2019 (3) TMI 1411 - SC - Indian Laws

Supreme Court validates arrests in jurisdictional error case, emphasizes legal channels over habeas corpus.

Serious Fraud Investigation Office Versus Rahul Modi and Another Etc. And Serious Fraud Investigation Office & Anr. vs. Vivek Harivyasi & Ors.

The Supreme Court allowed the appeals, setting aside the High Court's order and directing the writ petitioners to surrender before the Special Court, ... Extension of time for completing investigation and submission of investigation report - validity of ex post facto extension granted - Held that:- Under sub-Section (3) where the investigation is so assigned by the Central Government to SFIO, the investigation must be conducted in the manner and in accordance with the procedure provided in the Chapter and a report has to be submitted to the Central Government within such period as may be specified. This provision contemplates submission of a report within the period as may be specified. The subsequent provisions then contemplate various stages of investigation including arrest under sub-Section (8) and that SFIO is to submit an interim report to the Central Government, if it is so directed under sub Section (11). Further, according to sub-Section (12), on completion of the investigation, SFIO is to submit the “investigation report” to the Central Government. This report under sub-Section (12) may lead to further follow up actions. Under sub-Section (13) a copy of the “investigation report” could be obtained by any concerned person by making an application in that behalf to the Court while under sub-Section (14) on receipt of said “investigation report” the Central Government may direct SFIO to initiate prosecution against the Company. The “investigation report” under sub-Section (12) is to be submitted on completion of the investigation whereas report under sub-Section (11) is in the nature of an interim report and is to be submitted if the Central Government so directs. In the backdrop of these provisions we must now consider whether the period within which a report is contemplated to be submitted to the Central Government under sub-Section (3) is mandatory and what is the scope and extent of such stipulation. It must also be stated here that the provisions of Section 43(2) of 2008 Act do not postulate any such period and the assignment in the present case to SFIO was under the concerned provisions of 2013 Act as well as under 2008 Act. Section 212(3) of 2013 Act by itself does not lay down any fixed period within which the report has to be submitted. Even under sub-Section (12) which is regarding “investigation report”, again there is no stipulation of any period. In fact such a report under sub-Section (12) is to be submitted “on completion of the investigation”. There is no stipulation of any fixed period for completion of investigation which is consistent with normal principles under the general law - sub-Section (2) of Section 213 of 2013 Act does not speak of any period for which the other Investigating Agencies are to hold their hands, nor does the provision speak of any re-transfer of the relevant documents and records from SFIO back to said Investigating Agencies after any period or occurring of an event The very expression “assign” in Section 212(3) of 2013 Act contemplates transfer of investigation for all purposes whereafter the original Investigating Agencies of the Central Government or any State Government are completely denuded of any power to conduct and complete the investigation in respect of the offences contemplated therein. The idea under sub-Section (2) is complete transfer of investigation. The transfer under sub- Section (2) of Section 213 would not stand revoked or recalled in any contingency. If a time limit is construed and contemplated within which the investigation must be completed then logically, the provisions would have dealt with as to what must happen if the time limit is not adhered to. It is well settled that while laying down a particular procedure if no negative or adverse consequences are contemplated for non-adherence to such procedure, the relevant provision is normally not taken to be mandatory and is considered to be purely directory. Furthermore, the provision has to be seen in the context in which it occurs in the Statute. The only logical end as contemplated is after completion of investigation when a final report or “investigation report” is submitted in terms of sub-Section (12) of Section 212. It cannot therefore be said that in the instant case the mandate came to an end on 19.09.2018 and the arrest effected on 10.12.2018 under the orders passed by Director, SFIO was in any way illegal or unauthorised by law. In any case, extension was granted in the present case by the Central Government on 14.12.2018. But that is completely besides the point since the original arrest itself was not in any way illegal - the High Court completely erred in proceeding on that premise and in passing the order under appeal. Appeal allowed - writ petitioners namely Rahul Modi and Mukesh Modi are directed to surrender and remain present on 01.04.2019 at 11.00 a.m. before the Special Court, Gurugram. The Special Court may then consider the matter on merits and whether the accused are required to be remanded to custody. Issues Involved:1. Validity of ex post facto extension granted by the Competent Authority.2. Whether vested rights created in favor of the applicants during the period of no legal sanction render their arrest illegal.3. Whether the High Court can test the correctness, legality, and validity of an order of remand in a habeas corpus proceeding.4. Territorial jurisdiction of the High Court to adjudicate habeas corpus proceedings.Detailed Analysis:1. Validity of Ex Post Facto ExtensionThe Supreme Court examined whether the ex post facto extension granted by the Competent Authority was valid. The Central Government had directed an investigation into the affairs of certain companies and LLPs by the SFIO, specifying a period within which the investigation report had to be submitted. The High Court had found that the arrest of the petitioners after the expiry of the specified period was illegal. However, the Supreme Court held that the stipulation of the period within which the report had to be submitted was directory, not mandatory. The Court emphasized that the legislative scheme did not contemplate any negative consequences for non-adherence to this period, and thus, the mandate for SFIO to investigate did not come to an end with the expiry of the specified period.2. Vested Rights and Legality of ArrestThe Supreme Court addressed whether the rights created in favor of the applicants during the period of no legal sanction rendered their arrest illegal. The High Court had ruled that the arrest of the applicants was illegal due to the lapse of the investigation period. The Supreme Court disagreed, stating that the mandate to investigate by SFIO did not end with the expiry of the specified period, and the subsequent extension granted on 14.12.2018 validated the ongoing investigation and arrests. The Court concluded that the original arrest was not illegal or unauthorized by law.3. Testing Validity of Remand Orders in Habeas Corpus ProceedingsThe Supreme Court analyzed whether the High Court could test the validity of remand orders in a habeas corpus proceeding. The Court referred to established legal principles that the challenge to the legality of detention in habeas corpus proceedings should be based on the legality of detention at the time of the return, not at the initiation of the proceedings. The Court found that the High Court erred in entertaining the habeas corpus petition when there were valid remand orders passed by the Judicial Magistrate and the Special Court, Gurugram. The Court emphasized that the legality, validity, and correctness of remand orders should be challenged through appropriate appellate or revisional forums, not through habeas corpus petitions.4. Territorial Jurisdiction of the High CourtThe Supreme Court considered whether the High Court of Delhi had the territorial jurisdiction to adjudicate the habeas corpus proceedings. The writ petitioners were arrested in Delhi and kept in custody in Delhi, leading to the filing of the writ petitions in the High Court of Delhi. The Supreme Court acknowledged that the High Court of Delhi had jurisdiction to entertain the petitions due to the location of arrest and custody. However, the Court noted that since the accused were produced before a competent court in Gurugram, the High Court of Delhi should not have entertained the challenge. The Court emphasized that the Special Court, Gurugram, was the competent forum to deal with matters under Sections 435 and 436 of the Companies Act, 2013.ConclusionThe Supreme Court allowed the appeals, set aside the High Court's order, and directed the writ petitioners to surrender before the Special Court, Gurugram, for further proceedings. The Court clarified that the mandate for SFIO to investigate did not end with the expiry of the specified period and that the High Court erred in entertaining the habeas corpus petition when valid remand orders were in place. The Court also emphasized the importance of challenging remand orders through appropriate legal forums rather than habeas corpus petitions.