No fixed time limit to complete probe by SFIO: SC

The Supreme Court on Wednesday held that there is no fixed time limit to complete probe into a company’s affairs, once it is transferred to the Serious Fraud Investigation Office.

A bench of Justices Abhay Manohar Sapre and U U Lalit interpreted the provisions of the Companies Act to rule that the statute has not prescribed any period for completion of investigation.

The SFIO, a specialised unit under the Ministry of Finance, is headed by a director. It consists of experts with ability, integrity and experience in fields like banking, corporate affairs, taxation, forensic audit, capital market, information technology, law or such other fields. Section 212 of the Companies Act empowers the central government to assign the investigation into the affairs of a company to SFIO.

The top court gave its ruling on the provisions of the Act while allowing an appeal filed by the SFIO against the Delhi High Court order of December 20, 2018 that granted bail to Rahul Modi and Mukesh Modi, connected to Adarsh group of companies, in a case related to alleged duping of investors of Rs 200 Cr through Ponzi scheme.

The high court passed its order hearing a habeas corpus petition, as counsel for the accused contended that the investigation was transferred to the SFIO on June 20, 2018 and it came to an end after three months time on September 19, 2018. Therefore, the arrest of the accused on December 10, 2018 was illegal, the high court said.

Maintaining that the high court “completely erred”, the top court said “the only construction which is, possible (of legal provision) therefore, is that the prescription of period within which a report has to be submitted to the central government under sub-Section (3) of Section 212 is purely directory”. If any other interpretation is given, it would cause great violence to the scheme of the legislation, the court said.

It also said when the accused were into a period of remand, the arrest cannot be termed as illegal.

“The act of directing remand of an accused is thus held to be a judicial function and the challenge to the order of remand is not to be entertained in a habeas corpus petition,” Justice Lalit said in 57-page judgement, adding the high court ought not to have entertained the writ petition. Justice Sapre in his separate judgement concurred with the lead judgement.

The court said there is no fixed period within which the investigation under Criminal Procedure Code must be completed.

“If the investigation proceeds for a longer period, under Section 167 (statutory bail) of the Code certain rights may flow in the favour of the accused. But it is certainly not the idea that in case the investigation is not over within any fixed period, the authority to investigate would come to an end,” the court said.