CRIMINAL APPEAL NOS. 538-539 .OF 2019 (@ SLP(Crl)Nos.94-95 OF 2019)  Serious Fraud Investigation Office v. Rahul Modi and Another Etc.                                        1    

Reportable    

IN THE SUPREME COURT OF INDIA    

CRIMINAL APPELLATE JURISDICTION  

 CRIMINAL APPEAL NOS.538-539   OF 2019  

(Arising out of Special Leave Petition (Criminal) Nos.94-95 of 2019)      

Serious Fraud Investigation Office     …Appellant    

VERSUS  

Rahul Modi and Another Etc.          …Respondents    

WITH  

TRANSFER PETITION (CRL.) NO.35 OF 2019  (Serious Fraud Investigation Office & Anr.  vs.  Vivek Harivyasi & Ors.)  

J U D G M E N T  

 Uday Umesh Lalit, J.  

 1. Leave granted.  

 2. These Appeals challenge the correctness of the common interim  

order dated 20.12.2018 passed by the High Court of Delhi at New Delhi  

in Writ Petition (Crl.) Nos.3842 and 3843 of 2018.  

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3. In exercise of powers conferred by Section 212(1)(c) of the  

Companies Act, 2013 (“2013 Act”, for short) and under Section 43(2) and  

(3)(c)(i) of the Limited Liability Partnership Act, 2008 (“2008 Act”, for  

short), the Central Government vide order No.07/115/2018/CL-II (NWR),  

directed investigation into the affairs of Adarsh Group of Companies and  

LLPs (‘The Group’, for short) by Officers of Serious Fraud Investigation  

(SFIO) as nominated by Director, SFIO.  The relevant part of the Order  

dated 20.06.2018 was as under:-  

 “Whereas the Central Government is empowered under Section  212(1)(c) of the Companies Act, 2013 (the Act) to order  investigation into the affairs of a company in public interest by  the Serious Fraud Investigation Office (SFIO).    2. And whereas the Central Government is also empowered  to order investigation into the affairs Limited Liability  Partnerships (LLPs) under Section 43 (2) & (3) (c) (i) of the  Limited Liability Partnership Act, 2008.    3. AND whereas on the basis of opinion formed by the  Central Government, it has been decided to investigate the  affairs of following companies:-  

 S  N O  

CIN COMPANY /  LLP NAME  

NEW  ADDRES

S  

REGIO N  

PAN_  NUMBER  

STATU S  

1. U45201HR2000PLC045738  

ADARSH  BUILDESTA TE LIMITED  

1ST  FLOOR,  BLOCK-

B,  VATIKA  ATRIUM  

GOLF  COURSE  ROAD,  

SECTOR- 53  

GURGAO

Haryana AAJCA190 7A ACTV

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N  2  to  12 4  

.. … … … … …  

12 5  

U45201RJ2013PTC  042465  

WATER- FALL REAL  

ESTATES  PRIVATE  LIMITED  

J 7, MOTI  DOONGR I ROAD,  JAIPUR  

Rajastha n  

AABCW382 6E ACTV  

 4. Now, therefore, in exercise of powers conferred under  Section 212 (1) (c) of the Companies Act, 2013 and under  Section 43 (2) & (3) (c) (i) of the LLP Act, 2008 the Central  Government hereby orders investigation into the affairs of the  above named companies and LLPs to be carried out by officers  of the Serios Fraud Investigation Office (SFIO) as nominated  by Director, SFIO.    5. The SFIO shall investigate into following areas (above  mentioned companies and LLPs) in addition to any other issues  that it may come across during the investigation.    (i) To ascertain and unearth rotation of funds or identification  of quantum of diversion of funds of siphoning including  beneficiaries thereof:    (ii) To identify instances of mismanagement, negligence or  fraud;    (iii) To ascertain the role of auditors, KMPs or independent  directors or any other person in the alleged fraud:    (iv) To examine role of any other entity used as conduit in the  alleged fraud;    (v) To identify non-compliance of the statutory provisions of  the Act and its impact on Corporate Governance.    6. That the Inspector(s) so appointed shall exercise all powers  available to them under Section 217 of the Companies Act,  2013 and Chapter IX of LLP Act, 2008.  The inspector(s) shall  complete their investigation and submit their report to the  Central Government within a period of 03 (Three) months from  the date of issue of this order.   

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7. This order is issued for and on behalf of the Central  Government.  

 Sd/-  

(Santosh Kumar)  Joint Director”  

 4. On the same date, i.e. on 20.06.2018 an Order was passed by the  

Director, SFIO.  The relevant portion of said order was as under:-  

“3. Now, therefore, in exercise of powers conferred under  Section 212(1) of the Companies Act 2013, the following  Officers are designated as Inspectors to carry out the  investigation into the affairs of the above-mentioned entities and  shall exercise all the powers available to them under the  Companies Act, 2013:  

1. Shri P.C. Maurya, Addl. Director  2. Shri Prashant Baliyan, Deputy Director  3. Shri G. L. Meena, Sr. Asst. Director  4. Shri Kumar Gautam, Asst. Director  

 4. And further, in exercise of powers conferred under Section  212(4) of the Companies Act, 2013, Sh. Prashant Baliyan, Dy.  Director is appointed as Investigating Officer to carry out the  above noted investigation.  The Investigating Officer shall have  the powers of Inspector as enumerated under Section 217 of the  Companies Act, 2013.   As per the investigation order, following  issues are specifically to be examined along with other issues  which may come across during the investigation:    

(i) To ascertain and unearth rotation of funds or  identification of quantum of diversion of funds or  siphoning including beneficiaries thereof;  (ii) To identify instances of mismanagement, negligence  or fraud;  (iii) To ascertain the role of auditors, KMPs or  independent directors or any other person in the alleged  fraud;  (iv) To examine role of any other entity used as conduit in  the alleged fraud; and

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(v) To identify non-compliance of the statutory  provisions of the Act and its impact on Corporate  Governance.    

 5. The Inspectors and the Investigating Officer shall complete  the investigation and submit the report within three months  hereof.”  

 5. The period mentioned in Clause 6 of the Order dated  

20.06.2018 came to an end on 19.09.2018.  Based on the material  

gathered during investigation, an approval was sought under Rule (2) of  

the Companies (Arrests in connection with Investigation by Serious Fraud  

Investigation Office) Rules, 2017 (“2017 Rules”, for short) from the  

Director, SFIO to arrest three accused persons namely Rahul Modi,  

Mukesh Modi and Vivek Harivyasi.  The approval was granted by the  

Director, SFIO on 10.12.2018.  The arrest order issued under Rules 4 and  

5 of 2017 Rules made reference to the proceedings, “07/115/2018 CL-II  

(NWR) Dt. 20.06.2018”  

 The accused were accordingly arrested on 10.12.2018.  The  

compliance in terms of 2017 Rules was effected and they were produced  

before the Duty Magistrate, District Courts, Gurugram, Haryana on  

11.12.2018.    

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6. After hearing Counsel for the appellant as well as for the accused,  

the Judicial Magistrate First Class, Gurugram by order dated 11.12.2018  

granted remand till 14.12.2018 and directed they be produced before the  

Special Court (Companies Act), Gurugram on 14.12.2018.  The  

application seeking remand had sought to make out a case for custody of  

the accused.  The matter was dealt with by the Judicial Magistrate as  

under:-  

“5. Counsel for accused Nos.1 and 2 argued that these persons  have already been co-operated with the investigation since 20th  June and their office have been sealed.  Despite this, now  remand has been sought without any reason, therefore, kindly it  be declined.      6. Perusal of documents on record shows that there are  serious allegations and as per order dated 20.06.2018,  investigation was ordered to be initiated and now accused has  been produced before this court under Section 167 Cr.P.C.  seeking SFIO remand.  This court is to exercise the power of  Magistrate in terms of Section 436(1)(B).  At this stage, remand  has been sought.  The offence alleged is definitely serious in  nature and the arrest orders are placed on record.   Consequential to these documents, accused were arrested and  produced.  Undoubtedly, they have been appearing on notices  issued by the SFIO but still the investigation has not been  completed because some part of investigation needs personal  involvement.  This case prima facie attracts Section 447 of  Companies Act, which certainly makes this offence cognizable  and no bailable.  The main grounds for which the investigation  is to be conducted in custody is ascertainment of further trail  qua withdrawn money and to locate the beneficiaries.  In  addition to this, identification of properties and explanation  about loans and advances mentioned in the books of accounts  can only be given by accused but they have not come up with  any such explanations till now.  Even the persons who are in  custody are not going to facilitate the investigation in proper

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manner so that the real facts can be established.  These grounds  definitely require detained and comprehensive investigation so  it would be proper to grant the custody of these accused to  SFIO for three days.  Accused be produced before the Special  Court under Companies Act on 14.12.2018.  Copy of this order  be handed over to the IO and accused as they have requested.   Custody of all three accused namely Mukesh Modi, Rahul  Modi and Vivek Harivyasi is given to SFIO for three days.  File  be sent to the Special Court under the Companies Act.”  

7. On 13.12.2018 a proposal was made by SFIO seeking approval of  

the Central Government for extension of time for completing  

investigation and submission of investigation report in respect of 57 cases  

which were at various stages of completion and the period granted for  

completion of investigation had either expired or was near the expiry.   

One of the cases referred to was that of the Group at Sl. No.24 of the list.  

On 14.12.2018 the accused were produced before the Special Court with a  

fresh application for remand.  The prayer for extension of custody was  

opposed by the accused inter alia on the grounds that the period of  

completion of investigation as stipulated in the order dated 20.06.2018  

had expired and as such all further proceedings were illegal.  During the  

course of proceedings, the proposal seeking extension in respect of said  

57 cases, where investigation had not been completed, was placed before  

the Special Court.  After going into the record, the Special Court found  

that the application seeking further remand was justified.  It, therefore,

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extended the police custody of the accused till 18.12.2018.  Para 6 of the  

Order dated 14.12.2018 passed by the Special Court was:-  

“6.  Admittedly as per the provisions of Section 212(3) of the  Companies Act, the investigations ordered are required to be  completed within the specified time.  But the issue is even if it  not so done, what should be consequences and whether further  proceedings or investigations shall be unlawful.  The answer to  the mind of this court is simply no because the time frame  mentioned is to complete the investigations in a time bound  manner but the said time can be extended from time to time by  the same authority.  And in this case all, after investigations  when the team submitted report to competent authority, which  is the Director of SFIO, he permitted the team to arrest the  accused and go for further investigations, which in the given  facts and circumstances amount to extension.  Then the purpose  of section 212(3) is just to grant sanction to investigate as per  the procedure provided under Chapter XIV of the Companies  Act, 2013 and as per sub-Section 6, the offence alleged is  cognizable and non-bailable and thus power has been granted  to the SFIO to arrest the persons involved and see their remand  and then to file a final report to the Central Government.  And  thus the issue of filing a report before the court after arrest is  mandatory but doing so before the arrest of the accused is not a  time bound exercise that too violation of which can be legal  impediment for further investigation.”    

The proposal was accepted vide order dated 14.12.2018 passed by  

the Central Government in respect of the Group and extension was  

granted upto 30.06.2019.  

  8. On 17.12.2018 Writ Petition (Criminal) Nos.3842 & 3843 of 2018  

were filed under Articles 226 & 227 of the Constitution of India read with  

Section 482 of Cr.P.C. by Rahul Modi and Mukesh Modi respectively in

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the High Court of Delhi.  It was submitted that with the expiry of period  

within which the investigation had to be completed in terms of order  

dated 20.06.2018, all further proceedings including the arrest of the  

respondents were illegal and without any authority of law.  The Writ  

Petitions therefore prayed for declaration that the investigation carried out  

after 19.09.2018 was illegal and without jurisdiction and also prayed for  

Writ of Habeas Corpus directing release from illegal arrest made on  

10.12.2018.  The prayers in both the petitions were almost identical and  

were as under:  

A. “Issue a writ of mandamus or any other appropriate  writ/direction/order in the nature of a writ declaring that the  power of Respondents No.2 to 4 to carry out investigation  under Section 2012(2) Companies Act, 2013 after the expiry  of the time period is illegal and unconstitutional.  

 B. Issue a writ of mandamus or any other appropriate  

writ/direction/order in the nature of a writ declaring that the  investigation carried out after 19.09.2018 in File  No.SFIO/INV/AOI/2018-19-AGC & L/842-966 vide order  No.07/115/2018-CL-II dated 20.06.2018 as illegal and  without jurisdiction.  

   C. Issue a writ/direction/order declaring the arrest of the  

Petition dated 10.12.2018 at New Delhi in the office of  Respondent No.2 by Respondent No.3, and proceeding  emanating therefrom being without jurisdiction and illegal  and the Petitioner Rahul Modi be released forthwith.  

 D. Issue a writ of Habeas Corpus directing immediate release of  

the Petitioner herein Sh. Rahul Modi from the illegal arrest

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dated 10.12.2018 at New Delhi and consequent illegal  custody from Respondent No.2 to 4 at;  

9. These Writ Petitions came up before the High Court on  

18.12.2018 and following order was passed:  

“At request of Ms. Maninder Acharya, learned ASG  appearing on behalf of the Union of India, in order to enable  her to obtain instructions qua the extension of time for the  submission of report by the SFIO, the hearing of the petitions  is adjourned.”  

 On the same day the accused were produced before the Special  

Court and after being satisfied that further custody was required in order  

to complete investigation, the accused were remanded to police custody  

till 21.12.2018.  The relevant part of the Order of the Special Court  

was:-  

“2.  The SFIO has placed before the undersigned complete  noting proceedings showing the investigations carried out by  it from the last date till today.  As submitted by the counsel  for the complainant and after going through the case diary in  the form of noting sheets from the day the accused were  handed to the custody of the complainant till today, it comes  out that admittedly some more disclosures about the entire  scam has been disclosed by the accused persons relating to  some new issues leading to disclosure about undisclosed  wealth and thus the request for further custody of accused  persons is required to trail and confront them with the  subsequent evidence and events and to investigate the matter  further as per the disclosures made by the accused to unearth  real facts of siphoning of the huge money, in view of this  investigations in the order dated 14.12.2018.  As such, finding  the request to be genuine and the plea of custodial  interrogation to be necessary for the logical end of the entire

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investigations, the application in hand is allowed and all the  three accused persons are remanded to further custody of the  SFIO till 21.12.2018 upto 2.00 p.m.”  

10. The Writ Petitions came up before the High Court on 20.12.2018.   

The High Court issued notice making it returnable on 31.01.2019.  The  

High Court thereafter proceeded to consider whether immediate release  

of the respondents by way of ad interim relief was called for.  Both the  

sides were heard and the issues which arose for consideration in the Writ  

Petitions were framed as under:  

“a)  Whether the ex post facto extension granted on behalf of  the Competent Authority is valid in law; and    b)  Whether the vested rights created in favour of the  applicants, in the interregnum, when there was purportedly no  legal sanction to carry out the investigation against the  applicants, renders the said action, and in particular their arrest  illegal, without jurisdiction and contrary to law.”      

11. While considering the matter from the perspective of grant of ad  

interim relief, as prayed for in applications, Crl.M.A. No.50033 of 2018  

in Writ Petition (Criminal) No.3842 of 2018 and Criminal M.A.  

No.50035 of 2018 in Writ Petition (Criminal) No.3843 of 2018 the  

following points were framed:   

“15. In view of the submissions made on behalf of the parties,  the issues that arise for consideration in the present applications  are:-   

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“a)  Whether this Court can in a proceeding for habeas corpus  under Article 226 of the Constitution of India, test the  correctness, legality and validity of an order of remand, passed  by a Competent Magistrate/ and    b)  Whether this Court has the territorial jurisdiction to  adjudicate the present habeas corpus proceedings, in view of the  circumstance that the remand orders were rendered by a  Competent Magistrate at Gurugram, which have not been  specifically assailed in these proceedings?”  

   12. The High Court by its order dated 20.12.2018 directed release of  

said Rahul Modi and Mukesh Modi on interim bail, during the pendency  

of the writ petitions, on their furnishing personal bond in the sum of  

Rs.5 lakhs each with 2 local sureties in the like amount subject to  

conditions stipulated in the order.  During the course of its order  

following observations were made by the High Court in paragraphs 22  

to 30:-  

“22.  On a conspectus of the above decisions and in the light of  the arguments advanced on behalf of the parties, what we are  called upon to determine at this stage is whether the arrest of  the applicants was illegal and without the authority of law; and  whether the subsequent remand orders, which are cited to  sanctify the arrest, are beyond the pale of examination by this  Court in the present applications.    23. There is no denying the fact that, the Competent Authority  vide its order dated 20.06.2018 directed the SFIO to conduct an  investigation into the affairs of the subject entities, in public  interest.  There is also no quarrel with the circumstance that,  the period specified by the Competent Authority in the said  order dated 20.06.2018 lapsed on 19.09.2018.  There is also no  dispute with regard to the fact that, the SFIO sought an  extension of time, from the Competent Authority, to carry out

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further investigation under the mandate of the provisions of  Section 212 of the said Act, only on 13.12.2018,  admittedly  two and half months after the period granted to them by the  Competent Authority for the said purpose, had come to an end  by efflux of time.      24.  There is also no quarrel with the circumstance that, the ex  post facto extension granted by the Competent Authority,  retrospectively, was granted only on 14.12.2018.  It is,  therefore, prima facie axiomatic that, when the applicants were  arrested by the SFIO on 10.12.2018, the period specified in the  said order dated 20.06.2018 for the submission of the report,  post investigation, had already elapsed.  It is further relevant to  state that, at that juncture the SFIO had neither applied nor  obtained the ex post facto extension of the period specified in  the said order dated 20.06.2018.    25. It is, in these circumstances, read in conjunction with the  norms set out by the SFIO itself, warranting investigation to be  completed within the timeframe, stipulated by the Central  Government, that we are of the considered view that the order  of arrest suffers from the vice of lack of jurisdiction, unlawful  and illegal.    26. A statutory body must be strictly held to the standards by  which it professes its conduct to be judged.    27.  Illegal detention of the applicants, in our considered view,  cannot be sanctified by the subsequent remand orders, passed  by the concerned Magistrate.  The right of the applicants to  insist upon the strict and scrupulous discharge of their duty by  the SFIO and observe the forms and rules of law, is absolute.   The arrest of the applicants on 10.12.2018 in the light of the  circumstances antecedent and attendant was an absolute  illegality and patently suffers from the vice of lack of legal  sanction and jurisdiction.    28.  This Court in a petition for habeas corpus cannot justify the  continued illegal detention of the applicants; merely on account  of the circumstance that the concerned Magistrate has rendered  remand orders.  The further custody of the applicants would, in  our considered view, violate the principles of personal liberty,  enshrined in Article 21 of the Constitution of India.  The

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continued detention of the applicants does not admit of lawful  sanction.    29. Even otherwise, the remand order dated 14.12.2018,  insofar as, it observes as follows:-    

“6. ………..And in this case all, after investigations when  the team submitted report to competent authority, which is  the Director of SFIO, he permitted the team to arrest the  accused and go for further investigations, which in the  given facts and circumstances amount to extension.”  is wrong, incorrect and patently contrary to law and the  

official record.    30. This is quite apart from the circumstance that, the  applicants were arrested at the SFIO office at New Delhi on  10.12.2018, thereby rendering the remand orders passed by the  concerned Magistrate in Gurugram, wholly without  jurisdiction.”    

13. The original writ petitioners Rahul Modi and Mukesh Modi were,  

therefore, released on bail.  The aforesaid order dated 20.12.2018 passed  

by the High Court is presently under challenge.  Mr. Tushar Mehta,  

learned Solicitor General appeared for the appellant – SFIO in both  

criminal appeals while the original writ petitioners were represented by  

Mr. Kapil Sibal, Mr. Mukul Rohatgi and Mr. Sidhharth Luthra, Senior  

Advocates.  Both sides also filed their written submissions.  

 14. The learned Solicitor General submitted inter alia:  

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(a)  In terms of the provisions of 2013 Act, the investigation commenced  

when the present matter was assigned to SFIO under Section 212(1) of  

2013 Act and the investigation would end on filing of a report by SFIO  

after completion of investigation, as per Section 212(12) of the Act.  It  

would be incorrect to assume that the mandate to investigate or power to  

arrest would come to an end on completion of three months from  

20.06.2018.  

(b)  The stipulation in Section 212(3) of 2013 Act regarding submission  

of the report to the Central Government “within such period as may be  

specified in the order” is purely directory.   

(c)  Power of arrest under Section 212(8) of 2013 Act conferred upon the  

Director, Additional Director and Assistant Director is not circumscribed  

by any time limit and so long as the conditions stipulated in said sub-

section are satisfied, such power of arrest can be validly exercised.   

(d)  The Habeas Corpus Petition was not maintainable in the High Court  

of Delhi as after their arrest the original Writ Petitioners were produced  

before the Judicial Magistrate, Gurugram on 11.12.2018 and were  

remanded to custody under a judicial order.  Thereafter they were  

produced before the Special Court, Gurugram on 14.12.2018 and were

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again remanded to custody under judicial order passed by Special Court,  

Gurugram.    

(e) Since the registered office of the Principal Company was in  

Gurugram, they were rightly produced before the Magistrate and Special  

Court in Gurugram. Thus, if at all the Habeas Corpus Petition ought to  

have been filed before the High Court of Punjab and Haryana and not in  

High Court of Delhi.  

(f)  The focal point of examination in a Habeas Corpus Petition is the date  

of return and not the initiation of proceedings.  In the present case, on  

18.12.2018 when the petitions were taken up for consideration, not only  

was there an order of extension dated 14.12.2018 passed by the Central  

Government but there were valid orders of remand passed by the Judicial  

Magistrate, Gurugram on 11.12.2018 and by the Special Court, Gurugram  

on 14.12.2018 and 18.12.2018.  

 15. Mr. Sibal, Mr. Rohatgi and Mr. Luthra, learned Senior Advocates  

appearing for the original writ petitioners submitted, inter alia:-  

(a)  A special jurisdiction has been created by Section 212 of 2013 Act  

under which corporate affairs in relation to any company can be  

investigated into by SFIO, which may have far reaching consequences.  It  

is precisely for this reason that certain time limit is contemplated within

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which investigation must be completed and the investigation cannot be  

allowed to be an endless matter.   The period prescribed under the 1st  

Order, therefore, had to be scrupulously observed and the mandate came  

to an end on the expiry of said period.  

(b)  SFIO being a special entity which otherwise has no jurisdiction to  

investigate into the matter, must therefore act within the parameters of the  

mandate and no arrest after the expiry of the period could have been  

effected.  

(c)  Any arrest made beyond the period would be without jurisdiction and  

the High Court was, therefore, justified in granting the relief in the present  

matter.  

(d)  The Writ Petitions principally challenged the orders of arrest being  

without jurisdiction and it was only the 4th prayer in the Writ Petitions  

which pertained to issuance of a writ of Habeas Corpus.    

e) The order entrusting investigation to SFIO was passed in New Delhi,  

SFIO is located in New Delhi, the order of arrest was passed in New  

Delhi, the writ petitioners were arrested in New Delhi and were kept in  

custody in SFIO office in New Delhi and as such the High Court of Delhi  

had jurisdiction to consider the Writ Petitions and grant relief as prayed  

for.

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f) In the absence of any extension for further investigation, the power of  

arrest could not have been exercised on 10.12.2018.  Any further  

extension cannot validate the act of initial arrest.  Such arrest being  

unsupported by any valid mandate, was an act of illegality which violated  

Article 21 calling for interference by the High Court.  

 16. The basic facts in the present matter can be summed up:-  

a) The investigation was assigned to SFIO vide Order  

dated 20.6.2018.  This Order did stipulate in para 6  

that the Inspectors should complete their investigation  

and submit their report to the Central Government  

within three months.  

b) The period of three months expired on 19.09.2018.  

c) The proposal to arrest three accused persons was  

placed before the Director, SFIO and after being  

satisfied in terms of requirements of Section 212(8) of  

2013 Act approval was granted by Director, SFIO on  

10.12.2018.   

d) After they were arrested on 10.12.2018, the accused  

were produced before the Judicial Magistrate, who by

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his order dated 11.12.2018 remanded them to custody  

till 14.12.2018 and also directed that they be produced  

before the Special Court on 14.12.2018.  

e)  On 13.12.2018 a proposal seeking extension of time  

for completing investigation in respect of 57 cases  

including the present case was preferred by SFIO.  

f) On 14.12.2018 the Special Court, Gurugram remanded  

the accused to custody till 18.12.2018.  

g) On the same date i.e. on 14.12.2018 the proposal for  

extension was accepted by the Central Government in  

respect of the Group and extension was granted upto  

30.06.2019.  

h) On 17.12.2018 the present Writ Petitions were  

preferred which came up for the first time before the  

High Court on 18.12.2018.  

i) On 18.12.2018 itself the accused were further  

remanded to police custody till 21.12.2018.

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j) On 20.12.2018 Writ Petitions were entertained and the  

order which is presently under appeal was passed.  

k) Pursuant to said order, the original Writ Petitioners  

were released on bail.    

 In the backdrop of these facts, the High Court found that a case  

for interim relief was made out.  The principal issues which arise in the  

matter are whether the High Court was right and justified in entertaining  

the petition and in passing the Order under appeal?  

17. For considering whether the writ petitioners were entitled to any  

interim relief, two questions were framed by the High Court in paragraph 15  

of its Order.  Before considering the matter from the perspective of said two  

questions, an issue which was stressed by the learned Solicitor General may  

be addressed first.  It was submitted by him that the date with reference to  

which the legality of detention can be challenged in a Habeas Corpus  

proceeding is the date on which the return is filed in such proceedings and  

not with reference to the initiation of the proceedings.  He relied upon the

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decision of the Federal Court in Basanta Chandra Ghose vs. King  

Emperor1, which had concluded:  

“… …If at any time before the Court directs the release of  the detenue, a valid order directing his detention is  produced, the Court cannot direct his release merely on the  ground that at some prior stage there was no valid cause for  detention…. …”  

 Similar questions arose for consideration in Naranjan Singh  

Nathawan vs. State of Punjab2, Ram Narayan Singh vs. State of Delhi3,   

A.K. Gopalan vs. Govt. of India4, Pranab Chatterjee vs. State of Bihar  

and Another.5, Talib Hussain vs. State of Jammu and Kashmir6, Col.  

Dr. B. Ramachandra Rao vs. State of Orissa and Others.7.  These  

decisions were considered in Kanu Sanyal vs. District Magistrate,  

Darjeeling and Others8, as under:   

Re: Grounds A and B.    

1  (1945) 7 FCR 81  

2  (1952) SCR 395  

3  (1953) SCR 652,  

4  (1966) 2 SCR 427  

5  (1970) 3 SCC 926  

6  (1971) 3 SCC 118  

7  (1972) 3 SCC 256  

8  (1974) 4 SCC 141

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4. These two grounds relate exclusively to the legality  of the initial detention of the petitioner in the District Jail,  Darjeeling. We think it unnecessary to decide them. It is  now well settled that the earliest date with reference to  which the legality of detention challenged in a habeas  corpus proceeding may be examined is the date on which  the application for habeas corpus is made to the Court. This  Court speaking through Wanchoo, J., (as he then was) said  in A.K. Gopalan v. Government of India5:  

“It is well settled that in dealing with the petition for  habeas corpus the Court is to see whether the detention on  the date on which the application is made to the Court is  legal, if nothing more has intervened between the date of  the application and the date of the hearing.”  

In two early decisions of this Court, however, namely,  Naranjan Singh v. State of Punjab2 and Ram Narayan  Singh v. State of Delhi3 a slightly different view was  expressed and that view was reiterated by this Court in B.R.  Rao v. State of Orissa7 where it was said (at p. 259, para 7):  

“in habeas corpus proceedings the Court is to have  regard to the legality or otherwise of the detention at the  time of the return and not with reference to the institution  of the proceedings”.  and yet in another decision of this Court in Talib Hussain  v. State of Jammu & Kashmir6 Mr Justice Dua, sitting as a  Single Judge, presumably in the vacation, observed that (at  p. 121, para 6):  

“in habeas corpus proceedings the Court has to consider  the legality of the detention on the date of the hearing.”  Of these three views taken by the Court at different times,  the second appears to be more in consonance with the law  and practice in England and may be taken as having  received the largest measure of approval in India, though  the third view also cannot be discarded as incorrect,  because an inquiry whether the detention is legal or not at  the date of hearing of the application for habeas corpus  would be quite relevant, for the simple reason that if on that  date the detention is legal, the Court cannot order release of  the person detained by issuing a writ of habeas corpus. But,  for the purpose of the present case, it is immaterial which  of these three views is accepted as correct, for it is clear  that, whichever be the correct view, the earliest date with

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reference to which the legality of detention may be  examined is the date of filing of the application for habeas  corpus and the Court is not, to quote the words of Mr  Justice Dua in B.R. Rao v. State of Orissa7, “concerned  with a date prior to the initiation of the proceedings for a  writ of habeas corpus”. Now the writ petition in the present  case was filed on January 6, 1973 and on that date the  petitioner was in detention in the Central Jail,  Vizakhapatnam. The initial detention of the petitioner in  the District Jail, Darjeeling had come to an end long before  the date of the filing of the writ petition. It is, therefore,  unnecessary to examine the legality or otherwise of the  detention of the petitioner in the District Jail, Darjeeling.  The only question that calls for consideration is whether the  detention of the petitioner in the Central Jail,  Vizakhapatnam is legal or not. Even if we assume that  grounds A and B are well founded and there was infirmity  in the detention of the petitioner in the District Jail,  Darjeeling, that cannot invalidate the subsequent detention  of the petitioner in the Central Jail, Vizakhapatnam. See  para 7 of the judgment of this Court in B.R. Rao v. State of  Orissa. The legality of the detention of the petitioner in the  Central Jail, Vizakhapatnam would have to be judged on its  own merits. We, therefore, consider it unnecessary to  embark on a discussion of grounds A and B and decline to  decide them.”  

 The law is thus clear that “in Habeas Corpus proceedings a Court  

is to have regard to the legality or otherwise of the detention at the time  

of the return and not with reference to the institution of the proceedings”.   

In Kanu Sanyal8 the validity of the detention of the petitioner in District  

Jail, Darjeeling was therefore not considered by this Court and it was  

observed that the infirmity in the detention of the petitioner therein in the

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District Jail, Darjeeling could not invalidate subsequent detention of the  

petitioner in the Central Jail, Vishakhapatnam.     

 18. At this stage we may also deal with three recent cases decided by  

this Court:-  

A) In Manubhai Ratilal Patel through Ushaben  vs.  State of Gujarat  

and others9 a Division bench of this Court extensively considered earlier  

decisions in the point including cases referred to above.  It also dealt with  

an issue whether Habeas Corpus petition could be entertained against an  

order of remand passed by a Judicial Magistrate.  The observations of this  

Court in paragraphs 20 to 24 and para 31 were as under:  

20. After so stating, the Bench in Kanu Sanyal case8  opined that for adjudication in the said case, it was  immaterial which of the three views was accepted as  correct but eventually referred to para 7 in B.  Ramachandra Rao7 wherein the Court had expressed the  view in the following manner: (SCC p. 259)    “7. … in habeas corpus proceedings the court is to have  regard to the legality or otherwise of the detention at the  time of the return and not with reference to the institution  of the proceedings.”    Eventually, the Bench ruled thus: (Kanu Sanyal case8, SCC  p. 148, para 5)    

9  (2013) 1 SCC 314

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“5. … The production of the petitioner before the Special  Judge, Visakhapatnam, could not, therefore, be said to be  illegal and his subsequent detention in the Central Jail,  Visakhapatnam, pursuant to the orders made by the Special  Judge, Visakhapatnam, pending trial must be held to be  valid. This Court pointed out in Col. B. Ramachandra Rao  v. State of Orissa7 (SCC p. 258, para 5) that a writ of  habeas corpus cannot be granted  ‘where a person is committed to jail custody by a  competent court by an order which prima facie does not  appear to be without jurisdiction or wholly illegal’.”    21. The principle laid down in Kanu Sanyal8, thus, is that  any infirmity in the detention of the petitioner at the initial  stage cannot invalidate the subsequent detention and the  same has to be judged on its own merits.    22. At this juncture, we may profitably refer to the  Constitution Bench decision in Sanjay Dutt v. State  through CBI, Bombay (II)10 wherein it has been opined  thus: (SCC p. 442, para 48)    “48. … It is settled by Constitution Bench decisions that a  petition seeking the writ of habeas corpus on the ground of  absence of a valid order of remand or detention of the  accused, has to be dismissed, if on the date of return of the  rule, the custody or detention is on the basis of a valid  order.”    23. Keeping in view the aforesaid concepts with regard to  the writ of habeas corpus, especially pertaining to an order  passed by the learned Magistrate at the time of production  of the accused, it is necessary to advert to the schematic  postulates under the Code relating to remand. There are  two provisions in the Code which provide for remand i.e.  Sections 167 and 309. The Magistrate has the authority  under Section 167(2) of the Code to direct for detention of  

10  (1994) 5 SCC 410 : 1994 SCC (Cri) 1433

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the accused in such custody i.e. police or judicial, if he  thinks that further detention is necessary.    24. The act of directing remand of an accused is  fundamentally a judicial function. The Magistrate does not  act in executive capacity while ordering the detention of an  accused. While exercising this judicial act, it is obligatory  on the part of the Magistrate to satisfy himself whether the  materials placed before him justify such a remand or, to put  it differently, whether there exist reasonable grounds to  commit the accused to custody and extend his remand. The  purpose of remand as postulated under Section 167 is that  investigation cannot be completed within 24 hours. It  enables the Magistrate to see that the remand is really  necessary. This requires the investigating agency to send  the case diary along with the remand report so that the  Magistrate can appreciate the factual scenario and apply his  mind whether there is a warrant for police remand or  justification for judicial remand or there is no need for any  remand at all. It is obligatory on the part of the Magistrate  to apply his mind and not to pass an order of remand  automatically or in a mechanical manner.  

… … …    31. Coming to the case at hand, it is evincible that the arrest  had taken place a day prior to the passing of the order of  stay. It is also manifest that the order of remand was passed  by the learned Magistrate after considering the allegations  in the FIR but not in a routine or mechanical manner. It has  to be borne in mind that the effect of the order of the High  Court regarding stay of investigation could only have a  bearing on the action of the investigating agency. The order  of remand which is a judicial act, as we perceive, does not  suffer from any infirmity. The only ground that was  highlighted before the High Court as well as before this  Court is that once there is stay of investigation, the order of  remand is sensitively susceptible and, therefore, as a logical  corollary, the detention is unsustainable. It is worthy to  note that the investigation had already commenced and as a  resultant consequence, the accused was arrested. Thus, we  are disposed to think that the order of remand cannot be  regarded as untenable in law. It is well-accepted principle

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that a writ of habeas corpus is not to be entertained when a  person is committed to judicial custody or police custody  by the competent court by an order which prima facie does  not appear to be without jurisdiction or passed in an  absolutely mechanical manner or wholly illegal. As has  been stated in B. Ramachandra Rao3 and Kanu Sanyal9, the  court is required to scrutinise the legality or otherwise of  the order of detention which has been passed. Unless the  court is satisfied that a person has been committed to jail  custody by virtue of an order that suffers from the vice of  lack of jurisdiction or absolute illegality, a writ of habeas  corpus cannot be granted. It is apposite to note that the  investigation, as has been dealt with in various authorities  of this Court, is neither an inquiry nor trial. It is within the  exclusive domain of the police to investigate and is  independent of any control by the Magistrate. The sphere  of activity is clear cut and well demarcated. Thus viewed,  we do not perceive any error in the order passed by the  High Court refusing to grant a writ of habeas corpus as the  detention by virtue of the judicial order passed by the  Magistrate remanding the accused to custody is valid in  law.”  

 B) In Saurabh Kumar  vs.  Jailor, Koneila Jail and another11  the  

issue was dealt with in para 13 of the leading Judgment as under:-  

 13. It is clear from the said narration of facts that the  petitioner is in judicial custody by virtue of an order passed  by the Judicial Magistrate. The same is further ensured  from the original record which this Court has, by order  dated 9-4-2014, called for from the Court of the Additional  Chief Judicial Magistrate, Dalsingsarai, District  Samastipur, Bihar. Hence, the contention of the learned  counsel for the petitioner that there was illegal detention  without any case is incorrect. Therefore, the relief sought  for by the petitioner cannot be granted. Even though there  are several other issues raised in the writ petition, in view  

11  (2014) 13 SCC 436  

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of the facts narrated above, there is no need for us to go  into those issues. However, the petitioner is at liberty to  make an application for his release in Criminal Case No.  129 of 2013 pending before the Court of the learned  Additional Chief Judicial Magistrate, Dalsingsarai.”    

Thakur, J. (as the learned Chief Justice then was) who agreed with  

the leading Judgment authored by Ramana, J., also dealt with the matter  

in paragraph 22 of his concurring opinion as under:  

“22. The only question with which we are concerned  within the above backdrop is whether the petitioner can be  said to be in the unlawful custody. Our answer to that  question is in the negative. The record which we have  carefully perused shows that the petitioner is an accused  facing prosecution for the offences, cognizance whereof  has already been taken by the competent court. He is  presently in custody pursuant to the order of remand made  by the said Court. A writ of habeas corpus is, in the  circumstances, totally misplaced. Having said that, we are  of the view that the petitioner could and indeed ought to  have filed an application for grant of bail which prayer  could be allowed by the court below, having regard to the  nature of the offences allegedly committed by the petitioner  and the attendant circumstances. The petitioner has for  whatever reasons chosen not to do so. He, instead, has been  advised to file the present petition in this Court which is no  substitute for his enlargement from custody.”    

C)  A Bench of three learned Judges of this Court in State of Maharashtra  

and Others  vs.  Tasneem Rizwan Siddiquee12  concluded as under:-  

  “10. The question as to whether a writ of habeas corpus  could be maintained in respect of a person who is in police  

12  (2018) 9 SCC 745

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custody pursuant to a remand order passed by the  jurisdictional Magistrate in connection with the offence  under investigation, this issue has been considered in  Saurabh Kumar v. Jailor, Koneila Jail11 and Manubhai  Ratilal Patel9 v. State of Gujarat. It is no more res integra.  In the present case, admittedly, when the writ petition for  issuance of a writ of habeas corpus was filed by the  respondent on 18-3-2018/19-3-2018 and decided by the  High Court on 21-3-2018 her husband Rizwan Alam  Siddiquee was in police custody pursuant to an order  passed by the Magistrate granting his police custody in  connection with FIR No. I-31 vide order dated 17-3-2018  and which police remand was to enure till 23-3-2018.  Further, without challenging the stated order of the  Magistrate, a writ petition was filed limited to the relief of  habeas corpus. In that view of the matter, it was not a case  of continued illegal detention but the incumbent was in  judicial custody by virtue of an order passed by the  jurisdictional Magistrate, which was in force, granting  police remand during investigation of a criminal case.  Resultantly, no writ of habeas corpus could be issued.    11. Reverting to the prayer for expunging the scathing  observations made in the impugned judgment, in particular  paras 4-6, reproduced earlier, it is submitted that the said  observations were wholly unwarranted as the Deputy  Commissioner of Police concerned who was present in  Court, could not have given concession to release Rizwan  Alam Siddiquee in the teeth of a judicial order passed by  the Magistrate directing police remand until 23-3-2018.  Moreover, it is evident that the High Court proceeded to  make observations without giving any opportunity,  whatsoever, to the police officials concerned to explain the  factual position on affidavit. The writ petition was filed on  18-3-2018/19-3-2018 and was moved on 20-3-20182 when  the Court called upon the advocate for the appellants to  produce the record on the next day i.e. 21-3-2018. The  impugned order came to be passed on 21-3-20181,  notwithstanding the judicial order of remand operating till  23-3-2018. The High Court, in our opinion, should not  have taken umbrage to the submission made on behalf of  the Deputy Commissioner of Police that the respondent’s

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husband could be released if so directed by the Court. As  aforesaid, the DCP has had no other option but to make  such a submission. For, he could not have voluntarily  released the accused who was in police custody pursuant to  a judicial order in force. The High Court ought not to have  made scathing observations even against the investigating  officer without giving him an opportunity to offer his  explanation on affidavit.    12. Suffice it to observe that since no writ of habeas corpus  could be issued in the fact situation of the present case, the  High Court should have been loath to enter upon the merits  of the arrest in the absence of any challenge to the judicial  order passed by the Magistrate granting police custody till  23-3-2018 and more particularly for reasons mentioned in  that order of the Magistrate. In a somewhat similar  situation, this Court in State represented by Inspector of  Police and others v. N.M.T. Joy Immaculate13 deprecated  passing of disparaging and strong remarks by the High  Court against the investigating officer and about the  investigation done by them. Accordingly, we have no  hesitation in expunging the observations made in paras 4 to  6 of the impugned judgment against the police officials  concerned in the facts of the present case.”    

 19. The act of directing remand of an accused is thus held to be a  

judicial function and the challenge to the order of remand is not to be  

entertained in a habeas corpus petition.  The first question posed by the  

High Court, thus, stands answered.  In the present case, as on the date when  

the matter was considered by the High Court and the Order was passed by  

it, not only were there orders of remand passed by the Judicial Magistrate  

13  (2004) 5 SCC 729

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as well as the Special Court, Gurugram but there was also an order of  

extension passed by the Central Government on 14.12.2018.   The legality,  

validity and correctness of the order or remand could have been challenged  

by the original Writ Petitioners by filing appropriate proceedings.   

However, they did not raise such challenge before the competent Appellate  

or Revisional Forum.  The orders of remand passed by the Judicial  

Magistrate and the Special Court, Gurugram had dealt with merits of the  

matter and whether continued detention of the accused was justified or not.   

After going into the relevant issues on merits, the accused were remanded  

to further police custody.  These orders were not put in challenge before the  

High Court.  It was, therefore, not open to the High Court to entertain  

challenge with regard to correctness of those orders. The High Court,  

however, considered the matter from the standpoint whether the initial  

Order of arrest itself was valid or not and found that such legality could not  

be sanctified by subsequent Order of remand.  Principally, the issue which  

was raised before the High Court was whether the arrest could be effected  

after period of investigation, as stipulated in said order dated 20.06.2018  

had come to an end.  The supplementary issue was the effect of extension  

of time as granted on 14.12.2018.   It is true that the arrest was effected  

when the period had expired but by the time the High Court entertained the

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petition, there was as order of extension passed by the Central Government  

on 14.12.2018.  Additionally, there were judicial orders passed by the  

Judicial Magistrate as well as the Special Court, Gurugram, remanding the  

accused to custody.  If we go purely by the law laid down by this Court  

with regard to exercise of jurisdiction in respect of Habeas Corpus petition,  

the High Court was not justified in entertaining the petition and passing the  

Order.   

 20. We must, however, deal with the submission advanced on behalf of  

the original Writ Petitioners that the relief as regards Habeas Corpus was a  

secondary prayer while the principal submissions were with regard to the  

first three prayers in the petition.  It was submitted that with the expiry of  

period, the entire mandate came to an end and as such, there could be no  

arrest and that illegality in that behalf would continue regardless whether  

there was a subsequent order of extension.  In the submission of the learned  

counsel for the Writ Petitioner such an extension could not cure the inherent  

defect and as such, the High Court was justified in entertaining the petition.    

We may deal with this issue after considering the second question posed by  

the High Court in said paragraph 15.  

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21. The first Order dated 20.06.2018 itself indicated that the Registered  

Office of the Principal Company was in Gurugram, Haryana.  Section 435 of  

2013 Act contemplates establishment of Special Courts for the purpose of  

providing speedy trial of offences under said Act.  Section 436 then provides  

that “offences specified under sub-section (1) of Section 435 shall be triable  

only by Special Court established or designated for the area in which the  

Registered Office of the Company, in relation to which the offence is  

committed ……”.  Soon after the arrest, the accused were produced before  

the Judicial Magistrate, Gurugram on 11.12.2018, who remanded them to  

custody till 14.12.2018 and directed that they be produced before the Special  

Court, Gurugram on 14.12.2018.  Accordingly the accused were produced  

before the Special Court, Gurugram, who thereafter remanded them to  

custody first till 18.12.2018 and later till 21.12.2018.   The Special Court,  

Gurugram would be competent to deal with the matter in terms of Section  

436.  Learned counsel for the writ petitioners, however, contend that since  

the accused were arrested in Delhi, were kept in custody in Delhi, and the  

SFIO office being in Delhi, the High Court of Delhi was competent to  

entertain and consider the writ petitions so preferred by the writ petitioners.  

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Reliance was placed by them on the decision of this Court in Navinchandra  

N. Majithia v. State of Maharashtra and others14  

 22. In Navinchandra Majithia14, all the transactions between the  

parties had occurred within the jurisdiction of the High Court of Bombay.    

However, a complaint was filed against the petitioner at Shillong pursuant  

to which investigation was taken up by Shillong Police.  It was submitted  

that such investigation was wholly incorrect and unjustified and a writ  

petition was preferred in the High Court of Bombay seeking quashing of  

the complaint so filed at Shillong or in the alternative to transfer the  

investigation to an appropriate Investigating Agency of Mumbai Police.   

Paragraph 29 of the decision shows that in the peculiar fact situation of the  

case, this Court directed that further investigation in relation to the  

complaints filed at Shillong be conducted by Mumbai Police.  Thomas, J.  

who agreed with the leading Judgment authored by D.P. Mohapatra, J.  

observed in his concurrent opinion as under:  

 “44. In the present case, a large number of events have  taken place at Bombay in respect of the allegations  contained in the FIR registered at Shillong. If the  averments in the writ petition are correct then the major  portion of the facts which led to the registering of the FIR  

14  (2000) 7 SCC 640

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have taken place at Bombay. It is unnecessary to repeat  those events over again as Mohapatra, J. has adverted to  them with precision and the needed details.    45. In the aforesaid situation it is almost impossible to hold  that not even a part of the cause of action has arisen at  Bombay so as to deprive the High Court of Bombay of total  jurisdiction to entertain the writ petition filed by the  petitioner. Even the very fact that a major portion of the  investigation of the case under the FIR has to be conducted  at Bombay itself, shows that the cause of action cannot  escape from the territorial limits of the Bombay High  Court.”    

 23. In Dashrath Rupsingh Radhod vs. State of Maharashtra and  

another15,  a Bench of three learned Judges of this Court was called  

upon to consider the questions regarding territorial jurisdiction of Courts  

with regard to criminal complaints under the Negotiable Instruments  

Act, 1881 and para 13 of the decision noted the earlier decision in  

Navinchandra N. Majithia14 and observed as under:   

“13. We are alive to the possible incongruities that are  fraught in extrapolating decisions relating to civil law onto  criminal law, which includes importing the civil law  concept of “cause of action” to criminal law which  essentially envisages the place where a crime has been  committed empowers the court at that place with  jurisdiction. In Navinchandra N. Majithia v. State of  Maharashtra14 this Court had to consider the powers of  High Courts under Article 226(2) of the Constitution of  India. Noting the presence of the phrase “cause of action”  

15  (2014) 9 SCC 129

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therein it was clarified that since some events central to the  investigation of the alleged crime asseverated in the  complaint had taken place in Mumbai and especially  because the fundamental grievance was the falsity of the  complaint filed in Shillong, the writ jurisdiction of the  Bombay High Court was unquestionably available. The  infusion of the concept of “cause of action” into the  criminal dispensation has led to subsequent confusion  countenanced in High Courts. It seems to us that K.  Bhaskaran v. Sankaran Vaidhyan Balan and another16, ,   allows multiple venues to the complainant which runs  counter to this Court’s preference for simplifying the law.  Courts are enjoined to interpret the law so as to eradicate  ambiguity or nebulousness, and to ensure that legal  proceedings are not used as a device for harassment, even  of an apparent transgressor of the law. Law’s endeavour is  to bring the culprit to book and to provide succour for the  aggrieved party but not to harass the former through  vexatious proceedings. Therefore, precision and exactitude  are necessary especially where the location of a litigation is  concerned.”  

 24. It is true that the decision in Dashrath Rupsingh Radhod 15 was  

in the context of a criminal complaint under Section 138 of the Negotiable  

Instruments Act and not while dealing with an issue of maintainability of a  

writ petition under Article 226 of the Constitution.  It cannot, therefore,  be  

said that in the present case, the High Court completely lacked jurisdiction  

to entertain the petition.  However, since the challenge was with respect to  

the detention pursuant to valid remand orders passed by the Judicial  

Magistrate and the Special Court, Gurugram, in our considered view, the  

16  (1999) 7 SCC 510 : 1999 SCC (Cri) 1284

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High Court should not have entertained the challenge.  If the act of  

directing remand is fundamentally a judicial function, correctness or  

validity of such orders could, if at all, be tested in a properly instituted  

proceedings before the appellate or revisional forum.  In the circumstances  

even if the arrests were effected within the jurisdiction of the High Court,  

since the accused were produced before a competent court in pursuance of  

Sections 435, 436 of 2013 Act, the High Court ought not to have  

entertained the writ petition.  However, since the High Court considered the  

matter from the standpoint whether the initial Order of arrest itself was  

valid or not and then found that such illegality could not be sanctified by  

subsequent Order of remand, we may deal with that question now.  

 25. At the outset, we may extract relevant statutory provisions.  

A)  Sections 211 and 212 of 2013 Act are as under:-  

“211.  Establishment of Serious Fraud Investigation  Office. – (1)  The Central Government shall, by notification,  establish an office to be called the Serious Fraud Investigation  Office to investigate frauds relating to a company:  

Provided that until the Serious Fraud Investigation Office is  established under sub-section (1), the Serious Fraud  Investigation Office set-up by the Central Government in  terms of the Government of India Resolution  No.45011/16/2003-Adm-I, dated the 2nd July, 2003 shall be  deemed to be the Serious Fraud Investigation Office for the  purpose of this section.

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(2)  The Serious Fraud Investigation Office shall be headed by  a Director and consist of such number of experts from the  following fields to be appointed by the Central Government  from amongst persons of ability, integrity and experience in, -  

(i)  banking;  (ii) corporate affairs;  (iii) taxation;  (iv) forensic audit;  (v)  capital market;  (vi) information technology;  (vii)law; or  (viii) such other fields as may be prescribed.    

(3)  The Central Government shall, by notification, appoint a  Director in the Serious Fraud Investigation Office, who shall  be an officer not below the rank of a Joint Secretary to the  Government of India having knowledge and experience in  dealing with matters relating to corporate affairs.  

(4)  The Central Government may appoint such experts and  other officers and employees in the Serious Fraud  Investigation Office as it considers necessary for the efficient  discharge of its functions under this Act.  

(5)  The terms and conditions of service of Director, expert,  and other officers and employees of the Serious Fraud  Investigation Office shall be such as may be prescribed.  

212.  Investigation into affairs of Company by Serious  Fraud Investigation Office. – (1)Without prejudice to the  provisions of section 210, where the Central Government is of  the opinion, that it is necessary to investigate into the affairs  of a company by the Serious Fraud Investigation Office –   

(a)  on receipt of a report of the Registrar or inspector  under section 208;  

(b)   on intimation of a special resolution passed by a  company that its affairs are required to be  investigated;  

(c)  in the public interest; or   (d)  on request from any Department of the Central  

Government or a State Government,   

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The Central Government may, by order, assign the  investigation into the affairs of the said company to the  Serious Fraud Investigation Office and its Director, may  designate such number of inspector, as he may consider  necessary for the purpose of such investigation.  

(2)  Where any case has been assigned by the Central  Government to the Serious Fraud Investigation Office for  investigation under this Act, no other investigating agency of  Central Government or any State Government shall proceed  with investigation in such case in respect of any offence under  this Act and in case any such investigation has already been  initiated, it shall not be proceeded further with and the  concerned agency shall transfer the relevant documents and  records in respect of such offences under this Act to serious  Fraud Investigation Office.  

(3)  Where the investigation into the affairs of a company has  been assigned by the Central Government to Serious Fraud  Investigation Office, it shall conduct the investigation in the  manner and follow the procedure provided in this Chapter;  and submit its report to the Central Government within such  period as may be specified in the order.  

(4)  The Director, Serious Fraud Investigation Office shall  cause the affairs of the company to be investigated by an  Investigating Officer who shall have the power of the  inspector under section 217.  

(5)  The company and its officers and employees, who are or  have been in employment of the company shall be responsible  to provide all information, explanation, documents and  assistance to the Investigating Officer as he may require for  conduct of the investigation.  

(6)  Notwithstanding anything contained in the Code of  Criminal Procedure, 1973 (2 of 1974), 17[offence covered  

17 Subs. by Act 21 of 2015, sec. 17, for “the offences covered under sub- sections (5) and (6) of section 7, section 34, section 36, sub-section (1) of section 38,  sub-sections (5) of section 46, sub-section (7) of section 56, sub-section (10) of  section 66, sub-section (5) of section 140, sub-section (4) of section 206, section

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under section 447] of this Act shall be recognizable and no  person accused of any offence under those sections shall be  released on bail or on his own bond unless-  

(i)  the Public Prosecutor has been given an opportunity  to oppose the application for such release; and  

(ii)  where the Public Prosecutor opposes the application,  the court is satisfied that there are reasonable  grounds for believing that he is not guilty of such  offence and that he is not likely to commit any  offence while on bail:  

Provided that a person, who, is under the age of sixteen years  or is a woman or is sick or infirm, may be released on bail, if  the Special Court so directs:  

Provided further that the Special Court shall not take  cognizance of any offence referred to this sub-section except  upon a complaint in writing made by –   

(i)  The Director, Serious Fraud Investigation Office;  or  

 (ii) Any officer of the Central Government authorised,  

by a general or special order in writing in this  behalf by that Government.  

 (7)  The limitation on granting of bail specified in sub-section  (5) is in addition to the limitations under the Code of Criminal  Procedure, 1973 (2 of 1974) or any other law for the time  being in force on granting of bail.  

(8)  If the Director, Additional Director or Assistant Director  of Serious Fraud Investigation Office authorised in this behalf  by the Central Government by general or special order, has on  the basis of material in his possession reason to believe (the  reason for such belief to be recorded in writing) that any  person has been guilty of any offence punishable under  sections referred to in sub-section (6), he may arrest such  

213, section 229, sub-section (1) of section 251, sub-section (3) of section 339 and  section 448 which attract the punishment for fraud provided in section 447”.

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person and shall, as soon as may be, inform him of the  grounds for such arrest.  

(9)  The Director, Additional Director or Assistant Director of  Serious Fraud Investigation Office shall, immediately after  arrest of such person under sub-section (8), forward a copy of  the order, along with the material in his possession, referred to  in that sub-section, to the Serious Fraud Investigation Office  in a sealed envelope, in such manner as may be prescribed and  the Serious Fraud Investigating Office shall keep such order  and material for such period as may be prescribed.  

(10)  Every person arrested under sub-section (8) shall within  twenty-four hours, be taken to a Judicial Magistrate or a  Metropolitan Magistrate, as the case may be, having  jurisdiction:  

Provided that the period of twenty-four hours shall exclude  the time necessary for the journey from the place of arrest to  the Magistrate’s court.  

(11)  The Central Government if so directs, the Serious Fraud  Investigation Office shall submit an interim report to the  Central Government.  

(12)  On completion of the investigation, the Serious Fraud  Investigation Office shall submit the investigation report to  the Central Government.  

(13)  Notwithstanding anything contained in this Act or in any  other law for the time being in force, a copy of the  investigation report may be obtained by any person concerned  by making an application in this regard to the court.  

(14)  On receipt of the investigation report, the Central  Government may, after examination of the report (and after  taking such legal advice, as it may think fit), direct the Serious  Fraud investigation Office to initiate prosecution against the  company and its officers or employees, who are or have been  in employment of the company or any other person directly or  indirectly connected with the affairs of the company.  

(15)  Notwithstanding anything contained in this Act or in any  other law for the time being in force, the investigation report  filed with the Special Court for framing of charges shall be

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deemed to be a report filed by a police officer under section  173 of the Code of Criminal Procedure, 1973 (2 of 1974).  

(16)  Notwithstanding anything contained in this Act, any  investigation or other action taken or intimated by Serious  Fraud Investigation Office under the provisions of the  Companies Act, 1956 (1 of 1956) shall continue to be  proceeded with under the Act as if this Act had not been  passed.  

(17)  (a)  In case Serious Fraud Investigation Office has been  investigating any offence under this Act, any other  investigating agency, State Government, police authority,  income-tax authorities having any information or documents  in respect of such offence shall provide all such information  or documents available with it to the Serious Fraud  Investigation Office;  

(b)  The Serious Fraud Investigation Office shall share any  information or documents available with it, with any  investigating agency, State Government, police authority or  income-tax authorities, which may be relevant or useful for  such investigating agency, State Government, police authority  or income-tax authorities in respect of any offence or matter  being investigated or examined by it under any other law.  

B) Section 43 of 2008 Act is as under:-  

“43.  Investigation of the affairs of limited liability  partnership – (1) The Central Government shall appoint one  or more competent persons as inspectors to investigate the  affairs of a limited liability partnership and to report thereon  in such manner as it may direct if–     

(a) the Tribunal, either suo moto, or on an application  received from not less than one-fifth of the total  number of partners of limited liability partnership,  by orders, declares that the affairs of the limited  liability partnership ought to be investigated; or  

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(b) any Court, by order, declares that the affairs of a  limited liability partnership ought to be  investigated.  

 (2)  The Central Government may appoint one ore more  competent persons as inspectors to investigate the affairs of a  limited partnership and to report on them in such manner as it  may direct.    (3)  The appointment of inspectors pursuant to sub-section (2)  may be made, -     

(a) if not less one-fifth of the total number of partners  of the limited liability partnership make an  application along with supporting evidence and  security amount as may be prescribed; or  

(b) if the limited liability partnership makes an  application that the affairs of the limited liability  partnership ought to be investigated; or  

(c) if, in the opinion of the Central Government, there  are circumstances suggesting –   

 (i)  that the business of the limited partnership is being  

or has been conducted with an intent to defraud its  creditor, partners or any other person, or otherwise  for a fraudulent or unlawful purpose, or in a manner  oppressive or unfairly prejudicial to some or any of  its partners, or that the limited liability partnership  was formed for any fraudulent or unlawful purpose;  or  

 (ii)  that the affairs of the limited liability partnership are  

not being conducted in accordance with the  provisions of this Act, or  

 (iii) That, on receipt of a report of the Registrar or any  

other investigating or regulatory agency, there are  sufficient reasons that the affairs of the limited  liability partnership ought to be investigated.”  

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26. Reading of the provisions of 2013 Act shows that certain Sections in  

Chapter XXIX prescribe punishment for offences such as fraud, false  

statement, false evidence and withholding of property under Sections 447,  

448, 449 and 452 respectively.  The punishment for fraud involving an  

amount of at least Rs.10 lakhs or 1 per cent of the turnover of the Company, is  

imprisonment for a term which may extend to 10 years.  The offence of fraud  

in relation to the affairs of a Company is considered to be a grave offence and  

the writ petitioners were allegedly guilty of such offence.  Chapter XIV of  

2013 Act deals with Inspection, Inquiry and Investigation.  Under Section  

210, investigation into the affairs of a Company can be undertaken.  Section  

211 contemplates establishment of Serious Fraud Investigation Offence  

(SFIO) which is to be headed by a Director and is to consist of Experts with  

ability, integrity and experience in fields like Banking, Corporate Affairs,  

Taxation, Forensic Audit, Capital Market, Information Technology, Law or  

such other fields.  SFIO headed by a Director is thus a compact and  

competent unit consisting of experts in various domains.  Section 212  

empowers the Central Government to assign the investigation into the affairs  

of a Company to SFIO.  Upon such assignment the Director SFIO may  

designate such number of inspectors under sub-Section (1) and shall cause the  

affairs of the Company to be investigated by an Investigating Officer under

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sub-Section (4).  The expression used in sub-Section (1) is “assign the  

investigation”.  Sub-Section (2) incorporates an important principle that upon  

such assignment by the Central Government to SFIO, no other investigating  

agency of the Central Government or any State Government can proceed with  

investigation in respect of any offence punishable under 2013 Act and is  

bound to transfer the documents and records in respect of such offence under  

2013 Act to SFIO.    

 27. Under sub-Section (3) where the investigation is so assigned by the  

Central Government to SFIO, the investigation must be conducted in the  

manner and in accordance with the procedure provided in the Chapter and a  

report has to be submitted to the Central Government within such period as  

may be specified.  This provision contemplates submission of a report within  

the period as may be specified.  The subsequent provisions then contemplate  

various stages of investigation including arrest under sub-Section (8) and that  

SFIO is to submit an interim report to the Central Government, if it is so  

directed under sub Section (11).   Further, according to sub-Section (12), on  

completion of the investigation, SFIO is to submit the “investigation report”  

to the Central Government.  This report under sub-Section (12) may lead to  

further follow up actions.  Under sub-Section (13) a copy of the “investigation

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report” could be obtained by any concerned person by making an application  

in that behalf to the Court while under sub-Section (14) on receipt of said  

“investigation report” the Central Government may direct SFIO to initiate  

prosecution against the Company.  

   The “investigation report” under sub-Section (12) is to be submitted  

on completion of the investigation whereas report under sub-Section (11) is in  

the nature of an interim report and is to be submitted if the Central  

Government so directs.  In the backdrop of these provisions we must now  

consider whether the period within which a report is contemplated to be  

submitted to the Central Government under sub-Section (3) is mandatory and  

what is the scope and extent of such stipulation.  It must also be stated here  

that the provisions of Section 43(2) of 2008 Act do not postulate any such  

period and the assignment in the present case to SFIO was under the  

concerned provisions of 2013 Act as well as under 2008 Act.    

 28. Section 212(3) of 2013 Act by itself does not lay down any fixed  

period within which the report has to be submitted.  Even under sub-Section  

(12) which is regarding “investigation report”, again there is no stipulation of  

any period.  In fact such a report under sub-Section (12) is to be submitted  

“on completion of the investigation”.  There is no stipulation of any fixed

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period for completion of investigation which is consistent with normal  

principles under the general law.  For instance, there is no fixed period within  

which the investigation under Criminal Procedure Code must be completed.   

If the investigation proceeds for a longer period, under Section 167 of the  

Code certain rights may flow in favour of the Accused.  But it is certainly not  

the idea that in case the investigation is not over within any fixed period, the  

authority to investigate would come to an end.    

Again, sub-Section (2) of Section 213 of 2013 Act does not speak of  

any period for which the other Investigating Agencies are to hold their hands,  

nor does the provision speak of any re-transfer of the relevant documents and  

records from SFIO back to said Investigating Agencies after any period or  

occurring of an event.  For example, under Section 6 of the National  

Investigation Agency Act, 2008 (“NIA Act” for short) the Agency (NIA) can  

be directed by the Central Government to investigate the Scheduled Offence  

under the NIA Act and where such direction is given, the State Government is  

not to proceed with any pending investigation and must forthwith transmit the  

relevant documents and records to the Agency (NIA).  But under Section 7 of  

NIA Act, the Agency may, with previous approval, transfer the case to the  

State Government for investigation and trial of the offence.  

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29.  The very expression “assign” in Section 212(3) of 2013 Act  

contemplates transfer of investigation for all purposes whereafter the original  

Investigating Agencies of the Central Government or any State Government  

are completely denuded of any power to conduct and complete the  

investigation in respect of the offences contemplated therein.  The idea under  

sub-Section (2) is complete transfer of investigation.  The transfer under sub-

Section (2) of Section 213 would not stand revoked or recalled in any  

contingency.  If a time limit is construed and contemplated within which the  

investigation must be completed then logically, the provisions would have  

dealt with as to what must happen if the time limit is not adhered to.  The  

Statute must also have contemplated a situation that a valid investigation  

undertaken by any Investigating Agency of Central Government or State  

Government which was transferred to SFIO, must then be re-transferred to  

said Investigating Agencies.  But the Statute does not contemplate that.  The  

transfer is irrevocable and cannot be recalled in any manner.  Once assigned,  

SFIO continues to have the power to conduct and complete investigation18.  If  

that be so, can such power stand curtailed or diminished if the investigation is                                                              

18  The decision of this Court in Kazi Lhendup Dorji vs. State of Sikkim & Ors  reported in (1994) Supp. 2 SCC 116 (para 16), though in a different situation, laid  down that consent once given by State Government under which investigation was  handed over to CBI, could not be recalled or rescinded by the State Government  and it is the CBI which would be competent to complete investigation.

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not completed within a particular period.  The Statute has not prescribed any  

period for completion of investigation.  The prescription in the instant case  

came in the order of 20.06.2018.   Whether such prescription in the Order  

could be taken as curtailing the powers of SFIO is the issue.  

 30.  It is well settled that while laying down a particular procedure if no  

negative or adverse consequences are contemplated for non-adherence to  

such procedure, the relevant provision is normally not taken to be mandatory  

and is considered to be purely directory.  Furthermore, the provision has to  

be seen in the context in which it occurs in the Statute.  There are three basic  

features which are present in this matter:-   

1. Absolute transfer of investigation in terms of Section 212(2) of  

2013 Act in favour of SFIO and upon such transfer all documents and  

records are required to be transferred to SFIO by every other  

Investigating Agency.  

2. For completion of investigation, sub-Section (12) of Section 212  

does not contemplate any period.    

3. Under sub-Section (11) of Section 212 there could be interim  

reports as and when directed.  

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In the face of these three salient features it cannot be said that the  

prescription of period within which a report is to be submitted by SFIO  

under sub-Section (3) of Section 212 is for completion of period of  

investigation and on the expiry of that period the mandate in favour of  

SFIO must come to an end.  If it was to come to an end, the legislation  

would have contemplated certain results including re-transfer of  

investigation back to the original Investigating Agencies which were  

directed to transfer the entire record under sub-Section (2) of Section 212.   

In the absence of any clear stipulation, in our view, an interpretation that  

with the expiry of the period, the mandate in favour of SFIO must come  

to an end, will cause great violence to the scheme of legislation.  If such  

interpretation is accepted, with the transfer of investigation in terms of  

sub Section (2) of Section 212 the original Investigating Agencies would  

be denuded of power to investigate and with the expiry of mandate SFIO  

would also be powerless which would lead to an incongruous situation  

that serious frauds would remain beyond investigation.  That could never  

have been the idea.  The only construction which is, possible therefore, is  

that the prescription of period within which a report has to be submitted to  

the Central Government under sub-Section (3) of Section 212 is purely  

directory.  Even after the expiry of such stipulated period, the mandate in

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favour of the SFIO and the assignment of investigation under sub-Section  

(1) would not come to an end.  The only logical end as contemplated is  

after completion of investigation when a final report or “investigation  

report” is submitted in terms of sub-Section (12) of Section 212.  It cannot  

therefore be said that in the instant case the mandate came to an end on  

19.09.2018 and the arrest effected on 10.12.2018 under the orders passed  

by Director, SFIO was in any way illegal or unauthorised by law.  In any  

case, extension was granted in the present case by the Central  

Government on 14.12.2018.  But that is completely besides the point  

since the original arrest itself was not in any way illegal.  In our  

considered view, the High Court completely erred in proceeding on that  

premise and in passing the order under appeal.  

 31. These appeals therefore deserve to be allowed and the Order under  

appeal must be set aside.  Since the writ petitioners were directed to be  

released on bail, by way of interim relief, we direct as under:-  

(a)  The Order dated 20.12.2018 passed by the High Court in  W.P. (Crl.)  

No.3842 of 2018 and in W.P. (Crl.) No.3843 of 2018 is set aside.   

(b)  The writ petitioners namely Rahul Modi and Mukesh Modi are directed  

to surrender and remain present on 01.04.2019 at 11.00 a.m. before the

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Special Court, Gurugram.  The Special Court may then consider the matter  

on merits and whether the accused are required to be remanded to custody.    

(c)  In case, said writ petitioners do not appear on the day and at the time  

stipulated above, the personal bonds executed by them and the surety bonds  

shall stand forfeited and the appellant shall be at liberty to arrest said writ  

petitioners.  

(d)  The writ petitioners shall file affidavits of compliance in this Court by  

08.04.2019.  

  32. Transfer Petition (Crl.) No.35 of 2019 was filed by Serious Fraud  

Investigation Office (SFIO) and Deputy Director, SFIO (Original  

Respondents seeking transfer of Writ Petition (Crl.) No.3960 of 2018.  Said  

writ petition preferred on 21.12.2018 by Vivek Harivyasi claimed similar  

relief as was granted by the High Court in Writ Petition (Crl) Nos.3842 and  

3843 of 2018 on 21.12.2018.   However, before the writ petition could be  

taken up, the decision of the High Court dated 20.12.2018 was put in  

challenge before this Court and Transfer Petition (Crl.) No.35 of 2019  

seeking transfer of Writ Petition (Crl.) No.3960 of 2018 was also preferred.  

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33.  On 08.03.2019 learned counsel appearing for Vivek Harivyasi  

submitted that his client would prefer an application for bail before the  

concerned court and following direction was passed by this Court:  

“The respondent No.1 in T.P. (Crl.) No.35/20-19 may prefer  application for bail and if such an application is preferred,  the concerned court in question may consider the matter on  merits without being influenced by any observations in the  order of the High Court, impugned herein.    

34. In view of our above decision in Criminal Appeals arising from  

Special Leave Petition (Crl.) Nos.94-95 of 2019, no separate orders are  

called for in the transfer petition.  The transfer petition is, therefore, disposed  

of.  

 35. In the end, we must state that we have not and shall not be taken to  

have expressed any opinion on merits of the matter which shall be gone into  

independently by the concerned courts.  

………..…..……..……J.                                                                             (Abhay Manohar Sapre)  

..………….……………J.                                            (Uday Umesh Lalit)  

New Delhi,  March 27, 2019.

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    REPORTABLE  

IN THE SUPREME COURT OF INDIA  CRIMINAL APPELLATE JURISDICTION  

CRIMINAL  APPEAL Nos.538-539 OF 2019  (Arising out of S.L.P.(Crl.) Nos.94-95 of 2019)  

Serious Fraud Investigation Office   ….Appellant(s)          

    VERSUS          

Rahul Modi and Anr. Etc.         ….Respondent(s)                            

WITH  

TRANSFER PETITION (CRL.) NO.35 OF 2019          (Serious Fraud Investigation Office & Anr. vs. Vivek                 Harivyasi & Ors.)  

J U D G M E N T  

Abhay Manohar Sapre, J.  

1. I have had the advantage of going through an  

elaborate, well considered and scholarly draft  

judgment proposed by my esteemed brother Justice  

Uday Umesh Lalit.   

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2. I entirely agree with the reasoning and the  

conclusion, which my erudite brother has drawn,  

which are based on remarkably articulate process of  

reasoning.  However, having regard to the nature of  

the controversy, I wish to add a few words of mine.  

3. One of the questions which fell for  

consideration in these appeals and was ably argued  

at length by the learned senior counsel for both the  

parties was in relation to the scope, extent and the  

purpose of Section 212 of the Companies Act, 2013  

(hereinafter referred to as the “Act”) and, in  

particular, whether the compliance of sub-section  

(3) of Section 212 of the Act is mandatory or  

directory and, if so, why.  

4. As rightly reasoned out by my learned brother  

Lalit, J., having regard to the scheme of the Act  

underlined in Chapter XIV (Sections 206 to 229 of  

the Act) dealing with the matters relating to

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inspection, inquiry and investigation of the  

companies in juxtaposition with Chapter XXIX  

which prescribes the punishment/penalties for  

commission of various offences specified under the  

Act, the compliance of sub-section (3) of Section 212  

of the Act is essentially directory.   

5. If the submission of the learned counsel for the  

respondents (writ petitioners) that the compliance of  

sub-section (3) of Section 212 of the Act in relation  

to the submission of the report be held mandatory  

is accepted (which I am afraid, I cannot accept) in  

our view, the very purpose of enacting Section 212  

of the Act would get defeated and will become  

nugatory.   

6. Indeed, when I apply the well-known principle  

of purposive interpretation while interpreting the  

relevant provisions in juxtaposition and hold that  

sub-section (3) of Section 212 of the Act is directory

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in nature, it serves the legislative intent for which  

Chapter XXIX is enacted.  

7. I, therefore, agree with the reasoning and the  

conclusion arrived at by brother Justice Lalit on the  

interpretation of sub-section (3) of Section 212 of  

the Act.  

8. In the light of what is held above, the other  

arguments of learned counsel for the respondents  

do not survive for consideration.   

9. So far as the other issues are concerned,  

brother Lalit, J. has dealt with them succinctly.  I  

entirely agree with him.  

              ………...................................J.       [ABHAY MANOHAR SAPRE]             

                           New Delhi;  

March 27, 2019.