SERIOUS FRAUD INVESTIGATION OFFICE versus RAHUL MODI AND ANR. ETC.
[2019] 5 S.C.R. 91, Supreme Court of India, 2019
Outcome: Disposed off
Segment: Facts
A
B
C
D
E
F
G
H
91
SERIOUS FRAUD INVESTIGATION OFFICE
v.
RAHUL MODI AND ANR. ETC.
(Criminal Appeal Nos. 538-539 of 2019)
MARCH 27, 2019
[ABHAY MANOHAR SAPRE AND
UDAY UMESH LALIT, JJ.]
Companies Act, 2013 –  ss. 212(1), (2) and (3) –
Investigation into affairs of Company by Serious Fraud
Investigation Office – Period within which report is contemplated
to be submitted to the Central Government under sub-section (3),
mandatory or directory – On facts, SIFO directed to investigate
into the affairs of certain entities and furnish the report within the
period of three months – However, petitioners arrested by SIFO
after the expiry of the  specified period for investigation u/s. 213(2)
– Writ petition by  petitioners seeking declaration that investigation
carried out after the specified period was illegal and prayed for
writ of habeas  corpus directing release from illegal arrest –
Thereafter, the  petitioners released on bail – On appeal, held: 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 – Section 212(3)
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”, there is no stipulation of any
period – Such a report is to
be submitted “on completion of the
investigation” – Statute has not prescribed any period for
completion of investigation – in view thereof, prescription of
period within which a report is to be submitted by SFIO u/s. 212(3)
is not for completion of period of investigation and on the expiry of
that period the mandate in favour of SFIO does not come to an end
– Prescription of period within which a report has to be submitted
to the Central Government u/s.212(3) is purely directory – Thus, it
cannot be said that the mandate came to an end on expiry of three
      [2019] 5 S.C.R. 91
91
A
B
C
D
E
F
G
H
92
SUPREME COURT REPORTS
[2019] 5 S.C.R.
months and the arrest effected thereafter, was in any way illegal or
unauthorised by law – Arrest was effected when the period had
expired but by the time the High Court entertained the petition and
passed the order, the orders of remand were passed by the Judicial
Magistrate as well as the Special Court, Gurugram as also order of
extension was passed by the Central Government – Thus, the High
Court was not justified in directing release of the accused – Order
passed by the High Court is set aside.
Interpretation of statutes: Provisions, when mandatory or
directory – Held: While laying down a particular procedure if no
negative or adverse consequences are contemplated for non-
adherence, relevant provision is normally not taken to be mandatory
and is considered to be purely directory - Provision to be seen in
the context in which it occurs in the Statute.
Allowing the appeals and disposing of the transfer petition,
the Court
Per Uday Umesh Lalit, J:
HELD: 1.1 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. The act of directing remand of an accused is held to
be a judicial function and the challenge to the order of remand is
not to be entertained in a habeas corpus petition. In the instant
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 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
A
B
C
D
E
F
G
H
93
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. The arrest was
effected when the period had expired but by the time the High
Court entertained the  petition, there was as order of extension
passed by 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.
The High Court was not justified in entertaining the petition and
passing the Order. [Para 17, 19] [116-E; 122-C-H; 123-A-B]
Basanta Chandra Ghose v. King Emperor (1945) 7 FCR
81; Naranjan Singh Nathawan v. State of Punjab
[1952] SCR 395 ; Ram Narayan Singh v. State of Delhi
[1953] SCR 652 ; A.K. Gopalan v. Govt. of India
[1966] 2 SCR 427 ; Pranab Chatterjee v. State of Bihar
and Another (1970) 3 SCC 926 ; Talib Hussain v. State
of
Jammu and Kashmir (1971) 3 SCC 118 ; Col. Dr. B.
Ramachandra Rao v. State of Orissa and Others (1972)
3 SCC 256; Kanu Sanyal v. District Magistrate,
Darjeeling and Others (1974) 4 SCC 141 : [1974] 3
SCR 279; Manubhai Ratilal Patel through Ushaben v.
State of Gujarat and Others (2013) 1 SCC 314 : [2012]
8 SCR 993 ; Saurabh Kumar v. Jailor, Koneila Jail
and Another (2014) 13 SCC 436 : [2014] 8 SCR 909;
State of Maharashtra and Others v. Tasneem Rizwan
Siddiquee (2018) 9 SCC 745 - referred to.
1.2 The first Order dated 20.06.2018 itself indicated that
the Registered Office of the Principal Company was in Gurugram,
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
A
B
C
D
E
F
G
H
94
SUPREME COURT REPORTS
[2019] 5 S.C.R.
Haryana. 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.  Petitioners, however, submitted 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. [Para 21] [123-E-H; 124-A-B]
Navinchandra N. Majithia v. State of Maharashtra and
Others (2000) 7 SCC 640 : [2000] 3 Suppl. SCR 82;
Dashrath Rupsingh Radhod v. State of Maharashtra
and Another (2014) 9 SCC 129 : [1999] 3 Suppl. SCR
271 - referred to.
1.3 In the instant case, it cannot be said that 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, the 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. [Para 24] [125-G-H;
126-A-C]
1.4 Reading of the provisions of 2013 Act shows that
certain Sections in Chapter XXIX prescribe punishment for
A
B
C
D
E
F
G
H
95
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 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. [Para 26]
[132-C-H]
1.5 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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
A
B
C
D
E
F
G
H
96
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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. 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.
[Para 27] [133-A-F]
1.6 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 period
for completion of investigation which is consistent with normal
principles under the general law. 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. 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. [Para 28]
[133-F-H; 134-A-C]
A
B
C
D
E
F
G
H
97
1.7 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
investigation. If that be so, can such power stand curtailed or
diminished if the  investigation is 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. [Para 29] [134-D-G; 135-A]
Kazi
Lhendup Dorji v. State of Sikkim & Ors (1994) 2
Suppl. SCC 116 - referred to.
1.8 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;
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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
A
B
C
D
E
F
G
H
98
SUPREME COURT REPORTS
[2019] 5 S.C.R.
Investigating Agency; for completion of investigation,
sub-Section (12) of Section 212 does not contemplate any
period; and under sub-Section (11) of Section 212 there could be
interim reports as and when directed. In the face of the 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, 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 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 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
instant 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. The High Court completely erred in
proceeding on that premise and in passing the order under
appeal, and thus, is set aside. [Para 30, 31] [135-B-H; 136-A-D]
A
B
C
D
E
F
G
H
99
Case Law Reference
(1945) 7 FCR 81
        referred to
Para 17
[1952] SCR 395
        referred to
Para 17
[1953] SCR 652
        referred to
Para 17
[1966] 2 SCR 427
        referred to
Para 17
(1970) 3 SCC 926
        referred to
Para 17
(1971) 3 SCC 118
        referred to
Para 17
(1972) 3 SCC 256
        referred to
Para 17
[1974] 3 SCR 279
        referred to
Para 17
[2012] 8 SCR 993
        referred to
Para 18
[2014] 8 SCR 909
        referred to
Para 18
(2018) 9 SCC 745
        referred to
Para 18
[2000] 3 Suppl. SCR 82      referred to
Para 21
[1999] 3 Suppl. SCR 271    referred to
Para 23
(1994) 2 Suppl. SCC 116    referred to
Para 29
Per Abhay Manohar Sapre, J: (Supplementing):
HELD: Having regard to the scheme of the Companies
Act, 2013 underlined in Chapter XIV (Sections 206 to 229)
dealing with the matters relating to 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. If
the submission of the counsel for the respondents 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 cannot be accepted) the very purpose of enacting Section
212 of the Act would get defeated and will become nugatory. When
the well-known principle of purposive
interpretation is applied
while interpreting the relevant provisions in juxtaposition and
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
A
B
C
D
E
F
G
H
100
SUPREME COURT REPORTS
[2019] 5 S.C.R.
hold that sub-section (3) of Section 212 of the Act is directory in
nature, it serves the legislative intent for which Chapter XXIX is
enacted. The reasoning and the conclusion arrived at on the
interpretation of sub-section (3) of Section 212 of the Act is
concurred with. [Para 4-7] [138-A-E]
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
Nos. 538-539 of 2019.
From the Judgment and Order dated 20.12.2018 of the High Court
of Delhi at New Delhi in WPCRL Nos. 3842 and 3843 of 2018
With
Transfer Petition (Crl.) No.35 of 2019
Tushar Mehta, SG, Amit Mahajan, Rajat Nair, Manan Popli,
Ranvijay Singh, Rajeev Ranjan, Neeraj Kumar Sharma, Advs. for the
Appellant.
Kapil Sibal, Mukul Rohtagi, Sidharth Luthra, V. Giri, Sr. Advs.,
Aditya Singla, Adit Pujari, Ms. Priya Puri, Pallav Gupta, Kartik Venu,
Ranjay Duhbey, Ms. Vinita Meghrajani, Ravi Pathak, Ms. Supriya Juneja,
Ms. Cheshta Jetly, Ms. Varsha Poddar, Himanshu Gupta, Akshay Sehgal,
Saifuddin S., Sayantan Talapatra, Krishna Kumar Singh, Advs. for the
Respondents.
The Judgments of the Court were delivered by:
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.
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:-
A
B
C
D
E
F
G
H
101
“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:-
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 Serious 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.
S 
NO
CIN
COMPANY /
LLP NAME
NEW 
ADDRESS
REGION
PAN_
NUMBER
STATUS
1. 
U45201HR
2000PLC0
45738 
ADARSH 
BUILDESTATE 
LIMITED 
1ST FLOOR, 
BLOCK-B, 
VATIKA 
ATRIUM GOLF 
COURSE 
ROAD, 
SECTOR-53 
GURGAON
Haryana 
AAJCA190 
7A 
ACTV 
2 to 
124 
.. 
… 
… 
… 
… 
… 
125 
U45201RJ2
013PTC 
042465 
WATER-FALL 
REAL 
ESTATES 
PRIVATE 
LIMITED
J 7, MOTI 
DOONGRI 
ROAD, JAIPUR 
Rajastha
n 
AABCW38
26E 
ACTV

SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
102
SUPREME COURT REPORTS
[2019] 5 S.C.R.
(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.
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
A
B
C
D
E
F
G
H
103
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
(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.
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
104
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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
A
B
C
D
E
F
G
H
105
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, 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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
106
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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
A
B
C
D
E
F
G
H
107
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 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
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.”
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
108
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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:-
“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 Com-
petent 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 MukeshModi 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:-
A
B
C
D
E
F
G
H
109
“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 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.
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
110
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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.
A
B
C
D
E
F
G
H
111
14. The learned Solicitor General submitted inter alia:
(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 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.
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
112
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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.
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.
A
B
C
D
E
F
G
H
113
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 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.
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.
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
114
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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.
    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
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
A
B
C
D
E
F
G
H
115
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 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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
116
SUPREME COURT REPORTS
[2019] 5 S.C.R.
words of Mr JusticeDua 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
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.
9 (2013) 1 SCC 314
A
B
C
D
E
F
G
H
117
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)
“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.”
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
10(1994) 5 SCC 410 : 1994 SCC (Cri) 1433
A
B
C
D
E
F
G
H
118
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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
A
B
C
D
E
F
G
H
119
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
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 of the facts narrated
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
11(2014) 13 SCC 436
A
B
C
D
E
F
G
H
120
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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
12(2018) 9 SCC 745
A
B
C
D
E
F
G
H
121
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 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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
122
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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
13(2004) 5 SCC 729
A
B
C
D
E
F
G
H
123
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 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.
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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
124
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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.  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 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
14 (2000) 7 SCC 640
15 (2014) 9 SCC 129
A
B
C
D
E
F
G
H
125
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. Majithia14and 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” 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 Radhod15
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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
16(1999) 7 SCC 510 : 1999 SCC (Cri) 1284
A
B
C
D
E
F
G
H
126
SUPREME COURT REPORTS
[2019] 5 S.C.R.
orders passed by the Judicial Magistrate and the Special Court, Gurugram,
in our considered view, the 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.
(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;
A
B
C
D
E
F
G
H
127
(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,
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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
128
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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:
17Subs. 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 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”.
A
B
C
D
E
F
G
H
129
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 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.
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
130
SUPREME COURT REPORTS
[2019] 5 S.C.R.
(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 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
A
B
C
D
E
F
G
H
131
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 suomoto, 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
(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 pre-
scribed; or
(b)  if the limited liability partnership makes an application that
the affairs of the limited
liability partnership ought to be in-
vestigated; or
(c) if, in the opinion of the Central Government, there are cir-
cumstances 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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
132
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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.”
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 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.
A
B
C
D
E
F
G
H
133
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
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 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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
134
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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.
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
18 The decision of this Court in KaziLhendupDorji 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.
A
B
C
D
E
F
G
H
135
is 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.
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
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
[UDAY UMESH LALIT, J.]
A
B
C
D
E
F
G
H
136
SUPREME COURT REPORTS
[2019] 5 S.C.R.
212 is purely directory.  Even after the expiry of such stipulated period,
the mandate in 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 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
A
B
C
D
E
F
G
H
137
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.
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.
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.
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.
SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI
A
B
C
D
E
F
G
H
138
SUPREME COURT REPORTS
[2019] 5 S.C.R.
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 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 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.
Nidhi Jain
                         Matters disposed of.