SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI ETC & Anr.

Judgment

: HELD: 1.1 In Habeas Corpus proceedings a Court is to have regard to the legality or otherwise of the detention at the time of the return and not with reference to the institution of the proceedings. The act of directing remand of an accused is held to be a judicial function and the challenge to the order of remand is not to be entertained in a habeas corpus petition. In the instant case, as on the date when the matter was considered by the High Court and the Order was passed by it, not only were there orders of remand passed by the Judicial Magistrate as well as the Special Court, Gurugram but there was also an order of extension passed by the Central Government on 14.12.2018. The legality, validity and correctness of the order or remand could have been challenged by the original Writ Petitioners by filing appropriate proceedings. However, they did not raise such challenge before the competent Appellate or Revisional Forum. The orders of remand passed by the Judicial Magistrate and the Special Court, Gurugram had dealt with merits of the matter and whether continued detention of the accused was justified or not. After going into the relevant issues on merits, the accused were 92 A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI 93 remanded to further police custody. These orders were not put in challenge before the High Court. It was, therefore, not open to the High Court to entertain challenge with regard to correctness of those orders. The High Court, however, considered the matter from the standpoint whether the initial Order of arrest itself was valid or not and found that such legality could not be sanctified by subsequent Order of remand. Principally, the issue which was raised before the High Court was whether the arrest could be effected after period of investigation, as stipulated in said order dated 20.06.2018 had come to an end. The supplementary issue was the effect of extension of time as granted on 14.12.2018. The arrest was effected when the period had expired but by the time the High Court entertained the petition, there was as order of extension passed by Central Government on 14.12.2018. Additionally, there were judicial orders passed by the Judicial Magistrate as well as the Special Court, Gurugram, remanding the accused to custody. The High Court was not justified in entertaining the petition and passing the Order. [Para 17, 19] [116-E; 122-C-H; 123-A-B] Basanta Chandra Ghose v. King Emperor (1945) 7 FCR 81; Naranjan Singh Nathawan v. State of Punjab [1952] SCR 395 ; Ram Narayan Singh v. State of Delhi [1953] SCR 652 ; A.K. Gopalan v. Govt. of India [1966] 2 SCR 427 ; Pranab Chatterjee v. State of Bihar and Another (1970) 3 SCC 926 ; Talib Hussain v. State of Jammu and Kashmir (1971) 3 SCC 118 ; Col. Dr. B. Ramachandra Rao v. State of Orissa and Others (1972) 3 SCC 256; Kanu Sanyal v. District Magistrate, Darjeeling and Others (1974) 4 SCC 141 : [1974] 3 SCR 279; Manubhai Ratilal Patel through Ushaben v. State of Gujarat and Others (2013) 1 SCC 314 : [2012] 8 SCR 993 ; Saurabh Kumar v. Jailor, Koneila Jail and Another (2014) 13 SCC 436 : [2014] 8 SCR 909; State of Maharashtra and Others v. Tasneem Rizwan Siddiquee (2018) 9 SCC 745 - referred to.

1.2 The first Order dated 20.06.2018 itself indicated that the Registered Office of the Principal Company was in Gurugram, A B C D E F G H 94 A B C D E F G H SUPREME COURT REPORTS [2019] 5 S.C.R. Haryana. Soon after the arrest, the accused were produced before the Judicial Magistrate, Gurugram on 11.12.2018, who remanded them to custody till 14.12.2018 and directed that they be produced before the Special Court, Gurugram on 14.12.2018. Accordingly the accused were produced before the Special Court, Gurugram, who thereafter remanded them to custody first till 18.12.2018 and later till 21.12.2018. The Special Court, Gurugram would be competent to deal with the matter in terms of Section 436. Petitioners, however, submitted that since the accused were arrested in Delhi, were kept in custody in Delhi, and the SFIO office being in Delhi, the High Court of Delhi was competent to entertain and consider the writ petitions so preferred by the writ petitioners. [Para 21] [123-E-H; 124-A-B] Navinchandra N. Majithia v. State of Maharashtra and Others (2000) 7 SCC 640 : [2000] 3 Suppl. SCR 82; Dashrath Rupsingh Radhod v. State of Maharashtra and Another (2014) 9 SCC 129 : [1999] 3 Suppl. SCR 271 - referred to.

1.3 In the instant case, it cannot be said that the High Court completely lacked jurisdiction to entertain the petition. However, since the challenge was with respect to the detention pursuant to valid remand orders passed by the Judicial Magistrate and the Special Court, Gurugram, the High Court should not have entertained the challenge. If the act of directing remand is fundamentally a judicial function, correctness or validity of such orders could, if at all, be tested in a properly instituted proceedings before the appellate or revisional forum. In the circumstances even if the arrests were effected within the jurisdiction of the High Court, since the accused were produced before a competent court in pursuance of Sections 435, 436 of 2013 Act, the High Court ought not to have entertained the writ petition. However, since the High Court considered the matter from the standpoint whether the initial Order of arrest itself was valid or not and then found that such illegality could not be sanctified by subsequent Order of remand. [Para 24] [125-G-H; 126-A-C]

1.4 Reading of the provisions of 2013 Act shows that certain Sections in Chapter XXIX prescribe punishment for SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI 95 offences such as fraud, false statement, false evidence and withholding of property under Sections 447, 448, 449 and 452 respectively. The punishment for fraud involving an amount of at least Rs.10 lakhs or 1 per cent of the turnover of the Company, is imprisonment for a term which may extend to 10 years. The offence of fraud in relation to the affairs of a Company is considered to be a grave offence and the writ petitioners were allegedly guilty of such offence. Chapter XIV of 2013 Act deals with Inspection, Inquiry and Investigation. Under Section 210, investigation into the affairs of a Company can be undertaken. Section 211 contemplates establishment of Serious Fraud Investigation Offence (SFIO) which is to be headed by a Director and is to consist of Experts with ability, integrity and experience in fields like Banking, Corporate Affairs, Taxation, Forensic Audit, Capital Market, Information Technology, Law or such other fields. SFIO headed by a Director is thus a compact and competent unit consisting of experts in various domains. Section 212 empowers the Central Government to assign the investigation into the affairs of a Company to SFIO. Upon such assignment the Director SFIO may designate such number of inspectors under sub-Section (1) and shall cause the affairs of the Company to be investigated by an Investigating Officer under sub-Section (4). The expression used in sub-Section (1) is “assign the investigation”. Sub-Section (2) incorporates an important principle that upon such assignment by the Central Government to SFIO, no other investigating agency of the Central Government or any State Government can proceed with investigation in respect of any offence punishable under 2013 Act and is bound to transfer the documents and records in respect of such offence under 2013 Act to SFIO. [Para 26] [132-C-H]

1.5 Under sub-Section (3) where the investigation is so assigned by the Central Government to SFIO, the investigation must be conducted in the manner and in accordance with the procedure provided in the Chapter and a report has to be submitted to the Central Government within such period as may be specified. This provision contemplates submission of a report within the period as may be specified. The subsequent provisions then contemplate various stages of investigation A B C D E F G H SUPREME COURT REPORTS [2019] 5 S.C.R. including arrest under sub-Section (8) and that SFIO is to submit an interim report to the Central Government, if it is so directed under sub Section (11). Further, according to sub-Section (12), on completion of the investigation, SFIO is to submit the “investigation report” to the Central Government. This report under sub-Section (12) may lead to further follow up actions. Under sub-Section (13) a copy of the “investigation report” could be obtained by any concerned person by making an application in that behalf to the Court while under sub-Section (14) on receipt of said “investigation report” the Central Government may direct SFIO to initiate prosecution against the Company. The “investigation report” under sub-Section (12) is to be submitted on completion of the investigation whereas report under sub-Section (11) is in the nature of an interim report and is to be submitted if the Central Government so directs. The provisions of Section 43(2) of 2008 Act do not postulate any such period and the assignment in the present case to SFIO was under the concerned provisions of 2013 Act as well as under 2008 Act. [Para 27] [133-A-F]

1.6 Section 212(3) of 2013 Act by itself does not lay down any fixed period within which the report has to be submitted. Even under sub-Section (12) which is regarding “investigation report”, again there is no stipulation of any period. In fact such a report under sub-Section (12) is to be submitted “on completion of the investigation”. There is no stipulation of any fixed period for completion of investigation which is consistent with normal principles under the general law. If the investigation proceeds for a longer period, under Section 167 of the Code certain rights may flow in favour of the accused. But it is certainly not the idea that in case the investigation is not over within any fixed period, the authority to investigate would come to an end. Sub-Section (2) of Section 213 of 2013 Act does not speak of any period for which the other Investigating Agencies are to hold their hands, nor does the provision speak of any re-transfer of the relevant documents and records from SFIO back to said Investigating Agencies after any period or occurring of an event. [Para 28] [133-F-H; 134-A-C] 96 A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI 97

1.7 The very expression “assign” in Section 212(3) of 2013 Act contemplates transfer of investigation for all purposes whereafter the original Investigating Agencies of the Central Government or any State Government are completely denuded of any power to conduct and complete the investigation in respect of the offences contemplated therein. The idea under sub-Section (2) is complete transfer of investigation. The transfer under sub-Section (2) of Section 213 would not stand revoked or recalled in any contingency. If a time limit is construed and contemplated within which the investigation must be completed then logically, the provisions would have dealt with as to what must happen if the time limit is not adhered to. The Statute must also have contemplated a situation that a valid investigation undertaken by any Investigating Agency of Central Government or State Government which was transferred to SFIO, must then be re-transferred to said Investigating Agencies. But the Statute does not contemplate that. The transfer is irrevocable and cannot be recalled in any manner. Once assigned, SFIO continues to have the power to conduct and complete investigation. If that be so, can such power stand curtailed or diminished if the investigation is not completed within a particular period. The Statute has not prescribed any period for completion of investigation. The prescription in the instant case came in the order of 20.06.2018. [Para 29] [134-D-G; 135-A] Kazi Lhendup Dorji v. State of Sikkim & Ors (1994) 2 Suppl. SCC 116 - referred to.

1.8 It is well settled that while laying down a particular procedure if no negative or adverse consequences are contemplated for non-adherence to such procedure, the relevant provision is normally not taken to be mandatory and is considered to be purely directory. Furthermore, the provision has to be seen in the context in which it occurs in the Statute. There are three basic features which are present in this matter; absolute transfer of investigation in terms of Section 212(2) of 2013 Act in favour of SFIO and upon such transfer all documents and records are required to be transferred to SFIO by every other A B C D E F G H SUPREME COURT REPORTS [2019] 5 S.C.R. Investigating Agency; for completion of investigation, sub-Section (12) of Section 212 does not contemplate any period; and under sub-Section (11) of Section 212 there could be interim reports as and when directed. In the face of the salient features it cannot be said that the prescription of period within which a report is to be submitted by SFIO under sub-Section (3) of Section 212 is for completion of period of investigation and on the expiry of that period the mandate in favour of SFIO must come to an end. If it was to come to an end, the legislation would have contemplated certain results including re-transfer of investigation back to the original Investigating Agencies which were directed to transfer the entire record under sub-Section (2) of Section 212. In the absence of any clear stipulation, an interpretation that with the expiry of the period, the mandate in favour of SFIO must come to an end, will cause great violence to the scheme of legislation. If such interpretation is accepted, with the transfer of investigation in terms of sub Section (2) of Section 212 the original Investigating Agencies would be denuded of power to investigate and with the expiry of mandate SFIO would also be powerless which would lead to an incongruous situation that serious frauds would remain beyond investigation. That could never have been the idea. The only construction which is, possible therefore, is that the prescription of period within which a report has to be submitted to the Central Government under sub-Section (3) of Section 212 is purely directory. Even after the expiry of such stipulated period, the mandate in favour of the SFIO and the assignment of investigation under sub-Section (1) would not come to an end. The only logical end as contemplated is after completion of investigation when a final report or “investigation report” is submitted in terms of sub-Section (12) of Section 212. It cannot therefore, be said that the mandate came to an end on 19.09.2018 and the arrest effected on 10.12.2018 under the orders passed by Director, SFIO was in any way illegal or unauthorised by law. In any case, extension was granted in the instant case by the Central Government on 14.12.2018. But that is completely besides the point since the original arrest itself was not in any way illegal. The High Court completely erred in proceeding on that premise and in passing the order under appeal, and thus, is set aside. [Para 30, 31] [135-B-H; 136-A-D] 98 A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI 99 Case Law Reference (1945) 7 FCR 81 referred to [1952] SCR 395 referred to [1953] SCR 652 referred to [1966] 2 SCR 427 referred to (1970) 3 SCC 926 referred to (1971) 3 SCC 118 referred to (1972) 3 SCC 256 referred to [1974] 3 SCR 279 referred to [2012] 8 SCR 993 referred to [2014] 8 SCR 909 referred to (2018) 9 SCC 745 referred to [2000] 3 Suppl. SCR 82 referred to [1999] 3 Suppl. SCR 271 referred to (1994) 2 Suppl. SCC 116 referred to Para 17 Para 17 Para 17 Para 17 Para 17 Para 17 Para 17 Para 17 Para 18 Para 18 Para 18 Para 21 Para 23 Para 29 Per Abhay Manohar Sapre, J: (Supplementing): HELD: Having regard to the scheme of the Companies Act, 2013 underlined in Chapter XIV (Sections 206 to 229) dealing with the matters relating to inspection, inquiry and investigation of the companies in juxtaposition with Chapter XXIX which prescribes the punishment/penalties for commission of various offences specified under the Act, the compliance of sub- section (3) of Section 212 of the Act is essentially directory. If the submission of the counsel for the respondents that the compliance of sub-section (3) of Section 212 of the Act in relation to the submission of the report be held mandatory is accepted (which cannot be accepted) the very purpose of enacting Section 212 of the Act would get defeated and will become nugatory. When the well-known principle of purposive interpretation is applied while interpreting the relevant provisions in juxtaposition and A B C D E F G H 100 SUPREME COURT REPORTS [2019] 5 S.C.R. hold that sub-section (3) of Section 212 of the Act is directory in nature, it serves the legislative intent for which Chapter XXIX is enacted. The reasoning and the conclusion arrived at on the interpretation of sub-section (3) of Section 212 of the Act is concurred with. [Para 4-7] [138-A-E] CRIMINAL APPELLATE JURISDICTION: Criminal Appeal Nos. 538-539 of 2019.

From the Judgment and Order dated 20.12.2018 of the High Court of Delhi at New Delhi in WPCRL Nos. 3842 and 3843 of 2018 Transfer Petition (Crl.) No.35 of 2019 With Tushar Mehta, SG, Amit Mahajan, Rajat Nair, Manan Popli, Ranvijay Singh, Rajeev Ranjan, Neeraj Kumar Sharma, Advs. for the Appellant. Kapil Sibal, Mukul Rohtagi, Sidharth Luthra, V. Giri, Sr. Advs., Aditya Singla, Adit Pujari, Ms. Priya Puri, Pallav Gupta, Kartik Venu, Ranjay Duhbey, Ms. Vinita Meghrajani, Ravi Pathak, Ms. Supriya Juneja, Ms. Cheshta Jetly, Ms. Varsha Poddar, Himanshu Gupta, Akshay Sehgal, Saifuddin S., Sayantan Talapatra, Krishna Kumar Singh, Advs. for the Respondents. The Judgments of the Court were delivered by: UDAY UMESH LALIT, J. 1.Leave granted.

#2. These Appeals challenge the correctness of the common interim order dated 20.12.2018 passed by the High Court of Delhi at New Delhi in Writ Petition (Crl.) Nos.3842 and 3843 of 2018.

#3. In exercise of powers conferred by Section 212(1)(c) of the Companies Act, 2013 (“2013 Act”, for short) and under Section 43(2) and (3)(c)(i) of the Limited Liability Partnership Act, 2008 (“2008 Act”, for short), the Central Government vide order No.07/115/2018/CL-II (NWR), directed investigation into the affairs of Adarsh Group of Companies and LLPs (‘The Group’, for short) by Officers of Serious Fraud Investigation (SFIO) as nominated by Director, SFIO. The relevant part of the Order dated 20.06.2018 was as under:- A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI [UDAY UMESH LALIT, J.] 101 “Whereas the Central Government is empowered under Section 212(1)(c) of the Companies Act, 2013 (the Act) to order investigation into the affairs of a company in public interest by the Serious Fraud Investigation Office (SFIO).

#2. And whereas the Central Government is also empowered to order investigation into the affairs Limited Liability Partnerships (LLPs) under Section 43 (2) & (3) (c) (i) of the Limited Liability Partnership Act, 2008.

#3. AND whereas on the basis of opinion formed by the Central Government, it has been decided to investigate the affairs of following companies:- S NO CIN COMPANY / LLP NAME

#1. U45201HR 2000PLC0 45738 ADARSH BUILDESTATE LIMITED REGION PAN_ NUMBER STATUS Haryana AAJCA190 7A ACTV NEW ADDRESS 1ST FLOOR, BLOCK-B, VATIKA ATRIUM GOLF COURSE ROAD, SECTOR-53 GURGAON 2 to 124 .. 125 U45201RJ2 013PTC 042465 … … … … … WATER-FALL REAL ESTATES PRIVATE LIMITED J 7, MOTI DOONGRI ROAD, JAIPUR Rajastha n AABCW38 26E ACTV

#4. Now, therefore, in exercise of powers conferred under Section 212 (1) (c) of the Companies Act, 2013 and under Section 43 (2) & (3) (c) (i) of the LLP Act, 2008 the Central Government hereby orders investigation into the affairs of the above named companies and LLPs to be carried out by officers of the Serious Fraud Investigation Office (SFIO) as nominated by Director, SFIO.

#5. The SFIO shall investigate into following areas (above mentioned companies and LLPs) in addition to any other issues that it may come across during the investigation. A B C D E F G H 102 SUPREME COURT REPORTS [2019] 5 S.C.R. (i) To ascertain and unearth rotation of funds or identification of quantum of diversion of funds of siphoning including beneficiaries thereof: (ii) To identify instances of mismanagement, negligence or fraud; (iii) To ascertain the role of auditors, KMPs or independent directors or any other person in the alleged fraud: (iv) To examine role of any other entity used as conduit in the alleged fraud; (v) To identify non-compliance of the statutory provisions of the Act and its impact on Corporate Governance.

#6. That the Inspector(s) so appointed shall exercise all powers available to them under Section 217 of the Companies Act, 2013 and Chapter IX of LLP Act, 2008. The inspector(s) shall complete their investigation and submit their report to the Central Government within a period of 03 (Three) months from the date of issue of this order.

#7. This order is issued for and on behalf of the Central Government. Sd/- (Santosh Kumar) Joint Director” 4. On the same date, i.e. on 20.06.2018 an Order was passed by the Director, SFIO. The relevant portion of said order was as under:- “3. Now, therefore, in exercise of powers conferred under Section 212(1) of the Companies Act 2013, the following Officers are designated as Inspectors to carry out the investigation into the affairs of the above-mentioned entities and shall exercise all the powers available to them under the Companies Act, 2013:

#1. (cid:127) Shri P.C. Maurya, Addl. Director

#2. Shri Prashant Baliyan, Deputy Director

#3. Shri G. L. Meena, Sr. Asst. Director

#4. Shri Kumar Gautam, Asst. Director A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI [UDAY UMESH LALIT, J.] 103

#4. And further, in exercise of powers conferred under Section 212(4) of the Companies Act, 2013, Sh. Prashant Baliyan, Dy. Director is appointed as Investigating Officer to carry out the above noted investigation. The Investigating Officer shall have the powers of Inspector as enumerated under Section 217 of the Companies Act, 2013. As per the investigation order, following issues are specifically to be examined along with other issues which may come across during the investigation: (i) To ascertain and unearth rotation of funds or identification of quantum of diversion of funds or siphoning including beneficiaries thereof; (ii) To identify instances of mismanagement, negligence or fraud; A B C (iii) To ascertain the role of auditors, KMPs or independent directors or any other person in the alleged fraud; (iv) To examine role of any other entity used as conduit in the alleged fraud; and D (v) To identify non-compliance of the statutory provisions of the Act and its impact on Corporate Governance.

#5. The Inspectors and the Investigating Officer shall complete the investigation and submit the report within three months hereof.”

#5. The period mentioned in Clause 6 of the Order dated 20.06.2018 came to an end on 19.09.2018. Based on the material gathered during investigation, an approval was sought under Rule (2) of the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 (“2017 Rules”, for short) from the Director, SFIO to arrest three accused persons namely Rahul Modi, Mukesh Modi and Vivek Harivyasi. The approval was granted by the Director, SFIO on 10.12.2018. The arrest order issued under Rules 4 and 5 of 2017 Rules made reference to the proceedings, “07/115/2018 CL-II (NWR) Dt. 20.06.2018” The accused were accordingly arrested on 10.12.2018. The compliance in terms of 2017 Rules was effected and they were produced before the Duty Magistrate, District Courts, Gurugram, Haryana on 11.12.2018. E F G H 104 SUPREME COURT REPORTS [2019] 5 S.C.R.

#6. After hearing Counsel for the appellant as well as for the accused, the Judicial Magistrate First Class, Gurugram by order dated 11.12.2018 granted remand till 14.12.2018 and directed they be produced before the Special Court (Companies Act), Gurugram on 14.12.2018. The application seeking remand had sought to make out a case for custody of the accused. The matter was dealt with by the Judicial Magistrate as under:- “5. Counsel for accused Nos.1 and 2 argued that these persons have already been co-operated with the investigation since 20th June and their office have been sealed. Despite this, now remand has been sought without any reason, therefore, kindly it be declined.

#6. Perusal of documents on record shows that there are serious allegations and as per order dated 20.06.2018, investigation was ordered to be initiated and now accused has been produced before this court under Section 167 Cr.P.C. seeking SFIO remand. This court is to exercise the power of Magistrate in terms of Section 436(1)(B). At this stage, remand has been sought. The offence alleged is definitely serious in nature and the arrest orders are placed on record. Consequential to these documents, accused were arrested and produced. Undoubtedly, they have been appearing on notices issued by the SFIO but still the investigation has not been completed because some part of investigation needs personal involvement. This case prima facie attracts Section 447 of Companies Act, which certainly makes this offence cognizable and no bailable. The main grounds for which the investigation is to be conducted in custody is ascertainment of further trail qua withdrawn money and to locate the beneficiaries. In addition to this, identification of properties and explanation about loans and advances mentioned in the books of accounts can only be given by accused but they have not come up with any such explanations till now. Even the persons who are in custody are not going to facilitate the investigation in proper manner so that the real facts can be established. These grounds definitely require detained and comprehensive investigation so it would be proper to grant the custody of these accused to SFIO for three days. Accused be produced before the Special Court under Companies Act on 14.12.2018. Copy of this order be handed over to the IO and A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI [UDAY UMESH LALIT, J.] 105 accused as they have requested. Custody of all three accused namely Mukesh Modi, Rahul Modi and Vivek Harivyasi is given to SFIO for three days. File be sent to the Special Court under the Companies Act.”

#7. On 13.12.2018 a proposal was made by SFIO seeking approval of the Central Government for extension of time for completing investigation and submission of investigation report in respect of 57 cases which were at various stages of completion and the period granted for completion of investigation had either expired or was near the expiry. One of the cases referred to was that of the Group at Sl. No.24 of the list. On 14.12.2018 the accused were produced before the Special Court with a fresh application for remand. The prayer for extension of custody was opposed by the accused inter alia on the grounds that the period of completion of investigation as stipulated in the order dated 20.06.2018 had expired and as such all further proceedings were illegal. During the course of proceedings, the proposal seeking extension in respect of said 57 cases, where investigation had not been completed, was placed before the Special Court. After going into the record, the Special Court found that the application seeking further remand was justified. It, therefore, extended the police custody of the accused till 18.12.2018. Para 6 of the Order dated 14.12.2018 passed by the Special Court was:- “6. Admittedly as per the provisions of Section 212(3) of the Companies Act, the investigations ordered are required to be completed within the specified time. But the issue is even if it not so done, what should be consequences and whether further proceedings or investigations shall be unlawful. The answer to the mind of this court is simply no because the time frame mentioned is to complete the investigations in a time bound manner but the said time can be extended from time to time by the same authority. And in this case all, after investigations when the team submitted report to competent authority, which is the Director of SFIO, he permitted the team to arrest the accused and go for further investigations, which in the given facts and circumstances amount to extension. Then the purpose of section 212(3) is just to grant sanction to investigate as per the procedure provided under Chapter XIV of the Companies Act, 2013 and as A B C D E F G H 106 SUPREME COURT REPORTS [2019] 5 S.C.R. per sub-Section 6, the offence alleged is cognizable and non-bailable and thus power has been granted to the SFIO to arrest the persons involved and see their remand and then to file a final report to the Central Government. And thus the issue of filing a report before the court after arrest is mandatory but doing so before the arrest of the accused is not a time bound exercise that too violation of which can be legal impediment for further investigation.” The proposal was accepted vide order dated 14.12.2018 passed by the Central Government in respect of the Group and extension was granted upto 30.06.2019.

#8. On 17.12.2018 Writ Petition (Criminal) Nos.3842 & 3843 of 2018 were filed under Articles 226 & 227 of the Constitution of India read with Section 482 of Cr.P.C. by Rahul Modi and Mukesh Modi respectively in the High Court of Delhi. It was submitted that with the expiry of period within which the investigation had to be completed in terms of order dated 20.06.2018, all further proceedings including the arrest of the respondents were illegal and without any authority of law. The Writ Petitions therefore prayed for declaration that the investigation carried out after 19.09.2018 was illegal and without jurisdiction and also prayed for Writ of Habeas Corpus directing release from illegal arrest made on 10.12.2018. The prayers in both the petitions were almost identical and were as under: A. “Issue a writ of mandamus or any other appropriate writ/direction/order in the nature of a writ declaring that the power of Respondents No.2 to 4 to carry out investigation under Section 2012(2) Companies Act, 2013 after the expiry of the time period is illegal and unconstitutional. B. Issue a writ of mandamus or any other appropriate writ/direction/order in the nature of a writ declaring that the investigation carried out after 19.09.2018 in File No.SFIO/INV/ AOI/2018-19-AGC & L/842-966 vide order No.07/115/2018- CL-II dated 20.06.2018 as illegal and without jurisdiction. C. Issue a writ/direction/order declaring the arrest of the Petition dated 10.12.2018 at New Delhi in the office of Respondent No.2 by Respondent No.3, and proceeding emanating A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI [UDAY UMESH LALIT, J.] 107 therefrom being without jurisdiction and illegal and the Petitioner Rahul Modi be released forthwith. A D. Issue a writ of Habeas Corpus directing immediate release of the Petitioner herein Sh. Rahul Modi from the illegal arrest dated 10.12.2018 at New Delhi and consequent illegal custody from Respondent No.2 to 4 at;

#9. These Writ Petitions came up before the High Court on

18.12.2018 and following order was passed: “At request of Ms. Maninder Acharya, learned ASG appearing on behalf of the Union of India, in order to enable her to obtain instructions qua the extension of time for the submission of report by the SFIO, the hearing of the petitions is adjourned.” On the same day the accused were produced before the Special Court and after being satisfied that further custody was required in order to complete investigation, the accused were remanded to police custody till 21.12.2018. The relevant part of the Order of the Special Court was:- “2. The SFIO has placed before the undersigned complete noting proceedings showing the investigations carried out by it from the last date till today. As submitted by the counsel for the complainant and after going through the case diary in the form of noting sheets from the day the accused were handed to the custody of the complainant till today, it comes out that admittedly some more disclosures about the entire scam has been disclosed by the accused persons relating to some new issues leading to disclosure about undisclosed wealth and thus the request for further custody of accused persons is required to trail and confront them with the subsequent evidence and events and to investigate the matter further as per the disclosures made by the accused to unearth real facts of siphoning of the huge money, in view of this investigations in the order dated 14.12.2018. As such, finding the request to be genuine and the plea of custodial interrogation to be necessary for the logical end of the entire investigations, the application in hand is allowed and all the three accused persons are remanded to further custody of the SFIO till 21.12.2018 upto 2.00 p.m.” B C D E F G H 108 SUPREME COURT REPORTS [2019] 5 S.C.R.

#10. The Writ Petitions came up before the High Court on 20.12.2018. The High Court issued notice making it returnable on 31.01.2019. The High Court thereafter proceeded to consider whether immediate release of the respondents by way of ad interim relief was called for. Both the sides were heard and the issues which arose for consideration in the Writ Petitions were framed as under: “a) Whether the ex post facto extension granted on behalf of the Competent Authority is valid in law; and b) Whether the vested rights created in favour of the applicants, in the interregnum, when there was purportedly no legal sanction to carry out the investigation against the applicants, renders the said action, and in particular their arrest illegal, without jurisdiction and contrary to law.”

#11. While considering the matter from the perspective of grant of ad interim relief, as prayed for in applications, Crl. M.A. No.50033 of 2018 in Writ Petition (Criminal) No.3842 of 2018 and Criminal M.A. No.50035 of 2018 in Writ Petition (Criminal) No.3843 of 2018 the following points were framed: “15. In view of the submissions made on behalf of the parties, the issues that arise for consideration in the present applications are:- “a) Whether this Court can in a proceeding for habeas corpus under Article 226 of the Constitution of India, test the correctness, legality and validity of an order of remand, passed by a Competent Magistrate/ and b) Whether this Court has the territorial jurisdiction to adjudicate the present habeas corpus proceedings, in view of the circumstance that the remand orders were rendered by a Com- petent Magistrate at Gurugram, which have not been specifically assailed in these proceedings?”

#12. The High Court by its order dated 20.12.2018 directed release of said Rahul Modi and MukeshModi on interim bail, during the pendency of the writ petitions, on their furnishing personal bond in the sum of Rs.5 lakhs each with 2 local sureties in the like amount subject to conditions stipulated in the order. During the course of its order following observations were made by the High Court in paragraphs 22 to 30:- A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI [UDAY UMESH LALIT, J.] 109 “22. On a conspectus of the above decisions and in the light of the arguments advanced on behalf of the parties, what we are called upon to determine at this stage is whether the arrest of the applicants was illegal and without the authority of law; and whether the subsequent remand orders, which are cited to sanctify the arrest, are beyond the pale of examination by this Court in the present applications.

#23. There is no denying the fact that, the Competent Authority vide its order dated 20.06.2018 directed the SFIO to conduct an investigation into the affairs of the subject entities, in public interest. There is also no quarrel with the circumstance that, the period specified by the Competent Authority in the said order dated 20.06.2018 lapsed on 19.09.2018. There is also no dispute with regard to the fact that, the SFIO sought an extension of time, from the Competent Authority, to carry out further investigation under the mandate of the provisions of Section 212 of the said Act, only on 13.12.2018, admittedly two and half months after the period granted to them by the Competent Authority for the said purpose, had come to an end by efflux of time.

#24. There is also no quarrel with the circumstance that, the ex post facto extension granted by the Competent Authority, retrospectively, was granted only on 14.12.2018. It is, therefore, prima facie axiomatic that, when the applicants were arrested by the SFIO on 10.12.2018, the period specified in the said order dated 20.06.2018 for the submission of the report, post investigation, had already elapsed. It is further relevant to state that, at that juncture the SFIO had neither applied nor obtained the ex post facto extension of the period specified in the said order dated 20.06.2018.

#25. It is, in these circumstances, read in conjunction with the norms set out by the SFIO itself, warranting investigation to be completed within the timeframe, stipulated by the Central Government, that we are of the considered view that the order of arrest suffers from the vice of lack of jurisdiction, unlawful and illegal.

#26. A statutory body must be strictly held to the standards by which it professes its conduct to be judged. A B C D E F G H 110 SUPREME COURT REPORTS [2019] 5 S.C.R.

#27. Illegal detention of the applicants, in our considered view, cannot be sanctified by the subsequent remand orders, passed by the concerned Magistrate. The right of the applicants to insist upon the strict and scrupulous discharge of their duty by the SFIO and observe the forms and rules of law, is absolute. The arrest of the applicants on 10.12.2018 in the light of the circumstances antecedent and attendant was an absolute illegality and patently suffers from the vice of lack of legal sanction and jurisdiction.

#28. This Court in a petition for habeas corpus cannot justify the continued illegal detention of the applicants; merely on account of the circumstance that the concerned Magistrate has rendered remand orders. The further custody of the applicants would, in our considered view, violate the principles of personal liberty, enshrined in Article 21 of the Constitution of India. The continued detention of the applicants does not admit of lawful sanction.

#29. Even otherwise, the remand order dated 14.12.2018, insofar as, it observes as follows:- “6. ………..And in this case all, after investigations when the team submitted report to competent authority, which is the Director of SFIO, he permitted the team to arrest the accused and go for further investigations, which in the given facts and circumstances amount to extension.” is wrong, incorrect and patently contrary to law and the official record.

#30. This is quite apart from the circumstance that, the applicants were arrested at the SFIO office at New Delhi on 10.12.2018, thereby rendering the remand orders passed by the concerned Magistrate in Gurugram, wholly without jurisdiction.”

#13. The original writ petitioners Rahul Modi and Mukesh Modi were, therefore, released on bail. The aforesaid order dated 20.12.2018 passed by the High Court is presently under challenge. Mr. Tushar Mehta, learned Solicitor General appeared for the appellant – SFIO in both criminal appeals while the original writ petitioners were represented by Mr. Kapil Sibal, Mr. Mukul Rohatgi and Mr. Sidhharth Luthra, Senior Advocates. Both sides also filed their written submissions. A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI [UDAY UMESH LALIT, J.] 111

#14. The learned Solicitor General submitted inter alia: (a) In terms of the provisions of 2013 Act, the investigation commenced when the present matter was assigned to SFIO under Section 212(1) of 2013 Act and the investigation would end on filing of a report by SFIO after completion of investigation, as per Section 212(12) of the Act. It would be incorrect to assume that the mandate to investigate or power to arrest would come to an end on completion of three months from 20.06.2018. (b) The stipulation in Section 212(3) of 2013 Act regarding submission of the report to the Central Government “within such period as may be specified in the order” is purely directory. (c) Power of arrest under Section 212(8) of 2013 Act conferred upon the Director, Additional Director and Assistant Director is not circumscribed by any time limit and so long as the conditions stipulated in said sub-section are satisfied, such power of arrest can be validly exercised. (d) The Habeas Corpus Petition was not maintainable in the High Court of Delhi as after their arrest the original Writ Petitioners were produced before the Judicial Magistrate, Gurugram on 11.12.2018 and were remanded to custody under a judicial order. Thereafter they were produced before the Special Court, Gurugram on 14.12.2018 and were again remanded to custody under judicial order passed by Special Court, Gurugram. (e) Since the registered office of the Principal Company was in Gurugram, they were rightly produced before the Magistrate and Special Court in Gurugram. Thus, if at all the Habeas Corpus Petition ought to have been filed before the High Court of Punjab and Haryana and not in High Court of Delhi. (f) The focal point of examination in a Habeas Corpus Petition is the date of return and not the initiation of proceedings. In the present case, on 18.12.2018 when the petitions were taken up for consideration, not only was there an order of extension dated 14.12.2018 passed by the Central Government but there were valid orders of remand passed by the Judicial Magistrate, Gurugram on 11.12.2018 and by the Special Court, Gurugram on 14.12.2018 and 18.12.2018. A B C D E F G H 112 SUPREME COURT REPORTS [2019] 5 S.C.R.

#15. Mr. Sibal, Mr. Rohatgi and Mr. Luthra, learned Senior Advocates appearing for the original writ petitioners submitted, inter alia:- (a) A special jurisdiction has been created by Section 212 of 2013 Act under which corporate affairs in relation to any company can be investigated into by SFIO, which may have far reaching consequences. It is precisely for this reason that certain time limit is contemplated within which investigation must be completed and the investigation cannot be allowed to be an endless matter. The period prescribed under the 1st Order, therefore, had to be scrupulously observed and the mandate came to an end on the expiry of said period. (b) SFIO being a special entity which otherwise has no jurisdiction to investigate into the matter, must therefore act within the parameters of the mandate and no arrest after the expiry of the period could have been effected. (c) Any arrest made beyond the period would be without jurisdiction and the High Court was, therefore, justified in granting the relief in the present matter. (d) The Writ Petitions principally challenged the orders of arrest being without jurisdiction and it was only the 4th prayer in the Writ Petitions which pertained to issuance of a writ of Habeas Corpus. e) The order entrusting investigation to SFIO was passed in New Delhi, SFIO is located in New Delhi, the order of arrest was passed in New Delhi, the writ petitioners were arrested in New Delhi and were kept in custody in SFIO office in New Delhi and as such the High Court of Delhi had jurisdiction to consider the Writ Petitions and grant relief as prayed for. f) In the absence of any extension for further investigation, the power of arrest could not have been exercised on 10.12.2018. Any further extension cannot validate the act of initial arrest. Such arrest being unsupported by any valid mandate, was an act of illegality which violated Article 21 calling for interference by the High Court. A B C D E F G H SERIOUS FRAUD INVESTIGATION OFFICE v. RAHUL MODI [UDAY UMESH LALIT, J.] 113

#16. The basic facts in the present matter can be summed up:- A a) The investigation was assigned to SFIO vide Order dated 20.6.2018. This Order did stipulate in para 6 that the Inspectors should complete their investigation and submit their report to the Central Government within three months. b) The period of three months expired on 19.09.2018. c) The proposal to arrest three accused persons was placed before the Director, SFIO and after being satisfied in terms of requirements of Section 212(8) of 2013 Act approval was granted by Director, SFIO on 10.12.2018. d) After they were arrested on 10.12.2018, the accused were produced before the Judicial Magistrate, who by his order dated 11.12.2018 remanded them to custody till 14.12.2018 and also directed that they be produced before the Special Court on 14.12.2018. e) On 13.12.2018 a proposal seeking extension of time for completing investigation in respect of 57 cases including the present case was preferred by SFIO. f) On 14.12.2018 the Special Court, Gurugram remanded the accused to custody till 18.12.2018. g) On the same date i.e. on 14.12.2018 the proposal for extension was accepted by the Central Government in respect of the Group and extension was granted upto 30.06.2019. h) On 17.12.2018 the present Writ Petitions were preferred which came up for the first time before the High Court on 18.12.2018. i) On 18.12.2018 itself the accused were further remanded to police custody till 21.12.2018. j) On 20.12.2018 Writ Petitions were entertained and the order which is presently under appeal was passed. k) Pursuant to said order, the original Writ Petitioners were released on bail. B C D E F G H 114 SUPREME COURT REPORTS [2019] 5 S.C.R. A B C D E F G H In the backdrop of these facts, the High Court found that a case for interim relief was made out. The principal issues which arise in the matter are whether the High Court was right and justified in entertaining the petition and in passing the Order under appeal?

#17. For considering whether the writ petitioners were entitled to any interim relief, two questions were framed by the High Court in paragraph 15 of its Order. Before considering the matter from the perspective of said two questions, an issue which was stressed by the learned Solicitor General may be addressed first. It was submitted by him that the date with reference to which the legality of detention can be challenged in a Habeas Corpus proceeding is the date on which the return is filed in such proceedings and not with reference to the initiation of the proceedings. He relied upon the decision of the Federal Court in Basanta Chandra Ghose vs. King Emperor1, which had concluded: “… …If at any time before the Court directs the release of the detenue, a valid order directing his detention is produced, the Court cannot direct his release merely on the ground that at some prior stage there was no valid cause for detention…. …” Similar questions arose for consideration in Naranjan Singh Nathawan vs. State of Punjab2, Ram Narayan Singh vs. State of Delhi3, A.K. Gopalan vs. Govt. of India4, Pranab Chatterjee vs. State of Bihar and Another.5, Talib Hussain vs. State of Jammu and Kashmir6, Col. Dr. B. Ramachandra Rao vs. State of Orissa and Others.7. These decisions were considered in Kanu Sanyal vs. District Magistrate, Darjeeling and Others8, as under: Re: Grounds A and B.

#4. These two grounds relate exclusively to the legality of the initial detention of the petitioner in the District Jail, Darjeeling. We think it unnecessary to decide them. It is now well settled that the earliest date with reference to which the legality of detention