Parallel Probe By Separate Agency Is Not Permissible Once Investigation Is Initiated By SFIO Under Companies Act- Delhi HC

A Delhi High Court Bench of Justice Saurabh Banerjee has held that a parallel investigation by a separate investigation agency into the affairs of a company cannot be held once an investigation has been initiated by the Serious Fraud Investigation (SFIO) under Section 212 of the Companies Act, 2013.

In that context, it was said that, "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 SFIO has thus a vast power to investigate and enquire into the affairs of the Company once it has been given a green signal by the Central Government."

Senior Advocate Sudhir Nandrajog and Senior Advocate Preetesh Kapur appeared for the petitioner, while APP Ajay Vikram Singh appeared for the State.

In this case, the Court was hearing a petition for quashing an FIR filed by Delhi Police's EOW (Economic Offences Wing) against a person named Ashish Bhalla. In 2021, the Ministry of Corporate Affairs initiated an investigation under Section 212 of the Companies Act against the WTC group of Companies, of which Bhalla was a part.

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.

The High Court observed that once the SFIO has been given a green signal by the Central Government, it has vast powers to investigate and enquire into the affairs of a Company. 

On a holistic reading of the Companies Act, the Court concluded that, "after any transfer as per Section 212(17)(a) of the 2013 Act to SFIO, no other agency can proceed further with investigation of such offence involving the same nature, particularly, if the said offence is arising out of the same facts and circumstances."

The Court also stressed that 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.

Further, the Court also observed that, "the 2013 Act itself is a special piece of legislation enacted specifically for looking into the affairs of a Company, which has alleged to have committed ‘fraud’ whereas the proceedings before the EOW involving the provisions of the IPC, which are governed by the provisions of the Cr.P.C., a general piece of legislation. While dealing with the provisions of the 2013 Act, this Court cannot lose sight of the fact that the provisions of Section 212 introduced and contained in the 2013 Act is in addition to and not in derogation of any provisions contained in any other Act(s) or Statute(s)."

In light of the same, the Court directed that all the documents available with the Investigating Officer of the EOW shall be transferred to the SFIO within four weeks.

Cause Title: Ashish Bhalla v. State & Anr.

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