2018 (11) TMI 937 - SC - Companies Law

Supreme Court reviews High Court's urgent order, stays release, questions haste

SERIOUS FRAUD INVESTIGATION OFFICE Versus NEERAJ SINGAL AND ANR.

The Supreme Court addressed urgent mentioning and implementation of a High Court order before the scheduled hearing, expressing disapproval of the High ... Offences involving serious financial frauds or economic misdemeano - offences punishable under the Companies Act, 2013 - Constitutional validity of the provisions of the Companies Act, 2013 - Held that:- The observations made in the impugned order may have far reaching consequences and deprive the Competent Authority or the Statutory Authority to proceed in the matter in accordance with the provisions of the Companies Act, 2013 in respect of investigations and including filing of complaint/police report concerning the offences involving serious financial frauds or economic misdemeanor, the impugned order, therefore, deserves to be stayed. We order accordingly. The operation of the impugned order of the High Court is stayed but the interim relief granted to Respondent No.1/Neeraj Singal limited to his release on personal bond shall remain in force during the pendency of these proceedings, subject to the fulfillment of the conditions imposed by the High Court for his release and additionally to report to the concerned officer of SFIO on every Monday and Thursday between 10:30 A.M. to 12:30 P.M. and on such other day or time as directed by the officer concerned. We make it clear that the directions given in the interim order to the appellants [Union of India and Serious Fraud Investigation Office (SFIO)] shall remain stayed in view of the order of stay of operation of the impugned order, in particular, paragraph 71(iv) of the impugned order, namely, Respondent No.1/Neeraj Singal shall not be compelled by the SFIO to sign his statement under Section 217(4) read with Section 217(7) of the Companies Act. We also grant liberty to the appellants to take out a formal application in these proceedings for recall of interim protection or for modification and/or imposing further conditions for the release of Respondent No.1/Neeraj Singal on personal bond. That application will be considered on its own merits. Issues:1. Urgent mentioning and implementation of High Court order before Supreme Court hearing.2. Challenge to the interim order directing release of Respondent.3. Constitutional validity of provisions of the Companies Act, 2013.4. Comparison with provisions of the Prevention of Money Laundering Act, 2002.5. Grant of interim relief by the High Court.6. Consideration of bail under Section 439 Cr.P.C.7. Impact of High Court's observations on investigations and cases under the Companies Act, 2013.8. Stay of High Court order and continuation of interim relief for Respondent.9. Withdrawal and transfer of the writ petition to the Supreme Court.Analysis:1. The Supreme Court addressed the issue of urgent mentioning and implementation of a High Court order before the scheduled hearing. The Court expressed disapproval of the High Court's haste in issuing directions despite the matter being listed for hearing the next day. The Court noted the attempt to preempt the hearing and decided to continue with the appeals due to the potential far-reaching effects on investigations and cases under the Companies Act, 2013.2. The appellants challenged the High Court's interim order directing the release of the Respondent. The High Court's directions conflicted with the jurisdictional magistrate's order sending the Respondent to judicial custody. The substantive reliefs sought by the Respondent included challenging the constitutionality of certain provisions of the Companies Act, 2013 and seeking immediate release through a writ of Habeas Corpus.3. The Court delved into the constitutional validity of the provisions of the Companies Act, 2013, specifically focusing on Sections mentioned in the relief sought by the Respondent. The High Court's consideration of various aspects potentially hindering investigations under the Act was highlighted, raising concerns about the Competent Authority's authority to investigate and file complaints.4. A comparison was drawn between the provisions of the Companies Act, 2013 and the Prevention of Money Laundering Act, 2002. The High Court's grant of interim relief was primarily based on an analogy with a Supreme Court decision regarding bail provisions in the PMLA, indicating potential similar questions for consideration in pending cases before the Supreme Court.5. The Court analyzed the High Court's grant of interim relief to the Respondent and found that the reasons provided were not limited to the validity of specific Act sections or bail issues but extended to impacting investigations and lodging complaints under the Act. The Court refrained from elaborating on the contentions but highlighted the potential consequences of the High Court's order on investigations and statutory procedures.6. The Court discussed the application of bail considerations under Section 439 Cr.P.C., emphasizing that the High Court failed to address critical factors such as the gravity of the alleged offense. Additionally, the Court noted discrepancies in the High Court's order, including recalling observations made in a previous case.7. The Court decided to stay the High Court's order and continue the interim relief for the Respondent, subject to specific conditions. The order aimed to prevent potential hindrances to investigations and statutory procedures under the Companies Act, 2013. The appellants were granted liberty to seek modifications or additional conditions for the Respondent's release.8. Lastly, the Court ordered the withdrawal and transfer of the writ petition to the Supreme Court to be heard alongside related transferred cases, aligning the issues for a comprehensive and consolidated consideration.