In a case that will redefine the role of independent directors in the corporate sector, the Supreme Court on Friday stayed the National Company Law Appellate Tribunal’s July order that paved way for the government to freeze and attach assets, including bank accounts, of four independent directors of the Nirav Modi-led Firestar International to recover dues related to the Rs 13,000-crore PNB fraud case.
The four directors who appealed against the appellate tribunal’s order of July 12 are: Gopal Krishnan Nair, Suresh Senapathy, former CFO of Wipro, Gautam Mukkavilli, a former executive of PepsiCo, and Sanjay Rishi, president of American Express for South Asia and Network Partners. They were part of the board of Modi’s firm as independent directors.
A Bench led by justice RF Nariman, while seeking response from the Ministry of Corporate Affairs and others, stayed the NCLAT’s order that had set aside the April 2 order of the Mumbai Bench of the NCLT that gave relief to these independent directors. Senior counsel Iqbal Chagla, appearing for the independent directors, argued before the apex court that they had no role in the day-to-day operations of the two companies. He further said investigation agencies had so far given no evidence of any wrongdoing on the basis of which they had attached the independent directors’ assets.
As a result of the impugned order, the life of these directors and their families had come to a “standstill” and they were finding it difficult to make their ends meet, the appeals stated, adding that the confiscatory orders are in violation of their fundamental rights.
The Ministry of Corporate Affairs (MCA) had filed a petition before the NCLT, which in its interim order on February 23 had directed freezing of assets and properties of about 70 respondents, including a few independent directors. The tribunal had also restrained all companies and individuals from transfer or disposal of funds and properties without its approval.
However, it had later granted reprieve to them. While the NCLT had on April 2 vacated the stay on sale or disposal of assets of the directors observing that there was “neither an averment nor any incriminating material placed against” them, the NCLAT had on July 12 said these independent directors had exposure with the PNB and are found to be beneficiaries of the fraud, and without waiting for the report of the SFIO it was not open to exonerate some of the respondents. However, the appellate tribunal had allowed them to withdraw Rs 1 lakh per month from their account for monthly expenses.
The MCA had sought invocation of Sections 241, 246 with Section 339 and 340 including Section 222 of the Companies Act, 2013. Partners or directors in firms or companies are liable under Sections 339 and 340.