TaxTMI 
TaxTMI 
2024 (2) TMI 976
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.... its Director - Share Holder. On 28-07-2020, the 2nd respondent/Ministry of Corporate Affairs, Union of India addressed a communication to the petitioner/Company observing that a complaint has been received by it in respect of certain alleged incorrect address mentioned in Form No.10 filed by the petitioner/Company with Registrar. The communication never reached the petitioner. A show cause notice also comes to be issued against the petitioner, invoking Section 12 of the Act for the alleged non-maintenance of the registered office at the address mentioned in Form No.10 filed before the Registrar. The petitioner appears to have given its reply contending that owing to COVID-19 pandemic engulfing the nation, the Company began to work from home and, therefore, the registered office of the petitioner had been shifted. This results in another notice dated 19-08-2020 issued by the Registrar directing the petitioner to file adjudication application under Section 454 of the Act for the alleged non-maintenance of the office. The petitioner then submits an adjudication application before the Registrar who initiates adjudication proceedings against the petitioner for the alleged violation un....
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....he Company which had transaction with the petitioner. 5. Then comes a communication/notice to the Director of the petitioner/Company seeking details of several transactions were sought in respect of certain agreements with CMRL, the notice also indicated that failure of the petitioner to furnish all the details would become open to prosecution under Sections 447 and 448 of the Act. The petitioner is stated to have complied with all the necessities that were demanded in the show cause notice contending that KSIDC was a government Company functioning independently with its Board of Directors and had nothing to do with the family members of the Director of the petitioner/Company. 6. The further averment in the petition is that the petitioner comes to know of a Writ Petition filed before the High Court of Kerala seeking a direction to the Central Government to initiate investigation into the affairs of the petitioner/Company, CMRL and KSIDC. The said writ petition is said to be pending before the High Court of Kerala, at Ernakulum. The petitioner then avers that it comes to know from various media and newspapers that an order under Section 210 of the Act is passed by the 2nd responde....
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....(1) of Section 212. He would submit that Section 210 also has the same conditions for initiation of investigation except clause (d) that is found in Section 212. Therefore, he would submit that in the name of public interest, the 2nd respondent cannot go on assigning investigation, to other entities when there is already an investigation pending under Section 210 of the Act. He would contend that it is gross misuse of power conferred, on the Government of India under the Act. 8.1. The learned senior counsel would further submit that the basis of invoking the power under Section 212 should be formation of an opinion that it is necessary to have the investigation concluded into the affairs of the Company, there is no such opinion formed, in the case at hand, is the emphatic submission of the learned senior counsel. The other submission is that the petitioner is neither served with a copy of the order of the 2nd respondent dated 12-01-2024 ordering investigation under Section 210 of the Act, nor is made aware of the assignment of investigation to the SFIO under Section 212 of the Act. Therefore, the order suffers from violation of principles of natural justice, as well as, malice in ....
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....or assignment thereto should be made known to the person against whom the investigation is sought to be conducted or taken up. Natural justice, at this stage, would not be applicable to the fact situation. He would, therefore submit that the petition has to be dismissed on the ground that it projects no ground for entertaining the petition. 10. The learned senior counsel for the petitioner would join issue to contend that the SFIO was established in the wake of huge scams like the Sahara India or the Jet Airways. It is not a scam in the case at hand, but it is only alleged transactions of Rs. 1.70 crores, at this point in time. He would submit that he would have no objection for continuation of investigation under Section 210 of the Act, but and seeks quashment of investigation entrusted to the SFIO. 11. I have given my anxious consideration to the submissions made by the learned senior counsel and the learned Additional Solicitor General of India appearing for the respective parties and have perused the material on record. 12. The afore-narrated facts are not in dispute. The genesis of the problem is, as narrated hereinabove, but would require a little elaboration, as the issue....
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....registered office at the address specified in the MCA portal, within 10 days hereof." (Emphasis added) The petitioner was directed to offer explanation on the complaint, as to why action should not be taken under Section 12 of the Act for non-maintenance of registered office at the address specified. The petitioner then submits its reply justifying the change of address or no address being maintained on the score that due to the onset of COVID-19 from March, 2020 and in terms of the notification issued by the Government of Karnataka, directing IT companies to work from home, the registered office of the petitioner was shifted to work from home. On 19-08-2020, the office of the Registrar directed the Company to file an adjudication application under Section 454 of the Act for non-maintenance of registered office of the Company. 15. The petitioner then submits an application on 02-09- 2020. Based upon the said application, the Registrar initiated adjudication proceedings for imposition of penalty for alleged violation of Section 12 of the Act. An order of penalty comes about on 09-02-2021 imposing penalty of Rs. 1,00,000/- each upon the Company and its Director for the af....
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....again communicates seeking information under sub-section (4) of Section 206 of the Act directing submission of complete trial balance showing opening balance, debit and credit for the last five years. The communication reads as follows: "No.ROCB/INQ/ARBB/Exalogic/004243/2021/3037, Date: 01-10-2021 To Exalogic Solutions Private Limited (OPC), No.21, 2nd Floor, PID 98-50-21, New No. 020-W0181-40, 1st Main Road, Hebbal Ganganagara Layout, Bangalore-560 032 EK 761014705IN Sir, Sub: Inquiry u/s 206(4) of the Companies Act, 2013 in the matter of EXALOGIC SOLUTIONS PRIVATE LIMITED (OPC) - Reg. Ref: 1) This office letter of even number dated 29.1.2021 2) Your reply dated 22.02.2021 -- With reference to the subject cited, I am directed to state that the trial balance submitted by you alongwith your letter under reference (2) is not proper. You are requested to submit the Complete Trial balance with Opening balance, Debit and Credit and closing balances with all entries yearwise duly certified cy the Statutory Auditors of the company for the last 5 years. 2. Please furnish the Minutes of the Board meetings and General Meetings since incorporation....
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....trade payables and trade receivables as at 31-03-2017, 31-03- 2018, 31.03.2019 and 31-03-2020. (f) Please submit list of employees working in the office since 1-04-2017 and remuneration/salary paid to them (yearwise). The hardcopy of reply to be submitted in 'QUADRUPLICATE' and also send the soft copy (word document) by email. Yours faithfully, Sd/-1/10/2021 (B.BHUVANESWARI) ASST.REGISTRAR OF COMPANIES KARNATAKA" (Emphasis added) In the said communication, transactions between CMRL and the petitioner were highlighted. The receipt of amount and agreement of contracts between CMRL and the petitioner were directed to be furnished. The query was replied to by the petitioner on 17-11-2021 contending that donation of Rs. 1,30,000/- in the financial year 2018-19 was paid to the Chief Minister's Distress Relief Fund and the agreement between CMRL and the petitioner was in subsistence and was sought to be attached to the communication. This, after scrutiny of documents, results in a direction to the petitioner to appear in person before the Registrar. Proceedings go on. On 11-08-2023, on completion of scrutiny of financial statements, several violations are notice....
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....rs conferred under Section 210(1)(c) of the Companies act, 2013 the Central Government has formed an opinion that the affairs of the COCHIN MINERALS AND RUTILE LIMITED (CIN L2429KL1989PLC005452), KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED (CIN U45309KL1961SGC001937) AND EXALOGIC SOLUTIONS PRIVATE LIMITED (OPC) (CIN U72200KA2014OPC076509) are to be investigated. 5. Further, the Central Government is empowered to appoint Inspectors u/s 210(3) of the Companies Act, 2013 to investigate into the affairs of the Company and to submit its report thereon to the Central Government. 6. Accordingly, in exercise of the powers conferred u/s 210(3) of the Companies Act, 2013 the Central Government hereby appoints following Inspectors: Sl.No. Name of the Inspector(s) Designation 1. Shri Varun BS Dy.ROC, Karnataka 2. Shri K.M. Shanker Narayan Dy. Director, O/o RD (Chennai) 3. Shri A.Gokulnath ROC, Puducherry. 7. The Inspector(s) as appointed above, shall exercise all the powers available to them under the provisions of Companies Act, 2013. The Inspector(s) shall complete the investigation and submit the report to the Central Government within 4 months. Thi....
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....f the Companies Act, 2013. 3. Now, therefore, in exercise of powers conferred under Section 212(1) of the Companies Act, 2013, the following Officers are designated as Inspectors to carry out the investigation into the affairs of abovementioned companies and shall exercise all the powers available to them under the Companies Act, 2013. Shri Prasad Adelli, Additional Director, Shri M.Arun Prasad, Dy. Director, Shri K.Prabhu, Sr. AD Shri A.Gokulnath, ROC, Shri KMS Narayan, Deputy Director, Shri Varun, B.S., Dy.ROC. 4. And further in exercise of powers conferred under Section 212(4) of the Companies Act, 2013, Sri M.Arun Prasad, Dy.Director is appointed as Investigating Officer to carry out the above noted investigation. The Inspectors shall exercise all the powers available to them under the Companies Act, 2013. 5. The Inspectors and the Investigating Officer shall complete the investigation and submit their report within eight months to the Central Government. Sd/- (Anuradha Thakur) Director." (Emphasis added) After the assignment to SFIO, a notice is issued on 02-02-2024 to the petitioner to produce several documents, as SFIO has been assigned to in....
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....he 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 made to him by any person that the business of a company is being 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 in....
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....e being in force or in any contract to the contrary, the Registrar or inspector making an inspection or inquiry shall have all the powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in respect of the following matters, namely:- (a) the discovery and production of books of account and other documents, at such place and time as may be specified by such Registrar or inspector making the inspection or inquiry; (b) summoning and enforcing the attendance of persons and examining them on oath; and (c) inspection of any books, registers and other documents of the company at any place. (4)(i) If any director or officer of 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 ha....
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....tral Government may appoint such experts and other officers and employees in the Serious Fraud Investigation Office as it considers necessary for the efficient discharge of its functions under this Act. 5) The terms and conditions of service of Director, experts, and other officers and employees of the Serious Fraud SFIO shall be such as may be prescribed. 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 SFIO- (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 Fraud SFIO and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such inv....
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.... Government authorised, by a general or special order in writing in this behalf by that Government. (7) The limitation on granting of bail specified in subsection (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail. (8) If any officer not below the rank of Assistant Director] of Serious Fraud Investigation Office authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under sections referred to in sub-section (6), he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest. (9) The officer authorised under sub-section (8) shall, immediately after arrest of such person under such subsection], forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed and the Serious Fraud Investigation Offi....
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....ained in this Act, any investigation or other action taken or initiated by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 (1 of 1956) shall continue to be proceeded with under that Act as if this Act had not been passed. (17)(a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Government, police authority, income tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the Serious Fraud Investigation Office; (b) The Serious Fraud Investigation Office shall share any information or documents available with it, with any investigating agency, State Government, police authority or income tax authorities, which may be relevant or useful for such investigating agency, State Government, police authority or income tax authorities in respect of any offence or matter being investigated or examined by it under any other law." (Emphasis supplied) Section 206 deals with power to call for information, inspect books and conduct of inquiries. It is where on a scrutiny of any docum....
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.... Section 212. Any investigation by any agency preceding such assignment will cease to operate. It is on the bedrock of the aforesaid statutory frame work, the issue in the lis needs to be considered. 21. What would unmistakably emerge from what is above analysed is, once investigation has commenced under Section 210, the statute does not render the Government of India powerless, to assign the investigation under Section 212 to the SFIO. It neither results in duplication of investigation, nor takes away any right of the petitioner. Sub-section (2) clearly mandates that once the SFIO is entrusted with investigation under Section 212, any other investigation already initiated shall not be proceeded further and further, those agencies who are/were conducting any investigation, shall transfer all the relevant documents and records in respect of those offences to the SFIO. The powers of SFIO is statutorily determined from sub-section (3) to sub-section (17) of Section 212 and for conduct of investigation there is procedure in place which need not require elaboration at this juncture. 22. The submission of the learned senior counsel for the petitioner is that when the proceedings under....
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....refore, to unearth such intricate or minute details about the transactions it becomes necessary to hand it over to a multi-disciplinary body, like the SFIO. As submitted by the learned Additional Solicitor General, the multidisciplinary body would bring about multi-departmental correspondence to arrive at any finding. Therefore, no fault can be found with the action of the Union of India, in entrusting the investigation to the SFIO. 24. The second submission is that no reasons are provided to invoke Section 212 of the Act and, therefore, it suffers from nonapplication of mind. This is again unacceptable, as this Court is projected with a problem of investigation being handed over. At this stage, application of mind to hand over the investigation, again in the considered view of the Court, need not form part of the said order. The statement of objections are, in defence of interim report necessitating assignment of investigation. If the Union of India has thought it fit to entrust the investigation to the SFIO, owing to certain factors which have emerged while conduct of investigation under Section 210 and in public interest, this Court in exercise of its jurisdiction under Article....