Summary: The article examines the jurisdictional dispute between the Serious Fraud Investigation Office (SFIO) and the Central Bureau of Investigation (CBI) arising from the CBI v. Vijayraj Surana matter, in which the Karnataka High Court quashed the CBI’s FIR after SFIO had been assigned the investigation under Section 212 of the Companies Act, 2013. It discusses the allegations relating to the Surana Group, parallel investigations by SFIO, CBI and ED, the operation of Section 212, reliance on judicial precedents, and the issues pending before the Supreme Court, including whether Section 212 excludes parallel investigations involving offences under other laws such as the Prevention of Corruption Act, 1988, the effect of Section 26 of the General Clauses Act, 1897, and the consequences of quashing the CBI FIR on related PMLA proceedings. The article also outlines the Madras High Court’s view that the complaint under Section 447 of the Companies Act constitutes a predicate offence under the PMLA, discusses possible functional demarcation between investigating agencies, and states that the Supreme Court’s decision is awaited.
A Jurisdictional Puzzle in Corporate Fraud Enforcement
Recently, a battle between two powerful investigating agencies, Special Fraud Investigation Office (hereinafter referred as “SFIO”) and Central Bureau of Investigation (hereinafter referred as “CBI”), emerged to probe into the same accused with the same matter of fact in the matter of corporate fraud, but still moving in opposite institutional directions. It is like two watchdogs chasing the same fox.
The judgment given by the Karnataka High Court in the matter of CBI vs Vijayraj Surana; 2024:KHC:14912 was challenged in the Supreme Court on the basis that CBI can run parallel investigations into the matter, as the offence also falls under the Prevention of Corruption Act, 1988, even though SFIO has already been assigned the case under Section 212 of the Companies Act, 2013.
This issue shows the structural gap in the multi-agency investigative framework of India, as there are no clear boundaries restricting corporate fraud to a particular jurisdiction. The corporate fraud by the companies falls under IPC 1860, Companies Act 2013, PMLA and PCA, 1988, which give powers to Enforcement Directorate ( hereinafter referred as “ED” ), CBI and SFIO to conduct investigations. This matter was also brought to notice in previous cases, and now the Surana case brings it back to the attention of the Honourable Supreme Court.
THE FINANCIAL FRAUD BY THE SURANA GROUP
Vijayraj Surana is the promoter director of Surana Power Limited and several related entities. A huge amount of Rs. 10,233 crore was borrowed from the public sector bank, which was later declared as a non-performing asset with insolvency proceedings going on in NCLT, Chennai. Several other offences like misuse of borrowed funds, manipulation in project award procedures, accounting irregularities and large-scale diversion of funds to related entities, were brought into light when the matter was delegated to SFIO by the Ministry of Corporate Affairs under section 212 of the Companies Act, 2013. Whereas another complaint was filed by the IDBI Bank with the CBI, and the CBI registered an FIR under the provisions of IPC and PCA. This FIR was filed later by the CBI when SFIO had already started the investigation.
The FIR was filed by the CBI, which was then challenged by Vijayraj Surana before the Karnataka High Court, and he argued that companies act, being a special provision, has given power to SFIO under section 212, so only SFIO will deal with the investigation, and CBI will not have any jurisdiction in the matter. The High Court stands affirmative with that stance.
The High Court relied upon the precedent of the Delhi High Court in the matter of R. K. Gupta v. Union of India: ILR 1971 DELHI 254 and held that the legislature has entrusted the power of investigation into the hands of SFIO in the offences that fall under the Companies Act and explicitly bars the jurisdiction of any other agency and also SFIO has already started investigating when the complaint was filed in the Special Court, Chennai.
The High Court did not transfer the matter, but outrightly quashed the CBI’s FIR. The CBI argued on that particular stance taken by the High Court that if the FIR is quashed, then the alleged offences under PCA will be rendered nullified, which will also, in turn, stop the proceedings of ED under PMLA since the ED’s Enforcement Case Information Report (ECIR) has been registered on the accounts of the FIR filed by the CBI. This will threaten the entire chain of proceedings, which includes three separate agencies.
SECTION 212:
But in order to have a better clarification of this whole scenario, it is very important to have a clear understanding of Section 212 of the Companies Act, 2013. This section gave 4 circumstances under which the Central government has the authority to assign the case of a company’s affairs to SFIO:
- on the receipt of the report from the registrar of companies under section 208,
- the second is on the company’s own special resolution,
- the third is if there is any public interest involved, and
- lastly, when, upon the request of any state or central government.
Also, the section clearly laid down that if any other central or state government agency has already started the investigation, then the procedure will terminate at that point by transferring all the documents to SFIO once the case has been assigned to it, and only SFIO will have the power to probe into the matter and bar the jurisdiction of any other agency.
Vijayraj Surana emphasised this particular provision before the Supreme Court by relying on the judgment Ashish Bhalla V. State :2025/DHC/755, given by the Delhi High Court in 2023. That case also deals with the multiple investigating agencies, one of which was the Economic Offences Wing (EOW), which registered an FIR, as CBI registered in the present Surana case, and it included allegations of siphoning funds through shell companies, but an investigation was also started by SFIO.
Then the court quashed the FIR and ordered the transfer of all the documents to the SFIO. The Court held that it is mandatory under Section 212(17) for other agencies to transfer all information to the SFIO once the matter has been transferred to it. Hence, no parallel probes can continue simultaneously. But Justice Vishwanathan of the Supreme Court pointed out that the Ashish Bhalla case did not involve an offence under any other law, and only the company law was violated.
But the Surana Case is different; it includes offences under the Prevention of Corruption Act; hence, the Ashish Bhalla case cannot be relied upon in the present case.
While the matter is pending before the Supreme Court Bench consisting of Justice Sanjay Kumar, three main issues emerge before the court. The first issue deals with the primary objective of the incorporation of Section 212, whether it is there to create a monopoly by crowding out every other agency in offences under other laws or just administrative bifurcation to remove the burden from ordinary police officers, and these matters are handled by experts.
Another issue that was raised was section 26 of general clauses act, 1897, which allows prosecution under more than one statute, but not double jeopardy. So, if the question of double jeopardy is raised by Surana, citing constitutional violation, then section 26 resolves this issue. This suggests that parallel investigation can continue, but the accused can’t be punished twice for the same offence.
Lastly, CBI argues that the High Court erred in quashing the FIR rather than just transferring it to SFIO. As quashing the FIR would render the predicate offence on which PMLA’s enforcement machinery was dependent. But the court did not quash the section 447 complaint under companies act before the Special Court of Chennai, and an anomalous situation was created as Surana challenged the whole ED’s proceeding.
As the FIR of CBI was quashed by the court, Surana approached the Madras High Court to stop the proceedings going under PMLA and quashed the ECIR filed by ED because it was based on the predicate offence established by the CBI’s FIR. If that FIR does not exist now, then the question of predicate offence does not arise, and ED’s proceedings will be nullified. It shows that Surana’s litigation does not exist in isolation.
But the Madras High Court did not rule in favour of Surana and held that this complaint under section 447 of the Companies Act comes under a predicate offence under PMLA. So, quashing of CBI’s FIR, which was on jurisdictional grounds rather than substantive grounds, does not in itself render ECIR invalid as it exists independently.
Now the Supreme Court’s stance in the matter of CBI v. Vijayraj Surana will set the precedent for future cases in the same jurisdictional issue of parallel investigations carried out by multiple agencies. As this case is going to that jurisdiction, quashing of an FIR does not deny the facts. This is going to be a significant judgment which will determine whether ED’s proceeding will be hampered or not by virtue of section 212, which bars the jurisdiction of any other investigating agency and gives exclusive powers to SFIO.
WAY FORWARD – FUNCTIONAL DEMARCATION
The SFIO is a multidisciplinary body which brings together experts of many fields such as corporate law, banking, forensic accounting and capital markets, as corporate frauds like these require experts who understand all the financial instruments. If the investigation is fragmented, then there would always remain risks of duplication, turf wars, inconsistent conclusions and the possibility that the accused will have the opportunity to find a jurisdictional loophole. Many research articles by experts in this field have argued that such sophisticated corporate fraud should be handled by a special agency and not any general investigating agency under any other law.
Yet there are some gaps in this theory, like SFIO does not have the power to investigate public officials, and offences under PCA in this particular case also include allegations that public officials are also involved in the fraud. If, as per section 212, the jurisdiction of CBI is completely barred from investigating, then it would lead to the benefit of these kinds of corrupted officers, as it would not be investigated.
Then the purpose of this anti-corruption law, the Prevention of Corruption Act, would be defeated and would be antithetical to the rule of law.
The resolution for that could be to allow other agencies to carry out parallel investigations under PCA, IPC or PMLA, but only when the proofs required are completely different from what is required under section 447 of the Companies Act, 2013. And SFIO should have exclusive jurisdiction to investigate all the matters under companies act as per section 212. So, in this particular case, also, rather than quashing the CBI’s FIR in its entirety, it should be transferred to SFIO, and CBI should be allowed to continue its simultaneous investigation under PCA, as it requires proof of involvement of public officials. This functional distinction would be able to justify the parallel investigation by both agencies, and no monopoly would be created.
The clarification needs to be given by the judiciary in this particular matter, and coordination should be maintained by SFIO and other investigating agencies when the same facts gave rise to the offence. That’s why the judgment of the Surana case is much awaited.
CONCLUSION
The corporate fraud crossed boundaries, now on a routine basis, between company law, corruption law, IPC and money laundering law, so it was necessary to check whether the institutional framework for investigating corporate crimes is well established or not, which is posed as a question before the Supreme Court in the case of CBI vs. Vijayraj Surana where there was a battle between two central investigating agency, SFIO and CBI.
Section 212 of the Companies Act, which gives exclusive jurisdiction to SFIO, indirectly paved the way for those corporate frauds to escape liability under PCA because other agency like CBI is barred from investigating when SFIO has taken the matter into its hands.
The awaited judgment of the Surana case could be a landmark judgment in corporate criminal law in India. As it will be a guide on how multiple agencies should co-exist and performs its function when the offence falls under more than one legislation. It will determine the future of multi- agency enforcement in India for years to come.
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