Arvind Dham v. IDBI Bank Limited

1. Allowed, subject to all just exceptions.

2. The application stands disposed of. W.P.(C) 11718/2024, CM APPL. 48725/2024

3. The petitioner is invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India, thereby seeking quashing of the order dated 26.07.2024 (signed on 05.08.2024) passed by the „Fraud Examination Committee-I‟ of the respondent-bank, declaring the petitioner as „fraud‟.

4. Learned counsel for the respondent is present on advance notice.

5. Mr. Dayan Krishnan, learned Senior Advocate for the petitioner has urged that the impugned order dated 26.07.2024 is not sustainable in law since subsequent to the Show Cause Notice [“SCN”] dated 06.02.2024 (Annexure-P-7), the petitioner had written a letter dated 22.02.2024 (Annexure P-8) whereby he had sought certain documents from the respondent-bank to submit an effective reply, which documents were never supplied to him except for a reply which was received to his letter dated 06.03.2024, whereby against each of the documents that were sought, a cryptic reply was given to the effect that „document sought has not been relied by the bank for examining the account as fraud. Hence, could not be shared.

6. It is pointed out that the petitioner wrote another letter dated 28.03.2024 inter alia pointing out that only the extracts of the Forensic Report prepared by S.P. Chopra & Co. (SPC) had been supplied and the due diligence report looking into the affairs of M/s. Metalyst Forgings Ltd. [“MFL”] by K G Somani & Co. LLP (formerly KG Somani & Co.) dated 18.01.2022 had not been considered, which had given him a clean chit from all kinds of financial irregularities. In short, learned Senior Advocate for the petitioner vehemently urged that the impugned order dated 26.07.2024 has been passed containing generic allegations, without supply of relevant documents to the petitioner and completely overlooking the findings given by the subsequent auditor K G Somani & Co. LLP (formerly KG Somani & Co.), which have given a clean chit to the petitioner.

7. It is also vehemently urged that during the relevant time i.e. 2014-15, 2015-16 and 2016-17, he was merely a non-executive Director and he had demanded the copies of relevant documents since CIRP[1] against MFL commenced from 15.12.2017 and he was seriously handicapped in having access to the relevant documents.

8. Learned Senior Advocate for the petitioner also urged that no bias be entertained against the petitioner and the plea taken by the learned counsel for the respondent-bank that although the Supreme Court in the case of Jaskaran Singh Chawla v. UOI[2] vide order dated 27.02.2024 found instances of falsification and siphoning of funds from bank accounts at the behest of the management of the group of companies through their relatives, it was only prima facie view and clarified later vide order dated 13.08.2024 to the effect that directions passed were limited to initiating investigation of the affairs of the company concerned and its Directors and not directing the arrest of any concerned individual.

9. Per contra, learned counsel for the respondent-bank has urged that the plea by the petitioner that he was a non-executive Director is false since during the relevant period, as per the report on Corporate Governance for the year 2015-16, the composition of the Board as on March 31, 2016 reflected that he was a Promoter-Director. A bunch of documents to this effect have been placed on the record and it was pointed out that petitioner was also Chairman of the “Risk Management Committee” of MFL during the period 2015-16. Further,

1 Corporate Insolvency Resolution Process 2024 SCC OnLine 255 alluding to the observations made by the Supreme Court in the aforesaid case dated 27.02.2024, it was pointed out that even in the proceedings before the NCLT[3], Mumbai Bench in CP No. 296/2021 titled ‘UOI v. Metalyst Forgings Ltd. (Through Resolution Professional)’ an order was passed on 15.09.2021 wherein the petitioner was arraigned as respondent No. 2 as a Promoter-Director of MFL and several directions were passed inter alia freezing all bank accounts of the petitioner, which order has not been challenged. It is also pointed out that presently, the petitioner is in judicial custody on account of investigation being conducted by the Enforcement Directorate under the Prevention of Money Laundering Act, 2002 for having caused losses and siphoning of funds of more than Rs. 25,000 crores as a result of defaulting on loans taken by MFL and its holding company, thereby defrauding as many as 15 banks.

10. As regards the request letter of the petitioner dated 22.02.2024 and 28.02.2024, subsequent to the SCN dated 22.02.2024 it was pointed out that all the documents had been supplied to him in the pending proceedings before the NCLT, Mumbai Bench including transaction audit report dated 17.08.2018.

11. Prima facie, on consideration of the documents, which are placed on the record by the learned counsel for the respondent, it appears that the plea of the petitioner that he was a non-executive Director during the relevant time is not correct. It appears that he was a Promoter-Director during the relevant time and evidently, the request letters dated 22.02.2024 and 28.02.2024 whereby such

3 National Company Law Tribunal documents were sought, pertained to irrelevant matters, thereby attempting to stall the proceedings against him. Further, it cannot be said that relevant documents were not supplied to him and/or that he was caught unaware. In view of the same, at this stage this Court is not inclined to grant any interim relief to the petitioner. However, the issues raised by the learned Senior Advocate for the petitioner require deeper examination.

12. Issue notice. Notice is accepted by the learned counsel for the respondent appearing today.

13. Let reply be filed within four weeks from today with relevant documents.