TaxTMI 
TaxTMI 
2022 (1) TMI 134
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....the second respondent/ Director General, Ministry of Corporate Affairs, through its Joint Director in exercise of powers conferred under Section 212(1)(a) and (c) of the Companies Act, 2013 ordered investigation into the affairs of the appellant company, vide Order dated 27.02.2020 and in pursuance of the Order dated 27.02.2020, the investigation officer issued notice dated 16.06.2020 under Section 217 of the Companies Act calling for certain information and vide communication dated 19.06.2020 intimated the appellant company to strictly comply with notice under Section 217 of the Companies Act with default clause. The appellant company preferred a writ petition i.e., W.P.No.5024 of 2020 challenging the Order, dated 27.02.2020 passed by the second respondent under Section 212(1) (a) and (c) of the Companies Act, and filed another writ petition i.e., W.P.No.8997 of 2020 challenging the notices dated 16.06.2020 and 19.06.2020, issued under Section 217 of the Companies Act. 4. The facts of the case further reveal that on 22.11.2019, the National Stock Exchange (NSE) has reported to the Securities and Exchange Board of India (SEBI), the findings of an inspection and forensic audit co....
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.... Provided that where such information or explanation relates to any past period, the officers who had been in the employment of the company for such period, if so called upon by the Registrar through a notice served on them in writing, shall also furnish such information or explanation to the best of their knowledge. (3) If no information or explanation is furnished to the Registrar within the time specified under sub-section (1) or if the Registrar on an examination of the documents furnished is of the opinion that the information or explanation furnished is inadequate or if the Registrar is satisfied on a scrutiny of the documents furnished that an unsatisfactory state of affairs exists in the company and does not disclose a full and fair statement of the information required, he may, by another written notice, call on the company to produce for his inspection such further books of account, books, papers and explanations as he may require at such place and at such time as he may specify in the notice: Provided that before any notice is served under this subsection, the Registrar shall record his reasons in writing for issuing such notice. (4) If the Re....
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....y, 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 the opinion, that it is necessary to investigate into the affairs of a company,- (a) on the receipt of a report of the Registrar or inspector under section 208; (b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or (c) in public interest, it may order an investigation into the affairs of the company. (2) Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation into the affairs of that company. (3) For the purposes of this section, the Central Government may appoint one or more persons as inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct. 212. Investigation into affairs of Company by Serious Fraud Investigatio....
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....ed Assistant Solicitor General appeared in the matter and categorically stated that the respondents will take into account the explanation submitted by the appellant company and shall proceed with the enquiry in accordance with law. The writ petition was disposed of in view of the statement made by the learned Assistant Solicitor General, vide order dated 14.02.2020. 8. The appellant company thereafter requested the respondents vide letter dated 20.02.2020 stating that an opportunity of hearing be granted to the appellant company and as allegedly no response was received, the appellant company preferred another writ petition, i.e., W.P.No.4742 of 2020 and in the aforesaid case, it was brought to the notice of this Court that based upon the Inquiry Report dated 24.02.2020 submitted by the Registrar of Companies, the Office of the Director General has passed an Order dated 27.02.2020 directing investigation into the affairs of the appellant company under Section 212 (1)(a) and (c) of the Companies Act. 9. Aggrieved by the aforesaid order, the appellant company preferred another writ petition, i.e., W.P.No.5024 of 2020. The respondents have also issued notices under Section 217 ....
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....itrary and unconstitutional and consequently set aside the Notice No.SFIO/INV/UNIT-II/11214-223/KSBL/2020/1/ 19889/2020, dated 16/06/2020, Notice No.SFIO/ INV/UNIT-II/1214-1223/KSBL/2020/1/19930/ 2020, (ii) Issue writ of mandamus or any other appropriate writ, order or direction restraining the Respondents and their agents/officers from taking any coercive steps against the petitioner, pending W.P.No.5024 of 2020 before this Hon'ble Court." 11. The learned Single Judge has dismissed the writ petitions by a Common Order dated 26.08.2020 and relevant portion is reproduced as under:- "81. In the light of these allegations, the 5th respondent initiated inquiry under Section 206 of the Act and issued notices and the petitioner also filed a detailed reply dated 03.02.2020 and at during that stage, the 2nd respondent vide order dated 10.01.2020 directed the 5th respondent to conduct full-fledged inquiry under Section 206(4) of the Act and submit report. And this court vide order dated 14.02.2020 directed the respondents to conclude the inquiry under Section 206(1) of the Act by duly taking into consideration the reply submitted by the petitioner on 03.02.2020. Accordi....
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....ted just before AGM i.e., 30.09.2019, the media reports about investor grievances and to protect investors money, this office suggests that the Ministry may consider an investigation into affairs of this company, Karvy group of companies and 9 companies having domain name of karvy.com and having common addresses in UGC records, as mentioned in SEBI order dated 22-Nov-2019 by an appropriate authority in a speedy and efficient manner for better protection of public interest." 83. The above conclusions recorded by the 5th respondent needs no reiteration, and they are self explanatory, and one of the allegations against the petitioner and its group of companies is that, those companies raised loans from the Bank, which is public money, in a fraudulent manner detailed above. Hence, there is sufficient amount of public interest involved in this case. In the light of these conclusions, the 5th respondent recommended for further investigation vide his report dated 24.02.2020. 84. Along with the counter affidavit, respondents filed the minutes of the Oversight Committee meeting held on 25.02.2020. The said minutes disclose that the Committee considering the allegations aga....
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....is no material which can be termed as enough to warrant the exercise of power by the Central Government by resorting to Section 212(1) of the Act of 2013. The facts in the judgment of the Division Bench, are different from the facts of the present case, and hence except for the law laid down therein, it cannot be made applicable. 88. For the foregoing reasons, the issue No.2 is also answered in the affirmative. 89. The other contention of behalf of the petitioner is that as the matter is sub judice by SEBI, the present investigation has to await the result of inquiry by SEBI. 90. In the counter affidavit it is categorically stated that the authorities that deal with the inquiry, inspection or investigation under the Ministry of Corporate Affairs are altogether different and the scope of inquiry and the procedure that would be adopted by another regulator i.e., SEBI, is different, therefore, the case of the respondents is that the contention of the petitioner is incorrect and absolute false. 91. Sub-section (2) of Section 212 of the Act, mandates that where any case bas been assigned by the Central Government to SFIO for investigation under this A....
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....nd the further proceedings as per law. Hence, the investigation and the proceedings thereafter shall be strictly in accordance with law and uninfluenced by observations or findings, if any, made in this order. 95. For the foregoing reasons, the impugned order dated 27.02.2020 is confirmed and the writ petition in W.P.No.5024 is dismissed, and consequently, W.P.No.8997 of 2020, which has been filed challenging the notices issued in pursuance of the impugned order, is also dismissed. 96. Miscellaneous petitions pending, if any, shall stand closed. No order as to costs." 12. The appellant company before this Court while challenging the order passed by the learned Single Judge has raised two grounds:- (i) that no opportunity of hearing as required under Section 206(4) of the Companies Act was granted to the appellant company; and (ii) the Central Government has not formed any opinion keeping in view Section 210 of the Companies Act for directing investigation into the affairs of the appellant company. 13. In respect of the first ground of not conducting an inquiry and not providing an opportunity of hearing to the appellant company as required under Section 206(....
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.... the Order passed by the learned Single Judge. 17. Much has been argued by the learned counsel for the appellant company that no opinion was formed by the Central Government as required under Section 210 of the Companies Act. In this context, it is relevant to reproduce the Order dated 27.02.2020 passed by the respondent No.2/Office of the Director General, Ministry of Corporation Affairs, is reproduced as under:- "Government of India Ministry of Corporate Affairs Office of Director General No.07/341/2015-CL.II (SER) Kota House Annexe, 1, Shahjahan Road, New Delhi - 110 011 Dated: 27.02.2020 ORDER Whereas the Central Government is empowered under Section 212 of the Companies Act, 2013 to order investigation into the affairs of any company in Public Interest and to appoint one or more competent persons as inspectors to investigate the affairs of the company. 2. AND where as ROC, Hyderabad through RD (SER) has submitted Inquiry Report dated 24.02.2020 to the Central Government under Section 208 of the Companies Act, 2013 and recommended investigation into the affairs of the Karvy Stock Broking Limited (KSBL), its Group of Companies and ....
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....of this Court in the Medak Diocese of Church of South India Trust Association v. the Union of India 2017 SCC OnLine Hyd 388 : 2018 (1) ALT 260. The Order impugned in the aforesaid case is reproduced as under:- "Whereas the Central Government is empowered under section 212 of the Companies Act, 2013 to order investigation into the affairs of any company and to appoint one or more competent persons as Inspectors to investigate the affairs of the company. 2. And whereas RoC (Chennai)/RD, Southern Region, vide their report dated 2nd June, 2016 submitted to the Central Government Under section 208 of the Companies Act, 2013 has also recommended investigation into the affairs of the company i.e., M/s. Church of South India Trust Association. 3. Now, therefore, in exercise of powers conferred under section 212 (1)(a) of the Companies Act, 2013 the Central Government hereby orders investigation into the affairs of M/s. Church of South India Trust Association, to be carried out by the Serious Fraud Investigation office. 4. The Inspectors appointed by Director, SFIO to investigate into the affairs of the above mentioned company, shall exercise all the powe....