SFIO summons under Section 212 upheld despite ongoing 1956 Act proceedings

The Delhi HC dismissed a petition challenging SFIO summons issued under Section 212 of the Companies Act, 2013. Petitioners argued that since proceedings under the 1956 Act had commenced prior to enforcement of Section 212, SFIO lacked jurisdiction to initiate fresh proceedings. The court held that SFIO, constituted under Section 211 of the 2013 Act, operates as a specialized investigating body distinct from the Union Government's investigative powers under the 1956 Act. The investigation under the old Act applied only to one entity, not all petitioners, therefore the challenge failed.

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Issues Involved:

1. Jurisdiction of SFIO to initiate investigation under Section 212 of the Companies Act, 2013.
2. Validity of proceedings initiated under the Companies Act, 1956 after the enactment of the Companies Act, 2013.
3. Applicability of previous court orders restraining actions under the 2013 Act.
4. Scope of investigation against individual companies versus group companies.

Summary:

1. Jurisdiction of SFIO to initiate investigation under Section 212 of the Companies Act, 2013:
The petitioners challenged the summons issued by SFIO, arguing that since proceedings under the Companies Act, 1956 were initiated before the enforcement of Section 212 of the 2013 Act, the respondents lacked jurisdiction to initiate fresh proceedings under the 2013 Act. The court found that the SFIO, constituted under Section 211 of the 2013 Act, was empowered to investigate frauds relating to companies and that the investigation by SFIO under Section 212 was not trammelled by the continued existence of Sections 234 and 235 of the 1956 Act. The court held that the SFIO's power to investigate was independent and not eclipsed by the 1956 Act.

2. Validity of proceedings initiated under the Companies Act, 1956 after the enactment of the Companies Act, 2013:
The petitioners contended that the provisions of the 1956 Act prevailed until January 30, 2019, and thus, no proceedings under Section 212 of the 2013 Act could have been initiated. The court rejected this argument, stating that Sections 211 and 212 of the 2013 Act came into force on April 1, 2014, and empowered the SFIO to commence investigations. The court clarified that the SFIO's investigation powers under the 2013 Act were not affected by the continued existence of the 1956 Act until its repeal.

3. Applicability of previous court orders restraining actions under the 2013 Act:
The petitioners argued that previous court orders in related litigation restrained the respondents from initiating any proceedings under the 2013 Act. The court found that the earlier orders and judgments pertained specifically to Alchemist Infra Realty Limited (AIRL) and did not extend to other group companies. The court noted that the investigation against AIRL was confined to the 1956 Act, but this did not preclude the SFIO from investigating other group companies under the 2013 Act.

4. Scope of investigation against individual companies versus group companies:
The petitioners claimed that the investigation initiated prior to the enforcement of Section 212 was intended to cover all group companies. The court disagreed, stating that the investigation reports and orders clearly indicated that the investigation was confined to AIRL alone. The court emphasized that the investigation against the group companies commenced only with the order dated December 6, 2018, and the subsequent corrigendum excluding AIRL from the investigation. The court concluded that the investigation under Section 235 of the 1956 Act was specific to AIRL and did not extend to other group companies.

Conclusion:
The court dismissed the writ petition, upholding the jurisdiction of the SFIO to investigate the affairs of the Alchemist Group of Companies under Section 212 of the Companies Act, 2013, and clarifying that the investigation against AIRL was confined to the 1956 Act. All pending applications were disposed of accordingly.

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