9911796707
TMI Blog2021 (2) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the fore as to how non-compliance of statutory procedure by the authorities, who are bound to exercise it, resulted in spate of litigations and thereby wasting the precious time in adjudicating the lis in a different form and dimension. Reliefs sought: 2.The writ petitions viz., WP.Nos.25236 of 2018 and 32587 of 2019 have been filed by Church of South India Trust Association, whereas WP.No.25419 of 2018 has been preferred by one Sri Samuel Cornelius, who is the Diocesan Treasurer of Church of South India, Madras Diocese. The reliefs sought in the respective writ petitions are as follows: (i)Issue a Writ of Certiorari calling for the records relating to the order passed by the Government of India, Ministry of Corporate Affairs, New Delhi in File No.07/131/2011/CL-II(SR) dated 07.05.2018 and to quash the same. (ii)Issue a Writ of Certiorari calling for the records pertaining to the order passed by the Government of India, Ministry of Corporate Affairs, New Delhi in File No.07/131/2011/CL-II(SR) dated 07.05.2018 as sought in WP.No.25236 of 2018 and the consequential summons issued by the Investigating Officer viz., Assistant Director (Banking), Serious Fraud Investigation O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 02.06.2016, the Government of India, Ministry of Corporate Affairs, New Delhi (hereinafter referred to as 'the Central Government'), exercising its power conferred under Section 212(1)(a) of the Act, 2013, passed an order on 10.06.2016 to investigate into the affairs of the petitioner / CSITA by the Serious Fraud Investigation Office (SFIO). 4.4 One of the Dioceses of CSI viz., Medak Diocese in Andhra Pradesh filed a writ petition in WP.No.38841 of 2016 before the High Court of Judicature at Hyderabad for the State of Telengana and the State of Andhra Pradesh questioning the aforesaid order dated 10.06.2016 passed by the Central Government and the consequential proceedings and notice served on them. On 16.11.2017, the High Court of Hyderabad disposed of the said writ petition by setting aside the order as well the consequential proceedings and notice issued against the petitioner therein and remitted the matter to the Central Government, for exercise of its jurisdiction under Section 212 of the Act, 2013, basing on the report of the Registrar of Companies, within three weeks from the date of receipt of copy of the order. 4.5 In the interregnum period, the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A was furnished with a copy of the report of the Registrar of Companies, Chennai dated 13.12.2017 filed under Section 208 of the Act, 2013, which is under challenge in the third writ petition viz., WP.No.32587 of 2019. Pleadings of the parties: 5.1 According to the petitioner / CSITA, as the investigation by SFIO is a serious in nature, they cannot be deprived of the copy of the report dated 13.12.2017, based on which, the Central Government in exercise of its jurisdiction conferred under Section 212 of the Act, 2013, ordered SFIO investigation into the affairs of the company. Further, the order dated 07.05.2018 proceeded to state that the same was passed under Section 212(1)(a) and (c) of the Act, 2013, basing on the report of the Registrar of Companies, dated 13.12.2017 under Section 208; however, no inspection was made and no enquiry was conducted under Section 206/ 207, as contemplated; no opportunity of being heard was provided as per Section 206(4); and hence, the said report cannot be treated as a report under section 208. That apart, the order dated 07.05.2018 under Section 212, was passed without forming an opinion as contemplated under Section 210 and also contrary to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate veil of the CSITA deserves to be pierced. 6.3 The Central Government ordered investigation into the affairs of the petitioner / CSITA by SFIO, on 07.05.2018, after a thorough analysis of the report dated 13.12.2017 submitted by the Registrar of Companies under Section 208, which is in continuance of the earlier report dated 12.01.2016. Moreover, the High Court of Hyderabad, while remitting the matter, directed the Central Government only to reconsider the same afresh in terms of Section 212 of the Act, basing on the report of the Registrar of Companies. Hence, there is no need for a fresh inspection and inquiry under section 206/207 of the Act, 2013. 6.4 Since all the procedural aspects of the Act, 2013, have been complied with by the respondent authorities and reasonable opportunity of being heard was given to the CSITA, none of the civil rights of the petitioner have been affected. 6.5 An order under section 212 for investigation by SFIO is just a preliminary step in the proceedings and the investigation by SFIO is concluded by the submission of the Investigation report to the Central Government, as mandated under Section 212(12) of the Act, 2013. Only after consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fidavit filed by the seventh respondent, the writ petition was sworn by one Robert Bruce claiming himself to be the Treasurer of the CSITA, who is not a validly elected Treasurer and as per the order dated 18.11.2016 passed by the National Company Law Tribunal in CP.No.2 of 2016, as confirmed by this Court vide order dated 20.12.2018 in CRP.No.3739 of 2016, he has no locus standi to represent the CSITA and the entire election process is under the investigation of SFIO and hence, the writ petition filed by him on behalf of the CSITA is not maintainable and the same is liable to be dismissed in limini. It is also averred therein that the contents of the affidavit filed in support of the writ petition are not only false averments, but also misleading and fraudulent in nature, besides suppressive of material facts. Therefore, there is urgent need to regulate the affairs of the CSITA so as to ensure proper accountability, transparency and propriety. 9.The eight respondent in his counter affidavit, stated that the CSITA is a company registered under the Companies Act and is also functioning as a Trust and hence, it is bound by the provisions of the Companies Act as well as the law relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Registrar of Companies does not have powers under Section 208 to recommend the investigation by SFIO. Thus, according to him, the impugned report is liable to be quashed. 11.1 Mr.C.Selvaraj, learned counsel representing the counsel on record for the petitioner in W.P.No.25419 of 2018 submitted that consequent to the order dated 07.05.2018 passed by the Central Government, the impugned summons dated 19.09.2018 came to be issued by the first respondent /SFIO, directing the petitioner to appear for examination and recording of statement under Oath, without disclosing the prior approval of the Central Government in consonance with Section 217(4) of the Act, 2013; a copy of the order dated 07.05.2018 ordering investigation by SFIO, has not been enclosed therein; and hence, the impugned summons is arbitrary, illegal and violative of the principles of natural justice. It is also submitted that since the order dated 07.05.2018 is pertaining to investigation into the affairs of the CSITA by SFIO, the summons sent to the petitioner herein, who is an office bearer of the CSI, Madras Diocese, is contrary to law and hence, it is liable to be set aside. 11.2 Drawing the attention of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no specific allegation made against the petitioner. 11.4 The learned counsel further submitted that the letter dated 02.06.2016 arises out of the fresh complaints received by various complainants and the same is not in continuance of the earlier report dated 12.01.2016 and as such, the Registrar of Companies ought to have followed Section 206 and filed another report under Section 208. In other words, in respect of the complaints received after 12.01.2016, the Registrar of Companies has to make enquiry afresh and file another report under Section 208, after complying with Section 206. He also submitted that based on the report dated 12.01.2016, the Central Government ordered SFIO investigation into the affairs of the CSITA, vide order dated 10.06.2016, which was subsequently, set aside by the High Court of Hyderabad by order dated 16.11.2017 in WP.No.38841 of 2016 and the matter was remanded to the Central Government, for exercise of its jurisdiction under Section 212 of the Act, but, the said order was not strictly complied with by the Central Government. However, the learned counsel fairly submitted that the petitioner is inclined to appear for enquiry, if any such order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Law Board and Others, [1966 Supp SCR 311 : AIR 1967 SC 295], wherein it was held as follows:- "31. The object of Section 237 is to safeguard the interests of those dealing with a company by providing for an investigation where the management is so conducted as to jeopardize those interests or where a company is floated for a fraudulent or an unlawful object. Clause (a) does not create any difficulty as investigation is instituted either at the wishes of the company itself expressed through a special resolution or through an order of the court where a judicial process intervenes. Clause (b), on the other hand, leaves directing an investigation to the subjective opinion of the government or the Board. Since the legislature enacted Section 637(i)(a) it knew that Government would entrust to the Board its power under Section 237(b). Could the legislature have left without any restraints or limitations the entire power of ordering an investigation to the subjective decision of the Government or the Board? There is no doubt that the formation of opinion by the Central Government is a purely subjective process. There can also be no doubt that since the legislature has provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the basis of public and commercial morality.' There must therefore exist circumstances which in the opinion of the Authority suggest what has been set out in Sub-clauses (i), (ii) or (iii). If it is shown that the circumstances do not exist or that they are such that it is impossible for any one to form an opinion therefrom suggestive of the aforesaid things, the opinion is challengeable on the ground of non-application of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute." (ii) In Swadeshi Cotton Mills v. Union of India, [(1981) 1 SCC 664], wherein it was held as follows:- "58. On the other hand, Shri Nariman submits that the High Court was clearly in error in holding that the satisfaction of the Central Government with regard to the necessity of taking immediate action was not open to judicial review at all. It is emphasised that the very language of the provision shows that the necessity for taking immediate action is a question of fact, which should be apparent from the relevant evidence in the possession of the Government. 59. We find merit in this contention. It cannot be laid down as a general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which investigation was found to be warranted is 'public interest', within the meaning of the provisions of Section 212 of the 2013 Act. The Black's Law Dictionary, Sixth Edition, defines the expression 'public interest' to mean 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. 63. In view of the facts and circumstances as have been elaborated in the preceding paragraphs, the argument that the impugned order be set aside, since no public interest has been made out, is baseless, devoid of merit and thus rejected." 12.2 The learned Additional Solicitor General further submitted that pursuant to the direction of the High Court at Hyderabad, after two rounds of litigation, the order and summons impugned in respective WP Nos.25236 and 25419 of 2018, came to be issued and there is no procedural violation, as alleged by the petitioners. It is also submitted that considering the nature of the allegations raised against the petitioner/ CSITA, the Registrar of Companies filed a report under Section 208, recommending to order SFIO investigation, as the SFIO inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strar of Companies, under Section 208 and it is a case of agreement between the Registrar of companies and the Central Government. Therefore, the Central Government is deemed to have complied with the requirement of Section 212 and no exception to the order impugned, could be taken. 12.5 Mr.Venkataswamy Babu, learned Central Government Senior Panel Counsel, appearing for the Official respondents submitted that criminal cases have been registered against two of the office bearers of CSITA, on the allegation that they have sold the church property for a throw-away price. Further, he produced a sealed cover containing the noting proceedings relating to the subject company, for perusal of this Court. 13.1 Mr.R.Sreedhar, learned counsel representing the counsel on record for the seventh respondent in WP.No.25236 of 2018 questioned the capacity of C.Robert Bruce, Honorary Treasurer of the petitioner / CSITA in filing the writ petition. He also submitted that earlier two identical writ petitions came to be filed by the petitioner herein, challenging the report of the Registrar of Companies dated 12.01.2016 and the communication of the Regional Director (SR), Chennai dated 02.06.2016, ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding on the parties. Thus, the materials available on record would disclose that SFIO investigation is very much essential. 13.3 According to the learned counsel, prior to the Act, 2013, the petitioner / CSITA was constituted and hence, any amendment to the Articles of Association has to be made by way of passing a special resolution and the same has to be forwarded to the Registrar of Companies for making necessary entry. In this regard, he drew the attention of this Court to Clauses 4 and 7 of the AoA, dated 05.03.2002; only one PAN is available in the name of CSITA, but it is being used by 24 Dioceses and hence, the funds are routed through the petitioner / CSITA only. 13.4 The learned counsel further submitted that based on the NCLT Order, Justice K.Sampath (Retd.) was appointed as Administrator, against which, a Civil Revision Petition came to be filed, which was dismissed by this Court; subsequently, the Honorary Treasurer C.Robert Bruce was removed and the very same NCLT Bench removed the Administrator and gave power to CSITA itself; though major decisions were stalled, the petitioner has taken all the decisions and also passed resolution to that effect. According to the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has the power while dealing with the matter under the Contempt of Courts Act, to order for an investigation of the matter which comes in the knowledge of the Court regarding any violation, breach of law etc. and such a power stands derived from the Constitution itself, hence the submission of the learned counsel for the appellants that the Court cannot pass any direction for investigation while dealing with the contempt petition is absolutely untenable in law, hence the same is rejected. The impugned order passed by the learned Single Judge, in view of the facts and circumstances of the case, has been passed fully within the precincts of the power of the Court and the direction for investigation by the SFIO into the prima facie allegations which have been referred to in the gist of the report is just and proper." (ii) Court on it's own motion v. UOI, [Jharkhand HIgh Court], 2018 (3) JCR 44: " 15. ... Power of the High Court under Article 226 of the Constitution of India to direct the C.B.I to investigate the cognizable offence in a State without consent of the State Government was substantially the issue in the case of State of West Bengal and others Vrs. Committee for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment. The conspectus of facts and circumstances that have emerged in the matter of execution of such large project with an outlay of Rs. 1654 crores approximately and the manner in which huge advances have been made by the lending bank out of the public exchequer without any commensurate progress of work over a period of about 5 years since it commenced in December 2012, requires an inquiry as to whether its a case of serious fraud which needs to be investigated." (iii) C.K. Rajan vs State of Kerala and Others [AIR 1994 Ker 179]: "... In Sitarama Chetty v. Subramania Ayyar, 39 Mad 700 : (AIR 1917 Mad 551), the Madras High Court, citing Attorney General v Bro-die, (1846) 4 Moo Ind App 190 and Maharanee Shibessoree v. Mothooranath, (1869-70) 13 Moo Ind App 270, held that the High Courts and the mofussil Courts were Courts of both law and equity and that they can exercise jurisdiction over religious and charitable institutions in the same way as the Courts Chancery did in England." (iv) Guruvayoor Devasthanam Managing Committee and another v. C.K.Rajan and others, (2003) 7 SCC 546:- "90. The curtain of this litigation must be drawn here and now. The State admittedly implem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion are not absolute and unfettered. The right to manage, it goes without saying, does not carry with it a right to mismanage." (vi)Shekh Abdul Kayum v. Mulla Alibhai [ 1963 (3) SCR 623]:- "22. There cannot, in our opinion, be any doubt about the correctness of the legal position that trustees cannot transfer their duties, functions and powers to some other body of men and create them trustees in their own place unless this is clearly permitted by the trust deed, or agreed to by the entire body of beneficiaries. A person who is appointed a trustee is not bound to accept the trust, but having once entered upon the trust he cannot renounce the duties and liabilities except with the permission of the Court or with the consent of the beneficiaries or by the authority of the trust deed itself. Nor can a trustee delegate his office or any of his functions except in some specified cases, The rules against renunciation of the trust by a trustee and against delegation of his functions by a trustee are embodied, in respect of trusts to which the Indian Trusts Act applies, in sections 46 and 47 of that Act. These sections run thus "46. A trustee who has accepted the trust can- not af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent to the Central Government. Immediately, after passing the order, assigning the investigation of the company to the SFIO, the Power of Attorney of the petitioner filed a writ petition before the Hyderabad High Court. The said factum would prove that there were multifarious proceedings by the same petitioner/ CSITA before different forums. In such circumstances, the SFIO investigation has to be ordered and the same has to be monitored by this Court, besides providing sufficient safeguards for such investigation. He also submitted that without prejudice to Section 210, independently under Section 212, the Central Government can act. In this connection, he relied upon the phraseology used in the Section "necessary to investigate" and "opinion of the Central Government". That apart, this Court has power to invoke its special jurisdiction under Article 226 and order for SFIO investigation, since the involvement of the petitioner in the activities, would cause serious threat to the public interest. Adding further, he submitted that the stand of the petitioner that the CSI Dioceses are unregistered bodies, is totally incorrect as by its own action, more particularly, in all the audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbered and another was adjudicated and ultimately, dismissed and hence, the question of fraud does not arise herein. Also, the principle of res judicata cannot be applicable to the facts to the present case. 15.2 The learned Senior Counsel further submitted that as per the provisions of the Companies Act, an inspection or enquiry has to be conducted under Section 206 of the Act, 2013, and recommendation has to be made to the Central Government, on the basis of which, it is the prerogative right of the Central Government to order SFIO investigation; in this case, the impugned report dated 13.12.2017 submitted to the Central Government contained new allegations arising subsequent to the report dated 12.01.2016, for which, inspection and enquiry as envisaged under the provisions of Sections 206 /207 have to be given to the petitioner / CSITA and in the absence of such procedure, the impugned report cannot be treated as report under section 208 and hence it is non-est in the eye of law. Referring to sections 210 to 212 of the Act, 2103, he submitted that Section 210 contemplates investigation into the affairs of the company by appointing Inspectors by the Central Government, whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t comes to Court on account of a challenge, get validated by additional grounds later brought out. Thus, according to the learned counsel, the impugned proceedings do not stand in the eye of law, since it was not complied with the mandatory requirements as laid down in the Act, 2013 and hence, the same are liable to be quashed. 17.This Court has given its thoughtful consideration to the submissions made by all the parties and also carefully and meticulously perused the materials available on record, including the original files circulated by the official respondents. Brief about the Institution: 18.Before proceeding further, it would be appropriate to brief about the Institution. The CSITA is a non-Governmental, public, religious, charitable and non-profit company with no shareholders, debentures or other characteristics of a trading or listed company. It was incorporated on 26th September 1947 as a "Company Limited by Guarantee" i.e., a "Limited Company without Shares". Its identification number (CIN) is U93090TN197NPL00036 and its registration number is 000346. It consists of the Moderator, Secretary and Treasurer of the Synod together with 12 other members elected by the Syno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, the Ministry ordered inspection for CSITA under Section 209 A (search and seizure) of the Companies Act, 1956. * On 28.08.2012, an inspection report was submitted by the Registrar of Companies, recommending investigation by the SFIO in respect of (i) filing two sets of accounts, one with the Income Tax Department covering all the organization (Individual units / institutions, Dioceses of Church of South India which are either unincorporated body or registered society falling outside the scope and ambit of the Inspection under Section 209A of the Companies Act, 1956; and (ii) members are continuously sending complaints. * On 18.10.2012, the Regional Director sent a letter based upon the above mentioned inspection report to the Director (Inspection and Investigation), Ministry of Corporate Affair, New Delhi, stating that not much of serious financial irregularity could be unearthed and no ground for serious fraud could be identified as reported by the Inspection Officers. Further, it was stated therein that there was no serious fraud warranting investigation by SFIO. However, the Regional Director has forwarded the report to the Central Government to examine and issue necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ighted certain issues, which necessitate the Central Government to order investigation by the SFIO in the public interest against the petitioner. * By judgment dated 18.06.2018, the writ appeal was disposed of, granting liberty to the petitioner to challenge the said report. * Representations dated 01.08.2018 and 09.08.2018 were made requesting a copy of the report dated 13.12.2017. However, the same were not considered. * In the mean while, the petitioner challenged the order dated 07.05.2018 passed by the Central Government under Section 212(a) and (c) of the Act, ordering investigation into the affairs of the company by SFIO, by filing WP.No.25236 of 2018. * Subsequently, summons dated 19.09.2018 came to be issued to one Samuel Cornelius, Diocesan Treasurer of CSI, Madras Diocese, which is questioned in WP.No.25419 of 2018. * As per the direction of this Court, the petitioner / CSITA was served with a copy of the Report dated 13.12.2017, against which, WP.No.32587 of 2019 came to be filed. Thus, it is clear from the aforesaid factual matrix that the relief sought in WP.No.25236 of 2018 will have bearing on W.P.No.25419 of 2018; the report dated 13.12.2017 which is und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the complaints needs to be ascertained through an investigation. 3.NOW therefore, in exercise of powers conferred under section 212(1)(a)&(c) of the Companies Act, 2013, the Central Government hereby orders and assigns investigation into the affairs of Church of South India Trust Association (CSITA) to the Serious Fraud Investigation Office (SFIO). 20.2 The challenge made in WP.No.25419 of 2018 is to the impugned summons issued by the Assistant Director (Banking), Investigation, Hyderabad, dated 19.09.2018, served on 24.09.2018, wherein and whereby, the petitioner, who is one of the officer bearer of CSI Madras Diocese, was directed to appear along with the documents mentioned therein, before the Officer at 11.00 am on 27.09.2018 for examination and recording of statement under oath. 20.3 The report of the Registrar of Companies, Chennai, dated 13.12.2017, which is questioned in WP.No.32587 of 2019, arises out of the consolidated accounts of all the Dioceses filed from the financial year 2013-14 as well as various complaints received with respect to the allegations of misappropriation in CSI Kalyani, fraudulent, dubious sale of immovable property in CSI Coimbatore Diocese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant writ petition is well within the jurisdiction of this Court. 21.3 It is seen from the typed set filed by the seventh respondent dated 10.01.2018 that in the order dated 18.11.2016 passed in CA.No.12 of 2016 in CP.No.2 of 2016, the National Company Law Tribunal, after detailed discussion, was inclined to dismiss the application in limini on the ground that Dr.Daniel R.Sadananda, Secretary and Robert Bruce, Treasurer, have no locus standi to file the same. While doing so, it was observed that the company came to be incorporated under the provisions of the Company law and has its management committee to represent and hence, they are not the regular office bearers of the company; the persons who have signed as Honorary Secretary and Honorary Treasurer of the CSITA, are also holding the salaried office as General Secretary and Treasurer respectively of the Synod; in respect of the CSITA, there is no permanent membership as envisaged under Section 2(55) of the Act, 2013. However, having regard to the attending circumstances, the Tribunal proceeded to remove all the Directors and Managing Committee including the office bearers by appointing the Hon'ble Mr. Justice K.Sampath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e- (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 Investigation Office and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation." "206. Power to call for information, inspect books and conduct inquiries: (1) Where on a scrutiny of any document filed by a company or on any information received by him, the Registrar is of the opinion that any further information or explanation or any further documents relating to the company is necessary, he may by a written notice require the company-- (a) to furnish in writing such information or explanation; or (b) to produce such documents, within such reasonable time, as may be specified in the notice. (2) On the receipt of a notice under sub-section (1), it shall be the duty of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraudulent or unlawful purpose, every officer of the company who is in default shall be punishable for fraud in the manner as provided in section 447. (5) Without prejudice to the foregoing provisions of this section, the Central Government may, if it is satisfied that the circumstances so warrant, direct inspection of books and papers of a company by an inspector appointed by it for the purpose. (6) The Central Government may, having regard to the circumstances by general or special order, authorise any statutory authority to carry out the inspection of books of account of a company or class of companies. (7) If a company fails to furnish any information or explanation or produce any document required under this section, the company and every officer of the company, who is in default shall be punishable with a fine which may extend to one lakh rupees and in the case of a continuing failure, with an additional fine which may extend to five hundred rupees for every day after the first during which the failure continues." "207. Conduct of inspection and inquiry: (1) Where a Registrar or inspector calls for the books of account and other books and papers under Section 206, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd such report may, if necessary, include a recommendation that further investigation into the affairs of the company is necessary giving his reasons in support." "210. Investigation into affairs of company - (1) Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company,- (a) on the receipt of a report of the Registrar or inspector under section 208; (b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or (c) in public interest, it may order an investigation into the affairs of the company. (2) Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation into the affairs of that company. (3) For the purposes of this section, the Central Government may appoint one or more persons as inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct." 23.The aim and purpose of enactment of Section 212 and other allied sections under Chapter XIV of the Act, 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the affairs of a company by the SFIO. That opinion has to be based on the report of the Registrar or Inspector under section 208; or on intimation of a special resolution passed by a company that its affairs are required to be investigated; or in the public interest; or on the request from any department of the Central Government or the State Government. 26.By Section 211, the SFIO is established to investigate frauds relating to a company. It is a very special office and headed by a Director and consists of such number of experts from the fields enumerated in sub section (2) to be appointed by the Central Government from amongst persons of ability, integrity and experience. The wide powers that this office enjoy, as is set out in various sub sections of section 212, would denote as to how its involvement comes after the investigations are assigned to it by the Central Government. By their very nature, the investigations into frauds relating to a company have to be assigned. They have to be of such magnitude and seriousness demanding involvement of experts in the fields enumerated in sub section (2) of section 211. Therefore, while exercising the powers under section 212, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no need for a fresh inspection / enquiry under section 206 or 207. It is also contended that after complying with all the formalities as provided under Section 206, the Registrar filed his report under Section 208 and there is no violation of the principles of natural justice. Further, the investigation by SFIO is only at a preliminary stage and is concluded only after submission of the Investigation report as mandated under Section 212(12) of the Act, 2013 and therefore, no prejudice would be caused to the petitioner / CSITA, in the event of the same being continued. Thus, according to him, the Report, order and the consequential summons impugned herein are perfectly valid in law and the same do call for any interference by this Court. 30.Drawing the attention of this Court to the voluminous typed set of papers, the learned counsel for the respondents 7 and 8 in WP.No.25236 of 2018, raised various allegations against the petitioner / CSITA, with respect to fraud, misappropriation of funds, illegal sale of properties, mismanagement, etc. According to them, the petitioner was incorporated on 26.09.1947 under the Indian Companies Act 1913 as provided under Section 26 Company limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry special office and headed by a Director and consists of such number of experts from the field enumerated in subsection (2) of Section 211 to be appointed by the Central Government from amongst persons of ability, integrity and experience. The wide powers that this office enjoys, as is set out in various sub-sections of Section 212, would denote as to how its involvement comes after the investigations are assigned to it by the Central Government. By their very nature the investigations into frauds relating to a company have to be assigned. They have to be of such magnitude and seriousness demanding involvement of experts enumerated in sub- section (2) of Section 211. Therefore, while exercising the power under sub- section (1) of Section 212, the Central Government ought to be not only forming (1966) Supp SCR 311 (1969)1 SCC 325 an opinion about the necessity to investigation into the affairs of the company, but further that such investigations have to be assigned to the SFIO." (ii)The Delhi High Court in Sunair Hotels Limited case (supra), held as under: "30. The Central Government is entrusted with the power in Section 212 of the Companies Act, 2013 to order an investigatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for requiring the investigation, and the Central Government may, before appointing an Inspector, require the applicant to give security for such amount not exceeding Rs. 1000, as it may think fit for payment of the costs of the investigation. From the provisions contained in Sections 235 and 236, it is clear that the legislature considered that investigation into the affairs of a company is a very serious matter and it should not/be ordered except on good grounds. It is true that the investigation under Section 237(b) is of a fact-finding nature. The report submitted by the Inspector does not bind anybody. The Government is not required to act on the basis of that report, the company has to be called upon to have its say in the matter but yet the risk - it may be a grave one - is that the appointment of a Inspector is likely to receive much press publicity as a result of which the reputation and prospects of the company may be adversely affected. It should not therefore be ordered except on satisfactory grounds. 49. Since an investigation into the affairs of a company is likely to have a serious impact on the confidence of its shareholders and of the general public, it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad. 32.The High Court of Hyderabad, after detailed analysis, set aside the said order and remanded the matter to the Central Government for fresh consideration to exercise its power under Section 212, basing on the report dated 10.06.2016 of the Registrar of Companies, within three weeks from the date of receipt of a copy of the order. The relevant paragraphs of the order passed by the Hyderabad High Court, for the sake of convenience, are reproduced hereinbelow: "The petitioner is not challenging the jurisdiction or authority of 1st respondent to order investigation by SFIO. Therefore, the procedure followed by the 1st respondent alone is examined in this writ petition. According to Merriam Webster's Dictionary of Law, the word "opinion" Means-a belief stronger than impression and less strong than positive knowledge Therefore, the 1st respondent is required to form an opinion i.e., something more than mere re-telling of gossip or hearsay and reflects judgment or belief resulting from what one thinks on a particular question. Such belief or conviction is manifested by 1st respondent in ordering investigation by SFIO. The words "is of the opinion" "that it is necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , under section 208 to the Central Government, recommending the SFIO investigation into the affairs of the petitioner / CSITA, which is impugned in the third writ petition viz., WP.No.32587 of 2019. Based on the same, the Central Government passed the order dated 07.05.2018, exercising its power conferred under Section 212 of the Act, 2013, which is under challenge in the first writ petition viz., WP.No.25236 of 2018. Consequently, the SFIO issued summons to the office bearer of one of the Units of the petitioner / CSITA, which is questioned in the second writ petition viz., WP.No.32587 of 2019. Thus, the two main controversies revolved around herein are as follows: (i)whether the report dated 13.12.2017 submitted by the Registrar of Companies under Section 208 of the Act, 2013, is valid in law? (ii)Whether the order dated 07.05.2018 passed by the Central Government assigning the investigation of the petitioner / CSITA to the SFIO, is in consonance with the provisions of Section 212 of the Act, 2013? Issue No.1: 34.1 As against the report dated 13.12.2017 filed by the Registrar of Companies under Section 208, it is the specific contention made on the side of the petitioner th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifying the allegations, and calling upon the company to furnish reply thereto, and carryout the inquiry, after providing the company a reasonable opportunity of being heard. Under the first proviso to sub-section (4) of Section 206, if the Central Government is satisfied that circumstances so warrant, direct the Registrar or the inspector appointed by it for the purpose, to carryout the inquiry under this sub-section. Therefore, issuance of notice and opportunity of being heard are not required. 34.3 As regards the provision of law, it is vivid that Section 206(4) of the Act, 2013, mandates issuance of notice and opportunity of hearing and even under the proviso, the Central Government, if satisfied that the circumstances warrant, is empowered to direct the Registrar to carry out the inquiry under this sub section i.e., sub section (4) of Section 206 of the Act, 2013, which mandates issuance of notice and opportunity of hearing prior to conduct of inquiry. Therefore, the proviso does not carve out any exception to the main provision and it only additionally empowers the Central Government to direct the Registrar of Companies to conduct inquiry by following the procedure under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 13.12.2017 and the consequential order passed by the Joint Director, Ministry of Corporate Affairs, New Delhi dated 07.05.2018. 8.In view of the limited prayer now made by the learned counsel for the appellants, the writ appeals are disposed of by directing the appellants to challenge the Report of the Registrar of Companies, Chennai dated 13.12.2017 and the consequential order passed by the Joint Director, Ministry of Corporate Affairs, New Delhi dated 07.05.2018, if they so advised. No costs. Consequently, connected Miscellaneous Petitions are closed." Even thereafter, a copy of the said report dated 13.12.2017 was not served to the petitioner / CSITA. Subsequently, as per the direction of this Court in WP.Nos.25236 and 25419 of 2018, it was served on the petitioner / CSITA. Upon receipt of the same, pursuant to the liberty granted by the Division Bench, the petitioner / CSITA challenged the said report in WP.No.32587 of 2019. Thus, this Court is of the view that since the allegations raised therein are serious in nature and the same would affect the reputation of the petitioner company, the Registrar of Companies, before filing such report, has to comply with the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e two fundamental maxims of natural justice viz. (i)audi alteram partem and (ii)nemo judex in re sua. The audi alteram partem rule has many facets, two of them being (a) notice of the case to be met; and (b) opportunity to explain. This rule cannot be sacrificed at the altar of administrative convenience or celerity. The general principle - as distinguished from an absolute rule of uniform application - seems to be that where a statute does not, in terms, exclude this rule of prior hearing but contemplates a post-decisional hearing amounting to a full review of the original order on merits, then such a statute would be construed as excluding the audi alteram partem rule at the pre-decisional stage. Conversely if the statute conferring the power is silent with regard to the giving of a pre-decisional hearing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature, and no full review or appeal on merits against that decision is provided, courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing, shorn of all its formal trappings and dilatory features at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equisite opinion before passing the order under section 212(1)(a) and (c) of the Act, 2013, the perusal of the noting proceedings circulated by the respondent officials, would not whisper anything about the opinion as contemplated under section 210 of the Act, 2013. It contains only the communications between the Central Government and the Registrar of Companies through Regional Director (SR), Chennai. Though the minutes of the Oversight Committee meeting held on 17.04.2018 reveal that upon considering the report of the Registrar of Companies and the direction of the High Court of Hyderabad, in view of the provisions of Section 212(1)(a) and (c) of the Act, 2013, a recommendation was made to investigate the affairs of the company by the SFIO, the mandate of the law under section 210, to form an opinion for ordering such investigation, was not complied with by the Central Government, before passing the impugned order dated 07.05.2018. Though it was argued on the side of the respondents that the report dated 13.12.2017 is in continuance of the earlier report dated 12.01.2016, which holds the field and no inspection / enquiry as per the provisions of law, is required, it was clearly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Babu Verghese v. Bar Council of Kerala, (1999) 3 SCC 422, wherein it was held as under: "31. It is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all. The origin of this rule is traceable to the decision in Taylor v. Taylor (1875) 1 Ch D 426 which was followed by Lord Roche in Nazir Ahmad v. King Emperor AIR 1936 PC 253 who stated as under: "[W]here a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all." Applying the aforesaid ratio decidendi, the order passed by the Central Government, in exercise of its power under Section 212 of the Act, 2013, without forming an opinion as contemplated under Section 210, lacks merit. The second issue is answered accordingly. 38.At the same time, it is important to note here that the official respondents are proceeding against the petitioner/CSITA right from the year 2011, however, they did not follow the statutory requirements and complete the proceedings in accordance with law, within a reasonable time. The report of the Registrar of Companies dated 12.01.2016 addresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut several lakhs of crores and spread across the South India. However, contrary to the object for which the petitioner / CSITA has been formed, its management is riddled with instances of fraud, mismanagement, misfeasance, misappropriation, siphoning of funds etc. and to the extent to which as ordinary church members have been able to access such information. (ii)The petitioner / CSITA being a charity company, before amending the Memorandum of Articles of Association, should get prior permission from the Central Government, whereas they did not get any such permission. Even though, there is no amendment made by the company, the Bishops, who are the employees of the company, have entered into the administration and are doing all illegal actions. In this regard, the Central Government and the Registrar of companies have filed 43 criminal cases against the petitioner /CSITA. (iii)As per the Regulations, a registered company shall have a single PAN card, whereas some of the sub units of the CSITA are having multiple PAN cards. (iv)The Bishops shall entrust with the religious works. But they themselves prepared bogus record and submitted to the Director of Collegiate Education and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the documents and properties. (xii)The beneficiaries do not know the financial statements of CSITA for the post 70 years. Till date, the annual accounts are not given to beneficiaries or any others. (xiii)According to the Report of the Registrar of Companies, there was fraudulent / unlawful business carried on by the petitioner / CSITA and its management, which shall be unearthed only by proper enquiry and investigation by the SFIO. Thus, according to the respondents 7 and 8, there is an urgent need to regulate the affairs of the company so as to ensure transparency and accountability. 40.The aforesaid allegations, in the opinion of this Court, cannot be slightly brushed aside as the same are heinous in nature. There cannot be any smoke without fire. While the culture of secrecy should be broken and a culture of accountability and transparency be practised, the culture of questioning is also a desirable element. Also, there cannot be any difference of opinion by any of the parties that the Central Government can very well invoke Section 212(1)(c), i.e. in the public interest and order investigation into the affairs of the petitioner company. The decisions reproduced above w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other purpose other than charity. As the CSITA is the legal authority, administration should be done by its regulations. The allegation against the evangelical department is that they are not doing worship for the well being of the company and its beneficiaries and stakeholders. Instead, it is doing misappropriation and illegalities by selling most of the properties belonging to the Association. It is also placed on record that due to non-submission of accounts, the beneficiaries / donars to the CSITA could not get IT exemption. Such activities cannot be permitted to be sustained, having due regard to the object of the institution, which is to preach and propagate the religion of Christianity to the world and uplift the members of the CSI. Mere preaching from the church pulpits about "Christian holiness and Stewardship" does not work, when it comes to managing the finance and properties of the church in the most ethical way. The corporate morality and the biblical ethics reflected in the character of God are to be combined to form a base for maintaining the CSITA's corporate personality. Therefore, regulatory requirements are very much essential to bring about good governance in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
