013 & /kkjk 212 ¼1½¼x½ & yksd fgr & yksd ç;kstu vkSj fgr dh rF;kRed fo|ekurk vUos"k.k vknsf'kr djus dh iqjksHkkO; 'krZ gSA ¼iSjk 24½
¼3½ daiuh vf/kfu;e] 2013 & /kkjk 212 ¼1½¼x½ & yksd fgr & _.k ds çfrlank; esa O;frØe & daiuh ,d çkbosV fyfeVsM bdkbZ & daiuh vkSj cSad ds e/; laO;ogkj çkbosV vkSj okf.kfT;d laO;ogkj gS & daiuh cSad ds lkjs [kkrs igys gh iVk pqdh gS & vfHkfu/kkZfjr & laiw.kZ laO;ogkj esa yksd fgr vkSj@vFkok diV dk dksbZ rRo ughaA ¼iSjk 25 ,oa 41½
¼4½ Hkkjr dk lafo/kku & vuq- 226 & daiuh vf/kfu;e] 2013 & /kkjk 212 ¼1½¼x½ & U;kf;d iqufoZyksdu dh O;kfIr & daiuh ds dk;Zdykiksa ds vUos"k.k dh eatwjh & fjV vf/kdkfjrk esa U;kf;d iqufoZyksdu ugha fd;k tk ldrk] flok; nks vk/kkjksa dks NksM+dj & ¼d½ daiuh vf/kfu;e dh /kkjk 212 ds v/khu ;Fkk vkKkfir dsaæ ljdkj dh jk; gksus ij & ¼[k½ ;g minf'kZr djus ds fy, lkexzh vkSj ifjfLFkfr;k¡ gksus ij fd daiuh ds dk;Zdykiksa ls yksd fgr ij çfrdwy çHkko iM+ jgk gSA ¼iSjk 30½
¼5½ daiuh vf/kfu;e] 2013 & /kkjk 212 & 'kfä dh O;kfIr & ;g 'kfä lkekU;r% ;k çlkekU; ifjfLFkfr;ksa esa ;k ;kaf=d ढax ls ç;qä ugha dh tk ldrh & vlk/kkj.k ifjfLFkfr;‚ fl) gksuk gksrh gSa] lkexzh vkSj lqlaxr nLrkostksa vkSj ,slh vlk/kkj.k ifjfLFkfr;ksa dh ifjfLFkfr;ksa ij vk/kkfjr dsaæ ljdkj dh jk; gksuk gksrh gS] rFkk ;g jk; gksuk gksrh gS fd daiuh ds fo:) xaHkhj diV vUos"k.k dk;kZy; }kjk vUos"k.k vko';d gS & ,slh fujadq'k 'kfä vko';dr% vR;f/kd mÙkjnkf;Ro lfgr ç;qä dh tkuk pkfg,A ¼iSjk 31½
¼6½ daiuh vf/kfu;e] 2013 & /kkjk 212 & 'kfä dh O;kfIr & ;g oSosfdd 'kfä ,slh jhfr esa ç;qä ugha dh tkuk pkfg, ftlls dkuwu dk mn~ns'; foQy gks tk, & foosdkf/kdkj ;qfä;qär% vkSj fof/kiwoZd ç;qä djus ds fy,] dsaæ ljdkj }kjk ;g jk; xfBr dh tkuk visf{kr gS fd daiuh ds dk;Zdykiksa dk vUos"k.k vko';d gS & jk; [kjh] ,oa laxr lkexzh vkSj ifjfLFkfr;ksa ij i;kZIr /;ku nsus ds i'pkr~ nh xbZ gksuk vko';d gSA ¼iSjk 32½
¼7½ daiuh vf/kfu;e] 2013 & /kkjk 212 & daiuh ds dk;Zdykiksa ds vUos"k.k dh eatwjh & vkf{kIr eatwjh dkj.kjfgr vkSj vuk[;kid & euksfu;ksx ugha & ;kaf=d jhfr esa ikfjr & dsaæ ljdkj }kjk ,slh dksbZ Lora= jk; xfBr ugha fd yksd fgr esa daiuh ds dk;Zdykiksa dk vUos"k.k vko';d gS & ek= uSfefÙkd ढ+x ls vkSj ;kaf=d jhfr esa vUos"k.k vknsf'kr djuk] /kkjk 212 ds ç;kstukFkZ jk; xfBr djuk ugha gksxk & eatwjh foi;ZLr] fof/k esa nks"kiw.kZ vkSj nwf"kr & vikLrA ¼iSjk 33] 34 ,oa 42½
¼8½ daiuh vf/kfu;e] 2013 & /kkjk 212 & daiuh ds dk;Zdykiksa ds vUos"k.k dh eatwjh & dsaæ ljdkj }kjk xfBr jk; iw.kZr% vlaxr vkSj cká fopkj.kh; ckrksa ij vk/kkfjr ugha gksuk pkfg, & ftu lkexzh vkSj ifjfLFkfr;ksa ds vk/kkj ij jk; nh xbZ gS muls çFke–"V~;k nf'kZr gksuk vko';d gS fd lkexzh vkSj ifjfLFkfr;ksa ls fy, x, rF;ksa ds vk/kkj ij fd, x, vuqekuksa ls vlafnX/k fuf'prrk ds fu"d"kZ fudyrs gSaA fo'ks"k btktr ;kfpdk ¼flfoy½ Mk;jh Ø- 38664 lu~ 2017 fu.khZr fnukad 19-1-2018 esa iq"V 2016 ,llhlh v‚uykbu cacbZ 9276 voyafcrA ¼iSjk 36½
¼9½ daiuh vf/kfu;e] 2013 & /kkjk 212 & daiuh ds dk;Zdykiksa ds vUos"k.k dh eatwjh & /kkjk 212 ds v/khu vUos"k.k vkjaHk djus ds fy, dsaæ ljdkj dh jk; vko';d gS & ifjlekid dh jk; iw.kZr% vlaxr gksxhA ¼iSjk 37 ,oa 38½
ORDER
Dharmadhikari, J. -- 1. In this petition filed under Article 226 of the Constitution of India the petitioner seeks the following reliefs :--
(1) Issue a Writ of Certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction calling for the records in relation to the issuance of the impugned sanction dated 30.11.2021 issued by the respondent No. 1 after going through the legality, validity and propriety thereof issue such orders and directions quashing and setting aside the Respondent No. 1’s Impugned Sanction dated 30.11.2021;
(2) Issue a Writ of Certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction calling for the records in relation to the issuance of the Impugned Sanction dated 30.11.2021 issued by the respondent No. 1 after going through the legality, validity and propriety thereof issue such orders and directions quashing and setting aside any and all actions taken and orders issued in furtherance of the Impugned Sanction dated 30.11.2021 including the impugned notice and impugned summons;
(3) Issue a Writ of Certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction calling for the records in relation to the issuance of the Look Out Circular with respect to the Petitioner’s by the SFIO and after going through the legality, validity and propriety thereof issue such orders and directions quashing and setting aside the Look Out Circular issued against the Petitioners.
2. Before dealing with the merits of the petition, it is pertinent to highlight brief facts leading to the present petition which are as under :
1. The Company was incorporated on 24.2.2006 by the erstwhile promoters. On account of share purchase transactions between 2008 to 2011, the Petitioners became major shareholders of the Company.
2. For the purposes of business, the Company, in December 2009 took a loan from IDBI Bank to the tune of Rs.5 crores. The loan facilities were enhanced from time to time between 2010 to 2017 and finally IDBI Bank had extended facilities aggregating to Rs.70 crores. The IDBI Bank since 2013 conducted regular third party studies with respect to the Company. It is the submission of the Petitioners that IDBI Bank has renewed the financial facilities at least on 10 occasions. It is trite that at the time of renewing any financial facility, the bank does a thorough due diligence and only after being satisfied with the financial health of the entity grants/renews any financial facility. Therefore, the aspect of grant of financial facility on the following dates, 4.12.2010, 25.7.2012, 29.1.2013, 20.11.2013, 5.8.2014, 8.4.2015, 2.4.2016, 12.7.2016 and 7.9.2017, and regular independent audits conducted by the IDBI Bank is proof of the fact that the company was run in accordance with law and always financially healthy.
3. The Petitioners submit that in or around 16.8.2016, the Company requested NOC of IDBI Bank so as to enter into a transaction where the Company would be taken over by a listed entity. Effectively, the financial facility would also have been reassigned from IDBI Bank to SBI Bank. It is pleaded that IDBI Bank refused to give NOC and insisted that the existing management shall continue with the Company, which is against indicative of proper functioning of the Company.
4. However, between 2018 and 2019, the Company starting facing a rough patch due to which the Company could not service its debt and were eventually declared as an NPA on 18.3.2019. Subsequently, on 4.5.2019, the loans were also recalled by IDBI Bank. On 3.3.2020, the CIRP proceeding was admitted against the Company under section 9 of the IBC on account of an application made by one of the Operational Creditors. Since no resolution could be arrived at, a liquidation order was also passed on 4.12.2020.
5. Thereafter the liquidator appointed as transaction auditor. Based on the report of the transaction auditor, the liquidator h
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.
Court confirms that the assignment of investigation to the Serious Fraud Investigation Office under Section 212 can occur regardless of ongoing inquiries under Section 210, without violating principl....
Investigation into affairs of company – Statute does not contain any specific prescription of time and reference to completion of investigation within a stipulated period is directory and not mandato....
The Serious Fraud Investigation Office has the authority to investigate under the Companies Act without prior approval under Section 219, and it may also investigate offences under the IPC as per the....
The central legal point established in the judgment is that the provision allowing 'any person concerned' to obtain a copy of the investigation report under Section 212(13) of the Companies Act, 2013....
The issuance of a Look-Out Circular against the petitioner was quashed due to insufficient grounds and a violation of the right to personal liberty under Article 21 of the Constitution.
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