A Karnataka High Court Single Bench delivered a significant blow to Exalogic, a corporate entity where the Daughter of Kerala CM serves as a director. The court ruled that initiation of an investigation under Section 210 of the Companies Act 2013 doesn’t strip the Government of India of its authority to assign the probe to the Serious Fraud Investigation Office ( SFIO ) under Section 212 of the Companies Act.
The petitioner sought relief from the Karnataka High Court, urging the court to call for records and quash the order dated 31-01-2024 issued by the Director of the Serious Fraud Investigation Office.
Claiming to be a one-person company established in 2014 under the Companies Act, 2013, with the Registrar of Companies, Bangalore, the petitioner filed a petition against Exalogic Solutions Private Ltd. The company had contested the SFIO’s investigation, and Senior Advocate Arvind Datar, representing the petitioner, argued that the inquiry had started after the issuance of a notice under Section 206(4) of the Act, resulting in an order under Section 210.
Exalogic Solutions faced controversy over reports of receiving Rs 1.72 crore from Cochin Minerals and Rutile Ltd between 2017 and 2020. Allegations suggested that the payments were kickbacks routed to the CM’s daughter’s company under the guise of IT services consideration.
The single judge bench of Justice M Nagaprasanna dismissed Exalogic’s petition, emphasizing that the SFIO’s investigation could proceed under Section 212 even during ongoing proceedings under Section 210. It clarified that the powers of the SFIO are determined by statutory provisions, rejecting the argument that the SFIO assignment should follow a final report under Section 210.
The Karnataka High Court highlighted that Section 210 permits either interim or final reports and affirmed the government’s right to entrust the investigation to the SFIO based on emerging information during the Section 210 investigation.
It cited the seriousness of economic offenses and stated that the government’s decision to involve the SFIO cannot be annulled under Article 226 of the Constitution unless it contradicts the statute or is demonstrably arbitrary.
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