The Centre on behalf of the Serious Fraud Investigation Office (SFIO) has moved the NCLAT against the NCLT orders directing the probe agency to investigate into the affairs of two firms, contending that the insolvency tribunal has no jurisdiction to pass such probe orders.
In a petition moved before the National Company Law Appellate Tribunal (NCLAT), the SFIO submitted that it being a statutory investigative office can direct to investigate into the affairs of the companies only by the Ministry of Corporate Affairs (MCA), when it is of the opinion that such an investigation is necessary.
The matter came up for hearing last week before the NCLAT, which stayed the order of the principal bench of the National Company Law Tribunal (NCLT) directing to probe into the matters of Luxury Train Pvt LTD and Zynke Exports.
"Until further orders, the operation of the impugned orders dated July 24, 2019 and July 26, 2019 as impugned in these appeals shall remain stayed, in so far as relates to the direction to SFIO to investigate the matter," said a three-member NCLAT bench headed by Chairperson Justice S J Mukhopadhaya on September 19.
However, the NCLAT bench also said the proceedings "will continue in accordance with law" and directed to post both the appeals for orders on October 22, 2019.
Passing two orders on July 24 and July 26, respectively, the Delhi-based principal bench of the NCLT had rejected the plea of the SFIO to modify its order and direct the Regional Director (Northern Region) to probe into the affairs of the two companies, instead of the corporate fraud investigating agency.
This is challenged by Union of India through the SFIO before the appellate tribunal.
The SFIO contended the NCLT does not have the jurisdiction to direct an investigation into the affairs under the provisions of the Companies Act.
According to the SFIO, the NCLT has "erroneously exercised its powers" under the Companies Act and "exceeded the scope" of its jurisdiction.
The SFIO also contended that the investigation was ordered by the NCLT in purported exercise of its powers under the Companies Act but while hearing the matter under the Insolvency & Bankruptcy Code (IBC).
In the first matter, the NCLT was supervising the insolvency resolution process of Zynke Exports, against whom the insolvency process was initiated on June 8, 2018.
Later in September 2018, the Resolution Professional (RP) approached the NCLT, requesting it to issue directions to the ex-management to provide information/documents in their possession, as they were non-cooperating.
On November 16, 2018, the NCLT passed order requesting the SFIO to investigate into the affairs of Zynke Exports exercising jurisdiction under Section 210 and 213 of the Companies Act.
Similarly, in the matter of Luxury Train Pvt LTD, the NCLT had admitted insolvency plea filed by the Maharashtra Tourism Development Corporation (MTDC) on December 11, 2017.
On October 8, 2018, the NCLT ordered liquidation of the firm and asked the RP, who was also appointed as liquidator to submit a preliminary report. The RP in his report appeared to have suggested diversion of funds in the company, following which, the NCLT directed it to approach and the government agency for investigation, and approached the SFIO.
The SFIO declined to initiate probe stating that there is no specific direction by the NCLT to investigate and also cited lack of power to undertake any investigation on its own.
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