OSN Infrastructure and Projects Ltd and Anr. Vs Union of India (Delhi High Court)
Summary: The Delhi High Court, in OSN Infrastructure and Projects Ltd and Anr. Vs Union of India, considered a writ petition challenging the Central Government’s order dated 17 August 2018 directing an investigation under Section 212 of the Companies Act, 2013 into the affairs of Educomp Solutions Ltd. and related entities. The petitioners sought quashing of the investigation order and all consequential proceedings undertaken by the Serious Fraud Investigation Office (SFIO). Justice Yashwant Varma examined whether judicial interference was warranted when the petitioners apprehended prosecution on the basis of an investigation report that had allegedly been prepared but had not yet been considered by the Central Government.
The petitioners submitted that they had previously undertaken transactions with Educomp Solutions Ltd. and had subsequently been summoned to participate in the SFIO investigation. They claimed to have received information that the investigation report had been prepared around September or October 2022 and contained adverse findings against them. Apprehending that criminal prosecution would follow, they approached the High Court seeking to invalidate the original investigation order. Senior Advocate Mukul Rohatgi also referred to an interim order dated 26 May 2022 in W.P.(Crl.) 1242/2022, concerning a key managerial person of Educomp, in which protection against coercive action had been granted until the next hearing.
The petitioners further relied upon a complaint filed by the Economic Offences Wing (EOW), contending that the original allegations against Educomp had been founded on forged and fabricated documents. According to their submissions, Raffles Education Corporation Ltd., which had initiated the complaint against Educomp, relied on documents that the EOW itself subsequently found to be forged. It was argued that the SFIO investigation was consequently tainted and that both the Central Government’s investigation order and any further proceedings based upon it should be quashed.
The High Court examined the statutory framework under Section 212 of the Companies Act, 2013, particularly subsection (14). It observed that an SFIO investigation report must first be submitted to the Central Government, which is required to examine the report and may obtain legal advice before deciding whether prosecution should be initiated. The SFIO’s counsel informed the Court that the Central Government had not yet received the investigation report. Consequently, the Government had neither examined the findings nor formed an opinion on initiating prosecution. The Court held that the petitioners’ challenge was premature because the statutory decision-making process had not reached the stage at which prosecution could be authorised.
Justice Yashwant Varma further observed that the investigation report was only material for consideration by the Central Government and did not automatically result in prosecution. The petitioners’ apprehensions were based on information obtained from unspecified sources regarding alleged adverse findings. Such information could not justify invoking the Court’s jurisdiction on the assumption that prosecution would inevitably follow. The Court clarified that if prosecution were subsequently initiated, the petitioners would remain entitled to challenge both the criminal proceedings and any adverse findings in the investigation report through remedies available under law. Accordingly, the Delhi High Court declined to interfere with the investigation order dated 17 August 2018 or the consequential proceedings at that stage and dismissed the writ petition along with the pending application.
Cases Discussed:
1. Proceedings in W.P.(Crl.) 1242/2022 (Delhi High Court); Interim Order dated 26/05/2022. The petitioners referred to this connected proceeding instituted by a key managerial person of Educomp Solutions Ltd. challenging the investigation order dated 17 August 2018. The High Court was informed that an interim order restraining coercive action had been passed in that matter. However, the Court did not treat the interim protection granted in those proceedings as sufficient justification for interfering with the investigation in the present case. The order does not identify the parties to W.P.(Crl.) 1242/2022 or discuss any binding judicial precedent.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
CM APPL. 44255/2022 (for exemption)
Allowed, subject to all just exceptions.
The application shall stand disposed of.
W.P.(C) 14487/2022 & CM APPL. 44254/2022(Interim Relief)
1. This writ petition has been preferred seeking the following reliefs:-
“A. Issue a Writ, Order or Direction in the nature of a Certiorari or any other appropriate Writ, Order or Direction to quash and set aside the impugned Order dated 17.08.2018 bearing no. 1/52/2017-CL II issued by the Respondent and all consequential actions and proceedings emanating therefrom, including the proceedings/ investigation carried out by the Serious Fraud Investigation Office [“SFIO”] qua the Petitioners;”
2. The order which stands impugned and is dated 17 August 2018 embodies a decision taken by the Union Government exercising its powers conferred by Section 212 of the Companies Act, 2013 [“the Act”] initiating an investigation against Educomp Solutions Ltd. [“Educomp”] and other related entities.
3. The petitioner who is at some stage stated to have had dealings with Educomp appears to have been summoned to participate in that investigation by the Serious Fraud Investigation Office [“SFIO”]. It has approached this Court by means of the instant writ petition asserting that it has come to know that the report has been finally prepared sometime in September/October 2022 and carries adverse findings and comments against the petitioner here. It is consequently asserted that the petitioner apprehends that prosecution will inevitably be lodged against it.
4. Mr. Rohatgi, learned senior counsel appearing for the petitioner has invited the attention of the Court to the order passed in W.P.(Crl.) 1242/2022 instituted by one of the key managerial personnel of Educomp and on which on 26 May 2022 while considering a challenge to the order of 17 August 2018, a learned Judge had provided that till the next date of hearing, no coercive steps would be taken against the petitioner there.
5. Mr. Rohatgi also draws the attention of the Court to the complaint which has been filed by the Economic Offences Wing [“EOW”] and in which categorical recitals appear to the extent that Raffles Education Corporation Ltd. which had authored the original complaint against Educomp had relied upon forged and fabricated documents and the letters and papers which had formed the basis of that complaint including those of the petitioner have been found by the EOW itself to be forged and fabricated.
6. In view of the aforesaid, it was submitted that since the entire investigation stands tainted and is based on material which the respondents themselves have found prima facie to be forged and fabricated, the order of 17 August 2018 as well as all proceedings that are likely to be taken hereinafter are liable to be quashed.
7. Having heard learned counsels for parties, the Court at the outset notes that in terms of the provisions enshrined in Section 212 of the Act, on conclusion of investigation, the Investigation Report is liable to be transmitted to the Union Government for its consideration. In terms of sub section (14) thereof, the Union Government may after due examination of the said report and upon legal advice that may be obtained, proceed to direct the SFIO to initiate prosecution. Admittedly, that stage is yet to be reached in the present case. In fact, learned counsel appearing for the SFIO apprised the Court that the Union Government is yet to receive the Investigation Report. It is thus manifest that the Union Government is yet to apply to its mind on the report and form an opinion whether prosecution is liable to be initiated.
8. In that view of the matter, this Court is of the opinion that the challenge as laid is clearly premature since as and when the Union Government does get the opportunity to apply its mind and thereafter direct further proceedings to be taken by the SFIO, the petitioner shall have all remedies as are available in law to assail any prosecution that may be lodged as well as to challenge any adverse findings that may stand recorded or contained in the Investigation Report.
9. Insofar as the submission of Mr. Rohtagi that grave prejudice would be caused to the petitioner in case it is not provided a copy of the Investigation Report prior to initiation of steps including prosecution is concerned, it may only be observed that the Investigation Report only constitutes material for the consideration of the Union Government. The Union is yet to take a decision on whether the facts and material gathered and forming part of that report would justify prosecution being initiated. It would thus be clearly unsound for the Court to proceed on a presumption that prosecution would necessarily be launched against the petitioner. The Court also bears in mind that the present petition itself is based solely on information received by the petitioner that the report contains adverse findings against it. The jurisdiction of the Court cannot possibly be invoked based upon some information that the petitioner may have obtained from sources, known or unknown.
10. In any case even if prosecution were to be launched, the law provides sufficient and wholesome remedies to the petitioner which could be availed of to challenge not only any criminal proceedings that may be initiated but to assail the report itself. In view of the aforesaid, and since all rights in that regard stand duly reserved to be agitated at an appropriate stage, the Court finds no ground to interfere either with the impugned order dated 17 August 2018 or the proceedings drawn pursuant thereto, at this stage.
11. The writ petition, along with pending application, shall stand dismissed.
