Smt. Ramanathan Bhuvaneshwari vs Mr. Vipin Kumar & Ors

For 2nd Respondent : Mr. Arun Kathpalia, Senior Advocate assisted by Ms. Shyel Trehan and Mr. Aman Shukla, Advocates

For 3rd Respondent : Mr. Jatin Mongia and Ms. Mayanka Dhawan, Advocates

For 4th Respondent : Mr. Ashim sood, CGSC along with Ms. Payal Chandra, Advocate Mr. Hari Kishan, Prosecutor (SFIO)

WITH

Company Appeal (AT) (Insolvency) No. 571 of 2018

IN THE MATTER OF:

Zuventus Healthcare Ltd. ...Appellant

Versus

Mrs. Ramanathan Bhuvaneshwari& anr. ...Respondents

For Appellant : Mr. Arun Kathpalia, Senior Advocate assisted by Ms. Shyel Trehan and Mr. Aman Shukla, Advocates 2

For 1st Respondent: Mr. Omprakash K. V., Advocate

Ms. R. Bhuvaneshwari, Resolution Professional Mr. Mustapha, Advocate for R.P.

WITH

Company Appeal (AT) (Insolvency) No. 598 of 2018

IN THE MATTER OF:

Vipin Kumar ...Appellant

Versus

Ramanathan Bhuvaneshwari, R.P. for Tejkamal Pharmaceuticals Pvt. Ltd. ...Respondent

Present:

For Appellant :

For 1st Respondent: Mr. Omprakash K.V., Advocate

For 2nd Respondent : Mr. Arun Kathpalia, Senior Advocate assisted by Ms. Shyel Trehan and Mr. Aman Shukla, Advocates

Ms. R. Bhuvaneshwari, Resolution Professional Mr. Mustapha, Advocate for R.P.

ORDER

04.02.2019 These appeals were preferred against the common order dated

20th August, 2018 passed by the Adjudicating Authority (National Company Law

Tribunal), Bengaluru Bench whereby the Adjudicating Authority taking into the

consideration the allegations made by the 'Resolution Professional' with regard

to fraud and misappropriation etc. disposed of the applications directing the

Company Appeal (AT) (Insolvency) No. 543 - 544, 571 & 598 of 2018 3

Central Government to refer the matter to SFIO for investigation into the

allegation of fraud.

2. For disposal of the appeals, it is not necessary to go into the merit of the

allegations and counter-allegations made by the parties or the defence taken by

the appellants. 'Corporate Insolvency Resolution Process' was initiated against

the 'Tejkamal Pharmaceuticals Pvt. Ltd.' in which Mrs. Ramanathan

Bhuvaneshwari' was appointed as 'Resolution Professional' during the 'corporate

insolvency resolution process'. The transactions came to the notice of the

'Resolution Professional'. Therefore, she filed an application under Section 66 of

the I&B Code wherein the impugned order was passed on 20th August, 2018

directing the Central Government to make investigation through SFIO. It was in

this background the appellant suggests as to whether with regard to the whole

transactions which was not covered by Section 43 r/w Sections 44 & 45, in an

application under Section 66 can be entertained and whether the Adjudicating

Authority had a jurisdiction to direct the Central Government in terms of Section

213 of the Companies Act. The appellants also challenged the impugned order

in the light of the decision of this Appellate Tribunal in 'R.S. India Wind Energy

Private Ltd. vs. PTC India Financial Services Ltd. & Ors.' - 'Company Appeal (AT)

No. 15 of 2016' wherein this Appellate Tribunal by judgment dated 23rd

December, 2016 dealing with Section 213 of the Companies Act and observed as

follows:

"48. The basic principle of justice delivery system

involving offence resulting punishment is that if

Company Appeal (AT) (Insolvency) No. 543 - 544, 571 & 598 of 2018 4

any allegation is made by any person before a

court of law or Tribunal such person is required to

support the allegation by bringing on record some

evidence to suggest that a prima facie case is

made out and there are good reasons for seeking

an order. Therefore the sentence "supported by

such evidence as may be necessary for the

purpose of showing that applicants have

good reasons for seeking an order for

conducting an investigation into the affairs

of the company", as mentioned below clause (a)

of Section 213 is applicable in all cases and the

applicant(s), whoever prefers application under

Section 213, whether they belong to category as

mentioned in clause (a) or clause (b), such

evidence is required to be relied upon not only to

justify the allegations, but also to show that there

is a good reason for seeking an order, to enable

the Tribunal to form its opinion."

3. During the pendency of the appeal, an application was moved before the

'Committee of Creditors' under Section 12A through 'Resolution Professional'

which was approved by more than 90% voting share of the 'Committee of

Creditors'. The 'Resolution Professional' on the request of the applicant filed an

Company Appeal (AT) (Insolvency) No. 543 - 544, 571 & 598 of 2018 5

application for withdrawal of the company petition itself. The Adjudicating

Authority by order dated 19th November, 2018 allowed the application under

Section 12A and allowed the appellant to withdraw the application taking into

consideration the terms of payment with the following direction:

"11. In the result, I.A. No. 378 of 2018 is disposed of

with the following directions:

(1) Hereby disposed of I.A No. 378 of 2018 by

permitting the Resolution Professional to

withdraw the C.P. No.255 of 2016

(T.P.No.106 of 2017). Accordingly, C.P

No.255 of 2016 (T.P.No.106 of 2017) is

hereby dismissed.

(2) The status of the Corporate Debtor is

restored back prior to the initiation of

winding up/CIRP proceedings. However,

this restoration of Company would not

exempt the company from any

violation(s)/offence, if any committed by it

prior or during the process of CIRP in the

case;

(3) This order is also subject to the final orders

to be passed by the Hon'ble NCLAT in

Company Appeal (AT) (insolvency) Nos. 543-

Company Appeal (AT) (Insolvency) No. 543 - 544, 571 & 598 of 2018 6

544 of 2018 and Appeal (AT) (Insolvency)

No.571 and 598 of 2018 are filed by

Juventus Healthcare Ltd. and Vipin Kumar

respectively.

(4) All pending IAs including IA No. 378 of 2018

stands disposed of accordingly.

(5) No order as to costs."

4. It is in this circumstance the counsel for the appellant and others submit

that the main application has become infructuous except with prayer to set aside

the direction as the company petition has already been dismissed as withdrawn.

On the other hand learned counsel for the Central Government submits that

liberty should be given to the Central Government to proceed with the matter

independent of the order passed by the Appellate Tribunal.

5. We have heard the learned counsel for the parties, perused the impugned

order and also the subsequent development as noticed and referred to above.

6. There is nothing to suggest that the Adjudicating Authority after taking

into consideration certain evidence came to a prima facie conclusion that it is a

fit case for order under Section 213 of the Companies Act. In fact it is under

Section 213 that the SFIO can be directed to go for investigation, as apparent

from the provisions and reads as under :

"213. Investigation into company's affairs in other cases

The Tribunal may,--

(a) on an application made by--

Company Appeal (AT) (Insolvency) No. 543 - 544, 571 & 598 of 2018 7

(i) not less than one hundred members or

members holding not less than one-tenth of

the total voting power, in the case of a

company having a share capital; or

(ii) not less than one-fifth of the persons on the

company's register 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

(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

Company Appeal (AT) (Insolvency) No. 543 - 544, 571 & 598 of 2018 8

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

Central Government and where such an

order is passed, the Central Government

shall appoint one or more competent

persons as inspectors to investigate into the

Company Appeal (AT) (Insolvency) No. 543 - 544, 571 & 598 of 2018 9

affairs of the company in respect of such

matters and to report thereupon to it in such

manner as the Central Government may

direct:

Provided that if after investigation it is proved

that--

(i) the business of the company is being

conducted with intent to defraud its

creditors, members or any other persons or

otherwise for a fraudulent or unlawful

purpose, or that the company was formed

for any fraudulent or unlawful purpose; or

(ii) any person concerned in the formation of the

company or the management of its affairs

have in connection therewith been guilty of

fraud,

then, every officer of the company who is in default

and the person or persons concerned in the

formation of the company or the management of its

affairs shall be punishable for fraud in the manner

as provided in section 447."

Company Appeal (AT) (Insolvency) No. 543 - 544, 571 & 598 of 2018 10

7. In the circumstances, we are of the view that the impugned order dated

20th August, 2018 was uncalled for and in view of the development it has no

relevance.

8. Learned counsel appearing on behalf of the SFIO submits that Section 212

of the Companies Act is independent to Section 213 of the Companies Act. Even

if such submission is accepted that the Central Government order for SFIO

enquiry, the Adjudicating Authority cannot direct the same, except in terms of

Section 213 of the Companies Act.

9. This apart, in the present case we find that the Adjudicating Authority has

not given any reason to form opinion whether it is a case for investigation by

SFIO or not. The appellant and others were also not given notice, asking them

to state as to why the matter be investigated through SFIO. Merely on the

request of the 'Resolution Professional' Impugned order has been passed.

10. For the reasons aforesaid and in view of the development as noticed above,

we set aside the impugned order. However, it is made clear that we have not

gone into the question as to whether transaction in question was proper or not.

The question of law is left open for determination in an appropriate case. The

appeals are allowed with aforesaid observations.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial) /ns/uk/

Company Appeal (AT) (Insolvency) No. 543 - 544, 571 & 598 of 2018