2017 (11) TMI 1911 - HC - Companies Law

Validity of impugned order - whether conforms to Section 212 of the Companies Act 2013 or not - HELD THAT - There were no materials in the present case and which can be termed as enough to warrant the exercise of power by the Central Government by resorting to section 212(1) of the Act of 2013. The Central Government in the order under challenge did not spell out any circumstances except outlining its power under the above sections to order investigation into the affairs of a company in public interest. None disputes that power or its existence. In para 2 of the impugned order however a reference is made to the report of the Registrar of Companies West Bengal dated 13th January 2016. We have already held that the findings in this report are not enough for the Central Government to exercise the drastic power. Something more was required and to be established as circumstances or material enough for exercise of the power. That is clearly lacking in this case. The petitioner is not challenging the jurisdiction or authority of 1st respondent to order investigation by SFIO. Therefore the procedure followed by the 1st respondent alone is examined in this writ petition. According to Merriam Websters Dictionary of Law the word opinion means a belief stronger than impression and less strong than positive knowledge Therefore the 1st respondent is required to form an opinion i.e. something more than mere re-telling of gossip or hearsay and reflects judgment or belief resulting from what one thinks on a particular question. Such belief or conviction is manifested by 1st respondent in ordering investigation by SFIO - In the case on hand this Court is of the view that the order dated 10.06.2016 of 1st respondent does not reflect forming opinion on the necessity for investigation by SFIO. The order impugned in the writ petition does not satisfy the requirements i.e. is of the opinion that it is necessary to investigate in Section 212 (1) of the Act - the order is set aside - It is clarified that this Court has not examined the merits of the matter and after perusing the record produced the issue is remitted back to 1st respondent for re-consideration afresh in accordance with Section 212 of the Act.

Summary

Issues Involved:
1. Conformity of the impugned order with Section 212 of the Companies Act, 2013.
2. Relief sought by the petitioner.

Detailed Analysis:

1. Conformity of the Impugned Order with Section 212 of the Companies Act, 2013:

The petitioner sought a Mandamus declaring the impugned orders and communications as illegal and unconstitutional, challenging their conformity with Section 212 of the Companies Act, 2013. The core argument was that the impugned order failed to reflect the formation of an opinion by the Central Government, a requirement under Section 212 for ordering an investigation by the Serious Fraud Investigation Office (SFIO). The petitioner contended that the order merely referenced a report by the Registrar of Companies without demonstrating the Central Government's subjective opinion on the necessity of such an investigation.

The respondents argued that the impugned order was based on sufficient material, including the report from the Registrar of Companies under Section 208, and thus conformed to Section 212. They contended that the Central Government had formed an opinion based on the material available and that the order was valid.

The court referred to the judgment in PARMESHWAR DAS AGARWAL's case, which emphasized that the formation of an opinion, though subjective, must be demonstrable and based on relevant circumstances. The court noted that the impugned order did not explicitly show the existence of an opinion or the necessity for an investigation by SFIO, as required by Section 212.

2. Relief Sought by the Petitioner:

The court held that the impugned order did not satisfy the requirements of Section 212 (1) of the Act, as it failed to demonstrate the Central Government's opinion on the necessity of an investigation by SFIO. Consequently, the court set aside the impugned order dated 10.06.2016, the consequential communication dated 02.08.2016, and the notice dated 21.09.2016. The matter was remitted to the 1st respondent for reconsideration based on the report of the Registrar of Companies within three weeks from the receipt of the court's order.

The court clarified that it had not examined the merits of the matter and that the issue was remitted back to the 1st respondent for fresh consideration in accordance with Section 212 of the Act. The writ petition was ordered accordingly, with no order as to costs, and any pending miscellaneous petitions were closed.