Company Belonging To Kerala CM's Daughter Approaches Karnataka High Court Against SFIO Investigation

Exalogic Solutions, an IT company of which Kerala Chief Minister Pinarayi Vijayan's daughter Veena Vijayan is a Director, on Thursday, filed a petition in the Karnataka High Court seeking to quash the order dated January 31, passed by the Union of India directing the Serious Fraud Investigation Office (SFIO) to investigate the company.

The petition states that the impugned Order has been passed pursuant to an order passed by the Union of India, through the Ministry of Corporate Affairs, under Section 212 of the Companies Act 2013, directing an investigation by the SFIO, despite the pendency of an Investigation under Section 210 of the Act.

The petitioner argued that an investigation under Section 212 of the Act cannot be ordered before the conclusion of the investigation under Section 210 ((Investigation into affairs of company) of the Act.

Further, it is said the Impugned Order is arbitrary, devoid of any reasons and suffers from gross non-application of mind. Moreover, the order is violative of the principles of natural justice and amounts to malice in law, thereby violating Articles 14 and 21 of the Constitution.

The plea states that in 2021, the petitioner received a communication from the Registrar of Companies Bangalore, stating that an inquiry under section 206(4) of the Act, was sought to be initiated against the petitioner to examine its compliance under various provisions of the Act in respect of the transactions between Cochin Minerals and Rutile Limited (CMRL) and the Petitioner.

The petitioner duly filed its response dated 15.02.2021 and on 22.02.2021 furnished all the documents as sought for in the abovementioned notice.

However, on October 1, 2021, the ROC, once again issued a communication dated alleging that the documents furnished by the petitioner were improper and further directing the Petitioner to submit documents within 7 days failing which action would be initiated.

The petitioner submitted its response to the ROC, along with all the relevant documents/ details as sought by the ROC. The petitioner also sought an opportunity for personal hearing.

On June 24, 2022, the ROC issued a communication calling upon the petitioner to appear in person on 06.07.2022 at the office. The petitioner through its duly authorised representative appeared before the ROC.

On July 22, 2022, the Director of the company, Veena Thaikkandlyil, appeared before the ROC and provided all the necessary clarifications on all the inquiries raised by the ROC.

However, in August 2023, the ROC issued a show cause notice alleging inter-related party transactions in light of the fact that Kerala State Industrial Development Corporation (KSIDC') owns 13.4% shareholding of Cochin Minerals and Rutile Ltd ("CMRL") and that KSIDC allegedly acted as per the directions of Chief Minister of Kerala, who happens to be the father of the director of the petitioner company.

The company issued a response to the said show cause notice. Following this, the order under Section 210(1)(c) of the Act dated 12.01.2024 was passed by the 2nd Respondent initiating an investigation into affairs of CMRL, KSIDC and the Petitioner.

Later on January 31, the impugned order was passed and on February 6, the petitioner company received a Notice dated 02.02.2024 from one of the Inspectors, Prabhu K., appointed under the Impugned Order, directing the production of certain documents. In response to the same, the company requested for additional time to furnish documents.

The company has by way of interim relief sought for a stay on the impugned order and further proceedings under it. The matter is likely to be mentioned before the court for early hearing on Monday.

In a related news, the Kerala High Court, last month, had asked the Centre if an SFIO investigation was required against Exalogic.

Exalogic Solutions came under controversy following reports of payment of Rs 1.72 crore by Cochin Minerals and Rutile Ltd to Exalogic Solutions over three years since 2017. Based on an order passed by the Income Tax Interim Board of Settlement, which suggested that the amount was paid by CMRL to Exalogic without availing any services, allegations surfaced that the kickbacks were routed to the company of CM's daughter under the guise of consideration for IT services.

Appearance: Advocates Manu Kulkarni, Mrinal Shankar, Dharmendra Chatur, Ishi Prakash for Petitioner.