TaxTMI 
TaxTMI 
2022 (1) TMI 134
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry 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 conducted by the NSE in respect of the activities o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ficers 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 Registrar is satisfied on the basis of information available with or furnished to him or on a representation ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 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 Inves....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tition 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 of the Companies Act dated 16.06.2020 and 19.06.2020 and against the aforesaid notices, the appellant company preferred another writ petition, i.e., W.P.No.8997 of 2020. 10. Learned counsel for the appellant/petitioner company has vehemently argue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....espondents 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. Accordingly, the 5th respondent, by considering the reply of the petitioner dated 03.02.2020, concluded the inquiry under Section 206(4) of the Act and submitted report dated 24.02.2020, and this court, while considering the first issue, held that initiation of inquiry by Central Government and report submitted by 5th re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 against the petitioner, direction of this court in W.P.No.3143 of 2020 dated 14.02.2020 and the report of the ROC dated 24.02.2020, conveyed its decision to the Central Government recommending investigation into the affairs of the petitioner - company. The decision of the Oversight Committee is extracted as under for ready reference: "8. Decision of Oversi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Act, no other investigating agency of Central Government or the State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceed further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to SFIO. In the light of sub-section (2) of Section 212, the contentio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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(4) of the Companies Act is concerned, the stand of the Union of India is that under Section 208 of the Companies Act, the Registrar or inspector after inspection of books of account, submits a report in writing to the Central Government and such report may, if necessary, include a recommendation for further investigation into the affairs of the company. The aforesaid statutory provision makes it very clear that the Registrar of Companies can forward matter after inspection of books of acco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 9 other companies namely (i) Karvy Consultants Limited, (ii) Wizard Insurance Services Private Limited, (iii) Zenith Insurance Services Private Limited, (iv) Buoyant Insurance Services Private Limited, (v) Nova Wealth Management Services Private Limited, (vi) Vitalink Wealth Advisory Services Private Limited, (vii) Classic Wealth Management Services Private Limited, (viii) Champion Insurance Services Private Limited, (ix) Pelican Wealth Advisory Services Private Limited. 3. Now, therefore, in exercise of powers conferred under Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tral 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 powers available to them under the Companies Act, 2013. The Inspectors shall complete their investigation and submit the report to the Central Government within a period of six (6) months from the date of issue of this order. 5. Further, if any information is required during the course of investigation, you are requested to depute some officer to coordinate with the Ministry for obtaining the desired documents/information. 6. This order is issued for and on behalf of the Central Government. Sd/- (Himanshu Shekhar) Deputy Director" 20. Keeping in view the aforesaid order, it can be safely....