NCLAT New Delhi Holds SFIO Can File Disgorgement Plea As Union Government's Authorised Representative

The National Company Law Appellate Tribunal (NCLAT) at New Delhi on 25 August affirmed that the Serious Fraud Investigation Office (SFIO) was validly authorised to file disgorgement proceedings before the NCLT on behalf of the Union of India under Section 212(14A) of the Companies Act, 2013.

A Bench comprising Officiating Chairperson Justice Yogesh Khanna with Technical Members Ajai Das Mehrotra and Barun Mitra dismissed appeals by BSR & Associates LLP and N. Sampath Ganesh, observing that the Central Government took the decision to initiate the proceedings, while SFIO merely acted as its authorised representative. It observed:

“Therefore, the decision to file was of the Central Government and the proceeding too was filed with the Central Government as the applicant. The Director, SFIO/SFIO was merely authorized to present/execute the Petition that too in the name of Central Government in terms of the Allocation of Business Rules, 1961 and Transaction of Business Rules, 1961 under Article 77(3) of the Constitution of India.”

The case arose from an investigation into the affairs of IL&FS Securities Services Limited (ISSL), a subsidiary of Infrastructure Leasing & Financial Services Limited (IL&FS), which the Central Government ordered as part of its investigation into the affairs of IL&FS and its subsidiaries in September 2018. SFIO completed the investigation into ISSL and submitted its report to the Ministry of Corporate Affairs (MCA) on 14 July 2023.

On 26 September 2023, the MCA issued a letter authorising and directing SFIO to file proceedings before the NCLT Mumbai Bench seeking attachment and disgorgement of assets from the individuals and entities identified in the report.

SFIO then filed Company Application No. 234 of 2025 before the NCLT Mumbai Bench in the name of the “Union of India” as the applicant. BSR & Associates LLP, ISSL's statutory auditor, and N. Sampath Ganesh challenged the maintainability of the application, arguing that SFIO lacked locus to file such civil proceedings before the NCLT.

The appellants argued that Section 212(14) of the Companies Act, 2013, which empowers SFIO to initiate prosecution on the basis of an investigation report, does not authorise it to institute civil proceedings for attachment and disgorgement before the NCLT.

They further argued that Section 212(14A), which empowers the Central Government to seek disgorgement of property or assets, vests that power exclusively in the Central Government. They contended that the Central Government could not delegate this power to SFIO without a notification under Section 458 of the Companies Act, 2013. They also argued that the MCA's letter dated 26 September 2023 was merely an executive order and could not override the statutory provisions.

The respondents argued that the MCA issued the letter with the approval of the competent authority, namely the Minister of Corporate Affairs, and directed SFIO to initiate action for disgorgement against the persons and entities mentioned in the letter.

They further submitted that the MCA issued the letter after SFIO completed its investigation into the affairs of ISSL and submitted its report, and therefore the procedure adopted could not be faulted.

On 17 March 2026, the NCLT Mumbai Bench rejected the maintainability challenge. Aggrieved by this ruling, BSR & Associates LLP and N. Sampath Ganesh appealed the decision before the NCLAT.

Upon reviewing the case on appeal, the NCLAT Bench noted that SFIO submitted its investigation report to the Central Government, which then considered the material and decided to file the proceedings. It authorised SFIO to implement that decision by presenting the petition before the NCLT.

It further noted that the Union of India appeared as the applicant in the application, consistent with Section 79 of the Code of Civil Procedure, 1908, which deals with suits by or against the Government. It observed:

“...the SFIO did not itself take a decision to file CA 234 of 2025. It placed the ISSL Report before the Central Government. It is the Central Government that then considered the relevant material before it and formed an opinion/decided to file CA No. 234 of 2025. It is thus the decision-making authority. It then conveyed the decision to the SFIO/Director, SFIO for implementation. No discretion or the decision-making power was transferred or assigned to the SFIO.”

Accordingly, the NCLAT dismissed the appeals.