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2024 DIGILAW 385 (MP)

Madanlal Juharmal Goyal v. Union of India

2024-05-03

GAJENDRA SINGH, S.A.DHARMADHIKARI

body2024
ORDER Dharmadhikari, J. -- 1. In this petition filed under Article 226 of the Constitution of India the petitioner seeks the following reliefs :-- (1) Issue a Writ of Certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction calling for the records in relation to the issuance of the impugned sanction dated 30.11.2021 issued by the respondent No. 1 after going through the legality, validity and propriety thereof issue such orders and directions quashing and setting aside the Respondent No. 1’s Impugned Sanction dated 30.11.2021; (2) Issue a Writ of Certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction calling for the records in relation to the issuance of the Impugned Sanction dated 30.11.2021 issued by the respondent No. 1 after going through the legality, validity and propriety thereof issue such orders and directions quashing and setting aside any and all actions taken and orders issued in furtherance of the Impugned Sanction dated 30.11.2021 including the impugned notice and impugned summons; (3) Issue a Writ of Certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction calling for the records in relation to the issuance of the Look Out Circular with respect to the Petitioner’s by the SFIO and after going through the legality, validity and propriety thereof issue such orders and directions quashing and setting aside the Look Out Circular issued against the Petitioners. 2. Before dealing with the merits of the petition, it is pertinent to highlight brief facts leading to the present petition which are as under : 1. The Company was incorporated on 24.2.2006 by the erstwhile promoters. On account of share purchase transactions between 2008 to 2011, the Petitioners became major shareholders of the Company. 2. For the purposes of business, the Company, in December 2009 took a loan from IDBI Bank to the tune of Rs.5 crores. The loan facilities were enhanced from time to time between 2010 to 2017 and finally IDBI Bank had extended facilities aggregating to Rs.70 crores. The IDBI Bank since 2013 conducted regular third party studies with respect to the Company. It is the submission of the Petitioners that IDBI Bank has renewed the financial facilities at least on 10 occasions. The loan facilities were enhanced from time to time between 2010 to 2017 and finally IDBI Bank had extended facilities aggregating to Rs.70 crores. The IDBI Bank since 2013 conducted regular third party studies with respect to the Company. It is the submission of the Petitioners that IDBI Bank has renewed the financial facilities at least on 10 occasions. It is trite that at the time of renewing any financial facility, the bank does a thorough due diligence and only after being satisfied with the financial health of the entity grants/renews any financial facility. Therefore, the aspect of grant of financial facility on the following dates, 4.12.2010, 25.7.2012, 29.1.2013, 20.11.2013, 5.8.2014, 8.4.2015, 2.4.2016, 12.7.2016 and 7.9.2017, and regular independent audits conducted by the IDBI Bank is proof of the fact that the company was run in accordance with law and always financially healthy. 3. The Petitioners submit that in or around 16.8.2016, the Company requested NOC of IDBI Bank so as to enter into a transaction where the Company would be taken over by a listed entity. Effectively, the financial facility would also have been reassigned from IDBI Bank to SBI Bank. It is pleaded that IDBI Bank refused to give NOC and insisted that the existing management shall continue with the Company, which is against indicative of proper functioning of the Company. 4. However, between 2018 and 2019, the Company starting facing a rough patch due to which the Company could not service its debt and were eventually declared as an NPA on 18.3.2019. Subsequently, on 4.5.2019, the loans were also recalled by IDBI Bank. On 3.3.2020, the CIRP proceeding was admitted against the Company under section 9 of the IBC on account of an application made by one of the Operational Creditors. Since no resolution could be arrived at, a liquidation order was also passed on 4.12.2020. 5. Thereafter the liquidator appointed as transaction auditor. Based on the report of the transaction auditor, the liquidator has taken steps to file an application under section 43 and 45 of the IBC. The Application under section 43 and 45 is withdrawn by the IRP. Subsequently, on 21.6.2021, the liquidator filed an application under section 66 of the IBC, which is pending adjudication. The Petitioners state that they are taking independent steps to defend these proceedings before the Ld. NCLT, Mumbai. 6. The Application under section 43 and 45 is withdrawn by the IRP. Subsequently, on 21.6.2021, the liquidator filed an application under section 66 of the IBC, which is pending adjudication. The Petitioners state that they are taking independent steps to defend these proceedings before the Ld. NCLT, Mumbai. 6. However, shockingly, the Petitioners have recently learnt that on 30.11.2021, a sanction was uploaded by Respondent No.1 to investigate into the affairs of the Company by exercising power under section 212 of the Companies Act, 2013. It appears that on 10.3.2022 officers were also appointed in furtherance of the order dated 30.11.2021. 7. Being unaware of the investigation by the SFIO, the Petitioners continued to take bona fide steps to settle the claims with the financial creditor i.e. IDBI Bank. 8. Sometime on or about 12.10.2023, for the first time, notice was issued to one Mr. Gautam Kumar by the respondent No.2 with respect to the investigation. This is the first time that the Petitioners learnt that an investigation had been approved and commenced in terms of section 212 of the Act. 9. In the meantime, on 25.1.2024, IDBI Bank accepted a one-time settlement from the Petitioners and other persons involved with the Company and the Petitioners have substantially paid amounts in furtherance of the OTS. 10. In the meantime, the Petitioners learnt that an FIR was registered against them contrary to the law laid down by the Hon’ble Supreme Court in the case of State Bank of India v. Rajesh Agarwal [reported in (2023) 7 SCR 476 ] with respect to Reserve Bank of India (Fraud Classification and Reporting by Commercial Banks and select FIs) Directions, 2016. This Hon’ble Court by an order dated 1.3.2024 in Writ Petition No.4699 of 2024 was pleased to quash and set aside the FIR so filed. 11. Soon thereafter on 11.3.2024, the Petitioners were served with summons for investigation by Respondent No.2 dated 4.3.2024. 12. It is the case of the Petitioner that even prior to investigation and solely on the basis of the alleged case made out under section 66 of the IBC, the SFIO had already filed Company Petition No. 274 of 2022 praying for directions against the Petitioners under section 241(2), 242, 246 and 339 of the Companies Act, 2013, which is also pending adjudication before NCLT Mumbai. 13. 13. As on date, no further orders have been on merits passed either in the Petition under section 66 or the Petition filed by the SFIO. The Petitioners submit that pendency and continuation of these proceedings despite the Petitioners having made payments to the sole creditor i.e. IDBI Bank is gravely prejudicial to the personal interest of the Petitioners. 14. It is in this light that the Petitioners are now challenging the sanction dated 30.11.2021 read with the investigation directions dated 4.3.2024 and the order dated 4.3.2024 and all the actions taken in furtherance of the impugned directions. 3. The learned counsel for the petitioners submits that the primary contention of the Petitioners is based on the settled position that an order directing investigation under section 212 (1) (c) of the Companies Act, 2013 (“Companies Act”) should stand on its own feet and must be able to demonstrate that there exist material/circumstances which warrant investigation and that such material/circumstances have been been considered and an opinion is formed by the government to investigate into the affairs of the company on the basis such of material/circumstances. This opinion must be based on specific grounds and reasons which shall form a part of the order authorizing sanction. It is the specific case of the Petitioner that though an order sanctioning investigation ought not to be subjected to judicial review on merits, the same can be examined on ground whether the sanction complies with the mandatory requirement of ; i) there is requisite opinion formed by the Central Government; and ii) existence of material and circumstances to indicate that the company’s affairs are causing prejudice to the public interest. The Petitioners submit that in the present case the order of investigation is completely unreasoned, requisite opinion is not formed by the Central Government, there does not exist material/circumstances/fact necessitating investigation and is without any basis and is merely based on the ipse-dixi of the liquidator who has already filed an application under section 66 of the Insolvency and Bankruptcy Code 2016 (“IBC”), which is pending adjudication. 4. The order of sanction dated 30.11.2021 is reproduced as under : “Whereas the central government is empowered under section 212 of the companies act 2013 to order an investigation into the affairs of a company. 4. The order of sanction dated 30.11.2021 is reproduced as under : “Whereas the central government is empowered under section 212 of the companies act 2013 to order an investigation into the affairs of a company. AND Whereas IBBI has forwarded the name of SPG Multitrade Private Limited wherein the Resolution Professional has filed an application for avoidance and fraudulent transaction before hon’ble NCLT. AND Whereas liquidator made a presentation and informed that the transaction audit reported fraudulent transactions for Rs.364.59 crores and the central government has formed an opinion, on the basis of the transactions detailed in the presentation and other record that, since there are fraudulent transactions of a substantial amount, involving multidisciplinary transactions, therefore, the affairs of the company need to be investigated. Now, the Central government hereby orders an investigation into the affairs of SPG Multitrade Private Limited by SFIO under section 212 (1) (c) of the Companies Act 2013 in public interest with inspectors from the office of the (WR) also with the team leader from SFIO. The inspectors appointed by Director, SFIO to investigate into the Office of the above mentioned company, shall exercise all powers available to them under the companies act 2013. The inspectors shall complete their investigation and submit the report to the central government. This order is issued for and on behalf of the central government.” 5. It is the case of the Petitioners that since the above reproduced order does not make out any opinion/case/reason or show any application of mind and/or existing of material facts and circumstances to come to a conclusion as to why the affairs of the company be investigated, the present petition ought to be allowed. The learned counsel for Petitioners state that there is absolutely no public interest or prejudice to the public involved in the any of the transactions carried out by the Company. He further stated that without prejudice even assuming the Transaction audit report and all the material produced in the Application filed under section 66 by the IRP to be true and correct, at best, case is made out for a transaction under section 66 of the IBC and by no stretch of imagination can a man of normal prudence come to a conclusion that the same would qualify as transactions carried out in prejudice of the public for the purposes of section 212 of the Companies Act. He also stated that continuing with such an investigation not only is contrary to law but would also amount to double jeopardy. He further stated that in any event, the Petitioners in their personal capacity have already settled with IDBI Bank as evident from the communication dated 25.1.2024.Therefore, the sanctioning order dated 30.11.2021 be quashed and any further steps in furtherance thereto be quashed and set aside. 6. Notice was issued by this Court on 19.3.2024, time was given to the Respondents to file a reply and the Petition was made returnable within 3 weeks. On 15.4.2024, once again the Respondent sought time and as and by way of last indulgence, one week time was granted to the Respondent to file reply. However, till date, the Respondent has not filed any reply and therefore the matter shall be proceeded without reply. It may not be out of place to mention at this juncture that the Petitioners may be right in contending that the impugned sanction will have to stand on its own, the Respondent authority cannot substitute the existence of opinion, material facts and circumstances and public interest, by way of filing additional Affidavit. 7. The learned counsel for the Petitioners submits that their case is wholly covered by the judgment of the Bombay High Court in Parmeshwardas Agarwal v. Additional Director [reported in 2016 SCC OnLine Bom. 9276). Learned counsel for the Petitioners states that the said order has been confirmed by the Hon’ble Supreme Court in its order dated 19.1.2018 passed in SLP (Civil) Diary No. 38664 of 2017. The Petitioners rely upon paragraphs 40 to 42 & 46 and 47 of the judgment which are reproduced as under : “40. Thus, the principle is that there has to be an opinion formed. That opinion may be subjective, but the existence of circumstances relevant to the inference as to the sine qua non for action must be demonstrable. It is not reasonable to hold that the clause permits the Government to say that it has formed an opinion on circumstances which it thinks exist. Since existence of circumstances is a condition fundamental to the making of the opinion, when questioned the existence of these circumstances have to be proved at least prima facie. 41. In that light if one peruses the powers conferred under the 2013 Act, they are also identical. Since existence of circumstances is a condition fundamental to the making of the opinion, when questioned the existence of these circumstances have to be proved at least prima facie. 41. In that light if one peruses the powers conferred under the 2013 Act, they are also identical. By section 206, there is a power to conduct inspection and enquiry by section 207. Both these powers are to be exercised by the Registrar. Then, the report has to be made by the Registrar and the Registrar or the Inspector after inspection of the Books of account or inquiry under section 206 and other books and papers of the company under section 207, shall submit a report in writing to the Central Government along with such documents, if any, and such report may, if necessary, include a recommendation that further investigation into the affairs of the company is necessary. For that, reasons in support have to be set out. We are not concerned with the power of search and seizure vesting in the Registrar in terms of section 209. Then comes the crucial provision in the 2013 Act, namely, section 210. That reads as under : “210. Investigation into affairs of company. -- (1) Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company (a) on the receipt of a report or the Registrar or inspector under section 208; (b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or (c) in public interest it may order an investigation into the affairs of the company. (2) Where an order is passed by a Court or the Tribunal in any proceedings before it then the affairs of a company ought to be investigated, the Central Government shall order the investigation into the affairs of that company. (3) For the purposes of this section, the Central Government may appoint one or more persons as inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct.” 42. Therefore, a perusal of this section would indicate that the Central Government must form an opinion, that opinion must be that it is necessary to investigate into the affairs of a company. Therefore, a perusal of this section would indicate that the Central Government must form an opinion, that opinion must be that it is necessary to investigate into the affairs of a company. The Central Government can act on the receipt of a report of the Registrar or Inspector under section 208 or on intimation of a special resolution passed by a company that its affairs are to be investigated or in public interest. Thus, there is a discretion to order an investigation into the affairs of the company. 46 A bare perusal of this order would indicate that the Central Government has referred to the report dated 13th January, 2016, but completely misread and misinterpreted it. It has not recommended any investigations to be made under the Companies Act,1956 or 2013. If at all the investigations are to be made in terms of this recommendatory report, or suggestion therein, that is for the multiple disciplinary authorities to find out misutilisation of bank finances and other violations of law. The respondents ought be aware that there is a difference in the language of the two relevant sections, namely, section 210 and section 212. 47 section 210 falling in the same Chapter XIV titled Inspection, Inquiry and Investigation contains these two sections. Section 210 confers a discretion in the Central Government to order an investigation into the affairs of the company and that power has to be exercised if there is an order passed by a Court or a Tribunal in any proceedings II. before it to the effect that the affairs of a company ought to be investigated. Thus sub-section (1) of section 210 confers a discretion while sub-section (2) is mandatory in terms. By sub-section (3) and when the Central Government orders an investigation into the affairs of the company, it may appoint one or more persons as Inspectors so as to carry out this task and to report thereon in such manner as the Central Government may direct. By section 212 the seventeen sub-sections thereof enable investigation into the affairs of a company by Serious Fraud Investigation Office. This power is without prejudice to the provisions of section 210. This power is to be exercised if the Central Government is of the opinion that it is necessary to investigate into the affairs of a company by the SFIO. By section 212 the seventeen sub-sections thereof enable investigation into the affairs of a company by Serious Fraud Investigation Office. This power is without prejudice to the provisions of section 210. This power is to be exercised if the Central Government is of the opinion that it is necessary to investigate into the affairs of a company by the SFIO. Therefore,the power to investigate into the affairs of company is common to both provisions. In the former there are three clauses (a) to (c) in sub-section (1) of section 210 and the investigation is to be carried out by the Central Government by appointing Inspectors and there is a discretion in that behalf. This power is stated to be akin to section 235 of the 1956 Act. The latter enables investigations into the affairs of a company by the SFIO and there is one more clause (d) in sub-section (1) of section 212 where the Central Government can act on a request from any department of the Central Government or a State Government. Therefore, in a given case there could be an action initiated on the request of the Central Vigilance Commission or based on its recommendations. However, by its very title, the investigation under section 212 by the SFIO ought to be on the basis of the opinion of the Central Government that it is necessary to investigate into the affairs of the company by SFIO. That opinion has to be based on the report of the Registrar or Inspector under section 208; on intimation of a special resolution passed by a company that its affairs are required to be investigated; in the public interest or on the request from any department of the Central Government or the State Government. By section 211, the SFIO is established to investigate frauds relating to a company. It is a very special office and headed by a Director and consists of such number of experts from the fields enumerated in subsection (2) of section 211 to be appointed by the Central Government from amongst persons of ability, integrity and experience. The wide powers that this office enjoys, as is set out in various sub-sections of section 212, would denote as to how its involvement comes after the investigations are assigned to it by the Central Government. By their very nature the investigations into frauds relating to a company have to be assigned. The wide powers that this office enjoys, as is set out in various sub-sections of section 212, would denote as to how its involvement comes after the investigations are assigned to it by the Central Government. By their very nature the investigations into frauds relating to a company have to be assigned. They have to be of such magnitude and seriousness demanding involvement of experts in the fields enumerated in sub-section (2) of section 211. Therefore, while exercising the powers under sub-section (1) of section 212, the Central Government ought to be not only forming an opinion about the necessity to investigate into the affairs of the company, but further that such investigations have to be assigned to the SFIO.” 8. Counsel for the petitioners further replying upon the case of Parmeshwardas Agarwal v. Additional Director [reported in 2016 SCC OnLine Bom. 9276) where the Hon’ble Supreme Court following its finding in Rohtas Industries v/s. S.D. Agarwal [reported in 1969 1 SCC 325 ] and the Judgment of Marg Limited v. Karaikal. Port Private Limited 2021 SCC Online Mad 2585, more particularly para 68 discussed what would be the meaning of public interest with respect to investigation in the affairs of the company. He submits that in terms of the judgment of the Hon’ble Supreme Court, the mere fact that the monies borrowed from the bank are public monies would not fall within the doctrine of public interest. Therefore, the order needs to provide as to what public interest is being protected by the order. 9. It is argued by the counsel that an order directing investigation under section 212 (1) (c) of the Act must stand on its own foot, rationale, explanation and reasons. Outcome of the investigation ie reports or Additional Affidavits cannot be used to justify the order of investigation. It should meet the pre-requisite of exercising powers u/s 212 of the Act, the respondent No.1 ought to have fulfilled two necessary pre-requisites being; i) there is requisite opinion formed by the Central Government; and ii) existence of material and circumstances to indicate that the company’s affairs are causing prejudice to the public interest. 10. It should meet the pre-requisite of exercising powers u/s 212 of the Act, the respondent No.1 ought to have fulfilled two necessary pre-requisites being; i) there is requisite opinion formed by the Central Government; and ii) existence of material and circumstances to indicate that the company’s affairs are causing prejudice to the public interest. 10. It is further argued by the counsel for the Petitioners is that though the opinion formed by the Central Government while issuing an order under section 212 of the Companies Act, 2013 is not amenable to review jurisdiction of the Court, the question whether the Central Government has applied its mind and formed an opinion and whether there exist material and circumstances to form such opinion are open to judicial review. As the existence of circumstances relevant to the inference as the sine qua non for action must be demonstrable. 11. It is strenuously argued by the counsel for Petitioners is that the Central Government has not arrived at an opinion requisite to sanction investigation under section 212 (1) (c). It is argued that the impugned order dated 30.11.2021 is mechanically passed without application of mind and is completely non-speaking. There is absolutely no reflection of any sort of opinion arrived at by the Government in the impugned sanction. 12. It is further argued by the counsel for the Petitioners is that the provisions of section 212 require the respondent No. 1 to form an ‘opinion’ which itself means that there has to be due application of mind on the basis of relevant material before it, and the formation of ‘opinion’ under the said provisions cannot be rendered an empty formality as has been done in the present case. The passing of an order under section 212(1)(c) on a mere Transaction report allegedly placed on record by the Liquidator without any independent application of mind by the respondent No. 1 is impermissible. Further, the opinion so formed by the respondent No. I cannot be vague, generic or indefinite. The necessity and justification or otherwise for passing an order under section 212(1)(c) is also required to firstly exist and secondly the same has to be spelled out in the Impugned Order. Further, the opinion so formed by the respondent No. I cannot be vague, generic or indefinite. The necessity and justification or otherwise for passing an order under section 212(1)(c) is also required to firstly exist and secondly the same has to be spelled out in the Impugned Order. For the purposes of section 212 of the Companies Act, there is a mandatory duty on the Central Government to verify the material on record and the allegations made, no matter how serious the allegations are, and ascertain their veracity to a reasonable degree of certainty. It cannot be done in a mechanical way as is being done in the present case. 13. It is further vehemently argued by the Petitioners that there does not exist circumstances or material facts on basis of which sanction could have been granted by the Central Government under section 212 of the Companies Act. 14. It is argued that on perusal of the impugned order dated 30.11.2021, whereby the respondent No. 1 has directed the Respondent No. 2 to investigate into the affairs of the company on the ground of public interest. The Impugned Order has been passed mechanically by the respondent No.1 allegedly relying on the [Transaction Audit Report] and opinion of the Liquidator, which discloses no cause or fact or circumstance warranting an investigation to be ordered against the Petitioner under section 212 (1) (c) of the Companies Act. 15. It is argued by the counsel for the Petitioners that a detailed reading of the Transaction Audit Report in its entirety will show that no where does it state that there needs to be investigation under section 212 of the Companies Act and/or public interest is involved or affected by the Transactions made by the Company. Further it is argued that the opinion of the liquidator is immaterial and the Central Government ought to have formed an opinion for commencing investigation under section 212 of the Companies Act. 16. Learned counsel further contended that on a detailed reading and analysis of the Transaction Audit Report dated 4.6.2021 (“Transaction Audit Report”) it is clear that there is not even a whisper of public interest. Even assuming the Transaction Audit Report to be the gospel truth only transactions under section 66 of the IBC can be made out against the Company. Learned counsel further contended that on a detailed reading and analysis of the Transaction Audit Report dated 4.6.2021 (“Transaction Audit Report”) it is clear that there is not even a whisper of public interest. Even assuming the Transaction Audit Report to be the gospel truth only transactions under section 66 of the IBC can be made out against the Company. Therefore, by no stretch of imagination, can the respondent No. 1 initiate investigation at the behest of SFIO, under section 212 (c) of the Companies Act. 17. It is further argued that on a detailed reading of the scheme envisaged under the Companies Act with respect to initiation of SFIO investigation, it would be clear that such investigation can commence only after experts (Central Government) have independently applied their mind and have arrived at a conclusion that investigation is required by the SFIO. Experts for the purposes of section 212 of the Companies Act can by no stretch of imagination mean a liquidator. It is well settled that whenever in the process of liquidation, a liquidator has a suspicion that the affairs of the company have not been conducted in a manner as required under the Companies Act and there are transactions hit by section 66 of the IBC, he may file an application before the NCLT, seeking necessary reliefs. In the present case, the liquidator has already filed a preferential transaction application before the NCLT Mumbai, on the same cause of action. Therefore, it is stated that initiation of SFIO investigation under section 212 of the Companies Act, relying on the recommendation of a liquidator is completely without jurisdiction and deserves to be quashed and set aside. 18. It is the case of the Petitioners that once a transaction is classified as a transaction which is likely to be covered under section 66 of the IBC, the provisions of IBC will come into operation and all actions will be required to be taken under the IBC, which is a code in itself. In the present case, the liquidator has filed an application before the NCLT Mumbai, on the same cause of action, on the ground that the transactions carried out by the company or covered under section 66 of the IPC. The said application is pending, as on date. 19. In the present case, the liquidator has filed an application before the NCLT Mumbai, on the same cause of action, on the ground that the transactions carried out by the company or covered under section 66 of the IPC. The said application is pending, as on date. 19. On the other hand, Shri Sudhanshu Vyas learned counsel appearing for Union of India submitted that if it is brought to the notice of the Central Government that its affairs are being managed in such a way as would prejudice the interest of the public, then, to protect such larger public interest, powers are conferred in the Central Government. Learned counsel relied upon the entire scheme contained in The Indian Companies Act, 1956 and The Companies Act, 2013. He submits that the power akin to section 235 of the Companies Act, 1956 and now to be found in the Companies Act, 2013, vide section 212, has been exercised. That has been exercised on the footing that the report of the Registrar enables the Central Government to appoint Inspectors to investigate affairs of the company and to report thereon. It is in these circumstances that the power has been exercised. The grounds which have been set out in the report which forms the basis for the ultimate step can be said to be real and existing. It is not at the behest of any group that the Central Government has acted. The SFIO steps into the picture only because the Central Government formed the requisite opinion. The grounds or the contents of the report enabled the Central Government to form that opinion. The opinion is reasonable. The discretion has been exercised by applying correct judicial principles and there is no deviation from the same. For these reasons and when the petition is premature, this Court should not interfere in writ jurisdiction and the petition be dismissed. 20. The Indian Companies Act, 1956 (for short “1956 Act”) and The Companies Act, 2013 (for short “2013 Act”) are both enacted to consolidate and amend the law relating to companies and certain other associations. As far as the 2013 Act is concerned, on its initial enactment and later on its amendment, it has been clarified that the legislation relating to incorporation and registration of companies had to be consolidated and brought in tune with the current situation prevailing in the country and abroad. As far as the 2013 Act is concerned, on its initial enactment and later on its amendment, it has been clarified that the legislation relating to incorporation and registration of companies had to be consolidated and brought in tune with the current situation prevailing in the country and abroad. Several provisions had to be introduced which were hitherto not introduced. As far as the power and referable to the provisions of these two enactments are concerned, their basic foundation remains the same. 21. As far as the 1956 Act is concerned, the same contains provision enabling the Central Government to act upon a report made by the Registrar under sub-section (6) of section 234 or sub-section (7) of section 234 read with sub- section (3) thereof and appoint one or more competent persons as Inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct. The further powers in terms of section 236 enables members of the company to approach the Central Government for causing an investigation to be made. That is a situation dealt with by section 236. Without prejudice to the powers under section 235, the Central Government independently can direct investigation, but that is in other cases. The said power is to be found in section 237. In view of the aforesaid, the learned counsel for the respondent has prayed for dismissal of the writ petition. 22. We have heard learned counsel for the parties and perused the record. 23. Once the liquidator and the authorities have taken action against the company for the alleged transactions covered under section 66 of the IBC, there is no question of SFIO carrying out investigation with respect to the same transactions and same cause of action, more particularly on the ground of public interest, which will otherwise amount to double jeopardy. In the present case the Application under section 66 is pending therefore investigation by the SFIO pursuant to sanction under section 212 would amount to double jeopardy. 24. There is no element of public interest involved in the present case. Factual Existence of public purpose and interest is by the language of section 212 (1)( (c) a condition precedent to order investigation. 24. There is no element of public interest involved in the present case. Factual Existence of public purpose and interest is by the language of section 212 (1)( (c) a condition precedent to order investigation. Without prejudice to what is stated hereinabove, a perusal of the impugned order dated 30.11.2021 would show that the same is based on a representation made by the liquidator as well as the Transaction audit report. The liquidator, for the same cause of action, has filed preferential transaction application before the learned NCLT, Mumbai. Therefore, it can be safely, assumed that the liquidator has placed on record before the NCLT, Mumbai, all the relevant facts and circumstances, which show that the conduct of the company was carried out in a manner prejudicial to the public interest. It is stated that even assuming all the pleadings and documents placed by the liquidator through the preferential transaction application filed before the NCLT, Mumbai, to be true and correct one cannot come to a conclusion that the affairs of the company was carried out in a manner prejudicial to the public interest. Therefore, it is abundantly clear that there did not exist requisite material and circumstances based on which the Respondent No. 1 could have ordered investigation at the behest of SFIO. 25. There is no question of public interest in relation to any transaction with respect to the company as the company itself is a private limited entity. At best, assuming all the allegations to be true and correct, the only deviation of the company is in relation to default of the financial facilities of IDBI bank. The Petitioner states that it has already settled all the accounts with IDBI Bank by way of OTS dated 25.1.2024. It is trite that the transaction between the company and IDBI bank is a private and commercial transaction. IDBI bank considering all the necessary and relevant facts and circumstances has extended financial facilities to the company, owing to the market condition, the company could not repay the financial facilities. Therefore, in the entire transaction, there is no element of public interest. As per the Petitioners the following facts and circumstances show that the affairs of the Company was at all times carried in accordance with law and there is absolutely no element of fraud and/or public interest involved in the transaction carried out by the Company; 26. Therefore, in the entire transaction, there is no element of public interest. As per the Petitioners the following facts and circumstances show that the affairs of the Company was at all times carried in accordance with law and there is absolutely no element of fraud and/or public interest involved in the transaction carried out by the Company; 26. On 1.4.2009, 4.12.2010, 25.7.2012, 29.1.2013, 20.11.2013, 5.8.2014, 8.4.2015, 2.4.2016, 12.7.2016 and 7.9.2017 the IDBI Bank Ltd, considering the healthy financial status of the Company has extended financial facilities totaling to about 70 crores to the Company. At the time of renewal of the financial facilities, the IDBI Bank Ltd has done its due diligence inter-alia examining the financial health of the Company and the conduct of the management and after being duly satisfied, has renewed the financial facilities. 27. Since 2013 to 2019, the IDBI Bank Ltd, has been regularly conducting stock audit reports of the Company. A stock audit conducted by a Bank includes a third party verifying the physical stocks of the Company, examining the books of the Company vis-à-vis the sale and cash flow and as such is an examination of the financial health of the Company. As the Company had healthy financial status, at no point in time before commencement of CIRP, the IDBI Bank Ltd has raised any issue of fraud. 28. The Company on 16.8.2016, had sought for an NOC from the IDBI Bank Ltd to enable a listed Company to takeover the said Company. In the said request letter, it was brought to the notice of the IDBI Bank Ltd that the financial facility extended by them will be taken over by SBI. The IDBI Bank Ltd, after duly verifying with the financial health of the Company has refused to give NOC for take over and has insisted that the then existing management (Petitioners) continue. Furthermore, on 25.9.2018, considering the cash crunch in the Company, the Company itself requested the IDBI Bank Ltd to reduce their financial facilities, which was not timely processed by the IDBI Bank Ltd. The same is itself indicative of the fact that the company had been at all times complaint and was regularly servicing their financial facilities thus, as such there is no element of fraud in the dealing of the Company. 29. 29. On 3.3.2020 the Company was admitted under section 9 of the Insolvency and Bankruptcy Code and on 4.12.2020 the liquidation commenced against the said Company. However, even after liquidation commencing against the Company, in good faith, the Petitioners herein have attempted to settle the financial facilities granted to the said Company. In fact, the IDBI Bank Ltd has entered into a One Time Settlement Agreement (“OTS”) dated 25.1.2024 with the Petitioners and has even taken money in furtherance of the said OTS. Therefore, there is no question of fraud being imputed to the Petitioners. 30. We are of the opinion that a sanction passed by the Central Government under section 212 of the Companies Act cannot be subjected to judicial review before us exercising Writ Jurisdiction, except for testing the impugned sanction on two counts; A) whether there exists opinion by Central Government as mandated under section 212 of the Companies Act; B) Whether there exist material and circumstances to indicate that the company’s affairs are causing prejudice to the public interest. 31. In our opinion, commencement of investigation under section 212 of the Companies Act has far fetched impact on the functioning of a Company. Mere commencement of investigation by SFIO may cause serious injury as soon as it is made and such injury may not be capable of being entirely erased. These powers cannot be used ordinarily or in normal circumstances or in a mechanical way. There has to be extraordinary circumstances made out, an opinion formed by the Central Government based on material and relevant documents and circumstances of such extra ordinary circumstances and an opinion that investigation by SFIO is required against a company. The Legislature has given extremely wide powers under section 212 of the Companies Act to order investigation by the SFIO, on the presumption that the Central Government being an expert body will not arbitrarily or without duly applying its mind invoke the powers under section 212 of the Companies Act. Such kind of unbridled power will necessarily ought to be exercised with great responsibility. 32. Discretionary power has been conferred upon the central government to enable the government to assume the power to step in where there is reason to suspect that a company may be conducting its affairs in a manner prejudicial to the interest of the public at large. 32. Discretionary power has been conferred upon the central government to enable the government to assume the power to step in where there is reason to suspect that a company may be conducting its affairs in a manner prejudicial to the interest of the public at large. However the discretionary power must not be exercised, in a manner, that will defeat the object of the statute conferring search discretion. In order to exercise the discretion reasonably and lawfully, the Central Government is required to form an opinion that investigation is necessary into the affairs of the company. Such opinion must be an honest opinion, rendered after bestowing sufficient attention to the relevant material and circumstances available before the central government. 33. A perusal of the impugned sanction dated 30.11.2021 would show that the same is absolutely without any reason, is nonspeaking, evidences non-application of mind and has been passed in a mechanical manner. Scrutinizing every word in the impugned sanction would make it clear that there is no independent opinion formed by the Central Government that, in the public interest, investigation is required into the affairs of the Company under section 212 of the Companies Act by the SFIO. In fact, there is no opinion formed by the Central Government as contemplated and mandated under section 212 of the Companies Act. Merely ordering investigation in a routinely fashion and in a mechanical way, as is done in the present case, would not qualify as forming of opinion for the purposes of section 212 of the Companies Act. 34, Therefore, in our opinion the impugned sanction dated 30.11.2021 on the face of it is perverse and bad in law, in as much as it does not give any reasons, show application of mind and/or particulars on the basis of which the respondent No. I has passed the order for investigation into the affairs of the Petitioner. Therefore, in the impugned order the Central Government has not formed the requisite opinion as mandated under section 212 of the Companies Act. The non-speaking order and nonapplication of mind vitiates the sanction itself and thus even the consequential prosecution and actions has to fall to ground. 35. Therefore, in the impugned order the Central Government has not formed the requisite opinion as mandated under section 212 of the Companies Act. The non-speaking order and nonapplication of mind vitiates the sanction itself and thus even the consequential prosecution and actions has to fall to ground. 35. Even Assuming that there was a requisite opinion formed by the Central Government, it is incumbent upon us to examine whether there exist material facts and circumstances to form such an opinion or weather such opinion correct has been formed on basis of irrelevant considerations or no material at all or on materials so tenuous, flimsy, slender or dubious that no reasonable man could reasonably reach such conclusion. 36. We are of the opinion that the opinion formed by the Central Government must not be based on a wholly irrelevant or extraneous consideration. The material and circumstances based on which the opinion to order and investigation has been rendered will have to prima facie show that the inferences drawn from the facts in the material and circumstances led to conclusions of certain definiteness as has been rightly held in the judgment of Parmeshwardas Agarwal (supra). In other words, it will have to be examined weather there existed necessary material or circumstances to arrive at an opinion requiring investigation of the affairs of a company by the SFIO. At this juncture, we must caution ourselves to not sit in appeal over the opinion formed by the Central Government and to not substitute the opinion of the Central Government but restrict to examination of existence of circumstances and material facts to grant the impugned sanction. 37. A perusal of the impugned sanction dated 30.11.2021 would show that the Central Government has based its opinion on the following material and circumstances; A) presentation and information given by the liquidator; and B) transaction audit Report. 38. We are of the considered view that to commence investigation under section 212 of the Companies Act, opinion of the Central Government is necessary. The opinion of a liquidator will be completely irrelevant. 39. Let us now examine the transaction audit report which is exhibited at page 215 of the Writ Petition. A complete reading of the transaction audit report would show that there are only allegation of transactions which are covered under section 66 of the IBC. The opinion of a liquidator will be completely irrelevant. 39. Let us now examine the transaction audit report which is exhibited at page 215 of the Writ Petition. A complete reading of the transaction audit report would show that there are only allegation of transactions which are covered under section 66 of the IBC. There is not even a suggestion or recommendation in the Transaction Audit report that the affairs of the company ought to be investigated by the SFIO or even a whisper of any prejudice caused to the public at large. 40. As per the recommendation of the transaction audit report, the liquidator has already filed an application under section 66 of the IBC before NCLT Mumbai, alleging the same to be preferential transaction and for recovery of money. The said application is pending adjudication. When transaction is covered under section 66 and application under the IBC which is a code in itself is pending, initiation of investigation on the same cause of action may not be necessary and may amount to double jeopardy. 41. After examining the transaction audit report as also the application filed by the liquidator under section 66 of the IBC and the liquidation application, we are of the opinion that at best one could conclude that there is an allegation that the company has entered into transactions which deprive its creditor IDBI Bank. We are of the opinion that when a private bank enters into a commercial contract with a private limited company, there is default on repayment of loan by such private limited company, eventually the loan facility is settled by way of an OTS, such a transaction would not qualify to prejudice public interest for the purposes of section 212 (1) (c) of the Companies Act. In the present case, the functions of the Company have come to stand still since its admission under the CIRP by order passed by the NCLT Mumbai dated 3.3.2020 and is pending liquidation, further there is an Application under section 66 of the IBC for recovery of monies which will be decided on its own fate, therefore, in our opinion there is no public interest involved or even a prima-facie case made out for initiation of investigation under section 212 of the Companies Act, even assuming the material and circumstances available with the Central Government at the time of passing the impugned sanction to be true and correct. Therefore, on examination of all the material and facts available with the Central Government at the time of granting the impugned sanction dated 30.11.2021, we are of the considered opinion, there did not exist any material or relevant circumstances to arrive at a conclusion that investigation into the affairs of the company is required under section 212 (1) (c) of the Companies Act in the public interest and no prudent person could have arrived at such a conclusion on basis of the facts which were available with the Central Government at the time of granting the impugned sanction. 42. In light of the aforementioned judgments, we are of the opinion that an order of sanction under section 212 of the Companies Act, 2013 needs to be a reasoned order, there needs to be existence of opinion formed by the Central Government on the basis of material facts and circumstances warranting such investigation and in compliance with principles of natural justice. In our opinion the impugned sanction dated 30.11.021 fails on all counts for reasons stated hereinabove. On a perusal of the impugned order it is evident that the Impugned Order is solely based on the suspicion raised by the Liquidator and Transaction Audit Report. On a bare perusal of the Transaction audit report has not brought forth any fact, material or circumstance in its report that could have led the Central Government to form the requisite opinion for the purposes of section 212(1)(c). The same shows that the Impugned Order has been passed by the respondent No. 1 without applying its mind and the opinion so formed by it is lacking in the pre-conditions to be satisfied under section 212(1)(c). 43. The same shows that the Impugned Order has been passed by the respondent No. 1 without applying its mind and the opinion so formed by it is lacking in the pre-conditions to be satisfied under section 212(1)(c). 43. Furthermore, the actions of the Central Government will amount to forcing the Petitioners to defend the same action twice. The proceedings under section 66 of the IBC being I.A. No.1373 of 2021 in Company Petition No.3419 of 2019 is pending before the Ld. NCLT. The proceedings are based on the transaction audit report and the erroneous findings therein. The findings of the Ld. NCLT in the Petition would cover all issues on facts. Pending that Petition, it would be appropriate the Petitioners are not put to another investigation on the same facts for the same reliefs, more particularly under section 212 (1) (c) of the Companies Act, for reasons stated hereinabove. 44. In terms of the above, the sanction dated 30.11.2021 under section 212(1)(c) of the Companies Act, 2013 is arbitrary, illegal and bad in law and ought to be set aside. Any steps taken in furtherance of the sanction dated 30.11.2021 deserves to be quashed and set aside and the present Petition deserves to be allowed in terms of prayer clauses (a), (b) and (c). 45. Resultantly, the impugned sanction dated 30.11.2021, any steps taken in furtherance of the sanction dated 30.11.2021 and the Look Out Circulars issued against the petitioners are hereby quashed & set aside. Accordingly, the petitioner is allowed. There shall be no order as to costs.