The CSITA has little to celebrate despite a significant Madras High Court ruling in its favour. This in the five year long battle to stave off an investigation by the powerful Serious Frauds Investigation Office (SFIO) of the Government of India. The SFIO is much feared in corporate circles (the CSITA is a registered company) given its sweeping powers to conduct raids, confiscate documents, interrogate offenders and, since August 2017, to carry out arrests.
In an order delivered on Feb 1, 2021, Justice R. Mahadevan held that the Central Government as represented by the Ministry of Corporate Affairs did not follow due process when ordering an enquiry by the SFIO into the affairs of the CSITA in 2018. The CSITA through its constituent units had challenged the 2018 order on grounds of denial of natural justice and non-adherence to procedure established by law.
Justice Mahadevan, who had reserved orders in the case more than a year ago, ruled that the central government had erred on two counts. First when the December 2017 report of the Registrar of Companies (RoC) Chennai under S.208 of the Companies Act 2013 recommending an SFIO investigation was not preceded by an inspection and enquiry as required under S.206 and S.207. The plea taken by the respondents appearing for the central government that the 2017 report was merely a continuation of the report the RoC had issued in January 2016 — where the requirements of hearing the petitioners had been complied with — and on the basis of which the government had first ordered an SFIO enquiry in June 2016 did not wash with the judge.
He pointed out that the 2017 RoC order included new allegations of misappropriation in CSI Kalyani Hospital and dubious sale of property in Coimbatore diocese for which no response was sought from the CSITA. “The authorities have a duty to proceed in a way which is free from even the appearance of arbitrariness, unreasonableness or unfairness” said the judge in his 136 page order.
The second count on which the judge found fault with the Central Government was in how it ordered in May 2018 the SFIO enquiry without forming, for the second time in two years, an opinion for itself on the December 2017 report of the RoC which had recommended the SFIO probe. Ironically it was on precisely this very ground the Andhra High Court had quashed the June 2016 SFIO enquiry order of the government on a petition filed by the Medak Diocese on behalf of the CSITA.
The Court had in its November 2017 order referred the matter back to the central government to rework its order by expressing its own opinion on why an SFIO probe was warranted and not merely acting on what the RoC had recommended. Justice Mahadevan noted there is no dispute about the power of the Central Government to order an SFIO probe, but he held there was no evidence the decision making authority had arrived at its own opinion on the need for such a probe. He said from a perusal of file notings it was clear “the mandate of the law under Section 210 to form an opinion for ordering such investigation was not complied with by the Central Government.”
But while rapping New Delhi on its knuckles Justice Mahadevan also wielded a big stick against the CSITA. Listing out in detail the very many specific allegations of corruption, maladministration and fraud against the CSITA he said they were “heinous in nature” adding: “Mere preaching from church pulpits about ‘Christian holiness and stewardship’ does not work when it comes to managing the finance and properties of the church in the most ethical way. The corporate morality and the biblical ethics as reflected in the character of God are to be combined to form a base for maintaining the CSITA’s corporate personality.”
Justice Mahadevan said his court had the powers to suo moto order an SFIO investigation but would not do so as its brief in the current instance is “limited to the examination of decision making process [of the Central Government in ordering the SFIO probe] and not the decision.”
He however turned the screws on the CSITA declaring that:
a) The December 2017 RoC report of the allegations against the CSITA would now be treated as a show cause notice to which the CSITA will have to submit detailed explanation/objections within two weeks of receipt of the judge’s order.
b) The CSITA authorities will then have to appear for enquiry before the RoC between 17 Feb 2021 and 22 Feb 2021 and that no adjournments are to be allowed by the RoC
c) A detailed report under S.208 is to be submitted by the RoC to the Central Government “within a period of two weeks thereafter, without causing any delay.”
d) On receipt of the RoC report the Central Government “shall form an opinion independently and strictly in accordance with provisions of Section 210 “ and take action under S. 212 of the Companies Act “within a period of three weeks therefrom.”
To create a sense of urgency on the issue within government the judge also ruled that the respondent authorities “shall take action against officials” who were responsible for in one way or the other delaying the matter of investigating the finances of the CSITA since 2011.
It would appear that Justice Mahadevan has plugged many of the loopholes in proceeding with an SFIO enquiry though it is not beyond the devious CSITA authorities to create more hurdles perhaps by even legally challenging parts of Justice Mahadevan’s order itself. Watch this space.