NCLT lacks power to order SFIO probes directly; Central Govt referral required for fraud investigations.

The judgment clarifies that the Adjudicating Authority (NCLT) does not have the jurisdiction to directly order an SFIO investigation into fraud or siphoning of funds by a corporate debtor. Instead, the NCLT can refer the matter to the Central Government for consideration. The judgment emphasizes adherence to procedural requirements under the Companies Act and I&B Code, directing the Central Government to appoint Inspectors to investigate, with the option of involving the SFIO based on the investigation findings. The impugned orders directing SFIO investigations into two companies are modified, with the matter referred to the Central Government for proper investigation.

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Issues Involved:
1. Jurisdiction of the Adjudicating Authority to direct the Serious Fraud Investigation Office (SFIO) to investigate fraud or siphoning of funds.
2. Applicability of Section 70 of the Insolvency and Bankruptcy Code (I&B Code) and Section 212 of the Companies Act, 2013.
3. Procedure for investigation into the affairs of a company under Section 213 of the Companies Act, 2013.
4. Role of the Central Government in initiating investigations through Inspectors or the SFIO.

Detailed Analysis:

1. Jurisdiction of the Adjudicating Authority:
The core issue addressed in the appeals is whether the Adjudicating Authority (National Company Law Tribunal, NCLT) has the jurisdiction to direct the SFIO to investigate allegations of fraud or siphoning of funds by a corporate debtor. The judgment clarifies that the NCLT does not have the authority to directly order an investigation by the SFIO. Instead, the NCLT can refer the matter to the Central Government, which then decides whether an investigation by the SFIO is warranted.

2. Applicability of Section 70 of the I&B Code and Section 212 of the Companies Act, 2013:
Section 70 of the I&B Code pertains to the punishment for misconduct during the corporate insolvency resolution process, including failure to disclose or deliver assets or information to the resolution professional. The judgment highlights that any investigation into such misconduct must follow the procedural requirements of the Companies Act, specifically Section 212, which empowers the Central Government to order an investigation by the SFIO based on certain conditions, such as a report from the Registrar or Inspector, a special resolution by the company, public interest, or a request from a government department.

3. Procedure for Investigation under Section 213 of the Companies Act, 2013:
The judgment refers to Section 213 of the Companies Act, which allows the NCLT to order an investigation into a company's affairs if there are circumstances suggesting fraudulent or unlawful conduct. The NCLT must provide a reasonable opportunity for the concerned parties to be heard before making such an order. If the NCLT is satisfied that an investigation is necessary, it can direct the Central Government to appoint Inspectors to conduct the investigation. The Central Government, upon receiving the investigation report, may then decide whether further investigation by the SFIO is required.

4. Role of the Central Government:
The judgment emphasizes the role of the Central Government in overseeing investigations into corporate misconduct. The Central Government, upon receiving a referral from the NCLT under Section 213, can appoint Inspectors to investigate the matter. If the investigation reveals serious misconduct, the Central Government can decide to involve the SFIO. The judgment underscores that the NCLT cannot bypass this procedural framework and directly order an SFIO investigation.

Conclusion:
The judgment modifies the impugned orders dated 24th July 2019 and 26th July 2019, which had directed the SFIO to investigate the affairs of 'Luxury Train Pvt. Ltd.' and 'Zynke Exports Pvt. Ltd.' Instead, the matter is referred to the Central Government for investigation by Inspectors under Section 213 of the Companies Act, 2013. The Central Government will then determine if further investigation by the SFIO is necessary. This procedural adherence ensures that investigations are conducted within the legal framework established by the Companies Act and the I&B Code.

The appeals are disposed of with these observations and directions, ensuring that the investigation follows the proper legal channels. No costs are awarded.

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