Once Investigation Is Initiated By SFIO Under Companies Act, Parallel Probe By Separate Agency Not Permissible: Delhi High Court

The Delhi High Court has ruled that once an investigation has been initiated by Serious Fraud Investigation Office (SFIO) under Section 212 of the Companies Act, 2013, a parallel investigation by a separate agency into the affairs of such a company is not permissible.

Justice Saurabh Banerjee observed so in view of the bar contained under Section 212(2) of the Act which states that where a case has been assigned by the Central Government to the SFIO, no other investigating agency shall proceed with the probe.

“Once the investigation into the affairs of a Company has been initiated by the SFIO, there is no reason for any other agency to conduct investigation into the affairs of such a Company, more so whence the SFIO under Section 212 of the 2013 Act itself is a specialized agency consisting of experts from diverse fields with the expertise, knowledge and requisite information under Section 211 of the 2013 Act having a demarcated/ specialised mechanism,” the court said.

It added that the SFIO has a vast power to investigate and enquire into the affairs of a Company once it has been given a green signal by the Central Government.

The court said that after any transfer of investigation as per Section 212(17)(a) of the Act to the SFIO, no other agency can proceed further with investigation of such offence involving the same nature, particularly, if the offence is arising out of the same facts and circumstances.

“Furthermore, as already opined, Section 212 of the 2013 Act is a complete code in itself wherein all the provisions contained therein are, not only interdependent upon each other and thus have to be harmoniously read together conjointly with each other, especially when it concerns readings of the provisions of Section 212(2) and Section 212(17)(a) and Section 212(17)(b) of the 2013 Act,” the court said.

It also said that the Companies Act 2013, being a special piece of legislation, is not in derogation of the Cr.P.C. which is a general piece of legislation. The same is reinforced from the fact that they both and the proceedings emanating therefrom are very much co-existing and operating though in different spheres but before the same Special Court together, the court added.

Justice Banerjee made the observations while quashing an FIR registered by Delhi Police’s EOW qua one Ashish Bhalla as the SFIO was already seized of the investigation against a company owned by Bhalla.

The Ministry of Corporate Affairs in 2021 ordered the investigation against WTC group of Companies under Section 212 of the Companies Act.

The court directed that all the documents available with the Investigating Officer of EOW shall be transferred to SFIO within four weeks.

The complainants were Bhalla’s former associates in another project. The allegations against the accused company were regarding fraudulent and illegal siphoning of funds through shell companies and illegal collection of funds by running Ponzi Scheme in the name of “Assured Return” in the guise of several real estate projects.

“…in view of Section 212(17)(a) read with Section 212(2) of the 2013 Act and based upon all the contentions raised by the learned (senior) counsels for the parties coupled with the documents on record, in the considered opinion of this Court, the impugned FIR is liable to be quashed and transferred to the SFIO as the proceedings thereunder are not maintainable in the eyes of law,” Justice Banerjee said.

Case Title: ASHISH BHALLA v. STATE & ANR.

Citation: 2023 LiveLaw (Del) 860

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