Delhi High Court stays investigation into nine companies of Sahara Group

The Delhi High Court on Monday stayed the operation, execution and implementation of two orders passed by the Center for investigation into nine companies related to Sahara Group [Sahara Housing Investment Corporation Limited and Ors v Union of India and Ors]..The Bench of Chief Justice DN Patel and Justice Jyoti Singh heard the matter and ordered the stay after observing that there was a prima facie case in favor of the petitioners and the balance of convenience also lay on their side as the orders were passed in violation of the provisions of the Companies Act..Senior Advocate SB Upadhyay, appearing for Sahara group, submitted that the first order was passed on October 31, 2018 for investigation into three companies. The order set a time limit of three months from the date of the issue. However, no extension has been granted in this order and therefore its effect has come to an end, it was pointed out.He told the court that without completing the investigation in a time bound schedule as mandated by section 212(3) of the Companies Act, another order was passed by the Center on October 27, 2020 handing over the investigation of six more companies to the SFIO.Upadhyay further argued that as per section 219 of the Companies Act the power to conduct investigation into affairs of related companies have been given only for subsidiaries or holding companies of earlier three companies; however in the present case the six companies were neither subsidiaries nor holding companies of previous three.The Court was also informed that the only SEBI has power to investigate these matters but, in this instance, SFIO has been tasked with a probe which again violated the Companies Act. The counsel added that no opinion has been formed by the Center or no reason was recorded for forming the opinion which again violated Section 212 of the Companies Act..While Additional Solicitor General Chetan Sharma argued that a similar petition has been filed before the Lucknow bench of the Allahabad High Court, Upadhyay said that in that case, both the petitioners and the prayers are different..The petition also challenged sub-section 5 and sub-section 7 of Section 217 of the Companies arguing that through these provisions, Investigating Officers have been given very vast and wide power to examine witnesses. The petition said that the IOs have also been given powers of civil court which are violative of several Constitutional and Fundamental rights..The Court issued notice to the Center giving it three weeks to respond. The rejoinders have to be filed in a week thereafterThe case will be heard next on January 18.