NCLAT Sets Aside NCLT’s Perjury Conviction: Holds Special Courts Have Exclusive Jurisdiction Under IBC

The NCLAT set aside the NCLT’s perjury conviction, holding that only Special Courts have exclusive jurisdiction to try offences under the Insolvency and Bankruptcy Code (IBC).

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member), while deciding multiple appeals, held that the NCLT lacks jurisdiction to convict or initiate perjury proceedings under Section 68 of the IBC or Section 340 CrPC, as such authority vests exclusively with designated Special Courts under Section 236 of the IBC. The Tribunal further observed that an incorrect declaration in Form 18 filed with the ROC—when immaterial to the conversion of a company to an LLP—does not amount to perjury warranting prosecution.

The National Company Law Appellate Tribunal (NCLAT) adjudicated two appeals challenging the orders dated 17.05.2021 and 04.08.2021 passed by the National Company Law Tribunal (NCLT), New Delhi. The Appellants were aggrieved by the findings of the NCLT, which held them guilty of perjury and imposed a fine of ₹2 lakhs on each, while also directing the Resolution Professional (RP) to initiate proceedings for perjury against Mr. Ajay Vij under Section 340 of the CrPC.

The impugned orders arose out of a declaration filed in Form No. 18 before the Registrar of Companies (ROC) by Mr. Ajay Vij on 03.11.2018, in connection with the conversion of the corporate debtor from a private limited company into a Limited Liability Partnership (LLP). In that form, it was declared that no legal proceedings were pending against the company, despite an insolvency petition under Section 9 of the IBC having been filed on 25.04.2018. The NCLT concluded that the conversion was a deliberate attempt to escape insolvency and defraud creditors, and found the Appellants guilty of perjury based on that declaration and a conflicting statement relating to the possession of leasehold units.

Upon reviewing the record, the NCLAT found that the declaration in Form No. 18, while admittedly incorrect, was made before the ROC and not before the NCLT. It was also held that the declaration was not material to the process of conversion under the LLP Act, 2008. Sections 58(4)(b) and 58(3) of the LLP Act, read with the Third Schedule, clearly provide that conversion does not affect ongoing legal proceedings, which may continue against the LLP. Therefore, the Tribunal concluded that the declaration, even if wrong, did not attract the offence of perjury under Section 199 IPC, nor could it justify the initiation of prosecution under Section 340 CrPC.

The NCLAT further held that the discrepancy alleged in the affidavit of Mr. Pankaj Gambhir was also misplaced. A plain reading of the affidavit showed no contradiction between his statement that the premises had been “vacated” in 2016 and the counsel’s statement that the premises would be “handed over.” The Tribunal opined that such statements had no material bearing on the validity of the conversion or any element of fraud.

Additionally, the NCLAT emphasised that even if perjury had been committed, the NCLT lacked jurisdiction to order prosecution or impose fines under Section 68 of the IBC. Section 236 of the IBC mandates that only a Special Court designated under the Companies Act has jurisdiction over such offences. Moreover, the order under challenge lacked the essential finding that it was “expedient in the interest of justice” to initiate prosecution, as required under Section 340 CrPC. The Tribunal relied on settled law laid down by the Supreme Court in Chajoo Ram v. Radhey Shyam, Santokh Singh v. Izhar Hussain, and Narendra Kumar Srivastava v. State of Bihar, which stress judicial restraint in initiating perjury proceedings.

The NCLAT also referred to its own earlier decision in Writer Business Services Private Limited and Another v. Ashutosh Agrawala Resolution Professional for Cox and Kings Limited, REEDLAW 2022 NCLAT Del 02519, where it had held that the Adjudicating Authority under the IBC cannot impose fines or act on offences covered under Chapter VII of Part II of the Code. Since no charge under Section 68 IBC was even framed in the application filed by the RP, and the NCLT failed to set out any legal basis for invoking this provision, the conviction and fines imposed were held to be unsustainable in law.

Accordingly, the NCLAT set aside the impugned orders dated 17.05.2021 and 04.08.2021, allowed the appeals, and disposed of all pending applications.

Mr. Sakal Bhushan, Mr. Vasu Bhushan, Mr. Ashish Upadhyaya and Mr. Nipun Bhushan, Advocates, represented the Appellants.

Mr. Yatin Sharma, Advocate, appeared for the Respondent No. 1.

Mr. Rohan T., Ms. Pooja Dhar and Mr. Praful Pratap Singh, Advocates, appeared for Respondent No. 2 to Respondent No. 4.

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