SERIOUS FRAUD INVESTIGATION OFFICE versus RAHUL MODI AND ANR. ETC. on 27 March 2019

[2019] 5 S.C.R. 91

SERIOUS FRAUD INVESTIGATION OFFICE

v.

RAHUL MODI AND ANR. ETC.

(Criminal Appeal Nos. 538-539 of 2019)

MARCH 27, 2019

[ABHAY MANOHAR SAPRE ANDUDAY UMESH LALIT, JJ.]

Companies Act, 2013 – ss. 212(1), (2) and (3) –Investigation into affairs of Company by Serious FraudInvestigation Office – Period within which report is contemplatedto be submitted to the Central Government under sub-section (3),mandatory or directory – On facts, SIFO directed to investigateinto the affairs of certain entities and furnish the report within theperiod of three months – However, petitioners arrested by SIFOafter the expiry of the specified period for investigation u/s. 213(2)– Writ petition by petitioners seeking declaration that investigationcarried out after the specified period was illegal and prayed forwrit of habeas corpus directing release from illegal arrest –Thereafter, the petitioners released on bail – On appeal, held:Undersub-Section (3) where the investigation is so assigned by theCentral Government to SFIO, the investigation must be conductedin the manner and in accordance with the procedure provided inthe Chapter and a report has to be submitted to the CentralGovernment within such period as may be specified – Section 212(3)by itself does not lay down any fixed period within which the reporthas to be submitted – Even under sub-Section (12) which isregarding “investigation report”, there is no stipulation of anyperiod – Such a report is to be submitted “on completion of theinvestigation” – Statute has not prescribed any period forcompletion of investigation – in view thereof, prescription ofperiod within which a report is to be submitted by SFIO u/s. 212(3)is not for completion of period of investigation and on the expiry ofthat period the mandate in favour of SFIO does not come to an end– Prescription of period within which a report has to be submittedto the Central Government u/s.212(3) is purely directory – Thus, itcannot be said that the mandate came to an end on expiry of three

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Amonths and the arrest effected thereafter, was in any way illegal orunauthorised by law – Arrest was effected when the period hadexpired but by the time the High Court entertained the petition andpassed the order, the orders of remand were passed by the JudicialMagistrate as well as the Special Court, Gurugram as also order ofextension was passed by the Central Government – Thus, the HighBCourt was not justified in directing release of the accused – Orderpassed by the High Court is set aside.

Interpretation of statutes: Provisions, when mandatory ordirectory – Held: While laying down a particular procedure if nonegative or adverse consequences are contemplated for non-Cadherence, relevant provision is normally not taken to be mandatoryand is considered to be purely directory - Provision to be seen inthe context in which it occurs in the Statute.

Allowing the appeals and disposing of the transfer petition,the CourtD

Per Uday Umesh Lalit, J:

Conclusion

HELD: 1.1 In Habeas Corpus proceedings a Court is tohave regard to the legality or otherwise of the detention at thetime of the return and not with reference to the institution of theEproceedings. The act of directing remand of an accused is held tobe a judicial function and the challenge to the order of remand isnot to be entertained in a habeas corpus petition. In the instantcase, as on the date when the matter was considered by the HighCourt and the Order was passed by it, not only were thereorders of remand passed by the Judicial Magistrate as well asFthe Special Court, Gurugram but there was also an order ofextension passed by the Central Government on 14.12.2018. Thelegality, validity and correctness of the order or remand couldhave been challenged by the original Writ Petitioners by filingappropriate proceedings. However, they did not raise suchGchallenge before the competent Appellate or Revisional Forum.The orders of remand passed by the Judicial Magistrate and theSpecial Court, Gurugram had dealt with merits of the matter andwhether continued detention of the accused was justified or not.After going into the relevant issues on merits, the accused were H

remanded to further police custody. These orders were not putin challenge before the High Court. It was, therefore, not opento the High Court to entertain challenge with regard tocorrectness of those orders. The High Court, however,considered the matter from the standpoint whether the initialOrder of arrest itself was valid or not and found that such legalitycould not be sanctified by subsequent Order of remand.Principally, the issue which was raised before the High Courtwas whether the arrest could be effected after period ofinvestigation, as stipulated in said order dated 20.06.2018 hadcome to an end. The supplementary issue was the effect ofextension of time as granted on 14.12.2018. The arrest waseffected when the period had expired but by the time the HighCourt entertained the petition, there was as order of extensionpassed by Central Government on 14.12.2018. Additionally, therewere judicial orders passed by the Judicial Magistrate as well asthe Special Court, Gurugram, remanding the accused to custody.The High Court was not justified in entertaining the petition andpassing the Order.[Para 17, 19] [116-E; 122-C-H; 123-A-B]

Basanta Chandra Ghose v. King Emperor (1945) 7 FCR81; Naranjan Singh Nathawan v. State of Punjab[1952] SCR 395 ;Ram Narayan Singh v. State of Delhi[1953] SCR 652 ;A.K. Gopalan v. Govt. of India[1966] 2 SCR 427 ;Pranab Chatterjee v. State of Biharand Another (1970) 3 SCC 926 ;Talib Hussain v. Stateof Jammu and Kashmir (1971) 3 SCC 118 ; Col. Dr. B.Ramachandra Rao v. State of Orissa and Others(1972)3 SCC 256; Kanu Sanyal v. District Magistrate,Darjeeling and Others(1974) 4 SCC 141 : [1974] 3SCR 279;Manubhai Ratilal Patel through Ushaben v.State of Gujarat and Others(2013) 1 SCC 314 : [2012]8 SCR 993 ; Saurabh Kumar v. Jailor, Koneila Jailand Another (2014) 13 SCC 436 : [2014] 8 SCR 909;State of Maharashtra and Others v. Tasneem RizwanSiddiquee (2018) 9 SCC 745 - referred to.

1.2 The first Order dated 20.06.2018 itself indicated thatthe Registered Office of the Principal Company was in Gurugram, ABC

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AHaryana. Soon after the arrest, the accused were producedbefore the Judicial Magistrate, Gurugram on 11.12.2018, whoremanded them to custody till 14.12.2018 and directed that theybe produced before the Special Court, Gurugram on 14.12.2018.Accordingly the accused were produced before the Special Court,Gurugram, who thereafter remanded them to custody first tillB18.12.2018 and later till 21.12.2018. The Special Court, Gurugramwould be competent to deal with the matter in terms of Section436. Petitioners, however, submitted that since the accused werearrested in Delhi, were kept in custody in Delhi, and the SFIOoffice being in Delhi, the High Court of Delhi was competent toCentertain and consider the writ petitions so preferred by the writpetitioners. [Para 21] [123-E-H; 124-A-B]Navinchandra N. Majithia v. State of Maharashtra andOthers(2000) 7 SCC 640 : [2000] 3 Suppl. SCR 82;Dashrath Rupsingh Radhod v. State of MaharashtraDand Another (2014) 9 SCC 129 : [1999] 3 Suppl. SCR271 - referred to.

1.3 In the instant case, it cannot be said that the High Courtcompletely lacked jurisdiction to entertain the petition. However,since the challenge was with respect to the detention pursuantEto valid remand orders passed by the Judicial Magistrate andthe Special Court, Gurugram, the High Court should not haveentertained the challenge. If the act of directing remand isfundamentally a judicial function, correctness or validity of suchorders could, if at all, be tested in a properly institutedproceedings before the appellate or revisional forum. In theFcircumstances even if the arrests were effected within thejurisdiction of the High Court, since the accused were producedbefore a competent court in pursuance of Sections 435, 436 of2013 Act, the High Court ought not to have entertained the writpetition. However, since the High Court considered the matterGfrom the standpoint whether the initial Order of arrest itself wasvalid or not and then found that such illegality could not besanctified by subsequent Order of remand. [Para 24] [125-G-H;126-A-C]

1.4 Reading of the provisions of 2013 Act shows thatHcertain Sections in Chapter XXIX prescribe punishment for

offences such as fraud, false statement, false evidence andwithholding of property under Sections 447, 448, 449 and 452respectively. The punishment for fraud involving an amount of atleast Rs.10 lakhs or 1 per cent of the turnover of the Company,is imprisonment for a term which may extend to 10 years. Theoffence of fraud in relation to the affairs of a Company isconsidered to be a grave offence and the writ petitioners wereallegedly guilty of such offence. Chapter XIV of 2013 Act dealswith Inspection, Inquiry and Investigation. Under Section 210,investigation into the affairs of a Company can be undertaken.Section 211 contemplates establishment of Serious FraudInvestigation Offence (SFIO) which is to be headed by aDirector and is to consist of Experts with ability, integrity andexperience in fields like Banking, Corporate Affairs, Taxation,Forensic Audit, Capital Market, Information Technology, Law orsuch other fields. SFIO headed by a Director is thus a compactand competent unit consisting of experts in various domains.Section 212 empowers the Central Government to assigntheinvestigation into the affairs of a Company to SFIO. Upon suchassignment the Director SFIO may designate such number ofinspectors under sub-Section (1) and shall cause the affairs ofthe Company to be investigated by an Investigating Officerunder sub-Section (4). The expression used in sub-Section (1) is“assign the investigation”. Sub-Section (2) incorporates animportant principle that upon such assignment by the CentralGovernment to SFIO, no other investigating agency of theCentral Government or any State Government can proceed withinvestigation in respect of any offence punishable under 2013Act and is bound to transfer the documents and records inrespect of such offence under 2013 Act to SFIO. [Para 26][132-C-H]

1.5 Under sub-Section (3) where the investigation is soassigned by the Central Government to SFIO, the investigationmust be conducted in the manner and in accordance with theprocedure provided in the Chapter and a report has to besubmitted to the Central Government within such period as maybe specified. This provision contemplates submission of a reportwithin the period as may be specified. The subsequentprovisions then contemplate various stages of investigation ABCDEF

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Aincluding arrest under sub-Section (8) and that SFIO is to submitan interim report to the Central Government, if it is so directedunder sub Section (11). Further, according to sub-Section (12),on completion of the investigation, SFIO is to submit the“investigation report” to the Central Government. This reportunder sub-Section (12) may lead to further follow up actions.BUnder sub-Section (13) a copy of the “investigation report” couldbe obtained by any concerned person by making an application inthat behalf to the Court while under sub-Section (14) on receiptof said “investigation report” the Central Government maydirect SFIO to initiate prosecution against the Company. TheC“investigation report” under sub-Section (12) is to be submittedon completion of the investigation whereas report undersub-Section (11) is in the nature of an interim report and is to besubmitted if the Central Government so directs. The provisionsof Section 43(2) of 2008 Act do not postulate any such period andthe assignment in the present case to SFIO was under theDconcerned provisions of 2013 Act as well as under 2008 Act.[Para 27] [133-A-F]

1.6 Section 212(3) of 2013 Act by itself does not lay downany fixed period within which the report has to be submitted.Even under sub-Section (12) which is regarding “investigationEreport”, again there is no stipulation of any period. In fact such areport under sub-Section (12) is to be submitted “on completionof the investigation”. There is no stipulation of any fixed periodfor completion of investigation which is consistent with normal

principles under the general law. If the investigation proceedsFfor a longer period, under Section 167 of the Code certain rightsmay flow in favour of the accused. But it is certainly not the ideathat in case the investigation is not over within any fixed period,the authority to investigate would come to an end. Sub-Section(2) of Section 213 of 2013 Act does not speak of any period forwhich the other Investigating Agencies are to hold their hands,Gnor does the provision speak of any re-transfer of the relevantdocuments and records from SFIO back to said InvestigatingAgencies after any period or occurring of an event. [Para 28][133-F-H; 134-A-C]

1.7 The very expression “assign” in Section 212(3) of 2013Actcontemplates transfer of investigation for all purposeswhereafter the original Investigating Agencies of the CentralGovernment or any State Government are completely denudedof any power to conduct and complete the investigation inrespect of the offences contemplated therein. The idea undersub-Section (2) is complete transfer of investigation. Thetransfer under sub-Section (2) of Section 213 would not standrevoked or recalled in any contingency. If a time limit isconstrued and contemplated within which the investigation mustbe completed then logically, the provisions would have dealt withas to what must happen if the time limit is not adhered to. TheStatute must also have contemplated a situation that a validinvestigation undertaken by any Investigating Agency of CentralGovernment or State Government which was transferred to SFIO,must then be re-transferred to said Investigating Agencies. Butthe Statute does not contemplate that. The transfer isirrevocable and cannot be recalled in any manner. Once assigned,SFIO continues to have the power to conduct and completeinvestigation. If that be so, can such power stand curtailed ordiminished if the investigation is not completed within aparticular period. The Statute has not prescribed any period forcompletion of investigation. The prescription in the instant casecame in the order of 20.06.2018. [Para 29] [134-D-G; 135-A]

Kazi Lhendup Dorji v. State of Sikkim & Ors(1994) 2Suppl. SCC 116 - referred to.

1.8 It is well settled that while laying down a particularprocedure if no negative or adverse consequences arecontemplated for non-adherence to such procedure, the relevantprovision is normally not taken to be mandatory and isconsidered to be purely directory. Furthermore, the provisionhas to be seen in the context in which it occurs in the Statute.There are three basic features which are present in this matter;absolute transfer of investigation in terms of Section 212(2) of2013 Act in favour of SFIO and upon such transfer all documentsand records are required to be transferred to SFIO by every other AB

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AInvestigating Agency; for completion of investigation,sub-Section (12) of Section 212 does not contemplate anyperiod; and under sub-Section (11) of Section 212 there could beinterim reports as and when directed. In the face of the salientfeatures it cannot be said that the prescription of period withinwhich a report is to be submitted by SFIO under sub-Section (3)Bof Section 212 is for completion of period of investigation and onthe expiry of that period the mandate in favour of SFIO mustcome to an end. If it was to come to an end, the legislation wouldhave contemplated certain results including re-transfer ofinvestigation back to the original Investigating Agencies whichCwere directed to transfer the entire record under sub-Section (2)of Section 212. In the absence of any clear stipulation, aninterpretation that with the expiry of the period, the mandate infavour of SFIO must come to an end, will cause great violence tothe scheme of legislation. If such interpretation is accepted, withthe transfer of investigation in terms of sub Section (2) of SectionD212 the original Investigating Agencies would be denuded ofpower to investigate and with the expiry of mandate SFIO wouldalso be powerless which would lead to an incongruous situationthat serious frauds would remain beyond investigation. That couldnever have been the idea. The only construction which is,Epossible therefore, is that the prescription of period within whicha report has to be submitted to the Central Government undersub-Section (3) of Section 212 is purely directory. Even after theexpiry of such stipulated period, the mandate in favour of theSFIO and the assignment of investigation under sub-Section (1)would not come to an end. The only logical end as contemplatedFis after completion of investigation when a final report or“investigation report” is submitted in terms of sub-Section (12)of Section 212. It cannot therefore, be said that the mandate cameto an end on 19.09.2018 and the arrest effected on 10.12.2018under the orders passed by Director, SFIO was in any way illegalGor unauthorised by law. In any case, extension was granted in theinstant case by the Central Government on 14.12.2018. But thatis completely besides the point since the original arrest itselfwas not in any way illegal. The High Court completely erred inproceeding on that premise and in passing the order underappeal, and thus, is set aside. [Para 30, 31] [135-B-H; 136-A-D]H

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PerAbhay ManoharSapre, J: (Supplementing):

HELD: Having regard to the scheme of the CompaniesAct, 2013 underlined in Chapter XIV (Sections 206 to 229)dealing with the matters relating to inspection, inquiry andinvestigation of the companies in juxtaposition with Chapter XXIXFwhich prescribes the punishment/penalties for commission ofvarious offences specified under the Act, the compliance of sub-section (3) of Section 212 of the Act is essentially directory. Ifthe submission of the counsel for the respondents that thecompliance of sub-section (3) of Section 212 of the Act in relationGto the submission of the report be held mandatory is accepted(which cannot be accepted) the very purpose of enacting Section212 of the Act would get defeated and will become nugatory. Whenthe well-known principle of purposive interpretation is appliedwhile interpreting the relevant provisions in juxtaposition and H

Ahold that sub-section (3) of Section 212 of the Act is directory innature, it serves the legislative intent for which Chapter XXIX isenacted. The reasoning and the conclusion arrived at on theinterpretation of sub-section (3) of Section 212 of the Act isconcurred with. [Para 4-7][138-A-E]

BCRIMINAL APPELLATE JURISDICTION: Criminal AppealNos. 538-539 of 2019.

From the Judgment and Order dated 20.12.2018 of the High Courtof Delhi at New Delhi in WPCRL Nos. 3842 and 3843 of 2018

With

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Transfer Petition (Crl.) No.35 of 2019

Tushar Mehta, SG, Amit Mahajan, Rajat Nair, Manan Popli,Ranvijay Singh, Rajeev Ranjan, Neeraj Kumar Sharma, Advs. for theAppellant.

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DKapil Sibal, Mukul Rohtagi, Sidharth Luthra, V. Giri, Sr. Advs.,Aditya Singla, Adit Pujari, Ms. Priya Puri, Pallav Gupta, Kartik Venu,Ranjay Duhbey, Ms. Vinita Meghrajani, Ravi Pathak, Ms. Supriya Juneja,Ms. Cheshta Jetly, Ms. Varsha Poddar, Himanshu Gupta, Akshay Sehgal,Saifuddin S., Sayantan Talapatra, Krishna Kumar Singh, Advs. for theRespondents.E

The Judgments of the Court were delivered by:

UDAY UMESH LALIT, J. 1.Leave granted.

2. These Appeals challenge the correctness of the commoninterim order dated 20.12.2018 passed by the High Court of Delhi atFNew Delhi in Writ Petition (Crl.) Nos.3842 and 3843 of 2018.

3. In exercise of powers conferred by Section 212(1)(c) of theCompanies Act, 2013 (“2013 Act”, for short) and under Section 43(2)and (3)(c)(i) of the Limited Liability Partnership Act, 2008 (“2008 Act”,for short), the Central Government vide order No.07/115/2018/CL-IIG(NWR), directed investigation into the affairs of Adarsh Group ofCompanies and LLPs (‘The Group’, for short) by Officers of SeriousFraud Investigation (SFIO) as nominated by Director, SFIO. Therelevant part of the Order dated 20.06.2018 was as under:- “Whereas the Central Government is empowered under Section212(1)(c) of the Companies Act, 2013 (the Act) to orderinvestigation into the affairs of a company in public interest by theSerious Fraud Investigation Office (SFIO).

2. And whereas the Central Government is also empowered toorder investigation into the affairs Limited Liability Partnerships(LLPs) under Section 43 (2) & (3) (c) (i) of the Limited LiabilityPartnership Act, 2008.

3. AND whereas on the basis of opinion formed by the CentralGovernment, it has been decided to investigate the affairs offollowing companies:-

4. Now, therefore, in exercise of powers conferred under Section212 (1) (c) of the Companies Act, 2013 and under Section 43 (2)& (3) (c) (i) of the LLP Act, 2008 the Central Government herebyorders investigation into the affairs of the above named companiesand LLPs to be carried out by officers of the Serious FraudInvestigation Office (SFIO) as nominated by Director, SFIO.

5. The SFIO shall investigate into following areas (abovementioned companies and LLPs) in addition to any other issuesthat it may come across during the investigation.

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102SUPREME COURT REPORTS

[2019] 5 S.C.R.

A(i) To ascertain and unearth rotation of funds or identification ofquantum of diversion of funds of siphoning including beneficiariesthereof:

(ii) To identify instances of mismanagement, negligence or fraud;

(iii) To ascertain the role of auditors, KMPs or independentBdirectors or any other person in the alleged fraud:

(iv) To examine role of any other entity used as conduit in thealleged fraud;

(v) To identify non-compliance of the statutory provisions of theCAct and its impact on Corporate Governance.

6. That the Inspector(s) so appointed shall exercise all powersavailable to them under Section 217 of the Companies Act, 2013and Chapter IX of LLP Act, 2008. The inspector(s) shall completetheir investigation and submit their report to the Central GovernmentDwithin a period of 03 (Three) months from the date of issue of thisorder.

7. This order is issued for and on behalf of the Central Government.

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(Santosh Kumar) Joint Director”

4. On the same date, i.e. on 20.06.2018 an Order was passed bythe Director, SFIO. The relevant portion of said order was as under:-

“3. Now, therefore, in exercise of powers conferred underFSection 212(1) of the Companies Act 2013, the followingOfficers are designated as Inspectors to carry out theinvestigation into the affairs of the above-mentioned entities andshall exercise all the powers available to them under theCompanies Act, 2013:

G1. • Shri P.C. Maurya, Addl. Director

2. Shri Prashant Baliyan, Deputy Director

3. Shri G. L. Meena, Sr. Asst. Director

4. Shri Kumar Gautam, Asst. Director

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4. And further, in exercise of powers conferred under Section212(4) of the Companies Act, 2013, Sh. Prashant Baliyan, Dy.Director is appointed as Investigating Officer to carry out theabove noted investigation. The Investigating Officer shall havethe powers of Inspector as enumerated under Section 217 of theCompanies Act, 2013. As per the investigation order, followingissues are specifically to be examined along with other issueswhich may come across during the investigation:

(i) To ascertain and unearth rotation of funds or identification ofquantum of diversion of funds or siphoning including beneficiariesthereof;

(ii) To identify instances of mismanagement, negligence or fraud;

(iii) To ascertain the role of auditors, KMPs or independentdirectors or any other person in the alleged fraud;

(iv) To examine role of any other entity used as conduit in thealleged fraud; and

(v) To identify non-compliance of the statutory provisions of theAct and its impact on Corporate Governance.

5. The Inspectors and the Investigating Officer shall completethe investigation and submit the report within three months hereof.”

5. The period mentioned in Clause 6 of the Order dated 20.06.2018came to an end on 19.09.2018. Based on the material gathered duringinvestigation, an approval was sought under Rule (2) of the Companies(Arrests in connection with Investigation by Serious Fraud InvestigationOffice) Rules, 2017 (“2017 Rules”, for short) from the Director, SFIOto arrest three accused persons namely Rahul Modi, Mukesh Modi andVivek Harivyasi. The approval was granted by the Director, SFIO on10.12.2018. The arrest order issued under Rules 4 and 5 of 2017 Rulesmade reference to the proceedings, “07/115/2018 CL-II (NWR)Dt. 20.06.2018”

The accused were accordingly arrested on 10.12.2018. Thecompliance in terms of 2017 Rules was effected and they were producedbefore the Duty Magistrate, District Courts, Gurugram, Haryana on11.12.2018.

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A6. After hearing Counsel for the appellant as well as for theaccused, the Judicial Magistrate First Class, Gurugram by order dated11.12.2018 granted remand till 14.12.2018 and directed they be producedbefore the Special Court (Companies Act), Gurugram on 14.12.2018.The application seeking remand had sought to make out a case for custodyof the accused. The matter was dealt with by the Judicial Magistrate asBunder:- A

“5. Counsel for accused Nos.1 and 2 argued that these personshave already been co-operated with the investigation since 20[th]June and their office have been sealed. Despite this, now remandhas been sought without any reason, therefore, kindly it be declined.

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6. Perusal of documents on record shows that there are seriousallegations and as per order dated 20.06.2018, investigation wasordered to be initiated and now accused has been produced beforethis court under Section 167 Cr.P.C. seeking SFIO remand. Thiscourt is to exercise the power of Magistrate in terms of Section436(1)(B). At this stage, remand has been sought. The offencealleged is definitely serious in nature and the arrest orders areplaced on record. Consequential to these documents, accusedwere arrested and produced. Undoubtedly, they have beenappearing on notices issued by the SFIO but still the investigationhas not been completed because some part of investigation needspersonal involvement. This case prima facie attracts Section 447of Companies Act, which certainly makes this offence cognizableand no bailable. The main grounds for which the investigation isto be conducted in custody is ascertainment of further trail quawithdrawn money and to locate the beneficiaries. In addition tothis, identification of properties and explanation about loans andadvances mentioned in the books of accounts can only be givenby accused but they have not come up with any such explanationstill now. Even the persons who are in custody are not going tofacilitate the investigation in proper manner so that the real factscan be established. These grounds definitely require detainedand comprehensive investigation so it would be proper to grantthe custody of these accused to SFIO for three days. Accusedbe produced before the Special Court under Companies Act on14.12.2018. Copy of this order be handed over to the IO and D

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accused as they have requested. Custody of all three accusednamely Mukesh Modi, Rahul Modi and Vivek Harivyasi is givento SFIO for three days. File be sent to the Special Court underthe Companies Act.”

7. On 13.12.2018 a proposal was made by SFIO seeking approvalof the Central Government for extension of time for completinginvestigation and submission of investigation report in respect of 57 caseswhich were at various stages of completion and the period granted forcompletion of investigation had either expired or was near the expiry.One of the cases referred to was that of the Group at Sl. No.24 of thelist. On 14.12.2018 the accused were produced before the Special Courtwith a fresh application for remand. The prayer for extension ofcustody was opposed by the accused inter alia on the grounds that theperiod of completion of investigation as stipulated in the order dated20.06.2018 had expired and as such all further proceedings were illegal.During the course of proceedings, the proposal seeking extension inrespect of said 57 cases, where investigation had not been completed,was placed before the Special Court. After going into the record, theSpecial Court found that the application seeking further remand wasjustified. It, therefore, extended the police custody of the accused till18.12.2018. Para 6 of the Order dated 14.12.2018 passed by theSpecial Court was:-

“6. Admittedly as per the provisions of Section 212(3) of theCompanies Act, the investigations ordered are required to becompleted within the specified time. But the issue is even if it notso done, what should be consequences and whether furtherproceedings or investigations shall be unlawful. The answer tothe mind of this court is simply no because the time framementioned is to complete the investigations in a time boundmanner but the said time can be extended from time to time bythe same authority. And in this case all, after investigations whenthe team submitted report to competent authority, which is theDirector of SFIO, he permitted the team to arrest the accusedand go for further investigations, which in the given facts andcircumstances amount to extension. Then the purpose of section212(3) is just to grant sanction to investigate as per the procedureprovided under Chapter XIV of the Companies Act, 2013 and as A

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Aper sub-Section 6, the offence alleged is cognizable andnon-bailable and thus power has been granted to the SFIO toarrest the persons involved and see their remand and then to filea final report to the Central Government. And thus the issue offiling a report before the court after arrest is mandatory but doingso before the arrest of the accused is not a time bound exerciseBthat too violation of which can be legal impediment for furtherinvestigation.”

The proposal was accepted vide order dated 14.12.2018 passedby the Central Government in respect of the Group and extension wasgranted upto 30.06.2019.C

8. On 17.12.2018 Writ Petition (Criminal) Nos.3842 & 3843 of2018 were filed under Articles 226 & 227 of the Constitution of Indiaread with Section 482 of Cr.P.C. by Rahul Modi and Mukesh Modirespectively in the High Court of Delhi. It was submitted that with theexpiry of period within which the investigation had to be completed inDterms of order dated 20.06.2018, all further proceedings including thearrest of the respondents were illegal and without any authority of law.The Writ Petitions therefore prayed for declaration that the investigationcarried out after 19.09.2018 was illegal and without jurisdiction and alsoprayed for Writ of Habeas Corpus directing release from illegal arrestEmade on 10.12.2018. The prayers in both the petitions were almostidentical and were as under:

A. “Issue a writ of mandamus or any other appropriatewrit/direction/order in the nature of a writ declaring that thepower of Respondents No.2 to 4 to carry out investigationFunder Section 2012(2) Companies Act, 2013 after the expiry ofthe time period is illegal and unconstitutional.

B. Issue a writ of mandamus or any other appropriatewrit/direction/order in the nature of a writ declaring that theinvestigation carried out after 19.09.2018 in File No.SFIO/INV/AOI/2018-19-AGC & L/842-966 vide order No.07/115/2018-GCL-II dated 20.06.2018 as illegal and without jurisdiction.

C. Issue a writ/direction/order declaring the arrest of the Petitiondated 10.12.2018 at New Delhi in the office of RespondentNo.2 by Respondent No.3, and proceeding emanating H

therefrom being without jurisdiction and illegal and the PetitionerRahul Modi be released forthwith.

D. Issue a writ of Habeas Corpus directing immediate release ofthe Petitioner herein Sh. Rahul Modi from the illegal arrest dated10.12.2018 at New Delhi and consequent illegal custody fromRespondent No.2 to 4 at;

9. These Writ Petitions came up before the High Court on18.12.2018 and following order was passed:

“At request of Ms. Maninder Acharya, learned ASG appearingon behalf of the Union of India, in order to enable her to obtaininstructions qua the extension of time for the submission of reportby the SFIO, the hearing of the petitions is adjourned.”

On the same day the accused were produced before the SpecialCourt and after being satisfied that further custody was required inorder to complete investigation, the accused were remanded to policecustody till 21.12.2018. The relevant part of the Order of the SpecialCourt was:-

“2. The SFIO has placed before the undersigned complete notingproceedings showing the investigations carried out by it from thelast date till today. As submitted by the counsel for thecomplainant and after going through the case diary in the form ofnoting sheets from the day the accused were handed to thecustody of the complainant till today, it comes out that admittedlysome more disclosures about the entire scam has been disclosedby the accused persons relating to some new issues leading todisclosure about undisclosed wealth and thus the request forfurther custody of accused persons is required to trail andconfront them with the subsequent evidence and events and toinvestigate the matter further as per the disclosures made by theaccused to unearth real facts of siphoning of the huge money, inview of this investigations in the order dated 14.12.2018. As such,finding the request to be genuine and the plea of custodialinterrogation to be necessary for the logical end of the entireinvestigations, the application in hand is allowed and all the threeaccused persons are remanded to further custody of the SFIO till21.12.2018 upto 2.00 p.m.”

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A10. The Writ Petitions came up before the High Court on20.12.2018. The High Court issued notice making it returnable on31.01.2019. The High Court thereafter proceeded to consider whetherimmediate release of the respondents by way of ad interim relief wascalled for. Both the sides were heard and the issues which arose forconsideration in the Writ Petitions were framed as under:B

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“a) Whether the ex post facto extension granted on behalf of theCompetent Authority is valid in law; and

b) Whether the vested rights created in favour of the applicants,in the interregnum, when there was purportedly no legal sanctionCto carry out the investigation against the applicants, renders thesaid action, and in particular their arrest illegal, withoutjurisdiction and contrary to law.”

11. While considering the matter from the perspective of grant ofad interim relief, as prayed for in applications, Crl. M.A. No.50033 ofD2018 in Writ Petition (Criminal) No.3842 of 2018 and Criminal M.A.No.50035 of 2018 in Writ Petition (Criminal) No.3843 of 2018 thefollowing points were framed:

“15. In view of the submissions made on behalf of the parties, theissues that arise for consideration in the present applications are:- E

“a) Whether this Court can in a proceeding for habeas corpusunder Article 226 of the Constitution of India, test thecorrectness, legality and validity of an order of remand, passed bya Competent Magistrate/ and

b) Whether this Court has the territorial jurisdiction to adjudicateFthe present habeas corpus proceedings, in view of thecircumstance that the remand orders were rendered by a Com-petent Magistrate at Gurugram, which have not been specificallyassailed in these proceedings?”

12. The High Court by its order dated 20.12.2018 directedGrelease of said Rahul Modi and MukeshModi on interim bail, during thependency of the writ petitions, on their furnishing personal bond in thesum of Rs.5 lakhs each with 2 local sureties in the like amount subject toconditions stipulated in the order. During the course of its orderfollowing observations were made by the High Court in paragraphs22 to 30:-H

“22. On a conspectus of the above decisions and in the light ofthe arguments advanced on behalf of the parties, what we arecalled upon to determine at this stage is whether the arrest of theapplicants was illegal and without the authority of law; and whetherthe subsequent remand orders, which are cited to sanctify thearrest, are beyond the pale of examination by this Court in thepresent applications.

23. There is no denying the fact that, the Competent Authorityvide its order dated 20.06.2018 directed the SFIO to conduct aninvestigation into the affairs of the subject entities, in publicinterest. There is also no quarrel with the circumstance that, theperiod specified by the Competent Authority in the said order dated20.06.2018 lapsed on 19.09.2018. There is also no dispute withregard to the fact that, the SFIO sought an extension of time,from the Competent Authority, to carry out further investigationunder the mandate of the provisions of Section 212 of the saidAct, only on 13.12.2018, admittedly two and half months afterthe period granted to them by the Competent Authority for thesaid purpose, had come to an end by efflux of time.

24. There is also no quarrel with the circumstance that, the expost facto extension granted by the Competent Authority,retrospectively, was granted only on 14.12.2018. It is, therefore,prima facie axiomatic that, when the applicants were arrested bythe SFIO on 10.12.2018, the period specified in the said orderdated 20.06.2018 for the submission of the report, postinvestigation, had already elapsed. It is further relevant to statethat, at that juncture the SFIO had neither applied nor obtainedthe ex post facto extension of the period specified in the saidorder dated 20.06.2018.

25. It is, in these circumstances, read in conjunction with the normsset out by the SFIO itself, warranting investigation to becompleted within the timeframe, stipulated by the CentralGovernment, that we are of the considered view that the order ofarrest suffers from the vice of lack of jurisdiction, unlawful andillegal.

26. A statutory body must be strictly held to the standards bywhich it professes its conduct to be judged.

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A27. Illegal detention of the applicants, in our considered view, cannotbe sanctified by the subsequent remand orders, passed by theconcerned Magistrate. The right of the applicants to insist uponthe strict and scrupulous discharge of their duty by the SFIO andobserve the forms and rules of law, is absolute. The arrest of theapplicants on 10.12.2018 in the light of the circumstancesBantecedent and attendant was an absolute illegality and patentlysuffers from the vice of lack of legal sanction and jurisdiction.

28. This Court in a petition for habeas corpus cannot justify thecontinued illegal detention of the applicants; merely on account of thecircumstance that the concerned Magistrate has rendered remandCorders. The further custody of the applicants would, in our consideredview, violate the principles of personal liberty, enshrined in Article 21 ofthe Constitution of India. The continued detention of the applicants doesnot admit of lawful sanction.

29. Even otherwise, the remand order dated 14.12.2018, insofarDas, it observes as follows:- “6. ………..And in this case all, after investigations when theteam submitted report to competent authority, which is theDirector of SFIO, he permitted the team to arrest the accusedand go for further investigations, which in the given facts andEcircumstances amount to extension.”

is wrong, incorrect and patently contrary to law and theofficial record.

30. This is quite apart from the circumstance that, the applicantsFwere arrested at the SFIO office at New Delhi on 10.12.2018, therebyrendering the remand orders passed by the concerned Magistrate inGurugram, wholly without jurisdiction.”

13. The original writ petitioners Rahul Modi and Mukesh Modiwere, therefore, released on bail. The aforesaid order dated 20.12.2018passed by the High Court is presently under challenge. Mr. TusharGMehta, learned Solicitor General appeared for the appellant – SFIO inboth criminal appeals while the original writ petitioners were representedby Mr. Kapil Sibal, Mr. Mukul Rohatgi and Mr. Sidhharth Luthra, SeniorAdvocates. Both sides also filed their written submissions.

14. The learned Solicitor General submitted inter alia:

(a) In terms of the provisions of 2013 Act, the investigationcommenced when the present matter was assigned to SFIOunder Section 212(1) of 2013 Act and the investigation would endon filing of a report by SFIO after completion of investigation, asper Section 212(12) of the Act. It would be incorrect to assumethat the mandate to investigate or power to arrest would come toan end on completion of three months from 20.06.2018.

(b) The stipulation in Section 212(3) of 2013 Act regardingsubmission of the report to the Central Government “within suchperiod as may be specified in the order” is purely directory.

(c) Power of arrest under Section 212(8) of 2013 Act conferredupon the Director, Additional Director and Assistant Director isnot circumscribed by any time limit and so long as the conditionsstipulated in said sub-section are satisfied, such power of arrestcan be validly exercised.

(d) The Habeas Corpus Petition was not maintainable in the HighCourt of Delhi as after their arrest the original Writ Petitionerswere produced before the Judicial Magistrate, Gurugram on11.12.2018 and were remanded to custody under a judicial order.Thereafter they were produced before the Special Court,Gurugram on 14.12.2018 and were again remanded to custodyunder judicial order passed by Special Court, Gurugram.

(e) Since the registered office of the Principal Company was inGurugram, they were rightly produced before the Magistrate andSpecial Court in Gurugram. Thus, if at all the Habeas CorpusPetition ought to have been filed before the High Court of Punjaband Haryana and not in High Court of Delhi.

(f) The focal point of examination in a Habeas Corpus Petition isthe date of return and not the initiation of proceedings. In thepresent case, on 18.12.2018 when the petitions were taken up forconsideration, not only was there an order of extension dated14.12.2018 passed by the Central Government but there werevalid orders of remand passed by the Judicial Magistrate,Gurugram on 11.12.2018 and by the Special Court, Gurugram on14.12.2018 and 18.12.2018.

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15. Mr. Sibal, Mr. Rohatgi and Mr. Luthra, learned SeniorAdvocates appearing for the original writ petitioners submitted, interalia:- A

(a) A special jurisdiction has been created by Section 212 of 2013Act under which corporate affairs in relation to any company canBbe investigated into by SFIO, which may have far reachingconsequences. It is precisely for this reason that certain timelimit is contemplated within which investigation must be completedand the investigation cannot be allowed to be an endless matter.The period prescribed under the 1[st] Order, therefore, had to bescrupulously observed and the mandate came to an end on theCexpiry of said period.

(b) SFIO being a special entity which otherwise has nojurisdiction to investigate into the matter, must therefore act withinthe parameters of the mandate and no arrest after the expiry ofthe period could have been effected.

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(c) Any arrest made beyond the period would be withoutjurisdiction and the High Court was, therefore, justified ingranting the relief in the present matter.

(d) The Writ Petitions principally challenged the orders of arrestbeing without jurisdiction and it was only the 4[th] prayer in the WritPetitions which pertained to issuance of a writ of HabeasCorpus.

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e) The order entrusting investigation to SFIO was passed in NewDelhi, SFIO is located in New Delhi, the order of arrest waspassed in New Delhi, the writ petitioners were arrested in NewDelhi and were kept in custody in SFIO office in New Delhi andas such the High Court of Delhi had jurisdiction to consider theWrit Petitions and grant relief as prayed for.

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f) In the absence of any extension for further investigation, thepower of arrest could not have been exercised on 10.12.2018.Any further extension cannot validate the act of initial arrest. Sucharrest being unsupported by any valid mandate, was an act ofillegality which violated Article 21 calling for interference by theHigh Court.

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16. The basic facts in the present matter can be summed up:-

a) The investigation was assigned to SFIO vide Order dated20.6.2018. This Order did stipulate in para 6 that theInspectors should complete their investigation and submit theirreport to the Central Government within three months.

b) The period of three months expired on 19.09.2018.

c) The proposal to arrest three accused persons was placedbefore the Director, SFIO and after being satisfied in termsof requirements of Section 212(8) of 2013 Act approval wasgranted by Director, SFIO on 10.12.2018.

d) After they were arrested on 10.12.2018, the accused wereproduced before the Judicial Magistrate, who by his orderdated 11.12.2018 remanded them to custody till 14.12.2018and also directed that they be produced before the SpecialCourt on 14.12.2018.

e) On 13.12.2018 a proposal seeking extension of time forcompleting investigation in respect of 57 cases including thepresent case was preferred by SFIO.

f) On 14.12.2018 the Special Court, Gurugram remanded theaccused to custody till 18.12.2018.

g) On the same date i.e. on 14.12.2018 the proposal for extensionwas accepted by the Central Government in respect of theGroup and extension was granted upto 30.06.2019.

h) On 17.12.2018 the present Writ Petitions were preferredwhich came up for the first time before the High Court on18.12.2018.

i) On 18.12.2018 itself the accused were further remanded topolice custody till 21.12.2018.

j) On 20.12.2018 Writ Petitions were entertained and the orderwhich is presently under appeal was passed.

k) Pursuant to said order, the original Writ Petitioners werereleased on bail.

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114SUPREME COURT REPORTS

AIn the backdrop of these facts, the High Court found that a casefor interim relief was made out. The principal issues which arise in thematter are whether the High Court was right and justified in entertainingthe petition and in passing the Order under appeal?

17. For considering whether the writ petitioners were entitled toBany interim relief, two questions were framed by the High Court inparagraph 15 of its Order. Before considering the matter from theperspective of said two questions, an issue which was stressed by thelearned Solicitor General may be addressed first. It was submitted byhim that the date with reference to which the legality of detention can bechallenged in a Habeas Corpus proceeding is the date on which theCreturn is filed in such proceedings and not with reference to the initiationof the proceedings. He relied upon the decision of the Federal Court inBasanta Chandra Ghose vs. King Emperor[1], which had concluded:

“… …If at any time before the Court directs the release of thedetenue, a valid order directing his detention is produced, the CourtDcannot direct his release merely on the ground that at some priorstage there was no valid cause for detention…. …”

Similar questions arose for consideration in Naranjan SinghNathawan vs. State of Punjab[2], Ram Narayan Singh vs. State ofDelhi[3], A.K. Gopalan vs. Govt. of India[4], Pranab Chatterjee vs.EState of Bihar and Another.[5], Talib Hussain vs. State of Jammu andKashmir[6], Col. Dr. B. Ramachandra Rao vs. State of Orissa andOthers.[7]. These decisions were considered in Kanu Sanyal vs. DistrictMagistrate, Darjeeling and Others[8], as under:

Re: Grounds A and B.F

4. These two grounds relate exclusively to the legality of theinitial detention of the petitioner in the District Jail, Darjeeling. Wethink it unnecessary to decide them. It is now well settled that theearliest date with reference to which the legality of detention G1 (1945) 7 FCR 812 (1952) SCR 3953 (1953) SCR 652,4 (1966) 2 SCR 4275 (1970) 3 SCC 9266 (1971) 3 SCC 1187 (1972) 3 SCC 256H8 (1974) 4 SCC 141

challenged in a habeas corpus proceeding may be examined isthe date on which the application for habeas corpus is made tothe Court. This Court speaking through Wanchoo, J., (as he thenwas) said in A.K. Gopalan v. Government of India[5]:

“It is well settled that in dealing with the petition for habeas corpusthe Court is to see whether the detention on the date on which theapplication is made to the Court is legal, if nothing more hasintervened between the date of the application and the date of thehearing.”

In two early decisions of this Court, however, namely, NaranjanSingh v. State of Punjab[2] and Ram Narayan Singh v. State ofDelhi[3] a slightly different view was expressed and that view wasreiterated by this Court in B.R. Rao v. State of Orissa[7] where itwas said (at p. 259, para 7):

“in habeas corpus proceedings the Court is to have regard tothe legality or otherwise of the detention at the time of the returnand not with reference to the institution of the proceedings”.

and yet in another decision of this Court in Talib Hussain v. Stateof Jammu & Kashmir[6] Mr Justice Dua, sitting as a Single Judge,presumably in the vacation, observed that (at p. 121, para 6):

“in habeas corpus proceedings the Court has to consider the legalityof the detention on the date of the hearing.”

Of these three views taken by the Court at different times, thesecond appears to be more in consonance with the law and practicein England and may be taken as having received the largestmeasure of approval in India, though the third view also cannot bediscarded as incorrect, because an inquiry whether the detentionis legal or not at the date of hearing of the application for habeascorpus would be quite relevant, for the simple reason that if onthat date the detention is legal, the Court cannot order release ofthe person detained by issuing a writ of habeas corpus. But, forthe purpose of the present case, it is immaterial which of thesethree views is accepted as correct, for it is clear that, whicheverbe the correct view, the earliest date with reference to which thelegality of detention may be examined is the date of filing of theapplication for habeas corpus and the Court is not, to quote the A

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Awords of Mr JusticeDua in B.R. Rao v. State of Orissa[7],“concerned with a date prior to the initiation of the proceedingsfor a writ of habeas corpus”. Now the writ petition in the presentcase was filed on January 6, 1973 and on that date the petitionerwas in detention in the Central Jail, Vizakhapatnam. The initialdetention of the petitioner in the District Jail, Darjeeling had comeBto an end long before the date of the filing of the writ petition. It is,therefore, unnecessary to examine the legality or otherwise ofthe detention of the petitioner in the District Jail, Darjeeling. Theonly question that calls for consideration is whether the detentionof the petitioner in the Central Jail, Vizakhapatnam is legal or not.CEven if we assume that grounds A and B are well founded andthere was infirmity in the detention of the petitioner in the DistrictJail, Darjeeling, that cannot invalidate the subsequent detention ofthe petitioner in the Central Jail, Vizakhapatnam. See para 7 ofthe judgment of this Court in B.R. Rao v. State of Orissa. Thelegality of the detention of the petitioner in the Central Jail,DVizakhapatnam would have to be judged on its own merits. We,therefore, consider it unnecessary to embark on a discussion ofgrounds A and B and decline to decide them.”

The law is thus clear that “in Habeas Corpus proceedings a Courtis to have regard to the legality or otherwise of the detention at the timeEof the return and not with reference to the institution of the proceedings”.In Kanu Sanyal[8] the validity of the detention of the petitioner in DistrictJail, Darjeeling was therefore not considered by this Court and it wasobserved that the infirmity in the detention of the petitioner therein in theDistrict Jail, Darjeeling could not invalidate subsequent detention of theFpetitioner in the Central Jail, Vishakhapatnam.18. At this stage we may also deal with three recent cases decidedby this Court:-

A) In Manubhai Ratilal Patel through Ushaben vs. State ofGujarat and others[9]a Division bench of this Court extensivelyGconsidered earlier decisions in the point including cases referred to above.It also dealt with an issue whether Habeas Corpus petition could beentertained against an order of remand passed by a Judicial Magistrate.

9 (2013) 1 SCC 314H

The observations of this Court in paragraphs 20 to 24 and para 31 wereas under:

20. After so stating, the Bench in Kanu Sanyal case[8] opined thatfor adjudication in the said case, it was immaterial which of thethree views was accepted as correct but eventually referred topara 7 in B. Ramachandra Rao[7] wherein the Court had expressedthe view in the following manner: (SCC p. 259)

“7. … in habeas corpus proceedings the court is to have regard tothe legality or otherwise of the detention at the time of the returnand not with reference to the institution of the proceedings.”

Eventually, the Bench ruled thus: (Kanu Sanyal case[8], SCCp. 148, para 5)

“5. … The production of the petitioner before the Special Judge,Visakhapatnam, could not, therefore, be said to be illegal and hissubsequent detention in the Central Jail, Visakhapatnam, pursuantto the orders made by the Special Judge, Visakhapatnam, pendingtrial must be held to be valid. This Court pointed out in Col. B.Ramachandra Rao v. State of Orissa[7] (SCC p. 258, para 5)that a writ of habeas corpus cannot be granted ‘where a person is committed to jail custody by a competent courtby an order which prima facie does not appear to be withoutjurisdiction or wholly illegal’.”

21. The principle laid down in Kanu Sanyal[8], thus, is that anyinfirmity in the detention of the petitioner at the initial stage cannotinvalidate the subsequent detention and the same has to be judgedon its own merits.

22. At this juncture, we may profitably refer to the ConstitutionBench decision in Sanjay Dutt v. State through CBI, Bombay(II)[10] wherein it has been opined thus: (SCC p. 442, para 48)

“48. … It is settled by Constitution Bench decisions that a petitionseeking the writ of habeas corpus on the ground of absence of avalid order of remand or detention of the accused, has to bedismissed, if on the date of return of the rule, the custody ordetention is on the basis of a valid order.”

10(1994) 5 SCC 410 : 1994 SCC (Cri) 1433

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23. Keeping in view the aforesaid concepts with regard to thewrit of habeas corpus, especially pertaining to an order passed bythe learned Magistrate at the time of production of the accused, itis necessary to advert to the schematic postulates under the Coderelating to remand. There are two provisions in the Code whichprovide for remand i.e. Sections 167 and 309. The Magistrate hasthe authority under Section 167(2) of the Code to direct fordetention of the accused in such custody i.e. police or judicial, ifhe thinks that further detention is necessary.

24. The act of directing remand of an accused is fundamentally ajudicial function. The Magistrate does not act in executive capacitywhile ordering the detention of an accused. While exercising thisjudicial act, it is obligatory on the part of the Magistrate to satisfyhimself whether the materials placed before him justify such aremand or, to put it differently, whether there exist reasonablegrounds to commit the accused to custody and extend his remand.The purpose of remand as postulated under Section 167 is thatinvestigation cannot be completed within 24 hours. It enables theMagistrate to see that the remand is really necessary. This requiresthe investigating agency to send the case diary along with theremand report so that the Magistrate can appreciate the factualscenario and apply his mind whether there is a warrant for policeremand or justification for judicial remand or there is no need forany remand at all. It is obligatory on the part of the Magistrate toapply his mind and not to pass an order of remand automaticallyor in a mechanical manner.

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31. Coming to the case at hand, it is evincible that the arrest hadtaken place a day prior to the passing of the order of stay. It isalso manifest that the order of remand was passed by the learnedMagistrate after considering the allegations in the FIR but not in aroutine or mechanical manner. It has to be borne in mind that theeffect of the order of the High Court regarding stay of investigationcould only have a bearing on the action of the investigating agency.The order of remand which is a judicial act, as we perceive, doesnot suffer from any infirmity. The only ground that was highlightedbefore the High Court as well as before this Court is that once

there is stay of investigation, the order of remand is sensitivelysusceptible and, therefore, as a logical corollary, the detention isunsustainable. It is worthy to note that the investigation had alreadycommenced and as a resultant consequence, the accused wasarrested. Thus, we are disposed to think that the order of remandcannot be regarded as untenable in law. It is well-accepted principlethat a writ of habeas corpus is not to be entertained when a personis committed to judicial custody or police custody by the competentcourt by an order which prima facie does not appear to be withoutjurisdiction or passed in an absolutely mechanical manner or whollyillegal. As has been stated in B. Ramachandra Rao[3 ]and KanuSanyal[9], the court is required to scrutinise the legality or otherwiseof the order of detention which has been passed. Unless the courtis satisfied that a person has been committed to jail custody byvirtue of an order that suffers from the vice of lack of jurisdictionor absolute illegality, a writ of habeas corpus cannot be granted. Itis apposite to note that the investigation, as has been dealt with invarious authorities of this Court, is neither an inquiry nor trial. It iswithin the exclusive domain of the police to investigate and isindependent of any control by the Magistrate. The sphere of activityis clear cut and well demarcated. Thus viewed, we do not perceiveany error in the order passed by the High Court refusing to granta writ of habeas corpus as the detention by virtue of the judicialorder passed by the Magistrate remanding the accused to custodyis valid in law.”

B) In Saurabh Kumar vs. Jailor, Koneila Jail and another[11]the issue was dealt with in para 13 of the leading Judgment as under:-

13. It is clear from the said narration of facts that the petitioner isin judicial custody by virtue of an order passed by the JudicialMagistrate. The same is further ensured from the original recordwhich this Court has, by order dated 9-4-2014, called for from theCourt of the Additional Chief Judicial Magistrate, Dalsingsarai,District Samastipur, Bihar. Hence, the contention of the learnedcounsel for the petitioner that there was illegal detention withoutany case is incorrect. Therefore, the relief sought for by thepetitioner cannot be granted. Even though there are several otherissues raised in the writ petition, in view of the facts narrated11(2014) 13 SCC 436

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Aabove, there is no need for us to go into those issues. However,the petitioner is at liberty to make an application for his release inCriminal Case No. 129 of 2013 pending before the Court of thelearned Additional Chief Judicial Magistrate, Dalsingsarai.”

Thakur, J. (as the learned Chief Justice then was) who agreedBwith the leading Judgment authored by Ramana, J., also dealt with thematter in paragraph 22 of his concurring opinion as under:

“22. The only question with which we are concerned within theabove backdrop is whether the petitioner can be said to be in theunlawful custody. Our answer to that question is in the negative.CThe record which we have carefully perused shows that thepetitioner is an accused facing prosecution for the offences,cognizance whereof has already been taken by the competentcourt. He is presently in custody pursuant to the order of remandmade by the said Court. A writ of habeas corpus is, in thecircumstances, totally misplaced. Having said that, we are of theDview that the petitioner could and indeed ought to have filed anapplication for grant of bail which prayer could be allowed by thecourt below, having regard to the nature of the offences allegedlycommitted by the petitioner and the attendant circumstances. Thepetitioner has for whatever reasons chosen not to do so. He,Einstead, has been advised to file the present petition in this Courtwhich is no substitute for his enlargement from custody.”

C) A Bench of three learned Judges of this Court in State ofMaharashtra and Others vs. Tasneem Rizwan Siddiquee[12] concludedas under:- F

“10. The question as to whether a writ of habeas corpus could bemaintained in respect of a person who is in police custody pursuantto a remand order passed by the jurisdictional Magistrate inconnection with the offence under investigation, this issue hasbeen considered in Saurabh Kumar v. Jailor, Koneila Jail[11]Gand Manubhai Ratilal Patel[9] v. State of Gujarat. It is no moreres integra. In the present case, admittedly, when the writ petitionfor issuance of a writ of habeas corpus was filed by the respondenton 18-3-2018/19-3-2018 and decided by the High Court on21-3-2018 her husband Rizwan Alam Siddiquee was in police custody pursuant to an order passed by the Magistrate grantinghis police custody in connection with FIR No. I-31 vide orderdated 17-3-2018 and which police remand was to enure till23-3-2018. Further, without challenging the stated order of theMagistrate, a writ petition was filed limited to the relief of habeascorpus. In that view of the matter, it was not a case of continuedillegal detention but the incumbent was in judicial custody by virtueof an order passed by the jurisdictional Magistrate, which was inforce, granting police remand during investigation of a criminalcase. Resultantly, no writ of habeas corpus could be issued.

11. Reverting to the prayer for expunging the scathing observationsmade in the impugned judgment, in particular paras 4-6, reproducedearlier, it is submitted that the said observations were whollyunwarranted as the Deputy Commissioner of Police concernedwho was present in Court, could not have given concession torelease Rizwan Alam Siddiquee in the teeth of a judicial orderpassed by the Magistrate directing police remand until 23-3-2018.Moreover, it is evident that the High Court proceeded to makeobservations without giving any opportunity, whatsoever, to thepolice officials concerned to explain the factual position on affidavit.The writ petition was filed on 18-3-2018/19-3-2018 and was moved2on 20-3-2018when the Court called upon the advocate for theappellants to produce the record on the next day i.e. 21-3-2018.The impugned order came to be passed on 21-3-20181,notwithstanding the judicial order of remand operating till23-3-2018. The High Court, in our opinion, should not have takenumbrage to the submission made on behalf of the DeputyCommissioner of Police that the respondent’s husband could bereleased if so directed by the Court. As aforesaid, the DCP hashad no other option but to make such a submission. For, he couldnot have voluntarily released the accused who was in police custodypursuant to a judicial order in force. The High Court ought not tohave made scathing observations even against the investigatingofficer without giving him an opportunity to offer his explanationon affidavit.

12. Suffice it to observe that since no writ of habeas corpus couldbe issued in the fact situation of the present case, the High Court A

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Ashould have been loath to enter upon the merits of the arrest inthe absence of any challenge to the judicial order passed by theMagistrate granting police custody till 23-3-2018 and moreparticularly for reasons mentioned in that order of the Magistrate.In a somewhat similar situation, this Court in State representedby Inspector of Police and others v. N.M.T. Joy Immaculate[13]Bdeprecated passing of disparaging and strong remarks by the HighCourt against the investigating officer and about the investigationdone by them. Accordingly, we have no hesitation in expungingthe observations made in paras 4 to 6 of the impugned judgmentagainst the police officials concerned in the facts of the presentCcase.”

19. The act of directing remand of an accused is thus held to be ajudicial function and the challenge to the order of remand is not to beentertained in a habeas corpus petition. The first question posed by theHigh Court, thus, stands answered. In the present case, as on the dateDwhen the matter was considered by the High Court and the Order waspassed by it, not only were there orders of remand passed by the JudicialMagistrate as well as the Special Court, Gurugram but there was alsoan order of extension passed by the Central Government on 14.12.2018.The legality, validity and correctness of the order or remand could have been challenged by the original Writ Petitioners by filing appropriateEproceedings. However, they did not raise such challenge before thecompetent Appellate or Revisional Forum. The orders of remand passedby the Judicial Magistrate and the Special Court, Gurugram had dealtwith merits of the matter and whether continued detention of the accused was justified or not. After going into the relevant issues on merits, theFaccused were remanded to further police custody. These orders werenot put in challenge before the High Court. It was, therefore, not opento the High Court to entertain challenge with regard to correctness ofthose orders. The High Court, however, considered the matter from thestandpoint whether the initial Order of arrest itself was valid or not andfound that such legality could not be sanctified by subsequent Order ofGremand. Principally, the issue which was raised before the High Courtwas whether the arrest could be effected after period of investigation,as stipulated in said order dated 20.06.2018 had come to an end. Thesupplementary issue was the effect of extension of time as granted on 14.12.2018. It is true that the arrest was effected when the period hadexpired but by the time the High Court entertained the petition, therewas as order of extension passed by the Central Government on14.12.2018. Additionally, there were judicial orders passed by the JudicialMagistrate as well as the Special Court, Gurugram, remanding the accusedto custody. If we go purely by the law laid down by this Court withregard to exercise of jurisdiction in respect of Habeas Corpus petition,the High Court was not justified in entertaining the petition and passingthe Order.

20. We must, however, deal with the submission advanced onbehalf of the original Writ Petitioners that the relief as regards HabeasCorpus was a secondary prayer while the principal submissions werewith regard to the first three prayers in the petition. It was submittedthat with the expiry of period, the entire mandate came to an end and assuch, there could be no arrest and that illegality in that behalf wouldcontinue regardless whether there was a subsequent order of extension.In the submission of the learned counsel for the Writ Petitioner such anextension could not cure the inherent defect and as such, the High Courtwas justified in entertaining the petition. We may deal with this issueafter considering the second question posed by the High Court in saidparagraph 15.

21. The first Order dated 20.06.2018 itself indicated that theRegistered Office of the Principal Company was in Gurugram, Haryana.Section 435 of 2013 Act contemplates establishment of Special Courtsfor the purpose of providing speedy trial of offences under said Act.Section 436 then provides that “offences specified under sub-section(1) of Section 435 shall be triable only by Special Court establishedor designated for the area in which the Registered Office of theCompany, in relation to which the offence is committed ……”. Soonafter the arrest, the accused were produced before the Judicial Magistrate,Gurugram on 11.12.2018, who remanded them to custody till 14.12.2018and directed that they be produced before the Special Court, Gurugramon 14.12.2018. Accordingly the accused were produced before theSpecial Court, Gurugram, who thereafter remanded them to custodyfirst till 18.12.2018 and later till 21.12.2018. The Special Court, Gurugramwould be competent to deal with the matter in terms of Section 436.Learned counsel for the writ petitioners, however, contend that since AB

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Athe accused were arrested in Delhi, were kept in custody in Delhi, andthe SFIO office being in Delhi, the High Court of Delhi was competentto entertain and consider the writ petitions so preferred by the writpetitioners. Reliance was placed by them on the decision of this Courtin Navinchandra N. Majithia v. State of Maharashtra and others[14]

B22. In Navinchandra Majithia[14], all the transactions betweenthe parties had occurred within the jurisdiction of the High Court ofBombay. However, a complaint was filed against the petitioner at Shillongpursuant to which investigation was taken up by Shillong Police. It wassubmitted that such investigation was wholly incorrect and unjustifiedand a writ petition was preferred in the High Court of Bombay seekingCquashing of the complaint so filed at Shillong or in the alternative totransfer the investigation to an appropriate Investigating Agency ofMumbai Police. Paragraph 29 of the decision shows that in the peculiarfact situation of the case, this Court directed that further investigation inrelation to the complaints filed at Shillong be conducted by Mumbai Police.

DThomas, J. who agreed with the leading Judgment authored byD.P. Mohapatra, J. observed in his concurrent opinion as under:

“44. In the present case, a large number of events have takenplace at Bombay in respect of the allegations contained in theFIR registered at Shillong. If the averments in the writ petitionEare correct then the major portion of the facts which led to theregistering of the FIR have taken place at Bombay. It isunnecessary to repeat those events over again as Mohapatra, J.has adverted to them with precision and the needed details.

45. In the aforesaid situation it is almost impossible to hold thatFnot even a part of the cause of action has arisen at Bombay so asto deprive the High Court of Bombay of total jurisdiction to entertainthe writ petition filed by the petitioner. Even the very fact that amajor portion of the investigation of the case under the FIR has tobe conducted at Bombay itself, shows that the cause of actioncannot escape from the territorial limits of the Bombay High Court.”G

23. In Dashrath Rupsingh Radhod vs. State of Maharashtraand another[15], a Bench of three learned Judges of this Court wascalled upon to consider the questions regarding territorial jurisdiction of 14 (2000) 7 SCC 64015 (2014) 9 SCC 129H

Courts with regard to criminal complaints under the NegotiableInstruments Act, 1881 and para 13 of the decision noted the earlierdecision in Navinchandra N. Majithia[14]and observed as under:

“13. We are alive to the possible incongruities that are fraught inextrapolating decisions relating to civil law onto criminal law, whichincludes importing the civil law concept of “cause of action” tocriminal law which essentially envisages the place where a crimehas been committed empowers the court at that place withjurisdiction. In Navinchandra N. Majithia v. State ofMaharashtra[14 ]this Court had to consider the powers of HighCourts under Article 226(2) of the Constitution of India. Notingthe presence of the phrase “cause of action” therein it was clarifiedthat since some events central to the investigation of the allegedcrime asseverated in the complaint had taken place in Mumbaiand especially because the fundamental grievance was the falsityof the complaint filed in Shillong, the writ jurisdiction of the BombayHigh Court was unquestionably available. The infusion of theconcept of “cause of action” into the criminal dispensation hasled to subsequent confusion countenanced in High Courts. It seemsto us that K. Bhaskaran v. Sankaran Vaidhyan Balan andanother[16], , allows multiple venues to the complainant whichruns counter to this Court’s preference for simplifying the law.Courts are enjoined to interpret the law so as to eradicate ambiguityor nebulousness, and to ensure that legal proceedings are not usedas a device for harassment, even of an apparent transgressor ofthe law. Law’s endeavour is to bring the culprit to book and toprovide succour for the aggrieved party but not to harass the formerthrough vexatious proceedings. Therefore, precision andexactitude are necessary especially where the location of alitigation is concerned.”

24. It is true that the decision in Dashrath Rupsingh Radhod[15]was in the context of a criminal complaint under Section 138 of theNegotiable Instruments Act and not while dealing with an issue ofmaintainability of a writ petition under Article 226 of the Constitution. Itcannot, therefore, be said that in the present case, the High Courtcompletely lacked jurisdiction to entertain the petition. However, sincethe challenge was with respect to the detention pursuant to valid remand 16(1999) 7 SCC 510 : 1999 SCC (Cri) 1284

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Aorders passed by the Judicial Magistrate and the Special Court, Gurugram,in our considered view, the High Court should not have entertained thechallenge. If the act of directing remand is fundamentally a judicialfunction, correctness or validity of such orders could, if at all, be testedin a properly instituted proceedings before the appellate or revisionalforum. In the circumstances even if the arrests were effected withinBthe jurisdiction of the High Court, since the accused were producedbefore a competent court in pursuance of Sections 435, 436 of 2013 Act,the High Court ought not to have entertained the writ petition. However,since the High Court considered the matter from the standpoint whetherthe initial Order of arrest itself was valid or not and then found that suchCillegality could not be sanctified by subsequent Order of remand, wemay deal with that question now.

25. At the outset, we may extract relevant statutory provisions.

A) Sections 211 and 212 of 2013 Act are as under:- D“211. Establishment of Serious Fraud Investigation Office.– (1) The Central Government shall, by notification, establish anoffice to be called the Serious Fraud Investigation Office toinvestigate frauds relating to a company:

Provided that until the Serious Fraud Investigation Office isEestablished under sub-section (1), the Serious Fraud InvestigationOffice set-up by the Central Government in terms of theGovernment of India Resolution No.45011/16/2003-Adm-I, datedthe 2[nd] July, 2003 shall be deemed to be the Serious FraudInvestigation Office for the purpose of this section.

F(2) The Serious Fraud Investigation Office shall be headed by aDirector and consist of such number of experts from the followingfields to be appointed by the Central Government from amongstpersons of ability, integrity and experience in, -

(i) banking;

(ii) corporate affairs;

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(iii) taxation;

(iv) forensic audit;

(v) capital market;

(vi) information technology;

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(vii) law; or

(viii) such other fields as may be prescribed.

(3) The Central Government shall, by notification, appoint aDirector in the Serious Fraud Investigation Office, who shall bean officer not below the rank of a Joint Secretary to theGovernment of India having knowledge and experience in dealingwith matters relating to corporate affairs.

(4) The Central Government may appoint such experts and otherofficers and employees in the Serious Fraud Investigation Officeas it considers necessary for the efficient discharge of its functionsunder this Act.

(5) The terms and conditions of service of Director, expert, andother officers and employees of the Serious Fraud InvestigationOffice shall be such as may be prescribed.

212. Investigation into affairs of Company by Serious FraudInvestigation Office. – (1)Without prejudice to the provisionsof section 210, where the Central Government is of the opinion,that it is necessary to investigate into the affairs of a company bythe Serious Fraud Investigation Office –

(a) on receipt of a report of the Registrar or inspector undersection 208; (b) on intimation of a special resolution passed by a companythat its affairs are required to be investigated;

(c) in the public interest; or

(d) on request from any Department of the Central Governmentor a State Government, The Central Government may, by order, assign the investigationinto the affairs of the said company to the Serious FraudInvestigation Office and its Director, may designate such numberof inspector, as he may consider necessary for the purpose ofsuch investigation.

(2) Where any case has been assigned by the Central Governmentto the Serious Fraud Investigation Office for investigation underthis Act, no other investigating agency of Central Government or A

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any State Government shall proceed with investigation in suchcase in respect of any offence under this Act and in case anysuch investigation has already been initiated, it shall not beproceeded further with and the concerned agency shall transferthe relevant documents and records in respect of such offencesunder this Act to serious Fraud Investigation Office.

(3) Where the investigation into the affairs of a company hasbeen assigned by the Central Government to Serious FraudInvestigation Office, it shall conduct the investigation in the mannerand follow the procedure provided in this Chapter; and submit itsreport to the Central Government within such period as may bespecified in the order.

(4) The Director, Serious Fraud Investigation Office shall causethe affairs of the company to be investigated by an InvestigatingOfficer who shall have the power of the inspector under section217.

(5) The company and its officers and employees, who are orhave been in employment of the company shall be responsible toprovide all information, explanation, documents and assistance tothe Investigating Officer as he may require for conduct of theinvestigation.

(6) Notwithstanding anything contained in the Code of CriminalProcedure, 1973 (2 of 1974), [17][offence covered under section447] of this Act shall be recognizable and no person accused ofany offence under those sections shall be released on bail or onhis own bond unless-

(i) the Public Prosecutor has been given an opportunity to opposethe application for such release; and

(ii) where the Public Prosecutor opposes the application, the courtis satisfied that there are reasonable grounds for believingthat he is not guilty of such offence and that he is not likely tocommit any offence while on bail:

17Subs. by Act 21 of 2015, sec. 17, for “the offences covered under sub-sections (5) and(6) of section 7, section 34, section 36, sub-section (1) of section 38, sub-sections (5)of section 46, sub-section (7) of section 56, sub-section (10) of section 66, sub-section(5) of section 140, sub-section (4) of section 206, section 213, section 229, sub-sectionH(1) of section 251, sub-section (3) of section 339 and section 448 which attract thepunishment for fraud provided in section 447”.

Provided that a person, who, is under the age of sixteen years oris a woman or is sick or infirm, may be released on bail, if theSpecial Court so directs:

Provided further that the Special Court shall not take cognizanceof any offence referred to this sub-section except upon a complaintin writing made by –

(i) The Director, Serious Fraud Investigation Office; or

(ii) Any officer of the Central Government authorised, by ageneral or special order in writing in this behalf by thatGovernment.

(7) The limitation on granting of bail specified in sub-section (5)is in addition to the limitations under the Code of CriminalProcedure, 1973 (2 of 1974) or any other law for the time being inforce on granting of bail.

(8) If the Director, Additional Director or Assistant Director ofSerious Fraud Investigation Office authorised in this behalf by theCentral Government by general or special order, has on the basisof material in his possession reason to believe (the reason forsuch belief to be recorded in writing) that any person has beenguilty of any offence punishable under sections referred to in sub-section (6), he may arrest such person and shall, as soon as maybe, inform him of the grounds for such arrest.

(9) The Director, Additional Director or Assistant Director ofSerious Fraud Investigation Office shall, immediately after arrestof 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 sealedenvelope, in such manner as may be prescribed and the SeriousFraud Investigating Office shall keep such order and material forsuch period as may be prescribed.

(10) Every person arrested under sub-section (8) shall withintwenty-four hours, be taken to a Judicial Magistrate or aMetropolitan Magistrate, as the case may be, having jurisdiction:

Provided that the period of twenty-four hours shall exclude thetime necessary for the journey from the place of arrest to theMagistrate’s court.

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(11) The Central Government if so directs, the Serious FraudInvestigation Office shall submit an interim report to the CentralGovernment.

(12) On completion of the investigation, the Serious FraudInvestigation Office shall submit the investigation report to theCentral Government.

(13) Notwithstanding anything contained in this Act or in anyother law for the time being in force, a copy of the investigationreport may be obtained by any person concerned by making anapplication in this regard to the court.

(14) On receipt of the investigation report, the Central Governmentmay, after examination of the report (and after taking such legaladvice, as it may think fit), direct the Serious Fraud investigationOffice to initiate prosecution against the company and its officersor employees, who are or have been in employment of the companyor any other person directly or indirectly connected with the affairsof the company.

(15) Notwithstanding anything contained in this Act or in anyother law for the time being in force, the investigation report filedwith the Special Court for framing of charges shall be deemed tobe a report filed by a police officer under section 173 of the Codeof Criminal Procedure, 1973 (2 of 1974).

(16) Notwithstanding anything contained in this Act, anyinvestigation or other action taken or intimated by Serious FraudInvestigation Office under the provisions of the Companies Act,1956 (1 of 1956) shall continue to be proceeded with under theAct as if this Act had not been passed.

(17) (a) In case Serious Fraud Investigation Office has beeninvestigating any offence under this Act, any other investigatingagency, State Government, police authority, income-tax authoritieshaving any information or documents in respect of such offenceshall provide all such information or documents available with it tothe Serious Fraud Investigation Office; (b) The Serious Fraud Investigation Office shall share anyinformation or documents available with it, with any investigatingagency, State Government, police authority or income-tax

authorities, which may be relevant or useful for such investigatingagency, State Government, police authority or income-taxauthorities in respect of any offence or matter being investigatedor examined by it under any other law.

B) Section 43 of 2008 Act is as under:-

“43. Investigation of the affairs of limited liabilitypartnership – (1) The Central Government shall appoint one ormore competent persons as inspectors to investigate the affairsof a limited liability partnership and to report thereon in suchmanner as it may direct if–

(a) the Tribunal, either suomoto, or on an application receivedfrom not less than one-fifth of the total number of partnersof limited liability partnership, by orders, declares that theaffairs of the limited liability partnership ought to beinvestigated; or (b) any Court, by order, declares that the affairs of a limitedliability partnership ought to be investigated.

(2) The Central Government may appoint one ore morecompetent persons as inspectors to investigate the affairs of alimited partnership and to report on them in such manner as itmay direct.

(3) The appointment of inspectors pursuant to sub-section (2)may be made, - (a) if not less one-fifth of the total number of partners of thelimited liability partnership make an application along withsupporting evidence and security amount as may be pre-scribed; or (b) if the limited liability partnership makes an application thatthe affairs of the limited liability partnership ought to be in-vestigated; or

(c) if, in the opinion of the Central Government, there are cir-cumstances suggesting –

(i) that the business of the limited partnership is being or hasbeen conducted with an intent to defraud its creditor,partners or any other person, or otherwise for a fraudulent A

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Aor unlawful purpose, or in a manner oppressive or unfairlyprejudicial to some or any of its partners, or that the limitedliability partnership was formed for any fraudulent orunlawful purpose; or

(ii) that the affairs of the limited liability partnership are notBbeing conducted in accordance with the provisions of thisAct, or

(iii) That, on receipt of a report of the Registrar or any otherinvestigating or regulatory agency, there are sufficientreasons that the affairs of the limited liability partnershipought to be investigated.”C

26. Reading of the provisions of 2013 Act shows that certainSections in Chapter XXIX prescribe punishment for offences such asfraud, false statement, false evidence and withholding of property underSections 447, 448, 449 and 452 respectively. The punishment for fraudinvolving an amount of at least Rs.10 lakhs or 1 per cent of the turnoverDof the Company, is imprisonment for a term which may extend to 10years. The offence of fraud in relation to the affairs of a Company isconsidered to be a grave offence and the writ petitioners were allegedlyguilty of such offence. Chapter XIV of 2013 Act deals with Inspection,Inquiry and Investigation. Under Section 210, investigation into the affairsof a Company can be undertaken. Section 211 contemplatesEestablishment of Serious Fraud Investigation Offence (SFIO) which isto be headed by a Director and is to consist of Experts with ability,integrity and experience in fields like Banking, Corporate Affairs, Taxation,Forensic Audit, Capital Market, Information Technology, Law or suchother fields. SFIO headed by a Director is thus a compact and competentFunit consisting of experts in various domains. Section 212 empowersthe Central Government to assign the investigation into the affairs of aCompany to SFIO. Upon such assignment the Director SFIO maydesignate such number of inspectors under sub-Section (1) and shallcause the affairs of the Company to be investigated by an InvestigatingOfficer under sub-Section (4). The expression used in sub-Section (1)Gis “assign the investigation”. Sub-Section (2) incorporates an importantprinciple that upon such assignment by the Central Government to SFIO,no other investigating agency of the Central Government or any StateGovernment can proceed with investigation in respect of any offencepunishable under 2013 Act and is bound to transfer the documents andHrecords in respect of such offence under 2013 Act to SFIO.

27. Under sub-Section (3) where the investigation is so assignedby the Central Government to SFIO, the investigation must be conductedin the manner and in accordance with the procedure provided in theChapter and a report has to be submitted to the Central Governmentwithin such period as may be specified. This provision contemplatessubmission of a report within the period as may be specified. Thesubsequent provisions then contemplate various stages of investigationincluding arrest under sub-Section (8) and that SFIO is to submit aninterim report to the Central Government, if it is so directed under subSection (11). Further, according to sub-Section (12), on completion ofthe investigation, SFIO is to submit the “investigation report” to the CentralGovernment. This report under sub-Section (12) may lead to furtherfollow up actions. Under sub-Section (13) a copy of the “investigationreport” could be obtained by any concerned person by making anapplication in that behalf to the Court while under sub-Section (14) onreceipt of said “investigation report” the Central Government may directSFIO to initiate prosecution against the Company.

The “investigation report” under sub-Section (12) is to be submittedon completion of the investigation whereas report under sub-Section(11) is in the nature of an interim report and is to be submitted if theCentral Government so directs. In the backdrop of these provisions wemust now consider whether the period within which a report iscontemplated to be submitted to the Central Government under sub-Section (3) is mandatory and what is the scope and extent of suchstipulation. It must also be stated here that the provisions of Section43(2) of 2008 Act do not postulate any such period and the assignmentin the present case to SFIO was under the concerned provisions of 2013Act as well as under 2008 Act.

28. Section 212(3) of 2013 Act by itself does not lay down anyfixed period within which the report has to be submitted. Even undersub-Section (12) which is regarding “investigation report”, again there isno stipulation of any period. In fact such a report under sub-Section(12) is to be submitted “on completion of the investigation”. There is nostipulation of any fixed period for completion of investigation which isconsistent with normal principles under the general law. For instance,there is no fixed period within which the investigation under CriminalProcedure Code must be completed. If the investigation proceeds for alonger period, under Section 167 of the Code certain rights may flow in A

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Afavour of the Accused. But it is certainly not the idea that in case theinvestigation is not over within any fixed period, the authority to investigatewould come to an end.

Again, sub-Section (2) of Section 213 of 2013 Act does not speakof any period for which the other Investigating Agencies are to holdBtheir hands, nor does the provision speak of any re-transfer of the relevantdocuments and records from SFIO back to said Investigating Agenciesafter any period or occurring of an event. For example, under Section 6of the National Investigation Agency Act, 2008 (“NIA Act” for short)the Agency (NIA) can be directed by the Central Government toinvestigate the Scheduled Offence under the NIA Act and where suchCdirection is given, the State Government is not to proceed with any pendinginvestigation and must forthwith transmit the relevant documents andrecords to the Agency (NIA). But under Section 7 of NIA Act, theAgency may, with previous approval, transfer the case to the StateGovernment for investigation and trial of the offence.D

29. The very expression “assign” in Section 212(3) of 2013 Actcontemplates transfer of investigation for all purposes whereafter theoriginal Investigating Agencies of the Central Government or any StateGovernment are completely denuded of any power to conduct andcomplete the investigation in respect of the offences contemplated therein.EThe idea under sub-Section (2) is complete transfer of investigation.The transfer under sub-Section (2) of Section 213 would not stand revokedor recalled in any contingency. If a time limit is construed andcontemplated within which the investigation must be completed thenlogically, the provisions would have dealt with as to what must happen ifthe time limit is not adhered to. The Statute must also have contemplatedFa situation that a valid investigation undertaken by any InvestigatingAgency of Central Government or State Government which wastransferred to SFIO, must then be re-transferred to said InvestigatingAgencies. But the Statute does not contemplate that. The transfer isirrevocable and cannot be recalled in any manner. Once assigned, SFIOGcontinues to have the power to conduct and complete investigation[18]. Ifthat be so, can such power stand curtailed or diminished if the investigation 18 The decision of this Court in KaziLhendupDorji vs. State of Sikkim &Ors reportedin (1994) Supp. 2 SCC 116 (para 16), though in a different situation, laid down thatconsent once given by State Government under which investigation was handed over toCBI, could not be recalled or rescinded by the State Government and it is the CBI whichHwould be competent to complete investigation.

is not completed within a particular period. The Statute has not prescribedany period for completion of investigation. The prescription in the instantcase came in the order of 20.06.2018. Whether such prescription in theOrder could be taken as curtailing the powers of SFIO is the issue.

30. It is well settled that while laying down a particular procedureif no negative or adverse consequences are contemplated for non-adherence to such procedure, the relevant provision is normally not takento be mandatory and is considered to be purely directory. Furthermore,the provision has to be seen in the context in which it occurs in theStatute. There are three basic features which are present in this matter:-

1. Absolute transfer of investigation in terms of Section 212(2) of2013 Act in favour of SFIO and upon such transfer all documentsand records are required to be transferred to SFIO by every otherInvestigating Agency.

2. For completion of investigation, sub-Section (12) of Section212 does not contemplate any period.

3. Under sub-Section (11) of Section 212 there could be interimreports as and when directed.

In the face of these three salient features it cannot be said thatthe prescription of period within which a report is to be submitted bySFIO under sub-Section (3) of Section 212 is for completion of period ofinvestigation and on the expiry of that period the mandate in favour ofSFIO must come to an end. If it was to come to an end, the legislationwould have contemplated certain results including re-transfer ofinvestigation back to the original Investigating Agencies which weredirected to transfer the entire record under sub-Section (2) of Section212. In the absence of any clear stipulation, in our view, an interpretationthat with the expiry of the period, the mandate in favour of SFIO mustcome to an end, will cause great violence to the scheme of legislation. Ifsuch interpretation is accepted, with the transfer of investigation in termsof sub Section (2) of Section 212 the original Investigating Agencieswould be denuded of power to investigate and with the expiry of mandateSFIO would also be powerless which would lead to an incongruoussituation that serious frauds would remain beyond investigation. Thatcould never have been the idea. The only construction which is, possibletherefore, is that the prescription of period within which a report has tobe submitted to the Central Government under sub-Section (3) of Section A

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A212 is purely directory. Even after the expiry of such stipulated period,the mandate in favour of the SFIO and the assignment of investigationunder sub-Section (1) would not come to an end. The only logical endas contemplated is after completion of investigation when a final reportor “investigation report” is submitted in terms of sub-Section (12) ofSection 212. It cannot therefore be said that in the instant case theBmandate came to an end on 19.09.2018 and the arrest effected on10.12.2018 under the orders passed by Director, SFIO was in any wayillegal or unauthorised by law. In any case, extension was granted in thepresent case by the Central Government on 14.12.2018. But that iscompletely besides the point since the original arrest itself was not inCany way illegal. In our considered view, the High Court completelyerred in proceeding on that premise and in passing the order under appeal.

31. These appeals therefore deserve to be allowed and the Orderunder appeal must be set aside. Since the writ petitioners were directedto be released on bail, by way of interim relief, we direct as under:- D(a) The Order dated 20.12.2018 passed by the High Court inW.P. (Crl.) No.3842 of 2018 and in W.P. (Crl.) No.3843 of 2018 is setaside.

(b) The writ petitioners namely Rahul Modi and Mukesh Modiare directed to surrender and remain present on 01.04.2019 at 11.00Ea.m. before the Special Court, Gurugram. The Special Court may thenconsider the matter on merits and whether the accused are required tobe remanded to custody.

(c) In case, said writ petitioners do not appear on the day and atthe time stipulated above, the personal bonds executed by them and theFsurety bonds shall stand forfeited and the appellant shall be at liberty toarrest said writ petitioners.

(d) The writ petitioners shall file affidavits of compliance in thisCourt by 08.04.2019.

32. Transfer Petition (Crl.) No.35 of 2019 was filed by SeriousGFraud Investigation Office (SFIO) and Deputy Director, SFIO (OriginalRespondents seeking transfer of Writ Petition (Crl.) No.3960 of 2018.Said writ petition preferred on 21.12.2018 by Vivek Harivyasi claimedsimilar relief as was granted by the High Court in Writ Petition (Crl)Nos.3842 and 3843 of 2018 on 21.12.2018. However, before the writ H

petition could be taken up, the decision of the High Court dated 20.12.2018was put in challenge before this Court and Transfer Petition (Crl.) No.35of 2019 seeking transfer of Writ Petition (Crl.) No.3960 of 2018 wasalso preferred.

33. On 08.03.2019 learned counsel appearing for Vivek Harivyasisubmitted that his client would prefer an application for bail before theconcerned court and following direction was passed by this Court:

“The respondent No.1 in T.P. (Crl.) No.35/20-19 may preferapplication for bail and if such an application is preferred, theconcerned court in question may consider the matter on meritswithout being influenced by any observations in the order of theHigh Court, impugned herein.

34. In view of our above decision in Criminal Appeals arisingfrom Special Leave Petition (Crl.) Nos.94-95 of 2019, no separate ordersare called for in the transfer petition. The transfer petition is, therefore,disposed of.

35. In the end, we must state that we have not and shall not betaken to have expressed any opinion on merits of the matter which shallbe gone into independently by the concerned courts.

ABHAY MANOHAR SAPRE, J.

1. I have had the advantage of going through an elaborate, wellconsidered and scholarly draft judgment proposed by my esteemed brotherJustice Uday Umesh Lalit.

2. I entirely agree with the reasoning and the conclusion, whichmy erudite brother has drawn, which are based on remarkably articulateprocess of reasoning. However, having regard to the nature of thecontroversy, I wish to add a few words of mine.

3. One of the questions which fell for consideration in these appealsand was ably argued at length by the learned senior counsel for both theparties was in relation to the scope, extent and the purpose of Section212 of the Companies Act, 2013 (hereinafter referred to as the “Act”)and, in particular, whether the compliance of sub-section (3) of Section212 of the Act is mandatory or directory and, if so, why.

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4. As rightly reasoned out by my learned brother Lalit, J., havingregard to the scheme of the Act underlined in Chapter XIV (Sections206 to 229 of the Act) dealing with the matters relating to inspection,inquiry and investigation of the companies in juxtaposition with ChapterXXIX which prescribes the punishment/penalties for commission ofvarious offences specified under the Act, the compliance of sub-section(3) of Section 212 of the Act is essentially directory.

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5. If the submission of the learned counsel for the respondents(writ petitioners) that the compliance of sub-section (3) of Section 212of the Act in relation to the submission of the report be held mandatoryis accepted (which I am afraid, I cannot accept) in our view, the veryCpurpose of enacting Section 212 of the Act would get defeated and willbecome nugatory.

6. Indeed, when I apply the well-known principle of purposiveinterpretation while interpreting the relevant provisions in juxtapositionand hold that sub-section (3) of Section 212 of the Act is directory inDnature, it serves the legislative intent for which Chapter XXIX is enacted.

7. I, therefore, agree with the reasoning and the conclusion arrivedat by brother Justice Lalit on the interpretation of sub-section (3) ofSection 212 of the Act.

8. In the light of what is held above, the other arguments of learnedcounsel for the respondents do not survive for consideration.

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9. So far as the other issues are concerned, brother Lalit, J. hasdealt with them succinctly. I entirely agree with him.

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Nidhi Jain

Matters disposed of.

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