Karvy Stock Broking Limited vs The Union Of India
2021 Latest Caselaw 4702 Tel

THE HON'BLE THE CHIEF JUSTICE SATISH CHANDRA SHARMA
                         AND
        THE HON'BLE SRI JUSTICE N. TUKARAMJI

             WRIT APPEAL Nos.327 AND 328 OF 2020

COMMON JUDGMENT:      (Per the Hon'ble the Chief Justice Satish Chandra Sharma)


     Both the writ appeals are arising out of a common

Order and as the issue involved in both the writ appeals is

one and the same, they are being disposed of by this

common order.


2.   The present writ appeals are arising out of a common

order dated 26.08.2020, passed in W.P.Nos.5024 and 8997

of 2020 by the learned Single Judge dismissing the writ

petitions.


3.   The facts of the case reveal that the appellant/

petitioner is a company registered under the Companies

Act with the Registrar of Companies, Hyderabad and its

main object is to carry out the business as a registered

stock broker and a depository participant. The undisputed

facts of the case reveal that the second respondent/

Director General, Ministry of Corporate Affairs, through its

Joint Director in exercise of powers conferred under

Section 212(1)(a) and (c) of the Companies Act, 2013

ordered investigation into the affairs of the appellant

company, vide Order dated 27.02.2020 and in pursuance

of the Order dated 27.02.2020, the investigation officer

issued notice dated 16.06.2020 under Section 217 of the

Companies Act calling for certain information and vide

communication dated 19.06.2020 intimated the appellant

company to strictly comply with notice under Section 217

of the Companies Act with default clause. The appellant

company preferred a writ petition i.e., W.P.No.5024 of 2020

challenging the Order, dated 27.02.2020 passed by the

second respondent under Section 212(1) (a) and (c) of the

Companies Act, and filed another writ petition i.e.,

W.P.No.8997 of 2020 challenging the notices dated

16.06.2020 and 19.06.2020, issued under Section 217 of

the Companies Act.

4. The facts of the case further reveal that on

22.11.2019, the National Stock Exchange (NSE) has

reported to the Securities and Exchange Board of India

(SEBI), the findings of an inspection and forensic audit

conducted by the NSE in respect of the activities of the

appellant company and the same revealed many

misconducts on the part of the appellant company

including the unauthorised pledging of client securities

and transfer of funds raised from the above to the related

parties, stock lending scheme carried out by the company

and deletion of files and emails from the systems of Mr.

C.Parthasarthy, Chairman and Managing Director of the

appellant company as well as certain other employees,

using anti-forensic tools. The SEBI vide its ex parte ad

interim order, dated 22.11.2019 issued various directions

relating to the appellant company. The SEBI prohibited the

appellant company from taking new clients for broking

activities, directed the depositories, namely National

Securities Depository Limited (NSDL) and Central

Depository Services Limited (CDSL) not to act upon on the

instructions of the appellant company in pursuance of

Power of Attorney and also restricted transfer of securities

from one DP account of the appellant company.

5. The facts further reveal that there were complaints

from the investors and continuous reporting in press and

visual media about the fraudulent activities of the

appellant company and in those circumstances, the

Inquiry was ordered under Section 206 of the Companies

Act by the Registrar of Companies.

6. The statutory provisions, namely Sections 206, 208,

210 and 212 (1) of the Companies Act, which are necessary

for adjudication of the present writ appeals, are reproduced

as under:-

"206. Power to call for information, inspect books and conduct inquiries. -- (1) Where on a scrutiny of any document filed by a company or on any information received by him, the Registrar is of the opinion that any

further information or explanation or any further documents relating to the company is necessary, he may by a written notice require the company--

(a) to furnish in writing such information or explanation; or

(b) to produce such documents, within such reasonable time, as may be specified in the notice.

(2) On the receipt of a notice under sub-section (1), it shall be the duty of the company and of its officers concerned to furnish such information or explanation to the best of their knowledge and power and to produce the documents to the Registrar within the time specified or extended by the Registrar:

Provided that where such information or explanation relates to any past period, the officers who had been in the employment of the company for such period, if so called upon by the Registrar through a notice served on them in writing, shall also furnish such information or explanation to the best of their knowledge.

(3) If no information or explanation is furnished to the Registrar within the time specified under sub-section (1) or if the Registrar on an examination of the documents furnished is of the opinion that the information or explanation furnished is inadequate or if the Registrar is satisfied on a scrutiny of the documents furnished that an unsatisfactory state of affairs exists in the company and does not disclose a full and fair statement of the information required, he may, by another written notice, call on the company to produce for his inspection such further books of account, books, papers and explanations as he may require at such place and at such time as he may specify in the notice:

Provided that before any notice is served under this sub- section, the Registrar shall record his reasons in writing for issuing such notice.

(4) If the Registrar is satisfied on the basis of information available with or furnished to him or on a representation

made to him by any person that the business of a company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act or if the grievances of investors are not being addressed, the Registrar may, after informing the company of the allegations made against it by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit after providing the company a reasonable opportunity of being heard:

Provided that the Central Government may, if it is satisfied that the circumstances so warrant, direct the Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this sub-section: Provided further that where business of a company has been or is being carried on for a fraudulent or unlawful purpose, every officer of the company who is in default shall be punishable for fraud in the manner as provided in section 447.

(5) Without prejudice to the foregoing provisions of this section, the Central Government may, if it is satisfied that the circumstances so warrant, direct inspection of books and papers of a company by an inspector appointed by it for the purpose.

(6) The Central Government may, having regard to the circumstances by general or special order, authorise any statutory authority to carry out the inspection of books of account of a company or class of companies. (7) If a company fails to furnish any information or explanation or produce any document required under this section, the company and every officer of the company, who is in default shall be punishable with a fine which may extend to one lakh rupees and in the case of a continuing failure, with an additional fine which may extend to five hundred rupees for every day after the first during which the failure continues."

208. Report on inspection made:- The Registrar or inspector shall, after the inspection of the books of account or an inquiry under section 206 and other books and papers of the company under section 207, submit a report in writing to the Central Government along with such documents, if any, and such report may, if necessary, include a recommendation that further investigation into the affairs of the company is necessary giving his reasons in support.

210. Investigation into affairs of company:- (1) Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company,-

(a) on the receipt of a report of the Registrar or inspector under section 208;

(b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or

(c) in public interest,

it may order an investigation into the affairs of the company.

(2) Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation into the affairs of that company. (3) For the purposes of this section, the Central Government may appoint one or more persons as inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct.

212. Investigation into affairs of Company by Serious Fraud Investigation Office:- (1) Without prejudice to the provisions of section 210, where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company by the Serious Fraud Investigation Office-

(a) on receipt of a report of the Registrar of inspector under Section 208;

(b) on intimation of a special resolution passed by a company that its affairs are required to be investigated;

     (c)    in the public interest; or
     (d)    on request from any Department of the Central
            Government or a State Government,

the Central Government may, by order, assign the investigation into the affairs of the said company to the Serious Fraud Investigation Office and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation."

7. In the light of the aforesaid statutory provisions, the

respondent No.6/Assistant Registrar of Companies issued

a letter dated 03.12.2019 calling for certain information of

the appellant company with regard to the current status

and investigation of SEBI and the action taken against the

appellant company and its group companies and in

pursuance of the same, the appellant company submitted

its reply on 13.12.2019. The facts further reveal that the

respondent No.6/Assistant Registrar of Companies issued

a notice on 14.01.2020 under Section 206(1) of the

Companies Act calling upon the appellant company to

furnish some more information and documents within

seven days of receipt of such notice and the appellant

company sought four weeks time vide letter dated

22.01.2020 but time was not granted to the appellant

company and another notice dated 27.01.2020 under

Section 206(3) of the Companies Act was issued to the

appellant company to furnish original documents/registers

maintained by the appellant company. It has been stated

that the officers of the appellant company were physically

present on 27.01.2020 and submitted a preliminary reply

and sought time to submit some more documents and also

prayed for grant of opportunity of personal hearing. The

appellant company at that point of time preferred again a

writ petition, i.e., W.P.No.3143 of 2020 before this Court

stating that they were not given time to respond to the

letter dated 14.01.2020 and therefore, the action of the

respondents is bad in law. In the aforesaid case, the

learned Assistant Solicitor General appeared in the matter

and categorically stated that the respondents will take into

account the explanation submitted by the appellant

company and shall proceed with the enquiry in accordance

with law. The writ petition was disposed of in view of the

statement made by the learned Assistant Solicitor General,

vide order dated 14.02.2020.

8. The appellant company thereafter requested the

respondents vide letter dated 20.02.2020 stating that an

opportunity of hearing be granted to the appellant

company and as allegedly no response was received, the

appellant company preferred another writ petition,

i.e., W.P.No.4742 of 2020 and in the aforesaid case, it was

brought to the notice of this Court that based upon the

Inquiry Report dated 24.02.2020 submitted by the

Registrar of Companies, the Office of the Director General

has passed an Order dated 27.02.2020 directing

investigation into the affairs of the appellant company

under Section 212 (1)(a) and (c) of the Companies Act.

9. Aggrieved by the aforesaid order, the appellant

company preferred another writ petition, i.e., W.P.No.5024

of 2020. The respondents have also issued notices under

Section 217 of the Companies Act dated 16.06.2020 and

19.06.2020 and against the aforesaid notices, the

appellant company preferred another writ petition, i.e.,

W.P.No.8997 of 2020.

10. Learned counsel for the appellant/petitioner company

has vehemently argued before this Court that the appellant

company has not been granted an opportunity as provided

under Section 206(4) of the Companies Act and a Report

was submitted by the Registrar of Companies without

granting an opportunity to the appellant company and

therefore, the order dated 27.02.2020 deserves to be

quashed. Another ground raised by the appellant company

is that the Central Government has not formed any opinion

based upon the Report submitted by the Registrar of

Companies as required under Section 210 of the

Companies Act and therefore, the order passed by the

Central Government is bad in law. The appellant/petitioner

company has prayed for the following reliefs in the writ

petitions:-

"W.P.No.5024 of 2020:-

Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to

(i) Issue writ of mandamus or any other appropriate writ, order or direction declaring that the action of respondent No.2 in issuing order dated 27.02.2020 is in contravention of the provisions of the Companies Act, 2013 and is illegal, arbitrary and unconstitutional.

(ii) Issue writ of mandamus or any other appropriate writ, order or direction restraining the Respondents and their agents/officers from taking any coercive steps including investigation under Section 212 of the Companies Act, 2013, without following the procedures under Sections 206 to 208 of the Companies Act, 2013, without awaiting the final decision of SEBI.

W.P.No.8997 of 2020:-

Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to

(i) Issue writ of mandamus or any other appropriate writ, order or direction declaring that the action of respondent No.3 in issuing Notice No.SFIO/INV/UNIT-II/11214-223/KSBL/2020/1/

19889/2020, dated 16/06/2020, Notice No.SFIO/ INV/UNIT-II/1214-1223/KSBL/2020/1/19930/ 2020, dated 19/06/2020, is in contravention of the provisions of the Companies Act, 2013 and is illegal, arbitrary and unconstitutional and consequently set aside the Notice No.SFIO/INV/UNIT-II/11214-223/KSBL/2020/1/ 19889/2020, dated 16/06/2020, Notice No.SFIO/ INV/UNIT-II/1214-1223/KSBL/2020/1/19930/ 2020,

(ii) Issue writ of mandamus or any other appropriate writ, order or direction restraining the Respondents and their agents/officers from taking any coercive steps against the petitioner, pending W.P.No.5024 of 2020 before this Hon'ble Court."

11. The learned Single Judge has dismissed the writ

petitions by a Common Order dated 26.08.2020 and

relevant portion is reproduced as under:-

"81. In the light of these allegations, the 5th respondent initiated inquiry under Section 206 of the Act and issued notices and the petitioner also filed a detailed reply dated 03.02.2020 and at during that stage, the 2nd respondent vide order dated 10.01.2020 directed the 5th respondent to conduct full-fledged inquiry under Section 206(4) of the Act and submit report. And this court vide order dated 14.02.2020 directed the respondents to conclude the inquiry under Section 206(1) of the Act by duly taking into consideration the reply submitted by the petitioner on 03.02.2020. Accordingly, the 5th respondent, by considering the reply of the petitioner dated 03.02.2020, concluded the inquiry under Section 206(4) of the Act and submitted report dated 24.02.2020, and this court, while considering the first issue, held that initiation of inquiry by Central Government and report submitted by 5th respondent are in conformity with sub-section (4) of

Section 206 of the Act. The said report formed the basis for passing the impugned order dated 27.02.2020, ordering investigation by SFIO into the affairs of the company, and the investigation is also ordered in public interest.

82. As the report dated 24.02.2020 is relied upon by the 2nd respondent to pass the impugned order, it is necessary to examine the said report, to see whether the 2nd respondent is justified in forming an opinion to order for investigation by SFIO. The said report is filed along with the material papers to the counter affidavit, and the relevant conclusions are as under:

(14) CONCLUSION:

(14.1) The company has filed its latest financial statements for the financial year 2018-19 only on 23.12.2019 and Annual Return on 31.12.2019. Further based on the media reports and directions from the Directorate and the Ministry letters have been issued to the company include the latest one issued under Section 206(1) dated 14.01.2020 for their comments within 7 days. The company has furnished its reply vide letter dated 03.02.2020, which has been examined in detail in the Tabular Statement attached as Annexure-IV. It may be seen that the company has not provided full details on specific details called for, as may be seen from the attached report.

(14.2) In view of the nature of allegations, the number of group companies involved which are under jurisdictions of various ROCs, the prima facie findings that the company has raised their loan capital by pledging shares of their clients and diverted the money to group companies using a power of attorney taken from the clients, which is meant to be used only at the time of the client's direction to sell the securities, with a criminal intent without the knowledge or consent of clients, discrepancies in charge documents in this office with that

of the claims of bank revealed in SEBI orders, signing of standalone balance sheet by the continuing auditor and consolidated balance sheet by a different auditor appointed just before AGM i.e., 30.09.2019, the media reports about investor grievances and to protect investors money, this office suggests that the Ministry may consider an investigation into affairs of this company, Karvy group of companies and 9 companies having domain name of karvy.com and having common addresses in UGC records, as mentioned in SEBI order dated 22-Nov-2019 by an appropriate authority in a speedy and efficient manner for better protection of public interest."

83. The above conclusions recorded by the 5th respondent needs no reiteration, and they are self explanatory, and one of the allegations against the petitioner and its group of companies is that, those companies raised loans from the Bank, which is public money, in a fraudulent manner detailed above. Hence, there is sufficient amount of public interest involved in this case. In the light of these conclusions, the 5th respondent recommended for further investigation vide his report dated 24.02.2020.

84. Along with the counter affidavit, respondents filed the minutes of the Oversight Committee meeting held on 25.02.2020. The said minutes disclose that the Committee considering the allegations against the petitioner, direction of this court in W.P.No.3143 of 2020 dated 14.02.2020 and the report of the ROC dated 24.02.2020, conveyed its decision to the Central Government recommending investigation into the affairs of the petitioner - company. The decision of the Oversight Committee is extracted as under for ready reference:

"8. Decision of Oversight Committee:

8.1 In view of the presentation made by RD (SER) and the inquiry report, the oversight committee (OC) observed:

a) Interest of investors (more than 80,000), including retail investors, which are at stake as KSBL had prima facie abused its position as a Depository Participant.

b) KSBL had prima-facie borrowed fund from Banks & BFIs by citing false information.

c) There is a likelihood of diversion of public funds through related parties.

d) Specialized/Technical/Complex nature of the alleged fraud.

8.2 Taking into consideration all these factors, the Oversight Committee unanimously recommended investigation into the affairs of KSBL and their 9 companies mentioned in para 44 above, by SFIO under Section 212(1)(a) and (c) of Companies Act, 2013 by SFIO, in public interest.

85. Considering the report submitted by the 5th respondent dated 24.02.2020 and also the decision of the Oversight Committee dated 25.02.2020, I am of the considered view, that there are prima facie circumstances justifying the action taken by the 2nd respondent in forming opinion with regard to necessity for ordering investigation into the affairs of by the company by SFIO, as large public interest is involved.

86. In the judgments relied on by the learned Senior Counsel appearing for the petitioner in Medak Diocese of Church of South India Trust Association vs. Union of India (2018 (1) ALD 734), the facts disclose that the impugned order therein does not disclose formation of opinion with regard to necessity for ordering investigation by SFIO. Therefore, the learned single Judge has remitted the matter back for passing fresh orders in exercise of jurisdiction under Section 212 of the Act.

87. Similarly in the order of the Division Bench of the High Court of Bombay in Parameshwar Das Agarwal v. Additional Director (2016 SCC OnLine Bom 9276), the learned judges after exposition of the law on Section 212 of the Act, on facts found that there is no material which can be termed as enough to warrant the exercise of power by the Central Government by resorting to Section 212(1) of the Act of 2013. The facts in the judgment of the Division Bench, are different from the facts of the present case, and hence except for the law laid down therein, it cannot be made applicable.

88. For the foregoing reasons, the issue No.2 is also answered in the affirmative.

89. The other contention of behalf of the petitioner is that as the matter is sub judice by SEBI, the present investigation has to await the result of inquiry by SEBI.

90. In the counter affidavit it is categorically stated that the authorities that deal with the inquiry, inspection or investigation under the Ministry of Corporate Affairs are altogether different and the scope of inquiry and the procedure that would be adopted by another regulator i.e., SEBI, is different, therefore, the case of the respondents is that the contention of the petitioner is incorrect and absolute false.

91. Sub-section (2) of Section 212 of the Act, mandates that where any case bas been assigned by the Central Government to SFIO for investigation under this Act, no other investigating agency of Central Government or the State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceed further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to SFIO. In the

light of sub-section (2) of Section 212, the contention of the petitioner in this regard is rejected.

92. Before parting with the case it is to be noticed that this court is not sitting in appeal over the decision of the Central Government in ordering investigation into the affairs of the company under Section 212(1)(a) and (c) of the Act, and scope of this court under Article 226 of the Constitution of India, with regard to judicial review, is limited to the examination of decision making process, and not the decision. In the preceding paragraphs, this court, on examining the said process, found that ROC has followed the procedure envisaged under Section 206(4) of the Act and submitted the report; and the said report and the order of this court, and also the other material available on record, was examined by the Oversight Committee, and vide its minutes dated 25.02.2020, recommended for investigation. Eventually, the 2nd respondent, considering the report dated 24.02.2020, and in exercise of his jurisdiction under Section 212(1)(a) and (c) of the Act, and forming an opinion with regard to necessity for ordering investigation into the affairs of the company by SFIO, ordered investigation vide the impugned, as large public interest is involved. In these circumstances, no exception can be taken to the impugned order.

93. For the foregoing reasons, I do not find any infirmity in the impugned order warranting interference of this court under Article 226 of the Constitution of India for exercise of power of judicial review, and in view of the same, W.P.No.5024 of 2020 is liable to be dismissed.

94. It is made clear that the present writ petitions are confined to the jurisdiction of the 2nd respondent in ordering investigation into the affairs of the company by SFIO under Section 212 of the Act, and this court has not expressed any opinion on merits, and the truth or otherwise of the allegations are subject to the result of the

investigation and the further proceedings as per law. Hence, the investigation and the proceedings thereafter shall be strictly in accordance with law and uninfluenced by observations or findings, if any, made in this order.

95. For the foregoing reasons, the impugned order dated 27.02.2020 is confirmed and the writ petition in W.P.No.5024 is dismissed, and consequently, W.P.No.8997 of 2020, which has been filed challenging the notices issued in pursuance of the impugned order, is also dismissed.

96. Miscellaneous petitions pending, if any, shall stand closed. No order as to costs."

12. The appellant company before this Court while

challenging the order passed by the learned Single Judge

has raised two grounds:- (i) that no opportunity of hearing

as required under Section 206(4) of the Companies Act was

granted to the appellant company; and (ii) the Central

Government has not formed any opinion keeping in view

Section 210 of the Companies Act for directing

investigation into the affairs of the appellant company.

13. In respect of the first ground of not conducting an

inquiry and not providing an opportunity of hearing to the

appellant company as required under Section 206(4) of the

Companies Act is concerned, the stand of the Union of

India is that under Section 208 of the Companies Act, the

Registrar or inspector after inspection of books of account,

submits a report in writing to the Central Government and

such report may, if necessary, include a recommendation

for further investigation into the affairs of the company.

The aforesaid statutory provision makes it very clear that

the Registrar of Companies can forward matter after

inspection of books of accounts to the Central Government

or he can forward the matter after conducting an inquiry

as required under Section 206(4) of the Companies Act. In

the present case, keeping in view the complete material on

record, the Registrar of Companies has forwarded the

matter to the Central Government in public interest.

Keeping in view the larger public interest, the Inquiry was

not conducted by the Registrar of Companies under

Section 206(4) of the Companies Act. Proviso to sub-

section (4) of Section 206 of the Companies Act dispenses

with other requirements of sub-section (4) of Section 206 of

the Companies Act. The Inquiry under Section 206 of the

Companies Act by the Registrar of Companies and the

investigation under Section 212 of the Companies Act by

the Serious Fraud Investigation Office (SFIO) operate in

different fields and the information gathered by the

Registrar of Companies under Section 206 of the

Companies Act can be used as a tool for further

investigation and an investigation under Section 212 of the

Companies Act is in public interest and therefore, the first

ground argued by the learned counsel for the appellant

company is of no help to the appellant company.

14. In the considered opinion of this Court, for ordering

an investigation and further action by the SFIO under

Section 212 of the Companies Act, the requirement of

obtaining a report of the Registrar of Companies is not at

all warranted.

15. The investigation can be ordered on the basis of -

(a) on receipt of a report of the Registrar or inspector under

Section 208; (b) on intimation of a special resolution

passed by a company that its affairs are required to be

investigated; (c) in the public interest.

16. In the considered opinion of this Court, the

investigation has been ordered by the Central Government

in public interest and therefore, this Court does not find

any reason to interfere with the Order passed by the

learned Single Judge.

17. Much has been argued by the learned counsel for the

appellant company that no opinion was formed by the

Central Government as required under Section 210 of the

Companies Act. In this context, it is relevant to reproduce

the Order dated 27.02.2020 passed by the respondent

No.2/Office of the Director General, Ministry of

Corporation Affairs, is reproduced as under:-

"Government of India Ministry of Corporate Affairs Office of Director General No.07/341/2015-CL.II (SER) Kota House Annexe, 1, Shahjahan Road, New Delhi - 110 011 Dated: 27.02.2020 ORDER Whereas the Central Government is empowered under Section 212 of the Companies Act, 2013 to order investigation into the affairs of any company in Public Interest and to appoint one or more competent persons as inspectors to investigate the affairs of the company.

2. AND where as ROC, Hyderabad through RD (SER) has submitted Inquiry Report dated 24.02.2020 to the Central Government under Section 208 of the Companies Act, 2013 and recommended investigation into the affairs of the Karvy Stock Broking Limited (KSBL), its Group of Companies and 9 other companies namely (i) Karvy Consultants Limited, (ii) Wizard Insurance Services Private Limited, (iii) Zenith Insurance Services Private Limited, (iv) Buoyant Insurance Services Private Limited, (v) Nova Wealth Management Services Private Limited, (vi) Vitalink Wealth Advisory Services Private Limited, (vii) Classic Wealth Management Services Private Limited, (viii) Champion Insurance Services Private Limited, (ix) Pelican Wealth Advisory Services Private Limited.

3. Now, therefore, in exercise of powers conferred under Section 212(1) (a) & (c) of the Companies Act, 2013, the Central Government has formed an opinion that the affairs of the above referred companies need to be investigated to examine the serious nature of fraud

committed as large public interest is involved and thereby orders investigation into the affairs of Karvy Stock Broking Limited (KSBL), its Group of Companies and 9 other companies namely (i) Karvy Consultants Limited, (ii) Wizard Insurance Services Private Limited, (iii) Zenith Insurance Services Private Limited, (iv) Buoyant Insurance Services Private Limited, (v) Nova Wealth Management Services Private Limited, (vi) Vitalink Wealth Advisory Services Private Limited, (vii) Classic Wealth Management Services Private Limited, (viii) Champion Insurance Services Private Limited, (ix) Pelican Wealth Advisory Services Private Limited to be carried out by officers of the Serious Fraud Investigation Office as may be designated by Director, SFIO.

4. The inspectors appointed by Director, SFIO to investigate into the affairs of the above mentioned company, shall exercise all the powers available to them under the Companies Act, 2013. The inspectors shall complete their investigation and submit the report to the Central Government.

5. This order is issued for and on behalf of the Central Government.

(A.M.Mahapatra) Joint Director"

18. The aforesaid Order makes it very clear that the

Central Government has formed an opinion based upon

the serious nature of fraud committed in the matter as

larger public interest is involved in the affairs of the

appellant company and the opinion was formed based

upon the material forwarded by the Registrar of Companies

to the Central Government.

19. The learned counsel for the appellant company has

placed reliance upon the Judgment delivered by the

learned Single Judge of this Court in the Medak Diocese of

Church of South India Trust Association v. the Union of India1.

The Order impugned in the aforesaid case is reproduced as

under:-

"Whereas the Central Government is empowered under section 212 of the Companies Act, 2013 to order investigation into the affairs of any company and to appoint one or more competent persons as Inspectors to investigate the affairs of the company.

2. And whereas RoC (Chennai)/RD, Southern Region, vide their report dated 2nd June, 2016 submitted to the Central Government Under section 208 of the Companies Act, 2013 has also recommended investigation into the affairs of the company i.e., M/s. Church of South India Trust Association.

3. Now, therefore, in exercise of powers conferred under section 212 (1)(a) of the Companies Act, 2013 the Central Government hereby orders investigation into the affairs of M/s. Church of South India Trust Association, to be carried out by the Serious Fraud Investigation office.

4. The Inspectors appointed by Director, SFIO to investigate into the affairs of the above mentioned company, shall exercise all the powers available to them under the Companies Act, 2013. The Inspectors shall complete their investigation and submit the report to the Central Government within a period of six (6) months from the date of issue of this order.

5. Further, if any information is required during the course of investigation, you are requested to depute some officer to coordinate with the Ministry for obtaining the desired documents/information.

2017 SCC OnLine Hyd 388 : 2018 (1) ALT 260

6. This order is issued for and on behalf of the Central Government.

Sd/-

(Himanshu Shekhar) Deputy Director"

20. Keeping in view the aforesaid order, it can be safely

gathered that in the aforesaid case, there was no formation

of the opinion by the Central Government and in those

circumstances, the learned Single Judge has delivered the

Judgment holding that no case was formed by the Central

Government whereas the requirement of formation of

opinion has been fulfilled in the present case, and

therefore, the question of interference on this ground also

does not arise.

21. The learned counsel has also placed reliance upon the

Judgment delivered in the case of Mohinder Singh Gill v.

Chief Election Commissioner2.

22. This Court has gone through the aforesaid Judgment

and the present case is a case where the documents on

record establishes that the action was not only initiated by

the respondents based upon the Inquiry Report under

Section 208 of the Companies Act by the Registrar of

Companies but also based on the other material involving

public interest, as stated clearly in the order dated

(1978) 1 SCC 405

27.02.2020 and therefore, the Judgment relied upon, does

not help the appellant company in any manner. Not only

this, the conduct of the appellant company reveals that at

every stage, all possible hindrances are being created by

the appellant company in order to stop investigation by

SFIO right from day one on some pretext or the other, writ

petitions have been filed, interim orders were granted and

the matter is not proceedings forward at all, meaning

thereby not permitting the investigating agency i.e.,

Serious Fraud Investigation Office to investigate into the

affairs of the appellant company.

23. The matter is only at the stage of investigation and

otherwise also the appellant company has not been able to

point out the prejudice caused to the appellant company in

the matter. The respondents have adopted a transparent

process. They have given an opportunity of hearing to the

appellant company right from initial stages and the

respondents are under obligation to follow the procedure

prescribed under Section 212 of the Companies Act and

the Companies Act is a complete code in itself.

24. In the light of the aforesaid, this Court does not find

any reason to interfere with the Order passed by the

learned Single Judge and the writ appeals are accordingly

dismissed.

Miscellaneous petitions, if any pending, shall stand

dismissed. There shall be no order as to costs.

_____________________________ SATISH CHANDRA SHARMA, CJ

________________ N.TUKARAMJI, J

31.12.2021 Pln