Basil International Limited ... vs The State Of Jharkhand And Ors on 26 April, 2013

[Cites 3, Cited by 1]

Jharkhand High Court

Basil International Limited ... vs The State Of Jharkhand And Ors on 26 April, 2013

Pursuant to the notices issued in the instant cases, the Ministry of Corporate Affairs, Registrar of Companies-cum-Official Liquidator, Bihar & Jharkhand, National Capital Territory of Delhi & Haryana, the Securities and Exchange Board of India as well as RBI has also appeared.

Learned counsel for the RBI, however, submits that he has appeared in W.P. (C) No. 1196 of 2013. However, learned counsel for the RBI is directed to appear in all these matters.

Learned counsel for the petitioners shall supply copy of the pleadings upon the learned counsel for the RBI, Mr. Pandey Neeraj Rai by Monday and necessary corrections be carried out in respective writ petitions by learned counsel for the petitioners to implead the -2- RBI through its Regional Director, Regional Office, Patna, in all such petitions, in which it is not already a party.

The common grievance, in these writ petitions, raised on behalf of the petitioners is that the Respondents-District Authorities of the Government of Jharkhand have sealed the business premises of these petitioners without any authority of law. These petitioners have claimed that they are carrying out their business on the basis of Memorandum of Understanding and registration with the respective Registrar of Companies at different places. It is further contention that they have not violated any law and no notice or opportunity was given to them before taking the impugned action.

Learned counsel for the Respondents-State, however, in the respective writ petitions, has submitted that these petitioners were indulging in acceptance of deposits or investments from small time and others investors without complying with the provisions of SEBI Act as also the RBI Act and the regulations/guidelines of the Reserve Bank of India, as most of them are Non-Banking Finance Companies. Learned counsel for the Respondents-State submits that these companies were given notices to answer specific queries which they failed to do within the time stipulated and therefore to protect the interest of the investors, the respondents had to undertake the exercise of sealing the business premises. It is submitted that in some of the cases, criminal cases have also been filed against the concerned Companies and its Directors. It is further submitted that the report to that effect has also been sent to RBI and SEBI.

When these matters were taken up earlier, this Court directed the petitioners to implead the Securities and Exchange Board of India. The RBI, Ministry of Corporate Affairs and the Registrar of Companies-cum-Official Liquidator as it appeared to this Court that they are necessary and proper parties in the present proceedings.

Pursuant to notices issued as aforesaid the newly added respondents have appeared through their respective counsels.

Learned Senior Counsel appearing on behalf of the SEBI submits that they are in the process of inquiry into the affairs of different companies like the petitioners. Learned senior counsel for the SEBI submits that some of these petitioners have been given -3- notice, but they are not yet co-operating in proper manner that's why the inquiry is being delayed.

Learned counsel for the RBI submits that it is yet to receive any instruction in the matter from the RBI and has appeared on notice today.

Learned ASGI, Mr. Khan appearing on behalf of the Ministry of Corporate Affairs and the Registrar of Companies-cum- Official Liquidator submits that the respondents are also in the process of inquiring into the affairs of the said Companies, for which time is required.

I have heard learned counsels for the parties at some length. The petitioners had come before this Court alleging that the impugned action of sealing by the District Authorities of the State of Jharkhand was without any authority of law and no notice was given to them to defend themselves against any alleged violation of law. However, as already indicated hereinabove, this Court found it necessary to implead the statutory authorities, who are under the mandate of law to regulate the affairs of such companies and take action, if any violation are found out of such statutory enactments like SEBI Act and other allied Acts and their Rules and Regulations, the RBI Act, Companies Act, the Regulations/Guidelines framed thereunder as also Acts and Rules regulating the affairs of Multistate Co-operative Society. The Respondents-District Authorities had undertaken the act of sealing of the business premises of the petitioners in a preemptive exercise for protecting the interest of investors as it appeared to them that the provisions of the SEBI Act and the RBI Guidelines and other statutory enactment are not being complied by them. However, after appearance of the parties, this Court thinks it proper that the continuance of the sealing for indefinite length of time, is not going to serve purpose. The interest of the investors are to be protected and at the same time the affairs of the Companies are also to be inquired into by the regulating bodies. The petitioners also claim a fundamental right to carry on their business. In any case, the statutory authorities are also required to undertake an inquiry into the affairs of the Companies by examining documents and materials etc. which are presently lying within the sealing business premises of the petitioners' as also elsewhere.

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In the background of the aforesaid facts, this Court considers it just and proper to pass the following orders in the larger interest to protect the interest of the investors and the general public as also to ensure that the matter is properly inquired into by the respective statutory bodies and thereafter the petitioners may be allowed to carry out their business in accordance with law:

i) The business premises of the petitioners which are lying sealed, shall be unsealed subject to the following conditions;

ii) The Registrar of Companies-cum-Official Liquidator shall, in each individual case, prepare an inventory of all such documents, materials, papers and books which are lying within the seized premises within a period of two weeks with the aid and help of the District Administration and keep in safe custody;

iii) The District Administration including the Superintendent of Police of concerned district shall extend all possible help for preparation of such inventory and keeping the same in safe custody. The Deputy Commissioner of the concerned district may nominate an officer not below the rank of Additional Collector with whom the Official Liquidator shall coordinate all such action. Copies of the inventory so prepared shall also be handed over to the petitioners' or their representatives, who shall ensure their presence during the preparation of the inventory.

iv) The respective statutory authorities like the Securities and Exchange Board of India, the Reserve Bank of India, the Department of Co-operative having control of the Multistate Co-operative Society as also the Registrar of Companies shall inquire into the affairs of the Companies in respect of the compliance of the respective statutory provisions thereafter within a period of eight weeks subject to any extension as may be allowed on their requests. The petitioners shall cooperate in the said inquiry in all possible ways and it is made clear that if the petitioners fail to co-operate in the inquiry by the Statutory Authorities, it will be open to the Statutory Authorities to take any decision as are permissible in law.

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v) During the aforesaid period of inquiry, the petitioners shall not undertake any new business of the company or enter into fresh instrument with any party/investor and they will also not advertise in respect of their business during the said period. Petitioners also undertake to give an undertaking to that effect by way of an affidavit.

vi) During the course of inquiry, in case any existing customers/investors of the company, intends to make any deposit or investment, the same shall be deposited in an interest bearing Escrow Account opened in a Nationalized Bank under the modalities laid down by the Official liquidator-cum-Registrar of Companies. The petitioners shall not be allowed to withdraw the said money during the course of inquiry. Any such withdrawal thereafter will be permissible only after NOC /Clearance Certificate granted by the statutory authorities or this Court. The petitioners' undertake to file an affidavit to that effect also.

vii) In order to protect the interests of the investors/customers of the petitioners' companies, it is further directed that the petitioners shall not be allowed to operate and withdraw their existing Accounts during the period of inquiry. Only upon NOC/Clearance granted by respective Statutory Authorities will the petitioners be allowed to operate the Accounts and subject to any order passed or conditions imposed upon them.

viii) The petitioners' shall not alienate any assets, movable or immovable of the Company during the aforesaid period and thereafter only subject to the same conditions as aforesaid in the previous sub para.

ix) After conclusion of the aforesaid inquiry by the respective statutory authorities, it will be open to the statutory authorities to take recourse to any proceeding under the law if violation of such enactment Rules/Regulations/Guidelines are found to have been made by the respective petitioner company.

x) If the affairs of the company are found to be not in violation of the Rules/Regulations/Guidelines or the Act applicable to each such company by the respective statutory body, no objections certificate or clearance to that effect would -6- be furnished to such petitioners' company on their application, so that thereafter they can continue with their business.

xi) It would also be open to the petitioners' company to take recourse to law as are available to them, if they are aggrieved by any of the actions of the statutory authorities as indicated hereinabove after conclusion of the inquiry.

xii) It is informed that F.I.R. has been lodged against many of these companies. However, in the aforesaid circumstances, it is made clear that the directions issued by this Court are in no way intended to interfere in the proceedings of the competent court having criminal jurisdiction where the concerned proceedings are pending. It would be open to the competent court to proceed in accordance with law as per the provisions of the Cr.P.C. and/or any other procedural or substantive law against the petitioners. It will be open to the investing/prosecuting agency also to take recourse as are available under the procedural and substantive law in respect of the alleged offence against the petitioners' company as also to seek production of such materials/documents etc. which have been seized from the petitioners' premises and kept in custody of the Official Liquidator after preparation of inventory or are also found elsewhere during the course of investigation.

It is also made clear that the observations and directions which are being passed hereinabove, shall not prejudice the case of the petitioners' so far as the criminal proceedings are concerned. Petitioners are allowed to file their respective affidavits with their undertakings as aforesaid by Tuesday i.e. on 30.04.2013 The State official shall hand over any such material seized during the course of sealing processes to the official liquidator while preparing the inventory of the seized article. It is once again made clear that Registrar of Company-cum-Official Liquidator would be responsible for the safe custody of the seized materials till the conclusion of such inquiry and any statutory authority will have access to the same on making application for the purposes of inquiry. The petitioners' will have to pay to the official liquidator the cost and expenses incurred during the exercise undertaken by it in carrying -7- out directions of this Court, which should be paid by the concerned petitioners forthwith or to be realized from the Company by the Official Liquidator in accordance with law. The Official Liquidator will be free to raise bill from time to time.

The petitioners' shall file report duly certified by the Companies' Chartered Accountant every fortnight before the Official Liquidator showing compliance of the conditions on their part as per the directions given hereinabove. For the purposes of effectively participating in the inquiry before the Statutory Authorities, on application made before the Official Liquidator or any subordinate officers nominated by him, the petitioners will be entitled to obtain xerox copies of such documents as are necessary, on payment of prescribed fee by the Official Liquidator, which would be furnished without unreasonably delay.

It is also made clear that if the petitioners are found violating the directions/undertakings passed by this Court, it will be incumbent upon the concerned Deputy Commissioner as also other Statutory Authorities to bring it to the notice of the Court and also to take such steps, which are permissible in law. The Deputy Commissioner shall also affix the directions contained in this order at any conspicuous place in the business premises of the petitioners immediately so that it can be brought to the notice of general public and the intending consumers/investors of the Company. It will be open to the Respondents-Authorities to seek any clarification in the aforesaid order, if so necessary.

Let these cases be listed on 1st of May, 2013.

Let a copy of this order be handed over to the learned counsel for the SEBI, Registrar of Companies, RBI as well as State.

Let the name of Mr. Pandey Neeraj Rai appear in the cause list henceforth as the counsel for the Respondents-RBI.

(Aparesh Kumar Singh, J) jk

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Jharkhand High Court