Court invalidates report & SFIO investigation due to Companies Act non-compliance, emphasizes statutory adherence

The court found that the report dated 13.12.2017 submitted by the Registrar of Companies was not valid due to non-compliance with Section 206(4) of the Companies Act, 2013. Despite this, the court treated the report as a notice and directed the petitioner to respond. The order assigning the investigation to the SFIO was deemed invalid as the Central Government failed to form the necessary opinion under Section 210. The court emphasized adherence to statutory provisions and principles of natural justice. The petitioner was directed to respond to the report, and the Central Government was instructed to form an independent opinion. The order dated 07.05.2018 was invalidated, and actions against responsible officials were mandated.

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Issues Involved:
1. Validity of the report dated 13.12.2017 submitted by the Registrar of Companies under Section 208 of the Companies Act, 2013.
2. Validity of the order dated 07.05.2018 passed by the Central Government assigning the investigation of the petitioner to the Serious Fraud Investigation Office (SFIO).
3. Compliance with statutory provisions and principles of natural justice.

Issue-Wise Detailed Analysis:

Issue 1: Validity of the report dated 13.12.2017 submitted by the Registrar of Companies under Section 208 of the Companies Act, 2013.

The petitioner contended that the report dated 13.12.2017 cannot be treated as a report under Section 208 unless it is preceded by an inspection or enquiry as provided under Sections 206 and 207. The report contained new allegations and was not served on the petitioner, violating principles of natural justice. The respondents argued that the report was in continuation of an earlier report dated 12.01.2016, and no fresh inspection or enquiry was required.

The Court noted that Section 206(4) mandates issuance of notice and opportunity of hearing, which was not complied with in the report dated 13.12.2017. The report contained new allegations, and the petitioner was not provided with a copy until directed by the Court. The failure to comply with Section 206(4) vitiates the report, but considering the serious allegations, the Court treated the report as a notice under Section 206(4) and directed the petitioner to file a detailed explanation.

Issue 2: Validity of the order dated 07.05.2018 passed by the Central Government assigning the investigation of the petitioner to the SFIO.

The petitioner argued that the order dated 07.05.2018 was passed without forming an opinion as required under Section 210, and it was based on the report dated 13.12.2017, which was not valid. The respondents contended that the order was passed after thorough analysis and in public interest.

The Court found that the Central Government did not form the requisite opinion as mandated under Section 210 before passing the order. The order merely relied on the report dated 13.12.2017 without establishing circumstances or material enough for exercising such power. Despite a previous direction from the High Court of Hyderabad to form an opinion, the Central Government failed to comply.

Compliance with statutory provisions and principles of natural justice:

The Court emphasized the importance of following statutory provisions and principles of natural justice. It highlighted that the Registrar of Companies must issue notice and provide an opportunity of hearing before filing a report under Section 208. The Central Government must form an opinion as required under Section 210 before ordering an investigation by the SFIO.

Conclusion:

1. The petitioner shall submit a detailed explanation/objections to the report dated 13.12.2017, treating it as a show cause notice under Section 206(4), within two weeks.
2. The Registrar of Companies shall consider the explanation and submit a consolidated report under Section 208 to the Central Government within two weeks.
3. The Central Government shall form an opinion independently and proceed in accordance with Sections 210 and 212 within three weeks.
4. The order dated 07.05.2018 and the consequential summons do not survive.
5. The respondent authorities shall take action against officials responsible for delays.

The writ petitions were disposed of in these terms.

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