Any personal assets cannot be attached in
exercising the powers under Sections 337 & 339

Provision Involved:

Section 337 of the Companies Act, 2013 refers to the penalty for fraud by an officer of the company in which mismanagement has taken place. Section 339 pertains to any business of the company which has been carried on with the intent to defraud creditors of that company. It provides power to the Tribunal to make any persons (who were knowingly parties to the carrying of the business) personally liable for all or any of the debts or other liabilities of the company.

Facts of the case

• In the huge financial scam in PNB, the Union of India has initiated an investigation against 107 companies and 7 LLPs of Nirav Modi Group and Gitanjali Group of Companies.
• At the relevant time, the Appellant was Executive Director, PNB, Head Office, New Delhi. NCLT, Mumbai bench, passed the order for freezing Assets of the Appellant and prohibited him from disposing of movable and immovable Properties/Assets.
• The Appellant submits that the order has been passed in violation of the Principle of Natural Justice since the Appellant was not served with an advance copy of the said Application and without giving an opportunity of hearing, the order has been passed.
• Important legal issue is whether any personal assets (who is head of some other organizations) be attached in exercising the powers under Sections 337 & 339 of the Companies Act, 2013?

Decision

Assets of any person (who is head of some other organizations) cannot be attached in exercising the powers under Sections 337 & 339 of the Companies Act, 2013.

Our Opinion

• The NCLAT observed that the person who may be the head of some other organizations cannot be roped and his or her Assets cannot be attached in exercising the powers under Sections 337 & 339 of the Companies Act, 2013. Admittedly, the Appellant was the Executive Director of PNB, Head Office, New Delhi i.e. employee of other organization. Therefore, he cannot be impleaded as Respondent in the case against the Nirav Modi Group and Gitanjali Group of Companies.
• Thus, the order of NCLT, Mumbai bench is set aside, and the Appeal is allowed.

Vikas Agarwal, Senior Executive, SW India

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