SFIO not barred from investigating offences under IPC: Delhi High Court [Read Judgment]

NEW DELHI: In a landmark verdict the Delhi High Court has held that the Serious Fraud Investigation Office (SFIO) of the Ministry of Corporate Affairs is not barred from -investigating offences under the Indian Penal Code. It has also decided that the SFIO is not barred from conducting further investigation in accordance with law. 

A single-judge bench of Justice Amit Sharma has passed the order while hearing a writ petition under Article 226 of the Constitution read with Section 482 of the Criminal Procedure Code, 1973 (CrPC) by Bhushan Power & Steel Limited (BPSL) and others.

The plea sought to quash/set aside the Investigation Report dated 06-05-2022 submitted by the SFIO against the companies, and all consequent proceedings emanating therefrom.

Deciding the questions raised, Justice Amit Sharma opined that no separate approval was needed to investigate against Key Managerial Personnel of a company in terms of Section 2(51) of the Companies Act, 2013 (the Act) read with Section 219(d) of the Act. 

The Court also held that the effect of not taking prior approval would not ipso facto render the cognizance taken by a Special Court as invalid.

Background

The Ministry of Corporate Affairs (MCA) in exercise of powers under Section 212 (1)(c) of the the Act had ordered an investigation into the affairs of 15 companies.

Acting on the same the SFIO wing under the MCA appointed/notified a team of inspectors to carry out the investigation. While the same was ongoing, the SFIO sought approval to investigate the affairs of 20 additional companies, in terms of Section 219(c) of the Act, as well as 46 other companies. 

MCA, authorized inspectors of SFIO to investigate affairs of all 66 companies, as sought by SFIO. 

Thereafter SFIO submitted its Investigation Report under Section 212(12) of the Act, and was issued a sanction letter by the MCA directing SFIO to initiate prosecution against the petitioners for offences under the Act.

Following this, SFIO filed a complaint titled Serious Fraud Investigation Office v. Bhushan Airways Services Pvt. Ltd. before a Sessions Court in Delhi.

In the said complaint, Petitioner 1 (RK Gupta) was arrayed for offences under Sections 447, 36(c), 448 read with Sections 447 and 129 of the Act; Sections 417, 420, 120-B of the Penal Code, 1860 (IPC) and Section 211 read with Section 628 of the Act. 

Petitioner 2 was arrayed for commission of offence under Section 447 of the Act. 

Petitioner 3, Decor Investment and Finance (P) Ltd. was arrayed for commission of offences under Sections 417, 420, 120B of the IPC and Section 447 of the Act. 

Judgment

1. Jurisdiction or legal sanction/authority with SFIO to investigate Petitioners 1 and 2 

It was argued that SFIO could carry out an investigation only pursuant to approval or authority granted by the Central Government under Section 212(1) of the Act or after obtaining prior approval in terms of Section 219 of the Act to investigate affairs of related companies. It was also submitted that SFIO had no authority to carry out an investigation qua petitioners who were not named in the MCA orders.

The Court however, held, that once an approval was given under Section 212 of the Act to investigate into the affairs of a company, it would also apply to the Managing Director or manager or employee of the said company. 

The pre-condition of a prior approval under Section 219 of the Act applied to related companies and their Managing Director, Manager or employees as provided for in the said Section. 

It further opined that Petitioner 1, being a Key Managerial Personnel in terms of Section 2(51) of the Act would not need a separate approval for purposes of investigation in terms of Section 219(d) of the Act and the provisions of Section 219(d) of the Act would not cover the case of Petitioner 1.

The Court observed that the companys affairs were investigated into qua Petitioner 2 and the allegation would cover the case of Petitioner 2 under Section 219(c) of the Act. However, the effect of not taking such prior approval would not ipso facto render the cognizance taken qua Petitioner 2 by Special Court as invalid. 

The Court relied on Fertico Mktg. & Investment (P) Ltd. v. CBI, (2021) 2 SCC 525 and opined that defective investigation would not render cognizance taken by the Special Court as invalid. The Court noted that subsequent sanction was obtained from the Central Government before filing the complaint by SFIO in terms of Section 212(14) of the Act. The Court stated that Petitioner 2 was being prosecuted for a single transaction and it was always open for Petitioner 2, during trial, to demonstrate that prejudice leading to miscarriage of justice was caused on account of not obtaining approval under Section 219(c) of the Act. 

2. Powers of SFIO restricted to investigate offences under the Companies Act only 

The Court noted Senior Counsels submission that as per the scheme of the Act as well as the Criminal Procedure Code, 1973 (CrPC), the power of SFIO was limited to carrying out an investigation for offences under the Act only and therefore, investigation and subsequent complaint filed under the various provisions of the IPC was not maintainable. 

The Court further noted petitioners submission that only an officer in-charge of a police station could commence an investigation under the IPC and such a power was not given to any of the officers of SFIO. The Court opined that in the present case, the relevant provisions of the Act as well as the CrPC must be read harmoniously and the Court noted that under Section 438 of the Act, it was provided that the CrPC shall apply to the proceedings before the Special Court.

The Court further noted that Section 4(2) of the CrPC provided that investigation into offences under other statutes, like the present Act, shall be done in accordance with the CrPC unless the statute provided for otherwise and Section 212(15) of the Act provided that an investigation report filed before the Special Court shall be treated as a report filed by a police officer under Section 173 of the CrPC. 

The Court thus opined that the investigation report within the scheme of the Act would be treated as a police report and therefore, the officer filing the said report shall also be considered an officer in charge of a police station, although not specifically provided for in the Act. 

The Court further opined that if power was given to the Special Court under Section 436(2) of the Act to try offences other than those under the Act, then the power of SFIO to investigate into such offences could not be restricted and if the report which was filed was to be treated as a police report under Section 173(2) of the CrPC, then the officer was to be considered to be vested with powers of an officer in charge of a police Station. The Court thus stated that from a conjoint and harmonious reading of the provisions of the CrPC and the Act, it could not be said that SFIO was barred from investigating an offence under the IPC. 

3. Further Investigation by SFIO 

The Court opined that Senior Counsels submission that there could be no further investigation and supplementary chargesheet once an investigation report was filed by the SFIO was not tenable as Section 173(8) of the CrPC clearly provided for further investigation. The Court stated that it did not find any document that showed that after the Special Court had taken cognizance on 20-09-2022, petitioners were asked to join any further investigation by SFIO. The Court thus dismissed and disposed of the present petition.

Cause Title: R. K. Gupta & Ors v Union of India through Ministry of Corporate Affairs & Ors.

[Read Judgment]