Centre Can Authorise Officers Other Than SFIO Director To File Companies Act Fraud Complaints: Supreme Court

The Supreme Court has recently clarified that the Centre can authorise any Central Government officer, in addition to the Director of the Serious Fraud Investigation Office (SFIO), to institute a complaint under the second proviso to Section 212(6) of the Companies Act.

The clarification came while dismissing the Centre's review petition against the Court's January 9 judgment. In that judgment, the Court held that an offence under Section 448 of the Companies Act is an offence “covered under Section 447” and therefore attracts the requirements under the second proviso to Section 212(6).

A bench of Chief Justice Surya Kant, Justices K. Vinod Chandran and Joymalya Bagchi dismissed the review petition. The Court noted that the complaints in question had been filed by private individuals.

The Court, however, clarified that the Union government can invoke its powers under the second proviso to Section 212(6). It can authorise any Central Government officer, through a general or special order in writing, to institute the complaint in addition to the SFIO Director.

“However, the Union of India shall be at liberty to invoke its powers under the second proviso of Section 212(6) of the Companies Act, 2013, and authorize any officer of the Central Government by a general or special order, in writing, to institute the complaint in addition to the Director, Serious Fraud Investigation Office (SFIO).”

The case from a dispute concerning Shreemukh Namitha Homes Private Limited where a private complaint alleged offences under Sections 448 and 451 of the Companies Act along with offences under the Indian Penal Code.

The Special Court took cognizance on October 10, 2022 while the Telangana High Court on June 20, 2024 refused to quash the proceedings.

The appellants argued that the Special Court could not take cognizance of Sections 448 and 451 on a private complaint because of the statutory bar under Section 212(6). The State and complainant argued that the 2015 amendment restricted the Section 212(6) bar to Section 447 itself and that Section 448 could therefore be prosecuted on a private complaint.

The Supreme Court held that Section 448 cannot be read independently of Section 447, since Section 448 makes a person liable under Section 447 for making a false statement in documents required under the Companies Act.

It therefore held that Section 448 is an offence “covered under Section 447” and that the second proviso to Section 212(6) bars cognizance unless the complaint is made by the Director, Serious Fraud Investigation Office (SFIO) or an officer of the Central Government authorised by a general or special order in writing.

The Court explained the purpose of the safeguard, observing,

“As such, in case an allegation of fraud under Section 447 of the Companies Act is to be made out, the complaint has to be made by the Director, SFIO or an officer authorized by a written order of the Government. This adds a further level of scrutiny and investigation prior to taking cognizance in cases where allegations of fraud are made and ensures that cognizance is not taken by the Special Court simply upon filing of a private complaint."

Now the Court has dismissed Centre's review petition against the judgment, while clarifiying that the Centre was left at liberty to exercise its power under the second proviso to Section 212(6) to authorise an officer to institute the complaint in addition to the SFIO Director.

For Petitioner: Aishwarya Bhati, A.S.G, Advocates Atmika Patnaik, Khushboo Chaudhary, Abhinav Aggarwal, Madhulika Upadhyay, AOR, Mayank Pandey, Radhika Mishra, Diwakar Sharma, Santosh Kumar Pandey

For Respondent: Devina Sehgal, AOR, Advocates Yatharth Kansal, Srikanth Varma Mudunuru