Madras High Court annuls FIR against three Ex-Directors of IL & FS but refrains from providing Clean Chit

The Madras High Court has annulled a First Information Report (FIR) filed under the Tamil Nadu Protection of Depositors Act against three former directors of IL & FS. The court ruled that the Serious Fraud Investigation Office (SFIO) is the sole agency empowered to investigate offences related to the company under the Companies Act. While quashing the FIR, the court clarified that this decision does not impact the ongoing SFIO investigation or provide a clean chit to the individuals involved.

In Ravi Parthasarthy and Ors. v. State of Tamil Nadu [CRL. O.P. NOS. 3730, 4227, 4095 & 11206 OF 2021 CRL. M.P. NOS. 6647, 6649, 2218, 2601, 2679, 3388, 6708 & 6709 OF 2021W.P. NO. 1397 OF 2021 AND W.M.P. NO. 5917 OF 2021 dated August 31, 2021], Ravi Parthasarthy ("Petitioner No. 1"), Hari Sankaran ("Petitioner No. 2") and Ramchandra Karunakaran ("Petitioner No.3")have filed a petition to quash the FIR in EOW, Chennai Crime No.13 of 2020 filed against them by Moon Technologies Limited ("Respondent No. 2") under the Tamil Nadu Protection of Interest of Depositors Act of 1997 (TNPID Act).

Infrastructure Leasing & Financial Services Limited (IL & FS) is parent to 348 group companies. Due to financial crises, the Central Government employed a petition before the National Company Law Tribunal (NCLT) and as a result Directors were appointed, vide order dated October 1, 2018 and October 9, 2018, for the management of the company which included IL & FS Transportation Networks India Limited (INTL). Furthermore, the investigation into this ill-fated company was given to Company Act by Serious Fraud Investigation Office (SFIO) under Section 212 of the Companies Act. Meanwhile, INTL had also purchased non-convertible debentures from various companies including the Respondent No. 2. Therefore, Respondent No. 2, in order to recover the loan amount, had subsequently filed an FIR under the TNPID Act and therefore, this case.

The Petitioner, in this case, contended that the complaint lodged by the Respondent No. 2 was not at the helm of the affairs of the company as Petitioner No. 1, 2 and 3 had resigned from the posts of Non-Executive Director on July 27, 2018, October 1, 2018 and October 28, 2018 respectively. Further it was contended that Petitioner No. 1, 2 and 3's positions will not be considered as "Key Managerial Personnels" under Section 2 (51) of the Companies Act and thus claiming the report to be unsustainable.

At the perusal of all the facts and evidences, the Honorable Madras High Court adjudged that the SFIO is probing the case, no other investigative agency is empowered to investigate into the affairs of IL & FS and its subsidiary companies for any offences under the Companies Act.

Furthermore, the Court quashed a case registered under the TNPID Act, although the Court clarified that it is not commenting on the SFIO probe underway or giving the alleged perpetrators a clean chit.