Disposed

M/S Bansal Aradhya Steel Pvt. Ltd. v. Central Bureau of Investigation

Karnataka HC24 May 2022WP/5982/2022

Case brief

AI extract

What is this about?

High Court disposed a writ petition seeking quashing of an FIR and participation in the PLI scheme. Court allowed participation subject to filing an affidavit regarding insolvency code compliance and directed the bank to remove fraud tag.

What did the court decide?

Request to quash FIR not considered; petitioners permitted to participate in scheme subject to filing IBC affidavit; bank directed to de-tag fraud status.

M/S Bansal Aradhya Steel Pvt. Ltd. Vs Central… — Writ and Judicial Review | Karnataka HC (2022)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 24^TH DAY OF MAY, 2022

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BEFORE

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THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

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WRIT PETITION No.5982 OF 2022 (GM-RES)

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BETWEEN

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M/S BANSAL ARADHYA STEEL PVT LTD (FORMERLY KNOWN AS ARADHYA STEEL PVT LTD.,) A COMPANY INCORPORATED UNDER THE PROVISION OF THE COMPANIES ACT 1956 AND HAVING THEIR REGISTERED OFFICE AT 40/1A, 5^TH FLOOR, BASAPPA COMPLEX, LAVELLE ROAD BANGALORE - 560 001 REPRESENTED BY ITS AUTHORISED SIGNATORY

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M/S BANSAL WIRE INDUSTRIES LTD., A COMPANY INCORPORATED UNDER THE PROVISION OF THE COMPANIES ACT 1956 AND HAVING THEIR REGISTERED OFFICE AT F-3, MAIN ROAD, SHASHTRI NAGAR NEW DELHI - 110 052

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REPRESENTED BY ITS AUTHORISED SIGNATORY

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... PETITIONERS

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[BY SRI. SRINIVASAN S.K., ADV.]

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AND

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CENTRAL BUREAU OF INVESTIGATION ANTI-CORRUPTION BRANCH NO.36, BELLARY ROAD GANGANAGAR BENGALURU - 560 032 REPRESENTED BY SUPERINTENDENT OF POLICE

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SHRI PUTTA LAKSHMI NARAYANA DEPUTY GENERAL MANAGER/ZONAL MANAGER ZONAL OFFICE, 4^TH FLOOR, RAHEJA TOWERS, NO.26, 27 M G ROAD, BENGALURU - 560 001

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INDIAN BANK PUBLIC SECTOR BANK ZONAL OFFICE, 4^TH FLOOR, RAHEJA TOWERS, NO.26, 27 M G ROAD BENGALURU - 560 001 REPRESENTED BY ITS AUTHORISED PERSONNEL

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... RESPONDENTS

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[BY SRI. P.PRASANNA KUMAR, SPL. PP., FOR R1; R2 – SERVED; SRI. DILIP M.R., ADV. FOR R3]

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA AND UNDER SECTION 482 OF CR.P.C., PRAYING TO QUASH THE FIR DATED 21.01.2021 VIDE ANNEXURE-B LODGED REGISTERED BY THE R1 CBI, BENGALURU ON A COMPLAINT LODGED BY THE R2 U/S 120-B R/W 420, 467, 468, 471, 467, 477A OF IPC AND SECTIONS 13(2) R/W 13(1) (d) OF THE PC ACT, 1988 PENDING BEFORE THE

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HONBLE ADDITIONAL CIVIL AND SESSIONS JUDGE, CBI/ACB COURT, BENGALURU.

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THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioners are before this Court seeking quashment of the FIR dated 21.01.2021 registered for offences punishable under Sections 120B, 420, 467, 468, 471, 477A of IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.

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Heard Sri. Srinivasan S.K., learned counsel appearing for the petitioners, Sri. P.Prasanna Kumar, Special Public Prosecutor for respondent No.1 and Sri.Dilip M.R., learned counsel for respondent No.3.

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3. Learned counsel for the petitioners submits

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that the petitioners are not accused in the crime, as the proceedings are initiated against the erstwhile Company i.e., M/s.Aradhya Steel Pvt. Ltd. The petitioners are the

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ones who took over the Company against whom the crime is registered. This could be gathered from the complaint registered by the Indian Bank as appended to the petition, wherein it is entirely against Aradhya Steel Pvt. Ltd. and others. The names of the petitioners admittedly do not figure in the complaint. During the pendency of these proceedings, the Government of India, Ministry of Steel notifies a scheme “ Production Linked Incentive (PLI) Scheme for Specialty Steel ”. The scheme was extended from time to time and finally by an order dated 28.04.2022, the same is extended upto 31.05.2022.

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Learned counsel would submit the

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registration of FIR against M/s. Aradhya Steel Pvt. Ltd. is coming in the way of the petitioners participating in the said Scheme and availing the benefits so available under the Scheme. It is in that light the present petition

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is preferred questioning the FIR registered against M/s. Aradhya Steel Pvt. Ltd. and others.

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Learned counsel Sri.P.Prasanna Kumar

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representing respondent No.1 would submit that the petitioners are required to comply with Section 32A of the Insolvency and Bankruptcy Code, 2016 (‘IBC’ for short) for any permission to participate. Section 32A of IBC, reads as follows:

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“32A(1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not—

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(a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or

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(b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court:

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Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject to requirements of this sub-section having been fulfilled:

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Provided further that every person who was a “designated partner” as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008, or an “officer who is in default”, as defined in clause (60) of section 2

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of the Companies Act, 2013, or was in any manner incharge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor notwithstanding that the corporate debtor’s liability has ceased under this sub-section.

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(2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not—

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(i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or

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(ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court.

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Explanation.—For the purposes of this subsection, it is hereby clarified that,—

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(i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor;

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(ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this section, against

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whom such an action may be taken under such law as may be applicable.

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(3) Subject to the provisions contained in subsections (1) and (2), and notwithstanding the immunity given in this section, the corporate debtor and any person who may be required to provide assistance under such law as may be applicable to such corporate debtor or person, shall extend all assistance and co-operation to any authority investigating an offence committed prior to the commencement of the corporate insolvency resolution process.]

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Learned counsel relying on Section 32A.(1) of

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IBC, would submit that if the proceedings are not pending against a promoter in the management or control of the corporate debtor, or a related party, it can participate in the said Scheme. Related party is also defined under the Act. Sub clause 24 and 24A of Section 5 of IBC deals with who is a related party,

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elaborate meaning is rendered by the statute, as to who is a related party.

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Learned counsel for the respondent would further submit that the petitioners may be permitted to participate in the Scheme only if they satisfy that they do not incur any debarment under Section 32A of IBC read with Clause 24 and 24A of Section 5 of IBC and an affidavit to that effect be filed before the Competent Authority, who would on examination of an affidavit permit the petitioners to participate under the Scheme.

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Learned counsel for the petitioners would further take this Court through the salient features of the Scheme. The scheme prohibits a participant to be a part of the Scheme, if his accounts have been declared to be a fraud. The Bank has tagged the account of the petitioners to be a fraud and therefore that would debar the petitioners from participating in the scheme.

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A communication by the RBI to that effect is

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appended to the petition in which the Indian Bank is directed for updation and rectification of data in CRILC. In the light of the direction of the RBI, the Indian Bank

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– respondent No.3 is also required to act swiftly and de-tag the petitioners account to be a fraud to enable them to participate under the scheme.

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Learned counsel appearing for the petitioner has filed his rejoinder to the so contended objections and has accepted that he would file an affidavit to the satisfaction of the respondent. He would also take this Court through an affidavit that is already filed before the Competent Authority to avail the benefit of the scheme on 10.07.2020. In the light of the statement made in the rejoinder that an affidavit would again be filed as is required, I deem it appropriate to dispose the petition with the following:

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ORDER

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i) The petition stands disposed. The challenge impugned is not interfered with.

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ii) The petitioners shall be permitted to participate in the aforesaid Scheme notified by the Government of India - Ministry of Steel, subject to the petitioners filing an affidavit in compliance with Section 32A of IBC and Sub clause 24 and 24A of Section 5 of the IBC.

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iii) Respondent No.3 – Indian Bank is directed to forthwith take steps to de-tag the fraud status of the account of the petitioner in terms of the direction of RBI.

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iv) Other contentions of the petitioner with regard to the investigation or quashment of the proceedings are not considered.

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v) All contentions of both the parties are left open except to the extent considered in course of the order.

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vi) It is needless to observe that the petitioners shall co-operate with the process of investigation, as mandated under Section 32A of IBC.

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vii) The observations in the course of the order will not enure to the benefit of the accused M/s. Aradhya Steel and others, since the orders as aforesaid is only concern petitioner Nos.1 and 2.

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Sd/JUDGE

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M/S Bansal Aradhya Steel Pvt. Ltd. v. Central Bureau of Investigation

Case brief

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M/S Bansal Aradhya Steel Pvt. Ltd. v. Central Bureau of Investigation

Case brief

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