Order Under Section 206(4) Invalidated Due to Lack of Fraud Evidence Against Petitioner | HC

Case Details: HDFC Bank Ltd. v. Registrar of Companies. Mum. - [2024] 164 taxmann.com 143 (HC-Bombay)

Judiciary and Counsel Details

• K. R. Shriram & Jitendra Jain, JJ.
• Virag Tulzapurkar, Sr. Adv. Ms Bindi Dave, Jeshan Sinha, Aayesh Gandhi & Gaurang Samel for the Petitioner.
• Himanshu P. Singh & Ms Ashish Mehta for the Respondent.

Facts of the Case

In the instant case, proceedings under section 206(4) of the Companies Act, 2013 had been initiated against the petitioner and notice was issued calling upon him to furnish various details, documents and information.

It was noted that the impugned proceedings had been allegedly taken based on an email addressed by Mr. Devendra Sharma. The said email refers to an entity called HDFC AMC IPO. The impugned order had been passed against HDFC Bank, which was not an entity referred to in the said email. Therefore, the basis of initiating proceedings against the petitioner was itself misconceived.

Further, the respondent appeared to have passed the impugned order on the basis of a newspaper report about an offence committed by the petitioner’s former employee, against whom the petitioner had initiated criminal proceedings and submitted the requisite report to the Reserve Bank of India (RBI).

The petitioner was justified in contending that based on such a newspaper report, proceedings under Section 206(4) of the Companies Act, 2013 dehors application of mind or enquiry by the respondent could not be initiated. Therefore, even on this count, the impugned order was exfacie bad in law and without application of mind.

High Court Held

The High Court observed that the impugned order under Section 206(4) of the Act should make out a prima facie case as to the information called for and how it relates to a company’s business being carried on for fraudulent and unlawful purposes.

Further, the High Court observed that in the impugned order, the said linkage was totally absent, and there was no finding even prima facie of the petitioner’s business being conducted fraudulently, for unlawful purposes, or in defiance of provisions of the Act.

The High Court held that on contrary in an affidavit in reply it was stated in the impugned notice respondent was not alleging or establishing any fraud against petitioner but was issued for gathering information, and it was an opportunity of being heard.

Further, the High Court held that even on this count, initiation of proceeding under section 206(4) of the Act, being a jurisdictional condition, was not satisfied, and therefore, the impugned order was wholly without jurisdiction. Therefore, without satisfying these preconditions, an order of nature issued and impugned in the instant petition could not be sustained and, thus, was to be disposed of.