2023 (5) TMI 396 - HC - Companies Law

Court validates Companies Act investigation, dismisses jurisdiction challenge. Petitioners must comply with SFIO summons.

R. Subramanian, P. Augustine, R. Venkataramanan Versus Union of India, Director, Serious Fraud Investigation Office, New Delhi, M.V.K. Reddy, Assistant Director (Investigation), Hyderabad

The court upheld the validity of the supplementary investigation under Section 212 of the Companies Act, 2013, dismissing the petitioners' challenge on ... Supplementary investigation under Section 212 of Companies Act - Summons issued to petitioner but the petitioner failed to appear - case of petitioner is that the supplementary order for investigation has been made without reference to Section 212 (16) of the Act and without jurisdiction; as per the proviso to Section 212 (16) of the Act. The only case of petitioner is that the notice has been issued and investigation is ordered to be done only under Section 235 of the Companies Act, 1956 and not under Section 212 of the Act. HELD THAT:- Admittedly, the Companies Act, 1956 was in force during the year 2010. The corresponding provision that was incorporated in the new Act for Section 235 of the old Act is Section 210. Section 210 of the Act speaks about the investigation into the affairs of the Company on receipt of the report from the Registrar / Inspector under Section 208 of the Act. Section 208 of the old Act states that the Central Government may at the expense of the Company appoint a person to inquire into and report to the Central Government for sanctioning any payment of interest on so much of that share capital as is for the time being paid up, for the period and subject to the conditions and restrictions. But under Section 212 of the Act, it is stated that the investigation into affairs of the Company should be done by SFIO, whenever the Central Government is of the opinion without prejudice to the provisions of Section 212, it is necessary to investigate into the affairs of the Company by SFIO. But in both the cases, action will be taken on the report of the Registrar / Inspector. The petitioners without opting to abide the summons issued under Section 212(4), continues to claim that the correct provision applicable to their case is old Section 235 which is equivalent to Section 210 of the new Act. Such technicalities need not be adverted into at this stage of the proceedings. Since the petitioners have been called upon to give statement in view of the further investigation that has been ordered by the Central Government, it will be appreciable if they could cooperate with the investigation. However, the third respondent can also consider furnishing the copies of essential documents to the petitioners, if they are not secret documents and the interest of justice requires the copies to be furnished upon the petitioners. Since the investigation has already been completed and the complaint has been given and on which, a case is also pending on the file of the Special Court in E.O.C.C.No.2/2018 and for certain reasons, further investigation has also been ordered, it is natural on the part of the petitioners to know the reasons on which further investigation has been ordered. After all they are informations need to be given to the petitioners at any time during the proceedings. If the informations are furnished, no harm will be caused to the proceedings of the Central Government which directed the SFIO to conduct further investigation. The petitioners firmly believe that the action has to be taken only in accordance with Section 210 of the new Act which corresponds to the Section 235 of the old Act and not under Section 212 of the New Act, it is always open to them to appear before the third respondent in compliance of the summons issued to them without prejudice to their above contention. The Criminal Original Petitions disposed off. Issues Involved:1. Jurisdiction and validity of supplementary investigation under Section 212 of the Companies Act, 2013.2. Compliance with summons issued by SFIO under Section 217(8) of the Companies Act, 2013.3. Applicability of Companies Act, 1956 versus Companies Act, 2013 for ongoing investigations.Summary:1. Jurisdiction and Validity of Supplementary Investigation:The petitioners challenged the show cause notices issued by the SFIO, arguing that the supplementary investigation ordered under Section 212 of the Companies Act, 2013 was without jurisdiction. They contended that as per Section 212(16) of the Act, there is a complete bar on any order of supplementary investigation for a company under winding up. The petitioners argued that the investigation should be governed by the Companies Act, 1956, under which the initial investigation was ordered.2. Compliance with Summons Issued by SFIO:The petitioners received multiple summons from SFIO for supplementary investigation but claimed they were not provided with copies of the orders for supplementary investigation. Despite sending replies to each summons, they argued that the summons were repeatedly issued without jurisdiction. The petitioners sought to quash the show cause notices dated 27.01.2021 for non-compliance with the summons, asserting that the summons themselves were illegal.3. Applicability of Companies Act, 1956 versus Companies Act, 2013:The respondents argued that the Companies Act, 2013 replaced the Companies Act, 1956, and the provisions of the new Act apply to ongoing investigations. They contended that under Section 465 of the Companies Act, 2013, any action taken under the repealed enactments is deemed to have been done under the corresponding provisions of the new Act. The respondents maintained that the investigation ordered under Section 212 of the Companies Act, 2013 was valid and the petitioners were obligated to comply with the summons.Court's Observations:The court noted that the investigation had already been completed, and a final report was filed. The petitioners were summoned under Section 212(4) of the Companies Act, 2013 for further investigation. The court emphasized that the petitioners should comply with the summons issued to them and appear before the third respondent. The court also observed that the petitioners' request for copies of certain orders was not unreasonable and suggested that the third respondent consider furnishing the essential documents if they are not secret.Conclusion:The court disposed of the Criminal Original Petitions, directing the petitioners to appear before the third respondent in compliance with the summons without prejudice to their contention regarding the applicability of the Companies Act, 1956. The connected Miscellaneous Petitions were also closed.