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Supreme Court of India
Usha Ananthasubramanian vs Union Of India on 12 February, 2020Author: Rohinton Fali Nariman
Bench: Rohinton Fali Nariman, S. Ravindra Bhat, V. Ramasubramanian
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7604 OF 2019
USHA ANANTHASUBRAMANIAN Appellant(s)
VERSUS
UNION OF INDIA Respondent(s)
J U D G M E N T
R.F. Nariman, J.
1) The present appeal is by Usha Anandhasubramanian –
former MD & CEO of the Punjab National Bank. She was MD &
CEO of the said Bank from 14.08.2015 to 05.05.2017.
2) A charge sheet has been filed by the CBI against
several persons occupying positions in the Punjab National
Bank as well as the Directors of Gitanjali Gems Ltd.
3) Mr. C.S. Vaidyanathan, learned Senior Advocate
appearing on behalf of the appellant, points out that the
charge sheet by the CBI itself makes it clear that at the
highest even the criminal case against the appellant is only
that she omitted to take precautions or preventive steps to
prevent the fraud perpetrated by Nirav Modi and thereby
Signature Not Verified
committed mis-conduct and conspiracy with the other accused
Digitally signed by
SUSHMA KUMARI
BAJAJ
Date: 2020.02.18
16:47:43 IST
Reason: persons. After pointing out the aforesaid charge sheet, Mr.
Vaidyanathan then pointed out orders that were passed by the
NCLT in exercise of its jurisdiction under Section 241 of
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the Companies Act by which certain named individuals were
injuncted from disposing movable and immovable
properties/assets which belong to them and whose assets were
frozen, making it clear that post-freeze only a sum of
Rs.1,00,000/- per month will be allowed to each of such
persons for personal expenses. He further argued that in
exercising powers under Section 241, powers may be exercised
under various provisions of the Companies Act including
Section 337 and 339 only insofar as the mis-management of
that very Company is concerned, which is obviously not
relatable to any other corporate body, including the Punjab
National Bank, of which the appellant is the CEO & MD.
According to him, therefore, any order that freezes assets
of the appellant in the exercise of jurisdiction under
Section 241 of the Companies Act would be without
jurisdiction. He read to us the relevant sections of the
Companies Act and pointed out that however widely they are
construed they can only be qua the Company in which acts of
mis-management are alleged and not qua any other person.
4) Mr. Sanjay Jain, learned Additional Solicitor General
appearing for the respondent, on the other hand, supported the
orders passed by the NCLT and the NCLAT in the appellant’s
case by reading to us, in particular, Sections 337 and 339 of
the Companies Act. According to him, where a person is liable
for fraudulent conduct or business the jurisdiction under
Section 339 if very wide and would include freezing the assets
of any person who was knowingly a party to the carrying
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on of the fraudulent conduct of business.
5) Having heard learned counsel for both sides, we may first
set out Section 241(2) and Sections 337 and 339 of the
Companies Act, which read as follows:-
“241. Application to Tribunal for relief in
cases of oppression, etc.- (1) xxx
(2) The Central Government, if it is of the
opinion that the affairs of the company are
being conducted in a manner prejudicial to
public interest, it may itself apply to the
Tribunal for an order under this Chapter:
Provided that the applications under this sub-
section, in respect of such company or class of
companies, as may be prescribed, shall be made
before the Principal Bench of the Tribunal
which shall be dealt with by such Bench.
337. Penalty for frauds by officers.- If any
person, being at the time of the commission of
the alleged offence an officer of a company
which is subsequently ordered to be wound up by
the Tribunal under this Act. –
(a) has, by false pretences or by means of any
other fraud, induced any person to give credit
to the company;
(b) with intent to defraud creditors of the
company or any other person, has made or caused
to be made any gift or transfer of, or charge
on, or has caused or connived at the levying of
any execution against, the property of the
company; or
(c) with intent to defraud creditors of the
company, has concealed or removed any part of
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the property of the company since the date of
any unsatisfied judgment or order for payment
of money obtained against the company or within
two months before that date,
he shall be punishable with imprisonment for a
term which shall not be less than one year but
which may extend to three years and with fine
which shall not be less than one lakh rupees
but which may extend to three lakh rupees.
339. Liability for fraudulent conduct of
business.-
(1) If in the course of the winding up of a
company, it appears that any business of the
company has been carried on with intent to
defraud creditors of the company or any other
persons or for any fraudulent purpose, the
Tribunal, on the application of the Official
Liquidator, or the Company Liquidator or any
creditor or contributory of the company, may,
if it thinks it proper so to do, declare that
any person, who is or has been a director,
manager, or officer of the company or any
persons who were knowingly parties to the
carrying on of the business in the manner
aforesaid shall be personally responsible,
without any limitation of liability, for all or
any of the debts or other liabilities of the
company as the Tribunal may direct:
Provided that on the hearing of an application
under this sub-section, the Official
Liquidator or the Company Liquidator, as the
case may be, may himself give evidence or call
witnesses.
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(2) Where the Tribunal makes any such
declaration, it may give such further
directions as it thinks proper for the purpose
of giving effect to that declaration and, in
particular,—
(a) make provision for making the liability of
any such person under the declaration a charge
on any debt or obligation due from the company
to him, or on any mortgage or charge or any
interest in any mortgage or charge on any
assets of the company held by or vested in him,
or any person on his behalf, or any person
claiming as assignee from or through the person
liable or any person acting on his behalf;
(b) make such further order as may be necessary
for the purpose of enforcing any charge imposed
under this sub-section.
(3) Where any business of a company is carried
on with such intent or for such purpose as is
mentioned in sub-section (1), every person who
was knowingly a party to the carrying on of the
business in the manner aforesaid, shall be
liable for action under section 447.
(4) This section shall apply, notwithstanding
that the person concerned may be punishable
under any other law for the time being in force
in respect of the matters on the ground of
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which the declaration is to be made.
Explanation.—For the purposes of this section,—
(a) the expression “assignee” includes any
person to whom or in whose favour, by the
directions of the person liable, the debt,
obligation, mortgage or charge was
created, issued or transferred or the interest
was created, but does not include an assignee
for valuable consideration, not including
consideration by way of marriage, given in good
faith and without notice of any of the matters
on the ground of which the declaration is made;
(b) the expression “officer” includes any
person in accordance with whose directions or
instructions the directors of the company have
been accustomed
to act.”
6) Under Section 241(2), the Central Government, if it is of
the opinion that the affairs of the Company are being
conducted in a manner prejudicial to public interest, may
apply itself to the Tribunal for orders under this Chapter,
which is headed “prevention of oppression and mis-
management”. Apart from the vast powers that are given to the
Tribunal under Section 242, powers under Section 337 and 339
are also given in aid of this power, which will apply mutatis
mutandis.
7) Section 337 refers to penalty for frauds by an officer of
the company in which mis-management has taken place.
Likewise, Section 339 refers to any business of the company
which has been carried on with intent to defraud creditors of
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that company. Obviously, the persons referred to in Section
339(1) as persons who are other than the parties “to the
carrying on of the business in the manner aforesaid” which
again refers to the business of the company which is being
mismanaged and not to the business of another company or other
persons.
8) This being the case, it is clear that powers under these
sections cannot possibly be utilized in order that a person
who may be the head of some other organization be roped in,
and his or her assets be attached. This being the case, we
set aside the impugned order passed by the NCLAT and well as
the NCLT. The appeal is allowed in the aforesaid terms.
9) We may clarify that nothing stated in this judgment will
have any effect insofar as the investigation conducted by the
CBI or the investigation by the SFIO is concerned.
…………………….. J.
(ROHINTON FALI NARIMAN)
…………………….. J.
(S. RAVINDRA BHAT)
…………………….. J.
(V. RAMASUBRAMANIAN)
New Delhi;
February 12, 2020.
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