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TMI Blog2022 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies and the management and ownership of the said group is almost same, as that of M/s. L.B. Medi Services Private Ltd. The constituent companies of the L.B. Group of Companies along with their individual line of business are as follows: (a) L.B. Mediservices Pvt. Ltd.: Pharmaceutical Distribution. (b) L.B. Agro Pvt. Ltd. : Recycled Paper Manufacturing. (c) L.B. Enterprises Pvt. Ltd. : Cable Wires Manufacturing. (d) Dihing Tea Co. Pvt. Ltd.: Tea garden and Tea factory. 4. The Chief Executive Officer of the M/s. L.B. Group of Companies lodged an FIR before the SSP, CID, Guwahati, on 07.03.2020, alleging inter alia that the petitioner was working as the Chief Financial Officer (CFO) and the Deputy Chief Executive Officer (Dy. CEO) in their Group of Companies since 28.03.2018. From 08.01.2020 to 08.02.2020, the petitioner went on leave on account of her wedding and resumed her duties from 25.02.2020. During her leave period, the informant side came to know about several financial and procedural anomalies, mishandling of cash accounts, wrongful disbursals of cash and payments, forgery of documents, all of which has resulted in huge financial impact on the L.B. Group of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,583/ was found to be misappropriated from petty cash sources, in the ongoing scrutiny. (4) The petitioner embezzled a sum of ₹ 63,284/- in the name of travel expenditure. 7. Accordingly, giving all details of various malfunctioning by the petitioner, the Chief Executive Officer of the M/s. L.B. Group of Companies lodged the FIR, to investigate the matter and to take necessary action, in accordance with the law. Accordingly, the CID P.S. Case No.03/2020 was registered. 8. It may be noted herein that on 09.06.2020, the informant company lodged another FIR, alleging some more suspicious transactions made by the petitioner. 9. Challenging the FIR pertaining to CID PS Case No. 3/2020, the present petition is filed for setting aside and quashing of the same. 10. Against the present petition, the informant/respondent No.2 filed her affidavit in opposition against the plea of the petitioner. Respondent No.2 in her affidavit reiterated that the petitioner, who served in their Group of Companies in different capacities since 2015 and she was promoted to the post of Deputy Chief Executive Officer (Dy. CEO) and Chief Financial Officer (CFO) in the year 2018, who required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No.2/informant, the petitioner filed her affidavit. Referring to the various Sections of the Companies Act, 2013, e.g. Section 447 and Section 211 of the said Act, the petitioner contended that when there exists a laid down procedure for investigation of offence of fraud in relation to the affairs of a Company, investigation by any other agency is void and barred under the Act. Further, it is well settled law that the extent of special law shall prevail over the general laws and as such the CID has no jurisdiction to investigate the case. Accordingly, the petitioner reiterated her prayer for setting aside and quashing of the FIR, which resulted in registration of CID P.S. Case No.03/2020. 14. I have heard the learned counsel for both the parties and perused the record available before me. 15. The 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 (hereinafter, in sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Government in terms of the Government of India Resolution No. 45011/16/2003-Adm-I, dated the 2nd July, 2003 shall be deemed to be the Serious Fraud Investigation Office for the purpose of this section. (2) The Serious Fraud Investigation Office shall be headed by a Director and consist of such number of experts from the following fields to be appointed by the Central Government from amongst persons of ability, integrity and experience in,- (i) banking; (ii) corporate affairs; (iii) taxation; (iv) forensic audit; (v) capital market; (vi) information technology; (vii) law; or (viii) such other fields as may be prescribed. 3) xxx 4) xxx\ 5) Xxx How the investigation is carried out by the SFIO is prescribed by Section 212 of the Act, which reads as follows:- 212. Investigation into affairs of Company by Serious Fraud Investigation Office.- (1) Without prejudice to the provisions of section 210, 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- (a) on receipt of a report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Section 435, 436 and 437 of the Act, it provides that the offences punishable under this Act, shall be triable by the Special Court established by the Central Government and such Special Court has the jurisdiction to try offences under the Act and can also try any offence other than the offence mentioned in the Act. 19. Section 447 of the Act provides for punishment for the fraud and Explanation to the Section 447 of the Act prescribes for fraud as below. Explanation.-For the purposes of this section- (i) fraud in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss; (ii) wrongful gain means the gain by unlawful means of property to which the person gaining is not legally entitled; (iii) wrongful loss means the loss by unlawful means of property to which the person losing is legally enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence referred to this subsection except upon a complaint in writing made by- (iii) the Director, Serious Fraud Investigation Office; or (iv) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government. xxx xxx xxx xxx 49. substituted for the offences covered under Sub-Sections (5) and (6) of Section 7, Section 34, Section 36, Sub-Section (1) of Section 38, Sub- Section (5) of Section 46, Sub-Section (7) of Section 56, sub-section (10) of Section 66, sub-section (5) of Section 140, sub-section (4) of Section 206, Section 213, Section 229, sub-section (1) of Section 251, sub-section (3) of Sections 339 and Section 448, which attract the punishment for fraud provided in Section 447 by Act 21 of 2015, S.17 (w.e.f. 29-05-2015) 22. So far as the role duty of the Registrar is concerned, according to Sections 206 to 209 of the Act, it envisages that the Registrar may issue notice to the Company to call for information, inspect books and relevant documents an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cies for prosecution/appropriate action. d) Whether or not an investigation should be taken up by the SFIO would be decided by the Director, SFIO who will be expected to record the reasons in writing. These decisions will be further subject to review by a coordination committee. 4. xxx xxx xxx 5. As per the Companies Act, 2013 , Serious Fraud Investigation Office (SFIO) has been established through the Government of India vide Notification NO. S.O.2005(E) dated 21.07.2015. It is a multi-disciplinary organisation under the Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, banking, law, information technology, investigation, company law, capital market and taxation etc. for detecting and prosecuting or recommending for prosecution white collar crimes/frauds. 6. Investigation into the affairs of a company is assigned to SFIO, where Government is of the opinion that it is necessary to investigate into the affairs of a company (a) on receipt of a report of the Registrar or inspector under section 208 of the Companies Act, 2013; (b) on intimation of a special resolution passed by a company that its af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribing for, or underwriting securities; or (b) any agreement, the purpose or the pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; or (c) any agreement for, or with a view to obtaining credit facilities from any bank or financial institution, shall be liable for action under section 447. 38. Punishment for personation for acquisition, etc., of securities.-(1) Any person who- (a) makes or abets making of an application in a fictitious name to a company for acquiring, or subscribing for, its securities; or (b) makes or abets making of multiple applications to a company in different names or in different combinations of his name or surname for acquiring or subscribing for its securities; or (c) otherwise induces directly or indirectly a company to allot, or register any transfer of, securities to him, or to any other person in a fictitious name, shall be liable for action under section 447. 46 (5) If a company with intent to defraud issues a duplicate certificate of shares, the company shall be punishable with fine which shall not be less than five times the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Registrar may, after informing the company of the allegations made against it by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit after providing the company a reasonable opportunity of being heard: Provided that the Central Government may, if it is satisfied that the circumstances so warrant, direct the Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this subsection: Provided further that where business of a company has been or is being carried on for a fraudulent or unlawful purpose, every officer of the company who is in default shall be punishable for fraud in the manner as provided in section 447. 213. Investigation into company s affairs in other cases.- The Tribunal may,- (a) on an application made by- (i) not less than one hundred members or members holding not less than one-tenth of the total voting power, in the case of a company having a share capital; or (ii) not less than one-fifth of the persons on the company s register of members, in the case of a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re a person who is required to provide an explanation or make a statement during the course of inspection, inquiry or investigation, or an officer or other employee of a company or other body corporate which is also under investigation,- (a) destroys, mutilates or falsifies, or conceals or tampers or unauthorisedly removes, or is a party to the destruction, mutilation or falsification or concealment or tampering or unauthorised removal of, documents relating to the property, assets or affairs of the company or the body corporate; (b) makes, or is a party to the making of, a false entry in any document concerning the company or body corporate; or (c) provides an explanation which is false or which he knows to be false, he shall be punishable for fraud in the manner as provided in section 447. 251. Fraudulent application for removal of name.- (1) Where it is found that an application by a company under sub-section (2) of section 248 has been made with the object of evading the liabilities of the company or with the intention to deceive the creditors or to defraud any other persons, the persons in charge of the management of the company shall, notwithstanding that the company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior Counsel, Mr D Saikia also placed reliance upon the decision of Bombay High Court, in Manish Rangari Ors. Vs- Union of India Ors.; 2020 SCC Online Bom 226, wherein in para 7 (b), it has been held that:- 7 (b) 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 Penal Code, 1860 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. 27. It has been submitted that as a persuasive measure, such an observation can also be looked into although the same is not binding upon this Court. The learned Public Prosecutor for the State Respondent, Mr. M. Phukan, has also raised serious objection against the prayer made in the present petition and adopting the argument of the learned counsel for the private respondent No. 2 has submitted that it is not a fit case to invoke the provision of Section 482 CrPC. At ..... X X X X Extracts X X X X X X X X Extracts X X X X
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