SC sets aside HC order staying SFIO probe into 9 companies related to Sahara Group

The Supreme Court Thursday set aside an order of the Delhi High Court which had stayed the probe by the Serious Fraud Investigation Office (SFIO) into nine companies related to the Sahara group and also the subsequent actions, including lookout circulars against its chief Subrata Roy and others.

Observing that it is a very extraordinary order to stay an investigation, a vacation bench of Justices D Y Chandrachud and Bela M Trivedi allowed the appeals filed by the SFIO against the high court order.

For the above reasons, we are of the view that the high court was not justified in staying the investigation., the bench said while setting aside the high court order.

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The SFIO, a statutory corporate fraud investigating agency, had approached the top court against the December 13, 2021 order of the high court staying all subsequent actions and proceedings, including coercive measures and lookout notices, against the Sahara group chief and others.

The high court had also stayed the operation and implementation of two orders for an investigation into nine companies related to the Sahara group. It had stayed the Centre's October 31, 2018, and October 27, 2020 orders.

While noting that writ petitions filed in the matter are pending consideration in the high court, the top court clarified that its order is confined only to the issue of whether an interim direction was warranted and not on the merits of the pending pleas.

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The bench requested the high court to expeditiously take up the pending pleas for disposal and to endeavour to dispose of them, preferably within two months after re-opening of the court upon the conclusion of the ensuing summer vacation.

Before the high court, the petitioners (Sahara firm and others) had submitted that the first order was passed by the Centre on October 31, 2018, for an investigation into the affairs of three companies -- Sahara Q Shop Unique Products Range Ltd, Sahara Q Gold Mart Ltd, and Sahara Housing Investment Corporation Ltd.

The Sahara firm, in the plea, had said the perusal of the October 27, 2020 order revealed that no reason has been assigned as to why it was considered necessary that an investigation be made against the six companies -- Aamby Valley Ltd, Qing Amby City Developers Corporation Ltd, Sahara India Commercial Corporation Ltd, Sahara Prime City Ltd, Sahara India Financial Corporation Ltd, and Sahara India Real Estate Corporation Ltd.

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The petitioners had submitted in the petition that the six companies have never been, at any relevant time, the subsidiary or holding companies of the three other companies already under investigation.

During the hearing on Thursday, Solicitor General Tushar Mehta, appearing for the SFIO, told the bench that the high court order runs contrary to two verdicts of the apex court. This is Sahara Group of companies. The total amount involved would exceed Rs one lakh crore. SFIO investigation was going on, he told the bench.

Senior advocate Kapil Sibal, appearing for the Sahara Group companies, said Sahara Housing Corporation Limited had deposited an amount of Rs 24,000 crore with the SEBI in pursuance of the top court judgement of 2012. This is a very extraordinary order to stay an investigation, the bench orally observed during the hearing.

The bench, which noted the broad line of submissions advanced before it by both sides, observed that it is not appropriate or proper for the apex court to render a final adjudication on the merits of submissions as the writ petitions are pending consideration before the high court.

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It observed that undoubtedly, the high court does have the power to pass such extraordinary directions in the exercise of its extraordinary jurisdiction and the issue is whether, in the facts of the present case, the high court was justified in doing so. On May 17, the top court had agreed to consider listing for hearing the SFIO's plea challenging the high court order.

Mehta had then told the apex court that there was some apprehension on the part of the petitioner (SFIO) with regard to another bench recently staying a lookout circular against Sahara group chief Subrata Roy.

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"The petitioner SFIO has filed the plea against the final judgement of the Delhi High Court whereby the high court erroneously granted interim relief to Respondents 1 to 3 by staying the operation, implementation, and execution of the investigation orders dated October 31, 2018, and October 27, 2020, passed by the central government and stayed all subsequent actions and proceedings initiated pursuant thereof including coercive proceedings and lookout notices issued against the respondents," the SFIO had said in an application seeking urgent hearing of its appeal.

The high court had said the petitioners before it -- Sahara Housing Investment Corporation Ltd and others -- have made out a prima facie case for grant of interim relief, and the balance of convenience is also in their favour and if the interim relief is not granted, the irreparable loss shall be caused to them. The high court had also issued a notice to the Centre.

"... We hereby stay the operation, implementation, and execution of the orders dated October 31, 2018, and October 27, 2020, passed by the respondents as well as subsequent actions and proceedings initiated pursuant thereto, including coercive proceedings and look-out notices, qua the petitioners herein..till the next date of hearing," the high court had said.