TaxTMI 
TaxTMI 
2024 (2) TMI 976
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....t). The petitioner, is represented through 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....
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.... ('KSIDC' for short) which owns 13.4% share of the 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 ....
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....re listed in clauses (a), (b), (c) and (d) of sub-section (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 violat....
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....stage of investigation, it is no law that the appointment of Investigating Officer 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 ....
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....tions on the complaint and also state as to why action should not be taken against the company and its director u/s 12 of the Companies Act, 2013 for non-maintenance of 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 al....
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....WARI) ASST. REGISTRAR OF COMPANIES KARNATAKA" (Emphasis added) The petitioner replies to the same enclosing certain documents with regard to transactions between CMRL and the petitioner. 17. On 01-10-2021, the Competent Authority 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 ....
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....000 17-07-2018 3,24,000 20-09-2018 3,24,000 29-01-2019 3,24,000 06-06-2018 6,48,000 29-10-2018 6,48,000 18-05-2019 6,48,000 03-04-2019 3,24,000 03-10-2018 9,72,000 You are requested to furnish the details of transactions between the company, nature of transaction(s), purpose of the receipt of the amount, agreement or contracts entered into, terms and conditions, interest of the director. (e) Submit partywise break up of 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.....
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....the ROC, Bangalore under the provisions of Section 206(4) of the Companies Act, 2013, which highlighted various violations and offences under the Act while recommending an investigation into the affairs. 3. Whereas, further, on the basis of the report of ROC, Ernakulam submitted to the Central Government, on the complaints, it emerged that either replies furnished by COCHIN MINERALS AND RUTILE LIMITED are vague and evasive in nature, to the allegations or the reply is not furnished by KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED with respect to the notices issued by the ROC on the basis of the complaints. 4. Now, therefore, in exercise of powers 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 af....
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....directly affects public interest and, therefore, it was handed over to SFIO. The decision of assigning the investigation to SFIO on 31-01-2024 reads as follows: "No. SIFO/Inv/AOI/2023-24 Dated January 31, 2024. ORDER The Central Government has ordered (dated 31.01.2024) investigation u/s 212 (1)(a)&(c) of Companies Act, 2013 into the affairs of Exalogic Solutions Private Limited, Cochin Minerals and Rutile Limited and Kerala State Industrial Development Corporation Limited and has assigned the same to Serious Fraud Investigation Office (SFIO). 2. And whereas the officers are required to be designated as Inspectors to carry out the investigation under Section 212(1) and Investigating Officer under Section 212(4) of 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, Sh....
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....t shall be the duty of the company and of its officers concerned to furnish such information or explanation to the best of their knowledge and power and to produce the documents to the Registrar within the time specified or extended by the Registrar: 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 explanat....
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....gistrar or inspector calls for the books of account and other books and papers under Section 206, it shall be the duty of every director, officer or other employee of the company to produce all such documents to the Registrar or inspector and furnish him with such statements, information or explanations in such form as the Registrar or inspector may require and shall render all assistance to the Registrar or inspector in connection with such inspection. (2) The Registrar or inspector, making an inspection or inquiry under Section 206 may, during the course of such inspection or inquiry, as the case may be,- (a) make or cause to be made copies of books of account and other books and papers; or (b) place or cause to be placed any marks of identification in such books in token of the inspection having been made. (3) Notwithstanding anything contained in any other law for the time 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 matter....
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....), the Serious Fraud Investigation Office set up by the Central Government in terms of the Government of India Resolution No. 45011/16/2003- Adm-I, dated 2nd July, 2003 shall be deemed to be the Serious Fraud SFIO for the purpose of this section. (2) The Serious Fraud Investigation Office shall be headed by a Director and consist of such number of experts from the following fields to be appointed by the Central Government from amongst persons of ability, integrity and experience in,- (i) banking; (ii) corporate affairs; (iii) taxation; (iv) forensic audit; (v) capital market; (vi) information technology; (vii) law; or (viii) such other fields as may be prescribed. (3) The Central Government shall, by notification, appoint a Director in the Serious Fraud Investigation Office, who shall be an officer not below the rank of a Joint Secretary to the Government of India having knowledge and experience in dealing with matters relating to corporate affairs. (4) The Central Government may appoint such experts and other officers and employees in the Serious Fraud Investigation Office as it cons....
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....ion, documents and assistance to the Investigating Officer as he may require for conduct of the investigation. (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), offence covered under Section 447 of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless- (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by- (i) the Director, Serious Fraud Investigation Office; or (ii) any officer of the Central Government authorised, ....
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....nvestigation Office to initiate prosecution against the company and its officers or employees, who are or have been in employment of the company or any other person directly or indirectly connected with the affairs of the company. (14-A) Where the report under sub-section (11) or sub-section (12) states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability. (15) Notwithstanding anything contained in this Act or in any other law for the time being in force, the investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by a police officer under Section 173 of the Code of Criminal Procedure, 1973 (2 of 19....
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....tigation into the affairs of the said Company and they are, (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 itself and (c) in public interest. For the purpose of investigation under Section 210, sub-section (3) permits the Government to appoint one or more persons as Inspectors to investigate into the affairs of the Company and to report thereon to the Central Government; Section 211 deals with establishment of Serious Fraud Investigation Office which comes to be established in the year 2015. 20. Section 212 completes the fulcrum of the lis, it deals with investigation into the affairs of a Company by the SFIO, on four circumstances. Investigation can be assigned to the SFIO - (a) on receipt of a report of the Registrar or Inspector under Section 208, as is found in Section 210; (b) on intimation by the Company itself as is found in Section 210; (c) in public interest which is also found in Section 210 and what is in addition is, (d) a request from any department of the Central Government or a State Government to assign investigation to the SFIO. What hap....
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....is created under the Act, i.e., in terms of Section 211 with elaborate functions under Section 212. The protection to any Company from duplication of proceedings is kept tight under sub-section (2) of Section 212 and above all, and after all, it is investigation. 23. A bleak attempt is made by the learned senior counsel to submit that the phrase 'interim report' is found only in sub-section 11 of Section 212, and nowhere in Section 210 suffers from want tenability, as observed hereinabove, the report under Section 210, can either be interim or final. The said report will not result in any penalty being imposed straight away against any Company. It is for the purpose of investigation. Investigation is for the purpose of unearthing the alleged unethical activities of any Company, in the case at hand, the petitioner/Company. The Apex Court, in plethora of cases, has observed that with the advancement of technology, economic offences have become a real threat to the functioning of the financial system of the country. Those offences become a great challenge for Investigating Agencies to detect and comprehend intricate nature of transactions, as also the role of persons involved there....