TMI Blog2018 (9) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... l the filing of the present petition or even thereafter the Arrest order was not served on the Petitioner. On perusing the files, the Court noticed that the proposal placed before the Director SFIO was for the arrest of the Petitioner and one other person in exercise of the powers under Section 212(8) Companies Act. This proposal was approved. Yet for some unexplained that other person has not been arrested till date. It appears prima facie that the SFIO was selective about whom it wanted to arrest. Further despite the names of several individuals finding mention in the notes, whose culpability is more or less similar to that of the Petitioner, the coercive provision of arrest has been exercised only qua the Petitioner. The power vested in an Inspector of the SFIO to use the signed statement of an accused as evidence against him in terms of Section 271 (4) read with Section 217 (7) prima facie appears to violate the fundamental right against self incrimination enshrined in Article 20 (3) of the Constitution of India. The Petitioner has been arrested pursuant to the investigation commenced by the SFIO into the affairs of BSL, BSPL and their group companies. Yet till date th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the high threshold for grant of bail is concerned, barring the slight difference in the language, both provisions do make it equally difficult for a person accused of an offence thereunder to obtain bail. The above observations in Nikesh Tarachand Shah [2017 (11) TMI 1336 - SUPREME COURT OF INDIA], prima facie support the challenge by the Petitioner to the constitutional validity of Section 212 (6) Companies Act. Thirdly, even at a practical level, if indeed for a valid arrest if the records have to bear out the opinion of the Director SFIO that the person arrested “has been guilty” of the offence under Section 447, then it will be virtually impossible for the Special Judge to conclude for the purpose of Section 212 (6) that the said person is not guilty of the offence. For all the above reasons, the Court is of the view that the Petitioner has a prima facie case in his favour for the grant of interim relief. The present petition cannot be viewed as a mere petition for issuance of a writ of habeas corpus and an attempt to bypass the regular route of obtaining regular bail. With the provision for grant of bail, i.e. Section 212(6)(ii) Companies Act and the provision concerni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked to be investigated were for the period between Financial Years 2007-08 to 2014-15. 3. The broad allegations against the Petitioner, as stated by the SFIO in its application dated 9th August 2018 before the Special Judge (Companies Act), Dwarka Courts seeking his remand to judicial custody, are that he and his father Mr. B.B. Singal, the promoters of BSL, in connivance with its officials used multitude of complex, fraudulent manoeuvres to divert/siphon off funds raised by BSL from banks using its more than 100 associate companies aimed at personal gain which led to wrongful loss to the banks and other investors in the companies. It is further alleged that the fraudulent activities of B.B. Singal, Neeraj Singal and his associates have extended over a long period of time. The amount diverted through these fraudulent manoeuvres would be anywhere between ₹ 2000 to ₹ 3000 crore. 4. The remand application dated 9th August 2018 inter alia notes that since according to the SFIO, the Petitioner appeared to have committed offences punishable under Section 447 of Companies Act 2013 , the Petitioner was arrested on 8th August 2017 at 1930 hours, in accordance with l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, the writ petition was first listed for hearing on 20 th August 2018. Notice was issued and accepted by the Respondents, who were already present on advance notice. The order passed by the Court on that date noted: 3. Mr. Tushar Mehta and Ms. Maninder Acharya, learned Additional Solicitors General of India vehemently oppose the grant of any interim relief stating that the Respondents may be permitted to place their version in writing before this Court. Although both of them pray that time should be granted till 24th August 2018 for that purpose, learned Senior counsel for the Petitioner point out that it involves the issue of the Petitioner's liberty and further that 22nd August, 2018 is a holiday. 4. List on 21st August, 2018 at 2.15 pm to consider the question of interim relief. The Respondents are permitted to tender on that date their written reply to the prayer for interim relief. The Respondents will also bring the relevant records for perusal by the Court on the next date. 9. On 21st August 2018 the arguments of Mr. Tushar Mehta, ASG on behalf of the Respondents were heard. Mr. Mehta sought to produce before the Court a large file purporting to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of fraud under Section 447 Companies Act, the offence has been made cognizable and the grant of bail made subject to a very high threshold of the arrested person having to prove that he is not guilty of the offence as a precondition to grant of regular bail. According to the Petitioner, a similarly worded provision of the PMLA, i.e. Section 45, was struck down by the Supreme Court as unconstitutional in Nikesh Tarachand Shah v. Union of India (2018) 11 SCC 1. It is, therefore, contended that prima facie, the Petitioner s challenge to the vires of Sections 212 (6) (ii) and 212(7) Companies Act should succeed. 13. The other challenge is to Section 212 (8) of the Companies Act. Inasmuch as Section 447 Companies Act has been made a cognizable offence, this power of arrest given under Section 212 (8) Companies Act, which incidentally became effective from 24th August 2017, enabled the SFIO to arrest the Petitioner on 8th August 2018 on the ground that the conditionality under Section 212(8) Companies Act stood fulfilled, i.e. the SFIO had reason to believe that the Petitioner has been guilty of the offence punishable under Section 447 Companies Act. Prayer B in the writ petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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. 16. Section 212 (7) Companies Act states that the limitation on granting of bail specified in Section 212 (6) is in addition to the limitations under the Cr PC or any other law for the time being in force on granting of bail. 17. With effect from 24th August 2017 sub-sections (8) to (10) of Section 212 Companies Act, were notified which gave the Director, Additional Director or Assistant Director of the SFIO the power of arrest. The said provisions read thus: 212 (8) If the Director, Additional Director or Assistant Director of Serious Fraud 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 sub-section (6), he may arrest such person and shall, as soon as may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment if so directs, the Serious Fraud Investigation 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the whole where such Magistrate is an Executive Magistrate: Provided that where such Magistrate considers that the detention of such person upon or before the expiry of the period of detention is unnecessary, he shall order such person to be forwarded to the Special Court having jurisdiction; (c) the Special Court may exercise, in relation to the person forwarded to it under clause (b), the same power which a Magistrate having jurisdiction to try a case may exercise under section 167 of the Code of Criminal Procedure, 1973 (2 of 1974) in relation to an accused person who has been forwarded to him under that section; and (d) a Special Court may, upon perusal of the police report of the facts constituting an offence under this Act or upon a complaint in that behalf, take cognizance of that offence without the accused being committed to it for trial. . 438. Application of Code to proceedings before Special Court. Save as otherwise provided in this Act, the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al was approved. Yet for some unexplained that other person has not been arrested till date. It appears prima facie that the SFIO was selective about whom it wanted to arrest. Further despite the names of several individuals finding mention in the notes, whose culpability is more or less similar to that of the Petitioner, the coercive provision of arrest has been exercised only qua the Petitioner. Applicability of the Cr PC provisions 28. The submission on behalf of the SFIO is that Section 212 of the Companies Act is a code by itself as far as the procedure for arrest, investigation and prosecution of the offences under the Companies Act is concerned. It is submitted that there is no requirement for the registration of a case or the maintenance of case diaries as mandated by Section 172 Cr PC. It is contended just as in the cases of the officers of Customs and Directorate of Enforcement (DoE), the officers of the SFIO are also not police officers. In support of this proposition reliance is placed on the decision of the Supreme Court in Directorate of Enforcement v. Deepak Mahajan (1994) 3 SCC 440 which was in the context of the provisions of the Foreign Exchange Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32. The above submissions have been considered. The attempt by the SFIO to exclude the applicability of the Cr PC at this stage is prima facie not convincing. It appears that Section 438 Companies Act is clear that unless explicitly excluded by any provision f the Companies Act, the Cr PC would apply to the investigation and prosecution of all offences. Section 212 (6) excludes the applicability of the Cr PC only for the limited purpose of treating the offence under Section 447 cognisable and not for the entire procedure to be associated with such deeming nature of the offence. In Deepak Mahajan (supra) it was noted in para 128 (SCC) that: 128. To sum up, Section 4 (of the Cr PC) is comprehensive and that Section 5 is not in derogation of Section 4(2) and it only relates to the extent of application of the Code in the matter of territorial and other jurisdiction but does not nullify the effect of Section 4(2). In short, the provisions of this Code would be applicable to the extent in the absence of any contrary provision in the special Act or any special provision excluding the jurisdiction or applicability of the Code. In fact, the second limb of Section 4 (2) itself limits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of their statutory functions showing the name of the informant, as well as the name of the person who violated any other provision of the Code and who has been guilty of an offence punishable under the Act, nature of information received by them, time of the arrest, seizure of the contraband if any and the statements recorded during the course of the detection of the offence/offences. (emphasis supplied) 36. Here in the Companies Act, the Cr PC provisions are not per se excluded except in a limited context of treating Section 447 as a cognisable offence. Section 438 of the Companies Act makes this clear. If the investigative report filed under Section 212 (14) read with Section 212 (15) before the Special Court, whether as an enclosure to the complaint in terms of the second proviso to Section 212 (6) or otherwise, is indeed to be treated as the final report under Section 173 Cr PC, and with the Investigative Officer (IO) of the SFIO given vast powers of arrest and interrogation, it is all the more incumbent that the discipline of Chapter XII Cr PC including Section 172 Cr PC be adhered to by such officer of the SFIO. Section 172 Cr PC requires the IO to enter his proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , structure/work falls, comes into play and applies on all scores in the present case. Retrospectivity of the provisions 39. Now to the point concerning retrospectivity of the provisions. It will be recalled, that it was only with effect from 25th May 2015 that Section 212 (6) Companies Act stood amended and the offence of fraud under Section 447 Companies Act was made cognizable. Prior thereto, the offence under Section 447 Companies Act was non-cognizable and the restrictions on the grant of regular bail imposed under Section 212 (6) Companies Act did not apply thereto. The investigations into the affairs of BSL and BSPL were ordered on 3rd May 2016. At this stage Section 212 (8) to (10) which gave senior officers of the SFIO the power of arrest had not been notified. At this stage, therefore, the arrest of the Petitioner for the cognisable offence under Section 447 of the Companies Act could have been only by a police officer and he could have done so only on the registering of an FIR. It is only on 24th August 2017 that Sections 212 (8) to (10) as well as the SFIO Arrest rules became operational. The contention of the SFIO that this change was merely procedural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration of around 35,000 crores. 44. There is no mention of this fact anywhere in the notes of investigation by the SFIO that were shown to this Court. The Court finds from the noting of 1st July 2017 in the file of the SFIO, that BSL s account was classified as fraud . Further it is seen that although in the remand application it is stated that a Resolution Professional (RP) was appointed under the Insolvency and Bankruptcy Code 2016 (IBC) by the National Company Law Tribunal (NCLT) on 26th July 2017 due to non-payment of loans, this fact does not from part of the notes of investigation. 45. Under Section 15 IBC, there has to be a public announcement of the corporate insolvency resolution process. Under Section 18 IBC, the interim RP has to collect information concerning the business operations of the company under insolvency for the past two years. In terms of Regulation 36 (2) (h) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016, the information memorandum should contain details of all material litigation and any ongoing investigation of proceeding initiated by the Government and statutory autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion which turns on its head the presumption of innocence which is fundamental to a person accused of an offence . The Supreme Court further observed as under: Before application of a section which makes drastic inroads into the fundamental right of personal liberty guaranteed by Article 21 of the Constitution of India, we must be doubly sure that such provision furthers a compelling State interest for tackling serious crime. Absent any such compelling State interest, the indiscriminate application of the provisions of Section 45 will certainly violate Article 21 of the Constitution. Provisions akin to Section 45 have only been upheld on the ground that there is a compelling State interest in tackling crimes of an extremely heinous nature. 49. Both the PMLA provisions and Section 447 Companies Act pertain to economic offences. It is not possible at this stage to conclude that the offence under Section 447 Companies Act is more heinous than that under Section 45 PMLA. Secondly, as far as the high threshold for grant of bail is concerned, barring the slight difference in the language, both provisions do make it equally difficult for a person accused of an offence thereunder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of arrest, the SFIO is to be satisfied that the Petitioner has been guilty of the offence under Section 447 Companies Act and yet, for the purposes Section 212(6) Companies Act, if the Petitioner has to show that he is in fact not guilty of the offence. It would be impossible for the Special Judge, if he is satisfied with the validity of the arrest under Section 212 (8) Companies Act to hold, for the purposes of Section 212 (6) (ii) Companies Act, that the Petitioner is not guilty of the offence. 55. There is another practical aspect that arises in the present case. All that has been provided to the Petitioner at this stage, even 20 days after his arrest, is a remand application which is, at best, sketchy. It only makes sweeping conclusions without specifically adverting to any material gathered during the course of investigation. While it is true that even in a regular criminal case, at the stage of seeking bail, an accused may not know anything more than what is stated in the remand application and he would not be entitled to even peruse the case diary, there would at least be an FIR or a complaint where the precise case against the person arrested would be known. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact taken note of by the Special Judge (CBI-05) while passing an order on 27th January 2016 in an application filed by the present Petitioner seeking modification of the above two conditions. 59. The CBI Court in the above order dated 27th January 2016 noted that the applicant has been granted permission on various occasions and he has complied with the conditions each time. The CBI Court then substituted the above conditions in the earlier order dated 27th September 2014 with the following conditions: (i) The applicant shall not leave the country without informing the court 03 days in advance of his visiting abroad and shall furnish the complete itinerary stating the country/countries which he intends to visit and the period of his stay as also the addresses where he would be staying and his contact numbers. He shall also inform the court in writing about his return to India within a week thereof. Further, he shall not travel abroad during the period when the case is listed for effective hearings and his presence is required. (ii) While intending to go abroad he shall furnish FDR in the sum of ₹ 5 lakhs which shall be kept alive till he returns and informs th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inate Bench of this Court in Vakamulla Chandrashekhar v. Directorate of Enforcement [decision of a Division Bench of this Court dated in W.P. (Crl) 852/2017 8th May 2017] and Moin Akhtar Qureshi (supra) would continue to hold the field. 63. The above preliminary objection has been considered. There are several prayers in the main writ petition, one of which seeks the issuance of writ of habeas corpus. The other prayers in the writ petition pertain to the constitutional validity of Sections 212 (6)(ii), 212 (7) and 212 (8) of the Companies Act as being violative of Articles 14 and 21 of the Constitution of India. This Court has already observed earlier that the Petitioner has a prima facie case as far as the said challenge is concerned. 64. According to Ms. Acharya, Prayer B is not in the nature of the challenge to the constitutional validity of Section 212(8) Companies Act. Prima facie, the Court is unable to agree with the above submission. The reading of Prayer B does indicate that the challenge is to the validity of Section 212(8) Companies Act on the ground that it is violative of Articles 14, 20, and 21 of the Constitution. 65. Therefore, the present petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision in Moin Akhtar Qureshi (supra) is incorrect. That observation in para 4 of the order in Poonam Malik (supra) is hereby recalled. 68. At the highest, it could be argued that neither the decisions in Moin Akhtar Qureshi (supra) and Vakamulla Chandershekhar (supra) on the one hand and Rajbhushan Omprakash Dixit (supra) on the other, which seek to interpret Section 19 of the PMLA, should be considered while interpreting Section 212 (8) Companies Act. Going by that proposition, Section 212 (8) Companies Act would have to be interpreted on first principles without reference to the above decisions. That is the prima facie exercise which has been undertaken in this order earlier. 69. In any event, therefore, this would not impact the maintainability of this petition which inter alia challenges the constitutional validity of Section 212 (6) and (8) Companies Act in the present petition, which challenge can be considered only by a Division Bench of this Court. 70. Accordingly, the preliminary objections of the Respondents as to the maintainability of the main writ petition are hereby negatived. Conclusion 71. In that view of the matter, pending the final det ..... X X X X Extracts X X X X X X X X Extracts X X X X
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