2020 (1) TMI 1550 - HC - Companies Law

Jurisdiction - Error in SFIO investigating offences or not - Respondent No.1 submitted that Section 436(2) of the 2013 Act only empowers the Special Court to try an offence other than an offence under the 2013 Act with which the accused may, under the Cr.P.C., be charged at the same trial - HELD THAT - The various offences under the 2013 Act of which cognizance has been taken came into force only with effect from 12/09/2013 (Section 449) and 01/04/2014 (Section 129 and 217), whereas the underlying alleged violations at NSEL s exchange platform have all occurred on or before 31st July 2013 as per SFIO s own complaint filed before the learned Special Court. Prima facie, therefore, prosecution of the applicants under the 2013 Act appears to be impermissible under Article 20(1) of the Constitution of India. As per Section 212(2) of the 2013 Act, prima facie it is seen that the SFIO has jurisdiction to investigate offence under the said Act only. Hence, the SFIO s investigation and subsequent complaint for offences under the Indian Penal Code and under the 1956 Act prima facie appears to be without jurisdiction. A contrary interpretation would permit the SFIO to encroach upon investigating powers of other investigating agencies under other laws, which cannot be the intention of the legislature - For the same underlying transactions arising out of the NSEL payment defaults, the NSEL and others are already facing prosecution for offences under the Indian Penal Code before the learned MPID Court and the learned CBI Court, Mumbai. Similarly, for various violations under the 1956 Act discovered during inspection of NSEL by the Central Government, the NSEL and others are already facing prosecution before the learned Metropolitan Magistrate, Girgaon, Mumbai on complaints filed by the Registrar of Companies. This factual position has not been disputed by the other side. The SFIO Investigation Report dated 31st August 2018 and the subject complaint filed by the SFIO before the learned Special Court, appear to be without jurisdiction. Impugned Order, as such, becomes vulnerable, at least prima facie, case for consideration is, as such, made out - application allowed.

Summary

Issues:
Challenge to the Order taking cognizance of offences under various Acts based on SFIO complaint; Jurisdiction of SFIO to investigate offences under different Acts; Permissibility of prosecution under the 2013 Act for prior violations; Double jeopardy concerns; Validity of Order passed by the Central Government; Interpretation of Section 436(2) of the 2013 Act.

Analysis:
The applicants challenged the Order taking cognizance of offences under multiple Acts based on an SFIO complaint. They argued that the SFIO's investigation and subsequent complaint for offences under the Indian Penal Code and the 1956 Act were without jurisdiction as per Section 212(2) of the 2013 Act. They contended that the prosecution under the 2013 Act for prior violations, which occurred before the Act came into force, was impermissible under Article 20(1) of the Constitution of India. Additionally, they raised concerns of double jeopardy as the NSEL and others were already facing prosecution for similar transactions under different Acts.

The respondents, however, pointed out that the Special Court had the power to try offences under various Acts, including the 2013 Act, Indian Penal Code, and the 1956 Act. They argued that the SFIO's investigation under the 1956 Act was saved under Section 465(2)(j) of the 2013 Act. They also defended the Order passed by the Central Government, stating it was within their statutory powers.

The Court, after considering the submissions, found merit in the applicants' contentions. It observed that the prosecution under the 2013 Act for violations predating its enactment may violate Article 20(1) of the Constitution. The Court also noted concerns regarding the SFIO's jurisdiction to investigate offences under different Acts and the potential breach of double jeopardy principles. It highlighted that a Supreme Court judgment had questioned the public interest basis of the SFIO investigation, casting doubt on its jurisdiction. Consequently, the Court found the impugned Order vulnerable and granted ad-interim relief to the applicants.

In conclusion, the Court's analysis focused on the legality of the SFIO's investigation and subsequent prosecution under different Acts, highlighting jurisdictional issues, concerns of double jeopardy, and the validity of the Order passed by the Central Government. The Court's decision to grant ad-interim relief indicated a prima facie acceptance of the applicants' arguments, pending further submissions from the respondents.