Delhi High Court - Orders
Monica Aggarwal vs Serious Fraud Investigation Office on 2 August, 2021
Author: Yogesh Khanna
Bench: Yogesh Khanna
$~31
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CRL.M.C. 1722/2021
MONICA AGGARWAL .... Petitioner
Through : Mr. Pramod Kumar Dubey, Sr.
Advocate with Mr.Anurag Andley,
Mr.Shashank Dewan, Mr.Vikalp
Sharma and Ms.Aayushi Singh,
Advocates.
versus
SERIOUS FRAUD INVESTIGATION OFFICE ..... Respondent
Through : Ms Shiva Lakshmi, CGSC with
Mr.Siddharth Singh, Advocate.
CORAM:
HON'BLE MR. JUSTICE YOGESH KHANNA
ORDER
% 02.08.2021
1. The hearing has been conducted through Video Conferencing. CRL.M.A. 11974/2021 in CRL.M.C. 1722/2021
2. Exemption allowed, subject to all just exceptions.
3. The application stands disposed of.
CRL.M.C. 1722/2021 & CRL.M.A. 11973/2021
4. These petitions are filed with following prayers :
A. Pass an Order allowing the present Petition and quashing the Complaint being CC No. 770/2019 titled as "Serious Fraud Investigation Office Vis Bhushan Steel Ltd. &Ors." dated 01.07.2019 pending before the Ld. ASJ-03 & Special Judge (Companies Act), Dwarka Courts (South West), New Delhi qua the Petitioner who is arranged as Accused No.173;
B. Pass an Order quashing the Order dated 16.08.2019 passed by the Ld. ASJ-03 & Special Judge (Companies Act), Dwarka Courts (South West), New Delhi in Complaint being CC No. 770/2019 titled as "Serious Fraud Investigation Office Vis Bhushan Steel Ltd &Ors." qua the Petitioners who has been summoned as Accused No. 173;
5. It is submitted by learned senior counsel for the petitioner, the petitioner was appointed a Non-Executive Independent Director on the Signature Not Verified Digitally Signed By:VIJAYA LAKSHMI DOBHAL Signing Date:03.08.2021 17:31 Board of BSL, owning to the requirement of the Companies Act, 2013 mandating presence of Independent Directors on the Board of BSL.
6. It is submitted the petitioner has no shareholding or any other direct or indirect interest in BSL or any of its subsidiaries or its sister concerns.
7. It is submitted during her tenure as a Non-Executive Independent Director on the Baord of BSL, the petitioner attended the meetings and during the course of meetings there was no irregularity, fraud or illegality brought to the notice of the petitioner.
8. It is further submitted by learned senior counsel for the petitioner on 26.07.2017 the petitioner's tenure as an Non-Executive Independent Director on the Board of Directors of BSL ended upon the appointment of the Insolvency Resolution Professional for BSL.
9. During the course of arguments, reference was made to Annexure P5, which is a copy of the DIR 12 Form of the petitioner which shows the petitioner was appointed as Non-Executive Independent Director in BSL. Further the learned senior counsel for the petitioner has referred to Annexure P-9, a copy of General Circular dated 02.03.2020 and the following paras of the said circular are relevant :
2. Ordinarily, a whole-time director [WTD] and a key managerial personnel [KMP] are associated with the day-to-day functioning of the company and accordingly such WTDs and KMPs would be liable for defaults committed by a company. In absence of a KMP, such director or directors who have expressly given their consent for incurring liability in terms of the e-form GNL-3 filed with the Registrar would be liable. Where the consent for incurring liability for any of the provisions dealing with maintenance, filing or distribution of accounts or records is submitted in e-form GNL-3 by a person under the immediate authority of the Board or any KMP, the liability of such person will arise. However, in certain cases, the penal provisions in the Act hold a specific director, or officer, or any other person accountable for the default, in such cases, action should be initiated only against such director, or officer, or person, as the Signature Not Verified Digitally Signed By:VIJAYA LAKSHMI DOBHAL Signing Date:03.08.2021 17:31 case may be, such as disclosure of interest by directors under section 184 of the Act.
3. Section 149 (12) is a non obstante clause which provides that the liability of an independent director (ID) or a non-executive director (NED) not being promoter or key managerial personnel would be only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently. In view of the express provisions of section 149(12), IDs and NEDs (non-
promoter and non-KMP), should not be arrayed in any criminal or civil proceedings under the Act, unless the above mentioned criteria is met. Typically, apart from IDs, non promoter and non-KMP, NEDs, would exist in the following cases:
a) Directors nominated by the Government on the public sector undertakings;
b) Directors nominated by Public Sector Financial Institutions, Financial Institutions or Banks having participation in equity of a company, or otherwise;
c) Directors appointed in pursuance to any statutory or regulatory requirement such as directors appointed by the NCLT.
10. The learned senior counsel for the petitioner also referred to Annexure P-10 issued by Ministry of Finance, Government of India. The following paragraphs of the circular are relevant :
2. This Department would like to raise its concern in the matter of SFIO's investigations and the summons issued to Non-Executive Directors (NEDs) on the Board of BSL, namely Dr. R.K. Yaduvanshi (nominee of Punjab National Bank). Shri Ajoy Kumar Deb (nominee of State Bank of India) Ms Sunita Sharma and Shri Vipin Anand (both nominees of LIC). In this regard, the following are pointed out for consideration of the Ministry of Corporate Affairs (MoCA) -
(a) After deliberating on the issue, the CVC, in the matter of Dr. R.K. Yaduvanshi and Shri Ajoy Kumar Deb has agreed with their contention that the two officers did not get sufficient time at the Board Meeting to analyse the financial statements, which being price sensitive were tabled at the Board Meeting itself, and hence could not participate effectively in the decision making process.
CVC's OM number 19/Misc/29/433867 dated 27.09.2019 requesting this Department to take up the matter with Signature Not Verified Digitally Signed By:VIJAYA LAKSHMI DOBHAL Signing Date:03.08.2021 17:31 MoCA is enclosed at Annexure I.
(b) CVC, while referring to another representation of Dr. Yaduvanshi, vide its subsequent OM no.19/Misc/29 dated 12.06.2020 addressed to MoCA (copy enclosed as Annexure II), has further pointed out that the action taken by SFIO goes against the Ministry's own circular no. 16/1/2020-Legal dated 02.03.2020, para 3 of which makes it very clear that there is no liability/responsibility of part time Directors nominated by the Government of India on the Boards of Public Sector Undertakings, or of Directors nominated by Public Sector Financial Institutions, Financial Institutions or Banks having participation in equity of a Company.
(c) CVC has further observed that gross injustice has been done in this case which is clear from the circular dated 29.11.2019 of IBA stating that NEDs are not involved in day to day operations/activities of the Company. Now, Ministry of Corporate Affairs' own circular dated 02.03.2020 makes the above point abundantly clear. The Commission has, accordingly, advised MoCA to review the complaint filed againt Dr.Yaduvanshi in the Court, based on the above circular.
(d) This Department is also of the view that NEDs nominated by either the Government on the Boards of Public sector Undertakings, or by Banks/Financial Institutions on the Boards of companies in which they have equity participation, are not involved in the day to day operations/activities, and are neither promoters nor key managerial persons of the company concerned. As such, their liability should be restricted to what is covered under para 3 of MoCA's aforesaid circular dated 02.03.2020, ie, only to such acts of omission or commission by a company which had occurred with their knowledge, attributable through Board processes and with their consent or connivance or where they had not acted diligently.
(e) xxxx
(f) xxxx
(g) xxxx
3. In view of the foregoing, the MoCA is requested to review the action taken by SFIO against the four NEDs in the subject case mentioned in para 2 above, including inter alia, the complaint filed against them by SFIO before the Court. It is also requested that the provisions of the Ministry's circular dated 02.03.2020 be strictly followed in all cases involving NEDs, either nominated by the Government on the Boards of Signature Not Verified Digitally Signed By:VIJAYA LAKSHMI DOBHAL Signing Date:03.08.2021 17:31 Public sector Undertakings, or by Banks/Financial Institutions on the Boards of companies in which they have equity participation, and ongoing cases, if any, may also be accordingly reviewed.
11. It is submitted by learned senior counsel for the petitioner that none of the acts of omission or commission by a company occurred in her knowledge and consent/connivance and she always acted diligently.
12. As per the Office Memorandums above, it is argued the status of a Nominee Director is at par with Non-Executive Independent Director.
13. Reference is made of Dr.Rajesh Kumar Yaduvanshi v. Serious Fraud Investigation Office (SFIO) & Anr. Crl.Rev.P.1308/2019; Vipin Anand V. Serious Fraud Investigation Office & anr. Crl.M.C. 2020/2020 and Sunita Sharma V. Serious Fraud Investigation Office & Anr. Crl.M.C.2023/2020 and also to Ajoy Kumar Deb V. Serious Fraud Investigation Office Crl.Rev.P.1110/2019 to bring home his argument and hence prays the summons issued against her be also quashed.
14. Issue notice. Learned counsel for the respondent accepts notice and submits besides there being an inordinate delay in filing of the petition, the role of the petitioner qua her knowledge to the acts of omission and commission by the company needs to be determined and hence she intends to file a reply. Be filed within four weeks from today with an advance copy to learned counsel for the petitioner and be placed on record as well. Rejoinder, if any, be filed within two weeks thereafter with an advance copy to learned counsel for the respondent.
15. List on 08.09.2021.
YOGESH KHANNA, J.
AUGUST 02, 2021 VLD Signature Not Verified Digitally Signed By:VIJAYA LAKSHMI DOBHAL Signing Date:03.08.2021 17:31