National Company Law Tribunal sets aside the order against former PNB,Executive Director in Nirav Modi’s fraud case

NCLAT has set aside an order to take action against a former PNB,Executive Director in a matter related to the  Rs 14,000 crore scam involving Nirav Modi, diamond merchant. In January 2019, the National Company Law Tribunal in Janurary,2019 directed to implead19 people, including the K V Brahmaji Rao, bank’s former Executive Director in the case. There was also a direction given to freeze their assets. The tribunal’s ruling had come on a petition that was filed by the ministry of corporate affairs.

A appeal was filed by Rao against the ruling by the  NCLT, Mumbai bench. In a six page order, dated 17th August, the appellate tribunal noticed that the Supreme Court in February, this year had already set aside the order by NCLT regarding freezing the assets of Usha Ananthasubramanian and cited the same to give relief to KV Brahmaji Rao.

Usha Ananthasubramanian had served Punjab National Bank as Managing Director and CEO. A NCLAT bench of three member noted that the Supreme Court in case of Usha Ananthasubramanian had held that “the person who may be the head of some other organisations cannot be roped and his or her assets cannot be attached in exercising the powers under Sections 337 & 339 of the Act”.

NCLAT said that, “Admittedly, the appellant (Rao) was the Executive Director of PNB, Head Office, New Delhi i.e. employee of other organisation. Therefore, he cannot be impleaded as respondent in the company petition which is against the Nirav Modi Group and Gitanjali Group of Companies,”. The appellate tribunal said that the case of the appellant is on the same footing as of Usha Ananthasubramanian. “Thus, the impugned order is set aside with the terms as indicated in the aforesaid Judgment of the Supreme Court. The appeal is allowed,” they noted.

Section 337 of the Companies Act, 2013 refers to penalty for frauds 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 intent to defraud creditors of that company. The government had encouraged NCLT to freeze the assets of 19 people involved in Nirav Modi’s and Gitanjali Group cases after CBI filed a charge sheet. The charge sheet mentioned that they had acted dishonestly and fraudulently with other persons.


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