2019 (1) TMI 388 - HC - Companies Law

Jurisdiction - power of respondent nos.2, 3 and 4 to carry out investigation in terms of Section 212(3) of Companies Act, after expiry of the time period as provided in Section 212(3) Companies Act - illegal arrest - time limit to complete investigation by SHIO - applicability of judgment of a coordinate Bench of this Court in Rahul Modi v. Union of India & Ors. 2018 (12) TMI 1549 - DELHI HIGH COURT - Held that - Reliance by the petitioner on the said judgment may not be dispositive of the present case as there are certain issues which arise additionally in the present case, both factual and legal, which were not raised in that case and were accordingly not considered inter alia that the provisions of Sections 212(3) and 212(8) of the Companies Act operate in two different fields and the power of investigation and power of arrest are independent of each other; that the stipulation as to time-frame for investigation may not necessarily apply to the time period for which a person may be placed under arrest; that it is the prerogative of the SFIO to submit even an interim report at any stage of the investigation; that the petitioner in the present case is in Judicial Custody and not SFIO custody; that the Companies (Amendment) Act, 2015 making the offence of fraud under Section 447 of the Companies Act a cognizable offence may have retrospective application. It is deemed appropriate that a formal notice is issued, calling upon the respondents to file a detailed counter-affidavit answering the various issues arising in the present petition - List the matter for hearing on 9th January, 2019 before the Roster Bench.

Summary

Issues:
Challenge to investigation power under Section 212(3) of Companies Act and alleged illegal arrest.

Analysis:
1. The petitioner challenged the authority of respondent nos. 2, 3, and 4 to conduct an investigation under Section 212(3) of the Companies Act after the prescribed time limit had expired. The petitioner was arrested on 10.12.2018, following which he was remanded to custody. The petitioner argued that the investigation was illegal as the time period specified in the order for investigation had lapsed.

2. The petitioner contended that the investigation by SFIO was beyond the mandated time frame, as per the order dated 20.06.2018, leading to his alleged illegal arrest. The petitioner's counsel highlighted Section 212(3) of the Companies Act, emphasizing that any investigation exceeding the specified time limit is without jurisdiction. The petitioner's arrest in December 2018 was deemed unlawful due to the expiration of the prescribed investigation period.

3. The Additional Solicitor General representing the respondents argued that the investigation aimed to uncover substantial amounts of money diverted from entities under scrutiny. It was revealed that funds belonging to depositors were misappropriated, amounting to over ?10,000 crores. The petitioner was implicated as a key figure linked to multiple entities involved in real estate dealings. The ASG defended the extension of the investigation period, citing the complexity of the case and the magnitude of financial irregularities uncovered.

4. The court examined the contentions of both parties and referenced a prior judgment to address the distinct legal and factual aspects of the present case. It was noted that the powers of investigation and arrest under Sections 212(3) and 212(8) of the Companies Act operate independently. The court acknowledged that the time frame for investigation may not necessarily dictate the duration of a person's arrest. Additionally, the court considered the petitioner's judicial custody status and the retrospective application of the Companies (Amendment) Act, 2015.

5. Given the complexities and additional issues raised in the case, the court decided to issue a formal notice to the respondents to submit a detailed counter-affidavit addressing the various legal and factual aspects raised by the petitioner. The respondents were directed to file the counter-affidavit within three days, with a copy provided to the petitioner's counsel for a possible rejoinder before the next hearing scheduled for 9th January 2019 before the Roster Bench.