TaxTMI 
TaxTMI 
2021 (2) TMI 257
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....nt case will serve as a curtain-raiser bringing to the fore as to how non-compliance of statutory procedure by the authorities, who are bound to exercise it, resulted in spate of litigations and thereby wasting the precious time in adjudicating the lis in a different form and dimension. Reliefs sought: 2.The writ petitions viz., WP.Nos.25236 of 2018 and 32587 of 2019 have been filed by Church of South India Trust Association, whereas WP.No.25419 of 2018 has been preferred by one Sri Samuel Cornelius, who is the Diocesan Treasurer of Church of South India, Madras Diocese. The reliefs sought in the respective writ petitions are as follows: (i)Issue a Writ of Certiorari calling for the records relating to the order passed by the Government of India, Ministry of Corporate Affairs, New Delhi in File No.07/131/2011/CL-II(SR) dated 07.05.2018 and to quash the same. (ii)Issue a Writ of Certiorari calling for the records pertaining to the order passed by the Government of India, Ministry of Corporate Affairs, New Delhi in File No.07/131/2011/CL-II(SR) dated 07.05.2018 as sought in WP.No.25236 of 2018 and the consequential summons issued by the Investigating Officer v....
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....he Regional Director (SR), Chennai, recommending SFIO investigation, by communication dated 02.06.2016, the Government of India, Ministry of Corporate Affairs, New Delhi (hereinafter referred to as 'the Central Government'), exercising its power conferred under Section 212(1)(a) of the Act, 2013, passed an order on 10.06.2016 to investigate into the affairs of the petitioner / CSITA by the Serious Fraud Investigation Office (SFIO). 4.4 One of the Dioceses of CSI viz., Medak Diocese in Andhra Pradesh filed a writ petition in WP.No.38841 of 2016 before the High Court of Judicature at Hyderabad for the State of Telengana and the State of Andhra Pradesh questioning the aforesaid order dated 10.06.2016 passed by the Central Government and the consequential proceedings and notice served on them. On 16.11.2017, the High Court of Hyderabad disposed of the said writ petition by setting aside the order as well the consequential proceedings and notice issued against the petitioner therein and remitted the matter to the Central Government, for exercise of its jurisdiction under Section 212 of the Act, 2013, basing on the report of the Registrar of Companies, within three weeks from ....
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.... of this Court dated 28.06.2019 passed in WP.Nos.25236 and 25419 of 2018, the petitioner / CSITA was furnished with a copy of the report of the Registrar of Companies, Chennai dated 13.12.2017 filed under Section 208 of the Act, 2013, which is under challenge in the third writ petition viz., WP.No.32587 of 2019. Pleadings of the parties: 5.1 According to the petitioner / CSITA, as the investigation by SFIO is a serious in nature, they cannot be deprived of the copy of the report dated 13.12.2017, based on which, the Central Government in exercise of its jurisdiction conferred under Section 212 of the Act, 2013, ordered SFIO investigation into the affairs of the company. Further, the order dated 07.05.2018 proceeded to state that the same was passed under Section 212(1)(a) and (c) of the Act, 2013, basing on the report of the Registrar of Companies, dated 13.12.2017 under Section 208; however, no inspection was made and no enquiry was conducted under Section 206/ 207, as contemplated; no opportunity of being heard was provided as per Section 206(4); and hence, the said report cannot be treated as a report under section 208. That apart, the order dated 07.05.2018 under Section ....
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.... does not show any fixed assets in the balance sheet filed with the Registrar of Companies and hence, the corporate veil of the CSITA deserves to be pierced. 6.3 The Central Government ordered investigation into the affairs of the petitioner / CSITA by SFIO, on 07.05.2018, after a thorough analysis of the report dated 13.12.2017 submitted by the Registrar of Companies under Section 208, which is in continuance of the earlier report dated 12.01.2016. Moreover, the High Court of Hyderabad, while remitting the matter, directed the Central Government only to reconsider the same afresh in terms of Section 212 of the Act, basing on the report of the Registrar of Companies. Hence, there is no need for a fresh inspection and inquiry under section 206/207 of the Act, 2013. 6.4 Since all the procedural aspects of the Act, 2013, have been complied with by the respondent authorities and reasonable opportunity of being heard was given to the CSITA, none of the civil rights of the petitioner have been affected. 6.5 An order under section 212 for investigation by SFIO is just a preliminary step in the proceedings and the investigation by SFIO is concluded by the submission of the Investi....
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....y impleaded respondents filed their respective counter affidavits. 8.According to the averments made in the counter affidavit filed by the seventh respondent, the writ petition was sworn by one Robert Bruce claiming himself to be the Treasurer of the CSITA, who is not a validly elected Treasurer and as per the order dated 18.11.2016 passed by the National Company Law Tribunal in CP.No.2 of 2016, as confirmed by this Court vide order dated 20.12.2018 in CRP.No.3739 of 2016, he has no locus standi to represent the CSITA and the entire election process is under the investigation of SFIO and hence, the writ petition filed by him on behalf of the CSITA is not maintainable and the same is liable to be dismissed in limini. It is also averred therein that the contents of the affidavit filed in support of the writ petition are not only false averments, but also misleading and fraudulent in nature, besides suppressive of material facts. Therefore, there is urgent need to regulate the affairs of the CSITA so as to ensure proper accountability, transparency and propriety. 9.The eight respondent in his counter affidavit, stated that the CSITA is a company registered under the Companies Ac....
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....on 207 and therefore, the impugned report suffers from error apparent on the face of the record. Adding further, he submitted that the Registrar of Companies does not have powers under Section 208 to recommend the investigation by SFIO. Thus, according to him, the impugned report is liable to be quashed. 11.1 Mr.C.Selvaraj, learned counsel representing the counsel on record for the petitioner in W.P.No.25419 of 2018 submitted that consequent to the order dated 07.05.2018 passed by the Central Government, the impugned summons dated 19.09.2018 came to be issued by the first respondent /SFIO, directing the petitioner to appear for examination and recording of statement under Oath, without disclosing the prior approval of the Central Government in consonance with Section 217(4) of the Act, 2013; a copy of the order dated 07.05.2018 ordering investigation by SFIO, has not been enclosed therein; and hence, the impugned summons is arbitrary, illegal and violative of the principles of natural justice. It is also submitted that since the order dated 07.05.2018 is pertaining to investigation into the affairs of the CSITA by SFIO, the summons sent to the petitioner herein, who is an office....
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....lyani Hospital, which is incorrect in the eye of law. Thus, he totally refuted the comments given by the Registrar of Companies, as there was no specific allegation made against the petitioner. 11.4 The learned counsel further submitted that the letter dated 02.06.2016 arises out of the fresh complaints received by various complainants and the same is not in continuance of the earlier report dated 12.01.2016 and as such, the Registrar of Companies ought to have followed Section 206 and filed another report under Section 208. In other words, in respect of the complaints received after 12.01.2016, the Registrar of Companies has to make enquiry afresh and file another report under Section 208, after complying with Section 206. He also submitted that based on the report dated 12.01.2016, the Central Government ordered SFIO investigation into the affairs of the CSITA, vide order dated 10.06.2016, which was subsequently, set aside by the High Court of Hyderabad by order dated 16.11.2017 in WP.No.38841 of 2016 and the matter was remanded to the Central Government, for exercise of its jurisdiction under Section 212 of the Act, but, the said order was not strictly complied with by the Ce....
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....buttress the said submission, he placed reliance on the following decisions of the Supreme Court: (i)In Barium Chemicals Limited and another v. Company Law Board and Others, [1966 Supp SCR 311 : AIR 1967 SC 295], wherein it was held as follows:- "31. The object of Section 237 is to safeguard the interests of those dealing with a company by providing for an investigation where the management is so conducted as to jeopardize those interests or where a company is floated for a fraudulent or an unlawful object. Clause (a) does not create any difficulty as investigation is instituted either at the wishes of the company itself expressed through a special resolution or through an order of the court where a judicial process intervenes. Clause (b), on the other hand, leaves directing an investigation to the subjective opinion of the government or the Board. Since the legislature enacted Section 637(i)(a) it knew that Government would entrust to the Board its power under Section 237(b). Could the legislature have left without any restraints or limitations the entire power of ordering an investigation to the subjective decision of the Government or the Board? There ....
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....ight of specified grounds for an appointment on their own motion' and that 'they may be trusted not to appoint unless the circumstances warrant it but they will test the need on the basis of public and commercial morality.' There must therefore exist circumstances which in the opinion of the Authority suggest what has been set out in Sub-clauses (i), (ii) or (iii). If it is shown that the circumstances do not exist or that they are such that it is impossible for any one to form an opinion therefrom suggestive of the aforesaid things, the opinion is challengeable on the ground of non-application of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute." (ii) In Swadeshi Cotton Mills v. Union of India, [(1981) 1 SCC 664], wherein it was held as follows:- "58. On the other hand, Shri Nariman submits that the High Court was clearly in error in holding that the satisfaction of the Central Government with regard to the necessity of taking immediate action was not open to judicial review at all. It is emphasised that the very language of the provision shows that the necessity for taking immediate ....
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....id to have been based on any irrelevant or extraneous considerations. In my view, Respondent No.1 has bestowed sufficient attention to the ample material available before it, before passing the impugned order. 62. The ground on which investigation was found to be warranted is 'public interest', within the meaning of the provisions of Section 212 of the 2013 Act. The Black's Law Dictionary, Sixth Edition, defines the expression 'public interest' to mean something in which the public, the community at large, has some pecuniary interest, or some interest by which their legal rights or liabilities are affected. 63. In view of the facts and circumstances as have been elaborated in the preceding paragraphs, the argument that the impugned order be set aside, since no public interest has been made out, is baseless, devoid of merit and thus rejected." 12.2 The learned Additional Solicitor General further submitted that pursuant to the direction of the High Court at Hyderabad, after two rounds of litigation, the order and summons impugned in respective WP Nos.25236 and 25419 of 2018, came to be issued and there is no procedural violation, as alleged b....
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....is no requirement to quash the same. According to him, sufficient materials are available with the Central Government for ordering investigation by SFIO and in the case on hand, the investigation was ordered based on the report forwarded by the Registrar of Companies, under Section 208 and it is a case of agreement between the Registrar of companies and the Central Government. Therefore, the Central Government is deemed to have complied with the requirement of Section 212 and no exception to the order impugned, could be taken. 12.5 Mr.Venkataswamy Babu, learned Central Government Senior Panel Counsel, appearing for the Official respondents submitted that criminal cases have been registered against two of the office bearers of CSITA, on the allegation that they have sold the church property for a throw-away price. Further, he produced a sealed cover containing the noting proceedings relating to the subject company, for perusal of this Court. 13.1 Mr.R.Sreedhar, learned counsel representing the counsel on record for the seventh respondent in WP.No.25236 of 2018 questioned the capacity of C.Robert Bruce, Honorary Treasurer of the petitioner / CSITA in filing the writ petition. H....
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.... copy, the petitioner / CSITA has filed WP.No.32457 of 2017 on 11.12.2017, conveniently omitting the observations made by the Hyderabad High Court in the said order; since the order of the Hyderabad High Court was not challenged, it has become final and binding on the parties. Thus, the materials available on record would disclose that SFIO investigation is very much essential. 13.3 According to the learned counsel, prior to the Act, 2013, the petitioner / CSITA was constituted and hence, any amendment to the Articles of Association has to be made by way of passing a special resolution and the same has to be forwarded to the Registrar of Companies for making necessary entry. In this regard, he drew the attention of this Court to Clauses 4 and 7 of the AoA, dated 05.03.2002; only one PAN is available in the name of CSITA, but it is being used by 24 Dioceses and hence, the funds are routed through the petitioner / CSITA only. 13.4 The learned counsel further submitted that based on the NCLT Order, Justice K.Sampath (Retd.) was appointed as Administrator, against which, a Civil Revision Petition came to be filed, which was dismissed by this Court; subsequently, the Honorary Trea....
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....otect the same under paren patriea jurisdiction. To substantiate the said contention, he referred to the following decisions: (i) Coastal Projects Ltd v. IFCI Limited and another, Delhi High Court, (DB) [LPA.Nos.641 and 642 of 2016 dated 20.12.2018]: "33. The Court has the power while dealing with the matter under the Contempt of Courts Act, to order for an investigation of the matter which comes in the knowledge of the Court regarding any violation, breach of law etc. and such a power stands derived from the Constitution itself, hence the submission of the learned counsel for the appellants that the Court cannot pass any direction for investigation while dealing with the contempt petition is absolutely untenable in law, hence the same is rejected. The impugned order passed by the learned Single Judge, in view of the facts and circumstances of the case, has been passed fully within the precincts of the power of the Court and the direction for investigation by the SFIO into the prima facie allegations which have been referred to in the gist of the report is just and proper." (ii) Court on it's own motion v. UOI, [Jharkhand HIgh Court], 2018 (3) JCR 44:....
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....d in relation to a company in the public interest under Section 212 of the Act of 2013. The present matter relates to involvement of the Concessionaire Company incorporated under the Companies Act and also the instrumentalities of the State i.e. the authorities of the consortium of Banks led by Canara Bank, NHAI and also the State Government. The conspectus of facts and circumstances that have emerged in the matter of execution of such large project with an outlay of Rs. 1654 crores approximately and the manner in which huge advances have been made by the lending bank out of the public exchequer without any commensurate progress of work over a period of about 5 years since it commenced in December 2012, requires an inquiry as to whether its a case of serious fraud which needs to be investigated." (iii) C.K. Rajan vs State of Kerala and Others [AIR 1994 Ker 179]: "... In Sitarama Chetty v. Subramania Ayyar, 39 Mad 700 : (AIR 1917 Mad 551), the Madras High Court, citing Attorney General v Bro-die, (1846) 4 Moo Ind App 190 and Maharanee Shibessoree v. Mothooranath, (1869-70) 13 Moo Ind App 270, held that the High Courts and the mofussil Courts were Courts of....
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.... the general public, we see no reason as to why in a case of mismanagement of such charitable organizations, although run by minorities, the Court cannot oversee its functions. The Courts, indisputably, act as guardian of such societies. [See Guruvayoor Devaswom Managing Committee & Anr. vs. C.K. Rajan & Ors. (2003) 7 SCC 546.] Even otherwise, rights under Articles 25 and 26 of the Constitution are not absolute and unfettered. The right to manage, it goes without saying, does not carry with it a right to mismanage." (vi)Shekh Abdul Kayum v. Mulla Alibhai [ 1963 (3) SCR 623]:- "22. There cannot, in our opinion, be any doubt about the correctness of the legal position that trustees cannot transfer their duties, functions and powers to some other body of men and create them trustees in their own place unless this is clearly permitted by the trust deed, or agreed to by the entire body of beneficiaries. A person who is appointed a trustee is not bound to accept the trust, but having once entered upon the trust he cannot renounce the duties and liabilities except with the permission of the Court or with the consent of the beneficiaries or by the authority of the trust d....
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....nt, no prejudice would be caused to the petitioner / CSITA. 14.5 It is further submitted that the Medak Diocese of the CSITA challenged the order of inspection under Section 209A of the 1956 Act, passed by the Central Government dated 08.08.2011 by filing a writ petition in Writ Petition No.21343 of 2011, which was dismissed by this Court vide order dated 01.03.2012 and thereafter, inspection had taken place and the report was sent to the Central Government. Immediately, after passing the order, assigning the investigation of the company to the SFIO, the Power of Attorney of the petitioner filed a writ petition before the Hyderabad High Court. The said factum would prove that there were multifarious proceedings by the same petitioner/ CSITA before different forums. In such circumstances, the SFIO investigation has to be ordered and the same has to be monitored by this Court, besides providing sufficient safeguards for such investigation. He also submitted that without prejudice to Section 210, independently under Section 212, the Central Government can act. In this connection, he relied upon the phraseology used in the Section "necessary to investigate" and "opinion of the Centr....
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....ases. 15.1 By way of reply, Mr.G.Masilamani, learned Senior Counsel appearing for the petitioner /CSITA submitted that assuming that the petitioner has committed fraud on this Court, the learned counsel for the respondents 7 and 8 would have sought recalling such order obtained by the petitioner by playing fraud, whereas the same is not the position. In respect of the two writ petitions already filed, one writ petition was not even numbered and another was adjudicated and ultimately, dismissed and hence, the question of fraud does not arise herein. Also, the principle of res judicata cannot be applicable to the facts to the present case. 15.2 The learned Senior Counsel further submitted that as per the provisions of the Companies Act, an inspection or enquiry has to be conducted under Section 206 of the Act, 2013, and recommendation has to be made to the Central Government, on the basis of which, it is the prerogative right of the Central Government to order SFIO investigation; in this case, the impugned report dated 13.12.2017 submitted to the Central Government contained new allegations arising subsequent to the report dated 12.01.2016, for which, inspection and enquiry as ....
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....placed reliance on the decision of the Supreme Court in Mohinder Singh Gill and another v. the Chief Election Commissioner, New Delhi and others [(1978) 1 SCC 405], wherein it was held that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit. Otherwise, an order bad in the beginning may, by the time it comes to Court on account of a challenge, get validated by additional grounds later brought out. Thus, according to the learned counsel, the impugned proceedings do not stand in the eye of law, since it was not complied with the mandatory requirements as laid down in the Act, 2013 and hence, the same are liable to be quashed. 17.This Court has given its thoughtful consideration to the submissions made by all the parties and also carefully and meticulously perused the materials available on record, including the original files circulated by the official respondents. Brief about the Institution: 18.Before proceeding further, it would be appropriate to brief about the Institution. The CSITA is a non-Governmental, public, religious, char....
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....mong other things, but whose operation is now, sought to be tested under the scanner of the Serious Fraud Investigation Office (SFIO) casting a shadow of doubt and suspicion on various aspects of its governance. Thus, it should be concerned about what pollutes the Church of South India today. 19.For the sake of convenience, the factual score that needs to be depicted with necessitous chronology, as presented by the parties, is as follows: • On 08.08.2011, the Ministry ordered inspection for CSITA under Section 209 A (search and seizure) of the Companies Act, 1956. • On 28.08.2012, an inspection report was submitted by the Registrar of Companies, recommending investigation by the SFIO in respect of (i) filing two sets of accounts, one with the Income Tax Department covering all the organization (Individual units / institutions, Dioceses of Church of South India which are either unincorporated body or registered society falling outside the scope and ambit of the Inspection under Section 209A of the Companies Act, 1956; and (ii) members are continuously sending complaints. • On 18.10.2012, the Regional Director sent a letter based upon the abo....
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....dated 02.06.2016 of the Regional Director, Southern Region, Chennai. By order dated 22.02.2018 this Court dismissed the said writ petition as premature, with liberty to challenge the subsequent order in the manner known to law. • The petitioner went on appeal in Writ Appeal No.844 of 2018. While hearing the appeal, the Central Government produced a copy of the order of the Joint Director, New Delhi, in File No.07/131/2011/ CL-II (SR), dated 07.05.2018, in which it was stated that the Registrar of Companies, Chennai, vide its report dated 13.12.2017 has highlighted certain issues, which necessitate the Central Government to order investigation by the SFIO in the public interest against the petitioner. • By judgment dated 18.06.2018, the writ appeal was disposed of, granting liberty to the petitioner to challenge the said report. • Representations dated 01.08.2018 and 09.08.2018 were made requesting a copy of the report dated 13.12.2017. However, the same were not considered. • In the mean while, the petitioner challenged the order dated 07.05.2018 passed by the Central Government under Section 212(a) and (c) of the Act, or....
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....nd purchased properties unauthorizedly and in violation of the bylaws of CSI and in the sale deeds the sale consideration was misrepresented with malafide intention and to defraud the Government of stamp duty. iv. Various hospitals, educational institutions etc. function under the Company spread over five Southern states. Large number of Public avail services of the said institutions and hence, large public interest is involved. RoC has been constantly receiving complaints making serious allegations of mismanagement and misappropriation of funds and properties involving crores of rupees including funds received as donation / contribution from abroad. Hence, the veracity of the complaints needs to be ascertained through an investigation. 3.NOW therefore, in exercise of powers conferred under section 212(1)(a)&(c) of the Companies Act, 2013, the Central Government hereby orders and assigns investigation into the affairs of Church of South India Trust Association (CSITA) to the Serious Fraud Investigation Office (SFIO). 20.2 The challenge made in WP.No.25419 of 2018 is to the impugned summons issued by the Assistant Director (Banking), Investigation, Hyde....
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....a elected representative of the petitioner / CSITA and the same was also recognised by the Registrar of Companies, Chennai and that, a resolution was passed on 21.02.2017 to that effect by the CSITA Committee of Management. It is also submitted that after dismissal order dated 20.12.2018 passed by the Division Bench in CRP.No.3739 of 2016, the order of the NCLT was modified on 08.01.2019 and hence, the said Robert Bruce can very well file the writ petition on behalf of the petitioner / CSITA, whereas the private respondents made repeated complaints against the petitioner raising frivolous allegations. It is further submitted that the office of the petitioner / CSITA is situated at Chennai and hence, the instant writ petition is well within the jurisdiction of this Court. 21.3 It is seen from the typed set filed by the seventh respondent dated 10.01.2018 that in the order dated 18.11.2016 passed in CA.No.12 of 2016 in CP.No.2 of 2016, the National Company Law Tribunal, after detailed discussion, was inclined to dismiss the application in limini on the ground that Dr.Daniel R.Sadananda, Secretary and Robert Bruce, Treasurer, have no locus standi to file the same. While doing so, i....
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....ed to dismiss the writ petition on the technical ground, but is inclined to delve into the matter on merits. Overview of principles of law: 22.For effective adjudication of the present writ petitions, it would be relevant to consider the principles of law enunciated with regard to the provision of sub section (1) of section 212 and other allied provisions, under Chapter XIV of the 2013 Act, which reads as under: "212.Investigation into affairs of company by Serious Fraud Investigation Office - (1) Without prejudice to the provisions of section 210, where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company by the Serious Fraud Investigation Office- (a) on receipt of a report of the Registrar or inspector under section 208; (b) on intimation of a special resolution passed by a company that its affairs are required to be investigated; (c) in the public interest; or (d) on request from any Department of the Central Government or a State Government, the Central Government may, by order, assign the investigation into the affairs of the said company to the Serious F....
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....g carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act or if the grievances of investors are not being addressed, the Registrar may, after informing the company of the allegations made against it by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit after providing the company a reasonable opportunity of being heard: Provided that the Central Government may, if it is satisfied that the circumstances so warrant, direct the Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this sub-section: Provided further that where business of a company has been or is being carried on for a fraudulent or unlawful purpose, every officer of the company who is in default shall be punishable for fraud in the manner as provided in section 447. (5) Without prejudice to the foregoing provisions of this section, the Central Government may, if it is satisfied that the circumstances so warrant, direct inspection of books and papers of a co....
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....f the company disobeys the direction issued by the Registrar or the inspector under this section, the director or the officer shall be punishable with imprisonment which may extend to one year and with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees. (ii) If a director or an officer of the company has been convicted of an offence under this section, the director or the officer shall, on and from the date on which he is so convicted, be deemed to have vacated his office as such and on such vacation of office, shall be disqualified from holding an office in any company." "208. Report on inspection made:- The Registrar or inspector shall, after the inspection of the books of account or an inquiry under Section 206 and other books and papers of the company under Section 207, submit a report in writing to the Central Government along with such documents, if any, and such report may, if necessary, include a recommendation that further investigation into the affairs of the company is necessary giving his reasons in support." "210. Investigation into affairs of company - (1) Where the Central Government is of ....
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.... report in writing to the Central Government along with such documents, if any, and such report may, if necessary, include a recommendation that further investigation into the affairs of the company is necessary. For that, reasons have to be set out. The power of search and seizure vesting in the Registrar adumbrates to section 209. 25. Then comes Section 210, which confers power on the Central Government to order investigation into the affairs of the company either on the report of Registrar or on special resolution passed by a company or in public interest. Further, this section empowers the Court or the Tribunal to order that the affairs of a company ought to be investigated. For the purpose of investigation, the Central Government has the power to appoint inspector(s) and seek report. Section 212 deals with investigation into affairs of the company by SFIO. This power is to be exercised, if the Central Government is of the opinion that it is necessary to investigate into the affairs of a company by the SFIO. That opinion has to be based on the report of the Registrar or Inspector under section 208; or on intimation of a special resolution passed by a company that its affa....
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....SITA has not been served with a copy of the report dated 13.12.2017, which is in violation of the principles of natural justice. Hence, it is prayed to allow the writ petitions by setting aside the report of the Registrar of Companies and the order passed by the Central Government and the consequential summons. 29.On the contrary, the learned Additional Solicitor General appearing for the official respondents contended that the impugned order dated 07.05.2018 was passed after a thorough analysis of the report dated 13.12.2017 submitted by the Registrar of Companies under Section 208, which is in continuance of the earlier report dated 12.01.2016; the High Court of Hyderabad, while remitting the matter, directed the Central Government only to reconsider it afresh in accordance with Section 212 of the Act and accordingly, the Central Government reconsidered the matter afresh based on the report dated 13.12.2017; and there is no violation of the provisions of the Act, 2013 and hence, there is no need for a fresh inspection / enquiry under section 206 or 207. It is also contended that after complying with all the formalities as provided under Section 206, the Registrar filed his rep....
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.... to the sine qua non for action must be demonstrable. It is not reasonable to hold that the clause permits the Government to say that it has formed an opinion on circumstances which it thinks exist. Since existence of circumstances is a condition fundamental to the making of the opinion, when questioned the existence of these circumstances have to be proved at least prima facie. 47. . . . However, by its very title, the investigation under Section 212 by the SFIO ought to be on the basis of the opinion of the Central Government that it is necessary to investigate into the affairs of the company by SFIO. That opinion has to be based on the report of the Registrar or Inspector under Section 208; on intimation of a special resolution passed by a company that its affairs are required to be investigated; in the public interest or; on the request from any department of the Central Government or the State Government. By Section 211, the SFIO is established to investigate frauds relating to a company. It is a very special office and headed by a Director and consists of such number of experts from the field enumerated in subsection (2) of Section 211 to be appointed by the....
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..... It needs to be first established that no order of investigation passed under Section 212 of the Companies Act, 2013 may be challenged on such grounds before examining the veracity of the factual basis of these grounds. To elaborate on the standard of review that courts may exercise in reviewing a decision to order an investigation into the affairs of a company, it is imperative to first understand the character of the ordering authority, nature of investigation that would be conducted and effects of such an investigation on the company. (iii)In Rohtas Industries case (supra), the majority judgment explained the substantial effect that investigations have on Companies in the following words: "It may be noted that before the Central Government can take action under Section 235, certain preconditions have to be satisfied. In the case of an application by members of the company under clause (a) or (b) of Section 235, the same will have to be supported by such evidence as the Central Government may require for the purpose of showing that the applicants have good reasons for requiring the investigation, and the Central Government may, before appointing an Inspector, r....
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....m the pleadings and submissions summarised in the preceding paragraphs that various complaints were received raising allegations against the petitioner / CSITA, which prompted the Central Government to order inspection of the Books of Accounts of the company on 08.08.2011 under Section 209A of the Companies Act, 1956 and the said inspection was conducted and a report pointing out various violations of the provisions of the 1956 Act, was submitted on 29.08.2012 to the Central Government, which inturn, instructed to launch prosecutions against the petitioner and its officers before the Economic Offences Court, Chennai. Subsequently, an inquiry under section 206(4) of the Companies Act, 2013 was conducted on 05.10.2015 and the Registrar of Companies, after completion of the inquiry, filed a report dated 12.01.2016 under Section 208 of the Act, 2013. Based on the same, the Central Government ordered investigation into the affairs of the petitioner by Serious Fraud Investigation Office (SFIO) under Section 212 of the Act, 2013, on 10.06.2016. The said order was challenged in W.P.No.38841/2016 before the High Court of Hyderabad. 32.The High Court of Hyderabad, after detailed analysis,....
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.... In the case on hand, this Court is of the view that the order dated 10.06.2016 of 1st respondent does not reflect forming opinion on the necessity for investigation by SFIO. ....... For the above reasons, it is held that the order impugned in the writ petition does not satisfy the requirements i.e., "is of the opinion", "that it is necessary to investigate" in Section 212(1) of the Act. The order dated 10.06.2016 is set aside and the consequential proceedings dated 02.08.2016 and notice dated 21.09.2016 are also set aside. The matter is remitted to 1st respondent for exercise of its jurisdiction under section 212 of the Act, basing on the report of the Registrar of Companies, within three weeks from the date of receipt of a copy of this order. It is clarified that this Court has not examined the merits of the matter and after perusing the record produced, the issue is remitted back to 1st respondent for reconsideration afresh in accordance with section 212 of the Act. The writ petition is ordered as indicated above. There shall be no order as to costs." 33.Thereafter, the Registrar of Companies, submitted the report dated 13.12.2017, under se....
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....12.01.2016, with an opinion that it is just and necessary that the affairs of the company ought to be investigated by SFIO under Section 212 of the Act, 2013. With regard to the said report, there is no grievance on the side of the petitioner / CSITA, about the compliance of the statutory provisions by the Registrar of Companies. The same was also not questioned in WP.No.38841 of 2016 before the High Court of Hyderabad. Hence, the report dated 13.12.2017 filed by the Registrar of Companies to the Central Government is nothing but a report in continuance of the earlier report dated 12.01.2016. In such circumstances, no fresh inspection / enquiry as contemplated under Section 206 / 207 is warranted. It is also contended that under subsection (4) of Section 206, the jurisdiction of the Registrar of Companies is of suo motu in nature, because if he is satisfied based on the information available with him, or furnished to him, or on a representation by any person that the business of the company is being carried on for a fraudulent or unlawful purposes or not in compliance with the provisions of the Act, or if the grievance of the investors are not being addressed, he is empowered to is....
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....the time of hearing the writ appeal in WA.No.844 of 2018, which was disposed of, along with connected WA.No.1036 of 2018, vide judgment dated 18.06.2018, the relevant passage of which, is usefully reproduced hereunder: "6.On the above background, when the appeals are called today, the learned Additional Solicitor General appearing for the Ministry of Corporate Affairs produced a copy of the order of the Joint Director, Ministry of Corporate Affairs, Government of India, New Delhi-1 in File No.07/131/2011/CL-II (SR) issued in favour of the appellants in which it has been stated that the Registrar of Companies, Chennai vide its Report dated 13.12.2017 highlighted certain issues which necessitate the Ministry to consider ordering investigation in public interest against the appellants. The learned Additional Solicitor General further submitted that without challenging the Report dated 13.12.2017 of the Registrar of Companies, Chennai, approaching this Court by filing the writ petition and writ appeals are not at all maintainable. 7.At this stage, the learned counsel for the appellants submitted that the appellants may be given liberty to challenge the Report of the R....
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....y or by necessary implication excludes the application of principles of natural justice, because in that event the court would not ignore the legislative mandate, the requirement of giving reasonable opportunity of being heard before an order is made, is generally read into the provisions of a statute, particularly when the order has adverse civil consequences which obviously cover infraction of property, personal rights and material deprivations for the party affected. The principle holds good irrespective of whether the power conferred on a statutory body or Tribunal is administrative or quasijudicial. It is equally trite that the concept of natural justice can neither be put in a straitjacket nor is it a general rule of universal application.'' 34.6 In Swadeshi Cotton Mills Vs. Union of India, [(1981) 1 SCC 664] R.S. Sarkaria, J., speaking for the majority in a three-Judge Bench, lucidly explained the meaning and scope of the concept of "natural justice". Referring to several decisions, His Lordship observed thus (SCC p.666; Headnote): "Rules of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not poss....
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....of the case, vitiate the order itself. Applying the same to the facts of the present case, the report filed by the Registrar of Companies on 13.12.2017, without complying with the provisions of section 206, sans merit. However, considering the nature of the allegations raised against the petitioner / CSITA, this Court is not inclined to quash the same, but, in the interest of justice, is inclined to treat the said report as notice under Section 206(4), to which, the petitioner / CSITA shall file its detailed explanation / objections along with documentary evidence, within a given time. Upon receipt of the same, the Registrar of Companies shall also file a consolidated report under section 208 to the Central Government in a time bound manner. Accordingly, the first issue is answered. Issue No.2: 35.As regards the order dated 07.05.2018, passed by the Central Government to investigate the affairs of the petitioner / CSITA by the SFIO, the perusal of which would reveal that the same was passed, without forming an opinion as envisaged under section 210. There is no dispute in regard to the power of the Central Government under Section 212 and its existence. Though it is conten....
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....t, 2013, on the ground that the order does not reflect forming opinion on the necessity for investigation by SFIO under Section 210. Despite the same, the Central Government passed the order dated 07.05.2018 without forming an opinion as envisaged under section 210, but merely relying upon the report dated 13.12.2017. Such attitude on the part of the respondents cannot be countenanced. According to Merriam Webster's Dictionary of Law, the word 'opinion' means - a belief stronger than impression and less strong than positive knowledge. The words 'is of the opinion' 'that it is necessary to investigate' impose a jurisdictional duty on Central Government to form opinion on the necessity of investigation by SFIO. Therefore, in the considered view of this Court, the Central Government is required to form an opinion, as prescribed in the provisions of Section 210 for exercising the power under section 212, as observed by the High Court of Hyderabad. 37.It is a salutary principle of administrative law that an action to be taken in a particular manner as provided by a statute, must be taken, done or performed in the manner prescribed and in no other manner. In....
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....reign contribution received by the company; (xxii)auditors qualification; (xxiii)Illegal exemptions obtained from income tax department; (xxiv)Query on the functioning of CSI Coimbatore Diocese; (xxv)Irregularity in the election of Treasurer in CSI Coimbatore Diocese; (xxvi)procedural lapses in the election of members of CSITA; (xxvii)Irregularity in the election of the Bishop in the CSI Coimbatore Diocese; (xxviii)failure to explain the distribution of power in CSI and CSITA; (xxix)Irregularity in the conduct of election of Bishop- CSI Coimbatore Diocese; (xxx)Illegal sale of property in Coimbatore Diocese; (xxxi)Mismanagement and misappropriation of funds in the CSI Kalyanai Hospital; and (xxxii)Irregularities brought out in the writ petition filed by David Chellaraj. 39.In addition to the above, there are serious other allegations levelled against the petitioner / CSITA during the course of hearing, by the learned counsel for the respondents 7 and 8, who drew the attention of this Court to the voluminous typed set of papers filed by them and their counter affidavits in this regard, which are as follows: (i)The petitioner / CSITA is the organization, which owns and ad....
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....able properties, secured loans, sale of properties, sale consideration, purchase of properties, receipt of foreign contribution, income and expenditure of other Dioceses, units and sub units. (viii)In respect of Kanyakumari Diocese, they have been doing unlawful land sale, mortgaging properties in different banks, illegally withdrawing money from the accounts of the CSITA, leasing properties, etc. Similar unlawful activities have been carried on in CSI Dioceses at Coimbatore. (ix)As per the Memorandum of Articles of Association of the company, all income should go to the charity and shall be declared before the Income Tax Authorities, whereas the company's income was utilised for the personal luxuries tour to international countries and not been declared before the Income tax authorities. (x)Though the value of the properties has been increased from 1947 to 2017, a perusal of the recent sale deeds would disclose that the CSITA company properties sold for far-decreased price after 70 years. (xi)The company has no property list, even though there is a property board and employees for the maintenance of properties. Even after 70 years, the prope....
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....nts. 41.A repeated argument was made on the side of the respondents that there are sufficient materials available on record to order investigation into the affairs of the petitioner by SFIO. Even as per the statute as well as suo motu power, this Court can order such investigation. However, this Court is not inclined to do so, as it is not sitting in appeal over the decision of the Central Government in ordering investigation into the affairs of the company under Section 212(1)(a) and (c) of the Act and scope of this Court under Article 226 of the Constitution of India, with regard to judicial review, is limited to the examination of decision making process and not the decision. 42. At this juncture, it may not be out of place to mention that the petitioner / CSITA is a non-profit company started to do charity and Evangelism. But, the criminal cases numbering more than 40 had already been filed pointing out that some self wanted people hide all information and truth and are illegally doing against the CSITA. Charity was completely driven away. People from different angles are shooting the CSITA company and it finds itself in the midst of activities of illegalities and fraud c....