SERIOUS FRAUD INVESTIGATION OFFICE AND OTHERS versus SAHARA HOUSING INVESTMENT CORPORATION LIMITED AND OTHERS

Citation: [2022] 16 S.C.R. 1060 · Decided: 26-05-2022 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 16 S.C.R.
SERIOUS FRAUD INVESTIGATION OFFICE AND OTHERS
v.
SAHARA HOUSING INVESTMENT CORPORATION LIMITED
AND OTHERS
(Civil Appeal No. 4299 of 2022)
MAY 26, 2022
[DR. DHANANJAYA Y CHANDRACHUD AND
BELA M. TRIVEDI, JJ.]
Companies Act, 2013: ss.212 & 219 – Power to Investigate–
Affairs of Company – Body Corporate – Writ petitions filed before
High Court challenging the legality of the orders dated 31 October
2018 and 27 October 2020 of the Union Ministry of Corporate
Affairs, authorising an investigation under provisions of ss.212 and
219 in respect of several corporate entities of the Sahara group –
High Court, by its interim order stayed the operation, implementation
and execution of the investigation orders on the grounds that
directions issued for investigation by order dated 31 October 2018
was after the expiry of the stipulated time as per s.212(3); and order
dated 27 October, 2020 authorising investigation into six other
companies was prima facie contrary to s.219, as the six companies
were neither subsidiaries nor holding companies of the companies
which were to be investigated; and thirdly, orders did not furnish
the reasons or circumstances which compelled the Central
Government to form opinion – Aggrieved, Union government filed
instant appeal – Issue limited to whether the High Court was justified
in passing an interim direction staying the operation of the two
orders – Held: High Court does have the power to pass wide-ranging
directions in the exercise of its extraordinary jurisdiction –
Companies Act 2013 does not contain any specific prescription of
time and the reference to the completion of the investigation within
a stipulated period is directory and not mandatory – Order of the
Union Government dated 27 October 2020 contained factual
averments which related to the invocation of the jurisdiction clause
(c) of s.219, which allows an investigation into the affairs of any
other body corporate whose Board of Directors comprises nominees
   [2022] 16 S.C.R. 1060
1060
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of a company or is accustomed to act in accordance with the
directions or instructions of the company or any of its directors –
On the basis of material placed on record, it cannot be said that the
Union Government had not indicated reasons for the exercise of its
jurisdiction under s.212 and s.,219 – At this stage, the Union
Government was only ordering an investigation and it would be
inappropriate to place a burden of recording elaborate reasons
when the purpose of the investigation is to ensure that a full enquiry
into the affairs of the companies is carried out – High Court was
not justified in staying the investigation and in passing the
consequential directions which have been passed in the impugned
orders at the interlocutory stage – Interlocutory order.
Allowing the appeals, the Court
HELD: 1.1 The order of the Union Government dated 27
October 2020 contains factual averments which relate to the
invocation of the jurisdiction clause (c) of Section 219. Clause (c)
of Section 219 allows an investigation into the affairs of any other
body corporate whose Board of Directors comprises nominees
of a company or is accustomed to act in accordance with the
directions or instructions of the company or any of its directors.
The order dated 27 October 2020 contains a specific invocation
of the above provision, when it states thus: “AND whereas SFIO
vide letter dated 24th Sept. 2020 sought permission under section
219 of the Companies Act, 2013 for investigation into the affairs
of the following six companies that intertwined the activities of
the companies under investigation” [Para 14][1070-C-E]
1.2 It cannot be said that the Union Government had not
indicated reasons for the exercise of its jurisdiction under Section
212 and Section 219. At this stage, the Union Government was
only ordering an investigation and it would be inappropriate to
place a burden of recording elaborate reasons when the purpose
of the investigation is to ensure that a full enquiry into the affairs
of the companies is carried out. The third reason which weighed
with the High Court is hence specious. The High Court was not
justified in staying the investigation and in passing the
consequential directions which have been passed in the impugned
orders at the interlocutory stage. [Paras 15, 16][1071-A-C]
SERIOUS FRAUD INVESTIGATION OFFICE v. SAHARA HOUSING
INVESTMENT CORPN. LTD.
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SUPREME 

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