The Hon'ble Sri Justice C.V.Nagarjuna Reddy Writ Petition No.14938 of 2008 Date: 25.07.2011 Between: K.Madhav Reddy ..... Petitioner AND 1.Joint Director and Inspector, Government of India, Serious Fraud Investigation Office, Ministry of Corporate Office, 2nd Floor, Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi – 110 003 and another. .....Respondents Counsel for the Petitioner: Sri Sashidhar Reddy for Sri.S.Chakrapani Counsel for the Respondents: Sri Ponnam Ashok Goud, Asst. Solicitor General The Court made the following: Order: This Writ Petition is filed for a Mandamus to declare the action of the respondents in issuing summons, dated 25-06-2008 and 26-06-2008, to the petitioner, as illegal and without jurisdiction. I have heard Sri Sasidhar Reddy, learned Counsel for the petitioner, and the learned Assistant Solicitor General representing the respondents. The petitioner entered into certain sale transactions with M/s.JVG Finance Limited and its allied group of companies. The proceedings, under the Companies Act, 1956 (for short ‘the Act’), were initiated against the said group of companies. In connection with the investigation into the affairs of the said group of Companies, under Section 235 of the Act, respondent No.2 has issued the impugned summons, to the petitioner, in purported exercise of his powers, vested under sub-section (2) of Section 240 of the Act, to appear before him personally for examination along with relevant information/documents, books, papers etc., as shown in annexure- A. Feeling aggrieved by these summons, the petitioner filed the present Writ Petition. At the hearing, the learned Counsel for the petitioner submitted that in order to exercise the power of summoning the petitioner, who is, admittedly, an individual, and not an officer, employee or agent of M/s.JVG group companies, respondent No.2 is required to take approval of the Central Government. The learned Counsel submitted that no such approval was obtained by respondent No.2 in this regard. Per contra, the learned Assistant Solicitor General submitted that respondent No.2 has obtained prior permission of the Central Government through letter, dated 26-02-2008, of the Secretary, Ministry of Corporate Affairs, New Delhi, which was signed on 27-02-2008. In support of his submission, he has placed before the Court the said letter along with annexure- II, containing the names of as many as 143 companies/individuals, which reflects the name of the petitioner at Serial No.141. But, a perusal of the said letter of the Secretary, Ministry of Corporate Affairs would show that the permission was granted under Section 240 (1A) of the Act. As rightly pointed out by the learned Counsel for the petitioner, the provisions of Sections 240 (1A) and 240 (2) of the Act operate in different areas. Under Section 240 (1A) of the Act, the Inspector may, with the previous approval of the Central Government, require anybody corporate, other than a body corporate in respect of whose affairs investigation is being made, to furnish such information to, or produce such books and papers before, him or any person authorized by him in this behalf, if, in his opinion, furnishing of such information or production of such books or papers is relevant or necessary for the purpose of his investigation. Under 240 (2) of the Act, an Inspector may examine on oath any of the persons referred to in sub- section (1) i.e., the persons, who are connected with the affairs of the Company or any other body corporate, which are under investigation, and also any other person with the previous approval of the Central Government. While under sub-section (1A) of Section 240 of the Act, the Inspector has the power to require anybody corporate, other than a body corporate in respect of whose affairs investigation is being made, to furnish information or produce such books and papers, which, in his opinion, are relevant for the purpose of investigation, under sub-section (2) of Section 240 of the Act, any other person can be summoned by him with the previous approval of the Central Government for the limited purpose of examining him on oath in relation to the affairs of the company or other body corporate. Under sub-section 2, respondent No.2 is not vested with the power to call for information and require production of books and papers as under sub-section (1A). Even though the impugned summons refers to sub-section (2) of Section 240, respondent No.2 has, however, required the petitioner to furnish the accounts and other documents mentioned in annexure-A thereto. The provision of Section 240 (1A) of the Act, under which the Central Government has given permission to summon, does not apply to the individuals like the petitioner. The relevant provision, as rightly quoted by respondent No.2 in the impugned letter, is sub-Section (2) of Section 240 of the Act under which, he has power to summon the petitioner for the limited purpose of examining the latter on oath. As noted above, under the said provision, he has no power to summon any document from the petitioner or require him to furnish information relating thereto. Ordinarily, in the light of the above findings, the impugned summons is liable to be set aside. However, having regard to the purpose for which the summons were issued viz., to investigate into the affairs of the aforesaid group of Companies under Section 235 of the Act, I am inclined to read down the permission granted by the Central Government under the impugned summons, by holding that respondent No.2 is entitled to summon the petitioner only for the limited purpose of examining him on oath under Section 240 (2) of the Act. It is made clear that he shall not exercise any of the powers, which are vested in him under Section 240 (1) (A) of the Act against the petitioner. The Writ Petition is, accordingly, allowed to the extent indicated above. ______________________ (C.V.Nagarjuna Reddy, J) 25th July, 2011 LUR