Did You Seek Explanation From CMRL? First Show Your Bonafide: Kerala High Court To KSIDC On Plea Against SFIO Probe

It was alleged that CMRL was involved in corruption, and handed bribes to Veena Thaikandiyil (Veena Vijayan), daughter of Chief Minister Pinarayi Vijayan, and her company Exalogic Solutions Pvt. Ltd., as well as other public servants to facilitate illegal objectives.

Justice Devan Ramachandran orally stated that the KSIDC would be removed from the party array only if they prove their bonafides that they were not aware of the alleged illegal dealings made by CMRL.

The single bench also stated that further investigation is for the benefit of KSIDC as it would bring forward any illegal transactions made by CMRL. "Is it not in your interest (KSIDC) that a proper investigation be done?" the Court inquired. 

The Union Government had initiated an investigation against CMRL, Exalogic Solutions and KSIDC by an investigating team and an interim report was submitted seeking SFIO probe under Section 210, 212 of the Companies Act, since the investigation team had found that KSIDC holds a 13.4 per cent share in CMRL and that they also had a nominee director on CMRL's Board.

Senior Advocate Vaidyanathan instructed by Advocate P.U.Shailajan, submitted that KSIDC, a government-owned institution was only a financial institution that aids industries with funds and it has no knowledge about any illegal transactions of CMRL. KSIDC also argued that it provides funds to various companies for their development and was unaware of any illegal payments made by CMRL. It was stated that an explanation was sought from CRML regarding illegal payments.

Senior Counsel also submitted that as per the summons issued to them, they have submitted all the documents to the Ministry of Corporate Affairs. It was argued that if investigations like this were carried against KSIDC then it would affect its reputation, credibility and integrity. Further, it was argued that the interim report only states that CMRL had made some illegal payments to Exalogic Solutions and nowhere any allegations were raised against KSIDC. 

The Central Government Counsel relying upon SFIO v Sahara Housing Investment Corporation Limited and Others (2022), submitted that SFIO investigation against KSIDC may not be stayed since further investigation was warranted.

Considering the arguments made by Senior Counsel appearing for the KSIDC, the Court orally directed the KSIDC to produce documents proving their bonafide. It stated that if KSIDC had sought an explanation from CMRL regarding illegal payments, then such documents may be produced on record to prove their bonafide.

The matter has been posted for further hearing on February 26, 2024.

Case title: Kerala State Industrial Development Corporation Ltd (KSIDC), Vs Union Of India, Shone George Vs Ministry Of Corporate Affairs

Case number: WP(C) 4896/ 2024, WP(C) 42092/ 2023