Summary of arguments
ISSUE 2
2. Whether the alleged involvement of a related party in the company’s CSR
implementation amounts to misconduct or fraud?
I. It is submitted to the honourable tribunal that the CSR fund
allocation to Aranyav Foundations, a related -party NGO, is a
misuse of statutory obligations in context of the CSR precedents
and obligations on the basis of Section 135 and Rule 4(1) of the
CSR Rules.
II. The Fiduciary Duties of the Executive Director of KPL are violated by
the conflict of interests, legal basis being Section 166(4) ,
Companies Act of 2013. ₹15 crore was routed to Aranyav NGO,
operated by a relative of KPL’s Executive Director, violating Section
177 and 188 read with Schedule VII which mandates transparent
and arms-length CSR implementation. The NGO's connection with
Simlipal's private real estate retreat in the forest area suggests
misuse of funds and conflict of interest, undermining CSR’s
statutory objectives.
III. The failure to disclose the related-party nexus in the Board’s Report
triggers liability under Section 447 (Fraud) and Section 149(12) for
breach of fiduciary duty
IV. The intent to mislead regulators is shown by internal concealment of
red flags and dissent through redacted minutes, reflecting on a
culture of concealment and requiring justification under Section 212.
On the basis of the Satyam Case precedent, public trust has been
compromised and financial gain obtained through CSR route
warrants an SFIO probe.
Case Law Reference: Lok Prahari v. Union of India (2018) – SC emphasized
public interest in the management of public funds, even by private entities.
ISSUE 3
3. Whether the reliance on third-party consultants can absolve
directors of liability for disclosure-related breaches.
I. Director’s Responsibility : Section 149(12) of the Companies Act
imposes on independent and executive directors for acts of
omission and commission with their knowledge or consent.
Directors cannot delegate their statutory duties under Sections
134 and 135 as reliance on external ESG consultants does not
absolve them of accountability.
II. Obstruction of transparency : The redacted minutes and prior
complaints of the Board meeting by the internal compliance
officer who flagged irregularities highlight cover-up and evidence
the suppression of internal dissent rather than oversight.
III. Wilful ignorance does not amount to evasion of Liability : Section
166(3) of the Companies Act require the directors to act in good
faith exercise due care and diligence and avoid conflict of faith.
Mere engagement of third party/ external consultants cannot
absolve the board, and deliberate ignorance of irregularities or
passive approval of misstatements amounts to dereliction of duty.
Case Law References:
Re: Shree Ram Urban Infrastructure Ltd. – NCLT ruled directors are liable
despite third party involvement where red flags were evident. Regulatory
jurisprudence( SEBI v. PACL Ltd.) affirms that directors bear ultimate
responsibility for public disclosures and corporate governance failures.
ISSUE 4
4. Whether the Ministry of Corporate Affairs’ application under Section
212 is maintainable in the present case.
I. Section 212 authorizes the Centre to launch a probe under
Serious Offence investigation office where a prima facie fraud is
suspected. The MCA’s application satisfies the statutory triggers
under Section 212(1)(a) to (d):
o Public interest ramifications due to market destabilisation and
investor loss.
o Alleged fraud under the Companies Act.
o Evidence from whistleblower leaks and public domain (media
reports).
o Prior SEBI inquiry establishing prima facie case of financial
irregularity.
II. Also, statutory triggers under Section 212© like complexity,
Multilayered transactions, the threshold of involvement of senior
management are also clearly justified.
III. Procedural arguments and objections raised by KPL are meritless
as the leaked documents, supported by satellite imagery and
forest records reveal discrepancies in KPL’s statutory Board report
– a key public document required under Section 134 of the Act,
amounting to “reasonable grounds” that warrant an SFIO probe as
the investigations are based on reasonable grounds and not
conclusive proof.
IV. In Serious Fraud Investigation Office v. Rahul Modi & Ors., (2019)
13 SCC 602, The Supreme Court held that Section 212 is a special
investigative mechanism triggered when complex fraud or public
interest issues are involved. The Court emphasized that the MCA’s
"reason to believe" standard for directing an SFIO probe is
subjective but reviewable, and need not meet the criminal
standard at the preliminary stage. Thus, the MCA need not wait for
conclusive proof before evoking article 212 as whistleblower
evidences supported by objective data are enough to show
“reason to believe” that fraud exists.
ISSUE 5
5. Whether the reputational and financial fallout faced by Kosha Power
Ltd. justifies judicial restraint on further regulatory action at this stage.
I. There is no ground for Judicial restraint as reputational and
financial fallout cannot bar regulatory scrutiny. Regulatory action
must not be stalled due to reputational damage or market
impact. Judiciary restraint is not appropriate in case of evident
statutory violations and cannot be shielded against statutory
consequences.
II. Investor withdrawal and market losses are results of misconduct
by KPL – they cannot be used to insulate the company from legal
scrutiny. Public companies do enjoy market privileges but should
also uphold the trust of the investor. Regulatory action as a result
of compromise on the part of investor’s trust is a corrective
measure. The gravity of misinformation and its cascading impact
is highlighted by the withdrawal of ₹2,017 crore in foreign
investment post-whistleblower disclosures.
III. Allowing such practices to pass without scrutiny would set an
unwanted precedent in the accountability of corporate affairs,
defeating the purpose of SFIO’s existence. The Tribunal’s
obligation is to uphold corporate accountability and
stakeholder confidence, not protect erring entities like the KPL
from the consequences of their actions.
Case Law Reference: Nirma Industries v. SEBI- Market impact cannot
override statutory obligations.
