Delhi HC: Where the case has been admitted in NCLT, all the contentions including power to initiate such proceeding should be raised before and concluded by NCLT only

In Shriraj Investment and Finance Ltd. & Ors. and Casper Consumer Electronics Pvt. Ltd. v. Union of India & Anr. [W.P.(CRL) 1823/2020, & W.P.(CRL) 1414/2021 dated September 14, 2021], Shriraj Investment Pvt. Ltd. ("the Petitioner No. 1") and Casper Consumer Electronics Pvt. Ltd. ("the Petitioner No. 2") filed two Petitions, on the similar lines, impugning the Letter dated June 29, 2016 and the Corrigendum issued on November 29, 2019 ("Impugned letters") by the Union of India ("the Respondent No. 1") ordering the filing of complaints against the Petitioner No. 1 & 2 for the offences under the Companies Act, 2013 and further, the Respondent No. 1 issued directions to initiate proceedings under Section 241, 242 and 246 read with Section 339 of the Companies Act, 2013 ("the Companies Act") before the National Company Law Tribunal ("the NCLT").

In the case, the Petitioners contended that the Impugned letter calls for freezing and disgorgement of assets of 157 companies to be sold despite the fact such companies are functional. The Petitioners impugned the letter through the virtue of Section 212(14) of the Companies Act. Furthermore, the Petitioners argued that the officers of the Respondent No. 1 were obliged to go forth with scrutinizing the reports of the above companies, which apparently wasn’t done.

It was further stated by the Petitioners, that Section 212(14A) of the Companies Act came into effect on August 15, 2019, wherein for the first time power of disgorgement of properties came into effect. Nevertheless, in the present case on dated June 29, 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.

After taking perusal of all the facts and evidences, the Honorable Delhi High Court adjudged and opined 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,"