NCLT Mumbai Allows MCA Plea To Pursue Milind Patel, Others For Alleged IL&FS Fraud

The National Company Law Tribunal (NCLT) at Mumbai on Thursday allowed the Ministry of Corporate Affairs (MCA) to amend its pending IL&FS mismanagement petition.

The amendment introduces a prayer under Section 339 of the Companies Act, 2013 which permits the Tribunal to hold persons who knowingly participated in fraudulent conduct personally liable to compensate creditors and other victims against Milind Patel and several other individuals named in the SFIO investigation report relating to IFIN.

The tribunal held that the proposed amendment flowed directly from the findings of the Serious Fraud Investigation Office's (SFIO) investigation into IFIN. It also held that the amendment was not barred by limitation.

A Bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar permitted MCA to insert a prayer seeking a declaration that the persons identified in the SFIO report were knowingly parties to the fraudulent conduct of IFIN. MCA has sought a direction requiring them to compensate creditors and other victims of the alleged fraud.

“In view of the above, the present Application is allowed. The Applicant is directed to carry out the amendments in terms of the Schedule annexed within the time prescribed under NCLT Rules, and serve a copy of amended Petition to the Respondents, who shall be at liberty to file additional reply to the amended Petition within four weeks after receipt of copy of amended Petition.”, it ruled. 

The dispute arose from MCA's petition filed in 2018 under Sections 241 and 242 of the Companies Act alleging mismanagement in IL&FS. MCA had also directed the SFIO on September 30, 2018 to investigate the affairs of IL&FS and its subsidiaries.

The SFIO submitted its investigation report relating to IFIN on May 28, 2019. MCA subsequently sought to rely on the report to pursue reliefs against individuals allegedly involved in the fraudulent affairs of IFIN.

Tracing the procedural history, the Tribunal noted that the proposed prayer had earlier been inserted through amendments carried out by MCA. However, the National Company Law Appellate Tribunal (NCLAT) on May 15, 2025 directed its deletion. The appellate tribunal nevertheless granted MCA liberty to file a fresh amendment application.

MCA thereafter moved the present application in June 2025.

On limitation, the Tribunal held that the amendment application remained well within the prescribed period. It excluded the time during which the SFIO report and sanction order were under challenge before constitutional courts. It also excluded the period during which prayer (e) had been upheld by the Tribunal before being set aside by the NCLAT.

“The Applicant has filed the present Application for insertion of prayer (e) in the captioned Petition on 06.06.2025. Upon excluding the aforesaid periods, the present Application is well within the prescribed limitation period, whether computed from 28.05.2019, being the date of submission of the SFIO Investigation Report, or even from 30.09.2018, being the date on which MCA directed the SFIO to investigate the affairs of IL&FS, and is accordingly not barred by limitation.”, it ruled.

The Tribunal further observed that a declaration under Section 339 requires material showing knowledge, participation, collusion or abetment in the alleged fraud.

It held that the role of the individuals against whom the declaration is sought could not have been identified before receipt of the SFIO investigation report.

“There is no quarrel with this proposition, however, it is to be noted that a declaration under Section 339 can only be made after imputing the knowledge and participation or collusion of abetment on the part of persons involved in the commission of Fraud, and it cannot be said that the particulars in relation to the role of persons to whom such knowledge can be attributed were available prior to the receipt of the interim SFIO Report.”, it noted.

Allowing the application, the Tribunal directed MCA to carry out the amendments. It also granted the individuals named in the amended prayer liberty to file additional replies to the amended petition.