An order to indict a former Executive Director of the Punjab National Bank in connection with the Rs 14,000 crore Nirav Modi diamond trader scam was overturned by the National Company Law Appellate Tribunal (NCLAT).
The National Company Law Tribunal (NCLT) ordered the conviction of 19 people in the case in January 2019, including the former executive director of the bank, K V Brahmaji Rao. A directive to freeze their assets was also given. The tribunal's decision was based on a petition the corporate affairs ministry had submitted.
The appellate tribunal noted that the Supreme Court had already overturned an NCLT order from February of this year freezing Usha Ananthasubramanian's assets and cited that decision to help Rao.
In the instant case titled K.V Brahmaji Rao vs. Union of India the issue raised for clarification before the NCLAT was:
Whether the freezing of assets of Usha Ananthasubramanian was valid or not?
With regard to this issue, The appeal tribunal cited the Supreme Court's decision to overturn an NCLT order freezing Usha Ananthasubramanian's assets in February of this year in its six-page order from August 17 and granted Rao relief. The Punjab National Bank's managing director and CEO was Usha Ananthasubramanian (PNB).
The Supreme Court had ruled in the Usha Ananthasubramanian case, according to a three-member NCLAT bench, 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 and 339 of the Act."
The Companies Act of 2013's Section 337 mentions fines for frauds committed by officers of a firm if mismanagement has occurred. Any business conducted by the company with the intention of defrauding its creditors is covered under Section 339.
After the CBI filed a charge sheet in the cases of Gitanjali Group and Nirav Modi, the government requested that the NCLT freeze the assets of 19 individuals. They were also accused of engaging in dishonest and deceptive behaviour with others, according to the charge sheet.
The Court categorically stated 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"