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TMI Blog2023 (12) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to investigation of affairs of a company other than the company for which investigation has been ordered under Section 212 of the Act. In that context, clause (d) of Section 219 of the Act will apply to a Managing Director or Manager or Employee of the company referred to in clauses (a), (b) and (c) of the said Section. Section 219(a), (b) or (c), comes across role of Managing Director, Manager or employee of the said related companies, then no prior approval for investigation would be required. In other words, protection has been given only to the Managing Director or Manager or employee of the company being investigated under Section 212 of the Act and not for the Managing Director or Manager or Employee of the companies being investigated under Section 219 (a), (b) or (c) of the Act. The aforesaid position is not acceptable - In the considered opinion of this Court, once an approval has been given under Section 212 of Act to investigate into the affairs of a company, the same would also relate to a Managing Director or Manager or Employee of the said company. The pre-condition of a prior approval under Section 219 of the Act applies to related companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 173(2) of the CrPC, then the officer is to be considered to be vested with powers of an officer in charge of a police station . From a conjoint and harmonious reading of the aforesaid provisions of the CrPC and the present Act, it cannot be said that the SFIO is barred from investigating an offence under the IPC. Further Investigation by the SFIO - HELD THAT:- It is further pertinent to note that this Court has perused the record and does not find any document to show that after the learned Special Court has taken cognizance on 20.09.2022, the petitioners herein have been asked to join any further investigation by the SFIO. The present petition is dismissed. - HON BLE MR. JUSTICE AMIT SHARMA For the Petitioner Through: Mr. N. Hariharan, Senior Advocate with Ms. Ranjana Roy Gawai, Ms. Vashudha Sen, Mr. Vineet Wadhwa, Mr. Sharian Mukherji, Mr. Mueed Shah, Ms. Punya Rekha Angara and Mr. Prateek Bhalla, Advocates. For the Respondents Through: Mr. Amit Tiwari, Senior Panel Counsel Mr. Chetanya Puri, Government Pleader Mr. Nitin Agnihotri, Prosecutor for the SFIO with Mr. Shriram Tiwary, Mr. Salman Razi, Mr. Upanshu, Mr. Nitin Agnihotri, Advocates. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the SFIO to investigate into the affairs of all the aforesaid 66 companies, as sought by the SFIO. v. On 06.05.2022, the SFIO submitted its Investigation Report under Section 212(12) of the Act titled Investigation Report of Bhushan Power Steel Limited Others . vi. On 19.05.2022, the MCA issued a sanction letter, directing the SFIO to initiate prosecution against the petitioners for commission of offences under the Act. vii. On the same day, i.e., on 19.05.2022, the SFIO filed a complaint, i.e., CC No. 374/2022 titled Serious Fraud Investigation Office v. Bhushan Airways Services Pvt. Ltd. before the Court of the learned Additional Sessions Judge 03 and Special Judge (Companies Act), Dwarka District Courts, Delhi. viii. In the said complaint, petitioner no. 1/R.K. Gupta was arrayed as accused no. 45 for commission of offences under Sections 447, 36(c), 448 read with Sections 447 and 129 of the Companies Act; Sections 417, 420, 120B of the Indian Penal Code, 1860 ( IPC ) and Section 211 read with Section 628 of the Companies Act. Petitioner no. 2/Silver-Star Commercial Company Pvt. Ltd. was arrayed as accused no. 34 for commission of offence under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any; (c) any other body corporate whose Board of Directors comprises nominees of the company or is accustomed to act in accordance with the directions or instructions of the company or any of its directors; or (d) any person who is or has at any relevant time been the company s managing director or manager or employee, he shall, subject to the prior approval of the Central Government, investigate into and report on the affairs of the other body corporate or of the managing director or manager, in so far as he considers that the results of his investigation are relevant to the investigation of the affairs of the company for which he is appointed. 3.1. Learned Senior Counsel submitted that the SFIO can carry out an investigation only pursuant to approval granted by the Central Government under Section 212(1) of the Act or pursuant to prior approval sought in terms of Section 219 of the said Act. Attention of this Court was drawn to the order dated 03.05.2016 issued by the MCA in exercise of powers under Section 212(1)(c) of the Act, wherein the SFIO has been authorised to conduct an investigation into the affairs of 15 companies. Attention of this Court was further d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Serious Fraud Investigation Office for investigation under this Act, no other investigating agency of Central Government or any State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceeded further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to Serious Fraud Investigation Office. *** *** *** (17) (a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Government, police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the Serious Fraud Investigation Office; (b) The Serious Fraud Investigation Office shall share any information or documents available with it, with any investigating agency, State Government, police authority or income-tax authorities, which may be relevant or useful for such investigating agency, State Government, police authority or income-tax authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, the SFIO is conducting a further investigation and issuing summons to various persons in the present case. Learned Senior Counsel for the petitioners submitted that the same is impermissible. It was submitted that a bare reading of Section 212(12) of the Act makes it clear that an Investigation Report can be submitted upon completion of investigation. It was submitted that the learned Special Judge has also taken cognizance of the complaint filed by the SFIO on the premise that the investigation in the present case stands complete. Learned Senior Counsel submitted that the scheme of the Act does not provide for any procedure which authorises the SFIO to continue with a further investigation after the Investigation Report has been submitted. In support of the said contention, reliance was placed on Vinay Tyagi v. Irshad Ali and Ors., (2013) 5 SCC 762 (Paras 49 and 50). Judgments Relied upon on behalf of the Petitioners 6. In support of his contentions, learned Senior Counsel for the petitioners placed reliance on the following judgments: i. M/s Frick India Ltd. v. Union of India Ors. , (1990) 1 SCC 400 - Para 8. ii. Ashok Kumar Das v. University of Bur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution against the company and its officers or employees, who are or have been in employment of the company or any other person directly or indirectly connected with the affairs of the company. 7.2. It was submitted that Section 219 of the Act empowers an inspector appointed under Section 212 of the said Act, to investigate into the affairs of a company and if he deems necessary for the purposes of that investigation, investigate also into the affairs of: i. any other body corporate: which is or has been a subsidiary of the company which is or has been managed by the same manager or managing director as the company whose board of directors comprises of the nominees of the company or is accustomed to act with the directors or instruction of the company or any of its directors. ii. any person who is or has ay any relevant time, been the company s managing director or manager or employee. It was submitted that Section 219 of the Act further provides that such additional/further investigation can only be done with the prior approval of the Central Government. 7.3. Learned Senior Panel Counsel submitted that it has been contended on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also mandate that no transaction between an individual/other entity and a company (for which there is an approval under Section 212 of the Act) can be looked into without prior approval under Section 219 of the Act. 7.5. It was submitted that in the facts and circumstances of the case, as set out in the Investigation Report, clearly demonstrate that the decision not to investigate into the affairs of Silver Star Commercial Company Pvt. Ltd./petitioner no. 2 was a proper one, for the following reasons: i. The officers of the SFIO, from the forensic reports pertaining to BPSL, noted that a large amount of money was outstanding from various parties and accounted for under the head of Advance to Suppliers and Capital Advances . ii. Once the money trail was followed, it was found that the parties who has outstanding balances which had been account for as per the books of the BPSL, were entities that had no business relations with BPSL. Money was received by these entities only to provide accommodation entries to BPSL. The money so received was, at the instructions of BPSL personnel, transmitted onward to entities managed and controlled by Sh. Sanjay Singhal. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : S.No Particulars Decor Investment and Finance Pvt. Ltd. Silver Star Commercial Company Pvt. Ltd. 1. Date of Investigation Order Ordered vide Order 5/5/2016/CL-II dated 03.05.2016 N.A. 2. Provision under which investigation was ordered Section 212(1)(c) of the Act N.A. 3. Charges a) Charge 1, Instance 2 Siphoning of Funds from BPSL Through Capital Advances. b) Charge 1, Instance 3 Siphoning of funds from BPSL through Advances to Suppliers. c) Charge 3 Cheating upon banks liable to be punished under Section 120B/417/420 of the IPC Charge 1, Instance 8 Unsecured Loans to Silver Star Commercial Company Pvt. Ltd. 4. Provision under which charged Section 447 of the Act and Sections 120B, 417 and 420 of the IPC Section 447 of the Act. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This entity not only facilitated the round tripping of money, it also duped banks by infusing funds siphoned from BPSL as promoter contribution. It is thus arrayed as an accused charged under Section 447 of the Act. 7.7. It was submitted that the SFIO had approval under Section 212(1)(c) of the Act to investigate Decor Investment and Finance Pvt. Ltd./petitioner no. 3. It was submitted that as far as Mr. R.K. Gupta/petitioner no. 1 is concerned, he was a Key-Managerial Personnel and Company Secretary of BPSL, responsible for control and management of affairs of the said company and therefore, no authority qua him was ever required. It was submitted that the requirement of approval under Section 219 of the Act does not extend to a company secretary, who is a Key Managerial Personnel defined in Section 2(51) of the Act, as under: (51) key managerial personnel, in relation to a company, means (i) the Chief Executive Officer or the managing director or the manager; (ii) the company secretary; (iii) the whole-time director; (iv) the Chief Financial Officer; and (v) such other officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Punjab and Haryana in Raj Kumar Modi v. Serious Fraud Investigation Office, 2019:PHHC:133009. 8.2. Learned Senior Panel Counsel further drew the attention of this Court to a judgment delivered by a coordinate bench in Ashish Bhalla v. State Anr., 2023:DHC:6808, wherein while quashing an FIR and transferring the proceedings thereunder to the SFIO, it was observed and held as under: 91. Consequently, coming to the end, albeit, before drawing final curtains to the present litigation and conclusions thereon, this Court would like to categorically express that after an overview of the aforesaid factual matrix and legal proposition discussed hereinabove, the investigation (to be) conducted by the EOW pursuant to registration of the subsequent impugned FIR is liable to be quashed as the prior ongoing investigation conducted in the form of SFIO proceedings is arising out of the 2013 Act, which being a Special Act will prevail over the General Act, the IPC. Further due to commonality of the allegations involved, wherein, the subsequent allegations made in the impugned FIR are already subsumed and thus shall be considered by the SFIO during the proceedings conducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sections 212(15) and 212(17) of the Act. Analysis and Findings Jurisdiction or legal sanction/authority with the SFIO to investigate petitioners no. 1 and 2 11. Learned Senior Counsel submitted that SFIO could carry out an investigation only pursuant to approval or authority granted by the Central Government under Section 212(1) of the Act or after obtaining prior approval in terms of Section 219 of the said Act to conduct an investigation into affairs of related companies. It was pointed out that in the order dated 03.05.2016 issued by the MCA in exercise of powers under Section 212(1)(c) of the Act, the SFIO had been authorised to conduct an investigation into the affairs of the 15 companies and vide order dated 08.01.2018 issued by MCA, SFIO had been authorised to conduct an investigation into affairs of 66 other companies in terms of Section 219(b)(c) of the Act. Learned Senior Counsel submitted that admittedly, petitioners no. 1 and 2 have not been named in either of the aforesaid order and therefore, the SFIO had no authority to carry out an investigation qua them. 12. It was submitted that since the language of Section 219 clearly differentiates betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subsidiary company or holding company, or a subsidiary company of its holding company; b. any other body corporate which is, or has at any relevant time been managed by any person as managing director or as manager, who is, or was, at the relevant time, the managing director or the manager of the company; c. any other body corporate whose Board of Directors comprises nominees of the company or is accustomed to act in accordance with the directions or instructions of the company or any of its directors; d. any person who is or has at any relevant time been the company s managing director or manager or employee. 17. The contention of learned Senior Counsel on behalf of the petitioners is that the case of petitioner no. 1 would come under Section 219(d) of the Act and therefore, prior approval in terms of the said provision was required. The heading of Section 219 of the Act, as reproduced hereinabove, reflects that the said provision relates to role of certain related companies, which has surfaced during the course of investigation being conducted under Section 212 or other provisions of the Act and therefore, approval would be required in terms of Sections 219 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the affairs of a company, the same would also relate to a Managing Director or Manager or Employee of the said company. The pre-condition of a prior approval under Section 219 of the Act applies to related companies and their Managing Director, Manager or employees as provided for in the said Section. It is further pertinent to note that petitioner no. 1, being a Key Managerial Personnel in terms of Section 2(51) of the Act would not need a separate approval for purposes of investigation in terms of Section 219(d) of the Act. The provisions of Section 219(d) of the Act as explained hereinabove would not cover the case of petitioner no. 1. 19. It is an admitted case that petitioner no. 3 was mentioned in the original order dated 03.05.2016 issued by the MCA under Section 212 of the Act. So far as petitioner no. 2 is concerned, it is the case of the SFIO that since the affairs of the company were not being investigated, therefore, no approval was required in terms of Section 219(a) of the Act. It is the case of SFIO that since there was only a single transaction in relation to BPSL with petitioner no. 2, therefore, there was no need to investigate into the affairs of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion would cover the case of petitioner no. 2 under Section 219(c) of the Act. However, the effect of not taking such prior approval would not ipso facto render the cognizance taken qua petitioner no. 2 by learned Special Court as invalid. It is the case of the SFIO that prior sanction for prosecution with respect to petitioner no. 2 had been obtained under Section 212(14) of the Act. It is settled law that defective investigation would not render cognizance taken by the learned Special Court as invalid. In Fertico Marketing (supra), while examining an issue with regard to validity of investigation without approval of the State Government under Section 6 of the Delhi Special Police Establishment Act, 1946, the Hon ble Supreme Court observed and held as under: 22. As early as in 1955, the question arose for consideration before this Court, as to whether an investigation carried out by a police officer below the rank of Deputy Superintendent of Police, under Section 5(4) of the Prevention of Corruption Act, 1947, without the order of the Magistrate of First Class, was mandatory or directory? While holding that the provision is mandatory, this Court considered a question as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pp. 79-80, para 14) 14. The High Court, however, observed [ Kuppaswamy Gounder v. State of Karnataka, 1981 SCC OnLine Kar 220 : (1981) 2 Kant LJ 509] that provisions of Section 465 CrPC cannot be made use of to regularise this trial. No reasons have been stated for this conclusion. Section 465 CrPC reads as under: 465. Finding or sentence when reversible by reason of error, omission or irregularity. ( 1) Subject to the provisions hereinbefore contained, no finding, sentence or order passed by a court of competent jurisdiction shall be reversed or altered by a court of appeal, confirmation or revision on account of any error, omission or irregularity in the complaint, summons, warrant, proclamation, order, judgment or other proceedings before or during trial or in any inquiry or other proceedings under this Code, or any error, or irregularity in any sanction for the prosecution, unless in the opinion of that court, a failure of justice has in fact been occasioned thereby. (2) In determining whether any error, omission or irregularity in any proceeding under this Code, or any error, or irregularity in any sanction for the prosecution has occasioned a failure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be set aside unless the illegality in the investigation can be shown to have brought about a miscarriage of justice and that an illegality committed in the course of investigation does not affect the competence and the jurisdiction of the court for trial. This being the legal position, even assuming for the sake of argument that CBI committed an error or irregularity in submitting the charge-sheet without the approval of CVC, the cognizance taken by the learned Special Judge on the basis of such a charge-sheet could not be set aside nor could further proceedings in pursuance thereof be quashed. The High Court [ Prakash P. Hinduja v. Union of India, 2002 SCC OnLine Del 679 : (2002) 64 DRJ 34] has clearly erred in setting aside the order of the learned Special Judge taking cognizance of the offence and in quashing further proceedings of the case. 25. It could thus be seen that this Court held that even for the sake of argument that CBI had committed an error or irregularity in submitting the charge-sheet without the approval of CVC, the cognizance taken by the learned Special Judge on the basis of such a charge-sheet, would not be set aside nor could further proceedings in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a police station can commence an investigation under the IPC. It was submitted that such a power has not been given to any of the officers of the SFIO. Reliance was placed on Manish Rangari (supra) wherein it has been held as under: 7. I have carefully considered the rival submissions and perused the application and the documents placed on record by the applicants. Having done so, I am of the prima facie, view that the contentions raised by the applicants have merit. Prima facie, it appears that while passing the impugned Order dated 29/07/2019 taking cognizance of offence against the applicants, the learned Special Court failed to take judicial notice of the following legal aspects which go to the root of the matter, thus rendering the impugned Order vulnerable. (a) 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 appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied) 24. Per contra, learned Senior Panel Counsel on behalf of the respondent submitted that provisions of Section 212(2) and Section 436(2) of the Act are to be constructed harmoniously in a manner that does not restrict the power of SFIO to investigate offences under the Act only. It was pointed out that Section 436(2) of the Act gives power to the learned Special Court to try an offence other than the offences under the Act at the same trial and that would give jurisdiction to the SFIO for investigation as well as prosecution for offences punishable under the IPC. Reliance was placed on a judgment passed by a coordinate bench of this Court in Ashish Bhalla (supra), wherein an FIR registered by the Economic Offences Wing on the basis of a similar allegations which were part of an ongoing investigation being conducted by SFIO was quashed on the ground that since the Companies Act is a special act, the same would prevail over the general act, i.e., the IPC. It was further held, in Para 91, that Further due to commonality of the allegations involved, wherein, the subsequent allegations made in the impugned FIR are already subsumed and thus shall be considered by the SFIO durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Public Prosecutor. Similarly, Section 436(2) of the Act, provides as under: 436. Offences triable by Special Courts. *** *** *** (2) When trying an offence under this Act, a Special Court may also try an offence other than an offence under this Act with which the accused may, under the Code of Criminal Procedure, 1973 (2 of 1974) be charged at the same trial. Section 4 of the CrPC provides as under: 4. Trial of offences under the Indian Penal Code and other laws. (1) All offences under the Indian Penal Code (45 of 1860) shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions hereinafter contained. (2) All offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner of place of investigating, inquiring into, trying or otherwise dealing with such offences. It is pertinent to note that Section 4(2) of the CrPC provides that investigation into offences under other statutes, like the present Act, shall be done in accordance with the CrPC unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation in respect of an offence after a report under sub-section (2) has been forwarded to the Magistrate and, where upon such investigation, the officer in charge of the police station obtains further evidence, oral or documentary, he shall forward to the Magistrate a further report or reports regarding such evidence in the form prescribed; and the provisions of sub-sections (2) to (6) shall, as far as may be, apply in relation to such report or reports as they apply in relation to a report forwarded under sub-section (2). It is further pertinent to note that this Court has perused the record and does not find any document to show that after the learned Special Court has taken cognizance on 20.09.2022, the petitioners herein have been asked to join any further investigation by the SFIO. Conclusion 30. In view of the above discussion, the conclusions of this Court can be summarized as under: i. Petitioner no. 1, being a Key Managerial Personnel in terms of Section 2(51) of the Act would not need a separate approval for purposes of investigation in terms of Section 219(d) of the Act. The provisions of Section 219(d) of the Act as explained hereinabove wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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