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2025 (3) TMI 131 - AT - Companies LawInterpretation of Section 212(15) and sub-section (5) of Section 223 - Legality of investigation Report submitted by the Serious Fraud Investigation Office (SFIO) under Section 212(12) of the Companies Act 2013 - admissible as legal evidence or not as SFIO Report have been equated as report prepared under Section 173 of the Code of Criminal Procedure (CrPC) 1973 - relevance of 2nd SFIO Report and the Compilation of Documents filed by the Respondent on 07.02.2024 before the NCLT - no sufficient pleadings in the Company Petition/ Miscellaneous Application filed by the Respondent with respect to the SFIO Report and documents and Compilation of the Documents. HELD THAT - Section 212 provides for investigation into affairs of Company by Serious Fraud Investigation Office and contains detailed provisions pertaining to investigation to be carried out by the SFIO. Section 212(1) provides that where the Central Government is of the opinion that it is necessary to investigate into the affairs of a company by the Serious Fraud Investigation Office by order assign the investigation into the affairs of the said company to the Serious Fraud Investigation Office. On looking into the scheme of Section 212 it is clear that after investigation report is received under sub-section (11) or sub-section (12) of Section 212 Central Government may direct the SFIO to initiate prosecution against the company and its officers or its employees. Sub-section (15) is in reference to the SFIO Report which provided that investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by the police officer under Section 173. Thus investigation report submitted by the SFIO and filed in the Special Court has to be deemed to be a report filed by the police officer under Section 173 of the CrPC. It is on the basis of the report submitted by police officer under Section 173 of the CrPC charges are framed by Special Court in offences alleged in the charge-sheet. When SFIO Report is deemed to be a report filed by police officer (for framing of charges) sub-section (15) begins with notwithstanding clause and deeming fiction is created to treat the report as report submitted under Section 173 of the CrPC so that charges may be framed in the prosecution which has been directed by the Central Government under sub-section (14) after receipt of the investigation report. There can be no quarrel to the proposition that the police report is not legal evidence. The present is a case it is required to examine the purpose and object of Section 212 and whether the statutory scheme indicate that the SFIO Report which is submitted after the investigation as directed by the Central Government is not to be looked into in any material or evidence for any purpose as contemplated under the Act apart from framing of charges and legal fiction under sub-section (15) of Section 212 was engrafted for the purpose that SFIO Report be not treated as legal evidence. The legislature is well aware about the provisions of law and when sub-section (14A) was added in Companies Act by Act 22 of 2019 legislature was well aware about existing provisions of Section 212(15). When legislature specifically provides SFIO Report to take a proceeding against any director key managerial personnel and other officers of the company obviously the said report is to be relied for the said purpose and in event the submission of the Appellant is accepted that the said report cannot be looked into it not being the legal evidence the purpose and object of sub-section (14A) becomes meaningless and otiose - The statutory interpretation on legal fiction as noticed above has repeatedly laid down that deeming fiction should not be extended beyond language of the section and must be limited to the context it was introduced. Deeming fiction was introduced to make the SFIO Report as a Report of police officer under Section 173 of the CrPC for framing the charges. Thus object of legal fiction was to make the SFIO Report as report within the meaning of Section 173. Legal fiction was not for the purpose that SFIO Report be treated as inadmissible for the purposes of Companies Act 2013. Section 212 also contain a provision where any person concerned by making an application may obtain a report. Thus sub-sections (1) (2) and (3) are already reflected in provisions of Section 212. Thus when we come to sub-section (5) which says that nothing in this section shall apply to the report referred to in Section 212 the said sub-section obviously is relating to sub-section (4) where authentication is required for inspector s report to be admissible in a legal proceeding - Section 223 which provision dealt with the inspector s report there was no occasion to include any provision which is contrary to the scheme of Section 212. We thus are of the view that sub-section (5) of Section 223 in no manner has effect on the admissibility of the SFIO Report in proceeding under sub-section (14A) and the interpretation which was put by the Appellant under Section 223(5) cannot be accepted. The ground which was raised by the Appellant for rejecting the compilation of documents and SFIO Report submitted by the SFIO cannot be accepted at this stage to throw out the compilation of documents and the SFIO Report. The issue as to what has been pleaded in the application or the petition and what is the material or evidence on the record are issues which are to be examined when applications are decided on merits. Thus on the submission that there are no pleadings with regard to compilation of documents cannot be a reason to accept the prayers made in CA No.65 of 2024. Conclusion - The SFIO Report is admissible in proceedings under Section 212(14A) and the NCLT did not err in considering the report and associated documents. No grounds have been made out to interfere with the impugned order. All the appeals are dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are: (i) Whether the Investigation Report submitted by the Serious Fraud Investigation Office (SFIO) under Section 212(12) of the Companies Act, 2013 is admissible in evidence, given the provisions of Section 223(5) read with Section 212(15) of the Companies Act, 2013. (ii) Whether the 2nd SFIO Report and the Compilation of Documents filed by the Respondent on 07.02.2024 before the National Company Law Tribunal (NCLT) can be considered by the NCLT for deciding MA No.2070 of 2019, in light of the deeming fiction contained in Section 212(15) of the Companies Act, 2013. (iii) Whether there were sufficient pleadings in the Company Petition/Miscellaneous Application filed by the Respondent concerning the SFIO Report and the Compilation of Documents dated 17.02.2024. (iv) Whether the impugned order passed by the NCLT is legally sustainable. 2. ISSUE-WISE DETAILED ANALYSIS The issues are inter-connected and analyzed together: Relevant Legal Framework and Precedents: The legal framework involves Sections 212 and 223 of the Companies Act, 2013. Section 212 deals with the investigation into the affairs of a company by the SFIO, while Section 223 pertains to the admissibility of the inspector's report in legal proceedings. Section 212(15) creates a legal fiction by deeming the SFIO report filed with the Special Court for framing charges as a report filed by a police officer under Section 173 of the Code of Criminal Procedure (CrPC). Section 223(5) states that nothing in Section 223 applies to reports under Section 212, implying a different treatment for SFIO reports. Court's Interpretation and Reasoning: The Court interpreted that the SFIO Report, although deemed a police report under Section 173 of the CrPC for the purpose of framing charges, is not inadmissible in proceedings under the Companies Act, particularly under Section 212(14A). The Court emphasized that the legal fiction under Section 212(15) should not be extended beyond its context, which is primarily for framing charges, not for excluding the report from other proceedings. Key Evidence and Findings: The SFIO Report was central to the proceedings, as it formed the basis for the impleadment of individual entities and the application for interim relief. The Report detailed the investigation into IL&FS and its subsidiaries, highlighting issues such as the role of directors, fund management, and compliance with RBI guidelines. Application of Law to Facts: The Court applied the legal principles of statutory interpretation, emphasizing that the legislature is presumed to be aware of existing laws. The Court considered the purpose of the SFIO Report under Section 212(14A), which allows for proceedings based on the report, indicating its admissibility in such contexts. Treatment of Competing Arguments: The Appellants argued that the SFIO Report should be inadmissible as it is akin to a police report, which is not legal evidence. They relied on precedents asserting that a police report is merely an opinion. The Respondents contended that the SFIO Report serves broader purposes under the Companies Act and should be admissible for proceedings under Section 212(14A). The Court sided with the Respondents, emphasizing the legislative intent and the specific context of the legal fiction. Conclusions: The Court concluded that the SFIO Report and the Compilation of Documents are admissible and can be relied upon by the NCLT for proceedings under Section 212(14A). The interpretation that the report is inadmissible was rejected, as it would render Section 212(14A) meaningless. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: "The statutory interpretation on legal fiction as noticed above has repeatedly laid down that deeming fiction should not be extended beyond language of the section and must be limited to the context it was introduced." Core Principles Established: The judgment established that legal fictions should not be extended beyond their intended purpose. The SFIO Report, while deemed a police report for framing charges, remains admissible in proceedings under Section 212(14A) of the Companies Act. Final Determinations on Each Issue: The Court determined that the SFIO Report is admissible in proceedings under Section 212(14A), and the NCLT did not err in considering the report and associated documents. The appeals challenging the admissibility of the SFIO Report and the Compilation of Documents were dismissed.
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