BRIEF NOTES FOR THE REFERENCE
OF
SR. ADVOCATE, SHRI ADISH C. AGGARWAL
DATE OF ARGUMENTS: - 12.12.2023
Memo of Parties: 7-10
WRIT: 20-51
Grounds: 52-71
Prayer Clause: 72-73
Petitioner No. 1: Lalit Kishore (Director/ Guarantor of the Borrower Company)
Petitioner No. 2: Vanita Gupta (Director/ Guarantor of the Borrower Company)
Petitioner No. 3: Santosh Gupta (Guarantor of the Borrower Company)
Petitioner No. 4: M/S Classic Tradexim Pvt. Ltd. (Corporate Guarantor of the
Borrower Company)
Vs.
Respondent No. 1: CBI
Respondent No. 2: Punjab National Bank
DATES EVENTS PAGE NO. ANNEXURE
22.12.2022 IMPUGNED FIR
(Impugned) Central Bureau of
Investigation (Respondent
No. 2) had registered the
impugned FIR against the
Petitioners under Section
420 read with Section 120B
of Indian Penal Code 86-88 P1
(“IPC”) and Section 13(1)
(d) and 13(2) of the
Prevention of Corruption
Act, 1988
30.11.2018 Account of the borrower Company
declared as NPA
21.10.2019 CIRP (“Corporate Insolvency
Resolution Process”) initiated by the
NCLT
25.09.2020 Transaction Audit conducted by the
M/s Anil Khandelwal & Associates
wherein no Fraud Angle was found
16.09.2021 Executive Summary of the 104-118
Respondent No. 2 Bank was
P5
conducted wherein “No Fraud
Angle was perceived in the account (Relevant
at clause 14c” Page 106)
18.11.2021 Liquidation Order passed by the
NCLT in “M/s India Factoring &
Finance Solutions Pvt. Ltd. vs. M/s
Globalite Industries Pvt. Ltd.” CP
(IB) No. 564/ND/2019
20.11.2021 Respondent No. 2 Bank has reported
the account of the borrower
Company as FRAUD to the RBI
26.04.2022 Notice for identification of default
has been issued by the Respondent
No. 2 Bank on the following
grounds:
Received on Diversion of funds
09.05.2022 Siphoning of funds
Unauthorized Disposal of
Charged Assets
20.12.2022 Respondent No. 2 Bank made a 202-212 P10
Complaint to the CBI regarding the
FRAUD on the Grounds of
Preferential & Fraudulent
Transactions under Section 43 & 66
of IBC:
Section 43 of IBC 205
Section 66 of IBC 206
23.12.2022 Search warrant was issued 213-225 P11
24.12.2022 Search was conducted by the CBI at
the residence of the Petitioners
02.01.2023 Petitioners has filed the W.P. (C) No. 226-228 P12
60/2023 inter alia challenging the
constitutional validity of the RBI
Master Circular on Fraud and to
quash the decision of the Bank to
classify the account of the borrower
Company as FRAUD
10.02.2023 An OTS had took place between the 229-235 P13
Petitioners and Respondent No. 2
Bank
Memorandum of OTS dated
26.03.2023 10.02.2023 was executed
20.04.2023 NOC was issued by the Bank 237 P15
22.05.2023 Hon'ble Delhi High Court has set 238-244 P16
aside the declaration of FRAUD in
view of the judgement passes by the
Hon'ble Supreme Court of India in
“SBI & Ors. Vs. Rajesh Aggarwal
& Ors.” In Civil Appeal No. 7300 of
2022.
Proceedings of the Preferential and Fraudulent Transaction can only be try
by the NCLT. Also, Preferential Transaction is a Civil wrong and the same
cannot be dealt by the CBI.
Section 43 of IBC i.e. Preferential transactions and relevant time, it does
not have the Criminal consequences, it came under the Civil wrong and only
the direction for the return of money can be ordered under IBC.
(Pg. No. 205, point no. 9 of the Writ)
Section 44 of IBC i.e. Orders in case of preferential transactions, In case
of the preferential transaction, NCLT can direct the party to whom the
preference has been given to return the amount of the preferential
transaction
Section 66 of IBC i.e. Fraudulent trading or wrongful trading, and the
punishment for the same is provided U/S 68 of IBC: Imprisonment for 3 to
5 Years or Fine 1 Lakh to 1 Crores or Both | Punishment for defrauding the
Creditors defined U/S 69 of IBC: Imprisonment for 1 to 5 years or Fine 1
Lakh to 1 Crore or Both.
(Pg. No. 206, point no. V of the Writ)
Section 236 of IBC i.e. Trial of offences by Special Court, Crime
committed under Section 66 of IBC shall be tried by the Special Courts only:
236(1): Notwithstanding anything in the Code of Criminal
Procedure, 1973, offences under this Code shall be tried by the
Special Court established under Chapter XXVIII of the
Companies Act, 2013
236(2): No Court shall take cognizance of any offence punishable
under this Act, save on a complaint made by the Board or the
Central Government or any person authorised by the Central
Government in this behalf
The Complainant has failed to indicate that any offence has been committed
U/S 420 of IPC
As per the Judgement passed by the Hon'ble NCLAT in “ COC of Amtek
Auto Ltd. Vs. Mr. Dinkar T. Venkatsubramanium & Anr.” at Para 46 which
held that “
“46. In this background, we are of the view that it is the Adjudicating
Authority who is required to refer such matter to the Insolvency and
Bankruptcy Board of India or the Central Government to take up the
matter to the Special Court if on investigation, if any case of offence
under Chapter VII, including Section 74(3) is made out.”
Hon'ble High Court of Bombay in “Satyanarayan Bankatlal Malu & Anr.
Vs. IBBI & Anr.” Writ Petition No. 2592 of 2021, wherein Court held that:
14. It may also be noted that Section 236 (3) of the I.B. Code creates a
deeming fiction that the Special Court trying offences under I.B. Code
shall be deemed to be Court of Sessions. If the intention of the
legislature was that”, under Section offences under I.B. Code are to be
tried by the Sessions Court, then this subsection would have been
unnecessary. According to the Petitioners, this is an indication as to the
true and proper interpretation of Section 435 of the Companies Act,
2013 and Section 436 of I.B. Code. Thus for all the above reasons, the
impugned proceedings have been instituted by the Respondents
(Complainant) in the Court of Additional Sessions Judge, were not
sustainable for want of jurisdiction. As a consequence, order, ‘issue
process’ passed by the learned Additional Sessions Judge against the
Petitioners, in a complaint by the Respondents/Board was without
jurisdiction and therefore not sustainable equally. It is therefore to be
held that Special Court which is to try “Issue Process”, under Section
offences under the I.B. Code is the Special Court established under
Section 435 (2) (b) of the Companies Act, 2013 which consists of
Metropolitan Magistrate or Judicial Magistrate First Class. The
Petition is therefore allowed in terms of prayer clause (a).”
Hon’ble Supreme Court of India in “Nikhil Merchant Vs. CBI & Anr” 2008
9 SCC 677, wherein Court held that:
“24. On an overall view of the facts as indicated hereinabove and
keeping in mind the decision of this Court in B.S. Joshi’s case (supra)
and the compromise arrived at between the Company and the Bank as
also clause 11 of the consent terms filed in the suit filed by the Bank,
we are satisfied that this is a fit case where technicality should not be
allowed to stand in the way in the quashing of the criminal proceedings,
since, in our view, the continuance of the same after the 19 compromise
arrived at between the parties would be a futile exercise.”
Hon’ble Supreme Court of India in “CBI, ACB, Mumbai Vs. Narendra Lal
Jain” (2014) 5 SCC 364
“11. In the present case, having regard to the fact that the liability to
make good the monetary loss suffered by the bank had been mutually
settled between the parties and the accused had accepted the liability
in this regard, the High Court had thought it fit to invoke its power
under Section 482 Cr.P.C. We do not see how such exercise of power
can be faulted or held to be erroneous. Section 482 of the Code inheres
in the High Court the power to make such order as may be considered
necessary to, inter alia, prevent the abuse of the process of law or to
serve the ends of justice. While it will be wholly unnecessary to revert
or refer to the settled position in law with regard to the contours of the
power available under Section 482 Cr.P.C. it must be remembered that
continuance of a criminal proceeding which is likely to become
oppressive or may partake the character of a lame prosecution would
be good ground to invoke the extraordinary power under Section 482
Cr.P.C.”
High Court of Chhattisgarh at Bilaspur in the matter of WPCR No. 678 of
2019 titled as “Smt. Suman Devi Kela & Ors. Vs. Central Bureau of
Investigation & Ors.”
“23. In view of the foregoing discussion, I am of the opinion that
continuance of criminal proceeding against the petitioners would be an
abuse of process of law for the reasons that the entire outstanding has
been liquidated and the bank has accepted and settled their monetary
dues. Therefore, I am inclined to quash the criminal proceedings
against the petitioners by invoking the jurisdiction of 482 Cr.P.C.
Accordingly, the impugned Charge Sheet/Final Report and the
consequential proceedings of Crime No. RCBSK2016E0006/2016
(Annexure P-1) is quashed. In the result, the petition is allowed.”
