SC sets aside Delhi HC order staying SFIO probe into Sahara group firms

The Supreme Court, on Thursday, set-aside a Delhi high court order staying probe by the Serious Fraud Investigation Office (SFIO)—a Central agency to investigate corporate frauds—into the affairs of nine Sahara Group companies describing it as “extraordinary,” “not warranted,” and “not justified” at an interlocutory stage of the hearing of a challenge to the order of investigation.

Setting aside the stay order on all the three counts that weighed with the high court, including the lookout notice, Justice D.Y. Chandrachud heading a vacation bench also comprising Justice Bela M. Trivedi asked the high court to decide the challenge to the Central government’s order by the Sahara Group’s companies within two months of its reopening after summer recess.

The two high court orders that have been set aside are of December 13, 2021, and January 5, 2022.

The high court, while staying two orders of October 31, 2018, and October 27, 2020, and handing over the probe into the affairs of Sahara companies to SFIO had said that the investigating agency did not complete the probe within threemonths given to it by the government in exercise of powers under Section 212(3) of the Companies Act 2013, and were still continuing, the orders of probe were bereft of reasons and circumstance that compelled the government to form an opinion to order probe by SFIO.

The high court had also ruled that the six Sahara Group companies that were ordered to be probed in October 2020 were in no way connected with three companies that were already under the scanner since October 2018 and the same was in breach of Section 219(a) and (b) of the Companies Act 2013.

Finding the high court in error in holding the probe against the six companies in 2020 could have been order under Section 219(a) and (b) holding that they were in no way connected with the three Sahara companies that were already under investigation since 2018, the top court referred to Section 219(c) which says that investigation can also be ordered in “any other body corporate whose board of directors comprises nominees of the company or is accustomed to act in accordance with the directions or instructions of the company or any of its directors.”

The SFIO, in its September 24, 2020, report seeking to investigate six more companies of Sahara group, had said that those at the helm of affairs of these companies are accustomed to carry out the direction of Subrata Roy, the head of the group.

The SFIO, which was handed over the investigation into three Sahara Group companies on October 31, 2018 and subsequently into six more companies of the group, has been given four extensions of varying durations from three months to six months but it is still continuing.