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Usha Ananthasubramanian v. Union of India

Civil Appeal · 2020 INSC 176Decided 12 Feb 2020
Civil Appeal No. 7604 of 2019
Justice Rohinton Fali Nariman · Justice S. Ravindra Bhat · Justice V. Ramasubramanian

Background

The appellant was the former MD & CEO of Punjab National Bank (PNB) during the period of the Nirav Modi/Gitanjali Gems fraud, and the CBI's charge sheet alleged at most that she failed to take preventive steps against the fraud. In proceedings under Section 241 of the Companies Act (dealing with oppression and mismanagement of Gitanjali Gems), the NCLT and NCLAT had passed orders freezing her personal assets and restricting her to Rs. 1 lakh per month for expenses, even though she had no role in managing Gitanjali Gems itself.

Decision Breakdown

The Supreme Court held that the powers under Sections 241, 337 and 339 of the Companies Act, invoked for mismanagement of a particular company, can only be exercised against persons connected with the mismanagement of that very company, not against the head of an entirely different organisation such as PNB. Since the appellant had no connection to the management of Gitanjali Gems, the NCLT and NCLAT had no jurisdiction to freeze her assets under these provisions. The Court set aside both the NCLT and NCLAT orders and allowed the appeal, while clarifying that this ruling would not affect the separate ongoing CBI or SFIO investigations against her.

Lesson Learnt

Statutory powers meant to address fraud or mismanagement within a specific company cannot be stretched to freeze the personal assets of an outsider who had no role in managing that company: jurisdiction under such provisions is confined to the company actually under scrutiny.

Official source (sci.gov.in)View Judgment (PDF)

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