The Madras High Court on Tuesday quashed a case registered under the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act, 1997 in 2020 in connection with the ? 91,000 crore IL&FS scam, although the Court clarified that it is not commenting on SFIO probe underway or giving the alleged perpetrators a clean chit (Ravi Parthasarathy and ors v. State and anr).
Justice M Dhandapani passed the order in petitions moved by former IL&FS directors Ravi Parthasarathy (former chairman), Hari Sankaran (former vice-chairman) and Ramchand Karunakaran.
The three had filed petitions seeking to quash the TNPID case registered in Tamil Nadu against the bankrupt Infrastructure Leasing & Financial Services Limited (IL&FS), it's subsidiary IL&FS Transportation networks India Limited (ITNL), and various directors of IL&FS and ITNL.
"Crime No.13 of 2021 on the file of the 1st respondent/Deputy Superintendent of Police, EOW-II, Chennai, is quashed insofar as the petitioners in the above petitions and ITNL are concerned," the Court ruled on Tuesday.
The TNPID case was registered on a complaint by 63 Moons Technologies Ltd. that ITNL had defaulted on payment of interest on certain non-convertible debentures.
This development took place after the Central government had entrusted the Serious Fraud Investigation Office (SFIO) with investigating the IL&FS scam under Section 212 of the Companies Act, given the enormity of the economic offence involved. Citing Section 212 of the Companies Act, the High Court on Tuesday ruled that the TNPID investigation is barred given that the case has been assigned to the SFIO.
The order stated that a careful perusal of sub-section (2) of Section 212 of the Companies Act, it is predominantly clear that once the case has been assigned by the Central Government to SFIO for investigation under the Companies Act, the other investigating arms of the Central Government and the State Government has been denuded of its powers to proceed with the investigation in respect of any offence under the companies Act. It further mandates that even if any such investigation has been set in motion, it shall not be proceeded further with and the concerned agency is required to transfer the relevant documents and records in respect of such offences under this Act to SFIO.
Given that the SFIO is probing the case, no other investigative agency is empowered to investigate the affairs of IL & FS and its subsidiary companies for any offences under the Companies Act. The court observed that other investigating agencies can only investigate matters which are not within the realm of the Companies Act.
Justice Dhandapani added that it is well open to the intervenors to approach SFIO and submit an appropriate representation for the relief aforesaid in accordance with the law.
Another ground on which the Court quashed the TNPID case was in view of its finding that the amounts received by ITNL could not be termed as "deposits" under TNPID Act. Further, the Court also ruled that ITNL, being a company floating a private placement scheme, could not be termed as "financial establishment" under the same Act. The Court declined to comment on the culpability of the IL&FS directors with respect to non-payment of interest on non-convertible debentures floated by ITNL after an NCLAT moratorium. The court said that the culpability of the petitioners in the complex web of the economic offence, which is the subject matter of investigation by SFIO, will entangle itself only after a full-fledged investigation by SFIO.
While quashing the TNPID case, Justice Dhandapani added that he has not expressed any opinion in the matter, save for examining whether the matter falls within the purview of the TNPID Act. The judgement stated that (The Court) has not adverted to any facts or actions relating to IL & FS or any of its other group companies, as those entities are not before this Court. The judge emphasised further that this Court, by quashing the case relating to TNPID Act, by no stretch, is giving a clean chit to the petitioners herein, as persons who are beyond a pale of doubt.
The Court recorded the allegation that the petitioners have siphoned off huge sums of money in the form of salaries, in the purchase of immovable properties across the globe, but added that it is not entering into the said domain to find out the truth or otherwise of the said submissions. Instead, the Court urged the intervenors making these allegations to approach the SFIO with their inputs. The court observed that the jurisdiction of the SFIO is vast ... the intervenors, if in possession of information, which would be valuable to SFIO in their ongoing investigation, could very well provide the information available with them ... any additional material provided by the intervenors would be a material on which SFIO could investigate and try to find the truth and veracity of the very many transactions. Advocates B Kumar, Rahul Unnikrishnan, Manishankar, A Ashwini Kumar, MK Kabir and Sunder Mohan appeared for the former IL&FS directors. Senior advocate PS Raman, advocate Nithyesh Natraj appeared for 63 Moons Technologies Ltd. Other counsel who appeared for intervenors, were advocates Sarath Chander, B Vijay, Anand Sashidharan and Abdukumar Rajarathnam. Government advocate CE Pratap appeared for the State.