Civil Appeal No.3747 of 2019 titled Hari Sankaran vs. Union of India & Others filed by Ex-Director of Infrastructure Leasing & Financial Services Limited before the Apex Court has been dismissed by the Hon’ble Court.
The Civil Appeal No.3747/2019 was filed by Infrastructure Leasing & Financial Services Limited (referred to as ‘IL & FS’) before the Hon’ble Supreme Court of India against the Order dated 31.01.2019 passed by the National Company Law Appellate Tribunal, New Delhi in Company Appeal (AT) No. 29 of 2019. Vide the said order, the Appellate Tribunal had dismissed the appeal filed by the appellant and had confirmed the order passed by the National Company Law Tribunal, Mumbai Bench (referred to as ‘Tribunal’) dated 01.01.2019 by which the learned Tribunal allowed the application filed by the Central Government under Section 130(1) & (2) of the Companies Act, 2013 and permitted recasting and reopening of the accounts of IL&FS, IL&FS Financial Services Limited and IL&FS Transportation Networks Limited for the last five years. The Central Government had filed the said application with Ld. Appellate Tribunal as per Section 241 and 242 of the Companies Act on the ground of mismanagement by the Board of IL&FS and that the affairs of IL&FS were being conducted in a manner prejudicial to public interest.
Contentions
The Council for the appellant submitted that the conditions laid down in Section 130(1) and 130(2) of the Companies Act have not been complied with by Ld. Tribunal and that sufficient opportunity was not given to them which is in violation of the principles of natural justice. It was further submitted that there is no specific finding by Ld. Tribunal that either the relevant earlier accounts were prepared in a fraudulent manner, or the affairs of the company were mismanaged, during the relevant period casting a doubt on the reliability of financial statements.
Rival Submissions
It was submitted by Council for respondents thatwhile exercising powers under Section 130 of the Companies Act, there may not be any final conclusion/opinion that the relevant earlier accounts are prepared in a fraudulent manner or the affairs of the company were mismanaged during the relevant period. Further, it was submitted that if, on the basis of the material on record, the learned Tribunal is satisfied on either of the aforesaid two eventualities, it is always open to the Tribunal to pass the order to reopen the books of accounts and to recast the financial statements of thecompany.
Discussion
The Hon’ble Court inter-alia observed that the Tribunal may, under Section 130 of the Act, pass an order of reopening of accounts if it is of opinion that (i) the relevant earlier accounts were prepared in a fraudulent manner; or (ii)the affairs of the company were mismanaged during the relevant period casting a doubt on the reliability of the financial statements. Thus, the Tribunal would be justified in passing the order under Section 130 of the Act upon fulfillment of either of the said two conditions.
In view of the above referred legal position in addition to the reports of SFIO & ICAI, the specific observationsmadebythelearnedTribunal and considering the fact that the investigation of the affairs of the company is being conducted by SFIO, the Apex Court observed that it cannot be said that the conditions precedent while invoking the powers under Section 130 of the Act are not satisfied.
Further, it was noted that allthethreeprovisions viz. Section 130, Sections 211/212 and Sections 241/242arerequired to be considered as against the submissions of appellant that any observation made while passing the order/orders with respect to a particular provision may not be considered while passing the order under relevant provisions is concerned.
Thus, no merit was found in the instant appeal filed against order dated 01.01.2019 passed by the National Company Law Tribunal, Mumbai Bench and accordingly the same was dismissed by the Apex Court.
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