High Court Grants Interim Relief Staying Orders Pending Further Hearings

The High Court granted interim relief to the Petitioners by staying the operation of certain orders and subsequent actions. The Court found prima facie merit in the arguments presented, noting violations of statutory provisions and lack of justification for the investigations. Further hearings on the matter were scheduled for 18.01.2022.

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Issues:
Challenge to maintainability of the petition due to pending writ petitions in other courts regarding similar reliefs, violation of statutory mandate in continuing investigation, lack of reason for ordering investigation, legality of investigation into six companies, power of SEBI to investigate, admissibility of statements made before Investigating Officers, and constitutional validity of Section 217(5) of the Companies Act.

Analysis:

1. Maintainability of the Petition:
The Respondents raised a preliminary objection regarding the maintainability of the petition, citing pending writ petitions in other courts. However, the Petitioners argued that those petitions were not filed by them, making the present petition maintainable. The High Court agreed, stating that the present petition challenged specific orders and the constitutional validity of a Companies Act section.

2. Violation of Statutory Mandate:
The Petitioners contended that investigations into certain companies continued beyond the specified period, violating Section 212(3) of the Companies Act. The High Court found prima facie merit in this argument, noting that investigations were ongoing despite the lapse of the stipulated time.

3. Lack of Reason for Ordering Investigation:
The Petitioners highlighted that the orders directing investigations lacked clear reasons or circumstances justifying the Central Government's opinion for the investigations. The High Court observed that the orders did not provide sufficient material for forming an opinion, as required by Section 212 of the Companies Act.

4. Legality of Investigation into Six Companies:
Concerns were raised about the legality of investigating six companies based on an order dated 27.10.2020. The Petitioners argued that these companies had no affiliation with those under investigation earlier. The High Court found prima facie merit in this argument, questioning the justification for initiating investigations against these companies.

5. SEBI's Power to Investigate:
The Petitioners argued that only SEBI had the authority to investigate, not other authorities like the Respondents. Citing legal precedent, they claimed that investigations by the SFIO against the Petitioners were illegal. The High Court noted this argument for further consideration.

6. Admissibility of Statements Before Investigating Officers:
The Petitioners raised concerns about the admissibility of statements made before Investigating Officers under Section 217(5) of the Companies Act. They argued that such statements, obtained under pressure, should not be admissible as evidence. The High Court acknowledged this concern and noted the potential unconstitutionality of Section 217(5).

7. Conclusion:
Considering the arguments presented, the High Court granted interim relief to the Petitioners, staying the operation of the orders dated 31.10.2018 and 27.10.2020, along with subsequent actions and proceedings. The Court found a prima facie case for granting relief based on violations of statutory provisions and lack of justification for the investigations. The matter was scheduled for further hearing on 18.01.2022.

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