USHA ANANTHASUBRAMANIANversusUNION OF INDIA

882                      [2020]REPORTS
               SUPREME COURT    3 S.C.R. 882               [2020] 3 S.C.R.


A                    USHA ANANTHASUBRAMANIAN
                                        v.
                              UNION OF INDIA
                         (Civil Appeal No. 7604 of 2019)
B                            FEBRUARY 12, 2020
               [R. F. NARIMAN, S. RAVINDRA BHAT AND
                      V. RAMASUBRAMANIAN, JJ.]
            Companies Act, 1956: ss. 241, 337, 339 – Application to
      tribunal for relief in cases of oppression, etc. – Charge sheet filed
C
      by CBI against several persons occupying positions in the Punjab
      National Bank as well as the Directors of a company – Criminal
      case against the appellant-MD and CEO of the Bank that she omitted
      to take precautions or preventive steps to prevent the fraud
      perpetrated by Nirav Modi and thereby committed mis-conduct and
D     conspiracy with the other accused persons – Orders passed by NCLT
      and NCLAT in exercise of its jurisdiction u/s. 241 freezing the assets
      of the appellant – On appeal, held: Powers u/ss. 241, 337 and 339
      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 – Thus, the order passed by the NCLAT and well as the
E
      NCLT set aside.
            CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7604
      of 2019.
            From the Judgment and Order dated 04.07.2019 of the National
F     Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
      No. 79 of 2019.
            C.S. Vaidyanathan, Ms. Meenakshi Arora, Sr. Advs., Parthiv
      K. Goswami, Anirudh Sharma, Rajiv Dalal, Abhaid Parikh, Vikrant Singh
      Negi, Advs. for the Appellant.
G          Sanjay Jain, ASG, Kanu Agrawal, Zoheb Hussain, Padmesh
      Mishra, Arkaj Kumar, Arvind Kumar Sharma, Advs. for the Respondent.




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                                       882
    USHA ANANTHASUBRAMANIAN v. UNION OF INDIA                                 883


       The Judgment of the Court was delivered by                             A
      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.
                                                                              B
      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   C
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 committed
mis-conduct and conspiracy with the other accused 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    D
241 of 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      E
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   F
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.                                     G
       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
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884            SUPREME COURT REPORTS                          [2020] 3 S.C.R.


A     jurisdiction under Section 339 if very wide and would include freezing
      the assets of any person who was knowingly a party to the carrying
      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,
B     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
C           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
D           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. -
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            (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
F
            against, the property of the company; or
            (c) with intent to defraud creditors of the company, has concealed
            or removed any part of 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
G           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.-
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USHA ANANTHASUBRAMANIAN v. UNION OF INDIA                                 885
            [R. F. NARIMAN, J.]

 (1) If in the course of the winding up of a company, it appears          A
 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,
                                                                          B
 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:                                                     C
 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.
 (2) Where the Tribunal makes any such declaration, it may give
 such further directions as it thinks proper for the purpose of giving    D
 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           E
 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.                  F
 (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.                                                             G
 (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 which
 the declaration is to be made.
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886                SUPREME COURT REPORTS                       [2020] 3 S.C.R.


A             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
B             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
C             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-
D     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
E     339 refers to any business of the company which has been carried on
      with intent to defraud creditors of 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.
F
             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
G     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.

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      Nidhi Jain                                                   Appeal allowed.