AI Insights
The case involves multiple petitions filed by Adarsh Throughworks Pvt Ltd against the Union of India, challenging the orders issued for an investigation into the company's affairs by the Serious Fraud Investigation Office (SFIO) under Section 212 of the Companies Act, 2013. The petitions contested both the initial order dated 20.06.2018 and the subsequent extension order dated 13.12.2018, arguing that the orders were passed without adequate reasons and violated principles of natural justice. The court examined the procedural validity of the orders, the concept of public interest as it relates to corporate governance, and the legal standards for initiating investigations under the Companies Act. The court found that the Central Government's actions were justified and in accordance with the law, emphasizing the need for such investigations in the interest of protecting public funds and ensuring corporate accountability.
Appeal Details
Counselvise Citation
[2019] 140 COUNSELVISE.COM (IT) 702072 (HC-GUJARAT)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Others
Pronouncement Date
29-03-2019
Assessment Year
misc
Judgement Text
"C/SCA/20840/2018 CAV JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 20840 of 2018 With R/SPECIAL CIVIL APPLICATION NO. 20845 of 2018 With R/SPECIAL CIVIL APPLICATION NO. 20863 of 2018 With R/SPECIAL CIVIL APPLICATION NO. 20873 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? Yes 2 To be referred to the Reporter or not ? Yes 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No ========================================================= ADARSH THROUGHWORKS PVT LTD Versus UNION OF INDIA ========================================================= Appearance: MR MIHIR THAKORE, SENIOR ADVOCATE WITH MR YATIN OZA, SENIOR ADVOCATE WITH MR MASOOM K SHAH(6516) for the Petitioner(s) No. 1 MR MANINDERSINGH, ADDL. SOLICITOR GENERAL WITH MR DEVANG VYAS(2794) for the Respondent(s) No. 1 NOTICE SERVED BY DS(5) for the Respondent(s) No. 2 ========================================================= CORAM: HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI Date : 29/03/2019 CAV JUDGMENT Page 1 of 84 C/SCA/20840/2018 CAV JUDGMENT 1. These petitions are filed under Article 226 of the Constitution of India in which the petitioners have challenged the order dated 20.06.2018 passed by respondent No.1 while exercising powers under Section 212 of the Companies Act, 2013 (hereinafter referred to as 'the Act'). By way of amendment, petitioners have also challenged the order of extension dated 13.12.2018 for completing investigation. 2. As the issue involved in all these petitions is similar, at the request of learned counsel appearing for the parties, these petitions are being heard together and decided by this common order. However, for the sake of convenience, the facts stated in Special Civil Application No.20840 of 2018 are considered. 3. Factual matrix of the present case is as under: 3.1. The petitioner is the member of Adarsh Credit Cooperative Society Ltd. (hereinafter referred to as the Society), which is registered under Multi State Cooperative Societies Act, 2002. The said society owns 99% share holding of the petitioner. On 14.05.2015, Rajasthan High Court, vide its judgment, had directed all the cooperative societies and multi state cooperative societies accepting deposits to convert themselves to Bank Page 2 of 84 C/SCA/20840/2018 CAV JUDGMENT within stipulated time. Thereafter, on 27.05.2015, the Hon'ble Supreme Court permitted the society to prefer Special Leave Petition and thereafter passed interim orders whereby the aforesaid society is currently working. 3.2. It is stated that initially on 13.06.2018, news channel viz. 'ABP news' in their show titled as 'Master Stroke' aired certain defamatory news article qua the society whereby certain allegations are levelled against the society that money deposited by the depositors would be siphoned off and shall not be paid back. 3.3. On 20.06.2018, while exercising powers under Section 212 of the Act, the respondent No.1 passed impugned order whereby the respondent No.1 ordered investigation into the affairs of the petitioner and other companies in public interest by Serious Fraud Investigation Office (SFIO). The inspectors came to be designated for the purpose of impugned order. 3.4. Petitioner has stated that on 14.07.2018, respondent No.1 conveyed approval to the SFIO to file application whereby various petitions came to be filed before NCLT at Ahmedabad, Jaipur, Chandigarh and Chennai. The details are given by the petitioner in the petition about such proceedings. Page 3 of 84 C/SCA/20840/2018 CAV JUDGMENT 3.5. After this petition is filed, petitioner sought an amendment which was granted subject to the objections raised by the respondents. By way of the said amendment, petitioner has challenged the order dated 13.12.2018 passed by the respondent extending time for completion of investigation by SFIO. 3.6. The concerned respondent filed an affidavit opposing petition in which it is stated that respondent No.1 is mindful of creating a good climate for corporate governance and promoting healthy economy and is also the custodian of the public interest. Therefore, it cannot be expected to be a mute spectator while there are complaints against the petitioners to divert and misutilize the hardearned money of the public by some individuals for their personal gain. It is stated that on receipt of credible information or complaints from various sources, the respondent No.1 analyses the same based on inputs and after due analysis, an oversight committee consisting of high ranking officers from respondent No.1 Ministry of Corporate Affairs (MCA) is constituted to consider such inputs. On consideration, the oversight committee may or may not recommend investigation into the affairs of the company by any of its field officers. Page 4 of 84 C/SCA/20840/2018 CAV JUDGMENT However, if the committee, on account of complexity of the matter and satisfaction of requirement under Section 212 of the Act, may recommend for an investigation in to the affairs of the company by SFIO. It is further stated that oversight committee also considers the involvement of the 'public interest' as required under Section 212(1)(c) of the Act on the basis of the material/inputs presented before it and thereafter the recommendation of the oversight committee are to be forwarded to the Central Government and decision for ordering the investigation is taken thereafter. It is therefore stated that process of ordering the investigation entails a detailed and thorough examination of inputs and recommendations from various sources and involves due application of mind at various levels and cannot be said to be arbitrary exercise of power. 3.7. After explaining the aforesaid procedure, it is further stated that in the present case, after receipt of credible information in the form of compliant against the society and associated group companies regarding ongoing fraudulent conduct and when sufficient material was available on record for passing an order of investigation into the affairs of the company, to protect the public interest, decision was taken Page 5 of 84 C/SCA/20840/2018 CAV JUDGMENT by respondent No.1. 3.8. It is further stated that Adarsh Group of Companies and LLPs under investigation are 125 numbers and based on evidence suggesting that money has been fraudulently diverted by the said companies for personal gain for the society which deals in public funds, the Central Government formed an opinion of investigation into the affairs of Adarsh Group of Companies and LLPs. The respondent has further stated that the relevant file in which the respondent Government has taken the said decision will be presented before the Court during the course of hearing for perusal. 3.9. It is further stated that during the course of investigation, it was initially observed that certain companies of Adarsh Group had used the society as a front for siphoning off/diversion of money under the garb of loans for business purposes, taking undue advantage of the common management and control of said entities. During the course of investigation, it was further revealed that funds collected from the public by society through depositors were given as loans to the newly incorporated companies of the group based on unsubstantiated/questionable projected balance sheets. Page 6 of 84 C/SCA/20840/2018 CAV JUDGMENT 3.10. It is stated that in view of the material collected during the course of investigation, the Central Government, by an order dated 14.07.2018, authorized SFIO to file a reference before NCLT seeking interim attachment of the properties of the company as well as Directors, etc. pending investigation. In view of such direction, various steps were taken. Further details are given with regard to the proceedings initiated before NCLT and petitions filed before Rajasthan High Court and Delhi High Court in the reply. 3.11. It is further stated that as per Article 77(3) of the Constitution of India, the Allocation of Business Rules, 1961 have been enacted which specify the subjects which the respective Ministries would administer with regard to the conduct of business of the Government of India on behalf of the Hon'ble President. As per the Allocation of Business Rules, the administration of the Act vests with the Ministry of Corporate Affairs (MCA) and therefore once Ministry of Corporate Affairs passes an order in terms of the mandate of the Act, no separate opinion of the Hon'ble President is required. It is, therefore, requested by the respondents that the present petition may not be Page 7 of 84 C/SCA/20840/2018 CAV JUDGMENT entertained by this Court. 4. Heard learned Senior Counsel Mr. Mihir Thakore and learned Senior Counsel Mr. Y.N.Oza assisted by learned advocate Mr. Masoom K. Shah and K.I.Shah for the petitioners and Mr.Manindersingh, Additional Solicitor General with Mr. Devang Vyas, Assistant Solicitor General for the respondents. 5. Learned counsel Mr. Thakore appearing for the petitioners submits that the impugned order dated 20.06.2018 passed by the respondent No.1 is required to be quashed and set aside on the ground that there is no formation of opinion by the Central Government and it merely states about the power of the Central Government to pass such an order under Section 212(c) of the Act. It is contended that no reasons and materials are stated in the opinion on the basis of which the exercise of powers under Section 212 of the Act was warranted. The respondent No.1 in the order did not spell out any circumstance except outlining its power under the said Section to order investigation into the affairs of the company in public interest. In fact no public interest spell out or stated in the impugned order. Thus, in absence of any materials which are not referred in the impugned order, the Page 8 of 84 C/SCA/20840/2018 CAV JUDGMENT respondent No.1 could not have recorded satisfaction or opinion that investigation into the affairs of the company is necessary. It is submitted that the legislation in its wisdom has used the phrase 'opinion' which means application of mind on the basis of the relevant material, which has to be in writing in the opinion. It is further contended that the opinion of the Central Government envisaged under section 212 of the Act is neither an idle or empty formality nor an automatic event necessitated or to be given for the mere asking. It cannot be vague or general or indefinite. Thus, the respondent No.1 has to be appraised of the reasons at least as to why his opinion is being sought, the need or necessity and the justification or otherwise for claiming investigation of the companies. 5.1. Learned counsel further contends that the name of SFIO is 'serious investigation' which itself means the order should demonstrate serious reasons for investigation and the order cannot be passed in mechanical and cyclostyle manner. Such exercise of powers is arbitrary and violative of Article 14 of the Constitution of India. 5.2. Learned counsel would further contend that before passing the order so passed, no notice was issued to the petitioner nor any hearing was Page 9 of 84 C/SCA/20840/2018 CAV JUDGMENT afforded and the respondent No.1 has unilaterally taken the decision for investigation under Section 212 of the Act. 5.3. Learned counsel Mr. Thakore would further submit that even the extension order dated 13.12.2018 passed by the respondent No.1 is bad and illegal on the ground that no application for extension of order under Section 212(1) of the Act can be made. The extension application is filed generally for all the cases of SFIO and not in the case of the present petitioners. Hence, such general application is not maintainable in law. Even the extension application fails to make out a case for extension as there is no reference as to why extension is required in the case of the petitioners. At this stage, it is further submitted that while granting extension, opinion is required to be formed by the respondent No.1, whereas in the present case, such opinion is not formed. Without prejudice to the aforesaid contention, at this stage, it is further submitted that the application for grant of extension cannot be retrospective and once the same was not extended prior to 90 days being over, the extension order itself is without power. Hence the investigation lapses. 6. Learned Senior Counsel Mr. Oza appearing for Page 10 of 84 C/SCA/20840/2018 CAV JUDGMENT the concerned petitioner in Special Civil Application No.20873 of 2018 supported the aforesaid contentions raised by learned Senior Counsel Mr. Thakore. However, he would further contend that both the impugned orders i.e. order dated 20.06.2018 and extension order dated 13.12.2018 are passed in contravention of Article 77 of the Constitution of India. It is contended that the said orders are not passed in the name of the Hon'ble President. It is further contended that the respondents have failed to point out any material from which it can be said that powers are delegated to the concerned authority. 6.1. Learned Senior Counsel Mr. Oza has thereafter referred the provisions contained in Section 212 of the Act and contended that the word 'offence' is not defined in the Act. It is submitted that subsection(6) to subsection(13) of Section 212 of the Act are required to be read after Section 212(14) of the Act to make the proper interpretation of the section otherwise it leads to absurd interpretation whereby a person can be arrested even without FIR or complaint. The correct reading of Section 212 of the Act would show that no arrest can be made prior to launching of prosecution before the Special Court under Section 212(6). Thus, prior to launching of the prosecution, there cannot be arrest. Under Page 11 of 84 C/SCA/20840/2018 CAV JUDGMENT the criminal law, a person is not an accused unless and until FIR/complaint is filed and therefore there cannot be any arrest prior to the filing of the FIR. In fact, petitioners are required to be given right to make comment/representation/hearing on the report which is filed before the Central Government, whereby decision would be taken as regards whether the prosecution is required to be launched or not. 6.2. Learned Senior Counsel Mr. Oza would further submit that even when the FIR is filed, the same is required to be uploaded within 24 hours as per the decision rendered by the Hon'ble Supreme Court so that the accused can avail appropriate remedies. Thus, in absence of any reasons or any details not being made available in the impugned order, the materials or affidavit with sketch of allegations is required to be shared so as to make judicial review permissible. 6.3. It is further contended that the absolute power is anathema to rule of law and therefore the respondent No.1 ought to have produced some material to point out subjective satisfaction. 7. Both the learned counsel appearing for the petitioners contended that the respondents have not shared the material with the petitioners and Page 12 of 84 C/SCA/20840/2018 CAV JUDGMENT have only shared the same with the Court. Such a procedure is unconstitutional and against the rule of law. It is contended that if the petitioners are not given the material and on the basis thereof matter is decided then judicial review becomes impermissible. If the material is produced and pointed out to the petitioner, the petitioner could have properly assisted this Court on the point. 8. Learned counsel appearing for the petitioners have placed reliance upon the following decisions: 1. In Rohtas Industries v. S.D.Agarwal and Ors., reported in (1969) 1 SCC 325. 2. In Barium Chemicals Ltd. and Ors. v. Company Law Board and Ors, reported in AIR 1967 SC 295. 3. In Parmeshwar Das Agarwal v. Additional Direcor, reported in 2016 SCC Online Bom 9276. 4. In Medak Diocese v. Union of India, reported in 2017 SCC Online Hyd 388. 5. In Additional District Magistrate, Jabalpur v. Shivakant Shukla, reported in (1976) 2 SCC 521. 6. In the case of Mahiuddin Tayab Soni v. State of Maharashtra and others., reported in 1980 Cr.L.J. 1040. 7 In Kottam Raju Vikram Rao v. State of Gujarat, reported in 1977 (18) GLR 107. Page 13 of 84 C/SCA/20840/2018 CAV JUDGMENT 8. In R.S.Sheth Gopikrishan Agrawal v. R.N.Sen, Ass. Collector of Customs and Central Excise, reported in AIR 1967 SC 1298. 9. In Sheo Nath Singh v. Appellate Ass. Commissioner of Income Tax, Calcutta, reported in (1972) 3 SCC 235. 10. In Brij Mohan Singh Chopra v. State of Punjab, reported in (1987) 2 SCC 188. 11. In Aslam Mohammad Merchant v. Competent Authority and Ors., reported in (2008) 14 SCC 186. 12. In Calcutta Discount Co. Ltd. v. Incometax Officer, Companies District I, Calcutta & Anr., AIR 1961 SC 372. 13. In Baldev Raj Chadha v. Union of India and Ors., reported in (1980) 4 SCC 321. 14. In M/s. Ghaio Mal and Sons v. State of Delhi & Ors, reported in AIR 1959 SC 65. 15. In Bachhittar Singh v. State of Punjab, reported in AIR 1963 SC 395. 16. In Punjab State Industrial Development Corporation Ltd. v. PNFC Karamchari Sangh, reported in (2006) 4 SCC 367. 17. In State of Uttaranchal & Anr. v. Sunil Kumar Vaish & Ors, reported in (2011) 8 SCC 670. 18. In Dattatraya Moreshwar v. State of Bombay, reported in AIR 1952 SC 181. 9. Per contra, learned Additional Solicitor General Mr. Manindersingh, at the outset, referred the provisions contained in Chapter XIV Page 14 of 84 C/SCA/20840/2018 CAV JUDGMENT of the Act and pointed out that the said chapter deals with and provides for inspection, inquiry and investigation by the authorities so stipulated under various provisions of the Act. It is submitted that notification dated 21.07.2015 was issued in exercise of powers under Section 211 of the Act by which, SFIO had been established by the Government of India. The said office works under a Director. There are number of inspectors who are part of the said office. It is submitted that the Central Government can pass orders while exercising powers under Section 212 of the Act on forming an opinion of a necessity to investigate into the affairs of the company by the SFIO in different situation stated in the said provisions. It is contended that Section 212(1)(c) of the Act is one of the eventualities where the opinion is formed by the Central Government regarding the necessity to investigate into the affairs of the company in public interest and thereby Central Government assigns the investigation to the Director of SFIO, who is thereafter obliged to designate such number of inspectors as may be considered necessary for the purpose of such investigation. 9.1. Learned counsel for the respondents further submits that while exercising powers under Section 212(1) of the Act for forming an opinion Page 15 of 84 C/SCA/20840/2018 CAV JUDGMENT regarding investigating into the affairs of the company by SFIO, the subjective satisfaction of the Central Government should be based upon the objective material and such opinion of the Central Government should be bona fide and genuine. There is no necessity, in terms of the established principles of law, of any such opinion of the Central Government to be questioned either on the ground of propriety or reasonableness or sufficiency. In support of the said contention, learned counsel has referred the decision rendered by the Hon'ble Supreme Court in the case of Barium Chemicals Ltd. (supra) and Rohtas Industries (supra). 9.2. Learned Senior Counsel thereafter submits that when the powers under Section 212 of the Act is exercised by the Central Government, it is only required to be demonstrated that the objective material is available with the Central Government for forming an opinion to order of any such investigation by SFIO. Further, such opinion has to be subjective opinion which should be bona fide and genuine. There is no necessity of giving the details and particulars of any such objective material either in the order passed under Section 212 of the Act even in the counter affidavit. At this stage, learned counsel would further submit that whenever it is an issue of investigation Page 16 of 84 C/SCA/20840/2018 CAV JUDGMENT into any serious fraud, the disclosure of the particulars of the allegations/material upon which the allegations have been made, may itself be contrary to public interest and therefore if it is disclosed, the same may defeat the entire purpose of the investigation itself. 9.3. Learned counsel for the respondents thereafter submits that this Court can call for the records of the Central Government and peruse the same for satisfying itself that the opinion formed by the Central Government in passing the order under Section 212 of the Act is bona fide and genuine or not. 9.4. It is further contended that the Central Government for the purpose of issuing any administrative order is not required to record reasons for taking any such administrative decision. However, that does not mean that the Central Government can take a decision in arbitrary manner. 9.5. Learned counsel has referred various decisions and explained the meaning of 'public interest'. It is submitted that concept of 'public interest' is very wide. The contention raised by the petitioners that the concept of 'public interest' in relation to the affairs of the company should get restricted to the Page 17 of 84 C/SCA/20840/2018 CAV JUDGMENT management of the company and/or interest of the shareholders, is discussed by the Hon'ble Supreme Court in Re: Wood Polymer Ltd., reported in (1977) 47 Company Cases 597. Thus, it is submitted that scope of concept of 'public interest' is wide enough and would also include hundreds of members of public whose interests are seriously prejudiced and irreversibly impacted by the acts of omission and commission of the companies covered by the order of investigation passed on 20.06.2018. At this stage, from the record, it is pointed out that allegations are that huge amounts were collected from large number of persons by society on the premise of return of high interest on the loans received from them and the said amounts were transferred to the companies in question and from where such amounts were either deposited or invested in other societies. It is submitted that in para 2.1 of the writ petition being Special Civil Application No.20840 of 2018, the petitioner has stated that petitioner is the member of Adarsh Credit Cooperative Society Ltd. and the said society owns 99% share holding of the petitioner. 9.6. Learned counsel Mr. Singh for the respondents would contend that the impugned order has been passed by the competent Ministry i.e. MCA under Allocation of Business Rules, 1961. Thus, merely Page 18 of 84 C/SCA/20840/2018 CAV JUDGMENT because in the impugned order dated 20.06.2018 there is no mention that the order is passed in the name of the Hon'ble President, is of no consequence. Learned counsel has placed reliance upon various decisions of the Hon'ble Supreme Court as well as this Court and pointed out that nonmention/description of the Hon'ble President in any such administrative order would neither be irregular nor the same is fatal. 9.7. Learned counsel for the respondents pointed out that the objective material is available on record of the Central Government and the original file of the Central Government has been placed before this Court for its perusal and satisfaction. It is submitted that the contention raised by the petitioners that they should have been given an opportunity for explaining their stand before the Central Government had arrived at the decision of passing the order under Section 212 of the Act, is misconceived. It is stated that there is no such concept of providing any hearing to any person/entity falling within the purview of investigation to be conducted by the SFIO. 9.8. Learned counsel Mr. Singh thereafter referred the provisions contained in Section 212(3) of the Act and submitted that the Central Government is Page 19 of 84 C/SCA/20840/2018 CAV JUDGMENT having discretion to mention/indicate a time period for the SFIO to complete the investigation and file the report and the outer limit indicated in the order passed under Section 212 of the Act in the present case, would remain discretionary and will not become mandatory. Thus, when the investigation is not completed within stipulated time limit, investigation would not be stopped as a consequence of nonextension of the period nor the concerned person be discharged. However, in the present case, now the time limit is extended by the respondents by an order dated 13.12.2018. 9.9. Learned counsel Mr. Singh has referred the decisions cited by the counsel appearing for the petitioners and thereafter distinguished the said decisions and contended that the aforesaid decisions would not be applicable to the facts of the present case. 9.10. Learned counsel Mr. Singh therefore urged that the impugned orders dated 20.06.2018 and 13.12.2018 issued by the respondent Central Government while exercising powers under Section 212 of the Act are valid and legal and the investigation is at crucial stage and deserves a free hand towards its completion and for submitting the final report by the SFIO to the Central Government in accordance with the Page 20 of 84 C/SCA/20840/2018 CAV JUDGMENT provision and scheme of Section 212 of the Act. It is, therefore, urged that present petition be dismissed. 9.11. Learned counsel for the respondents has placed reliance upon the following decisions in support of the aforesaid contentions: 1. In Court on its own Motion v. State & Jai Bhagwan, 1985(9) DRJ 4. 2. In Nirmal Kanti Roy v. State of West Bengal, reported in (1998) 4 SCC 590. 3. In Union of India & Anr. v. W.N.Chadha, reported in (1993) Supp 4 SCC 260. 4. In Supdt. Of Police (CBI) V. Deepak Chowdhary, (1995) 6 SCC 225. 5. In Anju Choudhary v. State of U.P., (2013) 6 SCC 384. 6. In State of Gujarat v. Mohanlal Jitamalji Porwal, (1987) 2 SCC 364. 7. In V.K. Aggarwal Assist Commissioner of Customs v. Vasantraj Bhagwanji Bhatia, (1988) 3 SCC 467. 8. In K.K.Baskaran v. State, (2011) 3 SCC 793. 9. In Y.S.Jagan Mohan Reddy v. CBI, (2013) 7 SCC 439. 10. In Subarata Chattoraj v. Union of India & Ors., (2014) 8 SCC 768. 11. In Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC 212. Page 21 of 84 C/SCA/20840/2018 CAV JUDGMENT 12. In Union of India & Ors., v. E.G. Nambudiri, (1991) 3 SCC 38. 13. In Registrar, High Court of M.P. v. Rajabai Gorkar, 1995 Supp (3) SCC 202. 14. In Union of India v. Saleena, (2016) 3 SCC 437. 15. In Re. Wood Polymer Limited, (1977) 47 CompCas597(Guj). 16. In P. Joseph John v. State of Travancore, (1955) 1 SCR 1011. 17. In Major E.G.Barsay v. State of Bombay, AIR 1961 SC 1762. 18. In Air India Cabin Crew Assn. v. Yeshashwinee Merchant & Ors, (2003) 6 SCC 277. 19. In M. Balakrishna Reddy v. Director, CBI, (2008) 4 SCC 409. 20. In Sureshbhai Kalidas Soni v. U.O.I., (2014) SCC Online Guj 10533. 21. In Chairman, All India Railway Recruitment Board & Anr. v. K. Shyam Kumar & Ors., (2010) 6 SCC 614. 10. Having heard the learned advocates appearing for the parties and having gone through the material produced on record, it would emerge that the respondent No.1 has passed an order on 20.06.2018 while exercising powers under Section 212 of the Act for investigation by SFIO with regard to the affairs of the company in public Page 22 of 84 C/SCA/20840/2018 CAV JUDGMENT interest on the basis of the opinion formed by the Central Government with regard to various companies including the petitioners. Thereafter, on 13.12.2018, the time limit is extended for completion of investigation up to June, 2019 and therefore the petitioners have challenged the aforesaid orders on various grounds. 11. In the present petitions, from the submissions canvassed by the learned counsel appearing for the parties, following questions are required to be decided by this Court: (a) Whether opportunity of hearing is required to be given to the petitioners before passing order under Section 212 of the Act? (b) Whether the respondent Central Government is obliged to record the reasons at the time of passing an order under Section 212 of the Act for investigation by SFIO? (c) Whether subsequent material can be taken into consideration in cases of public interest? Whether the material shared with the Court is sufficient? (d) If the Central Government has not Page 23 of 84 C/SCA/20840/2018 CAV JUDGMENT passed an order in the name of the Hon'ble President, whether such order can be termed as invalid/illegal merely because the same is not passed in the name of the Hon'ble President? 12. Before deciding the aforesaid questions, at this stage, relevant provisions contained in the Act and the Constitution of India are required to be referred to. Section 212 of the Act provides as under: “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 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; 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 Page 24 of 84 C/SCA/20840/2018 CAV JUDGMENT Investigation Office and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation. (2) Where any case has been assigned by the Central Government to the Serious Fraud Investigation Office for investigation under this Act, no other investigating agency of Central Government or any 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 proceeded further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to Serious Fraud Investigation Office. (3) Where the investigation into the affairs of a company has been assigned by the Central Government to Serious Fraud Investigation Office, it shall conduct the investigation in the manner and follow the procedure provided in this Chapter; and submit its report to the Central Government within such period as may be specified in the order. (4) The Director, Serious Fraud Investigation Office shall cause the affairs of the company to be investigated by an Investigating Officer who shall have the power of the inspector under section 217. (5) The company and its officers and employees, who are or have been in employment of the company shall be responsible to provide all information, explanation, documents and assistance to the Investigating Officer as he may require for conduct of the investigation. Page 25 of 84 C/SCA/20840/2018 CAV JUDGMENT (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), [1][ offence covered under section 447] of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless— (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence referred to this subsection except upon a complaint in writing made by— (i) the Director, Serious Fraud Investigation Office; or (ii) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government. (7) The limitation on granting of bail specified in subsection (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of Page 26 of 84 C/SCA/20840/2018 CAV JUDGMENT 1974) or any other law for the time being in force on granting of bail. (8) If the Director, Additional Director or Assistant Director of Serious Frauds Investigation Office authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under sections referred to in subsection (6), he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest. (9) The Director, Additional Director or Assistant Director of Serious Fraud Investigation Office shall, immediately after arrest of such person under sub section (8), forward a copy of the order, along with the material in his possession, referred to in that sub section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed and the Serious Fraud Investigation Office shall keep such order and material for such period as may be prescribed. (10) Every person arrested under sub section (8) shall within twentyfour hours, be taken to a Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction: Provided that the period of twentyfour hours shall exclude the time necessary for the journey from the place of arrest to the Magistrate’s court.][ 2] (11) The Central Government if so directs, the Serious Fraud Investigation Page 27 of 84 C/SCA/20840/2018 CAV JUDGMENT Office shall submit an interim report to the Central Government. (12) On completion of the investigation, the Serious Fraud Investigation Office shall submit the investigation report to the Central Government. (13) Notwithstanding anything contained in this Act or in any other law for the time being in force, a copy of the investigation report may be obtained by any person concerned by making an application in this regard to the court. (14) On receipt of the investigation report, the Central Government may, after examination of the report (and after taking such legal advice, as it may think fit), direct the Serious Fraud Investigation Office to initiate prosecution against the company and its officers or employees, who are or have been in employment of the company or any other person directly or indirectly connected with the affairs of the company. (15) Notwithstanding anything contained in this Act or in any other law for the time being in force, the investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by a police officer under section 173 of the *Code of Criminal Procedure, 1973 (2 of 1974). (16) Notwithstanding anything contained in this Act, any investigation or other action taken or initiated by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 (1 of 1956) shall continue to be proceeded with under that Act as if this Act had not been passed. Page 28 of 84 C/SCA/20840/2018 CAV JUDGMENT (17) (a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Government, police authority, incometax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the Serious Fraud Investigation Office; (b) The Serious Fraud Investigation Office shall share any information or documents available with it, with any investigating agency, State Government, police authority or incometax authorities, which may be relevant or useful for such investigating agency, State Government, police authority or incometax authorities in respect of any offence or matter being investigated or examined by it under any other law.” 13. Before considering the facts of the present case, the decisions upon which the reliance is placed by learned counsel appearing for the parties are also required to be kept in mind. In the case of Rohtas Industries (supra), the Hon'ble Supreme Court was considering the provision contained in Section 237 of the Companies Act, 1956, wherein the Hon'ble Supreme Court has observed that The power under ss. 235 to 237 has been conferred on the Central Government on the faith that it will be exercised in a reasonable manner. The department of the Central Government which deals with companies is Page 29 of 84 C/SCA/20840/2018 CAV JUDGMENT presumed to be an expert body in company law matters. Therefore the standard that is prescribed under S. 237(b) is not the standard required of an ordinary citizen but that of an expert. It is further observed that from the facts placed before us, it is clear that the Government had not bestowed sufficient attention to the material before it before passing the impugned order. It is further stated that it is clear from the record that in making the impugned order, irrelevant consideration have been played an important role. The Hon’ble Supreme Court in the said judgment further observed that power under Section 237(b) is discretionary power the first requirement for its exercise is the honest formation of an opinion that the investigation is necessary and the further requirement is that \"there are circumstances suggesting\" the inference set out in the section; an action not based on circumstances suggesting an inference of the enumerated kind will not be valid; the formation of the opinion is subjective but the existence of the circumstances relevant to the inference as the sine qua non for action must be demonstratable. It is further observed that the Government is charged with the responsibility to form a bona fide opinion on the basis of relevant Page 30 of 84 C/SCA/20840/2018 CAV JUDGMENT material. The opinion formed in this case cannot be held to have been formed in accordance with law. 14. In the case of Barium Chemicals Ltd. and Ors. (supra), the Hon'ble Supreme Court has observed that before the Central Government forms its opinion it must have before it circumstances suggesting certain inferences. If the action is questioned on the ground that no circumstance leading to an inference of the kind contemplated by the section exists, the action might be exposed to interference unless the existence of the circumstances is made out. 14.1. In the case of Parmeshwar Das Agarwal (supra), the Bombay High Court has observed in para 40 as under: “40. Thus, the principle is that there has to be an opinion formed. That opinion may be subjective, but the existence of circumstances relevant to the inference as to the sine qua non for action must be demonstrable. It is not reasonable to hold that the clause permits the Government to say that it has formed an opinion on circumstances which it thinks exist.Since existence of circumstances is a condition fundamental to the making of the opinion, when questioned the existence of these Page 31 of 84 C/SCA/20840/2018 CAV JUDGMENT circumstances have to be proved at least prima facie. It is further observed by the Bombay High Court that while exercising the powers under section 212 (1), the Central Government ought to be not only forming an opinion about the necessity to investigate into the affairs of the company, but further that such investigations have to be assigned to the SFIO. In the facts of the said case, Bombay High Court held that “We do not think that there were materials in the present case and 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. 14.2. In the case of Medak Diocese, the A.P. High Court has observed in para 16 and 19 as under: “16. Thus, the principle is that there has to be an opinion formed. That opinion may be subjective, but the existence of circumstances relevant to the inference as to the sine qua non for action must be demonstrable. It is not reasonable to hold that the clause permits the Government to say that it has formed an opinion on circumstances which it thinks exist. Since existence of circumstances is a condition fundamental to the making of the opinion, when questioned the existence Page 32 of 84 C/SCA/20840/2018 CAV JUDGMENT of these circumstances have to be proved at least prima facie. 19. We do not think that there were materials in the present case and 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 Central Government, in the order under challenge, did not spell out any circumstances, except outlining its power under the above sections to order investigation into the affairs of a company in public interest...” 14.3. In the case of Additional District Magistrate, Jabalpur (supra), the Hon'ble Supreme Court observed in para 124 and 415 as under: “124. Section 16A (9) cannot be read down implying an exception in favour of disclosure to the Court as was suggested by the Bombay High Court (Nagpur Bench). Such disclosure to the court alone and not to the detenu will introduce something unknown to judicial procedure. This will bring in an element of arbitrariness and preclude both parties from representing their respective cases. Further, it would substitute or superimpose satisfaction of the Court for that of the Executive. This Court has held that the view of the detaining authority is not to be substituted by the view of the court... Page 33 of 84 C/SCA/20840/2018 CAV JUDGMENT 415.The view of the Bombay High Court that Section 16A (9) may be read down so as to enable the Court to examine the forbidden material is impossible to sustain. What use can a Court make of material which it cannot disclose to the detenu and how can it form a judicial opinion on matters not disclosed to a party before it? The High Court, at the highest could satisfy its curiosity by testing the forbidden fruit but its secret scrutiny of the grounds and of the file containing the relevant information and material cannot enter into its judicial verdict.” 14.4. In the case of Mahiuddin Tayab Soni, the Bombay High Court was considering the issue whether the material considered by the authorities is required to be disclosed to the petitioner detenu when the detenu is detained under the Preventive Detention Law. The Bombay High Court in the facts of the said case, observed that nothing is disclosed either in the affidavit or otherwise before the Court about the application of mind by the Detaining Authority while passing the order of detention. However, the said case would not be applicable in the facts of the present case.: 14.5. In the case of Kottam Raju Vikram Rao (supra), this Court was considering the Page 34 of 84 C/SCA/20840/2018 CAV JUDGMENT provisions contained in Section 173(5)(b) of the Code of Criminal Procedure, 1973 and thereafter the Court has considered the provisions contained in Sections 437 and 439 of the Code. At the time of deciding the application for bail, whether the material against the accused is to be disclosed to him or not was considered by this Court. In the facts of the said case, this Court has observed that Investigating Agency is bound to disclose the material collected during the course of investigation on which it wants to rely for the purpose of opposing bail application of the petitioner. 14.6. In the case of R.S.Sheth Gopikrishan Agrawal (supra), the Hon'ble Supreme Court was considering the provisions contained in Section 105 of the Customs Act, 1962. In the said case, it is contended by the petitioner that Section 105 of the said Act confers an unguided and arbitrary power on the Assistant Collector of Customs to make a search, the only condition being that he has reason to believe in the existence of the facts mentioned therein. It is said that the said belief is practically a subjective satisfaction and the section neither lays down any policy nor imposes any effective control on his absolute discretion. However, the Page 35 of 84 C/SCA/20840/2018 CAV JUDGMENT Hon’ble Supreme Court has considered various provisions of the Customs Act as well as provisions contained in Criminal Procedure Code and thereafter observed that, “It is, therefore, clear that not only a policy is laid down in S. 105, but also that the acts of the Assistant Collector are effectively controlled in the manner stated above. We cannot therefore, say that Section 105 offends Article 14 of the Constitution.” 14.7. In the case of Sheo Nath Singh (supra), the Hon'ble Supreme Court has observed in para 10 and 11 as under: “10. In our judgment, the law laid down by this Court in the above case is fully applicable to the facts of the present case. There can be no manner of doubt that the words \"reason to believe\" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Incomelax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The Court can always examine this aspect though the declaration or sufficiency of the Page 36 of 84 C/SCA/20840/2018 CAV JUDGMENT reasons for the belief cannot be investigated by the Court. 11. There is no material or fact which has been stated in the reasons for starting proceedings in the present case on which any belief could be founded of the nature contemplated by Section 34 (1A). The socalled reasons are stated to be beliefs thus leading to an obvious self contradiction. We are satisfied that the requirements of Section 34 (1A) were not satisfied and, therefore, the notices which had been, issued were wholly illegal and invalid.” 14.8. In the case of Brij Mohan Singh Chopra (supra), the Hon'ble Supreme Court has observed in para 9 as under: “9. The question which falls for consideration is whether the aforesaid two entries could be taken into consideration in forming the requisite opinion to retire prematurely the appellant from service. There is no doubt that whenever an adverse entry is awarded to a Government servant it must he communicated to him. The object and purpose underlying the communication is to afford an opportunity to the employee to improve his work and conduct and to make representation to the authority concerned against those entries. If such a representation is made it is imperative, that the authority should consider the representation with a view to determine as to whether the contents of the adverse entries are justified or not. Making of a representation is a Page 37 of 84 C/SCA/20840/2018 CAV JUDGMENT valuable right to a Govt. employee and if the representation is not considered, it is bound to affect him in his service career, as in Govt. service grant of increment, promotion and ultimately premature retirement all depend on the scrutiny of the service records...” 14.9. In the case of Aslam Mohammad Merchant (supra), the Hon'ble Supreme Court has observed in para 32 and 38 to 40 as under: “32. Before, however, an order of forfeiture can be passed, the Competent Au thority must not only comply with the principles of natural justice, he is also re quired to apply his mind on the materials brought before him. It is also necessary that a finding that all or any of the properties in question were illegally acquired properties is recorded. 38. It is, however, beyond any doubt or dispute that a proper application of mind on the part of the competent authority is imperative before a show cause notice is issued. 39. Section 68H of the Act provides for two statutory requirements on the part of the authority viz: (i) he has to form an opinion in regard to his 'reason to believe'; and (ii) he must record reasons therefor. 40. Both the statutory elements, namely, 'reason to believe' and 'recording of reasons' must be premised on the materials produced before him. Such materials must have been gathered during Page 38 of 84 C/SCA/20840/2018 CAV JUDGMENT the investigation carried out in terms of Section 68E or otherwise. Indisputably therefore, he must have some materials before him. If no such material had been placed before him, he cannot initiate a proceeding. He can not issue a show cause notice on his own ipse dixit. A roving enquiry is not contemplated under the said Act as properties sought to be forfeited must have a direct nexus with the properties illegally acquired.” 14.10. In the case of Calcutta Discount Co. Ltd. (supra), the Hon'ble Supreme Court has observed in para 24 to 26 as under: “24. It must therefore be held that the Incometax Officer who issued the notices had not before him any nondisclosure of a material fact and so he could have no material before him for believing that there had been any material non disclosure by reason of which an under assessment had taken place. 25. We are therefore bound to hold that the conditions precedent to the exercise of jurisdiction under S. 34 of the Incometax Act did not exist and the Incometax Officer had therefore no jurisdiction to issue the impugned notices under S. 34 in respect of the years 194243, 194344 and 194445 after the expiry of four years. 26. Mr. Sastri argued that the question whether the Incometax Officer had reason to believe that under assessment had occurred \"by reason of nondisclosure of material facts\" should not be investigated by the courts in an Page 39 of 84 C/SCA/20840/2018 CAV JUDGMENT application under Art. 226. Learned Counsel seems to suggest that as soon as the Incometax Officer has reason to believe that there has been under assessment in any year he has jurisdiction to start proceedings under S. 34 by issuing a notice provided 8 years have not elapsed from the end of the year in question, but whether the notices should have been issued within a period of 4 years or not is only a question of limitation which could and should properly be raised in the assessment proceedings. It is wholly incorrect however to suppose that this is a question of limitation only not touching the question of jurisdiction. The scheme of the law clearly is that where the Incometax Officer has reason to believe that an under assessment has resulted from nondisclosure he shall have jurisdiction to start proceedings for reassessment within a period of 8 years; and where he has reason to believe that an under assessment has resulted from other causes he shall have jurisdiction to start proceedings for re assessment within 4 years. Both the conditions, (i) the Incometax Officer having reason to believe that there has been under assessment and (ii) his having reason to believe that such under assessment has resulted from non disclosure of material facts, must coexist before the Incometax Officer has jurisdiction to start proceedings after the expiry of 4 years. The argument that the Court ought not to investigate the existence of one of these conditions, viz., that the Incometax Officer has reason to believe that under assessment has resulted from nondisclosure of material facts cannot therefore be Page 40 of 84 C/SCA/20840/2018 CAV JUDGMENT accepted.” 14.11. In the case of M/s. Ghaio Mal and Sons (supra), the Hon'ble Supreme Court was considering the letter written by Under Secretary Finance, (Exp.) to Government of Delhi State to Delhi State Secretariat, Delhi State. After considering the contents of the said letter, it was observed by the Hon’ble Supreme Court that it is an interdepartmental communication and it is written with respect to earlier communication made by the Excise Commissioner. After considering the facts of the said case, it was observed that, “the document which conveys the sanction can hardly be equated with the sanction itself. The document does not purport to have been authenticated in the form in which authentication is usually made. There is no statement at the end of the letter that it has been written \"by order of the Chief Commissioner\". For all these reasons it is impossible to read this document as the order of the Chief Commissioner.” However, the aforesaid decision would not be applicable to the facts of the present case. 14.12. In the case of Sunil Kumar Vaish & Ors., (supra), the Hon'ble Supreme Court has observed in para 23 and 24 as under: Page 41 of 84 C/SCA/20840/2018 CAV JUDGMENT “23. It is settled law that all executive actions of the Government of India and the Government of a State are required to be taken in the name of the President or the Governor of the State concerned, as the case may be [Articles 77(1) and 166(1)]. Orders and other instruments made and executed in the name of the President or the Governor of a State, as the case may be, are required to be authenticated in the manner specified in rules made by the President or the Governor, as the case may be [Articles 77(2) and 166(2)]. In other words, unless an order is expressed in the name of the President or the Governor and is authenticated in the manner prescribed by the rules, the same cannot be treated as an order on behalf of the Government. 24. A noting recorded in the file is merely a noting simpliciter and nothing more. It merely represents expression of opinion by the particular individual. By no stretch of imagination, such noting can be treated as a decision of the Government. Even if the competent authority records its opinion in the file on the merits of the matter under consideration, the same cannot be termed as a decision of the Government unless it is sanctified and acted upon by issuing an order in accordance with Articles 77(1) and (2) or Articles 166(1) and (2). The noting in the file or even a decision gets culminated into an order affecting right of the parties only when it is expressed in the name of the President or the Governor, as the case may be, and authenticated in the manner provided in Article 77(2) or Article 166(2). A noting or even a decision recorded in the file can always be reviewed/reversed/overruled Page 42 of 84 C/SCA/20840/2018 CAV JUDGMENT or overturned and the court cannot take cognizance of the earlier noting or decision for exercise of the power of judicial review. (See State of Punjab v. Sodhi Sukhdev Singh; Bachhittar Singh v. State of Punjab; State of Bihar v. Kripalu Shankar; Rajasthan Housing Board v. Shri Kishan; Sethi Auto Service Station v. DDA and Shanti Sports Club v. Union of India)” 14.13. In the case of Baldev Raj Chadha (supra), the Hon'ble Supreme Court has observed in para 4 as under: “4. A breakdown of the provision brings out the basic components. The order to retire must be passed only by 'the appropriate authority'. That authority must form the requisite opinion not subjective, satisfaction but objective and bona fide and based on relevant material. The requisite, opinion is that the retirement of the victim is 'in public interest' not personal, political or other interest but solely governed by the interest of public service. The right to retire is not absolute, though so worded. Absolute power is anathema under our constitutional order. 'Absolute' merely means wide not more. Naked and arbitrary exercise of power is bad in law. These essentials once grasped, the appellant's submissions become selfevident.” 14.14. In the case of W.N.Chadha (supra), the Hon'ble Supreme Court has observed in para 80 and 81 as under: Page 43 of 84 C/SCA/20840/2018 CAV JUDGMENT “80. The rule of audi alteram partem is a rule of justice and its application is excluded where the rule will itself lead to injustice. In A.S. de Smith's Judicial Review of Administrative Action, 4th Ed. at page 184, it is stated that in administrative law, a prima facie right to prior notice and opportunity to be heard may be held to be excluded by implication in the presence of some factors, singly or in combination with another. Those special factors are mentioned under items (1) to (10) under the heading \"Exclusion of the audi alteram partem rule\". 81. Thus, there is exclusion of the application of audi alteram partem rule to cases where nothing unfair can be inferred by not affording an opportunity to present and meet a case. This rule cannot be applied to defeat the ends of justice or to make the law 'lifeless; absurd, stultifying and selfdefeating or plainly contrary to the common sense of the situation' and this rule may be jettisoned in very exceptional circumstances where compulsive necessity so demands.” 14.15. In the case of Deepak Chowdhary (supra), the Hon'ble Supreme Court has observed in para 4 and 5 as under: “4. It is contended for the appellant that the question of giving an opportunity to the charged officer before granting sanction does not arise since it is not a quasi judicial function. Grant of sanction is an administrative Page 44 of 84 C/SCA/20840/2018 CAV JUDGMENT function. What is required is that the investigating officer should place all the necessary material before the sanctioning authority who should apply its mind to that material and accord sanction. Therefore, the question of giving opportunity of hearing to the accused before granting sanction does not arise. 5. We find force in the contention. The grant of sanction is only an administrative function, though it is true that the accused may be saddled with the liability to be prosecuted in a Court of law. What is material at that time is that the necessary facts collected during investigation constituting the offence have to be placed before the sanctioning authority and it has to consider the material. Prima facie, the authority is required to reach the satisfaction that the relevant facts would constitute the offence and then either grant or refuse to grant sanction. The grant of sanction, therefore, being administrative act the need to provide an opportunity of hearing the accused before according sanction does not arise. The High Court, therefore, was clearly in error in holding that the order of sanction is vitiated by violation of the principles of natural justice.” 14.16. In the case of Anju Choudhary (supra), the Hon'ble Supreme Court has observed in para 30 and 31 as under: “Is an accused entitled to hearing pre registration of an FIR? Page 45 of 84 C/SCA/20840/2018 CAV JUDGMENT 30. Section 154 of the Code places an unequivocal duty upon the police officer incharge of a police station to register FIR upon receipt of the information that a cognizable offence has been committed. It hardly gives any discretion to the said police officer. The genesis of this provision in our country in this regard is that he must register the FIR and proceed with the investigation forthwith. While the position of law cannot be dispelled in view of the three Judge Bench Judgment of this Court in State of Uttar Pradesh v. Bhagwant Kishore Joshi [AIR 1964 SC 221], a limited discretion is vested in the investigating officer to conduct a preliminary inquiry pre registration of a FIR as there is absence of any specific prohibition in the Code, express or implied. The subsequent judgments of this Court have clearly stated the proposition that such discretion hardly exists. In fact the view taken is that he is duty bound to register an FIR. Then the question that arises is whether a suspect is entitled to any preregistration hearing or any such right is vested in the suspect. 31. The rule of audi alteram partem is subject to exceptions. Such exceptions may be provided by law or by such necessary implications where no other interpretation is possible. Thus rule of natural justice has an application, both under the civil and criminal jurisprudence. The laws like detention and others, specifically provide for postdetention hearing and it is a settled principle of law that application of this doctrine can be excluded by exercise of legislative powers which shall withstand judicial scrutiny. The Page 46 of 84 C/SCA/20840/2018 CAV JUDGMENT purpose of the Criminal Procedure Code and the Indian Penal Code is to effectively execute administration of the criminal justice system and protect society from perpetrators of crime. It has a twin purpose; firstly to adequately punish the offender in accordance with law and secondly to ensure prevention of crime. On examination, the scheme of the Criminal Procedure Code does not provide for any right of hearing at the time of registration of the First Information Report. As already noticed, the registration forthwith of a cognizable offence is the statutory duty of a police officerincharge of the police station. The very purpose of fair and just investigation shall stand frustrated if preregistration hearing is required to be granted to a suspect. It is not that the liberty of an individual is being taken away or is being adversely affected, except by the due process of law. Where the officerincharge of a police station is informed of a heinous or cognizable offence, it will completely destroy the purpose of proper and fair investigation if the suspect is required to be granted a hearing at that stage and is not subjected to custody in accordance with law. There would be the predominant possibility of a suspect escaping the process of law. The entire scheme of the Code unambiguously supports the theory of exclusion of audi alteram partem pre registration of an FIR. Upon registration of an FIR, a person is entitled to take recourse to the various provisions of bail and anticipatory bail to claim his liberty in accordance with law. It cannot be said to be a violation of the principles of natural justice for two different reasons. Firstly, the Code does Page 47 of 84 C/SCA/20840/2018 CAV JUDGMENT not provide for any such right at that stage. Secondly, the absence of such a provision clearly demonstrates the legislative intent to the contrary and thus necessarily implies exclusion of hearing at that stage. This Court in the case of Union of India v. W.N. Chadha (1993) Suppl (4) SCC 260 : (AIR 1993 SC 1082 : 1993 AIR SCW 423) clearly spelled out this principle in paragraph 98 of the judgment that reads as under: \"98. If prior notice and an opportunity of hearing are to be given to an accused in every criminal case before taking any action against him, such a procedure would frustrate the proceedings, obstruct the taking of prompt action as law demands, defeat the ends of justice and make the provisions of law relating to the investigation lifeless, absurd and self defeating. Further, the scheme of the relevant statutory provisions relating to the procedure of investigation does not attract such a course in the absence of any statutory obligation to the contrary.\" 14.17. In the case of K.K.Baskaran (supra), the Hon'ble Supreme Court has observed in para 31 to 33 as under: “31. We fail to see how there is any violation of Article 14, 19(1)(g) or 21 of the Constitution. The Act is a salutary measure to remedy a great social evil. A systematic conspiracy was effected by certain fraudulent financial establishments which not only committed Page 48 of 84 C/SCA/20840/2018 CAV JUDGMENT fraud on the depositor, but also siphoned off or diverted the depositor's funds mala fide. We are of the opinion that the act of the financers in exploiting the depositors is a notorious abuse of faith of the depositors who innocently deposited their money with the former for higher rate of interest. These depositors were often given a small pass book as a token of acknowledgment of their deposit, which they considered as a passport of their children for higher education or wedding of their daughters or as a policy of medical insurance in the case of most of the aged depositors, but in reality in all cases it was an unsecured promise executed on a waste paper. The senior citizens above 80 years, senior citizens between 60 and 80 years, widows, handicapped, driven out by wards, retired government servants and pensioners, and persons living below the poverty line constituted the bulk of the depositors. Without the aid of the impugned Act, it would have been impossible to recover their deposits and interest thereon. 32. The conventional legal proceedings incurring huge expenses of court fees, advocates' fees, apart from other inconveniences involved and the long delay in disposal of cases due to docket explosion in Courts, would not have made it possible for the depositors to recover their money, leave alone the interest thereon. Hence, in our opinion the impugned Act has rightly been enacted to enable the depositors to recover their money speedily by taking strong steps in this connection. Page 49 of 84 C/SCA/20840/2018 CAV JUDGMENT 33. The State being the custodian of the welfare of the citizens as parens patriae cannot be a silent spectator without finding a solution for this malady. The financial swindlers, who are nothing but cheats and charlatans having no social responsibility, but only a lust for easy money by making false promise of attractive returns for the gullible investors, had to be dealt with strongly. The small amounts collected from a substantial number of individual depositors culminated into huge amounts of money. These collections were diverted in the name of third parties and finally one day the fraudulent financers closed their financial establishments leaving the innocent depositors in the lurch.” 14.18. In the case of Y.S.Jagan Mohan Reddy (supra), the Hon'ble Supreme Court has observed in para 34 as under: “34. Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country.” 14.19. In the case of Shrilekha Vidyarthi (supra), the Hon'ble Supreme Court has observed in para 13 as under: Page 50 of 84 C/SCA/20840/2018 CAV JUDGMENT “13. The learned Additional Advocate General contended that clause 3 of para 7.06 says that the appointment of a District Government Counsel is only professional engagement terminable at will on either side and not appointment to a post under the Government; and the Government has the power to terminate the appointment at any time 'without assigning any cause'. He contended that this power to terminate the appointment at any time without assigning any cause and the clear statement that the appointment is only professional engagement terminable at will on either side is sufficient to indicate that the relationship is the same as that of a private client and his counsel. In our opinion, this provision has to be read not in isolation, but in the context in which it appears and along with the connected provisions, already referred. The expression 'professional engagement' is used therein to distinguish it from 'appointment to a post under the Government' in the strict sense. This,' however, does not necessarily mean that a person who is not a Government servant holding a post under the Government does not hold any public office and the engagement is purely private with no public element attaching to it. This part of cl. 3 of Para 7.06 means only this and no more. The other part of cl. 3 which enables the Government to terminate the appointment 'at any time without assigning any cause' can also not be considered in the manner, suggested by the learned Additional Advocate General. The expression at any time merely means that the termination may be made even during the subsistence of the term of appointment and 'without assigning any Page 51 of 84 C/SCA/20840/2018 CAV JUDGMENT cause means without communicating any cause to the appointee whose appointment is terminated. However, without any cause is not to be equated with without existence of any cause'. It merely means that the reason for which the termination is made need not to be assigned or communicated to the appointee. It was held in Liberty Oil Mills v. Union of India (1984) 3 SCC 465 : (AIR 1984 SC 1271) that the expression 'without assigning any reason' implies that the decision has to be communicated, but reasons for the decision have not to be stated; but the reasons must exist, otherwise, the decision would be arbitrary. The nonassigning of reasons or the noncommunication thereof may be based on public policy, but termination of an appointment without the existence of any cogent reason in furtherance of the object for which the power is given would be arbitrary and, therefore, against public policy. Cl. 3 of para 7.06 must, therefore, be understood to mean that the appointment of a District Government Counsel is not to be equated with appointment to a post under the Government in the strict sense, which does not necessarily mean that it results in denuding the office of its public character; and that the appointment may be terminated even during currency of the term by only , communicating the decision of termination without communicating the reasons which led to the termination. It does not mean that the appointment is at the sweet will of, the Government which can be terminated at any time, even without the existence of any cogent reason during the subsistence of the term. The construction, suggested on behalf of the State of U.P. of this Page 52 of 84 C/SCA/20840/2018 CAV JUDGMENT provision, if accepted, would amount to conceding arbitrary power of termination to the Government, which by itself is sufficient to reject the contention and thereby save it from any attack to its validity.” 14.20. In the case of E.G. Nambudiri (supra), the Hon'ble Supreme Court has observed in para 6 as under: “6. Entries made in the character roll and confidential record of a Government servant are confidential and those do not by themselves affect any right of the Government servant, but those entries assume,importance and play vital role in the matter relating to confirmation, crossing of efficiency bar, promotion and retention in service. Once an adverse report is recorded, the principles of natural justice require the reporting authority to communicate the same to the Government servant to enable him to improve his work and conduct and also to explain the circumstances leading to the report. Such an opportunity is not an empty formality, its object, partially, being to enable the superior authorities to decide on a consideration of the explanation offered by the person concerned, whether the adverse report is justified. The superior authority competent to decide the representation is required to consider the explanation offered by the Government servant before taking a decision in the matter. Any adverse report which is not communicated to the Government servant, or if he is denied the opportunity of making Page 53 of 84 C/SCA/20840/2018 CAV JUDGMENT representation to the superior authority, cannot be considered against him. See : Gurdian Singh Fijji v. State of Punjab, 1979 (3) SCR 518. In the circumstances it is necessary that the authority must consider the explanation offered by the Government servant and to decide the same in a fair and just manner. The question then arises whether in considering and deciding the representation against adverse report, the authorities are duty bound to record reasons, or to communicate the same to the person concerned. Ordinarily, courts and Tribunals, adjudicating rights of parties, are required to act judicially and to record reasons. Where an administrative authority is required to act judicially it is also under an obligation to record reasons. But every administrative authority is not under any legal obligation to record reasons for its decision, although, it is always desirable to record reasons to avoid any suspicion. Where a statute requires an authority though acting administratively to record reasons, it is mandatory for the authority to pass speaking orders and in the absence of reasons the order would be rendered illegal. But in the absence of any statutory or administrative requirement to record reasons, the order of the administrative authority is not rendered illegal for absence of reasons. If any challenge is made to the validity of an order on the ground of it being arbitrary or mala fide, it is always open to the authority concerned to place reasons before the Court which may have persuaded it to pass the orders. Such reasons must already exist on records as it is not permissible to the authority to support Page 54 of 84 C/SCA/20840/2018 CAV JUDGMENT the order by reasons not contained in the records. Reasons are not necessary to be communicated to the Government servant. If the statutory rules require communication of reasons, the same must be communicated but in the absence of any such provision absence of communication of reasons do not affect the validity of the order.” 14.21. In the case of Registrar, High Court of M.P. (supra), the Hon'ble Supreme Court has observed in para 3 as under: “3. We are of the opinion that even though on the face of the order it was not stated that the action was initiated in public interest and even though the particulars in that behalf were not pleaded in the written statement, it was open to the State as well as the High Court to place material before the Court at the trial in support of its contention that the action was taken in public interest. Of course, that is not to say that care need not be taken while drafting the order of compulsory retirement or drawing up the defence if the action is challenged. But on that account alone the order will not be quashed if it can otherwise be shown that the action was taken in public interest. An attempt was made to point out certain material in support of the contention that the action was in public interest for the first time before this Court, but we have not permitted it. Therefore, we do not see any reason to interfere with the order passed by the High Court. Hence, the appeal is dismissed with no Page 55 of 84 C/SCA/20840/2018 CAV JUDGMENT order as to costs.” 14.22. In the case of Saleena (supra), the Hon'ble Supreme Court has observed in para 27 as under: “27. This being the position of law, when there is allegation that there has been nonapplication of mind and the representation has been rejected in a laconic or mechanical manner by the competent authority, we are disposed to think, the Court can always call for the file and peruse the notes and the proceedings whether there has been application of mind by the competent authority or not. Our said conclusion gets support from the decision in Ashok Narain (supra). In the said case, this Court on perusal of file has expressed its opinion that there had been no tardiness on behalf of any one and, therefore, the detention in no manner was illegal.” 15. At this stage, it is required to be noted that this Court has called for the original files and carefully examined the same. The contention of the petitioners that the respondents have not stated any reasons why the impugned order is passed nor any material is disclosed in the affidavit and therefore the impugned order be set aside. However, from the decisions rendered by the Hon'ble Supreme Court in the aforesaid cases, it can be said that while exercising the powers under Section 212 of the Act by the Central Page 56 of 84 C/SCA/20840/2018 CAV JUDGMENT Government the only thing which is required to be demonstrated prima facie is that the objective material is available with the Central Government for forming an opinion ordering for any investigation by SFIO and such opinion has to be subjective opinion which should be bona fide and genuine. It would not be permitted to be questioned either on the ground of propriety, reasonableness or sufficiency. There is no necessity of giving the details and particulars of such objective material either in the order issued by the Central Government under Section 212 of the Act or even in the counter affidavit filed by the Central Government before the Court. This Court is of the view that whenever it is an issue of investigation into any serious fraud, the disclosure of the particulars of the allegations/material upon which the allegations have been made, may itself be contrary to public interest and therefore if the material is disclosed, the same may defeat the entire purpose of the investigation itself. 16. This Court is of the view that the basis for arriving at an opinion under Section 212 of the Act may exist on the record of the Central Government and whenever it becomes necessary, the Central Government would consider and decide to place the same before the Court for the perusal Page 57 of 84 C/SCA/20840/2018 CAV JUDGMENT of the Court. In the present case, as stated hereinabove, the learned counsel appearing for the Central Government has produced original files before this Court for perusal and after perusing the record, this Court is of the view that the opinion formed by the Central Government on the basis of the material is not required to be interfered with. 17. At this stage, decision rendered by the Hon'ble Supreme Court in the case of Shrilekha Vidyarthi (supra) is required to be considered, wherein the Hon'ble Supreme Court has held that, “...'without assigning any cause' is not to be equated with 'without existence of any cause'. It merely means that the reason for which the termination is made need not to be assigned or communicated to the appointee. The expression 'without assigning any reason' implies that the decision has to be communicated, but reason for the decision have not to be stated; but the reasons must exist, otherwise, the decision would be arbitrary. The nonassigning of reasons or noncommunication thereof may be based on public policy. 18. Even in the case of Saleena (supra), the Hon'ble Supreme Court has observed that, '….On a careful persual of the file, we find that there Page 58 of 84 C/SCA/20840/2018 CAV JUDGMENT has been subjective satisfaction on the basis of the material placed before the competent authority along with the representation. It cannot be said that the subjective satisfaction is not discernible from the order passed. It is further observed that the, 'Court can always call for the file and peruse whether there has been rejection of the representation as required under the law.' 19. The Central Government, for the purpose of issuing any administrative order is not compelled to record reasons for taking administrative decision. However, that does not mean that the Central Government can take a decision in an arbitrary manner. In the case of E.G.Nambudiri (supra), the Hon'ble Supreme Court has observed that, 'Where an administrative authority is required to act judicially, it is also under an obligation to record reasons. But every administrative authority is not under any legal obligation to record reasons for its decision, although, it is always desirable to record reasons to avoid any suspicion. 20. The contention raised by the learned counsel for the petitioners that before passing the impugned order, opportunity of hearing is not afforded to the petitioners and therefore the Page 59 of 84 C/SCA/20840/2018 CAV JUDGMENT impugned order is to be set aside. However, this Court is of the view that said contention is misconceived. When the respondent Central Government has passed the order of investigation by SFIO in public interest on the basis of the material placed before it then the said decision is an administrative decision and the same cannot be termed as a quasi judicial decision. Thus, the opportunity of hearing is not required to be granted to the petitioners in such type of cases before passing an order otherwise the public interest itself would suffer. The Hon'ble Supreme Court in the case of Deepak Chowdhary (supra) considered the question of giving an opportunity to the charged officer before granting sanction in criminal cases, wherein the Hon'ble Supreme Court has observed that, 'grant of sanction is not a quasi judicial function but it is an administrative function'. It is further observed that what is required is that the Investigating Officer should place all the material before the sanctioning authority which should apply its mind to that material and accord sanction. Therefore, the question of giving an opportunity of hearing to the accused before granting sanction does not arise. 21. Similarly, in the case of Anju Choudhary (supra), the Hon'ble Supreme Court was Page 60 of 84 C/SCA/20840/2018 CAV JUDGMENT considering a question 'is an accused entitled to hearing preregistration of FIR?' While considering the said question, the Hon'ble Supreme Court has observed that, 'the law does not contemplate grant of any personal hearing to a suspect who attains the status of an accused only when a case is registered for committing a particular offence or the report under Section 173 of Code of Criminal Procedure is filed. Absence of specific provision requiring grant of hearing to a suspect and the fact that the very purpose and object of fair investigation is bound to be adversely affected if hearing is insisted upon at that stage, clearly supports the view that hearing is not a right of any suspect at that stage. 22. The reliance placed by the learned counsel appearing for the petitioners on the decision rendered by the Hon'ble Supreme Court in the case of Barium Chemicals Ltd. and Ors. (supra) is misconceived. In the said case, the Hon'ble Supreme Court considered the counter affidavit filed on behalf of the Central Government to ascertain the objective material on the basis of which the decision was taken to assign the investigation to SFIO. However, in the facts of the said case, the Hon'ble Supreme Court arrived at the conclusion that there was no material Page 61 of 84 C/SCA/20840/2018 CAV JUDGMENT which was placed before the Court to support the decision of the Central Government. In the said case, there was no material to demonstrate that the affairs of the company being carried out with an intent to defraud the creditors, members and other persons. 22.1. Even in the case of Rohtas Industries (supra), the Hon'ble Supreme Court has taken into consideration the counter affidavit filed on behalf of the Central Government and it was held that the only allegation against the company in that case was that the sister concern of the company had purchased preference shares at a rate higher than the market rate. In the facts of the said case, it was held that there was no material before the Central Government to show whether the preference shares were sold for inadequate consideration or not. 22.2. Thus, this Court is of the considered view that the aforesaid two decisions would not render any assistance to the petitioners in the facts of the present case. On the contrary, in the aforesaid cases the Hon'ble Supreme Court has observed that, 'any opinion of the Central Government formed on the basis of the objective material cannot be questioned either on the ground of propriety or reasonableness or Page 62 of 84 C/SCA/20840/2018 CAV JUDGMENT sufficiency'. In the present case, as discussed hereinabove, from the files produced before this Court, it can be said that sufficient material was placed before the Central Government for passing an order of investigation by SFIO in public interest. 23. Similarly, the decision rendered by the Bombay High Court in the case of Parmeshwar Das Agarwal (supra), relied upon by learned counsel for the petitioners, is also not applicable to the facts of the present case. In the said case, it has been recorded that the Registrar of Companies having jurisdiction to investigate had clearly reported that the matters were subjudice and it will not be possible for him to undertake any investigation. Despite this specific recommendation of the Registrar supported by the details of subjudice matter, the same was disregarded by the Government in passing the order. It was further observed by the Bombay High Court that the dispute essentially pertains to private dispute between the two groups and could not be investigated by SFIO. Thus, the reliance placed upon the said decision is misconceived. 24. Further, learned counsel for the petitioners have placed reliance upon the decision rendered by Andhra Pradesh High Court in the case of Medak Page 63 of 84 C/SCA/20840/2018 CAV JUDGMENT Diocese (supra). In the said case, the investigation by SFIO was ordered on the basis of report of the Registrar. However, in the facts of the said case, Andhra Pradesh High Court found that there was no material in existence justifying ordering of investigation by SFIO. Thus, this decision is also not helpful to the petitioners. 25. Another contention of learned counsel for the petitioners is that the concept of 'public interest' in relation to the affairs of the company should get restricted to the management of the company and/or interest of the shareholders. However, the said contention is also misconceived. At this stage, this Court would like to refer the decision rendered by this Court in the case of Re: Wood Polymer Ltd. (supra), wherein the Court has observed in para 25, 26 and 27 as under: “25. Learned Advocate General who appeared both on behalf of the transferorcompany and the transferee company contended that, taken at its face value, the report of the official liquidator is clearly in favour of the transferorcompany when it proceeds to state that the affairs of the transferor company are not conducted in a manner prejudicial to the members or public interest. It as said that on that averment, it can be said that the Page 64 of 84 C/SCA/20840/2018 CAV JUDGMENT requirement of the proviso has been complied with and the court should not further prove into the matter. The report of the official liquidator is subject to an important factual statement, namely, that the transferorcompany was a paper company only created for the purpose of acquiring Avenue House property without incurring any liability to pay capital gains tax. The liquidator was called upon to inquire whether the affairs of the transferorcompany have been carried on in a manner prejudicial to the members of the company or public interest. Now, the report clearly recites that the affairs are not shown to have been carried on in a manner prejudicial to the members of the company. But, if it is shown that the transferorcompany was a paper company, created for the purpose herein mentioned, could it be said that its affairs were carried on in a manner not prejudicial to public interest ? An attempt was made to urge that inquiry under the second proviso is limited to carrying on affairs of the company, meaning thereby, carrying on of the business or the management of the company, in other words, its internal affairs and it has nothing to do with the broader perspective of creation of company for a purpose and achieving that purpose by mere creation of the company, purpose being to defeat the payment of capital gains tax. The language of the second proviso does not admit of such narrow construction. What is meant by the expression \"carrying on the affairs of the company\" ? It involves setting up of the company, floating the company, carrying on business of the company, is internal working, its working in relation to the socioeconomic set up of the society and the way in which it treats Page 65 of 84 C/SCA/20840/2018 CAV JUDGMENT its members and creditors, all these will be included in the expression \"affairs of the company\". The expression \"affairs of the company\" need not be given restricted meaning, namely, \"the internal working of the company.\" The expression \"affairs of the company\" must take colour from the expression of \"public interest\" : used in the proviso. The query which the court must address itself is : whether the affairs of the company have been in a manner prejudicial to the public interest ? The expression \"affairs of the company\" must receive wider construction in view of the fact that they are to be examined in relation to public interest. Therefore, it is not possible to accept the submission that the expression \"affairs of the company\" must receive a narrow construction so a to confine it to internal management of the company itself. The question that should be fairly posed is : whether it is shown that the affairs of the company have not been carried on in a manner prejudicial to the public interest? 26. What then is the concept of \"public interest\" in company law. In the heydays of laissez faire, it was quite wellknown for the leaders of trade and industry not only to ignore but disavow public interest involved in carrying on business. Their sole attention was confined to the interest of creditors and members. But other important consumers of industrycumcommercial service were wholly ignored, namely, employees and consumers of the goods produced by the industry, I mean, the society. It would be interesting to recall the remarks of Correlius Venderbilt, the then Chairman Page 66 of 84 C/SCA/20840/2018 CAV JUDGMENT of the New York Central Rail Road, in the course of a celebrated controversy over the ruthless commercial policy followed by the Raol Road Company, when replying to a newspaper criticism of this policy, he openly declared \"the public be damned\". (vide The Concept of Public Interest in the Indian Company Law by D. L. Mazumdar I.C.S., quoted in The chartered Accountant, vol. XII part I, 196364, p. 406.) the concept of public interest has recently received recognition in the business practice of the more enlightened sections of the leaders in the trade and industry. As far as our Companies Act is concerned, it has received statutory recognition in sections 89(4), 205(1), 211(3), 221, 244(1), 250, 303,326,352 and 396 in the Companies Act. \"Public interest\" is a positive check on unhindered exercise of private right whether by management or stockholders. Our company law has recognised the fact that there are several areas in this field where even the joint will of the management and the stockholders must give way to the requirements of public policy. In the field in which public interest is recognised as a relevant consideration, freedom of management and stockholders to carry on the business of the company in regard to these matters, in such manner as they like, has been specifically subjected to the condition that autonomous decision making in these areas must not override the concept of the public interest (vide D. L. Mazumdar I.C.S. supra). 27. The expression \"public interest\" : is sometimes used as an expression inter changeable for the national interest. Page 67 of 84 C/SCA/20840/2018 CAV JUDGMENT This is a term very often used in contradistinction to \"private interest\" or \"personal interest\". It is something in which the public, the community at large, has some pecuniary interest, or some interest by which their legal rights or liabilities are affected (vide Black's Dictionary, 4th edition, p. 1393). The word \"public\" has a very wide connotation, and though the word \"public\" has a very wide connotation, the perspective in which it is used will determine its ambit. The expression \"interest of the general public\" came in for construction in Emperor v. Jesingbhai [1948] 50 Bom LR 544, wherein it was held that it is an expression of wide connotation and has got several implications. As the expression will take its colour from the context in which it is used, the object behind the legislative intendment within which it is used and the mischief it seeks to suppress, all these factors will enter into the verdict in deciding what constitutes 'public interest' in the context of the legislation in which it is used. In the very nature of the case, modern conditions and the increasing interdependence of the different human factors in the progressive complexity of a community make it necessary for the Government to touch upon and limit individual activities at more points than formerly. (Vide State of Bihar v. Maharajadhiraj Sir Kameshwar Singh of Darbhanga [1952] SCR 889 at 994; AIR 1952 SC 252). In the context in which the court is called upon to examine whether the affairs of the company were carried out in a manner prejudicial to the members of the company or public interest, it would be necessary to Page 68 of 84 C/SCA/20840/2018 CAV JUDGMENT determine the wider philosophical context why the State is permitted to levy tax. It is not necessary for me to dive deep into the philosophy of taxation. Suffice it to say that all the taxes are levied by the State in public interest. No tax is levied for merely enriching the Sate or for the private use of some private individual. The State represents the common will and is devoted to common good and all powers are conferred on the State for achieving common good. That is equally true police powers of the State. For carrying out all the activities expected of a welfare State, the State must have funds and to get them, it has to levy taxes. It would, therefore, be indisputable that taxes are levied for the common good and that would indisputably be in public interest. If such be the philosophy behind the taxing power of the State, could it be said that when by a device resorted to, in which success can be achieved with the aid of the court, a subject seeks to defeat tax, such action could even be in public interest? 26. From the aforesaid decision it can be said that the width and scope of concept of 'public interest' is wide and would also include hundreds of members of public whose interests are seriously prejudiced and irreversibly impacted by the acts of omission and commission of the companies covered by the order of investigation. In the present case, as discussed hereinabove, the allegations are that huge amounts were collected from large number of persons by Adarsh Page 69 of 84 C/SCA/20840/2018 CAV JUDGMENT Credit Cooperative Society Ltd. on the premise of return of high interest on the amounts received from them and the said amounts were transferred to the companies in question and from where such amounts were either deposited or invested in other societies. In fact the petitioner has stated in paragraph 2.1 that the petitioner is member of Adarsh Credit Cooperative Society Ltd. which is registered under the Multi State Cooperative Societies Act, 2002. The society owns 99% shareholding f the petitioner. Thus, from the aforesaid fact admitted in the petition itself, it is clear that the petitioner is closely connected with Adarsh Credit Cooperative Society Ltd. 27. At this stage, it is also required to be noted that affidavit is filed on behalf of respondents wherein the procedure/mechanism has been explained in dealing with the cases/complaints received from the concerned persons from the perspective of ordering an investigation under Section 212 of the Act. The respondent has also stated in the affidavit about the availability of credible information for formation of an objective opinion for passing the impugned order. The respondent has also stated about the concept of 'public interest' in the affidavitinreply in detail. It has come on Page 70 of 84 C/SCA/20840/2018 CAV JUDGMENT record that during the investigation it had been initially observed that the entire episode may involve two lakh depositors and the amount involved may be to the tune of Rs.10,000 crores. During the course of investigation material is collected which supports the formation of an opinion by the Central Government for investigation by SFIO. Thus, when the respondent Central Government has taken the decision to order an investigation by SFIO in public interest, this Court is of the view that no interference is required in the said decision. 28. Learned counsel appearing for the petitioners next contended that the subsequent material collected after passing of the impugned order cannot be looked into by this Court. At this stage, this Court would like to refer the decision rendered by the Hon'ble Supreme Court in the case of K. Shyam Kumar & Ors. (supra), wherein the Hon'ble Supreme Court has observed in para 44 and 45 as under: “44. We are also of the view that the High Court has committed a grave error in taking the view that the order of the Board could be judged only on the basis of the reasons stated in the impugned order based on the report of vigilance and not on the subsequent materials furnished by the CBI. Possibly, the High Court had in mind the constitution bench Page 71 of 84 C/SCA/20840/2018 CAV JUDGMENT judgment of this Court in Mohinder Singh Gill v. Chief Election Commissioner. 45. We are of the view that the decision maker can always rely upon subsequent materials to support the decision already taken when larger public interest is involved. This Court in Madhyamic Shiksha Mandal, M.P. v. Abhilash Shiksha Prasar Samiti and Others, (1998) 9 SCC 236 found no irregularity in placing reliance on a subsequent report to sustain the cancellation of the examination conducted where there were serious allegations of mass copying. The principle laid down in Mohinder Singh Gill's case is not applicable where larger public interest is involved and in such situations, additional grounds can be looked into to examine the validity of an order. Finding recorded by the High Court that the report of the CBI cannot be looked into to examine the validity of order dated 04.06.2004, cannot be sustained.” 29. Thus, from the aforesaid decision, it can be said that the subsequent material collected during the course of investigation can also be taken into consideration by this Court while considering the decision of the Central Government ordering investigation by SFIO and also for the purpose of grant of extension of time for completing an investigation. Thus, this Court is of the considered opinion that the contention raised by the petitioners that the subsequent material collected after passing of the impugned order cannot be looked into, is Page 72 of 84 C/SCA/20840/2018 CAV JUDGMENT misconceived. 30. The next contention of learned counsel appearing for the petitioners is with regard to the contravention of Article 77 of the Constitution of India while passing the impugned order. Article 77 of the Constitution of India provides as under: “77. Conduct of business of the Government of India (1) All executive action of the Government of India shall be expressed to be taken in the name of the President (2) Orders and other instruments made and executed in the name of the President shall be authenticated in such manner as may be specified in rules to be made by the President, and the validity of an order or instrument which is so authenticated shall nor be called in question on the ground that it is not an order or instrument made or executed by the President (3) The President shall make rules for the more convenient transaction of the business of the Government of India, and for the allocation among Ministers of the said business” 31. From the material placed on record, it is revealed that the impugned order has been passed by the Ministry of Corporate Affairs under the Allocation of Business Rules, 1961. However, in the impugned order there is no reference with Page 73 of 84 C/SCA/20840/2018 CAV JUDGMENT regard to the fact that the order has been passed in the name of the Hon'ble President. However, for nonmention/description of the Hon'ble President in the impugned order, which is an administrative order, it cannot be said to be illegal or invalid. For deciding the said issue, this Court has kept in mind various cases. In the case of P. Joseph John (supra), the Hon'ble Supreme Court has observed in para 8 as under: “8. Mr. Thomas argued that the show cause notice was not in accordance with the provisions of Article 166 of the Constitution inasmuch as it was not expressed to have been made in the name of the Rajpramukh. As above mentioned, this notice was issued on behalf of the Government and was signed by the Chief Secretary of the united State of TravancoreCochin who had under the rules of business framed by the Rajpramukh the charge of the portfolio of service and appointments\" at the Secretariat level in this State. This was in our opinion substantial compliance with the directory provisions of Article 166 of the Constitution. It was held by this court in 'Dattatreya Moreshwar v. State of Bombay', AIR 1952 SC 181 (B), that clauses (1) and (2) of Article 166 are directory only and noncompliance with them does not result in the order being invalid, and that in order to determine whether there is compliance with these provisions all that is necessary to be seen is whether there has been substantial compliance with those requirements. In the present case there Page 74 of 84 C/SCA/20840/2018 CAV JUDGMENT can be no manner of doubt that the notice signed by the Chief Secretary of the State and expressed to be on behalf of the Government and giving opportunity to the petitioner to show cause against the action proposed to be taken against him was in substantial compliance with the provisions, of the article. The petitioner accepted this notice and in pursuance of it applied for further time to put in his defence. He was twice granted this time. In these circumstances, the contention of Mr. Thomas that as the notice was not expressed as required under Article 166 it was invalid and therefore the requirements of Article 311 were not satisfied in this case must be held to be devoid of force. We are satisfied that all the requirements of Article 311 have been fully complied with in this case. It may also be mentioned that the High Court held that H. H. the Rajpramukh had intimation of the decision of the Council of Ministers and the action proposed to be taken against the petitioner and that in fact His Highness approved of the proposed action.” 32. In the case of Air India Cabin Crew Asson. (supra), the Hon'ble Supreme Court has observed in para 72 as under: “72. In our opinion, reference to Art. 77 is wholly inappropriate. The exercise of statutory power under Section 34 by the Central Government, even though not expressed to have been taken in the name of President, does not render it invalid. Clause 2 of Art. 77 insulates an Page 75 of 84 C/SCA/20840/2018 CAV JUDGMENT executive action of Government formally taken in the name of President from challenge on the ground that it is not an order or instrument made or executed by the President. Even if an executive action of the Central Government is not formally expressed to have been taken in the name of President, Art. 77 does not provide that it would, therefore, be rendered void or invalid. We need not, therefore, deal with the argument advanced on the basis of Art. 77 of the Constitution because the respondent/association itself is relying on the directive dated 16101989 of the Central Government which is not formally expressed in the name of President in terms of Art. 77 of the Constitution.” 33. Similarly, in the case of Sureshbhai Kalidas Soni (supra), the Division Bench of this Court, relying upon the decision rendered by the Hon'ble Supreme Court, has observed that an omission to make and authenticate an executive decision in the form mentioned in Article 166 does not make the decision itself illegal, on the basis that its provisions were directory and not mandatory. 34. Keeping in view the aforesaid decision, if the facts of the present case as discussed hereinabove are examined, it can be said that when the competent Ministry of Central Government has taken the decision while exercising powers under Section 212 of the Act in public interest after forming an opinion on the basis of the Page 76 of 84 C/SCA/20840/2018 CAV JUDGMENT material placed before it, whereby investigation is ordered by SFIO, merely because in the said order it is not stated that the same is passed in the name of Hon'ble the President, such an order cannot be termed as illegal or invalid. Business Rules of the Central Government were referred to by the learned counsel appearing for the respondents. 35. The petitioners have also challenged the order of extension dated 14.12.2018 on various grounds as stated hereinabove. With regard to the said issue, it is required to be noted that Section 212(3) of the Act provides that where the investigation into the affairs of the company has been assigned by the Central Government to SFIO, it shall conduct the investigation in the manner and follow the procedure provided in this chapter and submit its report to the Central Government within such period as may be specified in the order. Thus, no time limit is prescribed by the parliament for completion of the investigation. The Central Government has, while passing the impugned order dated 20.06.2018, observed that the investigation is to be completed within a period of 3 months. However, it has come on record that during the course of investigation investigating agency has collected material and when it is found that large scale illegality is Page 77 of 84 C/SCA/20840/2018 CAV JUDGMENT committed by the companies including the petitioners, the period of completion of the investigation is extended vide order dated 14.12.2018. Hence, looking to the facts of the present case, this Court is of the view that order of extension cannot be set aside on the grounds raised by the petitioners. When the SFIO is investigating into large scale serious fraud alleged to have been committed by various companies including the petitioners, the order of extension is not required to be interfered with. This Court is of the view that there cannot be any time restriction in relation to conduct or completion of any investigation and especially when the allegations are in relation to cases involving large scale financial scams. At this stage, decision rendered by the Hon'ble Supreme Court in the case of Nirmal Kanti Roy (supra) is required to be referred to, wherein the Hon'ble Supreme Court has observed in para 7 and 8 as under: “7. The order stopping further investigation into the offence and the consequential order of discharge are not intended to be automatic sequel to the failure to complete investigation within the period fixed in the subsection. The succeeding words in the subsection confer power on the Court to refrain from stopping such investigation if the Investigating Officer satisfies the Page 78 of 84 C/SCA/20840/2018 CAV JUDGMENT Magistrate of the fusion of two premises (1) that in the interest of justice it is necessary to proceed with the investigation beyond the period shown in the subsection and (2) that there are special reasons to do so. 8. A reading of subsection (6) further shows that even in a case where the order stopping investigation and the consequent discharge of accused has been made that is not the last word on it because the subsection opens another avenue for moving the Sessions Judge. If the Sessions Judge is satisfied that \"further investigation into the offence ought to be made\" he has the power to allow the investigation to proceed. Hence we take the view that the time schedule shown in S. 167(5) of the Code is not to be treated with rigidity and it is not mandatory that on the expiry of the period indicated therein the Magistrate should necessarily pass the order of discharge of the accused. Before ordering stoppage of investigation the Magistrate shall consider whether, on the facts of that case, further investigation would be necessary to foster interest of criminal justice. Magistrate at that stage must look into the record of investigation to ascertain the progress of investigation thus for registered. If substantial part of investigation was by then over, the Magistrate should seriously ponder over the question whether it would be conducive to the interest of justice to stop further investigation and discharge the accused.” 36. In view of the aforesaid discussion, this Court is of the view that Section 212(3) of the Page 79 of 84 C/SCA/20840/2018 CAV JUDGMENT Act gives discretion to the Central Government to mention / indicate time period for the SFIO to complete the investigation and file the report and therefore such outer limit indicated in the order passed under Section 212 of the Act would be discretionary and same cannot be termed as mandatory. Thus, there are no automatic consequences of either stoppage of investigation or discharge of the person concerned. Thus, when the respondent Central Government has thought it fit to extend the time limit for completion of the investigation vide order dated 14.12.2018, the said decision cannot be termed as illegal or invalid as contended by the petitioners. 37. Another contention raised by the learned counsel appearing for the petitioners is with regard to the provisions contained in Section 212 of the Act. It is contended that the correct reading of Section 212 shall show that no arrest can be made prior to launching of prosecution before the Special Court under Section 212(6) and subsection (6) of Section 212 to subsection (13) of Section 212 are required to be read after Section 212(14) of the Act, otherwise, it leads to absurd interpretation whereby a person can be arrested even without FIR or complaint. It is contended that prior to launching of prosecution there cannot be arrest and under criminal law a Page 80 of 84 C/SCA/20840/2018 CAV JUDGMENT person is not an accused unless and until FIR/compliant is filed and therefore there cannot be any arrest prior to the same. However, this Court is of the view that the aforesaid contentions are misconceived. Petitioners have not challenged the validity of any of the provisions of Section 212 of the Act. The Scheme of Section 212 is very clear. As per the scheme of the aforesaid provision, the Central Government can pass an order of investigation by SFIO under certain circumstances. 38. At this stage, it is relevant to note that Section 19 of the Prevention of Money Laundering Act of 2002 provides that if the Director, Deputy Director, Assistant Director or any other officer authorized in this behalf by the Central Government by general or special order, has on the basis of the material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest. Section 43 of the said Act provides for establishment of Special Court and Section 44 provides for offences triable by the Special Court. Further, Section 45 of the said Act provides that offence to be cognizable and non Page 81 of 84 C/SCA/20840/2018 CAV JUDGMENT bailable. 39. Thus, similar provision is made in the Prevention of Money Laundering Act, 2002. 40. Similarly, under Section 104 of the Customs Act, 1962, powers to arrest are given to officers of the Customs when he has reason to believe that any person in India or within the Indian Custom waters has committed offence punishable under the provisions of the Customs Act. 41. Thus, from the provisions contained in the Special Statutes like Prevention of Money Laundering Act and Customs Act, it can be said that the powers are vested with the concerned officer that without registration of the FIR or compliant on the basis of the material in the possession of such officer and if he has reason to believe that any person has been guilty of an offence punishable under the concerned Act, such officer can arrest such person. 42. In the present case, in absence of any challenge to the validity of the provisions contained in Section 212 of the Act, submissions canvassed by learned counsel for the petitioners on the aforesaid aspects cannot be entertained. 43. This Court has also gone through the Page 82 of 84 C/SCA/20840/2018 CAV JUDGMENT decisions upon which reliance is placed by the learned counsel appearing for the petitioners as observed hereinabove. However, this Court is of the view that the aforesaid decisions would not render any assistance to the petitioners and therefore the same are not discussed in detail. 44. In view of the aforesaid discussion, the answers of the aforesaid questions which are considered by this Court are as under: (a) The opportunity of hearing is not required to be given to the petitioners before passing an order under Section 212 of the Act. (b) The Central Government is not obliged to record the reasons at the time of passing an order under Section 212 of the Act for investigation by SFIO. However, there should be material with the Central Government at the time of formation of the opinion for passing an order of investigation by SFIO. (c) Material collected during the course of investigation can also be taken into consideration by the Court in case of public interest for considering the issue Page 83 of 84 C/SCA/20840/2018 CAV JUDGMENT whether the order of investigation by SFIO is valid or not and also for considering the issue of extension of time. The disclosure of material to the petitioners itself would defeat purpose of investigation when the decision is taken in public interest. Thus, in such cases if material is only shared with the Court for its consideration then it would be sufficient. (d) The order passed by the Central Government cannot be termed as invalid/illegal merely because the same is not passed in the name of Hon'ble the President, if otherwise as per the Allocation of Business Rules, 1961, subject is allotted to the concerned Ministry. 45. In view of the aforesaid discussion, all these petitions being devoid of any merits, are dismissed. Notice is discharged. (VIPUL M. PANCHOLI, J) Jani Page 84 of 84 "
Other Referred Cases
Rohtas Industries v. S.D.Agarwal and Ors., Barium Chemicals Ltd. and Ors. v. Company Law Board and Ors, Parmeshwar Das Agarwal v. Additional Director, Medak Diocese v. Union of India, Additional District Magistrate, Jabalpur v. Shivakant Shukla, Mahiuddin Tayab Soni v. State of Maharashtra and others, Kottam Raju Vikram Rao v. State of Gujarat, R.S.Sheth Gopikrishan Agrawal v. R.N.Sen, Ass. Collector of Customs and Central Excise, Sheo Nath Singh v. Appellate Ass. Commissioner of Income Tax, Calcutta, Brij Mohan Singh Chopra v. State of Punjab, Aslam Mohammad Merchant v. Competent Authority and Ors., Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta & Anr., Baldev Raj Chadha v. Union of India and Ors., M/s. Ghaio Mal and Sons v. State of Delhi & Ors, Bachhittar Singh v. State of Punjab, Punjab State Industrial Development Corporation Ltd. v. PNFC Karamchari Sangh, State of Uttaranchal & Anr. v. Sunil Kumar Vaish & Ors, Dattatraya Moreshwar v. State of Bombay
Laws Referred To
Companies Act, 2013, Multi State Cooperative Societies Act, 2002, Allocation of Business Rules, 1961, Constitution of India
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