NCLT Chennai Defreezes Karti Chidambaram's Salary & Family Accounts, Partly Relaxes SFIO Freezing Order

On June 19, the Chennai Bench of the National Company Law Tribunal (NCLT) ordered the defreezing of Congress MP Karti P. Chidambaram's salary account and the bank accounts of his family members.

However, it directed that the freeze on his other personal bank accounts, fixed deposits, and movable assets would continue in connection with an ongoing Serious Fraud Investigation Office (SFIO) probe under Section 212(14A) of the Companies Act, 2013.

Judicial Member Jyoti Kumar Tripathi and Technical Member Ravichandran Ramasamy heard Chidambaram's application challenging the interim SFIO order freezing his accounts and assets in relation to Vasan Health Care Private Limited. The Bench held:

“…while the seriousness of an investigation conducted by the Serious Fraud Investigation Office (SFIO) cannot be undermined, the interim measures under Section 212(14A) of the Companies Act 2013, must be invoked only to the extent of safeguard the proceeds proposed to be dispersed to the account of the government”

Chidambaram argued that he had no direct role in Vasan Health Care or Advantage Strategic Consulting Private Limited (ASCPL). He submitted that he held only indirect shareholding in ASCPL for a brief period through Ausbridge Holdings and Investments Private Limited and resigned in 2012, after which he ceased all involvement.

He also contended that the freezing order exceeded its scope and affected not only his accounts but also those of his wife, daughter, mother-in-law, and his company. He stated that the attachment prevented him from meeting essential expenses, including salaries, statutory dues, rent, medical costs, travel, and educational expenses.

The SFIO opposed the plea and alleged that Chidambaram continued to exercise control over ASCPL even after his resignation. It relied on internal communications and financial records to assert that he controlled payments, bank accounts, and asset acquisitions. It further alleged that ASCPL routed unlawful gains of Rs. 48 crore under his direction, making him the ultimate beneficiary.

The Tribunal held that the allegations regarding continued control and routing of funds required adjudication at the final stage. It also held that vacating the freezing order entirely at the interim stage would risk alienation or siphoning of assets and defeat the purpose of Section 212(14A). It held:

“…at this interim stage, completely vacating the freezing order on commercial and personal asset portfolios would risk potential alienation or siphoning of assets, thereby defeating the very purpose of Section 212(14A)”

However, the Bench accepted the contention regarding the salary account. It referred to Sections 3 and 4 of the Salary, Allowances and Pension of Members of Parliament Act, 1954 and held that salary and allowance accounts form part of livelihood and must not remain frozen. It observed:

“…we are of the view that salary and allowance account shall be defrozen as it forms a part of livelihood of the person”

Further, it also recorded that the SFIO agreed to the defreezing of the salary account and directed immediate defreezing to enable him to discharge public duties and meet basic living expenses.

On the accounts of family members, the Members noted that banks froze them only because they linked them to the applicant's PAN and not because of any independent SFIO allegation or action. It held:

“…if any account standing in the name of the Applicant's relatives came to be frozen, the same was solely because such accounts were found by banks to be linked with the Applicant's PAN, and not due to any independent action or allegation by SFIO”

Accordingly, the NCLT directed immediate defreezing of the salary account and the accounts of family members, while it continued the freeze on the remaining bank accounts, fixed deposits, and movable assets pending further orders.

For Applicant: Senior Advocate Sidharth Luthra, Advocates R Sivaraman and Raghav Rajeev Menon

For Respondent: Senior Advocate L Sunderesan and Advocate K.M Anand