TaxTMI 
TaxTMI 
2026 (9) TMI 1386
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.... by the respondent No.1; (c) the writ of certiorari for quashing of above mentioned sanction order; 2. Briefly stating, the facts emerging from record are that a complaint, i.e. complaint No.17/202, has been filed by the Serious Fraud Investigation Office Vs. SRS Ltd. and Ors., hereinafter being referred to as 'SFIO' only. The above mentioned complaint has been filed in the Court of learned Special Judge (designated under the Companies Act 2013), Gurugram, hereinafter being referred to as 'trial Court', only. The above-mentioned complaint has been filed against the petitioner, and his co-accused, under Sections 439(2) read with Section 436(1)(a) and (d) read with proviso to Section 212(6) read with Section 212(14) of the Companies Act 2013, read with Section 621(1) of the Companies Act, 1956. 3. According to complaint the SFIO being a statutory body, constituted and established under Section 211 of Companies Act 2013, launched an investigation into the affairs of 88 Companies of SRS Group, which revealed that the affairs of above-mentioned companies were managed and controlled by seven persons namely 'Anil Jindal', 'Jitender Kumar Garg', 'Praveen Kumar Kapoor', 'Bish....
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....s of the companies were conducted and audit reports prepared. The details of above mentioned audit have been given by the petitioner as under:- Company Financial year Date of Audit report SRS Limited 2010-2011 28.04.2011 2011-2012 30.05.2012 SRS Real Estate Limited 2010-2011 24.08.2011 6. The petitioner further alleged that on 01.08.2018 the Central Government through the Ministry of Corporate Affairs, the respondent No.1 herein, in the exercise of its power under Section 212(14) of Companies Act 2013, hereinafter being referred to as '2013 Act' only, directed the SFIO to investigate into the affairs of 'SRS Limited' and its group companies, which was completed by the SFIO in the year 2021. According to petitioner, based upon the above mentioned investigation report the sanction order dated 10.06.2021, i.e. order No. Legal-35/6/2020, hereinafter being referred to as 'impugned sanction order' only, was issued for filing a complaint against the petitioner and the above mentioned order served as foundation for filing of complaint against the petitioner. As per petitioner on the basis of above mentioned sanction order, the complaint was fil....
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....en Companies Act 2013 came in force. According to petitioner since on the date when 2013 Act came into being, the prosecution against the petitioner was not pending under the old Act, after the enactment of new Act any sanction could not have been issued. As per petitioner, despite above said defect the impugned sanction order has been issued under the old Act, and therefore, it is defective. It has been further pleaded by the petitioner that since the sanction order which is the foundation of summoning order in itself is defective the impugned summoning order, too, is not sustainable in view of maxim Sublato Fundamento cadit opusall (upon a foundation being removed, the superstructure falls) and debile fundamentum fallit opus (when the foundation fails, everything fails). 10. A joint reply to the above mentioned petition has been filed by the respondents. 11. The ground for quashing of impugned sanction order, as well as impugned summoning order, have been denied in toto by the above said respondents. However, it has not been denied that vide order dated 01.08.2018, passed by the Ministry of Corporate Affairs, an investigation was initiated into the affairs of SRS Limited an....
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.... diverted funds amounting to Rs. 645.86 Crore from SRS Group of Companies by way of separate/distinct transactions. Further, the unlawful gain to the family members or Companies of the controller of SRS Group was by way of siphoning-off the public funds from SRS Group of Companies and it was to the tune of Rs. 21.11 Crore after the period 11.09.2013; v) investigation also revealed that the auditors of the SRS Companies had deliberatively suppressed the actual figures & entries in the accounts of the company, and gave wrong, false and misleading statements in the financial statements, knowing it to be false in a material particular and had omitted to state the material facts, knowing to be material to hide the true nature of the financial statements. 13. The respondents have further alleged that in view of evidence collected during the course of investigation by the SFIO it was found that the petitioner and his co-accused have committed offence by resorting to following misdeeds:- i) False statement in balance sheets/books of SRS group of companies [Offences invoked against signatories/directors to the balance sheets - s.448 of the Companies Act, 2013 and/or s. ....
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....d taken by the petitioner, i.e. sanction order under the old act despite the enactment of new act, it has been pleaded by the respondents that in view of Section 465 of the 2013 Act and in view of Section-6 of General Clauses Act, the above mentioned prosecution is not barred. 16. Heard. 17. It has been contended by learned Senior counsel for the petitioner that instant case is a case, wherein the very foundation on basis of which the complaint was filed, resulting into passing of summoning order, is defective, and therefore, in view of maxim Sublato Fundamento cadit opusall (upon a foundation being removed, the superstructure falls) and debile fundamentum fallit opus (when the foundation fails, everything fails), the complaint itself is not maintainable. 18. According to learned Senior counsel for the petitioner, since the very foundation of the prosecution is defective, any subsequent order passed by the learned Special Court, too, is rendered unsustainable, and thus, in the instant case the impugned summoning order dated 16.08.2021 qua petitioner deserves to be quashed. 19. The learned Senior counsel for the petitioner has further contended that the impugned sanction....
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....thirdly, because on the date when impugned sanction order was issued the bar of limitation for the prosecution of petitioner had come into picture. 23. In support of his arguments, the learned Senior counsel for the petitioner has referred to the principles of law laid down by the Hon'ble Supreme Court of India in the case of 'Naresh Kumar Gurjar Vs. Security and Exchange Board of India', 2020 SCC Online Raj 2500, 'Kanya Resorts Pvt. Ltd. & Ors. Vs. Assistant Registrar of Companies' and 'Mahmadhusen Abdulrahim Kalota Shaikh Vs. Union of India', (2009) 2 SCC 1. 24. The above mentioned arguments have been controverted by learned Senior Panel Counsel for the respondents. It has been contended by learned Senior Panel Counsel that the present petition has been filed without any legal basis, and that a ground, which does not legally exist has been tried to be created. According to learned Senior Panel counsel for the respondents in the present case this fact cannot be ignored that for the purpose of investigation, once the order was passed by the Ministry of Corporate Affairs a herculean task was assigned to the SFIO, as the SFIO was supposed to investigate the matter of 88 compani....
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....ioner that the complaint is barred by limitation, it has been contended by the learned Senior Counsel for the respondents that instant case is a case wherein in a very long series of fraudulent acts committed by the companies belonging to SRS Group, the investigation has been conducted, and that during the course of investigation numerous documents were examined which ultimately led to the conclusion that the offence under Sections 439(2) read with Section 436(1)(a) and (d) read with proviso to Section 212(6) read with Section 212(14) of the Companies Act 2013, read with Section 621(1) of the Companies Act, 1956 have been committed by the petitioner and his co-accused. According to learned Senior Panel Counsel for the respondents in view of above mentioned fact-situation instant case is a case, wherein the act of the petitioner, which amounts to an offence, is part of continuing offence, and therefore, the bar of limitation is not attracted in the present case. 27. It has also been contended by the learned Senior Penal Counsel for the respondents that otherwise also as per Section 473 of Cr.P.C., if the Court is satisfied on the facts and circumstances of the case that the delay....
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.... petitioner. Thus, it is hereby ordered that the petitioner is entitled to receive the copy of sanction order dated 10.06.2021. 32. The point of determination No.1 is hereby answered accordingly in favour of petitioner. Point No.2: 33. With regard to this point there are two components which needs to be taken into consideration: i) that act allegedly committed by the petitioner is the part of a long series of findings, wherein by manipulating various documents, offences were committed by the persons belonging to SRS Group of companies in various capacities. Thus, being a part of long chain of events, spanning into number of years, at this stage, when the prosecution/complainant/respondent No.1 is, yet, to lead evidence and prove the proximity and link of the petitioner with the commission of crime, it is not possible to determine as to whether the alleged act of the petitioner was part of the same series of acts or it was an isolated act. The former situation will not invite the bar of limitation, whereas later one will; ii) whether the act attributed to the petitioner formed an integral part of the offence committed by SRS Group, or it was an act which c....
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....on such material facts and evidence collected during the investigation. Even such application of mind does not appear from the order of sanction, extrinsic evidence may be placed before the court in that behalf. While granting sanction, the authority cannot take into consideration an irrelevant fact nor can it pass an order on extraneous consideration not germane for passing a statutory order..." 38. With regard to similar situation the principles of law has been propounded by the Hon'ble Supreme Court of India in the case of 'Dinesh Kumar (supra)' also. The Hon'ble Supreme Court of India, in the above mentioned case, has refused to quash the prosecution at initial stage, while holding that illegality and validity of impugned sanction order for prosecution cannot be determined at initial stage. In the above mentioned case the opportunity was accorded to the petitioner to raise issues regarding illegality and validity of sanction order during the course of trial. 39. With regard to above, in the case of 'Parkash Singh Badal and another Vs. State of Punjab and others' 2007(1) RCR (Criminal) 1, the Hon'ble Supreme Court has observed that "there is a distinction between the absen....
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....ion of funds u/s. 447 of the Companies Act, 2013 Prosecution as proposed by SFIO against the persons/entities specified in the report for the relevant period is sanction. 2A Form & content of financial statements not giving True & Fair View of the affairs of the 8 companies who availed loan facilities, public deposits and received advance against booking of real estate projects. u/s. 209, 211, 217, 628 of the Companies Act, 1956 and u/s 128, 129, 134, 448 r/w 447 of Companies Act, 2013 Prosecution as proposed by SFIO against the persons/entities specified in the report for the relevant period is sanction. 2B Form & content of financial statements not giving True & Fair View of the affairs of the companies. u/s. 209, 211, 217, 628 of the Companies Act, 1956 and u/s 128, 129, 134, 448 r/w 447 of Companies Act, 2013 Prosecution as proposed by SFIO against the persons/entities specified in the report for the relevant period is sanction. 3 Fraudulent representation before banks for obtaining credit facilities u/s. 36(c) r/w Section 447 of the Companies Act, 2013 Prosecution as proposed by SFIO against the persons/entities specified in the report....
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....Gurjar (supra)', wherein it has been held that 'the petitioner further wants the Court to ignore the effect of provisions of Section 465 of the Companies Act, 2013 providing for "repeal and savings", although brought in effect from 30.01.2019. Section 465 saves only those proceedings before authorities or prosecution before Court, which are already filed under the repealed Act and are pending before 30.01.2019. What the petitioner seeks is that dehors the now applicable provisions of Section 465 of the Companies Act, 2013, this Court shall issue directions to the Respondent SEBI thereby permitting initiation of proceedings for adjudication and prosecution for contraventions of the provisions of Part III and IV of the repealed Companies Act, 1956 relating to securities. The same is not permissible in law.' 47. In the case of 'Kanya Resorts Pvt. Ltd. and Ors. (supra)', it has been observed by the Hon'ble Supreme Court of India that 'the Companies Act 1956 was repealed and replaced by Companies Act 2013. Only the cases instituted and pending at the time of commencement of 2013 Act were saved by the 2013 Act. However, all these cases have been instituted only in the year 2017 and th....
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....Court; 2(j) any inspection, investigation or inquiry ordered to be done under the Companies Act, 1956 (1 of 1956) shall continue to be proceeded with as if such investigation or inquiry has been ordered under the corresponding provisions of this Act; 50. With regard to applicability of old act, i.e. the Companies Act 1956, Section 465(3) of the Companies Act 2013, too, is relevant. It provides that "the mention of particular matters in sub-section (2) shall not be held to prejudice the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal of the repealed enactments as if the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) were also a Central Act." 51. The impact/effect of above mentioned provision enshrined in 2013 Act leads to the inference that despite exclusion clause comprised under Sections 465(1) & 465(2) of 2013 Act, the provision of Section-6 of General Clauses Act are applicable. 52. In view of above mentioned provision, it is necessary to look into Section-6 of 'General Clauses Act'. As per Section 6 of 'General Clauses Act'- "where this Act, or any [Central Act] or....
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....orce of that provision. 57. Thus, it is apparent that Section 465 of the 2013 Act had to come in force with effect from the date of notification and the abovesaid notification came into being on 30.01.2019, vide S.O.560(E) dated 30.01.2019. Once Section 465 came into being on 30.01.2019 the chronology of events which unfolded in the present case are very much relevant. It shows that the inspection report of the Registrar of Companies, submitted to the respondent No.1, was submitted on 17.04.2018 and pursuant to above mentioned report on 01.08.2018 the respondent No.1 in the exercise of power under Section 212(1)(a) of 2013 Act directed the SFIO to investigate into the affairs of SRS Limited and its group companies. 58. Thus, it is apparent that the investigation order was passed on 01.08.2018, i.e. before the enforcement of repeal clause enshrined under Section 465 of the 2013 Act. Since on 01.08.2018 the repeal clause itself was not in existence, this plea of the petitioner has got no force that the investigation order has been passed under the old Act after its repeal. Once the investigation order was passed prior to enforcement of repeal clause, enshrined under Section 465....