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The Supreme Court batch comprising Justice AM Sapre and Justice UU Lalit, held that there is no stipulation of any fixed period for completion of a Serious Fraud Investigation. It was further observed, that stipulation in Section 212(3) of the Companies Act, 2013 dealing with the submission of the report is directory in nature & not mandatory.
An appeal was filed by the Serious Fraud Investigation Office against the Delhi High Court order that termed arrests illegal because the investigation period was ‘over’ i.e. completion of the period of investigation.
Central Government assigns investigation into the affairs of a company to the Serious Fraud Investigation Office under Section 212(3). The Office 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.
Justice Lalit observed that the period prescribed by Section 212(3) within which the Office is required to submit a report is not for the completion of the investigation period and on the expiry of that period the mandate in favour of Office does not cease or come to an end.
"If it was to come to an end, the legislation would have contemplated certain results including re-transfer of investigation back to the original Investigating Agencies which were directed to transfer the entire record under sub-Section (2) of Section 212. In the absence of any clear stipulation, in our view, an interpretation that with the expiry of the period, the mandate in favour of SFIO must come to an end, will cause great violence to the scheme of legislation. If such interpretation is accepted, with the transfer of investigation in terms of sub Section (2) of Section 212 the original Investigating Agencies would be denuded of power to investigate and with the expiry of mandate SFIO would also be powerless which would lead to an incongruous situation that serious frauds would remain beyond investigation. That could never have been the idea."
The court further observed that:
It was also observed by the bench that Section 212(3) of the Companies Act, 2013, does not in itself law down any fixed period within which a report has to be submitted. Hence, there is no fixed period for the completion of the investigation.
"Even under sub-Section (12) which is regarding "investigation report", again there is no stipulation of any period. In fact such a report under sub-Section (12) is to be submitted "on completion of the investigation. There is no stipulation of any fixed period for completion of investigation which is consistent with normal principles under the general law."
"For instance, 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 of the Code certain rights may flow in 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,” observed the bench while explaining the provisions of CrPC.
The concurring judgement delivered by Justice Sapre stated:
"If the submission of the learned counsel for the respondents (writ petitioners) that the compliance of sub-section (3) of Section 212 of the Act in relation to the submission of the report be held mandatory is accepted (which I am afraid, I cannot accept) in our view, the very purpose of enacting Section 212 of the Act would get defeated and will become nugatory."
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