Government can transfer company investigation to SFIO under Section 212 during ongoing Section 210 proceedings

The Karnataka HC dismissed a petition challenging the transfer of investigation from Section 210 to SFIO under Section 212 of the Companies Act, 2013. The petitioner company argued that SFIO investigation could only commence after a final report under Section 210, not during ongoing proceedings. The HC held that Section 210 reports can be interim or final, and the Government retains statutory power to assign investigations to SFIO at any stage. The court found no statutory violation or arbitrary action, noting that investigation transfer serves public interest in detecting economic offences. Sub-section (2) of Section 212 prevents duplication by mandating cessation of other investigations once SFIO is entrusted. The petition was dismissed as the impugned action was within statutory bounds.

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Issues Involved:
1. Whether the investigation under Section 210 of the Companies Act, 2013 can be transferred to the SFIO under Section 212 during its pendency.
2. Whether the formation of opinion under Section 212 is necessary and if it was formed in this case.
3. Whether the petitioner was served with the order initiating investigation under Section 210 or assigning it to the SFIO under Section 212, and if this constitutes a violation of natural justice.

Summary:

Issue 1: Investigation Transfer from Section 210 to SFIO under Section 212
The petitioner argued that the SFIO could not be assigned the investigation under Section 212 of the Companies Act, 2013 while the proceedings under Section 210 were still ongoing. The Court held that the statute does not render the Government powerless to assign the investigation to SFIO during the pendency of proceedings under Section 210. It was noted that the report under Section 210 could be either interim or final, and if necessary, the investigation could be handed over to SFIO, a multi-disciplinary body created under the Act. The Court found no duplication of investigation or violation of the petitioner's rights, as Section 212(2) mandates that any other investigation shall cease once SFIO is assigned.

Issue 2: Formation of Opinion under Section 212
The petitioner contended that the basis of invoking Section 212 should be the formation of an opinion that it is necessary to have the investigation concluded by SFIO, and that no such opinion was formed in this case. The Court rejected this argument, stating that the interim report from the Inspectors under Section 210 necessitated the assignment to SFIO due to the grave nature of the alleged offences involving Rs. 135 crores. The Court emphasized that the decision to assign the investigation to SFIO was made in public interest and did not suffer from non-application of mind.

Issue 3: Service of Orders and Violation of Natural Justice
The petitioner claimed that they were not served with the order initiating the investigation under Section 210 or the assignment to SFIO under Section 212, constituting a violation of natural justice. The Court dismissed this claim, noting that at the stage of investigation, the principles of natural justice do not mandate that the appointment of an Investigating Officer or the assignment of investigation be made known to the person being investigated. The Court found no statutory aberration in the actions of the Union of India and concluded that the petition did not warrant any interference.

Conclusion:
The Court rejected the petition, upholding the assignment of the investigation to SFIO under Section 212 of the Companies Act, 2013, and found no violation of statutory provisions or principles of natural justice in the process.

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