Hyderabad: The Telangana High Court on Wednesday reserved orders on two writ appeals filed by Karvy Stock Broking Ltd, challenging the order of a single judge, who upheld the decision of the Union corporate affairs ministry to order an investigation into the affairs of the company by the Serious Fraud Investigation Office (SFIO) under Section 212 of the Companies Act.
Karvy Stock Broking also challenged the notices issued by the SFIO as part of Investigation.
A division bench of Telangana High Court had on September 14, 2020, stayed proceedings by the SFIO. On Wednesday, a division bench comprising Chief Justice Satish Chandra Sharma and Justice N. Tukaramji heard the contentions of both sides and reserved orders.
S. Niranjan Reddy, senior counsel, appearing for Karvy Stock Broking said the Centre had violated the procedure set up by the Supreme Court in relation to ordering an investigation into company affairs.
He said an SFIO investigation can be ordered when the Centre is of the opinion that it is necessary to investigate into the affairs of a company, on the receipt of a report of the Registrar of Companies (RoC) under Section 208 of the Companies Act. In this case, the RoC had forwarded a report under Section 206(4) of the Act, without giving the opportunity to the company to submit its contentions.
Niranjan Reddy submitted that notices were issued to the company under Section 206(1), which is meant for production of documents. It could not be said that reasonable opportunity was given to the company. Niranjan Reddy said the Karvy did not object to the investigation but it should be on legal lines.
T. Surya Karan Reddy, additional solicitor general, representing the Centre submitted that Section 208 does not bar the RoC from sending reports after inquiry under Section 206. It also said that the "Registrar shall after inspection of the books of accounts of the company 'or' inquiry under Section 206 and other books and papers of the company under Section 207, can send a report to the Central Government, recommending further Investigation.”
