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TMI Blog2025 (2) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... ed prosecution for the offences under the relevant provisions of the Companies Act and Indian Penal Code, 1860 (IPC). The impugned SFIO report has already been subjected to judicial scrutiny and has been upheld. The present writ petition, which seeks to relitigate the same issues under the garb of a fresh challenge, is therefore misconceived and an abuse of process of law. The grounds for quashing the investigation report are in the nature of defences to the compliant case pending against them. The Petitioners will have every opportunity to challenge the report's findings during trial, where their contentions regarding the alleged misappreciation of facts can be duly tested. At this stage, however, the invocation of writ jurisdiction to pre-emptively quash the SFIO's findings is both legally untenable and premature. Moreover, the impugned report does not stand in isolation. Conclusion - i) The SFIO's investigation and report upheld, finding substantial evidence of financial misconduct and fraudulent activities. ii) The Petitioners' arguments could be tested during trial, but the current petition to quash the report was premature and legally untenable. Petition dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport legally untenable. 2.4 As a Central Government agency, the SFIO bears an added duty of diligence and objectivity, particularly when its findings form the basis for potential prosecution. The SFIO, by failing to examine past investigations and actions already taken, has acted arbitrarily, thereby violating the Petitioners' fundamental rights under Articles 14, 19, and 21 of the Constitution. The SFIO deliberately disregarded the chequered history of the case to further the malicious agenda of VLS. 2.5 The SFIO emphasise that MCA had conducted inspection into the affairs of the Petitioner company culminating in the inspection reports dated 15th September, 1999 and 21st November, 2001. These reports pertain to the FY 1994-95, 1995-1996, 1996-1997 and 1997-1998. As such the affairs of the Petitioner company till 1998 have already been investigated and the appropriate action thereto was initiated. Pertinently, the prosecutions initiated by the MCA against the Petitioner company were compounded by the Company Law Board, which decision was upheld by the High Court and Supreme Court in appeal. 2.6 The SFIO, in its impugned investigation report, has placed undue reliance on content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtion made in this regard is that shares were allegedly issued under fake names and that loans were secured from public sector banks by pledging duplicate shares. However, no monetary harm was caused to the public since the loan taken by the Petitioner company was duly repaid. 3. The Court has considered the submissions of the Petitioners, and finds them unconvincing. 4. It is imperative to note that earlier the Petitioner company had filed a writ petition before this Court [W.P.(C) 3444/2016], challenging the very foundation to the investigation conducted by SFIO. In the said writ petition, the Petitioners challenged the order dated 29th February, 2016, passed by the MCA, exercising its powers under Section 212 (1) (c) of the Companies Act to direct an investigation into the affairs of the company in public interest. After a detailed examination of the factual and legal aspects, the Court, in its judgment dated 26th April, 2017, categorically rejected the challenge and upheld the MCA's decision to order an investigation. 5. Even though the SFIO report dated 31st October, 2016, which is the subject matter of challenge in the present petition, was not explicitly challenged in W.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraudulently falsified the Annual Financial Statements of Sunair with false records of shareholders. The promoters of Sunair and family members, the report suggested, "rotated Rs 1 crore 21 times to get the majority shares of SHL (Sunair) fictitiously held by approx. 350 shareholders "through other intermediary companies. According to the SFIO report identities from the general public were personated to allot the shares of Sunair in fictitious names; these shares were later transferred to Trans Asia Consultants P Ltd via Bindal Estate Pvt. Ltd. Further "Loans were secured from Axis Bank Ltd, which accepts deposits from general public, after using duplicate certificates or share certificates divided from the shares lying as seized property with the Income Tax Department. Thus, these loans were secured fraudulently." The report was given shape after going through a mass of 40,000 pages of materials, by a four-member SFIO team. 66. For the above reasons, i.e the materials which were on the record of the Central Government when it did issue the impugned order under Section 212 of the Companies Act - and given the report of the SFIO (which is, of course post such order) this court is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t read with section 420 of IPC. 18. Perusal of the records in FIR no. 99/2002 PS Connaught Place received from the Deputy Commissioner of Delhi Police, [Annexure 29 (Volume-IV(V) - Page 154)] reveals that SHL had issued shares to ICL vide certificate Nos. 10088, 10089, 10090,10108, 10109, 10110, 10087, 10104. 10105, 10106, 10107, 10100, 10101, 10102, 10103, 101111, 10086, 10096, 10097, 10098, 10099, 10092, 10093, 10094, 10095, 10085, 10084. 10091, totalling 47,20,000 shares were allotted on 15.09.98. The same were seized by the Income Tax Department on 20.11.2000 and subsequently were taken into police possession during the year 2004. As such, these shares were seized property of the Income Tax Department and hence became seized assets in the custody of the Income Tax Department. Subsequently, these were taken into police possession during the year 2004 and thus became case property. It is observed from the shareholders' register as on 30.9.2000, obtained from SHL that above mentioned 47,20,000 shares of SHL standing in the name of ICL were further transferred to Columbia Trading Company Limited (CTCL) (3,00,000 shares), Monica Impex Pvt. Ltd (MIPL) (9,00,000 shares), Monica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich further became the case property in case no. FIR 99/2002. During the course of statement recorded on 25.10.2016, Mr. S.P. Gupta, vide answer to question no.42 has agreed that 25.9 lakh shares of SHL which were given VLS Finance Limited were appropriated from Columbia Trading Company Limited (CTCL) during 2001. 20. Thus, it is revealed during investigation that Directors Sh. S.P. Gupta, Sh. Vipul Gupta, Sh. Kaveen Gupta have illegally falsified the records by cancelling and splitting the shares seized by the Income Department and issuing fresh shares to CTCL and VLSFL. Further, SHL. has pledged 21,25,176 shares of bearing distinctive nos. 64344825-66470000 of Columbia Trading Company Limited (CTL), fraudulently with the Axis Bank for securing loan and hence have committed offences under Section 628 of the Companies Act, 1956 read with 420 of the Indian Penal Code, 1860. xx............xx xx 28. SFIO has perused the complaint received from VLS Finance Limited in which Delhi Police has filed a Charge Sheet in FIR 99/2002 (PS: Connaught Place, New Delhi) before the ACMM, Tis Hazari Courts, Delhi u/s 420/406/409/468/471/477A/120B of IPC, PS Connaught Place, New Delhi. Investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectors of SHL and did not use professional skepticism to ensure disclosure of true and fair state of affairs and proceeded to audit the financial statements without verifying the primary records pertaining to shareholding, transfer of shares etc. The auditors receive remuneration for their service from the funds of the company and thus, company is the paymaster and the auditors are its servant. 30. The Statutory auditors had dishonestly and fraudulently falsified the Annual Financial Statements of SHL with false records of shareholders and thus made himself liable to be punished for the offence punishable under section 628 and section 211, 227,233 of the Companies Act, 1956. 31. The investigation carried out by SFIO has revealed that Sh. S.P. Gupta, CMD of SHL along with Sh. Kaveen Gupta, and Sh. Vipul Gupta, Directors of SHL have been engaging in fraudulent activities with regards to allotment, transfer of shares of SHL to gain and keep control over the SHL since 1994. It was revealed from the investigation that during the year 1995, the above persons rotated Rs.1 crore 21 times to get the majority shareholdings in the name of their family members. In the year 1997, the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Income Tax Department were later fraudulently pledged with Axis Bank to secure loans, raising significant concerns of financial impropriety and public interest ramifications. Given that the investigation spanned approximately 40,000 pages of documentation, the findings are neither speculative nor conjectural but rather the outcome of a detailed forensic examination. The investigation further establishes that Petitioners No. 2, 3, and 4 engaged in fraudulent allotment and transfer of shares to consolidate and maintain control over the Petitioner company. The report highlights that they rotated INR 1 crore across 21 transactions through different entities to artificially secure a majority shareholding under the names of their family members. Additionally, elements of share duplication and impersonation of public identities have been flagged, allegedly done to retain control of the company and secure loans in its name. These findings, as recorded in the impugned SFIO report, prima facie disclose offences under the relevant provisions of the Companies Act and IPC, warranting prosecution. 12. The grounds for quashing the investigation report are in the nature of defences to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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