GLIMPSE OF A LATEST VERDICT* CRL. O.P. NOS. 3730, 4227, 4095 & 11206 OF 2021 CRL. M.P. NOS. 6647, 6649, 2218, 2601, 2679, 3388, 6708 & 6709 OF 2021 W.P. NO. 1397 OF 2021 AND W.M.P. NO. 5917 OF 2021 *THE HONOURABLE MR. JUSTICE M.DHANDAPANI* THE HONOURABLE HIGH OF MADRAS QUASHED

*12.9.2021 ; GLIMPSE OF A LATEST VERDICT*
CRL. O.P. NOS. 3730, 4227, 4095 & 11206 OF 2021
CRL. M.P. NOS. 6647, 6649, 2218, 2601, 2679, 3388, 6708 & 6709 OF 2021
W.P. NO. 1397 OF 2021
AND
W.M.P. NO. 5917 OF 2021
*THE HONOURABLE MR. JUSTICE M.DHANDAPANI*
THE HONOURABLE HIGH OF MADRAS QUASHED CRIMINAL PROCEEDINGS UNDER TNPID ACT AGAINST DIRECTORS OF A COMPANY AGAINST WHICH PROSECUTION IS LAUNCHED BY THE CENTRAL GOVERNMENT UNDER SECTION 212 OF COMPANIES ACT AND HELD AS FOLLOWS

1.On a holistic and conscious consideration of the submissions put forth by the learned counsel on either side, the following issues emerge for consideration in these petitions :-
i) Whether entrustment of investigation to SFIO by the Central Government u/s 212 of the Companies Act bars the jurisdiction of other investigating agencies to proceed with investigation into any matter concerning the affairs of the company.
ii) Whether the default committed by ITNL on account of non-payment of interest in view of the moratorium granted by NCLAT could be held against ITNL and the petitioners,
iii) Whether the amounts received by ITNL could be held to be “deposits” within the meaning of Section 2 (2) and whether ITNL could be held to be a “financial establishment” as defined u/s 2 (3) of the TNPID Act.
iv) Whether the provisions of the TNPID Act could be enforced against ITNL for the debentures issued by it on private placement basis u/s 42 of the Companies Act.

2.A careful perusal of sub-section (2) of Section 212 of the Companies Act, it is predominantly clear that once the case has been assigned by the Central Government to SFIO for investigation under the Companies Act, the other investigating arms of the Central Government and the State Government have been denuded of its powers to proceed with investigation in respect of any offence under the companies Act. It further mandates that even if any such investigation has been set in motion, it shall not be proceeded further with and the concerned agency is required to transfer the relevant documents and records in respect of such offences under this Act to SFIO.

3.The culpability of the petitioners in the complex web of the economic offence, which is the subject matter of investigation by SFIO, will entangle itself only after full fledged investigation by SFIO. Therefore, this Court, at this point of time is not inclined to give a finding one way or the other as to the culpability of the petitioners in the default committed in payment of interest.

4. There is no whisper in any of the material placed before this Court that deposits were accepted from public by ITNL and even it is the case of the intervenors that what they have purchased from Trust Capital is debentures, which were floated on private placement basis by ITNL to a select few, as per the mandate of Section 42 of the Companies Act.

5.The act of the company issuing debentures for realising monies could in no way be termed to be business of receiving deposits from public as provided u/s 2 (3) of the TNPID Act and, therefore, ITNL cannot be said to be a company fulfilling the requirements of Section 2 (3) of the TNPID Act to be adjudged as a “financial establishment”.

6.TNPID Act is not applicable to the present case and the act of ITNL relating to issuance of debentures under the private placement scheme cannot be termed to be receipt of deposit from public and, therefore, the consequential registration of the case for investigation by the 1st respondent against ITNL and the petitioners herein is beyond its legal dominion and, necessarily the crime registered against the petitioners and ITNL deserves to be quashed.