Bombay HC in the case of N Sampath Ganesh Versus Union Of India

Case Covered:

N Sampath Ganesh

Versus

Union Of India

Facts of the case:

A prayer made under S. 140(5) of the Companies Act,2013 or 2013 Act against the statutory auditors by the Union of India through Ministry of the Corporate Affairs (MCA) in an investigation/dispute regarding constant evergreening of debts extended to its subsidiary Companies & third parties/companies by IL & FS Financial Services Limited (hereinafter referred to as “IFIN”) and the alleged dubious role played by its CAs ie company auditors before National Company Law Tribunal ie NCLT and orders passed therein, gives rise to the present bunch of petitions. Petitioners state that said S. 140(5) is unconstitutional and in any case, can not be invoked against the ex-statutory auditors. In WP 5263 of 2019, direction to lodge prosecution issued under S.212(14) of the 2013 Act is questioned. Since only law points are argued, we need not refer to the facts which are not crystallized as yet.

In Writ petition No.4144 of 2019, the petitioner is a partner of M/s. BSR and Associates which is a Limited Liability Partnership (LLP) of Indian Chartered Accountants. He has questioned the validity of section 140(5) of the Companies Act, 2013. He has also challenged the order dated 9/8/2019 passed by the National Company Law Tribunal, Mumbai Bench whereby his objection to the maintainability of Company Petition No. 2062 of 2019 raised by him vide Misc Application No. 2506 of 2019 has been dismissed and that company petition is held to be maintainable under section 140(5). The objection raised vide Misc Application No. 2505 of 2019 filed by M/s. BSR Associates’ challenging said maintainability also came to be rejected. M/s. BSR Associates has challenged it to vide WP 4145 of 2019. Misc. Application No.2258 of 2019 was filed by Petitioners in WP No. 5023 of 2019 M/s. Deloitte Haskins & Sells, another (LLP), Misc. Application No.2506 of 2019 was filed by the Chartered Accountant Sampat Ganesh, Misc. Application No. 2268 of 2019 was filed by Chartered Accountant Udayan Sen and Misc. Application No. 2270 of 2019 was filed by Chartered Accountant Kalpesh J. Mehta. All these Misc. Applications questioning the maintainability of Company Petition No. 2062 of 2019 were dismissed by a common order and the company petition filed by Union of India through the Ministry of Corporate Affairs was held maintainable. The petitioners mainly stated that because of resignation tendered by the Chartered Accountants, proceedings under section 140(5) do not survive. The other persons/concerns have filed criminal petitions for challenging the rejection of preliminary objection vide WP No.4145 of 2019, WP No. 5023 of 2019, WP No.5035 of 2019, WP No. 5036 of 2019. 

Observations of the court:

Answer to question whether the Central Government could have moved an application for change of auditor in the NCLT proceedings which are stayed by this Court on the liberty given by the Hon. Apex Court when it dismissed SLP need not detain us as all parties agree that the Companies Act, 2013 does not contain any other provision empowering the Central Government to move such request & no other forum except NCLT. Leave or liberty is given by the Hon. Apex Court is not in dispute & the burden was therefore on the petitioners to explain how that liberty could have been used. Even otherwise, the order dated 18.10.2019 can not be seen as adverse to any of the petitioners before us. It does not violate the interim orders of this High Court dated 4/9/2019.

The judgement of the court:

We have considered all the relevant arguments advanced before us by the respective learned counsel with the necessary case law. Parties have argued at length orally & have also, in addition, placed the brief written notes with case-law. We have also narrated their arguments to the extent necessary and attempted to avoid prolixity in the backdrop of our findings. As the prayers in the writ petitions are not identical, we proceed to pass the final orders.

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