In a single judge verdict the Delhi High Court observed that the SFIO is not barred from conducting a further investigation‘ as per provisions of IPC in pursuance of its duties under Section 219 of the Companies Act.
Ministry of Corporate Affairs ( MCA ), in exercise of powers under Section 212(1)(c) of the Companies Act, 2013 ordered an investigation into the affairs of 15 companies named in an order. Serious Fraud Investigation Office ( SFIO ), appointed a team of inspectors to carry out the investigation. During the course of investigation,the SFIO sought approval for investigation into the affairs of 20 additional companies, in terms of Section 219(c) of the Act.
Serious Fraud Investigation Office ( SFIO ) is a statutory corporate fraud investigating agency in India. Initially, it was set up by a resolution adopted by the Government of India on 2 July 2003 and carried out investigations within the existing legal framework under section 235 to 247 of the erstwhile Companies Act, 1956. Later, Section 211 of the Companies Act, 2013, accorded the statutory status to the Serious Fraud Investigation Office ( SFIO ). It is under the jurisdiction of the Ministry of Corporate Affairs, Government of India & primarily supervised by officers from Indian Administrative Service, Indian Police Service, Indian Corporate Law Service, Indian Revenue Service and other Central Services. The organisation has experts from various financial sector domains. The SFIO is mandated to conduct Multi-disciplinary investigations of major corporate frauds.
On 06.05.2022, the Serious Fraud Investigating Officer ( SFIO ) submitted its Investigation Report under Section 212(12) of the Act titled Investigation Report of Bhushan Power & Steel Limited & Others‘. On 19.05.2022, the MCA issued a sanction, directing the SFIO to initiate prosecution against the petitioners for commission of offences under the Act. On the same day, i.e., on 19.05.2022, the SFIO filed a complaint.
In the said complaint, petitioner R.K. Gupta was arrayed as accused for commission of offences under Sections 447, 36(c), 448 read with Sections 447 and 129 of the Companies Act; Sections 417, 420, 120B of the Indian Penal Code, 1860 ( IPC ) and Section 211 read with Section 628 of the Companies Act.
SilverStar Commercial Company Pvt. Ltd. was arrayed as accused for commission of offence under Section 447 of the Companies Act. Decor Investment and Finance Pvt. Ltd. was arrayed for commission of offences under Sections 417, 420, 120B of the IPC and Section 447 of the Companies Act. The Special Judge took cognizance on the aforesaid complaint and issued summons to the assessee(s).
Asseessee(s) contended that SFIO had no authority to carry out an investigation against them, either in terms of Section 212(1) or Section 219 of the Act. Asseesee had contended that SFIO can carry out an investigation only pursuant to approval granted by the Central Government under Section 212(1) of the Act or pursuant to prior approval sought in terms of Section 219 of the said Act. Assessee contended that the power of the SFIO is limited to carrying out an investigation under the Act only and it does not extend to offences under the IPC.
Assessee(s) further contended that they had been arrayed as accused for allegedly committing offences under the Act as well as the IPC. Assessee further contended that as per Section 4 read with Section 154 of the CrPC, the power and the jurisdiction to investigate offences under the IPC only lies with police officer.
Revenue contended that Sections 212 and 219 of the Act operate in different fields. Revenue argued that Section 212 of the Act enables an investigation into the affairs of a company which can lead to the submission of an Investigation Report under Section 212(12) of the said Act and/or prosecution under Section 212(14). Therefore, the inference that can be drawn is that approval under Section 212(1) of the Act is mandatory to commence an investigation into company. Revenue argued that Section 219 enables the SFIO to carry out an investigation into the affairs of any other body corporate, managing director, manager or employee when it is found that such investigation is necessary for the purposes of the investigation into a company in terms of Section 212 of the Act.
Revenue argued that Section 219 of the Act is an ancillary provision and required to be invoked only when an investigation is required to be conducted into a company/individual different from one for which approval has been given in terms of Section 212 of the Act. Revenue further submitted that Section 212(14) of the Act, on directions of the Central Government, empowers the SFIO to prosecute a company and its officers or employees or any other person directly or indirectly connected with the affairs of the company.
Revenue submitted that there is no stipulation for the requirement of a prior approval under Section 212(1) or Section 219 of the Act for investigation into any other person directly or indirectly connected with the affairs of the company. Revenue therefore contended that it would be incorrect to state that prior approval is required for investigating each person, who is sought to be charged.
Single judge of Justice Amit Sharma held that R.K Gupta being a key managerial personnel‘ in terms of Section 2(51) of the Act would not need a separate approval for purposes of investigation in terms of Section 219(d) of the Act. The provisions of Section 219(d) of the Act would not cover the case of the assesse.
The court also held that since the complaint itself reflects that investigations were conducted with respect to the affairs of Silver star, the same would be covered under the provisions of Section 219 of the Act.
“However, the effect of not taking such prior approval would not ipso facto render the cognizance taken with respect to Silver star by Special Court as invalid”, the bench observed.
The court further held that it cannot be said that the SFIO isn’t barred from investigating an offence under the IPC. SFIO is not barred from conducting a further investigation‘ in accordance with law.
The assessee was represented by N. Hariharan, Vashudha Sen, Vineet Wadhwa, Sharian Mukherji, Mueed Shah, Punya Rekha Angara and Prateek Bhalla. Revenue was represented by Amit Tiwari, Chetanya Puri, Nitin Agnihotri, Salman Razi, Upanshu and Nitin Agnihotri.
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