The Delhi High Court has made a recent ruling stating that when the Serious Fraud Investigation Office (SFIO) initiates an investigation into a company's affairs under the Companies Act, it is not allowed for any other agency to conduct a simultaneous investigation.

Justice Saurabh Banerjee thoroughly examined the origins of the amendments introduced in the Companies Act of 2013 and reached the determination that Section 212 of the Companies Act is, in essence, a comprehensive legal framework on its own. This provision empowers the Central government to request the Serious Fraud Investigation Office (SFIO) to conduct an investigation into a company's activities. The court emphasized that all the subsections of Section 212 must be interpreted in a manner that ensures they work together seamlessly since they are not only interconnected but also rely on each other for proper functioning.

The court additionally determined that once authorized by the Central government, SFIO possesses extensive authority to investigate and scrutinize a company's operations. It emphasized that even though the Companies Act is a specific and specialized piece of legislation, the provisions of the Code of Criminal Procedure (CrPC) are "fully applicable" to the proceedings conducted by the Serious Fraud Investigation Office (SFIO).

Court also observed that Section 212(2) of the Companies Act specifies that no other agency in the country can pursue the investigation once the case has been assigned to the Serious Fraud Investigation Office (SFIO), and stated that once SFIO takes charge of a case, all ongoing cases with other investigative authorities that are investigating matters related to or directly connected with offenses under the Companies Act, 2013, must be transferred to SFIO.
The Court further clarified that SFIO is obligated to share any pertinent information it discovers during its investigation, especially concerning offenses not related to the Companies Act of 2013, with other relevant agencies.

The Court made the observations while quashing a FIR registered by the Economic Offences Wing (EOW) of Delhi Police in January this year under Sections 406 (criminal breach of trust), 420 (Cheating and dishonestly inducing delivery of property) and 120B (criminal conspiracy) of the Indian Penal Code in relation to the WTC Group of Companies.
In 2022, the Ministry of Corporate Affairs instructed the SFIO to initiate an investigation into the activities of the WTC. In April 2022, the SFIO carried out search, seizure, and raid operations at the premises of WTC located in Noida.

The Court ruled that the investigation conducted by the EOW (Economic Offences Wing) should be nullified because the SFIO was already conducting an investigation into the same matter under the 2013 Companies Act. The Court also asserted that the FIR filed by the EOW is essentially a duplicate of the initial complaint made by the same complainant to the Ministry of Corporate Affairs (MCA), which led to the initiation of the SFIO proceedings.

Notably, the FIR filed by the EOW was quashed only in relation to the petitioner, Ashish Bhalla. While a total of 14 individuals and companies were named in the FIR, it was only Bhalla who had approached the High Court seeking the quashing of the case.

Case: Ashish Bhalla v. State & Anr CRL.M.C. 298/2023, CRL.M.A. 12731/2023 & CRL.M.A. 21779-21780/2023