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TMI Blog2025 (3) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... pesh Mehta and CA No.118 of 2024 filed by Udayan Sen were rejected. Aggrieved by the said order, these appeals have been filed. These Appeals arises out of the similar facts and sequence of the events, it shall be sufficient to refer to facts and pleadings in Company Appeal (AT) No.255 of 2024 for deciding these Appeals. 2. Brief background facts giving rise to these Appeals need to be noticed: 2.1. Ministry of Corporate Affairs (MCA) in exercise of powers under Section 212 of the Companies Act, 2013 directed the Serious Fraud Investigation Office (SFIO) to investigate the affairs of the IL&FS and its subsidiaries. A Company Petition No.3638 of 2018 was filed by the MCA under Sections 241 and 242 of the Companies Act, 2013 against ILFS and its then existing Board of Directors before NCLT, Mumbai. On 01.10.2018, NCLT Mumbai passed an order superseding the existing director of the ILFS with new Board of Directors. On 30.11.2018, SFIO submitted its 1st Interim Report. On 28.05.2019, SFIO submitted its 2nd Investigation Report to the Central Government in respect of investigation into IFIN. On the basis of 2nd SFIO Report, direction was issued by MCA dated 29.05.2019 under Section 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents on the above IAs and by impugned order dated 22.07.2024 has rejected the IAs filed by the Appellant holding that 2nd interim SFIO Report or compilation of documents consisting of extract from SFIO Report can be considered by the Tribunal for adjudication of interim relief as well as final declaration. Aggrieved by the above judgment, these Appeals have been filed. 3. We have heard Shri Neeraj Kishan Kaul, Learned Senior Counsel and Shri Arun Kathpalia, Learned Senior Counsel appearing for the Appellants and Shri Aditya Sikka, Learned Counsel appearing for the Union of India. 4. Learned Senior Counsel appearing for the Appellant in support of the appeals contends that the 2nd SFIO Report having been equated as report prepared under Section 173 of the Code of Criminal Procedure (CrPC) 1973, as per Section 212(15) of the Companies Act, 2013, the 2nd SFIO Report is not admissible as legal evidence. A report under Section 173 of the CrPC has been expressly made inadmissible as legal evidence and has been considered only to be an opinion of the police officer who conducts the police investigation. By virtue of deeming fiction created under Section 212 (15) by which SFIO Report is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oked into on this ground alone. The procedure before the NCLT being summary in nature, it is necessary that the appellant has notice of the case i.e. require to be met by it before NCLT. It is submitted that the admissibility of 2nd SFIO Report has not attained finality in the proceeding where impleadment application was allowed and order of impleading the appellant has been affirmed by this Tribunal in appeal. The issues which sought to be raised in this appeal have never been adjudicated nor any finality can be attached on the issue regarding admissibility of 2nd SFIO Report on the basis of order passed in the impleadment application. No finding having been rendered in earlier proceeding with regard to admissibility of 2nd SFIO Report, there is no question of applicability of even principle of constructive res judicata. NCLT has failed to consider that a combined reading of Sections 212 and 223(5) of the Companies Act would mean that such a report is not admissible in evidence. The judgment rendered by the NCLT is not in conformity with the principle of interpretation which has been laid down by the Hon'ble Supreme Court. The deeming fiction under Section 212(15) cannot be held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the provision of Section 223(5), it is contended that sub-section (5) of Section 223 only provides that nothing in Section 223 shall apply to Section 212 that the object was to not make SFIO Report; Under Section 212 subject to any authentication as contemplated under Section 223 for inspector's report, sub-section (5) of Section 223 cannot mean any more. Apart from not confining the report under Section 212 with the procedure as contemplated under Section 223, Civil and Criminal proceeding can simultaneously proceed. Coming to the submission of the appellant that there are no pleadings with respect to compilation of documents which are sought to be introduced before the NCLT, it is submitted that MA No.2070 of 2019 is an application for interim relief only and there are sufficient pleadings with reference to document being relied on. The 2nd SFIO Report having been served on the appellant in the year 2019 itself, appellants cannot be heard to contend that they are not aware of the documents which was part of the report. It is thus submitted that the submission that the compilation of document cannot be accepted deserve rejection and the compilation of document filed by the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, details of 1st interim report dated 30.11.2018 as well as 2nd SFIO Report dated 28.05.2019. Paragraph 12 of the application gives brief the investigation report. Paragraph 12 is as follows:- "12. That in brief the investigation report reveals as under, however, details of transactions are mentioned in the annexures to the report which are not reproduced here for the sake of brevity: I. Infrastructure Leasing and Financial Services Limited (hereinafter referred to as "IL&FS") is an infrastructure development and finance company. IL&FS have number of subsidiaries, associated and Joint Ventures in India and abroad. There were a series of media reports on the defaults made by IL&FS and its subsidiary companies in meeting their obligations to repay their Commercial Papers, short term borrowings and issues on the liquidity crunch, corporate governance, irregularities/complacency in risk assessment, etc. It was also reported that there had been a spate of resignations by nominee and key managerial personnel in recent past. II. Taking on the basis of the payment crisis in IL&FS Group, the role played by the company and its subsidiary companies, the quantum of investment of general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CA Nos. 65 of 2024, 117 of 2024 and 118 of 2024 have been filed subsequent to the Union of India having filed the compilation of documents which compilation of documents were part of the 2nd SFIO Report submitted on 28.05.2019. Counsel for the Respondent submitted that the 2nd SFIO Report dated 28.05.2019 which was also served in soft copy to all the appellants after they were impleaded in the proceedings. Annexure 18 to the Appeal is copy of the compilation documents filed by Respondent No.1 on 07.02.2024 before the NCLT. When we look into the said compilation, it contains the note of investigation report and some documents which were part of the 2nd SFIO Report. CA No.65 of 2024 was filed by Deloitte Haskins and Sells LLP which was dated 16.02.2024. In C.A. No.65 of 2024, following prayers were made in paragraph 10 of the application:- "10. PRAYERS : In light of the aforesaid circumstances, the Applicant herein is approaching this Hon'ble Tribunal seeking the reliefs as set out hereunder : a. That this Hon'ble Tribunal be pleased to declare that the Compilation of Documents dated 7th February 2024 (being annexures to the 2nd Interim SFIO Report) tendered by Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o corporate affairs. (4) The Central Government may appoint such experts and other officers and employees in the Serious Fraud Investigation Office as it considers necessary for the efficient discharge of its functions under this Act. (5) The terms and conditions of service of Director, experts, and other officers and employees of the Serious Fraud Investigation Office shall be such as may be prescribed." 13. 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. Section 212 (11) and (12) provides for interim report and investigation report which are as follows:- "212. Investigation into Affairs of Company by Serious Fraud Investigation Office -(11) The Central Government if so directs, the Serious Fraud Investigation Office shall submit an inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may file an application before Tribunal with regard to disgorgement and such director, key managerial personnel or officer may be held personally liable without any limitation of liability." 17. The 'notes on clauses' throw considerable light on the proposed amendment in Section 212 by sub-clause (14A) was sought to be inserted. Sub-section (14A) of Section 212 which is founded on report under sub- sections (11) and (12) of Section 212, the Central Government is authorised to file an application before the Tribunal for appropriate orders with regard to disgorgement of the said property when a report under sub-sections (11) and (12) states that a fraud has taken place in a company and due to such fraud any director, key managerial personnel or officer of the company or any other person entity has taken undue advantage or benefit. The legislative scheme clearly indicate that it is the report under sub-sections (11) and (12) of Section 212 on the basis of which an application can be filed by the Central Government before the NCLT. MA No.2071 of 2019 as noted above was filed by the Central Government after 2nd SFIO Report was received on 28.05.2019. 18. Now we need to notice Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the same subject-matter. In paragraph 16, following was laid down:- "16. There is a presumption against repeal by implication and the reason for this rule is based on the theory that the legislature while enacting a law has complete knowledge of the existing laws on the same subject-matter, and therefore, when it does not provide a repealing provision, the intention is clear not to repeal the existing legislation. [State of M.P. v. Kedia Leather & Liquor Ltd., (2003) 7 SCC 389, para 13 : 2003 SCC (Cri) 1642; See: Municipal Council, Palai v. T.J. Joseph, (1964) 2 SCR 87 : AIR 1963 SC 1561; Northern India Caterers (P) Ltd. v. State of Punjab, (1967) 3 SCR 399 : AIR 1967 SC 1581; MCD v. Shiv Shanker, (1971) 1 SCC 442 : 1971 SCC (Cri) 195; R.S. Raghunath v. State of Karnataka, (1992) 1 SCC 335 : 1992 SCC (L&S) 286; Ratan Lal Adukia v. Union of India, (1989) 3 SCC 537]" 21. In "Department of Customs" (supra), the Hon'ble Supreme Court had occasion to consider various provisions of the Customs Act, 1962. In paragraph 17, following was laid down:- "17. ............... The legislature was fully conscious that the Customs Act, 1962 exists on the statute book. The legislature was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. The said principle has been reiterated by this Court in M. Venugopal v. Divisional Manager, LIC of India [(1994) 2 SCC 323 : 1994 SCC (L&S) 664 : (1994) 27 ATC 84] . See also Indian Oil Corpn. Ltd. v. Chief Inspector of Factories [(1998) 5 SCC 738 : 1998 SCC (L&S) 1433] , Voltas Ltd. v. Union of India [1995 Supp (2) SCC 498] , Harish Tandon v. ADM, Allahabad [(1995) 1 SCC 537] and G. Viswanathan v. Hon'ble Speaker, T.N. Legislative Assembly [(1996) 2 SCC 353] ." 23. Another judgment relied by the Counsel for the Appellant is "State of Karnataka vs. State of Tamil Nadu and Ors.- (2017) 3 SCC 362" where the Hon'ble Supreme Court noticed that in interpreting a provision creating a legal fiction, the court is to ascertain for what purpose the fiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Karam Chand Thapar [Chief Inspector of Mines v. Karam Chand Thapar, AIR 1961 SC 838 : (1961) 2 Cri LJ 1] , J.K. Cotton Spg. and Wvg. Mills Ltd. v. Union of India [J.K. Cotton Spg. and Wvg. Mills Ltd. v. Union of India, 1987 Supp SCC 350 : 1988 SCC (Tax) 26] , M. Venugopal v. LIC [M. Venugopal v. LIC, (1994) 2 SCC 323 : 1994 SCC (L&S) 664] and Harish Tandon v. ADM, Allahabad [Harish Tandon v. ADM, Allahabad, (1995) 1 SCC 537] and eventually, it was held that when a statute creates a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, the Court has to examine and ascertain as to for what purpose and between which persons such a statutory fiction is to be resorted to and thereafter, the courts have to give full effect to such a statutory fiction and it has to be carried to its logical conclusion. 38. From the aforesaid pronouncements, the principle that can be culled out is that it is the bounden duty of the court to ascertain for what purpose the legal fiction has been created. It is also the duty of the court to imagine the fiction with all real consequences and instances unless prohibited from doing so. That apart, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A if the relevant conditions of the said section are fulfilled by him and in such an eventuality merely because such a mortgagee-in-possession is covered by the sweep of any final judgment or decree for redemption the same will not come in his way. On the facts of the present cases, however, as we have seen, not only the appellants were covered by a final decree for redemption but they had lost the status of mortgagees-in-possession almost 9 months prior to the coming into force of Section 4-A. Therefore, on the date on which the section operated they were no longer mortgagees-in-possession. Consequently the non obstante clause which would have otherwise helped them if they had continued as mortgagees-in- possession on 1-1-1970 does not avail the appellants on the facts of the present cases. The learned Senior Counsel for the appellants next contended that in any case the appellants had remained in possession as mortgagees by themselves and through their predecessors for more than fifty years, that the mortgage was of 1896 and even by the date the suit was filed, fifty years' period was over. That may be so. However the requirement of the second condition, as we have shown ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before such a deemed tenancy can arise it must be shown by the beneficiary concerned of the said provision that he was a mortgagee-in-possession for a continuous period of not less than fifty years immediately preceding the commencement of the said section. The words "immediately preceding the commencement" must necessarily be given their ordinary and full meaning. They necessarily point out the legislative intent that the fiction is created only for covering such type of cases where the mortgagee-in-possession not only exists on the land as mortgagee on 1-1-1970 but also continuously existed as such for a period backward stretching up to at least 50 years in past from 31-12-1969 which was the day immediately preceding such commencement. Argument of the learned Senior Counsel was that if the words "50 years of continuous possession as mortgagee at any time prior to the coming into force of the amending Act" are read in the section by implication, he would qualify for the benefit of Section 4-A. Such a contention would have stood the test if the section would have been worded differently, namely, as follows : "Such mortgagee was in continuous possession for a period of not less t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for all or any other purpose and at any rate for the purpose of either making the provisions of the Limitation Act, 1963 attracted to proceedings before such competent authority or clothe such authority with any power to be exercised under the Limitation Act. It is by now well settled by innumerable judgments of various courts including this Court, that when a statute enacts that anything shall be deemed to be some other thing the only meaning possible is that whereas the said thing is not in reality that something, the legislative enactment requires it to be treated as if it is so. Similarly, though full effect must be given to the legal fiction, it should not be extended beyond the purpose for which the fiction has been created and all the more, when the deeming clause itself confines, as in the present case, the creation of fiction for only a limited purpose as indicated therein. Consequently, under the very scheme of provisions enacted in Chapter VIII of the Act and the avowed legislative purpose obviously made known patently by those very provisions, the competent authority can by no means be said to be "court" for any and every purpose and that too for availing of or exercisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. The report must be in the form prescribed by the State Government and stating therein (a) the names of the parties; (b) the nature of the information; (c) the names of the persons who appear to be acquainted with the circumstances of the case; (d) whether any offence appears to have been committed and, if so, by whom (e) whether the accused has been arrested; (f) whether he had been released on his bond and, if so, whether with or without sureties; and (g) whether he has been forwarded in custody under Section 170. As observed by this Court in Satya Narain Musadi v. State of Bihar [(1980) 3 SCC 152, 157 : 1980 SCC (Cri) 660] that the statutory requirement of the report under Section 173(2) would be complied with if the various details prescribed therein are included in the report. This report is an intimation to the magistrate that upon investigation into a cognizable offence the Investigating Officer has been able to procure sufficient evidence for the court to inquire into the offence and the necessary information is being sent to the court. In fact, the report under Section 173(2) purports to be an opinion of the Investigating Officer that as far as he is concerned he has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of legal evidence does not arise. In any event, that function is that of the courts." 28. There can be no quarrel to the proposition that the police report is not legal evidence. The present is a case where we are 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. 29. We have noticed the judgment of the Hon'ble Supreme Court in "Union of India vs. Ranjit Kumar Saha" (supra) that legislature when passes a law has complete knowledge of existing law. We need to put the said statutory interpretation on sub-section (14A) which is relevant for the present case. In the present case, application MA No.2070 of 2019 has been filed by the Central Government under Section 212 (14A) and the objection which has been raised by the Appellant are with reference to proceeding under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany whose affairs have been investigated; or (b) by a certificate of a public officer having the custody of the report, as provided under section 76 of the Indian Evidence Act, 1872, and such report shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report." 32. The inspector's report under sub-section (4) becomes admissible in legal proceeding subject to compliance of sub-section (4). When we look into sub-sections (1), (2) and (3), the said provisions are provisions which empower the inspector to submit interim report and the final report which is also statutory scheme of Section 212 (11) and (12). No exception can be taken to sub-section (2) of Section 223 that every report shall be in writing. Sub- section (3) of Section 223 provides that report may be obtained by members, creditor or any other persons by making an application. Sub-section (3) of Section 212 provides as follows:- "212. Investigation into Affairs of Company by Serious Fraud Investigation Office- (3) Where the investigation into the affairs of a company has been assigned by the Central Government to Serious Fraud Investigation Office, it shall conduct the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guage used therein, giving reference to the context and other provisions of the statute. In paragraph 44 of the judgment, following was held:- "44. No word in a statute has to be construed as surplusage. No word can be rendered ineffective or purposeless. Courts are required to carry out the legislative intent fully and completely. While construing a provision, full effect is to be given to the language used therein, giving reference to the context and other provisions of the statute. By construction, a provision should not be reduced to a "dead letter" or "useless lumber". An interpretation which renders a provision otiose should be avoided otherwise it would mean that in enacting such a provision, the legislature was involved in "an exercise in futility" and the product came as a "purposeless piece" of legislation and that the provision had been enacted without any purpose and the entire exercise to enact such a provision was "most unwarranted besides being uncharitable". (Vide Patel Chunibhai Dajibha v. Narayanrao Khanderao Jambekar [AIR 1965 SC 1457] , Martin Burn Ltd. v. Corpn. of Calcutta [AIR 1966 SC 529] , M.V. Elisabeth v. Harwan Investment and Trading (P) Ltd. [1993 Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate to the issues before the court for its consideration. This Court has repeatedly held that the pleadings are meant to give to each side intimation of the case of the other so that it may be met, to enable courts to determine what is really at issue between the parties, and to prevent any deviation from the course which litigation on particular causes must take. 13. The object of issues is to identify from the pleadings the questions or points required to be decided by the courts so as to enable parties to let in evidence thereon. When the facts necessary to make out a particular claim, or to seek a particular relief, are not found in the plaint, the court cannot focus the attention of the parties, or its own attention on that claim or relief, by framing an appropriate issue. As a result the defendant does not get an opportunity to place the facts and contentions necessary to repudiate or challenge such a claim or relief. Therefore, the court cannot, on finding that the plaintiff has not made out the case put forth by him, grant some other relief. The question before a court is not whether there is some material on the basis of which some relief can be granted. The question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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