prior approval

IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 17th October, 2023
Pronounced on: 21st December, 2023
+ W.P.(CRL) 1891/2023 CRL.M.A. 17499/2023(Stay)
R.K. GUPTA & ORS. ..... Petitioner
Through: Mr. N. Hariharan, Senior Advocate
with Ms. Ranjana Roy Gawai, Ms.
Vashudha Sen, Mr. Vineet Wadhwa,
Mr. Sharian Mukherji, Mr. Mueed
Shah, Ms. Punya Rekha Angara and
Mr. Prateek Bhalla, Advocates.
versus
UNION OF INDIA THROUGH MINISTRY OF CORPORATE
AFFAIRS & ANR. ..... Respondents
Through: Mr. Amit Tiwari, Senior Panel Counsel
Mr. Chetanya Puri, Government
Pleader
Mr. Nitin Agnihotri, Prosecutor for the
SFIO with Mr. Shriram Tiwary,
Mr. Salman Razi, Mr. Upanshu,
Mr. Nitin Agnihotri, Advocates.
CORAM:
HONBLE MR. JUSTICE AMIT SHARMA
https://1drv.ms/b/s!AnA8RNRWqS7ZrdNdNgBYhPVjaODQww?e=aceUMWJurisdiction or legal sanction/authority with the SFIO to investigate
petitioners no.1 and 2
11. Learned Senior Counsel submitted that SFIO could carry out an
investigation only pursuant to approval or authority granted by the Central
Government under Section 212(1) of the Act or after obtaining prior approval
in terms of Section 219 of the said Act to conduct an investigation into affairs
of related companies. It was pointed out that in the order dated 03.05.2016
issued by the MCA in exercise of powers under Section 212(1)(c) of the Act,
the SFIO had been authorised to conduct an investigation into the affairs of
the 15 companies and vide order dated 08.01.2018 issued by MCA, SFIO had
been authorised to conduct an investigation into affairs of 66 other companies
in terms of Section 219(b)(c) of the Act. Learned Senior Counsel submitted
that admittedly, petitioners no.1 and 2 have not been named in either of the
aforesaid order and therefore, the SFIO had no authority to carry out an
investigation qua them.
12. It was submitted that since the language of Section 219 clearly
differentiates between a body corporate and a company. It was urged that the
term company relates to the company in respect of which a sanction is
already accorded under Section 212(1) of the Act, and term body corporates
relates to explanation provided under 219(a), (b) and (c) of the Act. Thus, the
person/individual referred under Section 219 (d) of Act, is to be connected to
the company and not the body corporate. It was submitted that that legislative
intent is to be construed from the words used in the statute, as per their plain
meaning.
13. Per contra, learned Senior Panel Counsel for the SFIO submitted that a
similar issue was raised before a learned Single Judge of the Honble High
Court of Punjab and Haryana in Raj Kumar Modi v. Serious Fraud
Investigation Office, 2019:PHC:133009, and the same was rejected.
14. Attention of this Court was drawn to Section 212(13) of the Act,
according to which on directions of the Central Government, SFIO can
Digitally Signed
By:RANJU BHALLA
Signing Date:21.12.2023
18:50:07
Signature Not Verified
W.P.(CRL) 1891/2023 Page 24 of 40
prosecute a company and its officer or employees or any other person
directly or indirectly connected with the affairs of the company. It was
pointed out that there is no stipulation for requirement of a prior approval
under Section 212(1) or Section 219 of the Act for investigation with respect
to any other person directly or indirectly connected with the affairs of the
company.
15. So far as petitioner no. 2 is concerned, learned Senior Panel Counsel
submitted that prior approval under Section 219 of the Act is only required
with regard to affairs of the company. It was submitted that investigation by
SFIO is affairs centric. It was submitted that in the facts and circumstances
of the present case, SFIO took a conscious decision not to investigate into the
affairs of petitioner no. 2. It was submitted that since the affairs of petitioner
no. 2 were not investigated, there was no requirement for approval under
Section 219 of the Act. As regards, petitioner no. 1, it was stated that he was a
Key Managerial Personnel as the Company Secretary of BPSL and was
responsible for control and management of the affairs of the said company.
16. Section 219 of the Act has the heading Power of inspector to conduct
investigation into affairs of related companies, etc.. The said provision
relates to the following entities:
a. any other body corporate which is, or has at any relevant time been the
companys subsidiary company or holding company, or a subsidiary
company of its holding company;
b. any other body corporate which is, or has at any relevant time been
managed by any person as managing director or as manager, who is, or
Digitally Signed
By:RANJU BHALLA
Signing Date:21.12.2023
18:50:07
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W.P.(CRL) 1891/2023 Page 25 of 40
was, at the relevant time, the managing director or the manager of the
company;
c. any other body corporate whose Board of Directors comprises
nominees of the company or is accustomed to act in accordance with
the directions or instructions of the company or any of its directors;
d. any person who is or has at any relevant time been the companys
managing director or manager or employee.
17. The contention of learned Senior Counsel on behalf of the petitioners is
that the case of petitioner no. 1 would come under Section 219(d) of the Act
and therefore, prior approval in terms of the said provision was required. The
heading of Section 219 of the Act, as reproduced hereinabove, reflects that the
said provision relates to role of certain related companies, which has
surfaced during the course of investigation being conducted under Section
212 or other provisions of the Act and therefore, approval would be required
in terms of Sections 219(a), (b) and (c) of the Act. The provision of Section
219(d) of the Act has to be construed by applying the rule of ejusdem generis.
A Constitution Bench of the Honble Supreme Court, in Kavalappara
Kottarathil Kochuni @ Moopil Nayar v. States of Madras and Kerala
and Others, 1958 SCC OnLine SC 12, while explaining the said rule, held
as under:
52...The rule is that when general words follow particular and
specific words of the same nature, the general words must be confined to
the things of the same kind as those specified. But it is clearly laid down
by decided case that the specific words must form a distinct genus or
category. It is not an inviolable rule of law, but is only permissible
inference in the absence of an indication to the contrary....
Digitally Signed
By:RANJU BHALLA
Signing Date:21.12.2023
18:50:07
Signature Not Verified
W.P.(CRL) 1891/2023 Page 26 of 40
In the present case, it is reasonable to construe the aforesaid clauses (a),
(b) and (c) of Section 219 of the Act as constituting a distinct category or
class, i.e., related companies. The language and the object behind the
aforesaid clauses is with respect to investigation of affairs of a company other
than the company for which investigation has been ordered under Section 212
of the Act. In that context, clause (d) of Section 219 of the Act will apply to a
Managing Director or Manager or Employee of the company referred to
in clauses (a), (b) and (c) of the said Section.
18. If the argument of the learned Senior Counsel for the petitioners is
accepted to the extent that Section 219(d) of the Act would apply to the
Managing Director, Manager or employee of the company, for whom
approval has been given under Section 212 of the Act, then in case if the
inspector, if after approval being given with regard to investigation of the
related companies mentioned under Section 219(a), (b) or (c), comes across
role of Managing Director, Manager or employee of the said related
companies, then no prior approval for investigation would be required. In
other words, protection has been given only to the Managing Director or
Manager or employee of the company being investigated under Section 212
of the Act and not for the Managing Director or Manager or Employee of the
companies being investigated under Section 219 (a), (b) or (c) of the Act. The
aforesaid position is not acceptable. In the considered opinion of this Court,
once an approval has been given under Section 212 of Act to investigate into
the affairs of a company, the same would also relate to a Managing Director
or Manager or Employee of the said company. The pre-condition of a prior
approval under Section 219 of the Act applies to related companies and their
Digitally Signed
By:RANJU BHALLA
Signing Date:21.12.2023
18:50:07
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W.P.(CRL) 1891/2023 Page 27 of 40
Managing Director, Manager or employees as provided for in the said
Section. It is further pertinent to note that petitioner no.1, being a Key
Managerial Personnel in terms of Section 2(51) of the Act would not need a
separate approval for purposes of investigation in terms of Section 219(d) of
the Act. The provisions of Section 219(d) of the Act as explained
hereinabove would not cover the case of petitioner no.1.
19. It is an admitted case that petitioner no.3 was mentioned in the original
order dated 03.05.2016 issued by the MCA under Section 212 of the Act. So
far as petitioner no.2 is concerned, it is the case of the SFIO that since the
affairs of the company were not being investigated, therefore, no approval
was required in terms of Section 219(a) of the Act. It is the case of SFIO that
since there was only a single transaction in relation to BPSL with petitioner
no.2, therefore, there was no need to investigate into the affairs of the said
company. Affairs of the company has not been defined in the Act but in the
ordinary meaning of the phrase, the same would include all aspects and
transactions of the company.
20. As per the complaint filed by the SFIO, the allegations with regard to
petitioners no. 2 and 3 are as under:
4.13.14 On Investigation, it is found that Sanjay Singal in connivance
with R.P. Goyal, Alkesh Sharma and Entry operators siphoned of
the funds from BPSL in the form of Advances to Suppliers and
cash generated from sale of goods siphoned off from BPSL and
introduced the same in the accounts of Adarsh lnfotech Pvt Ltd
and BSN Enterprises Pvt Ltd. through various paper companies
of Kolkata and Delhi. The funds siphoned off from BPSL were
used to purchase immovable property from BPSL at Flat No. 109
to 112 at International Trade Tower, Nehru Place, New Delhi by
Shree Ankleshwar Commercial Company Pvt Ltd. The directors
of Shree Ankleshwar are/were employee of BPSL/Sanjay Singal.
Digitally Signed
By:RANJU BHALLA
Signing Date:21.12.2023
18:50:07
Signature Not Verified
W.P.(CRL) 1891/2023 Page 28 of 40
This company is found to be managed and controlled by Sanjay
Singal which he has also admitted on oath.
Similarly, Silver Star Commercial Company Pvt. Ltd. is also
managed and controlled by San jay Singal. From the
examination of balance sheet as on 31.03.2017 (Note-17.12), the
company has taken unsecured loan from Corporate bodies for
purchase of immovable property and the payment was made as
advance directly to third party on its behalf. The company has
shown receipt of loan of Rs. 10 crore during F.Y. 2015-16,
details of which are as under:
Name of the party Loan Taken by Silver-Star
Commercial (amt in crore)
Bhima Agencies Pvt.
Ltd.
0.20
K.G. Finvest Pvt. Ltd. 1.00
Rootstar Merchandise
Pvt. Ltd.
3.00
Sarvottam Securities
Pvt. Ltd.
4.00
Wincliff Technologies
Pvt. Ltd.
0.80
Jagdhara Dealcom Pvt.
Ltd.
1.00
Total 10.00
The aforesaid extract, as quoted hereinabove, from the complaint filed
by the SFIO clearly shows that the affairs of the company were investigated
into qua petitioner no. 2 and the aforesaid allegation would cover the case of
petitioner no. 2 under Section 219(c) of the Act. However, the effect of not
taking such prior approval would not ipso facto render the cognizance taken
qua petitioner no. 2 by learned Special Court as invalid. It is the case of the
SFIO that prior sanction for prosecution with respect to petitioner no. 2 had
been obtained under Section 212(14) of the Act. It is settled law that defective
investigation would not render cognizance taken by the learned Special Court
Digitally Signed
By:RANJU BHALLA
Signing Date:21.12.2023
18:50:07
Signature Not Verified
W.P.(CRL) 1891/2023 Page 29 of 40
as invalid. In Fertico Marketing (supra), while examining an issue with
regard to validity of investigation without approval of the State Government
under Section 6 of the Delhi Special Police Establishment Act, 1946, the
Honble Supreme Court observed and held as under:
22. As early as in 1955, the question arose for consideration before
this Court, as to whether an investigation carried out by a police officer
below the rank of Deputy Superintendent of Police, under Section 5(4) of
the Prevention of Corruption Act, 1947, without the order of the
Magistrate of First Class, was mandatory or directory? While holding
that the provision is mandatory, this Court considered a question as to
whether and to what extent, the trial which follows such investigation, is
vitiated. The Court in H.N. Rishbud v. State of Delhi [H.N.
Rishbud v. State of Delhi, (1955) 1 SCR 1150 : AIR 1955 SC 196 : 1955
Cri LJ 526] , observed as under : (AIR p. 204, para 9)
9.  If, therefore, cognizance is in fact taken, on a police report
vitiated by the breach of a mandatory provision relating to
investigation, there can be no doubt that the result of the trial which
follows it cannot be set aside unless the illegality in the investigation
can be shown to have brought about a miscarriage of justice. That an
illegality committed in the course of investigation does not affect the
competence and the jurisdiction of the Court for trial is well settled
as appears from the cases in Parbhu v. King
Emperor [Parbhu v. King Emperor, 1944 SCC OnLine PC 1 : (1943-
44) 71 IA 75 : AIR 1944 PC 73] and Lumbhardar
Zutshi v. R. [Lumbhardar Zutshi v. R., 1949 SCC OnLine PC 64 :
(1949-50) 77 IA 62 : AIR 1950 PC 26]
These no doubt relate to the illegality of arrest in the course of
investigation while we are concerned in the present cases with the
illegality with reference to the machinery for the collection of the
evidence. This distinction may have a bearing on the question of
prejudice or miscarriage of justice, but both the cases clearly show
that invalidity of the investigation has no relation to the competence
of the Court. We are, therefore, clearly, also, of the opinion that
where the cognizance of the case has in fact been taken and the case
has proceeded to termination, the invalidity of the precedent
investigation does not vitiate the result, unless miscarriage of justice
has been caused thereby.
Digitally Signed
By:RANJU BHALLA
Signing Date:21.12.2023
18:50:07
Signature Not Verified
W.P.(CRL) 1891/2023 Page 30 of 40
It could thus be seen that this Court has held that the cognizance and the
trial cannot be set aside unless the illegality in the investigation can be
shown to have brought about miscarriage of justice. It has been held that
the illegality may have a bearing on the question of prejudice or
miscarriage of justice but the invalidity of the investigation has no
relation to the competence of the court.
23. It will also be apposite to note the following observations of this
Court in State of Karnataka v. Kuppuswamy Gownder [State of
Karnataka v. Kuppuswamy Gownder, (1987) 2 SCC 74 : 1987 SCC (Cri)
280] , while considering the provisions of Section 465 CrPC : (SCC pp.
79-80, para 14)
14. The High Court, however, observed [Kuppaswamy
Gounder v. State of Karnataka, 1981 SCC OnLine Kar 220 : (1981)
2 Kant LJ 509] that provisions of Section 465 CrPC cannot be made
use of to regularise this trial. No reasons have been stated for this
conclusion. Section 465 CrPC reads as under:
465. Finding or sentence when reversible by reason of error,
omission or irregularity.(1) Subject to the provisions hereinbefore
contained, no finding, sentence or order passed by a court of
competent jurisdiction shall be reversed or altered by a court of
appeal, confirmation or revision on account of any error, omission or
irregularity in the complaint, summons, warrant, proclamation, order,
judgment or other proceedings before or during trial or in any inquiry
or other proceedings under this Code, or any error, or irregularity in
any sanction for the prosecution, unless in the opinion of that court, a
failure of justice has in fact been occasioned thereby.
(2) In determining whether any error, omission or irregularity in
any proceeding under this Code, or any error, or irregularity in any
sanction for the prosecution has occasioned a failure of justice, the
court shall have regard to the fact whether the objection could and
should have been raised at an earlier stage in the proceedings.
It is provided that a finding or sentence passed by a court of
competent jurisdiction could not be set aside merely on the ground of
irregularity if no prejudice is caused to the accused. It is not disputed
that this question was neither raised by the accused at the trial nor
any prejudice was pleaded either at the trial or at the appellate stage
and therefore in the absence of any prejudice such a technical
objection will not affect the order or sentence passed by the
Digitally Signed
By:RANJU BHALLA
Signing Date:21.12.2023
18:50:07
Signature Not Verified
W.P.(CRL) 1891/2023 Page 31 of 40
competent court. Apart from Section 465, Section 462 provides for
remedy in cases of trial in wrong places. Section 462 reads as under:
462. Proceedings in wrong place.No finding, sentence or
order of any criminal court shall be set aside merely on the ground
that the inquiry, trial or other proceedings in the course of which it
was arrived at or passed, took place in a wrong Sessions Division,
district, sub-division or other local area, unless it appears that such
error has in fact occasioned a failure of justice.
This provision even saves a decision if the trial has taken place in a
wrong Sessions Division or sub-division or a district or other local
area and such an error could only be of some consequence if it
results in failure of justice, otherwise no finding or sentence could be
set aside only on the basis of such an error.
24. This Court in Union of India v. Prakash P. Hinduja [Union of
India v. Prakash P. Hinduja, (2003) 6 SCC 195 : 2003 SCC (Cri) 1314] ,
while relying on the judgment of this Court in H.N. Rishbud [H.N.
Rishbud v. State of Delhi, (1955) 1 SCR 1150 : AIR 1955 SC 196 : 1955
Cri LJ 526] , has observed thus : (Prakash P. Hinduja case [Union of
India v. Prakash P. Hinduja, (2003) 6 SCC 195 : 2003 SCC (Cri) 1314] ,
SCC p. 210, para 21)
21.  The Court after referring to Parbhu v. King
Emperor [Parbhu v. King Emperor, 1944 SCC OnLine PC 1 : (1943-
44) 71 IA 75 : AIR 1944 PC 73] and Lumbhardar
Zutshi v. R. [Lumbhardar Zutshi v. R., 1949 SCC OnLine PC 64 :
(1949-50) 77 IA 62 : AIR 1950 PC 26] held that if cognizance is in
fact taken on a police report initiated by the breach of a mandatory
provision relating to investigation, there can be no doubt that the
result of the trial, which follows it cannot be set aside unless the
illegality in the investigation can be shown to have brought about a
miscarriage of justice and that an illegality committed in the course
of investigation does not affect the competence and the jurisdiction
of the court for trial. This being the legal position, even assuming for
the sake of argument that CBI committed an error or irregularity in
submitting the charge-sheet without the approval of CVC, the
cognizance taken by the learned Special Judge on the basis of such a
charge-sheet could not be set aside nor could further proceedings in
pursuance thereof be quashed. The High Court [Prakash P.
Hinduja v. Union of India, 2002 SCC OnLine Del 679 : (2002) 64
DRJ 34] has clearly erred in setting aside the order of the learned
Digitally Signed
By:RANJU BHALLA
Signing Date:21.12.2023
18:50:07
Signature Not Verified
W.P.(CRL) 1891/2023 Page 32 of 40
Special Judge taking cognizance of the offence and in quashing
further proceedings of the case.
25. It could thus be seen that this Court held that even for the sake of
argument that CBI had committed an error or irregularity in submitting
the charge-sheet without the approval of CVC, the cognizance taken by
the learned Special Judge on the basis of such a charge-sheet, would not
be set aside nor could further proceedings in pursuance thereof be
quashed.
21. It is a matter of record that subsequent sanction has been obtained from
the Central Government before filing the complaint by the SFIO in terms of
Section 212(14) of the Act. Petitioner no. 2 is being prosecuted for a single
transaction, as explained above. It is always open for petitioner no. 2, during
the course of trial, to demonstrate that prejudice leading to a miscarriage of
justice has been caused on account of not obtaining approval under Section
219(c) of the Act.