SC Directs Centre To Scrutinise IFCI Irregularities [Read Judgment]

Disposing of a petition by the Centre for Public Interest Litigation, the Supreme Court has directed the Union Government to ensure a due and proper scrutiny into allegations of administrative and financial irregularities in Industrial Financial Corporation of India (IFCI) by (i) serious frauds investigation officer; (ii) Reserve Bank of India; and (iii) Security and Exchange Board of India (SEBI).

In its petition before the apex court, the CPIL had sought for i) the removal of Atul Kumar Rai, respondent No. 4 from the post of Chief Executive Officer and Managing Director; (ii) an independent investigation into allegations of administrative and financial irregularities of IFCI; (iii) a direction to the Union of India to exercise its powers under the “surviving provisions” of the Industrial Finance Corporation; (iv) the Transfer of Undertaking and Repeal Act, 1993, in particular by enforcing its rights for conversion of an investment of Rs. 523 crore in optional convertible debentures into equity.

Regarding the first prayer seeking the removal of Atul Kumar Rai from the post of CEO and Managing Director, the court noted that the said prayer is infructuous since he has already been removed from the posts.

Regarding the allegations of administrative and financial irregularities of IFCI, the Bench comprising Chief Justice of India T.S. Thakur and Justice D.Y. Chandrachud observed: “There is a vital element of public interest in ensuring that a full, fair and objective scrutiny is carried out by an independent regulatory with a view to ensure a degree of accountability. If it is found that the conduct of any official or employee of IFCI led to any loss, such conduct must be subjected to scrutiny and action in accordance with law.”

The court directed the Union Ministry of Finance and Union Ministry of Corporate Affairs to ensure that a proper scrutiny is carried out in respect of the allegations which form the subject matter of these proceedings as described in the earlier part of the judgment, including on the basis of the inspection report of the ROC dated 8 January, 2013.

The Union Ministry of Finance and Corporate Affairs, respectively, shall ensure that all aspects of the matter are duly looked into by the regulators competent to do so in areas entrusted to their respective domains.

“This exercise shall be initiated not later than a period of one month from the receipt of a copy of this judgment and shall be completed no later than a period of four months thereafter,” the Bench added.

Read the Judgment here.