2023 (1) TMI 1300 - SCH - Indian Laws

SC Confirms SFIO's Role in Complex Financial Investigations; Dismisses Appeal, Ensures No Prejudice to Ongoing Case

ANIL HIRALAL SHAH Versus STATE OF RAJASTHAN & ORS

The SC upheld the HC's decision to transfer the investigation to the SFIO, dismissing the petitioner's appeal. The court affirmed that the SFIO could ... Transferring the investigation triggered off by a complaint of Respondent No.3 to the Serious Fraud Investigation Office (SFIO) - generation of funds through forgery and criminal offences - the funds invested in shares of several companies - HELD THAT:- Though the allegations are against individuals, before the High Court, plea of the respondent no.3 was that the accused persons (one of them being petitioner before us) ran several companies and investigation of those companies and other companies of which the accused persons were directors could unfold the truth. It is also the allegation against the accused persons that they are involved in parking of black money and indulging in other illegal activities relating to the share market. Thus, though the allegations are against individuals, they also run several companies and investigation into those companies might be necessary to unravel the illegalities, if any. The regular police force may not be best equipped to deal with offences of this nature. Attention has been drawn to the provisions of subSection(2) of Section 210 of the 2013 Act, which stipulates that where an order is passed by a Court or Tribunal in any proceeding before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation into the affairs of that company. This provision applies to proceedings arising out of complaints of illegalities of corporate entities, and the requirement that it would be for the Central Government to order investigation would not apply to cases of this nature - The SFIO would come within the ambit of power of that Constitutional Court, as an investigating agency, upon whom such direction could be issued. The statutory provisions containing the manner of engaging such agency would not bind the Constitutional Court in issuing directions for investigation to reach at the root of the offences alleged before it. The High Court has given adequate reason for directing investigation by the SFIO and these reasons are not inadequate. Petition dismissed. Issues Involved:Transferring investigation to SFIO; Jurisdiction of SFIO; Authority to direct investigation by specialized agency; Choice of investigating agency for the accused.Transferring Investigation to SFIO:The petitioner's grievance was about transferring the investigation triggered by a complaint to the Serious Fraud Investigation Office (SFIO). The respondent alleged that funds were generated through forgery and criminal offenses, invested in shares of companies, and sought the transfer of investigation to SFIO. The petitioner argued that SFIO can investigate frauds related to companies only, not acts of individuals. However, the court found that the accused individuals ran several companies, and investigating these companies could uncover the truth behind the allegations. It was noted that regular police forces may not be adequately equipped to handle offenses of this nature.Jurisdiction of SFIO:The petitioner contended that SFIO's statutory mandate does not cover investigations related to individuals purchasing shares with funds generated by accused persons. However, the court held that SFIO could investigate offenses beyond corporate entities if directed by a Constitutional Court, provided the agency has the expertise to deal with such offenses. The court emphasized that the SFIO falls within the ambit of a Constitutional Court's power to direct investigations into offenses brought before it, even if the statutory provisions do not specifically mention such cases.Authority to Direct Investigation by Specialized Agency:The court referred to Section 210(2) of the Companies Act, 2013, which mandates the Central Government to order an investigation into a company's affairs based on court or tribunal orders. However, this provision does not apply to cases involving offenses like the present one. The court asserted that a Constitutional Court, even under the Code of Criminal Procedure, can direct investigations by a specialized agency if the agency has the necessary expertise. In this case, the High Court had provided sufficient reasons for directing the investigation by SFIO, which the Supreme Court found adequate.Choice of Investigating Agency for the Accused:The court clarified that an accused individual does not have the right to choose the investigating agency for complaints against them. In the judgment under review, the High Court's reasoning for directing the SFIO investigation was deemed satisfactory, leading to the dismissal of the petitioner's appeal. The court ensured that the dismissal of the petition would not prejudice the petitioner's pending case in the High Court.Conclusion:The Supreme Court declined to entertain the petition, upholding the High Court's decision to transfer the investigation to SFIO. The judgment highlighted the importance of specialized agencies like SFIO in investigating complex financial offenses involving individuals and companies. The ruling emphasized the authority of Constitutional Courts to direct investigations by specialized agencies, irrespective of statutory provisions, to address the specific nature of offenses alleged before them.