The Delhi High Court has clarified that once SFIO is asked to investigate under the Companies Act, it works under the statute and the Central Government, not as a “fact-finding wing” controlled by the company court.

Legal Issue

Whether, after directing an SFIO investigation under Sections 210 and 212 of the Companies Act, 2013, the company court can restrain SFIO from launching any prosecution against the ex-management until the court first examines the SFIO report, even though the Act gives that role to the Central Government.

Brief Facts

Assotech Limited was under provisional liquidation, with allegations that its former management had diverted funds and dealt with properties in violation of earlier court orders. The Company Court directed an investigation by the Serious Fraud Investigation Office (SFIO) into the company’s affairs. SFIO completed its probe and filed its report.

A Single Judge initially recorded that SFIO could proceed “as per law”, but on an application by the ex-management, passed a later order saying SFIO should not file any prosecution until the court had itself gone through the report and given permission. SFIO appealed, arguing that this effectively rewrote Sections 210 and 212, which require SFIO to submit its report to the Central Government and leave it to the Government to decide on prosecution. The ex-management argued that court control was necessary because of the ongoing liquidation and the interests of homebuyers.

Judgement

The Division Bench allowed SFIO’s appeal and set aside the restriction. It held that the Companies Act creates a complete code for SFIO: once an investigation is ordered, SFIO must report to the Central Government under Section 212(12), and the Government decides on prosecution under Section 212(14). Courts cannot insert an extra step that says “no prosecution unless the court approves the report first.”

Relying on settled principles that when a statute prescribes a specific procedure it must be followed “in that manner or not at all”, the Bench ruled that the Single Judge’s order wrongly turned SFIO into a subordinate arm of the court and cut across the executive’s role. The Court clarified that judges may order an SFIO investigation, but they cannot freeze or condition prosecutions beyond what the Act itself provides. The result: SFIO is free to act strictly as per the Companies Act framework, and company courts cannot use “clarifications” to delay or block prosecution decisions that the statute places in the Government’s hands.

Read the official judgement/order here

Case title: 

Serious Fraud Investigation Office v. Assotech Limited (in liquidation) & Anr.

Case number: 

CO.APP. 23/2024 & CM APPL. 51379/2024.

Bench:
Justice Anil Kshetrapal; Justice Harish Vaidyanathan Shankar.