TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 935
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....ourt is seized of a batch of writ petitions under Article 226 of the Constitution challenging the legality of the orders dated 31 October 2018 and 27 October 2020 of the Union Ministry of Corporate Affairs, authorizing an investigation under the provisions of Section 212 and Section 219 of the Companies Act, 2013 in respect of several corporate entities in the Sahara group. By its interim orders, the High Court stayed the operation, implementation and execution of the above orders. The High Court has also stayed all subsequent action and proceedings initiated in pursuance of those orders "including coercive proceedings and look-out notices" qua the petitioners and their directors, promoters, officers, employees or any other person concerning them. 3 On 31 October 2018, the Government of India in the Ministry of Corporate Affairs, in exercise of its jurisdiction under clauses (a) and (c) of Section 212(1) of the Companies Act 2013 formed an opinion, on the basis of a report dated 14 August 2018 submitted to it by the Registrar of Companies, Mumbai under Section 208, that an investigation was required to be conducted into the affairs of: (i) Sahara Q Shop Unique Products Range Lim....
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....he case may be, the material which has emerged on the record on the basis of which the orders dated 31 October 2018 and 27 October 2020 were issued. In this context, it is submitted that: (i) Section 212(3) of the Companies Act 2013 has expressly been held to be directory in nature by a judgment of this Court in Serious Fraud Investigation Office vs. Rahul Modi (2019) 5 SCC 256 ("SFIO vs. Rahul Modi"); (ii) While staying the investigation directed to be carried out in the order dated 27 October 2020, the Division Bench of the High Court has noted that the six companies are neither subsidiaries nor holding companies of the earlier three companies governed by the order dated 31 October 2018 nor were they managed by the same Managing Director. In coming to this conclusion, the High Court has relied on the provisions of clauses (a) and (b) of Section 219 ignoring the provisions of clause (c) which have specifically been invoked in the order dated 27 October 2020; and (iii) The Union Government while issuing both the orders was acting within its jurisdiction and it would be an improper construction of the statute to postulate that while ordering an investigation, detailed reasons ....
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....n interim direction staying the operation of the two orders dated 31 October 2018 and 27 October 2020 and interdicting all subsequent actions including the issuance of look-out circulars. The High Court does have the power to pass wide-ranging directions in the exercise of its extraordinary jurisdiction. The issue is whether in the facts of the present case, the High Court was justified in issuing such extra-ordinary directions, particularly at the interlocutory stage.. 12 The first reason which has weighed with the High Court in regard to the construction of Section 212(3) is ex facie contrary to the law, as has been laid down by a two judge Bench of this Court in SFIO vs Rahul Modi (supra). While elaborating upon the provisions of Section 212(3), this Court has held that the statute does not contain any specific prescription of time and the reference to the completion of the investigation within a stipulated period is directory and not mandatory. Paragraphs 31 and 34 of the decision are extracted below for convenience of reference: "31. Section 212(3) of the 2013 Act by itself does not lay down any fixed period within which the report has to be submitted. Even under sub-sectio....
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....s accepted, with the transfer of investigation in terms of sub-section (2) of Section 212 the original investigating agencies would be denuded of the power to investigate and with the expiry of mandate SFIO would also be powerless which would lead to an incongruous situation that serious frauds would remain beyond investigation. That could never have been the idea. The only construction which is possible, therefore, is that the prescription of period within which a report has to be submitted to the Central Government under sub-section (3) of Section 212 is purely directory. Even after the expiry of such stipulated period, the mandate in favour of SFIO and the assignment of investigation under subsection (1) would not come to an end. The only logical end as contemplated is after completion of investigation when a final report or "investigation report" is submitted in terms of subsection (12) of Section 212. It cannot, therefore, be said that in the instant case the mandate came to an end on 19-9-2018 and the arrest effected on 10-12-2018 under the orders passed by the Director, SFIO was in any way illegal or unauthorised by law. In any case, extension was granted in the present case....
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....f a company or is accustomed to act in accordance with the directions or instructions of the company or any of its directors. The order dated 27 October 2020 contains a specific invocation of the above provision, when it states thus: "AND whereas SFIO vide letter dated 24th Sept. 2020 sought permission under section 219 of the Companies Act, 2013 for investigation into the affairs of the following six companies that intertwined the activities of the companies under investigation: [...] Now, therefore, in exercise of powers conferred under Section 219 read with section 212 (1) (c) of the Act, the Central Government has formed an opinion that the affairs of the above referred companies/ entities needs to be investigated.." Hence, the finding of the High Court on the above ground to stay the investigation at the interlocutory stage was not warranted. 15 This Court in Neeharika Infrastructure Pvt. Ltd. vsState of Maharashtra and Others 2021 SCC OnLine SC 315 cautioned the High Courts against passing blanket interim orders directing no coercive steps to be taken by the investigating authorities as that might hamper the investigation at an early stage. Having due regard to the ma....