2022 (1) TMI 23 - HC - Companies Law

Validity of Investigation proceedings against the Employee by CID - Investigation was already being conducted by the SFIO - Legality and validity of the criminal proceedings - appropriate forum - prime contention raised in the present petition is whether the investigation can be carried out by the CID, in respect of the offences, alleged to have been committed by the accused petitioner, whereas, she is an employee under the group of companies and whether the investigation of such offences can only be conducted by Serious Fraud Investigation Office (SFIO)? HELD THAT - Undisputedly, the petitioner, herein, was working as an employee under the informant/Company and her personal conduct as an employee, has been challenged and the prime allegation is that while performing her duty, she has falsified the accounts by forging the documents, misappropriated the money of the informant/ Company and forged large number of documents of the Company, while withdrawing money from the Company s bank account and also received cash amount totaling ₹ 1,14,05,419 etc. etc. The offence alleged to have been committed by the petitioner with conspiracy with other co-employee(s) and accordingly, a case was registered under Sections 120(B)/408/420/467/477AIPC, and all such offences alleged to have been done in personal capacity and none of the offence will come under the purview of Section 447 (fraud) as defined under the Companies Act, 2013. The SFIO undertook the investigation of serious fraud under the Companies Act, 2013 into the affairs of the company as entrusted by the Central Government, not at the behest of a private person. A specific procedure has been laid down under the Companies Act, 2013, for launching prosecution under the Act and how the investigation is to be carried out and SFIO has no role and scope to enquire into the offences committed by an individual under the Company. The object of establishment of SFIO clearly indicates its functions, scope and ambit, which is much broader than inquiry of a private individual. There appears no illegality in registering the case by the CID and the provision under Section 212 (2) of the Companies Act, 2013 (which has already been mentioned above) has not denuded the investigation carried by any other agency, apart from SFIO. As has been contended in the present petition that there being alternative recourse to investigate into the affairs of the Company by the SFIO, the CID has no jurisdiction to try the offence, will hold no good - petition dismissed.

Summary

Issues Involved:
1. Jurisdiction of CID to investigate company-related offences.
2. Validity of the FIR and subsequent criminal proceedings.
3. Applicability of the Companies Act, 2013, versus Indian Penal Code (IPC) for the alleged offences.
4. Role and jurisdiction of the Serious Fraud Investigation Office (SFIO).

Issue-wise Detailed Analysis:

1. Jurisdiction of CID to Investigate Company-related Offences:
The petitioner challenged the jurisdiction of the CID to investigate the alleged offences, arguing that such matters should be investigated by the SFIO under the Companies Act, 2013. The petitioner contended that the CID's investigation was without jurisdiction and thus not maintainable.

The court examined Sections 143, 210, 211, 212, 435, 436, and 437 of the Companies Act, 2013. It was noted that the SFIO is established to investigate frauds relating to a company upon the Central Government's direction. However, the court found that the allegations against the petitioner pertained to individual misconduct, including criminal conspiracy, breach of trust, cheating, misappropriation, falsification of accounts, and forgery, which fall under the IPC and not exclusively under the Companies Act.

The court concluded that the CID had jurisdiction to investigate the offences as they were committed in the petitioner's individual capacity and not as part of the company's affairs.

2. Validity of the FIR and Subsequent Criminal Proceedings:
The petitioner sought to quash the FIR and the criminal proceedings, arguing that the investigation should be conducted by the SFIO. The court noted that the FIR was lodged based on allegations of financial anomalies, forgery, and misappropriation of funds by the petitioner during her tenure as CFO and Dy. CEO of the company.

The court found that the allegations made in the FIR were serious and warranted investigation. It emphasized that the CID's investigation was valid as it pertained to offences under the IPC, which are cognizable and can be investigated by the police.

3. Applicability of the Companies Act, 2013, versus Indian Penal Code (IPC) for the Alleged Offences:
The petitioner argued that the alleged offences should be investigated under the Companies Act, 2013, specifically by the SFIO. The court examined the provisions of the Companies Act, including Sections 447 (fraud), 212 (investigation by SFIO), and other related sections.

The court concluded that the offences alleged against the petitioner, such as embezzlement, forgery, and misappropriation, were criminal acts under the IPC and did not exclusively fall under the definition of fraud as per Section 447 of the Companies Act. Therefore, the investigation by the CID was appropriate and within its jurisdiction.

4. Role and Jurisdiction of the Serious Fraud Investigation Office (SFIO):
The petitioner contended that the SFIO should investigate the alleged offences. The court reviewed the role and jurisdiction of the SFIO, which is to investigate serious frauds related to a company's affairs upon the Central Government's direction.

The court found that the SFIO's jurisdiction is invoked for investigating serious frauds affecting the company's overall affairs, not individual misconduct by an employee. The court emphasized that the SFIO's role is broader and not limited to investigating individual criminal acts.

Conclusion:
The court dismissed the petition, upholding the CID's jurisdiction to investigate the alleged offences. It concluded that the offences committed by the petitioner in her individual capacity fell under the IPC and not exclusively under the Companies Act, 2013. The interim order was vacated, allowing the investigation to proceed as per law.