NCLT Has No Jurisdiction To Convict Person For Offence U/S 68 Of IBC In View Of Section 236 Of IBC: NCLAT
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Yogesh Khanna and Mr. Ajai Das Mehrotra (Technical Member) has held that the National Company Law Tribunal (NCLT) has no jurisdiction to convict a person for an offence under Section 68 under Chapter VII of Part II of the Insolvency and Bankruptcy Code, 2016 (Code) in view of the express provision contained...
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Yogesh Khanna and Mr. Ajai Das Mehrotra (Technical Member) has held that the National Company Law Tribunal (NCLT) has no jurisdiction to convict a person for an offence under Section 68 under Chapter VII of Part II of the Insolvency and Bankruptcy Code, 2016 (Code) in view of the express provision contained in Section 236(1) of the Code.
Brief Facts:
The present Appeals have been filed challenging two orders passed on May 17, 2021 and August 4, 2021 by the National Company Law Tribunal (NCLT). The NCLT has found the Appellants guilty for offence of perjury and a fine of Rs. 2 Lacs has been imposed on each of the Appellant. Furthermore, the NCLT had directed the Resolutional Professional (RP) to initiate proceedings for perjury against Mr. Ajay Vij.
The reason for holding the appellant guilty for perjury is two fold (a) the appellants have given wrong information to the Registrar of Companies (ROC) in Form No.18 required for converting a company into Limited Liability Partnership (LLP) wherein they had stated no proceedings are pending against the company but whereas an Insolvency petition under Section 9 IBC was pending against the company.
Secondly, the appellants had filed an affidavit wherein the appellants had deposed the units were handed over to the parties way back in December, 2016 but whereas their learned counsel stated the units will be handed over to the parties.
Contentions:
The Appellants submitted that the NCLT has no power to convict the appellants under Section 68 of the IBC since such conviction can be done only by the Special Court established under the Companies Act.
It was also argued that even if it is to be considered as has been intentionally done by one of the directors then also offence of perjury could be attracted only when false declaration touches any material fact.
Observations:
The Tribunal observed that Form 18 is merely procedural in nature which is used for converting a company into an LLP and is not material to the conversion itself. All assets, liabilities, rights and obligations of the company stand transferred to the LLP upon conversion as per section 58(4)(b) of the LLP Act. This reasoning is further fortified by clause 6(b) of the Third Schedule of the LLP Act.
It further added that even per Section 58(3) read with Clause 8 of third schedule of LLP Act, all proceedings by and against the company pending before any Court, tribunal or other authority can be continued, completed and enforced by or against the LLP.
The Tribunal observed that an inadvertent error declaration in Form 18 before the Registrar of Companies is not material to the conversion of a company into an LLP and does not constitute perjury under section 199 of the Indian Penal Code (IPC). Consequently, the finding against the Appellants that the offence of perjury has been committed and permitting the liquidator to file a complaint under section 340 of the Criminal Procedure Code, 1973 (CrPC) deserve to be set aside.
The Tribunal also observed that admittedly such declaration in Form 18 was never made/filed before the NCLT but before the ROC; therefore, it was not for the NCLT/Liquidator to move under 195 Cr.P.C for initiating action on such account.
The Tribunal also observed that the NCLT has no jurisdiction to convict a person for an offence under Section 68 under Chapter VII of Part II of the Code in view of the express provision contained in S. 236(1) of the Code which states that notwithstanding anything contained in the CrPC, offences under this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013.
The NCLAT in Writers Business Services Pvt. Ltd. & Ors. v. Ashutosh Agrawala (2022), RP for Cox & Kings Ltd. categorically held that an act which is termed as offence within specific provisions of Chapter VII of Part II of the Code could not be dealt with even indirectly by the Adjudicating Authority by imposing a fine.
Based on the above, the Tribunal observed that the impugned order dated 17.05.2021 convicting the Appellants under section 68(i)(a) of the Code and imposing a fine of Rs. 2 lac on each Appellant deserves to be set aside on this ground itself.
The Tribunal concluded that “there exists a Special Court per Section 236 of the Companies Act, 2013, hence the Ld. NCLT has no power to convict the appellants and impose a fine and as such the conviction and the fine imposed by Ld. Adjudicating Authority is hereby set aside”
Accordingly, the present appeal was dismissed.
Case Title: Ajay Vij and Anr. Vs Mr Abhishek Dutta and Anr.
Case Number: COMPANY APPEAL (AT)(INS) NO. 726 & 728 OF 2021 and COMPANY APPEAL (AT)(INS) NO. 818-819 OF 2021
Judgment Date: 28/02/2025
For Appellant:Mr Sakal Bhushan, Mr Vasu Bhushan, Mr Ashish Upadhaya, Mr Nipun Bhushan, Advocates.
For Respondent:Mr Yatin Sharma, Advocate for R-1.
Mr Rohan T., Ms Pooja Dhar, Mr Praful Pratap Pratap Singh, advocates for R2 to R4.