The Delhi High Court held that the central government can authorize initiation of proceedings and relief of freezing assets, disgorgement of property.
The petitions had been filed by Shriraj Investment & Finance Limited and Casper Consumer Electronics Pvt. Ltd. under the purview of 241, 242, 246 read with 339 of the Companies Act, 2013, before the NCLT. It was stated that the letter calls for freezing and disgorgement of assets of 157 companies to be sold despite the fact such companies are functional. The above letter was impugned through the virtue of section 212(14) of the Companies Act. The officers of the Central government were obliged to go forth with scrutinizing the reports of the above companies. It was stated that “it was humanly impossible to examine such a report, consisting of lakhs of pages within two days and then pass the impugned order”.
It was further stated that Section 212(14A) of the Companies Act came into effect on August 15th 2019, wherein for the first time power of disgorgement of properties came into effect. However, in the present case on dated June 29th, 2019, the order for disgorgement was issued hence it is a premature letter without any power. It was also stated that NCLT can’t decide jurisdiction of any issue. It was also argued that such power of disgorgement, even otherwise, can be ordered only after trial and not at filing of charge sheet as unless the State proves its case of disgorgement, no order can be passed by NCLT for such an action.
The single bench of Justice Yogesh Khanna held that With regards to the contention of invoking jurisdiction, it was ordained that “once the proceedings have been initiated before NCLT and if the NCLT is seized with the company petition, all contentions including power of the respondent to initiate such proceedings before NCLT must be raised before such forum and be determined in those proceedings.
“Disgorgement occurring in Section 212 (14A) cannot be read in blissful isolation whereas, the length and breadth of the Act, chapter and verse bespeaks of such properties/ shares/ debentures, to be frozen/ liquidated/disposal/ sold for utilization in furtherance of public interest by way of sale, recovery of undue gains to alleviate the wrong done to persons/ financial institutions,” the court said.Subscribe Taxscan AdFree to view the Judgment