IMPORTANT POINT
Investigation into affairs of company – Statute does not contain any specific prescription of time and reference to completion of investigation within a stipulated period is directory and not mandatory.

JUDGMENT :

Dhananjaya Y. Chandrachud, J.

1. Leave granted.

2. These appeals arise from the orders dated 13 December 2021 and 5 January 2022 of the Division Bench of the High Court of Delhi. The High Court is seized of a batch of writ petitions under Article 226 of the Constitution challenging the legality of the orders dated 31 October 2018 and 27 October 2020 of the Union Ministry of Corporate Affairs, authorizing an investigation under the provisions of Section 212 and Section 219 of the Companies Act, 2013 in respect of several corporate entities in the Sahara group. By its interim orders, the High Court stayed the operation, implementation and execution of the above orders. The High Court has also stayed all subsequent action and proceedings initiated in pursuance of those orders “including coercive proceedings and look-out notices” qua the petitioners and their directors, promoters, officers, employees or any other person concerning them.

3. On 31 October 2018, the Government of India in the Ministry of Corporate Affairs, in exercise of its jurisdiction under clauses (a) and (c) of Section 212(1) of the Companies Act 2013 formed an opinion, on the basis of a report dated 14 August 2018 submitted to it by the Registrar of Companies, Mumbai under Section 208, that an investigation was required to be conducted into the affairs of :

(i) Sahara Q Shop Unique Products Range Limited;

(ii) Sahara Q Gold Mart Limited; and

(iii) Sahara Housing Investment Corporation Limited.

4. On 10 January 2019, the Ministry of Corporate Affairs addressed a communication to the Director of the Serious Fraud Investigation Office,¹[“SFIO”] seeking an approval for extending the time for the conclusion of the investigation. On 27 October 2020, a communication was addressed by the SFIO to the Ministry of Corporate Affairs seeking permission under Section 219 to investigate the affairs of six other companies, namely :

“(i) Aamby Valley Limited;

(ii) Qing Ambay City Developers Corporation Ltd.;

(iii) Sahara India Commercial Corporation Limited;

(iv) Sahara Prime City Ltd;

(v) Sahara India Financial Corporation Limited; and

(vi) Sahara India Real Estate Corporation Limited”

5. A challenge has been set up before the Delhi High Court to impugn the legality of the above orders dated 31 October 2018 and 27 October 2020.

6. The Division Bench of the High Court, while staying the operation of the above orders and all consequential steps pursuant to them, has recorded three reasons for coming to the conclusion that the investigation was prima facie required to be stayed :

(i) Section 212(3) of the Companies Act, 2013 empowers the Central Government to direct that an investigation be conducted into the affairs of a company within a stipulated period and, in the present case, the period of three months which was stipulated in the order dated 31 October 2018 had expired;

(ii) The order dated 27 October, 2020 which authorizes an investigation into the affairs of six other companies prima facie appears to be contrary to the provisions of Section 219 since the six companies are neither subsidiaries nor holding companies of the three companies which were ordered to be investigated earlier nor have they been managed by the Managing Director of the earlier three companies under investigation; and

(iii) The orders dated 31 October 2018 and 27 October 2020 do not furnish the reasons or circumstances which compelled the Central Government to form an opinion while ordering the investigation.

7. The Union Government is in appeal.

8. Mr. Tushar Mehta, Solicitor General submitted that each of the three reasons which have weighed with the High Court in staying the investigation at the interlocutory stage is contrary to the express provisions of the statute or, as the case may be, the material which has emerged on the record on the basis of which the orders dated 31 October 2018 and 27 October 2020 were issued. In this context, it is submitted that :

(i) Section 212(3) of the Companies Act 201